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Barky

Dynamic Trend Following

Barky’s Dynamic Trend Following system (DTF) is a structured trading methodology that works in conjunction with Barky’s Diagonal Entry Model (DEM) to identify and trade trends based on the “leading timeframe.”

The basic concept is rooted in the fact that price action is fractal. Lower and higher timeframes setup identical continuation and reversal patterns, allowing those that master the Diagonal Entry Model to look for a lower timeframe entry when a higher timeframe is setting up a break or a reversal.

It emphasises clear, risk-defined trades with precise stop-loss and position management rules, using multi-timeframe analysis to confirm setups. By integrating with the DEM’s diagonal-based entries, the DTF system aims to maximise gains while minimizing emotional interference, making it a robust tool for traders seeking to follow trends systematically.

System Rules: Dynamic Trend Following (DTF) and Diagonal Entry Model (DEM)

The DTF system is designed to identify the dominant timeframe driving a market trend and use it to inform trade entries via DEM. The rules are structured to be systematic, repeatable, and risk-defined, minimising emotional decision-making. Here’s a breakdown of the core rules:

1. Identifying the Leading Timeframe (DTF Core Rule)

  • Objective: Determine the timeframe where price is being rejected/supported by the EMA9. This timeframe sets the context for trade entries.
  • Goal: Combine lower timeframe EMA9 continuation/reversals with higher timeframe EMA9 continuation/reversals for intra day swing trades out of sniper entries with an absolute minimum risk.
  • Process:
    • Analyze multiple timeframes (e.g., M2, M5, M10) to assess price action and trend strength.
    • Use 9/14-period Exponential Moving Average (EMA9/14) cloud (Barkster Clouds), to evaluate trend direction and continuation:
      • Uptrend: Price is above the EMA9, and pullbacks fail to break below it (support at EMA9).
      • Downtrend: Price is below the EMA9, with rallies failing to break above it (rejection at EMA9).
    • Identify the timeframe where the EMA9 rejection is strongest or where price action shows clear trend structure (e.g., higher highs/lower lows).

Confirmation Across Timeframes:

  • The DEM setup on a lower timeframe (e.g., M2) must align with the trend direction on the leading timeframe (e.g., M5 or M10).
  • Example: If the M5 EMA9 rejects price downward, an M2 DEM setup for a short trade is valid. If the M2 EMA9 then fails, M2 sets up a new DEM and gives a reversal entry to participate in M5 EMA9 reversal out of failed continuation.

2. Risk Management Rules

  • Stop-Loss Placement:
    • Place stop-losses at logical levels based on market structure:
      • For long trades: Below the most recent swing low or the EMA9 support candle.
      • For short trades: Above the most recent swing high or the EMA9 rejection candle.
    • Use a risk-defined approach: The distance between entry and stop-loss determines position size to limit risk to a fixed percentage of account equity (e.g., 1-2%, and never more than 5%).
  • Position Sizing (Standardised Risk):
    • Calculate position size based on the stop-loss distance and account risk tolerance.
    • Example: For a $10,000 account risking 1% ($100) with a 50-pip stop-loss, the position size is adjusted to ensure the loss does not exceed $100.
  • Dynamic Adjustments:
    • Adjust stop-losses as the trade progresses (e.g., trail stops using EMA9 backtests and continuation).
    • Add on higher lows (pyramiding) if the trend strengthens, but only using Barky’s entry concepts and edges to define risk.

3. Trade Entry and Exit Rules

  • Entry Conditions:
    • The DTF confirms a clear trend in the leading timeframe (e.g., price at a trending H1 EMA9 after a pullback).
    • The DEM forms a valid setup on a lower timeframe:
      • First diagonal confirms a trend break.
      • Second diagonal provides a risk-informed entry (e.g., backtested EMA9 or key level).
      • EMA9 pushes price out of the DEM range.
    • Enter only when both DTF and DEM conditions are met, ensuring alignment across timeframes.
  • Exit Conditions:
    • Profit-Taking: Exit 80% when price reaches the target diagonal or a predefined level.
    • Stop-Loss Hit: Exit immediately if price hits the stop-loss level.
    • Trend Reversal: Exit if the trend weakens (stagnation, failing to displace) or the EMA9 is breached on the leading timeframe.
    • Time-Based Exit (optional): If the trade stalls for too long without reaching the target, consider exiting to free up capital. Barky says that if price can’t break higher, ultimately it will break lower. Don’t get stuck in hope.

4. Multi-Timeframe Confirmation

  • Rule: Always confirm DEM setups on lower timeframes (e.g., M2) with the trend direction on higher timeframes (M5, M10 & H1).
  • Process:
    • Start with the leading timeframe (identified by DTF) to establish trend direction.
    • Check lower timeframes for DEM setups that align with the higher timeframe’s trend.
    • Example: In a downtrend on M10 (price below EMA9), look for M2 DEM setups after a flush and rejection at M5 EMA9.
  • Cascading Validation:
    • If a lower timeframe setup fails (e.g., M2 DEM is invalidated), check the next higher timeframe (e.g., M5) for a new DEM setup.
    • This cascading approach ensures trades are only taken when multiple timeframes align.

Implementation of the DTF System

Implementing the DTF system requires a combination of technical analysis, disciplined execution, and access to the right tools.

