Emini divergence journal

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no_pm_please

Since I don't see any other divergence-based journals, I thought I'd post one. In it I'll post a basic method with objective rules. Well there's a tiny bit of subjectivity. I'll go through the setups, stop loss calculation, profit target, and bar to get long or short.
I also plan on posting what the risk/reward was of each trade and keep a cumulative log of wins/losses, profits/losses. If you're only interested in whether this method makes any money then come back in a couple of weeks and check the last entry.
I'll be posting screenshots with annotations so it's pretty easy to see the trade develop. If I have time, I'll do most of the work in realtime.

With this method along with some advanced stuff I've added, I've taken a 25k account to over 200k in about a year and a half. I trade with 2% of my capital risked per-trade. I've had more than 10 winners in a row and I've had more than 10 losers in a row. Overall this method has given me a larger profit than loss on each trade and a 70% win rate. I only get 1-2 trades a day on average, so if you're a scalper this is not the journal for you.
 
If you want to see what I'm seeing during my setups, here's my configuration. I'm using TS2000i with Esignal as the datafeed. I subscribe to the CME. My cost is $182/mo. Someday I'll get around to buying a yearly subscription. My signals all come from the SP market (not emini). I don't know if they'd be exactly the same. I don't see the noisey spikes in the pit prices so that's what I use. I execute all trades in the Emini which is usually within .25 of the price I see on the SP contract. If not, I pass on the trade. My screen uses 5 min. bars using only day session data. My time is set to Chicago time so all times on the charts are Central time. I have three indicators on my screen. The first is the Keltner Channel with 20 period and 2.5 ATR's (average true range) based on the close. The second is the Chaikin Oscillator using Volume, 3 for the Fast and 10 for the Slow. The third is a 14 period ADX. My window is set to 8 bar spacing.

Here's what my basic screen looks like.
 

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The basic method is pretty simple. It gives me plenty of warning of a upcoming trade so I know when to get down to business.
The setup requires three basic things. 1). The ADX indicator must be over 30. 2). The Chaikin Oscillator must be showing divergence from the price. 3). The price must be near or outside the Keltner Channel.

Usually price is not a problem. I just added it as a rule to avoid taking bad risk/reward trades.

Once these 3 conditions are met, the trade is executed after the first full bar that doesn't set a low/high in the direction of the trend. I use the open of the second bar to base my slippage estimates. Sometimes I get better fills and sometimes I'm off by .5. They seem to balance out over time.

The amount of risk per-contract is determined by subtracting the high from the low of the Keltner Channel at or near the time of the trade. Then 1/3 of this number is used as the stop loss amount. For example, if the Keltner Channel is 12 pts. from low to high, then the stop loss would be 4 points. I risk 2% per trade, so if I have 100k then .02*100,000 = $2,000 risk per-trade. The number of contracts would then be 2,000/200 (4*50) or 10 contracts.

I'll post examples of the method using the trades from the beginning of August to the present to get used to the idea. Then I'll start posting everything as close to realtime as possible.
 
The first trade is marginal. I didn't take it as I like to see clear signals. I'll go through it to show the pieces as they fell into place.

At the beginning of the day the ADX was already above 30 (from the previous day) (1. on the chart).
There was no divergence when between the volume and price when the day opened so it was time to watch and wait. (2. on the chart).
 

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Quote from no_pm_please:

The first trade is marginal. I didn't take it as I like to see clear signals. I'll go through it to show the pieces as they fell into place.

At the beginning of the day the ADX was already above 30 (from the previous day) (1. on the chart).
There was no divergence when between the volume and price when the day opened so it was time to watch and wait. (2. on the chart).
More...

why do you use theleft side of price.?
 
At 3. divergence between volume and price starts. With the yellow it's pretty easy to see. Price was falling while the oscillator had bottomed and had turned up. In real trading I didn't see much of a divergence and passed on using it as a setup. I like to see trades clearly. Once divergence is noticed I have to figure out my stop and how many contracts to trade. Since the bars are 5 min. apart it gives me plenty of time to do a few calculations. At 4. the width of the Keltner Channel was 11.3 so I use 1/3 of it (rounded to .25 for emini) or 3.75 for the stop loss amount per-contract. The risk in this trade will be 3.75 from point of entry. I use stop orders for the stop loss. Once the divergence starts I look for the entry trigger. In this case it would be the first bar to not make a new low. At 5. the first bar to not make a low shows up. Entry would then be as close to the open of the next bar as possible. In this case, the open was 977.8 so a entry around 978 was expected. The stop loss is entered right after the entry and would be at 974.25 (assuming I got a 978 fill).

I hope this isn't too much detail. If I'm going to share I thought I should make it as clear as possible.
 

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Quote from bubba7:



why do you use theleft side of price.?
More...

I don't know what you mean? Price is to the right near the top with the Keltner Channel. New bars go from right to left so I leave the price on the right to see where we're trading. To get a exact price I use the drawing tool with the vertical chart status. In realtime all I need do is se the top line of the chart with the realtime price.
 
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