| Holy
Grail Indicator - What is it? |
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TradeStars'
"Grail Indicator" is based in part on the famous
"Holy Grail" indicator, which uses a combination
of moving averages and pullback to signal a stock trading
entry. The name is a humorous reference to the fact that stock
traders have historically been looking for an indicator that
is ALWAYS right - an impossible goal, of course (even the
famous 'Camarilla
Equation' has 'off' days!).
Actually,
the Grail Indicator is, in fact, a phenomenally good signpost
to possible stock trading successes if your style leans towards
'swing trading'. A good Grail Indicator entry point can set
you up in a trade that might last a couple of days or a week,
giving you the advantages a top trader might enjoy.
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| Holy
Grail Indicator - How it works. |
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The Grail
Indicator is based on the rather obvious stock trading rule
to 'trade with the trend'.
To this end, the Grail Indicator plots the general trend using
a moving average, and then hunts for a temporary retracement
against it, to facilitate a sensible stock trading entry point.
The retracement is either a natural 'profit taking' step within
the trend, or the actual END of the trend. If you want to
know the exact formula used to generate Grail signals, consult
our e-book, 'Trading the
Grail'.
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In stock trading,
no trend follows a straight line up or down - instead a typical
trend will form a series of 'steps' like this:-
The reason is
two-fold. Firstly, stock trading market players positioned on the
right side of the trend have different trading profiles, and thus
they will want to take some or all of their profits at different
times. This causes temporary weakenings of the trend. Secondly,
participants who are flat will try to 'pick the top' or 'pick the
bottom', and jump in when they judge the trend has just about exhausted
itself. If they are right, the 'step' they create could actually
be the final step, and the stock's trend will start to reverse (or
rotate randomly in a range for a while). Usually, of course, they
are wrong, and the trend will continue. Lesson - Never try to
catch a falling sword!
It therefore
follows that a retracement is either a confirmed opportunity to
join the trend at a reasonably safe point, or it is, in fact, the
end point. The Grail Indicator uses a confirmation bar before signposting
a stock trading entry point, which makes it relatively safe. Note
- stock trading also includes index and future trading of course.
| Holy
Grail Indicator - Stop Losses. |
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stock trading system is only as good as its stoplosses. Stops
on the Grail Indicator are placed at the point where statistically,
Dow Theory leads us to believe that either the final 'ending
step' has revealed itself, or a period of range-bound action
is likely, both very good points to 'can' the trade and search
for better opportunities for your stock trading activities.
There is more information about stoplosses, and other tips and
tricks in our e-book, 'Trading
the Grail'. |
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| Grail
Stock Trading Rules Summary |
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If you
have read and understood the stock trading theory behind the
Grail Indicator as shown on the left, you are ready for the
simple rules that dictate how you stock trade with it and
become a qualified trader. To trade with the Grail Indicator
might take you 10 minutes per day.
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| The
Rules for Stock Trading! |
First,
at the end of each trading day (or before the open!) scan your
instruments to see whether any of them have generated a 'Long'
or a 'Short' signal.
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| LONG
Signal Generated |
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The system
has given you a price above which you open a LONG position.
It also gives you a 'Stoploss' figure.
- If
price hits the 'StopLoss' figure first, abandon any idea
of trading this opportunity - look for another stock to
trade.
- If
it hits the 'Long' price first, then open a long position,
establishing your stoploss at the suggested value.
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| SHORT
Signal Generated |
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The system
has given you a price below which you open a SHORT position.
It also gives you a 'Stoploss' figure, above the 'Short' level.
- If
price hits the 'StopLoss' figure first, abandon any idea
of trading this opportunity.
- If
it hits the 'Short' price first, then open a short position,
establishing your stoploss at the suggested value above.
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Daily Routine |
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Each day,
monitor your stock trade to see whether you have been stopped
out. If you have not, move your stoploss to 'lock in' some
of your profits. Experience of your favorite instrument is
needed to become good at moving your stoploss, but a good
place to start would be to try the stop loss strategies outlined
in our ebook.
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