Setup and Tools

  • Trading Platform:
    • Use a charting platform like TradingView, MetaTrader, or Thinkorswim that supports multi-timeframe analysis and custom indicators.
    • Configure charts for multiple timeframes (e.g., M2, M5, M10, or equivalent in minutes/hours depending on the asset).
  • Indicators:
    • EMA9: Apply a 9-period Exponential Moving Average to all relevant timeframes to track trend direction.
  • Drawing Tools:
    • Use trendline tools to draw the three diagonals (trend break, entry, target) as part of the DEM.
  • Asset Classes:
    • The system is versatile and can be applied to stocks, forex, commodities, futures, or cryptocurrencies, provided sufficient liquidity and trend behavior exist.

Practical Example (Hypothetical Based on Rules)

  • Market: EUR/USD forex pair, M5 as the leading timeframe.
  • Step 1: DTF Analysis:
    • M5 chart shows price below EMA9, with multiple rejections confirming a downtrend. H1 EMA9 is also trending down, confirming a strong downtrend.
    • M5 EMA9 is rejecting price (physical touch) and is therefore identified as the leading timeframe.
  • Step 2: DEM Setup:
    • M5 EMA9 rejects price, producing an EMA9 downtrend on M2, a flush below a recent low forms the first diagonal (break of trend).
    • Price bounces and rejects at the M2 EMA9, forming the second diagonal (entry).
    • The next candle follows through and confirms the short entry at 1.0850.
  • Step 3: Trade Execution:
    • Stop-loss placed above the rejection high at 1.0870 (20 pips risk).
    • Risking 1% on a $10,000 account ($100), position size = 0.5 lots.
    • Target diagonal drawn to the next support at 1.0800 (50 pips reward, 2.5:1 risk-reward).
  • Step 4: Management:
    • After price drops to 1.0830, take partial profits for 1R or move stop-loss to breakeven.
    • Exit at 1.0800 when the target is hit, or if M5 EMA9 is breached upward.
  • Outcome: Profit of 50 pips ($250 for 0.5 lots) if target is hit, or breakeven/minimal loss if stopped out.

Learning and Practice

  • Courses: The Barkworthy Notes offers exclusive trading courses on Substack that teach the full DTF and DEM systems, including:
    • How to draw diagonals accurately.
    • Exact rules for stop-loss placement and position management.
    • Multi-timeframe analysis techniques.
    • Practical examples and live trade setups.
  • Practice:
    • Use a demo account to test the system on real-time data without risking capital.
    • Focus on one market (Barky trades S&P 500 and Nasdaq 100 futures) to master the system’s application before diversifying.
    • Join the Barkworthy Notes community (via Discord) for mentorship, live updates, and feedback on setups.
  • Backtesting:
    • Historical data validates the system’s edge.

Risk and Discipline

  • Capital Requirements: Start with an account size that allows risking 1-2% per trade.
  • Emotional Control: Follow the system’s rules strictly, avoiding impulsive trades or overriding signals.
  • Market Conditions: Pause trading in low-volume environments or during major news events unless the system explicitly accounts for them.

Clarifications and Notes

  • Proprietary Details: The Barkworthy Notes does not publicly disclose all parameters (e.g., exact EMA periods, ADX thresholds, or diagonal drawing rules) outside their paid courses.
  • Timeframes: The system uses flexible timeframes (e.g., M2, M5, M10, H1, H4, D1 and W1), which depend of the velocity of the expansion (trend). The courses provide specific guidance on selecting timeframes.
  • Indicators: While EMA9 is central, additional tools like RSI, MACD and ATR are used for confirmation, as they align with dynamic trend-following principles.
  • Scalability: The system is designed for both small retail traders and larger accounts, with position sizing adjusted to risk tolerance.
  • Flexibility:
    • The system performs under all market conditions. When price is trending, DEM gives all breaks into the direction of the underlying trend. When price is ranging sideways, DEM gives long at support, short at resistance, and it is in these sideways conditions where the Diagonal Entry Model truly shines.
    • Success depends on disciplined execution, as deviations from rules can lead to immediate losses.
    • Learning to draw diagonals accurately requires practice, as they are critical to the DEM’s effectiveness.
  • Effectiveness: The rules for risk and position management offer a potential 97% success rate, regardless of whether the setup follows through or not.

Potential Challenges

  • Learning Curve: While described as simple, mastering the interplay of timeframes and diagonals requires practice and familiarity with the system’s rules.
  • Parameter Sensitivity: The effectiveness of the DTF depends on correctly identifying the leading timeframe, which may require experience. Beginners are recommended to scalp only the DEM before attempting to trade inter timeframe entry concepts.

Availability and Learning

  • The Barkworthy Notes offers the DTF and DEM systems through exclusive trading courses on Substack, which are “properly organized” to help traders practice immediately.
  • The courses cover the complete set of rules, including how to place diagonals, set stops, and manage positions from entry to exit.
  • Testimonials suggest that the system is highly effective when followed precisely, with users reporting successful trades and consistent setups.

For further details or to learn the system, you can explore the trading courses offered exclusively through The Barkworthy Notes Substack platform, and join the Discord community for video instructions and live guidance.