Scott Dorman 4 Hour Trading Strategy
Scott Dorman
More Information
I am a professional trader. Risk control understanding through position size is what I feel is the most important attribute to have. Equally as important to that is to become dedicated to executing a trading strategy and not to be impatient. I can be contacted on my email which is cannestrader@outlook.com or follow me on twitter if you want to see what trades I am taking and when I am getting out in real time while I am doing it. My twitter handle is @Cannestrader74 .My trading strategy is available for you to read.
| Trading Experience: | 5 Years + | |
| Trader Type: | Day Trader | |
| Markets Traded: | Indices | |
| Skill Level: | Professional | |
| Preferred Approach: | Momentum |
Software/Technical
| Indicators Used: | MACD, Moving Averages (1, 2, 3, Lines), Stochastic (Slow, Fast) | |
| Preferred Trading Time Frame: | 1 min, 5 min, 15 min, daily |
Education
| Favorite Trading Books: | Market Wizard books |
I mentioned that I would post a trading system that works, for the traders that wanted to
Follow pretty much the same methods I use. Obviously I know as well as anyone that there are multiple ways of making money on the markets and that some of the regulars on this forum use different methods. I don’t for one second think what I am about to post is the only way to do things. I am well aware that other traders use different systems and that more than some are very successful. That being said so am I and I think over the last six months I have demonstrated enough skill on these pages to have what I am about to write to be treated thoughtfully. I am posting this to try and help those traders who are not generating a cash flow and as most of the forum know already I am a professional trader who is doing this. I am not interested arguing the point in some of what I am about to write either. If someone disagrees with any of it, then bore someone else with your opinion. Sorry about the hard line on this but obviously we all know what forums can be like and I have no intention of posting this information with the intention of helping and tolerating negative posts from amateur traders. It goes without question that this does not apply to the vast majority of the regular posters here who always posts with respect to each other and again I am sure those very same traders who I think of as friends understand why I have started off this post in this manner, and it certainly doesn’t apply to them.
Part 1/4
DAX Example Chart
Part 2/4
The second part of Scott's trading system. This is part two of a four part post on the trading system.Its a good idea to cut and paste this into a word processor on your computer.
I need to tell you a story now. Essentially whilst trading this system I need to take you completely away from what you think you know about trading and reframe your thoughts. I could get all technical about what you are looking at on the screen that you have just set up but there is a much easier way to do that. Look at your chart now and focus your attention on the top line and the bottom line of the bollinger band( if you have the capacity in your software to make those lines thicker than the other lines then do so).
This is now to be viewed as a river( so picture it to be like the Thames, the Nile, the Amazon, you get the idea.) When you look at a four hour chart over say a month or so you will see that the the bollinger band between the upper and lower lines is shaped like a river and it is essential for this trading system that you view it as such.
I am going to a step further now and say if you cant see the bollinger bars as a river then you are going to fail to grasp this system and you might as well get used to that idea right now. So it best if you just humor me and accept this condition right now and we move on. So now that you have done that and this is a river, what we need to do is just go with where the current takes us. We dont go swimming against the current(holding a short trade when the market is moving up or vice versa), we dont go reading a newspaper or news report on where the current is going to take us on a given day (the person writing may be wrong)and we dont listen to what our friends view is on where the current is going to take us either( unless they are a multi millionare trader its unlikely they know any more than you). What we do is get in the water and go where the water wants to take us.
Sounds simple doesnt it. Well it is. If you are prepared to accept what I have just said to you , you have now eliminated the possibility of holding a trade against the trend for 100's of points and losing lots of money in one trade. You have also put yourself in a situation where you are going to be able to benefit from being in a trending market when the market moves in a given direction, you have set up the main core of a trading system, you are now in a position to take advantage of momentum in price movement and by setting it up on a four hour chart you have gotten yourself outside of the clutches of most HFT traps. In other words you have the opportunity to make 100's of pips when the chance is there to do so.
In post three and four I am going to add to what I have just said. Obviously you know there is more to trading and being profitable than just this simplistic concept . However I know that too OBVIOUSLY, So I will post again in another 24 hours the next step and that will be what to do with the moving averages, the slow stoch and the macd. Again it will be in the river context. What I am doing in writing this is exploiting what you already know how about how rivers work which should be the same for almost all people who are reading this. I am going to MAKE you within the week find it very very hard indeed to justify to yourself why you want to take a trade in a direction that the market isnt moving in. Then with position size and stop losses I am going to show you how to sail the river
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Part 3/4
This is part three of the trading system out of four posts. Again this is just my trading system that I use and is not intended as financial advice. I will see if this comment helps this post stay up. So we are up to moving averages, slow stochs and the macd. In the context of the river the moving averages are rocks that the waves are going to be hitting against and bouncing off. This is also the case for the SMA of the bollinger band which is of course the mid point of it.
So all in all there are five rocks that the current can hit against in the river, the four moving averages and the SMA of the bollinger band. So lets put everything that has been discussed together now. The Index(DAX) price whatever that may be at a given time is to be thought of as the rivers current. The only thing the current will hit in the river is these five rocks or the sides of the river bank(the top and bottom line of the bollinger band).
How does that work in a trading system. It is to be assumed that the current will keep travelling in the same direction that it is currently traveling until it hits one of these five rocks or either one of the river banks.At this point the market will hit one of these things and it may or may not change direction. If the current hits any of these points and at the END (very important) of the 4 hour candlestick the final price finishes beyond it, then it is to be assumed that the current will keep travelling in the same direction that it was previously doing so until it meets its next obstacle(This applies to the five rocks only and not the two river banks). Perhaps you could say it just floated over the top of the rocks. Now occasionally you are going to find that when the water hits one of the river banks it is going to keep going. You can think if that as a flood. Almost always within the next one or two candlesticks you will find that the current will find itself back inside the river .
