Trading system QuickfingerLuc. Identifying entry and exit points.
Description of QuickfingerLuc trading strategy. Rules of trading according to QFL strategy. Identifying of entry and exit points.
In this article’ I’ll continue describing QuickfingerLuc strategy.
In the first part, I told you about new trading system, QuickfingerLuc.
I described the basics of the strategy:
- Explained the logic of “panics buying”.
- Described its basic elements: base level, rebound, crack.
- Described the process of strategy using with an explanation of each step;
- Gave examples from real trading.
If you haven’t read that article yet and are not familiar with QuickfingerLuc strategy, I recommend reading it here before you study the new information.
In this post, I’ll finish describing the system and tell you how to enter and exit trades based on the strategy. To enter a trade, you’ll need to use alert, a function that provides a sound notification when the price reaches a certain level. Any trader must have this tool; if don’t yet apply it, you should obviously do.
As I said before, first, you need to select a trading instrument with high volatility. QuickfingerLuc is a position strategy that suggests buying panic; the emotionally unstable platform you find, the more entry points it will provide, and so, you will have more opportunities to make profits. Remember, one of the most important entry rules is that the price level must be below the last base level.
To understand the process of opening a position better, lets’ study it on the example of ETHBTC.
In the chart above, I marked the range of emotional swings. The red line marked the panic’s start, the blue one – the border of the panic move, base level, and the green one marks the border of the panic buyout, rebound.
If you put these marks, you will easier calculate the distance between the red and the blue lines. This distance will be the benchmark to calculate the limits for the future panic price drop.
Finally, roughly calculated, the average distance of ETHBTC drop in four-hour timeframe is 0.006 BTC.
As we see in the chart above, if the ticker during the panic dives at the calculated level, the price still won’t reach the base level, and so, according to QFL strategy, you can’t buy in this case.
Therefore, this benchmark doesn’t suit the current market situation.
We can identify the entry point in a different way. It is calculating of the crack’s length.
We should base on at least three last cracks for the period.
Conditionally, to calculate the crack, we can take the distance between the last four base levels.
In our case, it is the distance of 0.002; 0.0018; 0.0042. The average of these three values is 0.00267 BTC.
Next, we mark the level at the calculated distance from the last base level; it will be the entry point.
Another point to add more purchases is the level of the nearest base that is below the last base, the one we are analyzing (in the chart above, I marked the projection of the nearest base for our case with a dotted line).
Ideally, one can enter trades at all three points, suggested above.
Luc doesn’t say anything about how to divide the orders between these points; however, we should understand that the longer is the distance from the current base, the safer is the level to enter.
The ideal safe entry point, Luc recommends, shouldn’t be closer than 10% from the base level.
Here, it is important to emphasize that the drop during the crack emerging must be really sharp.
If the price is falling down to the marked levels gradually, without panic dumps, you’d better not buy at these levels. That is what the strategy is based on; as I’ve said before, we are aiming at buying the panic in the market. If it is a smooth drawdown, there is nothing to buy in the market, as, in fact, there is no panic. So, it is better to use alerts, rather than to put pending orders; as entering on the sound alert will allow you to properly assess the situation and understand what’s going on in the market, whether it is a panic, or a gradual drawdown. I’d like to note that applying this strategy for the first time, you are likely to feel an inner contradiction, as any other trader, used to classical trading principles. Each of us has been always told that we mustn’t buy falling knives and trade against the trend. Following this strategy, we violate these rules.
To manage your fear, trade only a comfortable amount of money, which won’t make you suffer a lot in case of a loss. Only after you have become confident, increase the size of your orders up to the amount, your risk management allows. One of the biggest advantages of this strategy is that you will always trade against the majority. As known, the majority always loses in trading. So, we have studied how to enter a trade, based on QFL strategy. Now, let’s find out where we should take the profits.
One of the simplest ways is to look the sell point around the base level, where the crack has started from (see the picture below: the base level is marked with a long blue line; red arrow marks the crack’s length; green ticks mark the level of purchasing). In the picture below, this exit point is marked with the top border of the green box.
Another way to exit the trade is to extend the price move up to the distance, whose length is equal to at least three last rebounds (the distance from the base to the nearest peak, buyout limit). As an example, I’ll take the ETHBTC pair. For calculation, we have four rebounds, with the length of 0.006986; 0.006329; 0.007046; 0.005971 BTC. Finally, the average is at about 0.006583 BTC.
As you see, these two approaches differ, and suggest different levels for taking the profit. Luc doesn’t suggest any strict rules to this effect. Like with entering a trade, he offers to divide the levels to exit in two parts and not to close a position until you understand that panic’s buyout is over and the correction is going to start.
The worst enemy in the strategy is you fear! If you opened a position based on this strategy, and the market is going against you, you should be happy with this opportunity to buy at even cheaper prices. That is how the author describes his feelings in similar situations. Panic and fear will get you to make hasty steps and lose your money.
You must trade only the part of your deposit that is psychologically comfortable and won’t result in much stress in case of a drawdown.
Never use more than 50% of your deposit for one position!
Never use margin trading or financial leverage with QFL strategy.
That is all about the description of entering/exiting process.
- Start analyzing the chart with the monthly timeframe and finish with 5-minute one (look for patterns and fractals).
- Analyze the regularity of panic sales; mark the main elements: the base, the rebound, the crack.
- Calculate the average of the crack and the rebound, based on retrospective.
- Make up a plan to trade: in the chart, put alerts at the levels of assumed entering.
- When the alert works out, analyze the type of the price move. You must buy only provided there is a panic in the market.
- Never trade your whole deposit! Always leave a supply for averaging. Enter a few trades, in parts; close you profits in the same way, in parts.
- A position for one liquid instrument (TOP 3) mustn’t be more than 50% of your deposit.
- For low-liquid altcoins, the position size mustn’t exceed 2%-10% of the deposit.
In my next article, I’ll try to retell Luc’s experience of trading with this strategy. His tips and recommendations have become an essential part QFL strategy; and one must learn them before they start using the strategy.
I wish you good luck and good profits!
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.