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I took this time to explain to the readers how we will trade on this blog and how to understand my graphs.
Trading philosophy
We are snipers. We will not make a lot of operations in a day. We are not tape readers nor scalpers. Much respect to these trading schools, but here we are trying to make one great trade per day, even if we have to wait hours sitting at the bushes and aiming at our target. We will wait 'til the wind is good, 'til our target is in range and 'til the shoot is perfect.
We do what is worth of doing. That means we are looking for good risk/return ratios. That means we expect to profit more than one time our average stop.
We shoot to kill. If there is any doubt about result of the operation, we stay away. Only headshots are allowed here.
We don't bleed. Trading is a high risk activity. There are players that are so big that we look like a tiny plancton near them. WE MUST NOT BLEED IF WE WANT TO SURVIVE. Don't make impulsive operations, don't trade based on your feeling. Here, we keep emotions outdoors while we are trading indoors.
The Graph and the indicators
Please give you some moments to admire the picture above.
Nice, so, lets go on.
I use to use the "best resolution" graph. What does it means? It means the faster pace wich a graph of an asset is understandable. For brazilian futures, my specialty, it is the one minute pace. For company shares, it goes from the two minutes pace to thirty minutes pace. At cripto I found the one hour pace to be the most aproppriate.
Besides that, we use slower graphs, like the daily pace or the weekly pace, to trace the big picture, to know what to expect from our trades and to map important price zones where the price might resist or reverse its trend. This big picture analisys, or "mapping the forest" like my master would say, will be done every sunday night in this blog. So, stay tunned.
Now, the indicators. Follow the list:
- '9 moving average (Red line on the upper graph)
- '20 moving average (Blue line on the upper graph)
- '200 moving average (Bright green line on the upper graph)
- MACD (bottom graph {tip: if you can, add bollinger bands to it})
The '9 +'20
The combination of this two averages makes what we call Trend Tracker. They have only the purpose of helping to identify if the shorter trend is upwards, fueling a buy operation, downwards, enriching a sell operation, or is consolidating, where we do nothing.
Let's take a look on how does it look like.
Buy (or long) configuration, upward trend:
Sell (or short) configuration, downward trend
Do nothing, crabwalking, lateralization, consolidate price
The mighty '200
The '200s average is the most important average to have on your graph. It's the most heavy average that you can have. The price uses to get away and get back to it.
While analysing the '200s, there are two main things that we are looking for:
- It's direction and angle of it's inclination. If the '200s goes up, we don't sell (or short). We only buy (or long). If the '200s is going down, we don't buy. sell only. If it's crabwalking, we would be extremely carefull, like if we were doing repairs on a nuclear reactor while it is running.
- The distance from the price. Do you remember that I said "if '200s is going up we only buy"? That's not completely true. You might remember that i said in the begining that the price chases the '200s, getting away and then getting back to it. If the price is farther than 0,5% from the '200s, you are probably witnessing a come back trade. In this situation, we are looking for the exact opposite from what I said before.
Our great friend, MACD
The MAC is an oscilator and it tells about the energy the price have.
If it's close to zero, we consider that the price is resting and does have energy to make a solid movement. If it's stretched, it's more likely that the price will find trouble on the way.
Furthermore, we just buy if MACD is positive and just sell if it is negative. MACD acts like a filter, putting us out of bad operations that will probably fail.
Any doubt just ask in the comments.
Stay tuned and be profitable!
Dear reader, I've took this space to ask you about one thing.
Here in Brazil we call short operations by selling operations and we call long operations by buying operations.
Could you understand if I use Brazilian terminology (Buy and sell) or you guys prefere the classical english names (Long and Short)? Please, answer in the comments and help this blog to be even better
