A mechanical trading system by William F. Eng
As a professional floor trader at the Chicago Board of Figure 1 Trade, I have studied many trading
techniques. Some work and some don't. Most trading techniques work with the one missing element that
we all needódiscipline. I preface this article with this caveat because I am of the firm belief that the best
system, without minimal discipline, will fail. I have derived a very good approach to trading the markets
and have seen this fail when others have used it because they lacked the discipline to follow it.
Independent of your approach, you must have discipline.
The approach described here is simple, and its simplicity gives it a tremendous amount of elegance. My
system is based on swing charts. My first exposure to swing charts was in a technical analysis class
taught by a William D. Gann technique instructor. The beauty of using swing charts lies not in the fact
that you, the trader, can determine when you should position in the direction of a breakout of a price
boundary, either upside or downside, but in the fact that such price boundaries can be used as stop loss
limit points. Therein lies the utility of swing charts. They may not flag you as to when you should take
profits, but they will definitely indicate when you should, and must, take limited losses on bad trades.