השכלה

The WD-50 Strategy Tutorial

מאת ‎TrojanGTX‎

TUTORIAL CONTENTS
1. INTRODUCTION:

1.1 About,
1.2 Aims,
1.3 Structure,
1.4 Supporting information.

2. PRE-REQUISITES:

2.1 Trader pre-requisites,
2.2 Key knowledge the trader must already know.

3. STRATEGY DESIGN:

3.1 Identifying the key components of the strategy,
3.2 Strategy Checklist,
3.3 Strategy Explanation,
3.4 Indicators, settings and features

4. BACK TESTING:

4.1 Gathering Statistics.
4.2 Back testing using TradingView's Bar Replay.
4.3 Identifying entry conditions that were not met.

5. DEMONSTRATION:

5.1 Identifying set ups and verifying conditions,
5.2 Risk assessment for position sizing,
5.3 Entering the trade and setting the limits,
5.4 Trade management. Optional to further increase profits.

6. QUALITY CHECKING:

6.1 Assessing your performance using the strategy,
6.2 Common mistakes,
6.3 Psychology,
6.4 Assessing risk and maximising reward.

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1. INTRODUCTION:

About the author and origins of the strategy
I am a qualified instructor in the electrical industry, who since 2005 has been training and assessing a wide range of candidates in various countries across the world. I am a technical specialist in IEC 60079, The Explosive Atmospheres Standards and British Standard 7671, Requirements for Electrical Installations. I am also a qualified Assessor and a Verifier for Internal Quality Assurance with a foundation that comes from industry standards laid down by it's various awarding bodies.

I apply my educational and technical expertise to my trading which began in May 2021. My trading education really only started in August 2021 when I joined the https://howtotrade.com/ trading room after watching a YouTube video on the "Cycle of Doom" by Andrew Lockwood, former London International Financial Futures Exchange pit trader. From there, I focused my education, was mentored and I discussed markets and strategies with fellow traders on a daily basis.

I tried many strategies from others but I never had enough success to fully adopt them. When I "copy-traded" ideas, even from successful traders, it would often result in a loss. I realised very early on that I had to find my own strategies that are more mechanical and more rule based. I knew that this would only come from a lot of hard work. It was about this time that Andrew Lockwood told me to "STOP TRADING!" in a video call. A stark truth I had to realise to prevent me from continuing to lose money. I researched how to build strategies by watching this video and applied what I liked from other places to create my own strategy. I then entered into a phase of back-testing it and manually recording statistics for 200 trades on M5 and H1 time frames.

One of the mentors at https://howtotrade.com/, Max Norbury created a strategy called the Wave Dash System. The strategy found entries in an EMA cross in the direction of where price was in relation to the 200 EMA. I never had much success with WDS on higher time frames but I found the EMA cross to be a very simple rule to adopt and this forms the initial condition of my strategy. To add security and increase probabilities, I added other objective, rule-based conditions. To increase the number of opportunities, I adopted a 50 EMA instead of a 200 EMA. I added the MACD signal & slow EMA values and a little squirt of Fibonacci. With this in mind, I named my strategy "WD-50."

The strategy has been applied successfully since I came out of two months of back-testing it in May 2022. With complete faith in the strategy from the statistics I have gathered, I now share it with you. I wish you every success.

Parere Praecepta! - Obey the Rules!

1.1 About
This tutorial contains the information needed in order to apply the WD-50 strategy to the German Stock Index a.k.a "DAX", or "Germany40."
STRATEGY NAME: WD-50
SYMBOL: GER40, Pepperstone.
TIME FRAME: H1 (Entry), H4 (Anchor).
STATISTICS: Summary of back-testing 100 trades on H1
1.2 Aims
The strategy is aimed at those that are objective traders not subjective traders. It is designed for those that are able to apply mechanical, rule based strategies to enter trades. The strategy will teach you discipline and give you the ability to plan your trade entries with educated, forward expectations. If you are a subjective trader that relies on emotional and discretionary approaches to your decision making, this is not for you.
1.3 Structure
To achieve success with the WD-50 strategy, traders must be able to understand the rules, be able to apply them, be able to enter a trade with stop loss and profit target in the GER40 market on the H1 timeframe.
The structure of the strategy is as follows:
All Conditions for entry must be present,
Exact time of entry must be followed,
Stop loss must be applied at the pre-determined value.
Take profit must be applied at the pre-determined value.

