ER2 Blog - Enthios.com "Universal" system

About setting up your charts if you do not have Ensign

Remember that this is a two-chart system:

Market-Profile or Price Histogram (Preferably 5 min, or 30min if you need to "look back" farther

It is easy to set up the charts yourself, assuming your charting program has a Market Profile or Price Histogram indicator. If not, you can still mark your charts manually by checking our blogs each morning:
http://www.enthios.com/blogs/esblog.htm
http://www.enthios.com/blogs/er2blog.htm
http://www.enthios.com/blogs/ymblog.htm
Universal Chart with oscillators and exit targets. (Preferably 50-range for es and er2).

Fast Stochastic: 9,3,3 with an adaptive average. In Ensign, we use Howard's special version.
Slow Stochastic: 81,27,27 with an adaptive average. Note this is 9x the faster stochastic.
Keltner: 3, 60 for es; 3.8, 60 for ER2; 3, 60 for ym; with an adaptive average.

We have had many requests from users of other charting programs that do not use Range charts, for how to "port" the settings over. The most important chart for intraday trading is the Market Profile or Price Histogram. Of lesser importance is the Universal. Instead it is important to understand what the Universal does: it simply uses oscillators (one short term, one longer term for confirmation) to help you get into the trade. It then uses a Keltner band, which is an average of the trading range, to target the exit. You can use any oscillator, including MACD, CCI, RSI, or even two moving averages.

As for time frames, if your charting program does not have Range bars then we would suggest you use tick charts (start with 100~300 tick), or a 1-minute chart. You can "map" the time frame to ours by observing the charts that we post to the blogs.

Preserving Profits on the Universal

This chart is a good example of how to preserve profits, or at least protect against losses, using the Keltner. After entering the trade, there is always a "risk" portion, shown here in the Red box. Rarely does the trade immediately move in your favor. So be prepared for it to move against you before it moves into the plus column. If it does not move in your favor, you simply have a losing trade. Exit at the Keltner (or use whatever well-tested stop method you already have) and move on. If, however, it then moves into the "Profit portion" of a trade, shown here in the Blue box, then you want to figure out a way to exit at the maximum profit. That is why we use the Keltner band as an initial target, and stochastic or Fibonacci to then maximize the remainder.

If, however, prices move into the Profit portion and come close to touching the Keltner, but then move back down, it is always a good idea to protect profits by inserting a break-even stop. The reason for this is simple. If the trade moves in your favor towards the Keltner, then it is clearly making the move that we expected. You can see that move. But if the move then, for whatever reason, fails just short of our target, then it's usually over. When it is over, it's time to get out - hopefully, at break-even.

Russel 2000 is in a narrow range. Watch for breaks.

The ER is doing strange things today, but here's the logic: Short was triggered as prices moved above the 710 VPC pre-market around 8:30, which is just borderline for taking a morning trade. But then, if you look at the Price Histogram for this morning (which starts at 9:30), you can see that we gapped above that 710 VPC. So now, ER is trading back down to it - which triggered the long trade

This chart shows how you can use Fibonacci the optimize the exit of your trade. Typically, the first wave in the reversal (the "seed wave") occurs between the entry point and the Keltner exit, as shown here. That wave can then be used to measure the amplitude of the next presumed wave, as the Fibonacci tool shows here. With the target known well in advance, you can set a bracket exit for either break-even, or the Fib target.