So over the weekend I figured I’d review our systems and trading techniques, and have decided that I am going to start a series of videos on a simple trading system, based on my top four trading tools.
So to get us started, here is our initial base.
1. COT Report
Straight in at number one is the COT Report.
This is my initial bread and butter and is the tool I use to set tone and direction for the market. The key with the COT is having an extremely good indicator – and I think we have the best. I would say that it was built specifically to my specifications but it can even cope with implied COT (i.e. imagine COT for EURGBP) and that is the basis for this system
Using the COT report alone can make you a large amount of money if you are consistent, so it’s a great base for a system
2. NinjaTrader LFPsych & Metastock Psych
This is a really basic indicator but it’s really useful for giving an idea of trend in the market and is one I really like.
After all, why not keep it simple.
Used with COT it is a nice conditional signal.
What I also like to use is the Metastock Psych Indicator on the On Balance Volume to proxy how orders are flowing into the market.
3. NinjaTrader + Volume Profile and Volume Zones
Although we will build our own versions of these indicators, that is not to say the standard ones aren’t great. They are fine, but there are a few bits I would like to tweak to make it even easier for everyone.
The key to these is the Point of Control on daily candlesticks and defining detailed support and resistance.
The key to Point of Control is, if price closes above; that’s Bullish, if price closes below; that’s Bearish
4. Metastock & On Balance Volume
Then the best way we have found to proxy our order book stuff for users without the joy of a massive server farm to parse all the data, is by using Eikon platform on Metastock Pro.
The reason it is so good is that it actually uses Reuters price feed so your on balance volume and order flow is from banks, providing you a really clear picture of the market. Unfortunately the majority of single broker price feeds won’t even get you close to this.
Just look at these chart, this gives me the clearest picture ever of what is happening and how I ought to be positioned.
So let’s combine these and looking at an example – GBPUSD
So COT is pointing Long since late last year, meaning I need to be buying into the pair
Then I can use the order flow indicators in order to pick my entry points.
If I use small positions to open entries on COT strategies and order book strategies, I end up naturally scaling into a trend allowing me to lock in profit as the trend develops.
We get all this and yet you actually only need to look at your charts once a day.
If you did this across 3 currency pairs, AUDUSD, EURUSD and GBPUSD you would do extremely well on dailies alone but you can easily bring it down to a lower level like 4 hourly or hourly charts and expand the number of pairs.
You can then use POC on lower levels to get better entries and manage your trade entries as well as get confirmation for the trend continuation on lower levels.