Trading Manual
Trading Manual
Trading Manual
Trading Solutions
Trend Following Suite
Trading guide (v3.0)
Trend following is a proven trading strategy that outperforms any other type of traditional investment.
It is the ideal home-based business: there is no inventory to store in warehouses, no cold calling, no
working schedule and no marketing. You don't have any physical stock that needs maintenance, no
franchise fees, no employees and no lawyers to keep the retainer. Yet, profit margins can run well
over 90% and are absolutely scalable over time. All you need is the right tool, the right mindset and a
certain amount of starting capital.
Trend following works because you don't outthink the market. You wait for the market to move, and
follow it. You are a follower, not a predictor. Trend following doesn't argue with markets nor tries to be
right. You watch chart lines, not headlines. You choose which instruments and timeframes to trade
based on objective reasons, not subjective preferences. You don't have the slightest clue about what
price action will do in the future, and you don't care.
Trend following is widely used by successful traders, hedge funds and financial institutions. In the
meantime, hundreds of thousands of unexperienced traders are lured by brokers and financial
magazines into the nonsense of trading 5M charts.
This document will teach you how to become your own profitable hedge fund using our trend
following system and obtain exceptional returns trading financial markets.
The PZ Trend Following Suite has been created to enhance your trading activity by simplifying the
two most difficult aspects of trading, which are finding trading opportunities and position
management. You will be able to trade four or five times more markets than before, without giving up
any of your precious time or hiring any trading staff.
Furthermore, you won't need to lose your money to deceptive brokers any more, pay outrageous
commissions to mutual funds or watch your savings being inflated out of existence by a bankrupt and
debt-junkie government.
We hope our trading system helps you to achieve your financial goals soon.
Sincerely,
Arturo Lpez Prez
Trader, speculator, investor and software engineer.
Developer of Point Zero Trend Following Suite
http://www.pointzero-trading.com/
Table of contents
1) What is trend following?........................................................................................................................5
1.1) What trend following is not........................................................................................................... 5
1.2) The advantages of trend following.............................................................................................. 6
2) The right trading mindset..................................................................................................................... 7
2.1) Trading is a business......................................................................................................................7
2.2) Good trading habits....................................................................................................................... 7
3) The indicators......................................................................................................................................... 8
3.1) The PZ Levels Indicator ................................................................................................................. 8
3.2) The PZ Bars indicator..................................................................................................................... 8
3.3) The PZ Oscillator indicator ........................................................................................................... 9
3.4) The PZ Dashboard Indicator ...................................................................................................... 10
4) The PZ Manager Expert Advisor.........................................................................................................12
5) Trading setups..................................................................................................................................... 13
5.1) The trend change ........................................................................................................................ 13
5.2) The pullback.................................................................................................................................. 16
5.3) The short ride............................................................................................................................... 17
5.4) The Reversal..................................................................................................................................18
6) Assembling your trading portfolio..................................................................................................... 20
7) Other considerations.......................................................................................................................... 21
7.1) Trading stocks............................................................................................................................... 21
7.2) Currency pairs are the paradise of trend followers................................................................. 21
7.3) Let the market tell you which timeframe to trade................................................................... 22
7.4) Have a financial plan.................................................................................................................... 22
8) Recommended reading...................................................................................................................... 23
9) Free trading scripts.............................................................................................................................. 23
10) Visit our website................................................................................................................................ 24
Returns tend to be higher than what a buy-and-hold investor would expect, even over what positions
traders expect, making trend following the ideal way to trade for a living.
Trend following requires just a little of your time each day. It allows you to hold a full-time job or do
other things with your time rather than squinting at pixels all day.
You don't need to worry about poring over financial statements, catching precise tops and bottoms or
seeing the bulk of your profits evaporate on overnight gaps.
Trend following isolates you from the madness of fundamental investing in a fiat-currency based
economy. Since the currency supply is virtually unlimited, capital flowing to one asset class or sector
does not mean it is being taken from other sector or asset class, and supply and demand fundamentals
are difficult to track under these conditions. A trend following approach allows you to profit when all
these accumulated distortions and miss-allocations of capital reveal themselves.
And of course, trend following allows you to profit in bull or bear markets.
Stop thinking about losing and winning. Those terms have a direct emotional impact on the quality of
your decisions. Think about income and expenses instead.
Respect your trading plan: you must do whatever the hell your system tells you to do, regardless of
your personal opinion. Avoid thoughts like: The market has been in a 3 month rally and I am already
late: I rather don't take this trade.
Good business have good records: you must write down every trade. Why did you take this trade?
What timeframe did you based your decision on? Which was the entry price and timeframe?
Keep commissions low: find a good broker and watch him like a hawk.
The only reason to take a trade is because the market is doing something
3) The indicators
The PZ Trend Following Suite provides a set of four indicators, each one serving a different purpose. Three of
them are combined into the trading template, and the last one is a multi-market and multi-timeframe
dashboard which task is to find trading opportunities for you and stay on top of the market at all times. Let's
review each one of them.
Of course, this indicator implements visual, email and sound alerts for every type of signal.
During a downtrend...
This indicator is primary, which means that you should never -ever- trade against it.
Additionally, if the main value is above the signal line, the uptrend is strong and vice-versa for downtrends. The
PZ Oscillator is a primary indicator and you should never trade against it. The last three indicators combined
provide a powerful and very informative trading template in which several trading setups can be found. Please,
take a look at the following screenshot and try to find profitable trading patterns before continuing.
