Tradonomix Academy

Trading Systems

Chapter 21
Flow 30

Version 1.0 January 2014

Chapter 21: Flow 30

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reserved 2010.

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 Chapter 21: Flow 30

Table of Contents

1. Introduction to the Method................................................................................................................3

1.1 Overview......................................................................................................................................3
1.2 Time Frame..................................................................................................................................3
1.3 Perspective..................................................................................................................................3
1.4 Filters...........................................................................................................................................3
2. Setups..................................................................................................................................................4
2.1 LONGS SET UP..............................................................................................................................4
2.2 SHORT SET UP..............................................................................................................................5
2.3 SOH..............................................................................................................................................6
3. Entries..................................................................................................................................................7
3.1 Initial Entry..................................................................................................................................7
3.2 Adds.............................................................................................................................................7
4. Stop Loss..............................................................................................................................................8
4.1 Initial Stop Loss............................................................................................................................8
4.2 Trailing Stop Loss.........................................................................................................................8
5. Partial Profit Booking.........................................................................................................................10
6. Exits...................................................................................................................................................11
7. Dealing with Special Scenarios (E.g., Gaps, WRB’s, EOM’s etc.,).......................................................12
8. Examples with Charts........................................................................................................................15
9. Quick Checklist..................................................................................................................................18
10. Glossary of Trading Terminologies.................................................................................................21

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 Chapter 21: Flow 30

1. Introduction to the Method

1.1 Overview

In this method of trading, we use the philosophy of buying when the markets are rising and
selling when the markets are falling. We trade the 30min chart in this method. There is no
analysis here, no thinking, just going with the flow up and down. We might move to higher /
lower time frames to have a look at those charts to get a clearer perspective

The method uses pivots as the core concept to define a rising or a falling market. Additional
concepts arrive only when pivots are not present and we need to protect our position.

The Dictionary defines a pivot as a " point around which something turns”. And that's all there
is to it. These turning points are there all over the place in our charts, making definite pivot
highs and pivot lows. So that a break is enough for us to go long, and vice versa for going short.

1.2 Time Frame

30 minutes

1.3 Perspective

Although we do not trade using any other higher time frames in this method. But may view 60
minutes charts for a clear direction in sideways or the 15 min charts in the event of vertical
moves.

1.4 Filters

Filters are some additional space we give to the price to move in order to keep us away from
false trades. There are no hard set rules for filters % wise. A large filter will give a late entry and
a small filter might result in false reversals. Keeping this is mind and after back testing filter
values can be decided. There are the following filters used in the method

1. Entry filter: This is the filter that gets us into a trade

2. Gap filter (on gap days): A filter larger than the entry filter that we use on gap days.
3. Add filter: A filter less than the entry filter that’s used for taking adds

For Nifty - Initial filter is 12 points, Gap filter is 20 points and add filter is 6 points

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2. Setups

2.1 LONGS SET UP

The broad Long Setup is shown as below

Exhibit A: Long Setup

The Long Setup consists of a pivot high over which we go long, keeping a SAR (Stop and
Reverse) level to the nearest pivot low. Adds are taken over subsequent pivot highs and SAR
levels are trailed accordingly to new higher pivot lows.

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2.2 SHORT SET UP

Exhibit B: Short Setup

The Short setup consists of a pivot low below which we go short, keeping a SAR (Stop
And Reverse) level to the nearest pivot high. Adds are taken over subsequent pivot lows and
SAR levels are trailed accordingly to new lower pivot highs.

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 Chapter 21: Flow 30

2.3 SOH

There is no SOH (Sit on Hands) in Flow 30 method. We just go with the flow of the
market without trying to forecast the direction.

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 Chapter 21: Flow 30

3. Entries

3.1 Initial Entry

 Entry (Long or Short ) in this method is taken over the most recent Pivot High (in case of
Long Entry) and most recent Pivot Low (in case of Short Entry) keeping a SAR (Stop And
Reverse ) at the respective Pivot Lows and Pivot Highs.

3.2 Adds

Adds in Longs:

 After the Initial Entry Long, Adds are taken over each new pivot high that’s higher than
the Initial Entry Level and the SAR is moved higher after each add.

 When the higher time frame (Daily Time Frame) is in line with the 30 min Flow, we can
take a maximum of 3 adds. And when the daily time frame is not in line with the 30 min
flow, we take only 1 Add i.e., one initial position and one add after that.

