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Tuesday, December 18, 2012

Small Range Setup

New Setup : Small Range

This is an old setup focused to trade trending and/or impulsing markets in the direction of the trend.
The Entry Type uses Stop Orders as it is intended for fast volatile never returning markets like crude oil or gold.
This setup uses the following Tools :
  • A slow Moving Average to define the Trend (blue line)
  • An envelope around a fast moving average to define the trade / no-trade condition
  • A channel to verify that the entry bar is making an extreme of the move
  • A tool to calculate the range of the bar ( not used on range bars)
When the blue line is all outside the envelope, the setup has a trend. Otherwise it is in neutral state ; gray bars = do nothing.
If we have red bars and current bar is touching the upper channel, then we have a possible short entry.
When not using range bars we can add another condition ; signal bar must be of small range ;

The short entry is a Sell Stop some ticks below signal bar ( usually 2 to 3 ticks ).
If at next bar we have a better entry we move the order to new place, like on example above.
Once the entry is filled, the stop should be placed some ticks above the signal bar.
Using range chart is easy for this setup because the stop is a fixed value ; the range of bar + 2 times the offset. On a 9 range CL chart using 3 ticks as offset, the stop is 15 ( 9 + 2 x 3 )
I have a developed a special indicator for this setup on