The strategy conditions are explained in Section 3.
1.4 Supporting information

Video links which supported this strategy.
The Cycle of Doom, Andrew Lockwood, YouTube
Wave Dash System, Max Norbury, Trader room Academy, forexsignals.com (no link)
Anchor Point, A P Boss Stategy, Max Norbury, Trader room Academy, forexsignals.com (no link)
Objective traders not subjective trader, The Secret Mindset, YouTube
How to build a strategy, WBTrading, YouTube
38.2% candle concept, The Trading Channel, YouTube
Using the ATR, Andrew Lockwood, YouTube

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2. PRE-REQUISITES:

2.1 Trader pre-requisites
This strategy makes use of indicators and alerts in TradingView. Whilst using TradingView is not a requirement of this strategy, any references to the setting up of or applying items only available within in it must be understood and adapted to another platform if used.

The trader must be able to:
Follow and apply the rules of the strategy.
Access the DAX or GER40 index or other symbol that displays the current market value of the Deutscher Aktien IndeX, the German stock exchange index.
Must be able to apply three specific EMA and an ATR indicator to the H1 and H4 charts and understand how to obtain their values.
On the H1 entry chart:
Must be able to identify a cross of two specific EMA.
Must be able to identify price and candle colour at close in relation to one of the EMA.
Must be able to apply a Fibonacci drawing to the entry candle to measure its strength.
Must be able to identify trend in price action.
On the H4 anchor chart:
Must be able to identify price and candle colour at close in relation to one of the EMA.
2.2 Key knowledge the trader must already know.

Although entries using WD-50 do not depend on any of the following, the trader with risk analysis/ contract sizing aspect in mind will be assisted by:
- Identifying market conditions in terms of trend and consolidation in high and low volatility.
- Identifying trends, chart patterns and spotting potential reversals.
- Observing price action and understanding what is taking place.
- Identifying Supply zones and demand zones.
- Identifying Support and resistance areas.
- Researching fundamental DAX news which is likely to directly affect a trade.
  
  ____________________________________________________________________________________________________
  
  3. STRATEGY DESIGN:
  - 3.1 Identifying the key components of the strategy
  - 1.0 Conditions: Verify all five conditions are present.
  - 2.0 Entry: Enter on the close of the H1 candle when all five conditions have been verified.
  - 3.0 Stop Loss: Identify the ATR value on the entry chart and set the stop loss.
  - 4.0 Target: Set the take profit target at 1:1 R:R.
    
    The strategy consists of five conditions of entry, all of which must be verified before entering. When all conditions are confirmed at the close of the entry chart candle, we use the current ATR value to determine our trade limits and we enter. A check list for the strategy with descriptions is given below.
    
    *3.2 Strategy Checklist
    - 1.0 - CONDITIONS
      ON THE H1 ENTRY CHART
      IF
      1.1 - A 9 & 26 EMA cross occurs to determine trade direction,
      AND
      1.2 - The candle close is beyond the 50 EMA on the side of the trade direction and is the correct colour,
      AND
      1.3 - The entry candle strength measures between 0% and 38.2% Fibonacci retracement,
      AND
      1.4 - The candle close confirms continuation in the trade direction,
      AND
      ON THE H4 ANCHOR CHART
      1.5 - Price is aligned with the 50EMA on the side of the trade direction and the candle is the correct colour,
      When 1.1 to 1.5 are verified the conditions for entry are confirmed.
    - 2.0 ENTRY
      Enter the trade when all conditions 1.1 - 1.5 are met and the entry chart candle closes.
    - 3.0 STOP LOSS
      Obtain the entry chart ATR at candle close and set the SL to 2 x ATR.
    - 4.0 TAKE PROFIT
      Place take profit at 1:1 R:R
    - 3.3 Strategy Explanation
      - 1.0 - CONDITIONS
        ON THE H1 ENTRY CHART
        IF
        1.1 - A 9 & 26 EMA cross occurs to determine trade direction,
        
        Condition 1.1, the EMA cross indicates the shift in sentiment from sellers to buyers (as pictured above) or from buyers to sellers. This is the first link in the chain for a successful entry. If the 9 crosses above the 26 we look to buy, if it crosses below we look to sell. The EMA cross cloud colour confirms our trade direction. Once the EMA cross has taken place we look to the next conditions to validate our entry.
        
        AND
        1.2 - The candle close is beyond the 50 EMA on the side of the trade direction and is the correct colour,
        
        Condition 1.2, price beyond the 50 EMA, is a rule for reinforcement of trend in the direction of the trade. If we have an EMA cross buy signal but price is not above the 50 EMA this could indicate that price is reversing or we are in a period of consolidation and it is not advisable to enter. Price action is king, it's just another layer of security for the entry. With Condition 1.1 in place we need to see price beyond the 50 EMA before we can consider the next conditions.
        
