The Delineator Analytic - Long Trades
The Delineator is a disciplined decision making methodology that identifies
short term trading opportunities. Entering and exiting an actual trade is done
in a precise order from the signals generated by the Delineator.
The following is a step by step example of a Long Trade execution as it
would be seen on the Delineator system in real time:
Entering The Trade:
Figure 3-1
1) The Delineator has a positive slope change. This is the first sign that a
new long signal could be generated. However, an actual trading signal is not
generated by a slope change. Additionally, the indicator line will be blue
(following the slope change) if the slope change direction is confirmed
by the secondary indicator or grey if not confirmed by the secondary
indicator.
So:
Step1:
- Have a slope change, indicated by an up arrow.
- For now, wait.
Figure 3-2
Step 2) When the indicator spreads to a calculated amount (representing that the slope of the Delineator cannot reverse), the indicator line turns green. This is the initial trading signal (Early Enter Long). However, it is crucial to point out that when the indicator first generates a signal (when the delineator line first turns to green), it is subject to reversing within that bar (time frame) and nullifying the signal. So confirmation, the actual signal, creates a position wherein it would be impossible for the Delineator to reverse within at least 1 full trading day. This means that counter trend price moves create opportunities for additional profit as the price action will move back in the direction of the signal.
Figure 3-3
Step 3) Final Confirmation, Enter Trade. When the green dot appears on the chart that is your signal to enter your long trade.
Exiting The Signal:
Figure 3-4
Step 4) Assuming you use the initiation of a long trade as a point in time to begin whatever strategy you may use, plus a buck for example, the Primary Delineator up cycle ends when the Primary's slope changes. Trading from enter long to exit long rarely achieves a profit! The Delineator wasn't designed to tell you WHEN to take your profits (see Strategies - Taking Profits on Long Trades below), just when to trade and in what direction.
Figure 3-5
Step 5) Final confirmation, Exit Trade. When the first bar (rollover) appears
after the slope change, exit the trade.
Note: While the indicator may appear compressed and ready to change slope,
you should NOT try to anticipate the change but rather wait for it to actually
happen.
Strategies - Taking Profits on Long Trades:
How you decide to trade is, of course, your own decision. Personally,
I find my trading to be most effective if I stick to one simple
trading strategy: trade for a $1 change in the ETF I am trading.
As soon as I have entered a trade, I immediately put in a
GTC sell limit at "plus a buck" from the signal price.
If the limit is executed, then I have successfully traded
a long signal. If the Delineator issues an Exit Long signal
before my sell limit is executed, then I will sell the position
at that time and cancel my limit and wait for the next signal.
I have traded this way successfully since 2001 without regard to what was going on in the overall market and economy. Volatility manifests itself by expanding the daily ranges of most securities, certainly all ETF's. If you're trading for a specific amount that doesn't change, "plus a buck" for example, then volatility reduces your risk because it becomes easier to achieve your goal.