3 Secret Chart Settings

to Skyrocket Your Profits

Does a One-Size-Fits-All Approach to Trading Work?

One of the biggest problems facing day traders is the simplistic notion that you can
just plug and play some indicator or indicators and expect them to behave like an
ATM machine pumping out money.

Each market has a personality, just like you do. Professionals spend lots of time
getting to know the behavior of the markets they trade. Does it tend to trend? Is it
really volatile? Does it have large range days? Beginning traders assume that a one-
size-fits-all approach is all they need. Nothing could be further from the truth. A prime
example of this fallacy is thinking that you can use a single chart setting (time frame)
that comes from one of the generic choices in your platform s drop-down menu.
’

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 Zoom In With Custom Chart Settings

In the TradeSafe Mechanical Day Trading System, one of its core components is
establishing a cycles-based relationship among your charts so that you get the
equivalent of a zoom lens in evaluating an intraday market. Because markets are
inherently fractal, you will see the same types of patterns repeating themselves,
regardless of whether you are on a daily chart or on a one-minute chart.

Just like the zoom lens on a camera, your big picture would be your highest setting
chart, the equivalent of a wide-angle perspective. Your intermediate time frame gives
you the dominant cycle s trend for part of a day, and is the so-called normal view of
’

the intraday market. Your lowest setting time frame (closeup) is what you use for a
low risk, surgical entry.

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These chart settings provide you with a roadmap that accurately informs you as to not
only the trend for each time frame, but the overall strength of the trend for a trade
setup that occurs on your entry time frame. This allows you to anticipate potential
follow-through when you get a trade set up.

This is important because it avoids the one-size-fits-all approach of managing and

exiting a trade. Typical beginning traders focus on entries, whereas experienced and
professional traders will focus more on exits. Planning ahead before you get into a
trade is more like planning ahead in a game of chess.

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You evaluate the consequences of your decisions before even getting a set up. Too
many novice traders treat their day trading like a video game and basically are
reacting as if they are shooting anything that moves. Now, you can patiently wait
for a signal, knowing in advance that is safe to execute the trade.

Done correctly, day trading can be a relaxed, strategic exercise with plenty of time
to consider outcomes, rather than white-knuckling your mouse, hoping you don t ’

miss something.

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 "Where Do I Get Out?"
One of the biggest challenges beginning traders face once they are in a trade is: "Where
do I get out?" Way too many traders use a subjective combination of variables in
deciding where to exit their trades. Do I get out at a Fibonacci level ? Maybe I
“ ” “

should exit at the next support level. I ve heard Market Profile works pretty well.
” “ ’ ”

The all-important factor of consistency is missing.

Automated
Exit Strategies

If you are using a typical trend-following method, you can increase your trade accuracy
and winning probability significantly by having a reliable gauge of the strength of the
trend. This will allow you to utilize an appropriate exit strategy based on that trend s
’

strength. To use a baseball metaphor, if you have the wind at your back you would want
to swing for the fences. Typically, that might mean utilizing a scale-out exit strategy,
where you go for an easily-reached price target and then scale out of part of your
position. This pays for the trade, relieves emotional stress, and increases your odds of
having a winner.

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From that point forward, you would trail a mechanical stop based on an indicator or
automated exit strategy that gets you out when the trend is either ending or
reversing. On the other hand, if you have a very weak trend, you would do the
equivalent of bunt and get on base. That would be some form of a scalp, where you
have low expectations of further follow-through. Again, you are going for increased
accuracy and high probability of getting a winning trade, based on the likelihood of
potential follow-through.

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So how do you gauge the strength of the trend? Setting aside the issue of how do you
even determine if there is trending (a topic for another article), you can reliably gauge
trend strength by utilizing a combination of specific cycles-based timeframes.

The generic time frame choices in a day trading platform s drop-down menu are
’

inadequate. Typically, you will see settings like Daily, 60-minute, 30-minute, 15-
minute, five-minute, three-minute, and one-minute. This does not permit tailoring your
settings in a specific manner. Usually, amateur platforms only allow you to use their
generic settings. More professional platforms will let you dial in the exact time frame
setting you desire.

Because each market has its own personality you will want to tailor your chart
“ ”

settings uniquely for that market. Below is a formula used in the TradeSafe System
which allows you to have synchronized, cycles-based timeframes for day trading.
The following example is for the so-called index minis (S&P, Dow, NASDAQ,
Russell), but the approach can be modified to discover the exact chart settings needed
for other markets.

First, you must determine the number of minutes in the daytime trading session.
Although the minis typically trade past an afternoon close, you will focus on the pit-
traded Open and Closing times: 8:30 AM Chicago pit time for the Open, and 3:15 PM
for the Close. This will yield the Master Number you will begin with to determine your
ultimate day trading chart settings. That Master Number is 405.

You must then look for the largest integer that divides into 405 without a remainder.
That number is 135. The next smaller number that divides into 405 is 81. Obviously,
these chart settings are too large for day trading purposes.

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Continuing, with a 3 to 1 ratio, one third of 81 is 27. This will actually produce a chart
setting that is more accurate and reliable than the generic 30-minute chart. From there,
continuing the 3 to 1 ratio, you will end up with nine-minute, three-minute, and one-
minute charts.

