Thomas Wood | MicroQuant Divergence Trading Futures and ......Divergence Trading Workshop Day One presented by Thomas Wood | MicroQuantSM Futures and FOREX Bootcamp . Risk Disclaimer

Divergence Trading

Workshop

Day One

presented by

Thomas Wood | MicroQuantSM

Futures and FOREX Bootcamp

Risk Disclaimer

Trading or investing carries a high level of risk, and is not suitable for all persons. Before deciding to trade or invest you should carefully consider your investment objectives, level of experience, and ability to tolerate risk. This content is subject to change at any time without notice, and is provided for the sole purpose of education and assistance in making independent investment decisions. ValueCharts.com has taken reasonable measures to ensure the accuracy of the information contained herein; however, ValueCharts.com does not guarantee its accuracy and is not liable for any loss or damage which may result directly or indirectly from such content or from an inability to access such information or any delay in or failure of the transmission or the receipt of any instruction or notification in connection therewith. Any past performance results are shown for illustration and example only, are hypothetical and as such have many inherent limitations. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. Past performance is not necessarily indicative of future results.

CFTC Rule 4.41 (Hypothetical Disclaimer)

U.S. Government Required Disclaimer - Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures, stocks or options on the same. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results.

CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.

NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL, OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE DISCUSSED WITHIN THIS SITE, SUPPORT AND TEXTS. OUR COURSE(S), PRODUCTS AND SERVICES SHOULD BE USED AS LEARNING AIDS ONLY AND SHOULD NOT BE USED TO INVEST REAL MONEY. IF YOU DECIDE TO INVEST REAL MONEY, ALL TRADING DECISIONS SHOULD BE YOUR OWN.

Futures and FOREX Bootcamp

• Fundamentals of Risk Management • Strategies to Maximize Your Reward

Risk Ratio • Trading the Right Side of the

Mountain • Drawing Proper Trendlines and

Identifying Support/Resistance

Fundamentals of Risk Management


• One of the most important fundamentals of trading, but one of the most often overlooked or ignored parts of trading, is risk management.

• One thing that separates successful traders and average or losing traders, is having a strong set of risk management rules.


• When we talk about risk management, we are referring to controlling losses. There are a million different strategies you can use to trade profitably, but if you do not limit your downside risk, the probabilities of being in this business for the long haul are very slim.

• I am not saying that you cannot ever lose or that losing is even bad, but as a trader you cannot afford to have a “blowup day” or give back weeks worth of gains because you do not stop trading.


• Two of the hardest things to deal with with while trading are accepting that losses happen, and not being upset when you miss a trade opportunity.

• The risk of loss is one thing that will always be a part of trading, but if we can learn to manage our risk, the probabilities of success start to really increase.


• On the most basic level, three parts of risk management that I believe every trader should have are as follows: • Daily Loss Limits • Weekly Loss Limits • Monthly Loss Limits

• In my own trading, I also limit my risk on a per trade basis. (covered in next section on Reward Risk Ratio)


• Now it is one thing to say “I will stop trading if I hit my loss limit” it is another thing to actually follow your rules and STOP.

• One of the worst things for a new trader to do is be successful in digging their way out of a hole. The reason behind this is that it only takes one time of you trying to make back the losses and you end up with a large blowup day.


• What are some simple steps you can take to help limit risk? • Right Equipment – Fast internet and good

computer. • Always use stop losses! • Follow Your Trading Plan – Based on

Probabilities • Do not overleverage • Do not get in a hurry to make millions! • Have a good reward to risk ratio

How to Maximize Your Reward Risk

Ratio

Maximizing Reward Risk Ratio

• One thing we can do as a trader to ease the

burden of having to be right, is have an attractive reward risk ratio.

• You do not have to always be right on your trades to be a successful trader, you just need to make sure you are making more money on your winning trades than your losing trades.

• You can have a 40% success rate with your trades, but if you have a 2/1 (make 2x what your risk) reward risk ratio, you should still be profitable.


• One of the most commonly overlooked parts

of trading is that the reward risk ratio needs to be account wide, not on a per trade basis. Meaning you want to try and keep your risk the same no matter what market you are trading. The goal should be for one winner to pay for at least 2 losers, no matter what market the trades were placed in.

• Keep your risk the same across the board, do not risk $500 on one trade and $250 on another.



