Trading Nasdaq 100 Using DMAC Method

DMAC - Dual Moving Average Crossover
A solid and proven trend capturing method. DMAC works VERY well in strong trending markets (up or down). But its basically unusable when the market is choppy. To succeed with this method you need to be a very focused and quick trader who can go long or short within short time spans during the day. Hesitation is your worst enemy. The potential daily profit is $1,000 - $3,000 (or more) when using a trade size of approx. $40K (1,000 shares QID). While this is a healthy profit, its very difficult to capture 100% of the maximum daily gain. If you are a beginning trader, like me, you can expect maybe 25% of that amount. If you are more experienced or you can automate this method while filtering out the market noise (chop), maybe you can achieve up to 80%, but I am only guessing at this point. My goal is to consistently capture $1,000 per day or $5,000 per week using this method. I hope to automate this system to some degree.

How to Trade the DMAC method using QQQQ and QID/QLD
Buy when faster (short) moving average crosses & closes up (above) the slower (longer) moving average. Short when the faster moving average crosses and closes below the slower moving average. Use a 4-period and 8-period moving average. I prefer to use the Exponential Moving Average (EMA) and 1-minute bars. Use QQQQ as your buy/sell trigger mecahnism...but when the trigger says BUY, trade the QLD (Ultralong) or you can also short the QID. When the trigger says SELL, trade the QID long. By using the Ultra ETF's you crank up the leverage and get a bigger swing in the move.

Some things to consider:

• Pivot Points - watch these for bounce and support/resistance.
• Prior day's high/low, prior Friday's close/high - areas of support/resistance
• Volume spikes - can confirm beginning or end of trend
• Boring range bound trading can occur...after 30minutes or so, watch for major trend reversal
• Gaps up/down at open are usually closed providing a nice trading opportunity
  

Trading Tips:

• On the 1-minute time frame some trends are as short as 10-minutes (or less) and as long as 1 hour.
• Biggest moves usually come in at 4 points during the day: (1) At the open until 10am. (2) Midmorning 11am -12noon. (3) 1pm and/or 2pm. (4) At the close - the last 30 mins are crucial. Watch closely starting at 3pm.
• There will be about 6-10 "turns" to catch a crossover trigger during each day.
  
• Try to buy at the exact start of the 1-min bar following when crossover occurs.
• Consider taking quick partial profits as trends can quickly reverse. I like to take what I call "dimes" and "quarters" from a trade. Dime = $100 Quarters = $350. I use 1000 shares to trade the QID and 500 shares for QLD. So $100 profit = $0.10 move in QID.
  
• I prefer to short the QID as opposed to go long the QLD due to greater liquidity and narrower spread.
• The biggest challenges..staying focused and catching the triggers....and not losing your "nerve" and exiting a trade too early. AS LONG AS THE MOVING AVERAGES ARE PARALLEL STAY IN THE TRADE. Alternatively, you can take the safe route and exit after (1) you have captured a dime or quarter (2) the average makes a sharp angle turn in direction, although the averages have not crossed yet. Sometimes the averages "kiss" but never cross, then they separate and continue parallel in the direction they were going.
• Something I am exploring...how to automate this trade so you take your emotions out of the equation. There has to to be some discretion involved however, is my gut instinct. Entries could be automated, leaving the exit to you.