Financial Sense

Trading the ROADKILL

It is all about a successful trading method!

by Gail Mercer, Hawkeye Traders | February 13, 2009

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Everyone has heard the adage, “The trend is your friend.” At times, all traders, even professionals, find themselves on the wrong side of the market.

Fighting the trend--trying to pick tops and bottoms--can lead to disastrous results and is one of the most frustrating states of mind that a trader can experience. Missing the trend can also make one feel like an orphan left behind. Curiously, all our trend-following mistakes seem so maddeningly obvious in hindsight!

New traders suffer the frustrating experience of having a positive trade that immediately reverses to a negative position, causing him to panic resulting in closing his positions – only to watch his trade revert back to the trend and go up even higher. This often occurs because most of the new trader does not understand price action and the importance of using dynamic stops that move with the price, while allowing enough room for the price to have small retracements. Instead of looking at their timeframes, or their emotional state of mind, they blame the indicators. Also, remember, each moment in the market is unique and the markets do not move exactly the same every day. Learn to move with the markets, instead of fighting for the market to move within your specified timeframe. Expand your definition of trading by using suitable timeframes depending on how the market was moving and how much time you wanted to sit in front of the screen. Scalping is the hardest method of trading that you can attempt and equates to the equivalent of trying to be a surgeon but bypassing the training required to become a surgeon.

What is RoadKill? How does it work?

Nigel’s favorite setup is “Roadkill,” a meal fit for a hungry hawk who likes his leisure. Here is the recipe: Take two time frames; add the trend indicator and let settle until the colored dots on the longer-term chart indicate a trend has begun. When the dots on the shorter time frame turn white (neutral) or the opposite color, and then turn back, it is time to buy or sell short in the direction of the higher timeframe.

roadkill

The Roadkill methodology eliminates many of the trend whipsaws. Instead of entering at the beginning of the trend, you are waiting for the trend to establish itself then you are looking for entries using your short-term charts. Although you are being more cautious with your entry, you are increasing your probabilities of having a successful trade. However, the most successful Roadkill entries occur with the first 2-3 Roadkill opportunities because the further you go in a trend, the more likely it is that the trend will change.

Visit http://www.HawkeyeTraders.com to learn more on RoadKill.

Copyright © 2009 Gail Mercer, retired CTA
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