Learn the Holy Grail trading strategy and you'll be on your way to finding winning trading positions. The goal of the Holy Grail stock trading strategy is to help you discover how you can take an easy trading setup and make consistent earnings. We're also going to go over how, contrary to what some sources may declare, there is no Holy Grail in trading.
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When it comes to trading, most traders focus on the prospective earnings as the main metric. There's absolutely nothing wrong with wishing to generate income. Nevertheless, professional traders have a different state of mind as they focus more on managing the capital they already have. If your goal is to double your wealth overnight, you won't be in the trading game for very long.
One group of traders focuses on the Holy Grail, while the other group of traders focuses more on managing threat. At the end of the day, you will not pay by constantly concentrating on your PnL. Both profits and losses require to be efficiently handled. You're going to end up being a profitable trader by concentrating on the trading process and the marketplaces.
Exists a "Holy Grail" in Trading?
The Holy Grail stock trading system is a system that always produces successful trades despite the marketplace environment or asset class traded. It is a theoretical idea that-- though it doesn't exist in practice-- can help you design a more lucrative trading strategy to call your own.
No matter just how much you fine-tune the entry rules or no matter the mix of indicators you use, you're not going to discover the Holy Grail. Trading is inherently risky. Nevertheless, danger can be still be successfully handled.
Some traders might rightfully mention that arbitrage in trading can result in risk-free positions. However, arbitrage is not something that the ordinary day trader ought to develop their method in pursuit of.
3 Reasons There is no Holy Grail Trading Strategy
In the trading world, there is nobody size fits all approach.
For instance:
A trend-following strategy will do improperly when the marketplace is varying.
Secondly, the markets are continuously altering.
The cost action resembles the ups and downs of the ocean. It is continuously changing both in intensity and duration.
Third, there is no wonderful formula for trading since no one can get ready for all market situations. The efficient market hypothesis is wrong because if the market were efficient certainly, there is no chance to earn a profit.
These 3 factors clearly demonstrate why there is no Holy Grail in trading.
Even price action trading methods bring their own share of dangers.
Price Action is Not the Holy Grail Stock Trading
Don't get me wrong, mastering rate action trading strategies can be extremely beneficial.
However, the cost is full of noise, and cutting through the sound can be extremely challenging.
We're not saying you can't trade on the rate action alone.
Quite contrary.
We hope we busted another misconception that is so widely spread in the trading community.
We're going to demonstrate how one basic trading pattern can be used as the Holy Grail trading strategy.
Initially, the name "Holy Grail trading strategy" was offered by Market Wizard Linda Raschke.
This is a really simple trade setup that deals with any instrument (stocks, forex, products, cryptocurrency, etc). And, simply to prove to you that you can find an edge outside of the price action trading techniques, the Holy Grail trading system utilizes two technical signs.
Initially, let's lay down the trading tools we need for the Holy Grail trading strategy:
See the stock chart listed below:
The ADX indicator is a technical sign utilized to assess the strength of a pattern. In theory, the more powerful the pattern is the higher the ADX reading will be. So, the ADX is a non-directional indicator or a strong pattern indication.
Here is how the ADX works:
If the ADX is moving greater and higher and at the same time the price is moving upwards, then it indicates a strong bullish pattern.
On the other hand, if the ADX is moving higher and greater and at the same time the cost is moving downward, then it signals a strong bearish trend.
See the ADX chart listed below:
The Holy Grail trading system is developed to record the very first retracement after a strong trend (upwards or downwards) was established. As a general guideline, the first pullback in a bullish or bearish trend is the most successful trade setup.
Market Wizard Linda Raschke noted that the Holy Grail trading setup offers a low-risk entry point. Second of all, the result of this trading setup is really predictable, in the sense that the two following possible trading scenarios have the highest probability to take place:
A retest of the previous swing high (low). The profit margins in this situation depend upon how far the pullback has gone.
Second of all, the prevailing pattern resumes and a new extension leg to the upside (disadvantage) begins.
So, next, we're going to lay out the Holy Grail trading rules (for buy signals).
Step 1: 14-Period ADX must be above 30 Level and Continue Rising.
The very first criterion handle measuring the trend strength.
An ADX reading above the 30 levels is enough to indicate that a strong trend is underway. If we wait too long and the ADX reaches higher reading, the pattern may be overextended and we might be late to the celebration.
The ADX reading above 30 is a great way to formulate the presence of a strong trend and filter weak versus strong patterns.
See the Tesla stock chart listed below:
Step 2: Search for a Retracement in Price to Tag the 20-period EMA.
The 2nd Holy Grail trading guideline handle price action.
We wait on the first retracement to the 20-period EMA. Remember; we wish to keep track of the very first retracement to the exponential moving average, not the second or the 3rd.
It makes good sense for the ADX to follow the lead of the rate action and decline. So, do not be frightened when the ADX is heading south during the pullback. Nevertheless, if the ADX moves below the 30 levels throughout the retracement, that's a red flag.
The ADX needs to hold above the 30 levels to verify that the dominating pattern is strong enough to sustain its momentum.
Step 3: Buy once we break above the Candlestick High that tagged the 20 EMA.
As an entry trigger point, we're going to use the first's candle light high that touches the 20-period EMA. A break of that candle high will activate our buy order.
We're systematizing everything with our trading approach. There is no space for analysis here. It's better to have an organized structure of your method than to add discretionary aspects to it. The first trading advantage that comes with this approach is that you can better measure the threat.
Remember that we should hold above the 20-period EMA in order for the Holy Grail signal to remain valid.
Step 4: Location SL below the Retracement Low, Trail SL to Lock In Profits.
The protective stop loss is hidden below the newly formed swing low. To put it simply, you position the SL below the swing low left by the pullback.
Second of all, the forex take profit stop loss has 2 approaches:
First, track the stop loss listed below the 20-period EMA and ride the trend.
Secondly, you can aim to take earnings at the most recent swing high.
The Holy Grail sell signals work the very same but in reverse.
Here is a chart example:
The Holy Grail trading strategy assists you quantify the threat within an already established pattern. Using it in addition to the ADX sign, we have a good trading system with systematic entries. Measuring-- and handling-- threat is among the most important things a trader can do.
Final Words-- Holy Grail Trading System
The truth is that there is no Holy Grail stock trading method. All trades carry a minimum of some degree of risk. Simple and robust ideas together with proper threat management are the Holy Grail of trading. Once you include the trading compound result of multiplying your earnings you can acquire a various point of view of what trading is all about.
Rewarding trading is all about your state of mind, your capability to access information, and your ability to adhere to your basic trading concepts. Of course, you require an edge, however without the right mindset, even the most successful trading technique can lose you cash.
So, here is a little wrap-up of the Holy Grail trading strategy:
Use the ADX to evaluate the strength of the pattern.
Buy the very first retracement of the freshly emerged trend.
Usage price action and the 20-period EMA to time your entries.
Path your stop loss to lock in earnings.
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