How To Set Up Your Automated Trading Strategies When Trading With Price Action
Today we are going to discuss how to set up your automated trading strategies when trading with price action, using NinjaTrader software. Since I tend to get this question often from our YouTube viewers, I thought it would be best to just create an article along with an easy to follow “how to” video so that you can quickly see how I set up my NinjaTrader Automated Strategies. There are actually several benefits when using these automated trading strategies that many people might not realize, so I will discuss those in the article as well. If you don’t think it’s worth your time and effort to learn how to use automated strategies that come with NinjaTrader, then think again. I also know that many of the brokers offer a free version of NinjaTrader in which you can trade from, but usually this free version does not allow the use of the auto strategies. While you might feel like you are saving money by using the free version, it’s my experience that using the auto strategies will actually pay for a full lifetime license to NinjaTrader if you make it long term as a day trader.
If you are not familiar with NT’s auto strategies, they are basically a way to set up your trades so that as soon as your trade entry order is executed, NT will then automatically add or place a target order and a stop order. These orders go in instantly upon the entry order being executed, so one of the main benefits is that your target limit orders are placed very quickly, so that gets you into the queue much faster than by doing it manually. If you are entering orders manually, you will normally want to enter your stop first as well, so this delays your target limit order even further, so that will also further delay your entry into the order queue. If you are not aware, orders at most exchanges are executed on a first come, first serve basis, so by being early in the queue, my limit orders are often filled without prices having to tick through the order. Normally limit orders must see prices move through the order price in order to guarantee a fill, but I find that by using auto strategies, I often get filled without prices having to trade through my limit orders, and this is always a good thing when you are primarily trying to scalp quick profits.
Another benefit to auto strategies is that it cuts down on the possibility of human error when trying to quickly enter orders in both directions. The only real thinking required is where to place your initial entry order, and after that, if the order is indeed executed, then the target order and the stop order will automatically be entered correctly without worry. You will be surprised as to how easy it is to make order entry errors when you are doing so on the fly with your money on the line, so this often saves you mistakes that will cost you money. When my original entry order is triggered, the auto strategy is set to do three things. One, it will automatically place my safety stop at the maximum level in which I’m willing to give any trade in the ES, which is two points. Normally I will tighten this stop to one or two ticks above or below the signal bar, but I always start at my maximum stop which is two points. If a trade needs a bigger stop than two points, I have to find a different way to enter in order to stay with my trade management rules, or else I have to skip the trade. There are many ways to change up your trade management, but I won’t discuss that here. If you want to learn more about stop placement, you can go here for more information about proper stop placement.
Secondly, the strategy will place two target “limit” orders. One target limit order will be a limit order for some portion of my trade to take or scalp profits at 4 ticks. We don’t monkey with this first scalp order or change it, because if we move it, even if we move it right back, we lose our place in the queue and we go back to the end of the line. The auto strategy will also place a second target “limit” order at some designated target, such as two or three points. This particular limit order might be moved in order to best manage our trade, but only move it if you want a smaller or larger target, as it works the same way as all other orders, which are first come, first filled. You could add additional target limit orders if you like, scalping out different portions of your trade at different levels if you like, but I normally only use two targets, taking off half my trade at 4 ticks so that I make a full point on the scalp portion, then using one additional target limit order for the remainder of the trade. Again, we don’t move the first four tick scalp target to keep from losing our place in the queue, but you can move the second target or the target on the runners as we call them. They still go to the back of the line in the queue, but that’s not as important as when dealing with the first 4 tick scalp portion of our trade.
Thirdly, the auto strategies will automatically move our safety stop to break even on the remainder of the trade as soon as the scalp portion is filled. We like to move our safety stop to break even or break even plus one tick to make sure we don’t lose any money on the runners or remaining contracts after we scalp out of half our trade. You don’t have to go to break even or break even plus one tick, but that’s how we prefer to do it. This allows us to always make money on every trade that moves more than 4 ticks in our favor, but it also takes away any and all risk after that point as well, so we are guaranteed to make money on the trade if it goes at least 4 to 5 ticks in our favor. Many runners will get stopped out at break even only to go further in your direction, but we find that we still get enough runners to make this strategy worth following almost all the time. When you do get a good runner, it will often make you more money that many, many scalps combined. Once the safety stop has moved to break even, we then manage it and our profit target based on our price action rules and strategies, as every trade is different. As prices move further in my favor on the runners, I normally tighten my stop, so that I lock in more profit, but there are no hard and fast rules on this part of the strategy, so do what you feel most comfortable with in your own personal trading.
Believe it or not, the savings from fewer trade entry errors, along with the number of times you will get filled on your limit orders, without prices having to trade through your limit order, will pay for your NT license over the long haul. This means that while you might feel like you are saving money with the free version, over the life of a successful trader, you will probably save enough money to easily pay for your lifetime NT license many times over. If you want an easy walk through on how we set this up, you can view the included video below, as it’s too difficult to talk someone through these steps in writing. Hopefully you will find value in our instructions on how to set up your automated trading strategies when trading with price action. If you would like to learn more about how we use price action trading to consistently day trade the ES profitably every single day, then you can find out more at http://priceactiontradingsystem.com/pats-price-action-trading-manual.