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“ WinningTradingStrategies “How To Finally Attain the ResultsYou Want In Trading and BuildYour Wealth and Income withProven Strategies that WorkBy TradersGPS

In this chapter, I will share with you some of my favourite winningstrategies I personally use. As discussed earlier, it is important to adopt astrategy that has a winning probability of more than 0.5 (50%) and a payoffratio of at least 1 to be profitable in the long run. These strategies I amgoing to share had been through extensive back-testing and provided mewith good returns in live trading all these years. I am sharing them with youso that you can focus on trading well rather than engaging in an endlesssearch for the holy grail.Different strategies are suited for different time-frames. I believe there isno one size fits all strategy. Below is how I define my time-frames: Intra-day Trade – Position opened and closed within the sametrading day Swing Trade – Position opened and closed within 5 trading days Position Trade – Position opened and closed for 2 weeks or longerSwing trade: Selling at peaks in downtrendSwing trade: Buying at dips in uptrendPosition trade: riding on big movesillustration of position and swing trading

The Swing Trading StrategyFor swing trading, the intention is to identify, follow and trade the trend.Swing traders look to make profits within 5 trading days. Daily candles arefrequently used for Technical Analysis, which determines the key entry andexit decisions in swing trading. For swing trades, traders generally buy thedips in an uptrend or sell the peaks in a downtrend.Remember the famous quote “The trend is your friend”? By trading thetrend, you are riding the momentum of the market, which gives an edge totraders. It is like swimming alongside with the sea current rather thanagainst it. You should know how tough it is to swim against the current andeventually you will choose to give up due to exhaustion. Remember thatas a trader, we must always have an edge over the market to be successful.This is just like a casino having an edge over the punters.For new traders, you may not understand exactly what is an up or downtrend. To qualify an uptrend, we are looking for higher highs and higherlows.!illustration of a market in an uptrend

On the other hand, to qualify as a downtrend, we are looking for lowerhighs and lower lows.!illustration of a market in a downtrendThere are times where there are no higher highs or lower lows made.Under such situations, the market is moving sideways or otherwise knownas “consolidation”.Resistance!Supportillustration of a market in consolidation

For trend trading, you have to identify 2 things:1) The Current trend, which I term as the tide.BullishTrendBearishTrendillustration of tides

2) Dips in an uptrend and rallies in a down-trend, which I term n of waves

I am using the Simple Moving Averages (SMAs) to help read and identifytrends. The parameters I frequently use are the 20 and 40 SMAs. AMoving Average (MA) is simply the average value of a security’s price overa set period.BearishTrendBullishTrend!Identify market trends using moving averagesThe parameters used for Moving Averages often mean something to someindividuals or institutions. 20 SMA is the trader’s most dominant MA whichcan be used in all time frames. 50 SMA is mostly employed by banks andinstitutions and is used on the daily time frame most of the time. Sometraders use the 50 SMA and 40 SMA interchangeably and thus it is up tothe individual’s preference. The 200 SMA is what many call the investor

line and serves as a good support and resistance especially on the 15minscharts. 10 or 20 SMA – Traders’ Line 40 or 50 SMA – Banks and Institutions’ Line 200 SMA – Investors’ LineBased on my experience, it is not so much about the number or parameteryou are using on your charts. Rather, it is what the numbers mean and howyou use or perceive it in accordance to your overall trading strategy. Sometraders like to use the 21 SMA as 21 is a Fibonacci number. To them, theymay have a good understanding of Fibonacci numbers and thus believethat the number 21 means something in the equity market. To me, it doesnot really matter if the number is 20, 21 or 19. Once again, it is how Iinterpret the number, what it means to me and how I use it to define mysetups. Thus, do not be too overly concerned with exactly which numberto use and dwell into the endless research for the “HOLY NUMBER”.There are many ways to use a Moving Average (MA). Take for example,many traders use MAs for crossover setups or to analyse a trend.

BearishCrossover- ‐SellBullishCrossover- ‐Buy!BullishCrossover- ‐BuyCrossover set-upsHowever for me, I don’t really use it as a signal to buy or sell. Instead I willread the gradient of the MA to analyse the strength of a trend. If the 200SMA is sloping up, it is telling me that the long term investors are bullishabout that particular stock. With the 20 SMA sloping up, it is telling methat the short-term traders are bullish about the stock. If the 20 SMA issloping up, 50 SMA is flat while the 200 SMA is sloping down, it is tellingme that the short-term traders are bullish; the banks are neutral while theinvestors are bearish about the stock. The chart must be able to tell us astory and the story told will help traders like us make a better decision.Other than the slope, you can also inspect the sequence of the MAs. Abearish trend is considered established when the 200, 50 and 20 MAs arealigned respectively as shown in the chart below. The opposite is true for abullish trend.