Adds in Shorts:

 After the Initial Entry Short, Adds are taken over each new pivot low that’s lower than
the Initial Entry Level and the SAR is moved lower after each add.

 When the higher time frame (Daily Time Frame) is in line with the 30 min Flow, we can
take a maximum of 3 Adds. And when the daily time frame is not in line with the 30 min
flow, we take only 1 Add i.e., one initial position and one add after that.

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Chapter 21: Flow 30

4. Stop Loss

4.1 Initial Stop Loss

 Stop Loss in the 30 min flow will always involve getting us out of the previously taken
position and an entry into the opposite direction. This is termed as SAR (Stop and
Reverse).

 Stop Loss for the Longs is placed at recent pivot lows

 Stop Loss for the Shorts is placed at recent pivot highs

4.2 Trailing Stop Loss

 Stop Loss is trailed to the higher pivot low in case of longs

 Stop Loss is trailed to the lower pivot high in case of shorts

 The SAR is usually moved after a new high or low is made but there can be exceptions to
it. If we get a lower high with a clear pivot low, the SAR can be moved at that place too.
But , these exceptions should be used with utmost care

Exhibit C: Trailing Stop Loss – In Shorts

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Chapter 21: Flow 30

Exhibit D: Trailing Stop Loss – In Longs

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 Chapter 21: Flow 30

5. Partial Profit Booking

Though in this method we go with the flow taking whatever the market is giving, there are
some points at which we book profits. They are

 WRB (Wide Range Bar’s) Vertical moves

 EOM (End-of-Move) Bars

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Chapter 21: Flow 30

6. Exits

 As already mentioned earlier, in this method, the exit is always accompanied by an entry
in the opposite direction of the trade we took earlier
 Therefore, if we are holding Longs, the Exit Point of Longs will be our Shorts
 And if we are holding Shorts, the Exit Point of Shorts will be our Longs

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 Chapter 21: Flow 30

7. Dealing with Special Scenarios (E.g., Gaps, WRB’s, EOM’s etc.,)

Gaps

 There are days when the market gaps up or down. To deal with this special scenario we
have the following rules in place
 The gaps that we are talking about are Visual gaps i.e., outside the previous day’s range
and visual to the eyes.

Rules Used in Case of Gaps

(i) Against Our SAR: We Wait for 1st 15 min bar to form and reverse with High/Low (+ / -) with
Gap Filter (GF)

ii) Against Our Position but within our SAR: We keep the Original SAR +/- Filter

iii) In Our Favor: Suppose, if we are long and continuous up move with a few WRBs and next
day price gapping up and if the first 15 min bar is a bearish bar, then

a) Reverse on first 15min bar low – Using Gap Filter, with SAR at High of 1st 15 min bar plus Gap
Filter

b) In all other cases stops can be moved to previous day's last bar low

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 Chapter 21: Flow 30

Wide Range Bar’s

The Rules of WRB’s are as follows

i) WRB Break - Out:

 Here we have higher pivot highs and lows, and then we have a WRB Breakout
over a previous pivot high, as always a visually obvious WRB
 We are now looking for the next bar. If the next bar closes below 50% of the
previous WRB (Open-Close), then, we can revert to shorts below the low of this
bearish bar

Note 1:

 This above pattern is valid only in an uptrend, only in WRB Breakouts alone
 Not valid for WRB Breakdowns in downtrend. In WRB Breakdowns, stops are
brought down to the high of the WRB. No 50% next bar reversals. We reverse
only on a break of the high of the WRB

Note 2:

 The above pattern is not only in an uptrend, but it cannot be the first WRB
breakout bar after a downtrend
 The first WRB that we reverse with ending the downtrend and triggering off a
new uptrend, has SAR at low of the bar and we are not really looking at the next
bar reversal
 The above pattern is usually in an ongoing uptrend creating multiple higher
pivot highs and lows and then there comes this WRB Breakout
 We are in essence looking out for the WRB Breakout Failure and to reverse
early

ii) WRB Continuation:

 Multiple WRBs one after another and SAR is shifted to the 50% point of the rally
 This must be WRB one after another; price must close below the 50% mark for
reversals to happen
 In a case where the uptrend has already been in motion for some time,
successive higher pivot highs and lows, then, sets up a WRB after another and
finally culminating in a huge WRB, take the 33% mark of that last bar
 If Price crosses this point, revert to short. But not so in a downtrend, SAR at the
high of the last huge WRB

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 Chapter 21: Flow 30

EOM (End-of-Move) Bars:

 These are those bars that in which the close and high/low (depending on
whether the bar is bullish/bearish) are approximately at the same level
 Suppose we are long and after a decent up move, we get an EOM, then, we
would exit some of the positions at/below the EOM Bar
 Suppose we are short and after a decent down move, we get an EOM, then, we
would exit some of the positions at/above the EOM Bar

Some adverse scenarios in Flow 30:-

 Suppose we are long over a pivot and then there is a WRB down, we short the WRB low
and then again there is a bullish WRB. But such incidences are rare.
 Suppose we are long, and instead of getting a new high we get a flag or a long sideways.
In such a scenario we could exit on flag breakdown.