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These will be the main charts that you will use to produce the zoom lens effect that
enables you to go from the big picture to the low risk entry chart. The nine-minute chart
is the biggest setting that you can use for intraday trading and still get a reliable big
picture of the overall day s potential.
’

The three-minute chart will provide you with the dominant cycle and trend direction for
that part of the day that you are monitoring. To keep risk levels low, you would enter
trades on a one-minute chart.

Keeping in mind that a one-minute chart is, statistically speaking, noise, you are
compensating for that lack of reliability by ensuring that trades taken on that timeframe
are only done when you have trend agreement between that entry time frame and the
next higher time frame.

This will be your lowest level of trend agreement and would dictate that you would
consider only a scalping exit strategy or a scale-out exit strategy that has its initial target
at an easy to reach price level.

When all three time frames are trending in the same direction, a trade has the potential
for much greater follow-through. Essentially, the trade has more wind at its back.
‘ ’

Consequently, you would want to exploit that greater potential follow-through by

utilizing a scale-out exit strategy with a slightly higher target for the initial scale out
then you would if only the one-minute and three-minute charts were trending together.

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To help my students remember this strength-of trend-relationship, I employ a rhyming
mnemonic that goes like this:

The minimum is the one and the three need to agree, the best is if all three agree.
‘ ’

By creating a rules-based approach to gauging strength of trend, a trader can more

reliably and consistently tailor their exit strategies to what the market is capable of
giving in each unique situation.

Using multiple time frames has been around for quite a while. However, traders
typically employ a generic approach with chart settings that are not appropriate for the
market they are trading. They default to the drop-down settings in their platform s ’

menu rather than tailoring the settings as described above.

An additional benefit is that a trader will get what are called nested pivots. This means
that because the chart settings are in a specific cycles-based relationship, pivots on
higher time frames will have lower time frames turning at the exact same spot, to the
tick. It is not uncommon to find a daily chart, or a 135- minute chart that has all the
other lower chart settings forming a swing or pivot at the exact same spot as the higher
time frame s turning point.
’

This enables a trader to more effectively gauge the stopping power of a support or
resistance level based on what timeframe it came from. Each morning in the TradeSafe
coaching room, we utilize this approach to do a full top-down market analysis and
assign specific values to these support/resistance levels so that if a TradeSafe setup
occurs within a specific zone of influence, the trader will be able to gauge in advance
the likelihood of interference in a trade s follow through.
’

Feel free to experiment with this approach in determining a given market s Master
’

Number and resulting cycles-based smaller chart settings. Occasionally, they don t ’

always come out evenly and you may need to experiment a bit. The main thing is to
maintain the 3 to 1 ratio so that you get the zoom lens effect.

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Obviously, for Forex there is no starting or stopping times. Consequently, you must
create a synthetic relationship that mimics an Open and Close. That way you will end
up with your three basic chart settings. However, my experience has been that a one-
minute entry time frame setting is too small for Forex. You should use at least a three-
minute minimum setting.

For swing traders, you can expand on this concept and have the best of both worlds.
You can get a low-risk intraday entry that can be parlayed into an overnight position
that may last several days. Again, a one-minute chart is too small a setting for swing
trading.

Using the minis as an example again, instead of the 9,3, and one- minute charts, you
would utilize the 27, nine, and three-minute charts. You would not scalp, obviously,
but would select a scale-out exit strategy. Also, you would not be taking off half of
your position (i.e., trading in pairs of 2, 4, 6, etc.), but rather you would trade in sets of
three (6,9, etc.).

You would first get trend agreement between at least the nine and three (or even
better, all three time frames), then you would enter your trade using whatever entry
strategy your approach calls for. Typically, trend following approaches, whether for
intraday or swing trading, have historically used entries on pullbacks in a trend.
Once in the trade, when it reaches your initial scale out target you would take off the
first third of the position. Then you would trail your profit stop on the middle third of
the position until the close. The final third of the position will be held overnight with a
GTC stop loss.

Assuming you are still in the position when the market opens the next day, you would
trail a mechanical profit stop on the next higher time frame rather than the one you
entered on. This would keep you in the market for a longer period of time.

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As you can see, using a cycles-based approach to creating chart settings will enable
you to effectively gauge the strength of the trend so that you can use the most
effective exit strategy for the conditions at hand. Whether you are an intraday trader or
a swing trader, you still get the benefits of a customized approach that produces higher
accuracy and greater probability of winners.

As mentioned earlier, this is a core component of the TradeSafe Mechanical Day

Trading System, and with other rules-based components, it enables a trader to achieve
higher accuracy with reliable consistency.

THE SPECIAL OFFER

For more information on the TradeSafe Mechanical Day Trading System, you can
watch a recent webinar that walks you through how the entire system works
by Clicking HERE to watch the replay.

LEARN ABOUT THE TRADESAFE MECHANICAL TRADING

SYSTEM, COURSE, AND COACHING IN THIS FREE TRAINING!

ABOUT THE AUTHOR

Author: Michael Guess

Company: TradeSafe LLC

Website: DayTradeSafe.com

Services Offered: Trading Courses, Systems and Strategies

Markets Covered: Futures, Commodities, Trending Markets

For 26 years, Michael Guess has professionally day traded the markets, learning
the value of combining a proven Mechanical System with the critical discipline
necessary to achieve the true Holy Grail of trading: Consistency.

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