Day Trading Strategies By Markus Heitkoetter (Rockwell Amibroker AFL)
Markus Heitkoetter invented many certified day trading methods and creator of the global bestseller The Complete Guide to Day Trading: A Practical Manual From a Professional Day Trading Coach. For more information about his trading style and strategies, we recommend reading his book.
In this article you will learn how to have confidence in your trading decisions by using simple day trading strategies that only relies on two indicators.
What Are The Best Markets For These Day Trading Strategies ?
This strategy is a simple trend following strategy that should work in any market, but as a day trader Markus prefers to trade futures. We at StockManiacs.net tested the strategy successfully in our Nifty Index and recommend these to all traders.
How To Set Up Your Day Trading Software
When selecting a timeframe, Markus preferred tick charts for this strategy. If you’re not familiar with tick charts, a tick bar completes after a specific number of trades, instead of a time frame like a 5 or 15 minute bar. As an example, Markus used a 4,500 tick chart for the E-mini S&P. This means that a bar or a candle is plotted every 4,500 trades. A bar can take 2 to 5 minutes to complete, but the actual time it takes to complete really doesn’t matter. All that counts is the amount of trades that have been executed in the market. You can successfully set a 4500 tick bar in Amibroker from Tools –> Preferences –> Intraday.
The advantage of using tick charts is that the number of bars will increase and decrease depending on volatility. When the markets are moving and there are more trades, you will have more bars. If the markets are quiet you will have fewer bars.
As an example, a setting of 4,500 trades for the E-mini S&P will typically produce between 7 and 10 bars during the 17 hour overnight session (16:30 pm EST and 9:30 am EST) since the E-mini S&P is not actively traded during this time. However, in the first two hours of active trading (between 9:30 am and 11:30 am EST), you can expect between 16 and 24 bars, depending on the trading activity of the day.
Tick charts remove the time factor from charts and add volume and volatility to your bars. Give it a try and you’ll probably find that tick charts are an easier way to see intraday movements in the markets you trade.
We should update tick settings for the markets we follow 2-3 times per year, since volatility in the markets can change.
The next step is to add the popular MACD Indicator to the chart. Just use the standard settings:
26 for the slow moving average
12 for the fast moving average and
9 for the moving average of the MACD – the “signal line”
We use the MACD to identify the direction of the market, but Markus used it with a little twist:
The market is in an uptrend if the MACD is above its signal line and above the zero line.
The market is in a downtrend if the MACD is below its signal line and below the zero line.
Amibroker software allows us to color the bars based on certain criteria, and therefore I am coloring the bars in an uptrend (according to the definition above) green and the bars in a downtrend red.
To avoid being whipsawed in a sideways market and to only catch strong trends, Markus added a second indicator: Bollinger Bands. He used the following settings:
12 for the moving average
2 for the standard deviation
Markus used the Bollinger Bands to determine our entry signal:
Enter LONG with a stop order at the value of the Upper Bollinger Band if the market is in an uptrend (see image above). If you are not filled, adjust your stop order to reflect the Upper Bollinger Band value as long as we remain in an uptrend.
Enter SHORT with a stop order at the value of the Lower Bollinger Band if the market is in a downtrend (see image above). If you are not filled, adjust your stop order to reflect the Lower Bollinger Band as long as we remain in a downtrend.
By using stop orders we will only be triggered if price pushes through the Bollinger Band, which can signal a continuation of the trend. You will see that these simple rules allow you to catch a strong trend, and that the use of the Bollinger Bands will help you avoid many “false signals”.
Markus used this Average Daily Range (ADR) to calculate our stop loss and profit target:
Stop Loss = ADR * 0.10
Profit Target = ADR * 0.15
As you can see, Markus used 10% of the Average Daily Range as a stop loss and 15% of the ADR as a profit target. He highly recommended using a profit target to take profits and get out of a trade before it turns against you.
In addition to profit target and stop loss, Markus closed a trade if a bar completes and he saw a MACD crossover. If long and MACD crosses back below the signal line, or short and MACD crosses back above the signal line, he wanted to close the trade to get out of a position in case the trend reverses.
This strategy is one of the day trading strategies that’s easy to understand and execute. Test it out and you will be surprised at how robust it is. Once you are familiar with the basic rules, consider incorporating your personal trading preferences like scaling in and out of a position, using trailing stops or any additional filters that you are comfortable with.
We in StockManiacs.net have developed a simple Amibroker afl formula for this Rockwell bar Colour day trading trategies. You can freely download and use the Rockwell bar Colour afl by clicking this button below.
You can immediately see the Rockwell coloured bars on your Amibroker charting software. You may distribute this excel to your friends, but do not forget them to refer them to our site.
Need to check out a more advanced trading system for Amibroker? Check our newly launched product Trend Blaster here.
Indrajit is a professional blogger and Trading System developer, Amibroker expert, Wordpress expert, SEO expert and Stock market analyst. Trading since 2000, he has started the journey of StockManiacs.net on 2008. He follows Indian and world stock markets closely.