Exhibit E: Flag Scenario

 It’s better to close positions, remain SOH ahead of big events like elections, budgets etc.,

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Chapter 21: Flow 30

8. Examples with Charts

 This is a flow chart for flow30 which would be helpful

Exhibit F: Flow Chart For Easy Decision Making Purpose

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Chapter 21: Flow 30

 In a Broad sense in this method, for example, if we are long we do not change our SAR
till a new high is made, exception are the cases like Gap, WRB, Vertical move etc., where
we can change our SAR

Exhibit G: Flow 30 – Shorts – Adani Enterprises

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Chapter 21: Flow 30

Exhibit G: Flow 30 – Longs – Aurobindo Pharma

Exhibit H: Flow 30 – Longs and Shorts

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Chapter 21: Flow 30

9. Quick Checklist

Entry Stop Loss Exit Notes

Setup Profit
Initial Full
Adds Initial SL TSL Bookin
Entry Exit
g
Price Long above Subsequent Below Below WRB’s, Below
making a mph Adds above mpl latest mpl EOM Bar mpl
new low newly after new
with a formed highs are
visible mph mph made,
Below
WRB,
EOM Bar

Bearish Over the Subsequent Below Below WRB’s, Below

WRB high of Adds above mpl latest mpl EOM Bar mpl
Bearish newly after new
WRB formed highs are
mph made,
Below
WRB,
Longs EOM Bar

Pivot above Long above Subsequent Below Below WRB’s, Below

ERL mph Adds above mpl latest mpl EOM Bar mpl
newly after new
formed highs are
mph made,
Below
WRB,
EOM Bar

SAR’ed at Reversal to Subsequent Below Below WRB’s, Below

Pivot Low Longs at Adds above mpl latest mpl EOM Bar mpl
and Price 3:28 PM to newly after new
trading 3:29 PM formed highs are
above this mph made,
Pivot Low Below
at end-of WRB,
day EOM Bar

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Chapter 21: Flow 30

Not
Entry Stop Loss Exit
es
Setup Profit
Initial Full
Adds Initial SL TSL Booki
Entry Exit
ng
Price Short Subsequent Above Above latest WRB’s, Above
making a below mpl Adds below mph mph after EOM mph
new high newly new lows are Bar
with a formed mpl made, Above
visible mpl WRB, EOM
Bar

Bullish WRB Below the Subsequent above above latest WRB’s, Above
50% range Adds below mph mph after EOM mph
of the WRB newly new lows are Bar
formed mpl made, Above
WRB, EOM
Bar

Pivot below Long above Subsequent Below Below latest WRB’s, Above
ERL mph Adds above mpl mpl after EOM mph
newly new highs Bar
Shorts formed are made,
mph Below WRB,
EOM Bar

SAR’ed at Reversal to Subsequent Below Below latest WRB’s, Above

Pivot High Longs at Adds above mpl mpl after EOM mph
and Price 3:28 PM to newly new highs Bar
trading 3:29 PM formed are made,
below this mph Below WRB,
Pivot High EOM Bar
at end-of
day

SOH SOH only - - - - - -

ahead of
elections,
budget etc.,
rest of the
time, since
then, no
SOH, only

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 Chapter 21: Flow 30

SAR

Special In Longs, if - - - - - - -
Scenarios a Flag is
formed,
can exit on
breakdown
of Flag

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Chapter 21: Flow 30

10. Glossary of Trading Terminologies

Term Description
mph Minor Pivot High
mpl Minor Pivot Low
VPH Visual Pivot High
VPL Visual Pivot Low
AP Aggressive Pivot
SR Support and Resistance
ISL Initial Stop Loss
TSL Trailing Stop Loss
PPB Partial Profit Booking
SOH Sit on Hands (Do Nothing Mode)
UT Uptrend
DT Downtrend
EOD End of Day
EOM End of Move
WRB Wide Range Bar

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