Firstly, I say "rule based". This means that although we are discretionary traders, we create a set of rules within which we trade. Why rules? So that we can repeat what works. We don't reinvent the wheel every trade. The basis of how I trade is to identify the trend and trade the pull backs. This means I need to know when I have a trend and I need to be able to recognise a pull back. This means that we need rules. How rigid these rules are depends on us. It depends on how and what we back test. My rules need to allow me to be discretionary in my trading, but rigid enough to meaningfully back test.
There was a comment on Friday by a reader who reported that friends of his said my methodology would not work. Kind of the wrong answer. A trader needs to conduct his own testing based on his own interpretation of a methodology. He then doesn't need to ask anyone anything. He knows. We have a fairly high failure rate amongst new traders. It's partly because they don't put in the right effort to define what they do based on successful back testing. If you don't have successful back testing then you are only hoping. The traders who send me emails that they have reached CP after reading the blog are the ones who also put in the hundreds of hours of work before they risked their money. Defining rules are part of that work.
What a wonderful start to the week!!! The chart says it all. I'm using the Renko with wicks known recently as the Better Renko for those of you using Ninjatrader.
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