Raghee’s Trading Plan
I trade for financial freedom. I realized at a young age that I had a strong desire for independence.
My approach is trend following. The trend could be price - intraday or end of day - but also a macro trend. Trends offer the most “predictable” price action. I add to that the indicators I have created like the 34 EMA Wave and GRaB candles, along with other tools such as volatility studies like the Hourly Price Movement Ranges, and VScore.
My goals for trading are predicated on trend and volatility. You can not take from the market what it is not willing to give. My expectations are higher in trending environments and lower in choppy, range bound markets. Adapting to each environment is the cornerstone of my trading.
Objectives are always, identify the market trend first, if it is not a good trade, do not take it! Simple advice but not heeded enough. Secondly, I want to understand the risk I am taking. I utilize my volatility analysis that is based on historical volatility price movement. Identify historically price movement ranges, likely reward levels, and balancing that with intelligent risk-taking. Taking risk in a trending market is different than taking risk in a choppy market - so the objective of knowing the behavior of the underlying market is key. Without that the application of indicators as well as using a particular strategy is left to dumb luck. Risk-taking and dumb luck is a surefire combination to a short trading career.
Futures, Futures Options, Forex etc… My rules apply to any market. There must be volume, also known as participation - lots of it. I prefer to trade markets that are open as close to 24-hours as possible. Forex and Futures (and Futures Options) are my preference. ETF options trading is actually a very hand-in-glove fit for Futures Index traders since the weighting of ETFs mimics those of the Futures Index contracts like the S&P and NASDAQ, minus the leverage trading futures provides. I have spent a career spanning over three decades focusing on where the trend and participation is and this changes. I am, and I teach traders to be fluent enough, to flow from market to market and be able to trade anything.
The daily and the one-minute chart. I will either focus on the daily time frame - which I believe is the most psychologically relevant time frame - or day trade a one-minute time frame. Now there is some flexibility here. Instead of a one minute chart, I could use a 5 or 15-minute, but the idea is one longer time frame and one short-term intraday time frame and that is it. Finding which time frame is a matter of understanding the historical price movement and the risk involved in that movement. It comes back to the historical volatility analysis process I use and the underlying trend.
The setups I trade are basic. I have developed a process of entering trades into retracements in up or down markets. I also utilize a process to “fade” resistance or support in choppy markets which I coined “distribution fades” for the market trend environment and the way I will enter at the top or bottom of the range. I will also daytrade which, because of time and volume, has some unique setups apart from the daily time frame trading I do. What is most important is that the indicators I use allow a trader to not have to draw subjective lines and endure prolonged learning curves. How? The automation of the indicators I have created and use afford even a new trader to see the levels and setups on their chart; when the criteria for a setup appears, it is process-driven.
Entry rules are simple: In trend, wait for retracements. Some call them bounces, pullbacks, or corrections, but retracements are probably the most accurate because it is a temporary, measured move against the dominant trend. For non-trending, choppy markets it is important to recognize the trend that was, and favor that for the entry even when the trend has been broken, or as I like to say “Respect the trend that was.” We look for the top and bottom of the range in chop. Intraday the focus is the 1-minute chart which is primarily about the first two hours of the day using time as well as ranges created during the first 30 and 60-minutes after the bell. Volume-derived price levels using my VWAP Max Trio offer traders an edge in identifying “submarket trends and levels” that traditional price dependent levels cannot see. The key to entry is having a checklist, a process, with specific criteria needing to be met before entering the trade. The fewer the criteria met the smaller the position.
Stop losses are something I have taken a very different view of since I began trading. I consider a stop loss to be a “Point of Validity” and not a level to exit at a loss based on dollars or a percentage. Sure those should be taken under consideration, but not the primary reason for the exit. Validity means there is a reason I entered the trade, and therefore the reason to exit is based on the entry no longer being valid. Now, if that level exceeds the dollar or percentage maximum allowable for the account, the trade can be taken with smaller size, a different asset class (ie options versus futures), or not at all. Stop losses are also best defined based on historical volatility. There is a natural and repeating range that most markets move within. You can smother your trade by placing your stop-loss “too close”. You can also risk “too much” by entering too aggressively (very far from the entry) and needlessly beyond the symbol’s historical range.
Taking profits, and the mindset behind my approach, is very similar to stop loss placement. It’s based on historical price movement and it is not based on dollars or percentages. If a market has a historical price movement range of 5 points, that knowledge should be factored into the location of the profit target. Another feature to my taking profits, is the process of immediately moving the initial stop loss to a breakeven which allows a trader to “not let a winner turn into a loser.” Another thought behind taking profits is related to risk control. Placing the 1st target “too far” away delays the move from the initial risk-based stop loss to the breakeven, and this causes some traders to see profits vanish because they were looking for “too much”. What is too much? Typically, and most measurably, beyond the typical price movement range. Another way to manage winning trades is to bracket a winner after the first target with a second profit target and a trailing stop. That way, either way, profits can be locked in. Show me your stop, and I will show you your P&L!
Risk management is really about risk-taking. The only “risk” we can manage is the risk we are willing to take. These are 1) If we will enter a trade (discipline) 2) How much we will enter the trade with (position sizing) 3) From what price we will enter (strategy). The rest of the risk is up to the market. This means we can track volatility and volatility ranges, track economic events that are likely to trigger volatility, but that is observable, not controllable. The Risk of Ruin (a.k.a. “blowing up your account”) is 50% of your account. I taught a class called “Market Money Math” that discusses how and what to measure in terms of risk and how this influences position size and affordability of a trade. Bottom line: Know what risk you can control and focus on that first.
Pre-market activities include scanning ForexLive, scanning financial Twitter, scanning the pre-market levels, and major themes for the day.
Post-market activities are not really that different because forex is a 24-hour market and futures is nearly 24-hours, so the routine is the same especially if I am trading Asian session.
My preferred tools are the indicators I have created like the GRaB candles, 34 EMA Wave, VScore, and Autochartist. As well as the tools I created from that, called HPMR (Hourly Price Movement Range).