• There are a couple simple things we can do to

help increase the probabilities of having an attractive reward risk ratio. • Make sure we are not chasing markets. • Be as precise as possible with timing our

entries. • Make sure we are not trading a market that

is already over extended. • Try to get into trades where the overall

move is just starting. • Trade with the trend. • Correct Mistakes Immediately.


• Make Sure You Are Not Chasing Markets

• If we find ourselves chasing a market, the chances are the entry already happened and we are becoming emotional and just do not want to see a move happen without us in it.

• When we chase a market, a lot of times we are trading with emotions and not following our rules. Ask yourself every time you place a trade “What is the reason I am getting into this market?” If you cannot answer it, get out.


• Be Precise With Trade Entries

• The more precise we are with our trade entry, the tighter we can keep our stop. The tighter our average stop, the easier it is to get an attractive R/R ratio.

• Do Not Trade Extended Markets • If we are trying to get in a market that is

already over extended, the probabilities of that market moving far enough to give us a good reward risk ratio are much lower. It is not the norm for a market to continue running after we are already extended.


• Place Trades When the Move is Just Starting

• The sooner we can get into a trade after the move starts, the further we can ride that trade and the more profits we can get.

• Trade With the Trend • By trading with the trend, we have a higher

probability of the market continuing to move our direction.

• When we trade counter trend, we are looking for a bigger move against the overall market. It is harder for a market to reverse than to continue.


• Correct Mistakes Immediately

• One mistake that many traders make is they allow a simple mistake to cost them more money than necessary. If you place a trade that you should not have made, go ahead and close it as soon as you can. There is no need to let that market go all the way up and hit a stop loss. If you should not have placed that trade to begin with, then why give it a chance to play out? Fix it immediately.


• Never “give it a little more room”

• If you place a trade and set your stop, do not decide to just give it a little more room to play out. If it hits your stop, get out.

• NEVER AVERAGE DOWN! • There is a saying, losers average losers. This

is very true, never average down when trading. Also, I personally would never recommend a strategy like martingale unless you have extremely deep pockets.

Trading the Right Side of the Mountain


• There is a saying that goes “Trade the right

side of the mountain” I believe this is one of the most effective ways of increasing your probabilities of having a profitable trade.

• What this is saying is basically wait for the market to show you it is going to move your direction. Don’t go long on the way down, wait until it starts moving back your direction. Don’t go short on the way up, wait until it rolls over.


• One major problem that many traders have is

they try to pick the top or bottom of a market. The money is not made at the top or at the bottom, the money is made in the 80% of the move where the market is actually going somewhere.








• Remember, all we are looking for is to have

the market show us that it is going to be moving our direction before we jump in. This can be something as simple as waiting for a break of the previous bars high/low or something as long as waiting for a trend reversal.

• Two of the biggest traits that separate a successful trader from a losing trader are patience and discipline.

Identifying Support/Resistance and

Drawing Trendlines

Support/Resistance and Trendlines

• When we are looking for support or resistance

levels, the main thing we want to identify is a pivot point. Meaning, a price where the market tested, then was rejected.

• The more significant the bounce off of the support/resistance number, the more “weight” we will put on that support or resistance level.






• Additionally, the more times a specific price

point has rejected the market, the higher the probability of a good breakout.

• If we have 2 or more pivots, this is a much stronger support or resistance level than if we only had the market test a level once.






• When we draw a trendline, we want to make

sure we are connecting at least two different pivot points (support/resistance levels)

• We never want to draw a trendline connecting one bar to the bar right next to it. Your trendline should be connecting two well defined pivots.


• Just like with a support or resistance level, the

more well defined the pivots are for our trendline, the more “weight” we place on that trendline.

• Additionally, similar to a support or resistance level, the more pivots we can connect with our trendline the higher the probability of the market respecting it.


• As a general rule of thumb, we want to make

sure that any trendline we are using to place a long trade is angled down and go across the tops of resistance.

• Also, any trendline we are using to place a short trade, should be angled up and go across the bottoms of support.


















Take Out Your Support/Resistance and

Trendline Quiz to Test Your Understanding

Documents

Thomas Wood | MicroQuant Divergence Trading Futures and ......Divergence Trading Workshop Day One presented by Thomas Wood | MicroQuantSM Futures and FOREX Bootcamp . Risk Disclaimer