Daveatt
Education

Algorithm Builder - INDICES - SPX500 - Review Oct 18th, 2019

FX:SPX500   S&P 500 Index
Hello traders

I. Daily tutorial publishing challenge officially begins

Starting today, I'll be publishing every night what were the setups given by the Algorithm Builder Indices.
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You'll find more information about that script in this script signature.
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II. Wisdom of the day

Last Friday was the Triple witching hour day. That is the day where the US contracts come to expiration on the US market - this event happens once a month.
Hopefully, only once a month, because this day is often particularly hard for traders to trade.

Those days are the expiration of three kinds of securities:
1. Stock market index futures ;
2. Stock market index options;
3. Stock options.
The simultaneous expirations generally increases the trading volume of options, futures and the underlying stocks, and occasionally increases volatility of prices of related securities.

III. Why a 1-minute chart?

The indicator won't give more than 3/5 trades per day even. This is not a scalping trading method, it's intraday and based on smoothed indicators for entering in a strong trend only.
Those are the most secure trades possible because:
- the Algo Builder waits for a strong confirmation and will avoid the fakeouts
- the 1 minute allows to enter very early. This point is crucial.
We made it so that to enter early but with a minimum of security.

IV. SPX500 - Signals of the day


2.1 Morning trade

1. 8:45 am
We had a difficult move to take because in front of multi-timeframes resistances. and US stocks opening 45 min later.
What I usually do, is to wait for a pullback near the EMA 20 which has a few huge benefits:
- generally gets me a better entry price (lower for a long, higher for a short)
- reduce the distance between my entry price and stop-loss - hence reducing the risk of the trade
The Algorithm Builder - INDICES calculates the stop-loss internally, based on the price where the signal appears

2. 10:12 am and 11:45 am

The IDEAL scenario for the Algorithm Builder. Leading trend is red, short signal, no supports near, a great setup with a decent risk-to-reward ratio.
When we're in the same direction as the leading trend and the next algorithmic SMAs are a bit far, those are the moments where I know that my reward is far greater than my risk.
Would I overleverage or increase my position size drastically anyway knowing this is the Triple witching hour day? Maybe not :)

The three morning trades gave about 270 pips

2.2 Afternoon trades

1. 1:05 pm

We now see a BUY against the leading trend in red. Which means, the trend is not too strong to go crazy yet.
The method tells to wait for a pullback near the EMA 20 to enter with more security

2. 3 pm

In the same direction as the leading trend but in front of MTF resistances. Even waiting for a pullback allowed to grab the last 30 pips of the day

To quote Ice Cube - it was a good day :)

All the best,
Dave
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