A 2000 point move Dow Jones Trade
This update is correct as of 20/01/2016.
Hello Traders, Thiru Nagappan here, founder of Master the Markets, Elite Traders Conference and The Traders Open Day.
Here is just a very quick video on the DOW trade that we have taken.
Over the last few weeks you would have heard on the news about the US stocks falling and carrying on from that, the China stocks and the market over there having a crash. So here is just a very quick overview of how we actually took this trade.
It is based on the concept of what we call a mismatch. The mismatch that we’re talking about is between two timeframes. We’re looking at the weekly and the daily. Usually we would choose the higher timeframe as opposed to the smaller one which we’re going to trade upon. On the higher timeframe, if we have, let’s say, a down-trend and on the daily we have an up-trend, that is what we call a mismatch. Actually at that point on the daily I’ll be taking a short position against the trend on the daily, but looking for the weekly trend to prevail and to turn that up-trend into a down-trend. In other words, we’re saying that the weekly is basically the higher current, or the wave, and the daily would be a smaller wave, but the bigger wave actually overtakes the smaller wave.
Let me explain the set up. We took the whole set up at a certain point indicated by the entry point in November last year. But by that time, if you’ve seen valuations and trends you can see that this has actually been a down-trend by that particular time, taken at that low, so it was already a down-trend on the weekly timeframe. Now shifting forward to the daily timeframe we can see that by that time in November that was actually an up-trend. Then we had a variation setting up and only when it cut through this particular point then we had a down-trend which is much later on.
According to the mismatch strategy we’re actually entering it much earlier as it gets nearer to this particular high point because we are seeing the higher timeframe showing a down-trend. So that’s how we entered; we entered around this time – I had to transfer the position from a futures position to a CFD because the futures expired and I couldn’t get the same price and I didn’t know if it was going to retrace. So we actually shorted it from 1761.2 at this price and finally right now it’s at 156.90, nearly 2000 points we have taken at the moment. About 1119 points we’re looking at, very near to 2000 points. So that’s the mismatch strategy, basically looking at two timeframes where you can catch really big moves but they don’t happen very often. It’s a low frequency strategy but very high reward. That’s the risk ratio.
The second thing is that this strategy itself at the moment has given us about 300% return on the account that we have. The good thing is that it is scalable but the unfortunate thing we had at that particular time when we put the position on, our research wasn’t fully complete. Do remember here that at Master the Markets we fully research our system before we publish it and trade live. It’s a very systematic, methodical procedure, a six-step process before we scale up our money. In fact, because of time limits in researching another system which we do in the morning every day – it’s called Morning Glory – because of the time scale we couldn’t really get all the results and the research in time to put this on a full size account, anything starting from £100,000. So we just had to do it just as a research account.
So on this small research account where we were testing the system, there is a very small amount that we put in at 500 and now it is at 1329 – that’s a very big 300% return.
Do remember that not all the time a 300% return is actually that great because on some systems you won’t be able to scale it so what’s the point? You make about 200 or 300 points and you say you made a 300% return but you can’t scale it. In this particular system, because we are looking to enter a position as it goes further up, you’d be able to scale it no matter how much the account is. You in fact would get positive slippage. That actually validates this strategy.
I think there are two things you can take away from this; one is that definitely look into timeframe mismatches. They really give you low frequency but high profitability trades. The second thing is that they do give you high percentage returns, as I’ve shown you this 300% return, on just a very small research account before we start to scale it up to 100,000, 500,000 to 1 million and beyond.
Also do remember that when you have 300% return strategies, make sure that they are scalable and reproducible therefore your parameters have got to be quantified. This is why here at Master the Markets do remember that all our swing highs, swing lows are all quantified with all the Smart Money indicators.
I hope that has been useful. If you have any questions, do post us an email or contact us on any of our social media platforms and feel free to ask us any questions you have. That’s all from me for now. As we always say stay disciplined, follow your trading plan and Trade like a Master.