Trend trades are generated based off the direction of the higher timeframe.  Then you identify an area for entry into the trend.  While most traders use a breakout area, this is the highest point of risk.  THD uses a pullback area, which is the lowest point of risk.  Most of the trades we enter have either 15 ticks or less of risk for a three minute chart, especially on trend trades.

Trend Trades

For trend trades entries the direction is taken from the higher timeframe.  We then look for a retracement to the ATR stop on the lower timeframe.  This morning the 180 minute was moving down.  We wait for a retracement to the ATR and then enter.  The stop is 5 ticks above the ATR or a flip of the ATR (from red to blue in this case).

Trend Trades on Dow and NQFor a profit target, we simply double the risk.  In this case the total risk was 15 ticks per contract.  Using a 1:2 risk to reward ratio, our profit target was at least 30 ticks.  The target was made on it.

Trend trading requires two timeframes – a higher timeframe and a lower timeframe.  Then the entry is simple at a point of low risk.  If you are stopped out, then it will be a small loss.

A more advanced technique, after you build your confidence with your system, is to move your stop down as price progresses in your favor.  By moving the stop down with price, you can capture more of a trend move then simply setting an arbitrary profit target.  In this case, you would still be in both trades by simply offsetting the previous bar high by 5 ticks.  This enables you to increase your risk to reward ratios when the market is trending. In this case, the entry was at 17684 and the stop is currently at 17619 or 65 points on the Dow.  This increases your risk to reward to 1 : 4.3.  Click on the chart to expand.

Dow Trend Trades Stop Exit