Futures — Strategy — By The Books

Doctrine — The Books

Diary of a Professional Commodity Trader

Peter Brandt

Trading System

The primary system this channel runs on. A practitioner's account of applying classical patterns strictly to futures markets over decades. Core idea: most setups fail — the edge comes from cutting losses ruthlessly and letting the occasional high-quality setup run to its full target.

Weekly charts as the primary timeframe — daily bars for confirmation, but the pattern must be clear and unambiguous on the weekly
Strict geometry — only trade patterns where the boundaries are clean and undeniable; ambiguous formations are skipped entirely
Risk 1% of capital per trade — position size is calculated from the stop distance, not from conviction; the stop is never moved to accommodate hope
Position sizing is the true craft — pattern selection is secondary; survival and compounding depend on never letting a single trade become a catastrophe

Technical Analysis of Stock Trends

Robert D. Edwards & John Magee — 11th edition

Pattern Reference

The definitive reference for classical Western chart patterns — used here for pattern definitions and entry geometry. Core idea: price patterns repeat because human psychology repeats — fear and greed leave the same geometric footprints in every market, every era.

Support and resistance as psychological price levels — areas where collective memory of buyers and sellers creates predictable friction
Volume as confirmation — a genuine breakout is accompanied by expanded volume; a breakout on thin volume is suspect until proven
Patterns as pictures of supply and demand — each formation is a snapshot of the balance between motivated sellers and patient buyers, and its resolution predicts which side finally wins

Technical Analysis and Stock Market Profits

Richard W. Schabacker — 1932

Pattern Reference

The original source from which Edwards & Magee drew — used here for pattern structure and measured-move targets. Written in 1932, still the structural foundation of classical chart analysis. Core idea: the market's structure is not random noise — it is the net result of informed and uninformed participants wrestling over price, and that struggle has shape.

Consolidation as energy accumulation — sideways price action is not stagnation; it is compression before a directional release
The measured-move target — the expected distance of the post-breakout move is a function of pattern height, giving a mechanical, objective target
Breakout without volume is suspect — the pattern completes on paper, but participation tells you whether real money is committed to the move

Patterns Detected

Rectangle Breakout

Price consolidates in a horizontal channel; a breakout above resistance or below support signals the next directional leg.

Ascending Triangle

Flat upper resistance with rising lows — buyers are accumulating; a break above the ceiling completes the pattern.

Descending Triangle

Flat lower support with declining highs — sellers are pressing; a break below support targets a measured-move decline.

Double Bottom

Two lows at approximately the same level separated by a recovery; confirmation comes on a break above the intervening high.

Trend Pullback Breakout

A brief retracement within an established trend that forms a compact consolidation before resuming in the trend direction.

Inverse Head & Shoulders

A reversal pattern with three troughs — the middle trough deeper than the two flanking ones — signaling exhaustion of selling pressure.

Flag / Pennant

A sharp move followed by a tight, brief consolidation; the flag or pennant resolves with a continuation thrust in the original direction.

Rising Wedge

Converging, upward-sloping trendlines where price makes higher highs and higher lows — but the range narrows, signaling a bearish resolution.

Falling Wedge

Converging, downward-sloping trendlines with narrowing range — bullish reversal or continuation pattern, typically resolved with a breakout above resistance.

Risk Management

Fixed $1,000 risk per trade — regardless of conviction or pattern quality; position size is derived mechanically from the stop distance

One open position per market at a time — no pyramiding or stacking of positions in the same contract

Stop placed at pattern invalidation — below support on long setups, above resistance on shorts; the level where the pattern's thesis is definitively wrong. Once entered, the stop advances daily per the Brandt Trailing Stop Rule and Continuation Pattern Stop (see Stop Management below).

Stop Management — Brandt doctrine (Ch. 3) — two rules advance the stop daily; the more protective result is applied; the stop never retreats:

Trailing Stop Rule: The bar with the highest high since entry is the "high day." Any later bar that closes below the high day's low is the "setup day." The stop advances to the setup day's low. Mirrored for shorts using the lowest-low day.
Continuation Pattern Stop: When the last 9 daily bars form a tight consolidation (range ≤ 3.5%), the stop advances to the floor of that consolidation — consistent with Brandt's observation that flags and pennants within a trend provide the opportunity to tighten the protective stop.

Target at pattern projection — measured-move height extended from the breakout point; a mechanical, objective target that does not move

No discretionary overrides — if the pattern fails and the stop is hit, the position is closed; no averaging down, no hope-based holding