Futures trading strategies are often taught incorrectly. Especially with this one, commonly taught technique, that will lose you money! These Futures trading strategies that can be used for Day trading, Swing trading, Stocks, or Forex.
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Today, we’re going to talk about not only futures trading, and futures trading strategies, but I’m also going to give you an example that you can apply to the Dow, S & P, the NASDAQ stocks, Forex, commodities, really anything you can chart. This is one of the most used indicators, and the most common way it’s used is absolutely horrible.
Futures Trading and Charts
What we have here, (see video), is multiple time-frames. We are looking at a 5-minute chart over here, and a 60-minute chart over here. So that’s problem number one, that the ratio of those two time intervals is way too far apart, in order to use the longer-term time-frame as a confirmation for the shorter term time-frame. A 5-minute to 60-minute, that’s a 1 to 12 ratio.
What’s happening over here on the longer-term chart is, it’s much slower. People will teach futures trading that you should use a long term chart as a confirmation, to hold veto power over the shorter term time-frame. They’ll say, “Well, the long term chart is more prevalent, it has domination in the market. It’s more accurate or reliable.” It makes sense intuitively, so everybody buys into it, but there’s no logical reason behind it.
At Top Dog Trading, we’re looking for the alignment of money flow, so that all the various uncorrelated energies of money flow are in sync. Just like you’re jumping into a stream with a strong current. That current is just uni-directional, and we go with the smart money. Using multiple time frames is fine, but what’s not fine is to use a longer time frame that is much slower. That negates the power of the long term charts, and it’s just too long of a period of time for it to confirm on the short term charts.
Futures Trading and Trend
This is the 50 period, simple moving average. That’s a common trend indicator, but the problem with using any type of trend indicator whatsoever, is that trend is not just direction. Trend is by definition, ‘The extended general direction of something.’ That is literally Webster’s dictionary definition, so it’s a long term move by definition. That’s important when we’re trend trading. We are looking to trade in the long term direction so we get a big reward. We want a small risk, and a big reward, so that’s why people trade trends.
If you’re going to use trend on the longer-term chart to confirm the trade on the short-term chart, you’d never get a good set up. This is moving up all day long. In that same day, the 50 MA is moving down all day long, and that’s because it is a lagging indicator. All trend indicators must be lagging indicators. You can’t measure the extended general direction of something until it’s moved quite a bit, to confirm that you have an extended move.
The real fiasco is when you use an already lagging indicator, on a slower time-frame, such as the 60-minute chart, it’s going to have zero correlation. In that sense it actually ends up hurting you, because it can keep you out of otherwise good trades. It would keep you out of the whole day, so it can hurt you in that way. It can also be information overwhelm, so that’s just one more piece of information that you’ve got to consider with futures trading.
Final Thoughts
Whatever trend indicator you’re using on the long-term chart, you don’t want to use a trend indicator to confirm. You also don’t want to use a ratio more than one to three between the short term, and the long term. I use multiple time-frames, one to three ratio, but I use a faster indicator than trend. I use a potential leading indicator momentum, and I’ve done many videos on momentum.
Our time is up for today, because I try to keep these videos to about 10 minutes. Check out some of my many other YouTube videos on momentum. I have videos on the RSI, which is a momentum indicator, and CCI. Those are much better for confirming on a longer-term time frame.
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It’s good to share good things with good people. I have a very specific trade strategy that I want to share with you. The Rubber Band Trade Strategy. It’s one of my favorite trade setups that I take to this day. It works, and has been working for decades. I’m happy to share with you all the rules, the entries, the exits, all the details of it. It’s about a 26 minute video that I will give you absolutely free. Just click on the link in the top right-hand corner of this video or the link in the description below. As soon as you do that, I will email to you the Rubberband Trade Strategy.
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BTW, if you’re interested in the indicator that I use personally for very precise entries and exits, I’m happy to share that with you. Just send me an email at support@topdogtrading.com, and I’ll show you how to get access to that indicator.
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Also, I’m giving away one of my favorite futures trading strategies that work in trading the markets. Just fill out the yellow form at the top of the sidebar on the right. Once you do that, I’ll personally send you an email with the first video.
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