As I noted on my About page I was first bitten by the trading bug several decades ago well before the internet age.
Back then I had no idea of what I was doing except to know that trading with the trend was the Golden Rule. Naturally I made many mistakes and paid the usual price.
So over fifteen years ago I decided to try to find a much more reliable technical system of analysis that was possible with today’s internet capabilities. That was when I ‘discovered’ my Tramline Trading system that consists of three main pillars: Tramlines, Fibonacci levels and basic Elliott Wave Theory.
Tramlines It is a curious fact that when you view a price chart it is often possible to connect successive lows in a straight line in what we call a trend. That applies over all time frames.
And it is sometimes possible to connect the highs in a straight line parallel to that trend. If so then you have a tramline pair. Your tramline pair can point up, down or straight and they are very useful!
All trading has taken place between your tramlines and the expectation is that the market will continue to trade between them until one of them is broken. The tramlines then act as likely reversal points - a valuable insight. If broken that can provide another trading signal - another valuable insight.
Fibonacci levels Markets move in waves up and down and these waves are often related to each other by the Fibonacci ratios. I have found that the most common wave retracements are at either the 50% or the 62% level. That is a valuable insight especially when a precise trade entry or exit is sought.
Elliott Wave Theory Some traders view its study as akin to taking a four year course in Medieval French alchemy! But the basic principle is simple: main trends are built from five waves - three (1,3 and 5) going with the trend and two (2 and 4) corrective to the trend. The idea is to correctly identify the wave labels and hence direct your trading stance. Waves 3 and 5 are often the longest in terms of price - a valuable insight. Major gains can often be captured on third and fifth waves.
Third waves are usually the longest and strongest and basically take no prisoners. Negative news is usually brushed off in their mission to extend the trend regardless of the news. Third wave moves usually extend far beyond what most believe possible. It really is a case of climbing that famous Wall of Worry (or descending the Slope of Hope in bear markets).
This is mainly a visual study and those with good visual skills can assess almost any chart quickly. Of course, the wave labels are often not of textbook form and there are several rules and guidelines to aid you.
I view the Elliott Wave Theory as offering the most accurate way discovered so far of to understand how markets evolve. With skill, it can often make astonishingly accurate predictions of when markets will turn and how far they are likely to travel before the next turn. This information can be invaluable for swing traders.
If you wish to learn more I highly recommend the classic Frost and Prechter book Elliott Wave Principle.
The critical input from sentiment Markets reach highs when bullish sentiment becomes extreme. And they reach lows when there are hardly any bulls to be found. That is a valuable insight and a rough reading of sentiment can be gleaned from a scan of the headlines of the financial press. Also there are many technical indicators available to judge where market sentiment lies in real time and I often refer to them in my posts. So why not join us on our journey?
RISK MANAGEMENT
Controlling your risk is of fundamental importance to traders and investors alike. I have a simple and effective method of controlling risk:
The 3% Rule Limit your maximum potential loss using a stop loss to no more than 3% of your account balance when placing the trade. This applies to small and medium sized accounts. Larger accounts can use a smaller % figure
The Break Even Rule If and when your trade is in good profit, move your stop to Break Even (BE). You now have a ‘free ride’.
And when in better profit, move your stop towards the market in a trailing stop manner until stopped out where you take your profit.
The Split Bet Strategy A simple version is to divide your initial stake into two parts. If and when the market behaves as you wish and reaches an important price target that you have identified then you take profit on one part and leave the other part open with its trailing stop. Having money in the bank is such a comfort!
This is a relatively stress-free style of trading suitable especially for medium to long term traders and investors. Much anxiety can be generated by continually trying to pick tops or bottoms. And stress is often a barrier to success.
For a lot more detail into my methods, get a copy of my book Tramline Tradingwhich received rave 5-star reviews on Amazon when published.