200SMA50SMA20SMA!Alignment of Moving Averages to determine market trendIf the sequence of the MAs are 50, 20 and 200 respectively, a trend is yetto be established and you may wish to stay on the sidelines while waitingfor an opportunity. Do not be too eager to enter a trade when the signalto enter is not shown.Studying the space between the MAs is another option. If the MAs are farapart, it acts as an “insulator”, which also means to say that the currenttrend is very strong. Under such conditions, when the price drop into theMAs, it will likely bounce off and resume its prior trend.

�the40SMAandcon@nuetrendingup.!Determine strong market strength using Moving AveragesIn contrast, if the MAs are narrow, it may signify that the trend is weak anda change of trend may occur. As such, you have to be cautious whenentering a trade under such conditions.!Determine weak market strength using Moving AveragesPersonally, I felt that it was not good enough by just identifying the tide aswe may end up buying the top of an uptrend or selling at the bottom of adowntrend. As such, we should always aim to buy a dip or pullback in anuptrend and to sell a rally in a downtrend.

I am using CCI(5) to effectively identify a dip (in an uptrend) or rally (in adowntrend). Basically, CCI (Commodity Channel Index) measures thecurrent price level relative to an average price level over a given period oftime, which in my case is 5 days. CCI is relatively high when prices are farabove their average. CCI is relatively low when prices are far below theiraverage. In this manner, CCI can be used to identify overbought andoversold levels.The reason why I use CCI as compared to other momentum indicators(which is frequently used by many other traders) is that the latter took only2 points to compute the value. Momentum and rate of change (ROC) aresimple technical analysis indicators displaying the difference betweentoday’s closing price and the close N days ago. With that, it is evident tome that the CCI provide a clearer picture about the market, as it takes intoaccount the values for every past N day. This will make a big difference inyour studies, especially when looking at the shorter term.The reason why I used 5 as my parameter in CCI is because the equitymarket has a certain pattern which repeats itself. Generally the uptrendmarket has around 5-7 candles up followed by 3 candles down and viceversa for downtrend. If the tide is up and there are 3 candles going up and5-7 candles down, it may signal a change or reversal in trend. Also not toforget, there are 5 trading days in a week. Traders like to open theirposition beginning of the week and close their trades before the end ofthe week. As such, using 5 as my CCI parameter resonates with me betteras compared to other numbers. You can of course have another set ofnumbers that suit your strategies.CCI will generally oscillate between overbought ( 100) and oversold(-100) and we study CCI closely to observe the price pull-back.

Below is the chart and description on my setup for a Bullish Swing Trade.!Example of bullish swing trade1) 20MA and 40MA must be sloping up (with 20MA above 40MA).Having a space between the MAs further indicates the strength of thetrend.2) Wait for price to pullback to 20 SMA. Take note that during verybullish or bearish situations, price may not pullback to 20 SMA butonly pullback to the 10SMA. Thus we need to be flexible at times astrading is an art, not just science. If price pullback to the 10 SMA andCCI is at -100, there is still a possibility of a setup.3) Look out for meaningful pullbacks to buy on a dip, which means wemust wait for CCI be at -100.

4) Next look for the buy zone, which is the region between the 20 SMAand 40 SMA. When price is inside this zone, get ready to enter atrade. It is important that we do not anticipate.5) Buy when price trades 1 bid above the previous day’s high. The highof the previous candle is the most bullish point for the previous day. Iftoday’s high can conquer the previous day’s high, it means that todayis more bullish than the previous day. (At this time, your CCI may notnecessary be at -100, but it should have visited the -100 readingbefore)6) Stop loss at 1 bid below the previous day’s low or today’s low,whichever is lower.For any strategy, traders must always be looking out for a Payoff Ratio ofmore than 1 before entering a trade. That means to say that the amount ofpotential profit made will generally be more than what you wouldpotentially lose if the trade went sour. More on the Payoff Ratio will beshared in a later chapter.For this particular swing trading strategy, we always buy at the point whereprices have made a pullback after a bull run and we believe that the trendwill continue thereafter. Before taking the trade, we identify the previoushigh as our profit target and the previous day’s or today’s low as our risk(stop-loss). With that, we calculate the Payoff Ratio. The general rule ofthumb is to have the Payoff Ratio to be 2, or at least 1. Having a PayoffRatio of 2 simply means that if the trade is a winning one, we will make 100 (for example) and if it happens to be a losing trade, we will lose 50.In general, ensure that what you will gain is going to be more than whatyou will lose if the trade happens to be a losing one. Coupling this

concept with a strategy that has a win rate of at least 0.5 (50%); and youwill be profitable in the long run as it is just pure mathematics.Sometimes, prices can be so bullish that the CCI did not pullback to theoversold region, but to the neutral region (at 0). You can still enter suchtrades under such circumstances. It is optional and you can still make thetrade depending on your comfort level and/or experience. I know that weare always looking for the ideal setup condition to be sure that the tradewill make money. But to be honest, you do not always see ideal ortextbook situations in the stock market. Even if the setup is ideal, it doesnot mean the trade will definitely be a winning one. Whatever yourdecision is, you must never fail to ask yourself what is the Payoff Ratiobefore making a trade.For this strategy, the opposite applies for bearish trades.!Example of a bearish swing trade