        AND
        1.3 - The entry candle strength measures between 0% and 38.2% Fibonacci retracement,
        
        Condition 1.3, the Fibonacci retracement is a rule added to measure the entry candle's strength. What does a strong candle look like? A pin bar? What about the open and close prices for that? What about its wicks? Adding a rule that confirms a "strong" candle is yet another layer of security. We need the candle to be strong in the direction of the trade. As long as price does not retrace and close behind the 38.2% line we consider it confirming the trade direction. We draw the Fibonacci drawing in the direction of the trade on the entry candle alone. For long trades we draw from the bottom and place 100% at the low and the 0% at the high and we verify that the close price is between the 0 and 38.2% lines. For short trades we start at the top and place the 100% on the high and the 0% on the low. In both cases, the close price must be inside the zone between 0 and 38.2%. When this condition is confirmed, we move on to verify the next condition.
        
        AND
        1.4 - The candle close confirms continuation in the trade direction,
        
        Condition 1.4, confirming the trade direction, is a rule to confirm that the recent price action is moving in the direction of the trade. If we are looking to enter a long trade we verify that the candle close is making higher highs against the previous candles, and for short trades we confirm lower lows. Confirmation against the previous two candles is sufficient. This is not an assessment of the entire structure of the H1 chart. It is confirmation that the closing price is an indication of strength in the direction of the trade. I will often switch the chart from candles to line to give a clearer confirmation of trade direction. If we wish to enter a long trade but the candle close is lower than the previous close this is a reason not to enter as price could be reversing against our idea. This condition is confirmed when you can verify that price is closing in the direction of the trade. When this condition is confirmed, we move on to verify the next condition.
        
        AND
        ON THE H4 ANCHOR CHART
        1.5 - Price is aligned with the 50EMA on the side of the trade direction and the candle is the correct colour,
        
        Condition 1.5, price beyond the 50 EMA on the anchor chart, is a rule for reinforcement of the direction of the trade. The higher time frame is given significant weight and respected. If the anchor chart price at the time of entry is on the wrong side of the 50 EMA or is the wrong colour it could be a sign of a weakening of trend or a reversal and we should not enter. The verification of the condition on the anchor chart is the final layer of security before we make our entry. If the price is above the 50 EMA and is green in colour we can enter long trades. If the price is below the 50 EMA and is red in colour we can enter short trades.
        
        When ALL conditions are confirmed, we can enter the trade.
      - 2.0 ENTRY
        Enter the trade when all conditions 1.1 - 1.5 are met and the entry chart candle closes. Note: At this point it is optional to evaluate risk to consider our position size. More on this in Section 5.2.
      - 3.0 STOP LOSS
        Obtain the entry chart ATR at candle close and set the SL to 2 x ATR.
      - 4.0 TAKE PROFIT
        Place take profit at 1:1 R:R
        
        TRADE RESULT
      - 3.4 Indicators, settings and features
        TradingView provides the technical benefit to this strategy and its execution. As mentioned above, if you do not use the TradingView platform you will need to determine how to achieve the following objectives on the platform of your choice. The essential objectives of this tutorial are:
        1) Place 3 x EMAs on your charts.
        2) Add an ATR indicator.
        3) Draw a Fibonacci drawing on the entry chart candle close.
        In addition:
        4) Add an alert on the cross of the 9 and 26 EMA (not essential but allows you time away from the charts).
        5) Place an EMA cloud indicator (not essential, visual aid only).
        
        Essential for the strategy1) Place 3 x EMAs on your charts.Moving Average Ribbon Inputs Moving Average Ribbon Style
        For achieving the purpose of plotting the exponential moving averages, I use the "MA Ribbon" indicator." This indicator can plot up to 4 x MA with the cost of one indicator which will assist those with the Basic TradingView package whose limit is 3 indicators per chart. All MA should be set to "EMA" for Exponential Moving Average and "close" to plot the close prices.
        
        Set the MAs as follows:
        MA No1 = 9 EMA; MA No2 = 26 EMA; MA No3 = 50 EMA. Customise the appearance to your liking.
        
        2) Add an ATR indicator.ATR Inputs ATR Style
        To assess volatility and with the purpose of determining the trade limits , I use the "Average True Range" indicator.
        
        Set the ATR as follows:
        Length = 14; Smoothing = EMA. Customise the appearance it's location in your chart to your liking.
        
