How We Trade The Dax

Blackbox believe in transparency, therefore we have decided to share our trading knowledge, experience and strategies with you regardless of whether you have signed-up and joined our trading community or parted with any of your money.

Blackbox apply Pure Price Action which is based solely on chart structure in the form of support and resistance, to trade the German DAX30 intraday using our own unique hybrid MT4 trading environment, the Blackbox Trade Controller.

We use two installs of MT4; one to trade from using the 1-minute and 5-minute charts, and the other to display the higher time frame context, as described in detail on the Custom Setup page.

We use multiple time frames to assist us in our trading decisions which provides context and improved visibility of any patterns or trends that maybe developing. The article, “Improving the Odds by Trading Multiple Time Frames” by Don Steinitz, clearly explains the reasoning and advantages of using multiple time frames and he sums it up as follows.

LAWS OF MULTIPLE TIME FRAMES
  1. Every time frame has its own structure.

  2. The higher time frames overrule the lower time frames.

  3. Prices in the lower time frame structure tend to respect the energy points of the higher time frame structure.

  4. The Energy points of support/resistance created by the higher time frame’s vibration (prices) can be validated by the action of lower time periods.

  5. The trend created by the next time period enables us to define the tradable trend.

  6. What appears to be chaos in one time period can be order in another time period.

Price action patterns are fractal in nature; within each time frame is another time frame with very similar patterns. Therefore, when looking for high probability trade opportunities, we mark up the specific A-B-C chart pattern that conforms to our Trading Edge on each time frame, we overlay the Price Action Grid which comprises of support and resistance in all its forms and defines chart structure, then we look for confluence across time frames.

We believe in keeping the charts as pure and simple as possible. The horizontal structure is fundamental so it is permanently overlaid on all time frames, whereas the equidistant channel structure is overlaid as and when required for reference purposes only. Overlaying the Price Action Grid comes down to personal preference and what the individual finds most helpful.

The Trade Controller environment automates tasks such as calculating risk/reward, position size, trade management and trade journaling, and has been designed to free up the trader to focus on developing and implementing their pattern recognition skills. It has been designed to assist those of you who want to learn how to trade the markets, not to function as a robot that mechanically automates trading for you.

Trading is often a lonely pursuit and having a community to share trade ideas, see things you may have missed and help you with your struggles, can be a game changer. Blackbox host a really helpful trading community where we we encourage each other, share our analysis and ideas throughout the trading session via our daily blogs and strive to help you to become a better trader.

We believe preparation is key. We encourage all of our members to take the time to define their own personal Trading Plan and trading rules that resonate with their personality and risk profile. Before each trading session we update our charts and we watch the Blackbox Inspirational & Motivational Trading Plan Video to ready our mind and reinforce our rules. Throughout the session we display our trading plan and some examples of great setups to help keep us focused.

When trading price action our mantra is ‘Be The Bear’. We must adopt the same mind-set as the mature bear by learning to filter out and ignore low probability trade setups in the same way as the bear ignores the minnows and waits patiently for juicy salmon.

The Blackbox Trading Edge is based on specific A-B-C price action chart patterns that forms regularly on all time frames. When these patterns form, our trading edge is in play providing potential trade opportunities.

When a clear, impulsive A-B leg forms, we mark up the A-B-C chart pattern, use the Fib Tool to identify the ‘Golden Zone’ and we look for confluence with other chart structure and other time frames. We use the Trade Tool to mark up the trade entry, stop loss and profit target levels and we look for a minimum of 2R Risk-Reward.

The following video provides a live demonstration of this process.

We refer to our trading plan and trading rules before entering a trade and we ask the following questions:

  • Have I anticipated this or am I reacting?
  • Can I see the A-B-C with excellent role-reversal?
  • Do I have great structure?
  • Do I have great confluence?
  • Do I have great context?

Assuming we have satisfied the questions above, finally we ask:

  • Does this trade look good?
  • Does this trade feel good?
  • Would I take this trade again – win or lose?

The answer must be Yes to all or we pass on the trade.

As is the case with casinos, losing trades are part of the probabilities gig we are in as explained in this video “Trade Like a Casino for Consistent Profits” by entrepreneur, peak performance trainer and stocks/FX trader Adam Khoo. So we follow our process, we take each trade with the understanding that it is statistically independent of the all the trades that went before and all the trades that will follow, and we allow our trading edge to play out over time.

At the end of each day we review our performance, to learn from our mistakes and reinforce our learning. The Review/Analysis process is an essential part of a successful traders routine. Traders who overlook the journaling, review and analysis process are setting themselves up for failure!

Effective review ‘internalizes the process and installs the pattern recognition circuitry’ required for success.