Adam H. Grimes

1. My Rules (The Blog of Adam H Grimes), 18 Nov 2013 — own site, 2013
2. How to trade pullbacks — own site
3. Trading Pattern: the Failure Test — own site

• FilterPullbacks: the market must be both trending and fluctuating. Skip very strong trends with no pullbacks; judge the trend from structure, swing length, lower-time-frame momentum and strength versus exhaustion.
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• FilterAvoid entering after potentially climactic large-range bars far outside the band, and trades that point to the end of a trend; do not force trades when the market is not pulling back.
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• EntryUse bands (Keltner or Bollinger) set to contain roughly 80–90% of price action and then do not change them. Wait for a bar to touch the band and enter near the average in the trend direction; a lower-time-frame break of the previous bar’s high is a useful refinement.
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• EntryFailure test: price trades beyond a prior pivot or support/resistance level and quickly fails back across it. Same-bar version: it closes back inside on the same bar, enter on that bar’s close. Next-bar version: a bar closes beyond the level and the following bar reverses back across it.
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• StopPlace the stop beyond the previous extreme; as a rough starting point, 2–4 ATRs beyond the entry.
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• StopFailure test stop: at or just beyond the new extreme set on the move (for a short, just above the high of the signal bar).
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• ExitLet winners run: do not exit winners without reason. Admit errors quickly and exit; use time stops when the expected scenario does not develop; being flat is a legitimate position.“Do not exit winners without reason!”
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• ExitTake the first profit at a gain equal to the initial risk (1R), then scale out of the rest. Add a new pullback trade only after taking partial profits and moving stops, so you never hold more than one trade’s risk.
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• Size and riskWatch correlations: several positions can amount to one oversized risk. Manage today’s correlations, not the past ones. Risk management is the most important part of the job.
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• Size and riskTrade failure tests with smaller size and risk than most other setups: gaps through the stop and larger-than-expected losses happen, and in trends the gap-and-go beyond an extreme tends not to reverse.
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• DisciplineProfitable trading requires an edge: if you cannot name your edge, you do not have one. Markets are highly competitive and nearly fully efficient, and simple approaches tend to work.
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Often attributed to this trader, but not found in the sources above. Not listed as his or her rules.

• Profit targets for the failure test and an exact risk per trade are not given on these pages; the 2–4 ATR stop is described as a rough starting point, not a rule.

Rules are partly qualitative (“orderly”, “climactic”). The failure test is the same idea as Wyckoff’s spring and upthrust and as a 2B entry; none of these pages publishes a record of results.