Sample Trading Strategy

Given the Jacobs Ladders support and resistance levels, there are many trading strategies one can form to use them in trade.
The Sample Trading Strategy is a an educational reference strategy provided by Jacobs Ladders.

Disclaimer
Objective
Assumptions
Rules
Sample Strategy Trade Set Ups
Download Trade set up Spreadsheet

Disclaimer

If you use this educative trading strategy, you accept the disclaimer stated here

Objective

  • This strategy aims to achieve 4 ES handles a day or equivalent in any other future instrument.
  • It equates to 2% return on margin per day – see assumptions below
  • It equates to 20 ES handles a week.

Assumptions

  • A margin of $10,000 per ES contract is assumed.
  • A major level is intended to give a risk out trade or an escape hatch
  • If a major level gave an escape hatch, the set up is considered as success
  • A level set up is considered failed only if it is stopped out as per the rule listed below in the rules section
  • Risk out is considered to be achieved when price bounced 2 handles from entry
  • A blind trade of a major level means first visit of that level. It can be traded right away. There is no waiting to see if this level will hold or not. All blind trade set ups are listed in the rules below.
  • A major level first test may be front run up to 2 handles  from the level price depending on the volatility of the day and distance between two major levels.  If price comes within 2 handles of the major levels on first test as defined in the rules below and gives a 2+ ES handles or equivalent reaction, then the first trade is considered to be over.
  • A second test of a major level is not a blind entry. It needs to be observed for valid support or resistance.  A support or resistance is assumed on 5 to 15 min of price action. There is an element of subjective judgement required to determine this. A conservative approach is to wait for 15 minutes of price action, establishing support or resistance. However, in strong trending price action, there may be only 5 minutes of demonstration of support or resistance.  Review weekly updates of charts and tweeted examples to learn from different scenarios.

Rules

  • The strategy trades only the set ups against each of the Jacobs Ladders levels, listed in the table below
  • A profitable trade is exited at the next major level. If the trend continues, the system waits for next set up for continued entry into the trend. The purpose is to keep the system simple. Remember, the goal is to make 4 ES handles a day. Another reason for this model is that it helps a trader book profits frequently and assumes that one does not know how far a trend would go on a given day. If trend continues, there will be other set ups to get into the trade.  Different strategies could be formed that keeps runners for a longer ride if a trader has conviction in the direction. However, it is not part of this strategy. Example of this profit taking strategy:
    • Level Low long trade is exited when price reaches OPG.
    • Level OPG long is exited at Level High.
    • Level High short is exited at level OPG
  • Only a maximum of two entries are taken against a level in the same direction, For example, only two attempts are made against Level Low as support. Or only two attempts are made against Level OPG as resistance.
  • Level Higher Low and Lower High are excluded from this strategy.
  • A trade is considered stopped if it breaks the adjacent level. Example:
    • Level Low long set up is considered stopped if it breaks below level Low 1
    • Level High is considered stopped if it breaks above level High 1


(The table below is an image file. You may click it to view a larger image or download it to view it clearly)

Sample Strategy Trade Set Ups



Download Trade set up Spreadsheet

To help practice the Sample Strategy, download the spreadsheet in Excel format. Use it everyday to keep track of your trades.
Download Sample Strategy Spreadsheet for Jacobs Ladders