As for the Slow stoch and the MACD then you can think of them as river guides. When a river hits a rock or a river bank and the slow stoch or the MACD are rolling over (or just changing direction) then you can think of that as very good piece of advice that the market is going to bounce off the resistance line too. Now I am going to leave it at that today. The basics of the system are now in place. Tomorrow I will talk about the position size and the stop loss component part of it which acts a safe guard when unexpected things happen and allows me to take advantage of the good parts of the river where I can take larger positions. Talk to you tomorrow.
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Part 4/4
So the first discussion point is going to be the stop loss. We are looking at a raging river Ladies and Gentleman when we look at the Four hour chart in the way we do. We are not looking at a stream where you take your kids for a swim...... There are no family pets in this river having a paddle either...... I am quite confident that the senior citizens retirement group doesn’t come to my river for their holidays........ Its a violent river where people use it for Olympic canoe racing. Occasionally there is a cocky showoff type person who tries to impress his friends and gets in for a swim thinking he is good enough to outsmart everyone else...... My rivers gots sharks in it, its got piranhas that eat people too and I am quite confident there are crocodiles in there that love eating no it all people who think they are somehow special. The cocky showoff type person doesn’t get out of the water alive in my river. The only way to protect yourself is to use some safety equipment and that is my "StopLoss" anti shark, piranha and crocodile flotation device. It repels these creatures you see. If you don’t use it then you WILL be someone’s lunch. Are you hearing what I am saying to you loud enough here????? WE WILL BE USING STOPLOSSES. Its not amateur week and 99.9 percent off you are nowhere near good enough to make a lot of money without using one. I know for sure I am not good enough so seeing as how I am the one writing this and your reading it I suggest you accept that. (KEEP REREADING THIS UNTIL IT SINKS IN TOO) Your stoploss is usually around 10 points below the lowest point of the two most recent Four hour candlesticks that have finished forming .You don’t by the way enter a trade until the start of a new 4 hour candle. I will allow you to enter no more than 10 minutes early if it is a runaway current. I didn’t say anything about 11 minutes however. So you need to make sure BEFORE you put your trade on that you know how much money is being risked should the trade go against you and adjust your position size accordingly to meet your comfort levels. Also notice I have said the 4 hour chart. I didn’t say anything about the 15 min or the hourly or the Daily. The river exists on the 4 hour chart only. It doesn’t exist on the other time frames. You need to accept this too. It doesn’t exist because as far I am concerned Computers in Investment banks, Hedge funds, High Frequency Trading etc manipulate the markets. This time frame I have tested and I have found to be the most suitable as most of these computer systems manipulate the smaller time frames and the Daily and Weekly are manipulated by the Central banks and the Reserve banks. Again this is just my view but my point is, this system works on the 4 hourly charts only in my view.
Ok now that you have accepted the stop loss part I am going to speak to you about position size. There are certain parts of the river that the currents just flow quickly and are its safer to take larger position sizes and there are other parts of the river where it is more dangerous. I don’t think it is going to surprise anyone to learn that when you are in amongst the rocks it is more dangerous than when you’re not. Now by me writing this I know you are looking at your FOUR HOUR chart and you have interpreted that if there are a couple or more moving averages all around the "Current" then it is going to be risky to work out where the market is price is going to head to next so you don’t want to be in a full position or sometimes even any position at all at these moments. (YOU see its not that difficult and you really already know this) There will be other times however where you will be in open water and the current will be strong. These are the moments where you take the larger position. The best trading time is when the "Current" has gotten past the rocks and is heading to the River bank. That’s usually a very strong time and the best money is to be made there. Now I want to talk to you about position sizes. A full position in a trade is 4 blocks, A half position size is 2 blocks and 1 block is a quarter of your position size. So you trade size will be one of these three. Depending on what your account size is a full position might be worth $100 US dollars, a half $50 and a quarter $25. For someone else it may be $4, half would be $2 and $1 for a quarter and maybe a larger trader would have $10000,$5000 and $2500. It makes no difference. What matters is that when you are trading around the rocks you have only a quarter size position which is one block. When you are in open water and your heading into the river bank then take it to four blocks if you wish. When you are feeling a little uncertain half you position size if you want. You will be looking to take advantage of the good parts of the river and being cautious at the tricky parts. You don’t look at the river as if it is consistent all the way through. Its not YOU EXPLOIT with bigger position sizes when it’s safer to do so. That’s how you make money over time. What I will be doing on Monday is posting on the Forum when I take a trade and when I get out, I will do this every day next week. I suggest that next week you compare my trades to what your charts are showing and see if you can work out for yourself based on my description why it is I take a trade and why I dont. By the end of next week I am confident that if your serious about trading, you will have put in the effort to try absorb what I have written. I am confident that at the time you will be able to see for yourself not only positive results in your trading from a dollar point of view, but you will be able to reverse engineer so to speak my River story and the trading system will reveal itself to you technically also. So this is the first time I have tried to write a trading system in text, with no charts and without being in the same room as the person. I hope you have the basics of the River Trading System in your mind now, I will as I said be trading it online next week to give you a more practical feel for it in Real time. You should have enough information now to have a pretty good idea where I am coming from now so that next week when I take a trade it should not so much come as a surprise to you but rather a confirmation for you. I want to wish you all the best with it. I am just an email away too. I won’t be cluttering your email inboxes with marketing stuff or anything like that. I am not running a business where I require that. I just felt inspired to share some ideas for free . I quite possibly won’t even do this sort of thing again. If your reading this and it helps you well I would like to think that you are doing the right in your lives and life wanted you to have a break. Secret That Change Your Life Click Here
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