        3) Draw a Fibonacci drawing on the entry chart candle close.Fibonacci Retracement Drawing Long Trade Fibonacci Retracement Drawing Short Trade
        To assess the entry candle strength we apply the Fibonacci drawing to that candle alone.
        Fibonacci Retracement StyleTrade tip: Notice in this image the candle is not "strong" for an entry as per the condition rules. Price retraces behind the 38.2% line.Enhancements for the strategy:4) Add an alert on the cross of the 9 and 26 EMA (not essential but allows you time away from the charts).MA Ribbon Alert Settings
        The TradingView alerts are used as an early warning signal and indication of the market sentiment. I have alerts set on the 9 & 26 EMA cross, at candle close, on M5, M15, H1 and H4 charts (see image).
        
        The M5 cross alert always precedes the M15 cross alert and the M15 cross alert precedes the H1 cross alert. Having early warning signals set to trigger frees us up from the screen. For example, we check the H1 chart and we are anticipating a reversal from short to long. On the M15 chart, price is still very much short (EMAs bearish and spread). For price to reverse to long we will first see a long cross on the M5 and then the M15. As the M15 alert is triggered we are aware the market sentiment may be shifting towards our trade idea and we make the necessary preparations to determine an entry. In this way we can make forward and educated projections. Planned trading as it should be.
        
        The amount of M5 crosses in one day is also a good indication of a market in consolidation due to the even balance between buyers and sellers. However, the market is the market and does what it wants but if we can roughly predict it's movements it places us in a good position as a retail trader.
        
        The H1 cross is our first entry condition and through our preparations, we should already know the likelihood on an entry before the H1 alert takes place. The H1 cross alert is the final call to trade. If I have been busy, I have been alerted to the H1 cross by my watch and I've rushed to the screens to verify all other conditions and entered successful trades.
        
        Set the alerts on M5, M15, H1 and H4 as follows:
        Condition = MA Ribbon, MA No1; Crossing, MA Ribbon, MA No2.
        Options = Once Per Bar Close. (so you don't have to keep resetting the alert).
        Expiration time = as far in the future as possible
        Alert name and message: "H1 Condition 1.1 for entry" (Including the time frame in the alert name will display it to your device notification so you know which time frame cross is taking place).
        
        5) Place an "EMA Cross" cloud indicator (not essential, visual aid only).EMA Cross Inputs EMA Cross Style
        For a visual aid the cross cloud indicator displays the shift in sentiment from buyers to sellers. This indicator serves no other purpose other than to provide visual confirmation from long to short or short to long.
        
        Set the EMA Cross as follows:
        Short EMA Length = 9; Short EMA Source = close; Long EMA Length = 26.
        Customise the appearance to your liking. For example, I do not enable the long/ short indication arrows as it makes me feel like I'm riding a bicycle with stabilisers on.
        
        I make use of a 2x2 chart display to provide me with a good overview of the major timeframes. On the M5 I added a customised version of the Fx Market Sessions. This is related to something else I am working on for session break outs and only explained here because it is on the image.
        
        ____________________________________________________________________________________________________
        
        4: BACK TESTING:
        4.1 Gathering Statistics.
        In order to gain maximum value from back testing and to confirm a strategy has a statistical edge you will need to collect and calculate data. How you do this is up to you. I struggled to understand the MT4-esque ForexTester type programs, so I adopted the TradingView feature, the Bar Replay.
        
        To record the data, I created a spread sheet. This continued to evolve with the number of trade results I entered onto it. The current version headers can be seen in the H1 Summary of back-testing results. The titles are self explanatory perhaps with the exception of MAE and MFE. MAE - Maximum Adverse Excursion and MFE - Maximum Favourable Excursion. In terms of price movement, these are the maximum limits for and against the trade. This was helpful to determine the size of the trades and how exposed I was should the trade fail.
        
        For winning trades MFE, I measured from entry to the maximum distance until an opposite 9&26 cross took place, e.g. from entry the trade moved 461.6 points but on the way retraced against entry by 42.0 points and then to an 9&26 EMA cross in the opposite direction, I took the MFE to be 461.6 points. With this it was clear to see how many more points were left on the table beyond the 2 x ATR TP. For losing trades, I took the MFE to be the furthest distance from entry until the trade hit SL.
        
        For winning trades MAE, I measured from entry to furthest distance against the trade until the TP was hit. For losing trades, I took the MAE as the furthest distance from entry until an opposite 9&26 cross took place, e.g. from entry the trade moved 10 points then retraced 100 points to an 9&26 EMA cross in the opposite direction, I took the MAE to be 100 points.
        
