Trading Dow from higher timeframe using the ATR stop for entry resulted in a profit of 253 points or $1,265 today. While most traders think trading smaller timeframes results in a lower risk and higher profits, actually the opposite is true. Trading an ATR setup off the higher timeframe can actually decrease the risk and result in higher profits.
In the Futures and Binary Trading room this week, I forewarned everyone that we were right on the edge of making an ADX magenta peak on the weekly chart, which would send price back to the ATR on the Weekly. That would result in really nice uptrends on the all the lower timeframes. We were watching the 16170 area because this is the area where the magenta peak would come in.
Trading Dow from Higher Timeframe
Today, by 8:15 this morning, the 45 minute chart showed that price was at the ATR. The very next bar showed a volume shift (order flow transitioning from selling to buying on the lows) appeared. That sealed the deal as price would go up from that point. The strategy held the order till the end of the day for a total profit of 253 points while risking fifty ticks on entry using the strategy.
While the three minute provided multiple entries into the uptrend using the Trend ATR stop or the congestion dots (which are incorporated into the Trend ATR indicator), the better entry was the 45 minute chart as it kept you in the trade for the long haul. By staying with the trend for the duration of the day, you trade less so you lower your commissions and you receive more profits as you are not popping in and out of the markets. Plus, since you are trading a higher timeframe, it doesn’t require you to monitor every tick, which can be a good thing.
The Trend ATR indicator is available for TradeStation, NinjaTrader and Multicharts.