Successful traders find a repetitive decision-making basis that makes them more often right than wrong in predicting directional price moves. So the question is: what is the basis of their decision-making?
We want to demonstrate in this publication how we combine price move signals and volume (actual exchange at critical price turning points) for high-probability trading decisions.
Let us share some of our research findings:
- Spotting and entering early into a price move had a higher probability of success than later entries (Early Price Move Signals)
- Focusing on price-based decision-making allows to bring risk and reward more often into an acceptable relation than time-based decision-making points (Timeless)
- Considering volume differentials helps to separate stronger from weaker price move setups (Volume)
Let us now go a step deeper, starting with price-based decision-making:
Timeless
The usual decision-making basis for a day trader is price happenings on a time scale: 5-minutes, 10-minutes, 20-minutes. The issue with time-based decision-making is to bring risk and reward into a meaningful relationship with the system probability. To solve this issue, we developed the NLT Timeless Concept, where we accept that price as the result of a change in supply and demand to specify potential price move setups with clearly defined:
- Entries (price threshold)
- Exits (targets)
- Stops (wrong assumption)
With our systems and strategies, we want to help you to higher accuracy by:
- Only accepting a trade when the direction is confirmed
- Exiting at a pre-defined target, prevening for the price to pull back and taking your profits away before you realize them
- Choosing an adequate stop so you are not taken out of a trade by a too-tight stop and keeping reward and risk in a meaningful balance.
A Quick tip: buyers and sellers move the market; whoever has the upper hand moves the market in their direction.
This write-up focuses on day trading, while the concept also works for swing trading or longer-term investing.
By the NLT Timeless Concept, we simplify life for you and let the chart tell when to buy or sell, specifying all decision-making dimensions at once:
- Entry Conditions: Execute buy-stop or sell-stop orders at pre-defined price thresholds at assumed probability
- Exit Condition: When is the target reached
- Stop Condition: When are you wrong and exit
- Risk Management: Risk limiting and risk-adjusted by considering the Relation of (Entry – Exit) / (Entry – Stop)
When day trading for pre-defined price moves, positions are kept open for a couple of bars/candles but permanently close the same day.
One of the NLT Timeless Concept clients said: “Now I am feeling comfortable, walking away from the trade without feeling the need for controlling it.”
Our research example combines three high probability systems: NLT Top-Line, NLT Trend Catching, and the NLT Timeless Price Turning Points. We then count the instances those signals appeared and led to a trade that worked to the set conditions or failed.
Volume
Filtering signal (predictable price move indication) from noise (random happening), we use a volume differential study and focus on four instances:
- Cyan Volume: impulsive solid engagement in the exchange of assets compared to the prior happening
- Blue Volume: strong engagement with a directional upside price move
- Red Volume: intense exchange with a directional downside price move
- Purple Volume: slightly higher volume engagement with a price move potential
The chart also shows gray and yellow highlighted volume, which we do not consider indicative of supporting a potential price move.
Early Price Move Signals
Let us take a simple chart so you can see an example of combining volume and price move indications:
NLT Price Move Indications September 30, 2022
On the chart, we highlighted three situations:
Situation-1: NLT Top-Line, Sell < $3,672.3. As long as this signal appears on candle #1 or #2 of an NLT sequence, volume support is not required, while all other signals come to a higher probability decision with the help of highlighted volume. We also tested the probability of this signal coming to the target when it appears later in an NLT sequence. The likelihood of coming to the pre-defined target dropped by 20%, which is significant.
Situation-2: NLT Trend Catching and Timeless Floating Up signal combination: Buy > $3,667.50 with blue volume support, and the trade came to target two bars after, and immediately after, the price reverted.
Situation-3: Buy > $3,665.30 and Floating Up, with volume support, and the trade came to target two candles after the entry.
Taking September 23 to 29, 2022, we documented the instances for the three NLT system signals and their actual performance:
NLT Signal Distibution
On average, we documented 16 trading opportunities per day. The day with the most signal was September 28, and here is the performance on the observed days:
NLT Signal Performance
Hence, four of our signals made it into the high probability range above 70% accuracy, which is what we focus on going forward. NLT PowerTowers at candle #3 will not be a signal we trade.
Here is the set of data acquired:
Past performance cannot always be taken as indicative of future results; however, if you are ready to experience high probability trade performance and strategies:
contact@NeverLossTrading.com Subj.: Demo
What we share is:
- Acting with a system probability > 65%
- Mechanical rules for entry, exit, stop
- Trade at perfect moments only
- Consider overall factors, patterns
- Risk and reward in an acceptable balance
- Risk-averse trading
- Holding positions to target
- Do not add to losers
- Stick with a trading strategy. Follow a business plan – action plan and financial plan
- Trade for meaningful price moves
- Systematic trading
- Having a mentor to learn from
To succeed in trading, you best work with an experienced coach and learn much about trading. Our #1 competitive advantage is the support and customer service we offer. We work one-on-one with you to specify what we teach to your specific wants and needs; hence, if your knowledge base is not expanding rapidly, you are doing something wrong.
Ongoing education and mentoring are crucial to longevity in this business. Veteran traders have been through more ups and downs than you can imagine. So, experienced pros have probably experienced it whatever you’re going through.
If you are ready to make a difference to your trading:
We are happy to share our experiences and help you build your trading business. Trading is not a typical career, and you best learn from those who are long-term in this business to cope with the rollercoaster of the financial markets. We are here to help and provide feedback on what you might be doing right or wrong.
Strive for improved trading results, and we will find out which of our systems suits you best.
Our blog and YouTube channel hold many examples of systems and decision-making points.
We are happy to hear back from you,
Thomas Barmann (inventor and founder of NeverLossTrading)
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