        MFE/ MAE brought me much confusion and there's very little guidance on using it to build a strategy. In order to use it for strategy building and testing you have to set yourself a system to follow. The one above is mine.
        
        H1 back testing results_01 H1 back testing results_02
        4.2 Back testing using TradingView's Bar Replay.Setting up the chart
        1) Maximise and reset your H1 chart.
        2) Zoom out to maximum and drag the chart back to the earliest possible candle.
        3) On the first candle carry out focused zoom using CTRL+MOUSE WHEEL FORWARD until the chart displays your preferred amount of candles.
        
        How to use the Replay function
        4) Select the replay function and place the pointer on any candle in the chart (preferably before an EMA cross condition).
        5) Press Play and be prepared to press Pause when Condition 1.1 takes place (the 9 EMA crosses the 26 EMA). Set the replay speed accordingly. Condition 1.1 confirms the trade direction.
        6) Confirm that Condition 1.2, 1.3 and 1.4 have taken place. When verified, place a vertical line on the entry candle.
        7) Change the time frame to the anchor chart by selecting 4h at the top. Align the cross hair where the H1 candle close price is and confirm Condition 1.5. Note: The H4 candle shows its close price which may not be the close price of the H1 entry candle. If 1.5 has not been met switch back to 1h and resume play until price reaches the H4 50 EMA area and pause when it has.
        
        How to "place" the trade
        8) If all conditions 1.1 to 1.5 have been met switch the time frame back to the 1h and place the long or short position drawing at the candle close.
        9) Obtain the ATR of the entry candle and set the trade limits (2 x ATR stop loss and 1:1 R:R profit target).
        10) Resume play and watch the trade play out. Record your statistics to validate your back-testing. See 4.1 for statistics I gathered.
        
        When the trade statistics have been recorded repeat the 10 steps above upon the next 9 & 26 cross.
        
        Video of back testing using TradingView's Bar Replay
        4.3 Identifying entry conditions that were not met.
        
        The following links show examples of where the conditions of entry were not met but those preceding them were. E.g. In the example where condition 1.4 was not met the conditions 1.1, 1.2 and 1.3 were met. Remember, all conditions must be present before we can enter the trade.
        
        Condition 1.1 not met
        Although price looks strong and bullish we do not yet have a 9 & 26 EMA cross in that trade direction.Although price looks bearish we do not yet have a 9 & 26 EMA cross in that trade direction.
        
        Condition 1.2 not met
        Price is above 50 EMA but candle is bearish, the wrong colour and is against the trade direction.Price is below the 50 EMA but candle is bullish, the wrong colour and is against the trade direction.
        
        Condition 1.3 not met
        Price retraced behind the 38.2%. We need to see bullish price between the 0 to 38.2% zone.Price retraced behind the 38.2%. We need to see bearish price between the 0 to 38.2% zone.
        
        Condition 1.4 not met
        Weak continuation in trade direction, making lower lows instead of higher highs.
        
        Condition 1.5 not met
        All preceding conditions are met but price on the anchor chart is not supporting the trade direction by being above 50 EMA.
        
        The conditions are layers of security to confirm your trade direction. Don't look for ways to make the trade fit!
        Parere Praecepta! - Obey the Rules!
        
        ____________________________________________________________________________________________________
        
        5: DEMONSTRATION:
        
        In order to display the WD-50 strategy a video collection is presented. The videos are live at the time of recording and I explain my thought processes through out.
        
