Barky’s Three Level Trade Plans
Updated and shared daily via the Substack newsletter, the Three Level Trade Plans offer clear charts, each with three primary levels:
- Level 1: key resistance – hourly break out above;
- Level 2: Bull/bear line – the balance line of the hourly setup;
- Level 3: key support – hourly break down below.
Here is an example of an actual trade plan, with the three levels marked.
During the session, when price hits one of these pre-planned levels, I wait for my Diagonal Entry Model to define risk and participate in trend continuation or reversal. Levels 1 and 3 always hold the key to the hourly trend.
Here is how that works on a price chart.
Short, partials into level 1 for 3R, trail runners;
Long, level 3 reclaimed, partials at level 2 for 3R and the day is made.
Simplicity and repeatability
This model sets up multiple times daily
Barky’s Diagonal Entry Model
The holy grail of proficient trading lies in the elegant interplay of higher highs and higher lows, organically shaping the EMA9 as a dynamic reflection of price momentum and trend.
When price retraces to test the EMA9 and encounters support, three diagonals form the Diagonal Entry Model to facilitate a risk-calibrated opportunity to engage, perpetuating the prevailing trend with precision and discipline.
The system includes comprehensive rules for risk and position management,
Part one: EMA9 Reversals
Always wait for price to attempt to trend. Never engage when price is locked inside a range. When price attempts to leave a range and displaces lower, we can draw a Trend Control Diagonal along the candles.
If you would be short in the example below, as long as this diagonal is respected, your position is safe.
To monitor and trade trends, initially all you need is a cloud that represents EMA9 to EMA14.
The Setup
Once the TCD is violated, it becomes a Break of Trend and initiates a
consolidation (sideways) or a retrace (bounce) towards the leading, trending EMA9.
The first time a trending EMA9 is tested, the rejection is nearly guaranteed.
This rejection becomes the pivot to trade against, and allows us to draw a second trend line.
This second diagonal is called Entry Control Diagonal.
Breaking the ECD indicates that continuation is failing, but buyers
have to find acceptance above the EMA9.
Their attempts to do so, allow us to draw an Entry Diagonal.
The Entry
Sellers break lower and fail to hold below – “failed continuation”.
Price has looked above our entry diagonal, and we have local rejection.
This gives us the ability to define risk for a possible EMA9 reversal.
The next candle opens below the EMA9.
If sellers now fail to hold price below the EMA9, buyers take control and will be free to seek the EMA50.
Therefore, breaking through the entry diagonal triggers the entry for the trade.
After that, if buyers can’t hold the EMA9, the trade invalidates.
The stop will be very close to the entry, allowing us to make good money from this setup.
The entry triggers. With risk adjusted position sizing, this setup produced a 200% gain. In other words, if you were to risk a $1000 loss at the distance between the entry and the stop, at 2R, the position would be worth $3000. That is your initial $1000 risk and a $2000 profit.
In this example, price gave long from a failed breakdown, and has not yet backtested the reversal, the setup doesn’t have a higher low. Therefore, when the EMA9 fails to hold, the trade ends, and because of the absence of a higher low prior to the break out, this trade was essentially just a good scalp.
This exact concept repeats itself multiple times daily, every single day, and just scalping these compounds a solid daily income.
Bounces are essentially just a search for a lower high, and after price has neutralised the EMA9, it simply seeks the EMA50, where we should anticipate rejection and continuation to set up. This brings us to the second part of the Diagonal Entry Model setup.
Part two: Continuation
When an EMA9 trend ends, price will always seek the EMA50 and experience at least some sort of reaction. This reaction typically results in a higher low, after which buyers and sellers again negotiate around the EMA9 to determine if the underlying trend resumes, establishing a new EMA9 downtrend.
If this continuation of the underlying trend fails, a broader reversal attempt will take place.
We continue with the same setup for this example and added an EMA34 to EMA50 cloud to our chart. As you can see, EMA50 has rejected price and a hammer candle confirms the higher low.
This is how the Continuation Model (CMod) forms.
It is typically a wedge shape with the EMA9 crossing through it.
When price looks above, the backtest of EMA9 has to hold, setting up the long entry.
In this case we see a hard rejection and again EMA9 was lost.
On the next candle, buyers attempt to reclaim the EMA9 but can’t hold. When price undercuts the previous candle and the control diagonal, it triggers the entry, again with the stop just above the EMA9, and we are rewarded 1.7R, meaning that our initial $1000 risk is has yielded $1700.
The position is further managed through observation. The low of the setup should reject as price consolidates below the low to resume the downtrend with EMA9 leading.
If price makes it back inside the range and reclaims EMA9, the breakdown fails and sets the long instead.
Now, because price was rejected by EMA50 and EMA9 continuation failed, we have to prepare for a broader reversal, as those still short from before will now start exiting their positions as buyers will enter the trade.
When the entry triggers, there is no room for hesitation, and as price overshoots the previous lower high, we have to be ready for acceleration, rejection or consolidation. Price will always do one of three things. But the EMA9 parameter allows for such good entries that losses are kept super small, as long as you stick to the discipline of killing the trade when EMA9 support fails.
Just like with the breakdown attempt, we want price to hold the pre-break high and wait for EMA9 to catch up. That confirms momentum. If price was to come back immediately for a backtest, it would signify a potential lack of momentum. Regardless, this is a break out, and EMA9 has to trend, lead price higher.
Price backtests EMA9 and accelerates. We take what the market gives us.
Now we only have to draw a new Trend Control Diagonal. When that gets violated,
price will again seek the EMA9 and the game starts all over again.
Super simple and extremely repeatable.
On lower timeframes, this sets up several times daily, but it works the same way on hourly charts (intra day swings), daily (swings), and weekly (non-speculative investing).
Still not convinced?
Then have a look how well this entry model concept works together with Barky’s Tree Level Trade plans, to trade the S&P 500 and Nasdaq 100 Futures, shared daily via Substack.
Or choose a plan via the link below
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