Emini Trading with the 50/50 Strategy
The 50/50 Strategy is primarily used in the ProTrend Methodology with weekly and daily stock charts. However, the 50/50 Strategy can be used on any trading instrument (stocks, futures, Forex) and in any timeframe.
I initially developed the 50/50 Strategy while trading the Emini Nasdaq back in the 90's, but I found that the 50/50 applied extremely well to stocks, too, so I begain to use it as one of my main stock trading strategies. In the chart above, the 50/50 Strategy is applied to the Emini S&P (ES) on 13 March 2014.
The 50/50 Strategy's basic premise to be long when price is above a rising 50 EMA, along with RSI 20 greater than 50; be short below a falling 50 EMA, along with RSI 20 less than 50. In the chart of the 5-minute ES, note how RSI 20 crosses below 50 (arrow) (indicator turns red below 50) to show weakness as price drops below the 50 EMA (arrow). When price turns back up and tests the 50 EMA, it fails to cross back above it, and RSI fails to get above the 50 level. This is the point of the low risk short "trend" trade. Also, note that as price fails to cross back above the 50 EMA, the EMA is turning down, fulfilling one of the main criteria of the 50/50 Strategy (price below a falling 50 EMA).
In the image of 3D Systems (DDD) below, the same concept is applied to an hourly chart of a stock.
In this instance, price is in a period of range consolidation. In consoldations, the 50 EMA moves sideways, so false signals often occur when price crosses above/below the 50 EMA (dark blue) and RSI 20 crosses above/below the 50 level. The trader must wait for price to breakout of the range. Outside of range, the 50/50 Strategy keeps the trader in the short trade based on weakening RSI 20 and the failed tests on retracements to the 10 SMA (cyan line).
The 50/50 Strategy can provide the basis for a versatile and robust trend trading methodology, and other strategies (swings, scalps, reversals, etc) can be integrated with the 50/50 to take maximum advantage of profit opportunities.