The very first thing to do with the PZ Trend Following Suite is assembling your trading portfolio and setting up
the PZ Dashboard in a separate monitor/window to stay on top on those markets and receive trading email,
sound and screen alerts.
To do so, just load the indicator into a chart and type into the Symbols input parameter the markets of your
trading portfolio separated by a semicolon. For instance EURUSD;GBPUSD;USDJPY;XAUUSD;CBOT.YM.
You might want to enable certain alerts to receive for each timeframe and save the template into your
Metatrader4 platform to avoid repeating this process in the future.
With the PZ Dashboard you will be able to stay on top of 40-50 markets very easily.
All trades are partially closed as soon as the profits cover the initial risk.
Additionally, the stop-loss can be moved to break-even when this task is performed.
With the PZ Manager EA, you don't have to spend any time managing positions, which represents a tenfold
increase in the amount of concurrent trades you can have and manage at any given moment. On the other
hand, your mind is allowed to disengage from the position management process, which would test your
emotions and self-control over and over again. Profits will be allowed to run regardless of what you think or
feel about it.
The PZ Manager EA can trail the stop-loss using three different methods:
This method is based on the Average True Range, which is a volatility indicator.
It should be used for volatile instruments and intraday trading.
If all these trailing stop methods confuse you, use the ATR Trailing Stop.
5) Trading setups
The three chart indicators of the suite are combined into a very informative trading template, which provides
quite a few trading setups which allow you to ride big trends, profit from range-bound markets and recognize
possible trend changes before they actually take place.
Place a sell stop order at the low of the previous bar if...
The obvious question might arise here... should all signals be traded? The answer to that question is that most
of them yes. But not all: some signals might be sudden and violent corrections of price action which trigger the
breakout threshold and others might not be confirmed by the Oscillator. To understand trend changes properly
there is just one thing you need to know, and it is that a market does not simply reverse and change its
direction.
For a market to reliably reverse, it must have passed through an accumulation/distribution period. In that
sense, the market is like an elastic band: it can only stretch so much before bouncing back. Accumulation
takes place before the price breaks up, and distribution takes place before the price breaks down.
For example, a double-top pattern is a very fast and aggressive distribution period: the big players can't wait to
get rid of their shares. On the opposite hand, a double-bottom is a fast and aggressive accumulation period.
The same can be applied to S-H-S patterns and congestion zones.
A range-bound market is simply an accumulation/distribution period which is taking place very slowly and not
in a recognizable price pattern. But it is intrinsically not different from a double-top or a double-bottom: those
are simply periods when this process takes place faster.
So how should you proceed with trend changes? Well, ask yourself the following. Has price action suddenly
reversed or an accumulation/distribution period has taken place? If it has suddenly reversed, you can be very
confident it is a fishy wild correction and nothing more. If unsure, you can always stay out of the market or
place a buy/sell stop order with just a 1% risk at the high/low of the previous bar and treat that trade very
carefully should the trade be triggered.
On the other hand, if a clear accumulation/distribution period is present and a breakout has taken place, you
can take the trade with plenty on confidence. Remember to always use pending orders to enter the market to
decrease the impact of unprofitable decisions.
Place a sell stop order at the low of the previous bar if...
Place a sell stop order at the low of the previous bar if...
The oscillator confirms the trend is weak and is above the signal line
Place a sell stop order at the low of the previous bar if...
The oscillator confirms the trend is weak and is above the signal line
Euro
Japanese Yen
American Dollar
Australian Dollar
Mexican Peso
Euribor
Aussie Bank Bills
US 10-Year Note
US 30-Year Note
Canadian Gov. Bonds
German Gov. Bonds
French Gov. Bonds
Italian Gov. Bonds
Japanese Gov. Bonds
Aussie 10-Year Bond
Wheat
Corn
Soybeans
Soy Meal
Bean Oil
Canola
Cotton
Sugar
London Sugar
Coffee
Cocoa
Orange juice
Lumber
S&P 500
DJIA
Russell 2000
FTSE 100
IBEX 35
Nikkei
Euro Stoxx 50
Hang Seng
Australian SPI 200
Live Cattle
Feeder Cattle
Platinum
Silver
Gold
Copper
HG Copper
Aluminum
Nickel
Zinc
Light Crude Oil
Brent Crude Oil
Heating Oil
Gas Oil
Uranium
Unleaded Gas
Natural Gas
That's diversity! How many currency pairs can be found in the above list? Around six, but no more. Those
underlying assets can be easily traded using futures or CFD's and several brokers offer most of them. In other
words, please bear in mind that trading several currency pairs is not diversification. If your portfolio is properly
diversified, you'll find that big trends taking place in some instruments pays off all other little losses and then
some.
7) Other considerations
7.1) Trading stocks
All stocks belong to an index, which allows you to know the market trend. So, if you are trading stocks, make
sure not to trade against the market trend. If the index is bullish, you should pick only long positions among its
stocks. If the index is bearish, you should pick only short positions among its stocks. You should pick the
stronger stocks if the index is bullish, and the weaker stocks if the index is bearish. Never trade stocks against
the market sentiment.
8) Recommended reading
Some trading books worth reading:
Extraordinary popular delusions and the madness of the crowds. Charles Mackay.