This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

Coulda, woulda, still glad I didn’t. This is a solid trade setup, but it doesn’t meet my current risk parameters. I’ve got to see more of these, and think about how I can minimize my risk.

One of the drawbacks of trading futures is the inability to use proper position sizing to keep your risk within certain levels. Big traders like Zoomie and Richard can get away with it, but small timers like me can’t trade any smaller.

Anyway, here is the trade. I saw it in real-time, but didn’t pull the trigger. At 11:00 am, crude filled the gap, and stochastics was not confirming the highs. That was the first warning signal. It sold off for a bit, and was forming a base that was bumping against the trend line from the morning lows. The TL is highlighted in blue. Look at the PnF chart. At the same point (blue line), the PnF chart was giving a double bottom sell signal. An initial target would be the previous swing low (yellow lines on both charts.)

Although it was a solid trade, it paid out slightly over 1:1 depending on where you took profits. Its just another example of how point and figure charts can help identify support and resistance levels to enhance your trades. Or possibly how candlestick charts can improve your PnF performance.

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

I was stopped out of my 1st trade this morning (red 1). My risk was extremely small (5 cents). The second trade (light blue 2) did not allow me a low risk entry. I watched as oil continued to climb without me.

However, at 11:45 the QM printed a shooting star on heavy volume. High volume late in the rally can often signal at least a short-term correction. I looked to the PnF chart for my entry. It pulled back to the 45 degree trendline, and I went short. With my stop set at 7.5 cents, I was able to pull out a nice R gain of over 5:1.

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

I’ve been experimenting with different ways to use the PnF charts. With this particular setup (5/22), you have a gap down on the 5′ chart. A common strategy is to wait for the gap to fill, and then go short. As you can see from the 5′ view, it never filled. However, look at what happened on the PnF chart. It rallied exactly to the downtrend line (45 degree), and reversed.

Both charts are highlighted by ‘1′ to show the exact point of reference. As you can see from the regular candlestick setup, oil printed a bearish engulfing bar on heavy volume which would have alerted “smart” traders to a possible short entry. Since I’m not that smart, I like the simple way which was presented on the trusty PnF chart.

What I am finding particularly useful about the point and figure setups is the ability to limit my risk dramatically. I find myself straying from the textbook entries, and looking for what I call creative strategies. Open the left side of your brain, and see what happens.

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com