Welcome to Top-Down Day-Trader!
Saturday, March 14, 2015 – today is known as “pi” day. It's named after the mathematical function pi, 3.14159…, which describes circles and spheres. It doesn't have anything to do with trading, it's just coincidence.
Today we're proud to launch TDDT – Top-Down Day-Trader! We've been developing the system for many months now, based on years of research and study, trading, trial and error, successes, mistakes, distractions and all the rest that life brings. At this website, we’ll be describing the markets, trading systems in general, specifics about our system, as well as reporting on daily activity.
What does “Top-Down” Day-Trader mean? It’s simple: we look at DAILY charts first. This gives us a higher level of understanding for PREVAILING market direction and support / resistance levels. Then we look at intra-day charts AFTER we’ve made initial determinations from DAY charts – hence, “Top-Down” Day-Trading.
The Top-Down approach serves two main purposes - MARKET DIRECTION and BIG WINNERS.
Daily charts give us perspective on MOMENTUM and Support-Resistance levels. Momentum is the essence of the top-down approach. Day-trading can be a very difficult business, if you're focused only on intraday activity. The noise of the market can be a killer to day-trading.
By determining long-term momentum first, top-down day-trader gives us a substantial edge that can drastically reduce losses from the noise of the market.
SLOPING MARKETS – the trend is your friend. This is fundamental to Top-Down Day-Trader. Daily price patterns and momentum in sloping markets make a huge difference in the TDDT approach.
Prevailing Market Direction also helps us with …
We are not shy about it. We're after BIG WINNERS!
Multiple time frames are the secret to getting these big winners. That's what the TDDT approach is all about.
- Daily Charts – we use these to establish prevailing market direction
- Hourly Charts – we use these to establish midterm market direction
- 5-minute Charts – we use these to see what the market is doing at the moment
In sloping markets, we only trade if all three of these time frames are showing movement in the same direction. This is what leads to BIG WINNERS.
If the prevailing momentum (DAILY) is in a certain direction, and the midterm momentum (HOURLY) is also in that direction … that provides a solid directional foundation. When the short-term money (5-MINUTE) is ALSO moving in that direction, the chances of a big winner are substantially higher.
So - what happens if the market isn’t sloping? Very simple. We don't trade it. Instead, we look for other markets that ARE sloping.
OK, a clarification of the above. We might (and I say MIGHT) trade a particular market if the DAILY chart is flat. In that case, we’d look for the Hourly and 5-minute charts to both be sloping in the same direction. But really – why bother? Between futures, Forex and optionable ETFs / stocks, there will ALWAYS be plenty of TDDT candidates on any given day.
Note to new traders: if any of this language is confusing or unfamiliar to you, it's critical that you take time to educate yourself before putting real money into any trades. There are plenty of resources available to learn the basics. We hope you'll bookmark TDDT and come back when you're ready. Trading is a complicated business, and can be very costly if you jump in before being fully informed. Most successful traders have been at it for years. We assume that our readers are at least familiar with the fundamentals of trading.
NOTICE – this is an extremely simplified version of our system. Novice traders should trade these ideas using a paper-trade account only. Risk management, position sizing, detailed entry and exit rules and other factors are essential to trading success. EXPERIENCE is also critical. Novice traders should learn how to trade using “virtual” money in a paper-trading environment.
The TDDT Blog ...
Market views and trading ideas are part of our regular blog, check it out ...