Building a good trading plan is like building a dream home. You cannot build a home with just with a saw or hammer. Instead you need a building plan which encompasses all the other components for building your dream home — a foundation plan, an electrical plan, a plumbing plan, a layout for the rooms,and the list goes on and on.
This same conceptapplies to building a trading plan.
A trading plan also has many components – a money management plan, risk to reward plan, entry plan, exit plan, stop plan, and an emergency plan. And, of course, it has to complex enough to protect your account, while being simple enough to follow on the live edge of the market.
As most of our clients will tell you, the THD method encompasses all of these things and more. First, we realize that, in addition to offering great tools based on the technical analysis concepts of J. Welles Wilder and Richard D. Wyckoff, you need to build your trading skills on the live edge of the
market.
ADX Magenta Peak Magic With Price Action and Volume Analysis
Most of us know how the J. Welles is a useful tool for measuring the strength of trends. However, most traders are not able to decipher all the information that Wilder’s ADX encompassed within the three lines (Average Directional Index, DMI + and DMI-). Instead they are stuck in a state of perpetual analysis on the live edge of the market.
Gail Mercer, Founder of TradersHelpDesk.com has been trading using the combination of ADX, RSI & Volume Analysis in her trading. Gail realized that the squiggly lines were causing the issue of “perpetual analysis” and reprogrammed the ADX to be a color-coded ADX line and histogram.
This simplified the process of determining whether the market was trending or not trending. Then she added magenta, both in the histogram and as a dot on the ADX. When the ADX makes a pointed top with a magenta dot, this signals that price will pull back to the ATR stop (Average True Range).
And, since the ATR provides the first level of support and resistance, price will normally stop and bounce at the ATR.
Visit http://www.tradershelpdesk.com for more details.