        5.1 Identifying set ups and verifying conditions.
        Video 1/5. On the entry chart, condition 1.1 is forming on this potential retracement for the bear trend continuation. If the 9 & 26 cross takes place (Condition 1.1) then I will look to enter a short trade. Before the cross actually take places I preview the other conditions to assess if they will line up. I place a short position drawing ready for an entry.
        https://www.tradingview.com/chart/GER40/02J37PvR-5-1-Identifying-set-ups-and-verifying-conditions-1-5/
        Video 2/5. 15 minutes later we can see price continues to sell off and condition 1.1, the 9 & 26 EMA cross is getting closer. I replace the short position drawing and set the limits based on the current ATR. Note that the ATR may change. Based on where the trade limits are I can then review the market structure and begin to assess my risk.
        https://www.tradingview.com/chart/GER40/y1OOgZfQ-5-1-Identifying-set-ups-and-verifying-conditions-2-5/
        Video 3/5 - 15 minutes later and condition 1.1 was not met on the previous candle. The 26 EMA closed 24 points above the 9 EMA. I am looking for a bearish cross (below). Bearish sentiment is still strong so I will observe. Entry may come on the current candle close.
        https://www.tradingview.com/chart/GER40/Zf9Kpz0z-5-1-Identifying-set-ups-and-verifying-conditions-3-5/
        Video 4/5. 15 minutes later and condition 1.1 is almost taking place. A quick check of the ATR and the short position drawing is set in preparation for the candle close in approx.40 minutes time. I am reviewing the other conditions in preparation.
        https://www.tradingview.com/chart/GER40/7D3mq4Ns-5-1-Identifying-set-ups-and-verifying-conditions-4-5/
        Video 5/5. With 3 minutes to go the EMA Cross has taken place (Condition 1.1 - 9 EMA crosses the 26 EMA) and it is not looking like that will change before candle close.
        Now it's time to confirm that ALL entry conditions have been met one-by-one.
        https://www.tradingview.com/chart/GER40/69zc9Fwf-5-1-Identifying-set-ups-and-verifying-conditions-5-5/
        5.2 Risk assessment for position sizing.
        Video 1/1. To help decide the position size we should check for key areas in market structure that may affect the trade and check current volatility. Nothing prevents an entry when the conditions are all met, not even fundamental news. We assess the market structure for risk management, that's it.
        
        In this example the ATR is high at 96.5, I know this from back testing. We have visual confirmation by the size of the entry candle. During back testing, high volatility sometimes resulted in reversals against the trade so this is a reason to consider lowering the risk exposure.
        
        With a trade drawing placed on the chart, I set the approximate trade limits at 2 x ATR and add horizontal lines on those prices. I then look back to key areas that may affect the trade. In this example we can see significant resistance being used as support near to the TP. Due to how close these significant points were to my TP, along with the high volatility, I decided to reduce my risk from 5% down to 3.5%.
        
        Using the stop loss points, I can calculate my position size based upon the % risk. In this example, 193 points at 3.5% risk put my position size at 0.6 contracts.
        
        When we are minutes away from candle close, I will set up my trade on my broker so all that is needed is for me to push the send button.
        https://www.tradingview.com/chart/GER40/Zwk7wnbB-5-2-Risk-assessment-for-position-sizing/
        5.3 Entering the trade and setting the limits.
        Video 1/1. With all the conditions confirmed and seconds before the candle closes we obtain the ATR and calculate our trade limits. 2 x ATR stop loss with a 1:1 R:R profit target.
        
        This was recorded a little closer to the candle close than usual. The objective is to enter the trade on the close of the candle so prepare everything for the push of the deal button. Once all 5 conditions for entry are confirmed all we are waiting for is the candle to close. I had already prepared my trade deal with my broker and set my position size and limits accordingly. It was just waiting for me to execute the deal. Tip: If required you can always adjust your trade limits once you have entered.
        
        You will also see here the alert notification of H1 Condition 1.1. If I was away from the screen and able to trade, I could quickly confirm all entry conditions and enter the trade within one minute of the candle close and from my phone if I had to. Price continues to move so enter asap to ensure the trade limits are correct.
        https://www.tradingview.com/chart/GER40/lQFQEr45-5-3-Entering-the-trade-and-setting-the-limits/
        
        Before we continue here is the trade result - 16/06/2022 - 15:48 hrs UK Time - 193.5 points profit - +5.32% account balance.
        5.4 Trade management. Optional to further increase profits.
        
        Video 1/3. In this example I was not at the screen when the TP was hit so this section is a mixture of live demonstration and replay. Here I am using Max Norbury's lessons on anchor points and choosing them as exit points. Once the anchor point is identified and marked, we move our TP. I marked the original TP for reference.
        
        You may move your stop loss if you can to lock in profits but on my broker platform it is not possible. The principle for exit is if price closes on the wrong side of the anchor point we close the trade.
        
