Another talk that I attended on the first day of the Invest Fair was by Tom Gentile, the senior vice-president and chief market strategist of Optionetics. The title of his talk was “Terminating Inconsistency in 5 Minutes“.
Tom Gentile spoke about the use of a trading system, where it’s
- 100% mechanic with no human inteference.
- Based on repeatable and tradeable patterns.
- Able to be back tested.
- Able to be scanned for efficiency.
He then shared with us a system that he uses. It’s pretty easy to implement.
- Look for a volume spike of more than 300% on any particular trading day. Record the price limits for that day. We shall call them L (low price) and H (high price). The range (R) is calculated as H – L.
- After a volume spike, the market tends to move in momentum one way or the either.
- Following the volume spike day, wait for a day until the price breaks either L or H.
- If H is broken on the upside, initiate a long trade. Stop loss is at L. 50% profit level at H + R.
- If L is broken on the downside, initiate a short trade. Stop loss is at H. 50% profit level at L – R.
Actually, I was expecting Tom to touch a bit on psychology, since it’s one of the major contributor to trading inconsistency. I suppose there’s a limit to how much he can cover in one hour.