        DISCLAIMER: This optional trade management brings emotion and demands your attention at the screen. If you have an unstable trading psychology or cannot ensure you are available to close the trade leave the limits as you set them at entry and walk away.
        https://www.tradingview.com/chart/GER40/mnKC8U11-5-4-Trade-management-Optional-to-further-increase-profits-1/
        Video 2/3. With price pulling back behind my TP I would be feeling at a loss. Here a new price action pull back takes place which becomes the new exit point and position for exit. If price closes above the anchor point I should close the trade. My knowledge of this method is still weak and I may update these videos in the future.
        https://www.tradingview.com/chart/GER40/7CYbt9eB-5-4-Trade-management-Optional-to-further-increase-profits-2/
        Video 3/3. You can see that price did continue to increase profits but when the anchor point (exit) was reached, had it been a trade it would have resulted in approximately 40% less profit than the original TP. This is the risk and the mental challenges you will face. Perhaps my anchor point methodology is not correct but in this example I would have came away with profit but 40% less than my original target. Perhaps the same can be applied to a lower time frame but this confirms we are outside the boundaries of the WD-50 rules.
        https://www.tradingview.com/chart/GER40/B2mBi0Rb-5-4-Trade-management-Optional-to-further-increase-profits-3/
        
        To conclude, the back testing resulted in significantly more profit than 2 x ATR. If you can find a way to maximise on that, please let me know.
        
        ____________________________________________________________________________________________________
        
        6: QUALITY CHECKING:
        6.1 Assessing your performance using the strategy.
        
        In order to maximise our potential using the strategy, we should continually confirm our progress. Ultimately it will be displayed in our increasing account balance but to be successful we must seek ways to continually improve. Below are a range of outcomes and methods we can use to continually develop as a trader using the WD-50 strategy.
        
        Able to identify forming set-ups, demonstrate the strategy rules and be able explain when entry conditions have not been met.
        Demonstrate how to assess price in relation to 9, 26 and 50 EMA and can identify the 9 and 26 EMA cross.
        Demonstrate how to apply a Fibonacci drawing to the entry candle to measure its strength.
        Assess price action and be able to identify confirmation in trend.
        Obtain the ATR value at time of entry and set the limits of the trade.
        Explain how to manage risk when considering position size in relation to significant areas of market structure and price action.
        Explain how fundamental DAX news may affect a set up.
        Maintain a chart layout that does not hinder thought processes (analysis paralysis).
        Demonstrate record keeping by placing trade entries into a trading record.
        Carry out back testing to record and gather statistics to reinforce trading psychology.
        
        6.2 Common mistakes
        Mistakes will be made. We are only human. Making repeated mistakes is less forgivable. Up until now, I have only recorded one mistake using this strategy in a live environment. Should any more occur they will be listed below.
        
        Entering without confirming the conditionsThe first trade drawing shown was entered before Condition 1.1 was present.
        Here, I took the price above the 50 EMA to be the entry condition and failed to remember the EMA cross condition 1.1. I entered the trade, realised my mistake and soon after a valid entry occurred. On this occasion price reversed on the second shoulder of a head and shoulders pattern resulting in a loss.
        
        Not knowing when to stay out
        I kept myself out of this trade with knowledge I gained from back testing and manually recording my results. When the MFE (maximum favourable excursion) was virtually zero immediately after the entry candle, price often reversed away from the trade direction and resulted in a loss. This occurred when price was in a range or a range within a range which is happening here (more visible on lower time frames). The strong candle at entry and immediate reversal added confluence to overruling the entry conditions.
        
        6.3 Psychology
        Having developed this strategy myself and manually recorded back testing statistics for 200 trades, I have a) witnessed the results, b) obtained the win / loss ratio, c) calculated the profit / loss ratio and d) calculated the relative draw down, all of which have helped develop faith in the strategy. I have noticed a significant improvement in my trading psychology by applying this strategy. I can only share my experience but ultimately how you address your trading mentality is down to you.
        
        Trading with a mechanical, rules based strategy has many advantages. It helped me with:
        1) Controlling emotions that held me back from trading like fear of loss, lack of conviction in my ability, anxiety and doubt.
        2) Controlling emotions that tempt me to trade such as impatience and over confidence in my own ability due to some success.
        3) Controlling emotions that cloud judgement such as revenge trading to recover a loss.
        4) Developing a positive approach to trading by rejecting FOMO and any confirmation bias whereby I was looking to make a trade fit my entry.
        5) Trading with objectivity instead of subjectivity and discretion.
        
        Applying the WD-50 strategy has helped me to develop a positive approach to trading by:
        6) Increasing my planning time giving me more time away from the screens and setting alerts to tell me when to check set-ups.
        7) Improving my record keeping so that trades are logged as well the reasons why I took the trade.
        8) Improving my ability to respect DAX market structure and the fundamental reasons behind price movement.
        8) Improving my ability to identify when trades are likely to go against me helping me to cut my losses.
        10) Developing my understanding of risk and knowing when to increase and lower my position size.
        
        6.4 Assessing risk and maximising reward.
        This section is created based on statistics and experience gathered through back testing. I cannot recommend enough the gathering of statistics through a manual process of back testing. It was discovered that there are no consistent times of the day when larger wins can be expected. Entry times occurred during each of the major sessions, even at market close over the weekend. ATR is typically lower during the Asian session but entries should still be taken if presented. The experience gained is invaluable.
        
        Assessing Risk
        Please remember that no technical or fundamental factors should prevent us from entering with WD-50. The rules are the rules. If we find that the entry conditions all align, we enter. However, how much risk we are prepared to place on the trade may be adjusted based on technical and fundamental analysis. Below is a list of factors that have been known to drive the DAX market as well as areas of market structure we can use to our advantage. If we consider one or more factors to support our trade entry we may enter at maximum risk. If against the set-up, we reduce. Your trade's risk should be set according to your trading plan. I vary mine between 2.5 to 5.0%.
        
        Factors to consider when deciding risk at entry:
        1) Major, high impact news in the US, EU and Germany.
        2) Large movements in weighted sectors that make up the Germany 40.
        3) Financial report releases from heavily weighted companies in the Germany 40.
        4) Currency fluctuations in the Euro which will affect imports, exports and trade balance.
        5) Entry in a periods of consolidation when TP will extend outside "the range."
        6) Highly volatile entry candle whose momentum met the entry criteria.
        7) Trading against the trend in a corrective wave.
        8) Confluence from supply zones and demand zones at or after entry.
        9) Confluence from support and resistance at or after entry.
        10) Confluence from market structure such as at double tops/ bottoms and head and shoulders patterns.
        
        Example 1) If all conditions for entry aligned and price is moving away from a demand zone, I would enter with maximum 5%. Equilibrium theory confluence.
        Example 2) If all conditions for entry aligned and the entry candle was potentially breaking out of a range, I would reduce risk to 2.5% due to the fake out potential which was sometimes witnessed during back testing.
        
        Example of a losing trade which was entered on the second shoulder of a head and shoulders pattern.
        
        I highly recommend you carry out your own back testing to find out when to adjust your risk.
        
        Maximising reward
        Back testing results revealed an average ATR profit of 5.2. With this in mind we can confidently assume that profits may exceed past 2 x ATR most for a significant amount of time. Out of 69 winning trades 53 of them exceeded 3 x ATR. Even typing this now makes me realise, I should be setting the TP at 3 x or 4 x ATR. Putting this aside in order to extend our gains beyond a set target of 2 x ATR requires 1) pushing the TP further, 2) having an exit strategy. This falls under trade management and requires a lot of observation, skill and nerves of steel.
        
        Please understand that managing a "fire and forget" mechanical, rule based strategy goes against the rules to be followed. The reason this topic is being discussed is that during back-testing it was discovered that trades often continued for 4x, 6x, 10x, 20x ATR and even further. With this much potential available, should we be content with our 2 x ATR alone? Increasing our gains increases our profit / loss ratio. Managing a trade brings many unwanted emotions, subjectivity and discretion hence the extremely cautious approach.
        
        My only experience so far was a recent trade. The TP was firmly reached through the European session into the U.S session. The plan was to monitor price and exit when the price reversed below the most recent pull-back anchor point. I pushed the TP further before TP was hit and price almost immediately started to reverse. I got nervous and closed the trade manually for 5 points less than the original TP. Following one bearish candle price then continued higher until around 5 x ATR before levelling off and reversing. Emotion, uncertainty, subjectivity, regret, lack of conviction, doubt. All of them present because I moved the TP and exited leaving 3 x ATR uncollected.
        
        Example of a managed trade that resulted in a minor loss from targeted profit due to closing too early.
        
        If you wish to maximise profit, like I do, it is recommended to study, back test and practice Max Norbury's "AP Boss Strategy." Many more points are on the table so find your way to add them to your trading account.
        
        ____________________________________________________________________________________________________
        
        CONCLUSION:
        
        The creation of this tutorial has taken around three weeks to complete. During this time, I have taken a total of four trades, three wins, one loss and gained 9.77% on my trading account. There was a lot more potential to be gained and this is what I will continue to improve on.
        
        Any updates I make will be posted to this private tutorial.
        
        Through the time you have taken to read it, I hope that you found it rewarding. If you have any questions about the strategy, why I created it, back-testing stats or anything else please message me. The strategy records a 69% win rate based on 1:1 over 100 trades. Impressive right? I would value your feedback and comment.
        
        If you decide to use the strategy, even for a single trade, I would love to know how it went for you.
        
        My Best Regards,
        Gareth

TrojanGTX

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