Wednesday, January 16, 2008



First of all The “Holy Grail” trade was originally described in Linda Bradford Raschke’s Street Smarts book.

I get questions all the time about the Holy Grail Setup: Well here it is explained and i'll walk you thru it step by step.
I want to let you know that this setup is VERY Easy and Simple and it is very spottable and occurs very often especially during trending markets, UP or DOWN. Also, if you master this pattern, i am confident, that'll you'll be able to pull money out of the market a lot more often.

Tools You will Need to Day Trade the Holy Grail Setup:

1. A 5 minute chart
2. Volume
3. The 20 Bar Simple Moving Average(SMA or EMA)
4. Basic pattern recognition skills (i.e. BULL FLAGS, triangles, pennants, Bear flags, etc)
5. An ego that handle a small loss from time to time :-)

You need to spot a trend in a stock (i like to use the 5 minute bars, ten minute bars work really well too). A trend should be either UP or DOWN and you can see that just by eye balling the direction of the price trend after the first hour of trading.

You want to look at volume to see the conviction of the move. Lots of volume during the first hour will tell you the force of the move UP or DOWN. Tells me how reliable the move is and the conviction of traders.

Now, this is the most important part of the setup and this is where this setup becomes an art and moving away from the 'science' of trading. This will test your eye balling skills, pattern recognition skills and trading prowess.
You wanna see a slow and corrective retrace back to test the 20 bar simple moving average(20 SMA). You wanna see a hammer off that 20MA, a pattern like a triangle, a wedge or a coiling symmetrical triangle, NR7s, a consolidation move of some kind. The operating words here are: slow and corrective retrace to test the 20 SMA.
Really strongly trending stocks will not pullback for long, so you need to be aware of that and be on the lookout for that scenario and that'll tell you what kind of demand/supply you are dealing with.
I always BUY/SHORT into the pattern/pullback but some people like to wait for a complete test and breakout away from the 20 SMA.

I ALWAYS buy HALF a position into the pattern/test and if the trade starts to work(hopefully right away, because 'time is money') and make money then I will add the other half and ride out a bigger move. I prefer to be wrong on a small amount then be wrong on a full position. BUY a half position and test it out, if you start making money then, that the market is agreeing with your assessment and trading decision and tells you to buy more because you are probably correct.
You know you are wrong when the pattern fails to hold the 20 SMA and that's when i just SELL it and MOVE ON to the next trade. Don't get stubborn and hold on to something that isn't working....please just sell it and move on. I don't use stop losses, i just use mental stops but i stick by them like my life depends on it. Trading isn't a game for slackers, dreamers, or optimists. Please just scratch the trade and move on to the next. This pattern is very common and reliable enough that be sure you'll have better success on the next trade.

Always trade in the direction of the overall trend of the market and you could make a killing on this setup. Always, trade with the order flow of the market. Why go LONG when the market is selling off. DON'T FIGHT THE TAPE! Trade holy grail patterns LONG if the market is bullish and trade inverse holy grail patterns in bearish markets.

*******A picture is worth a thousand words****** Enjoy!


Anonymous said...

This post is going into my favorites folder. Great work, thanks!!!

Stewie said...

no prob dude. enjoy!

Anonymous said...

Thanx for putting into more depth for us (1/2 position etc) Stewie!

Unknown said...

Great post. I am just getting started on the HG, but it is working great so far. I have some comments and questions (and I may have others after I study the charts.)
First, I assume this is your version of the Holy Grail which to my knowledge is attributed to Linda Raschke. Your approach looks to be a modification or refinement of hers (if I am wrong then my questions will make no sense so please ignore). Your comments on the differences will be appreciated (and may save me and others several hundred hours of testing, etc.)
The differences I see are as follows:
A. She uses 20 ema, whereas you use 20 sma. (Probably an insignificant difference for 5 min bars).
B. She uses ADX over 30 and rising, whereas you are apparently using a combination of RSI and volume in lieu thereof.
C. In the examples I have seen she is using 30 Min Bars and you are using 5 minute Bars (and you mention 10 minute bars). Have you used other time frames? (And what if you have a HG in multiple time frames: I that a Holiest Grail?)
Thanks for great article (and other posts).

dowdyism said...

Thanks for taking the time to put this together Stewie.

Anonymous said...

WOW long comment: hahaha. Thanks for reading and i am so stoked that it is working for ya already.
Anyways, Linda Rascke has turned me on to teh idea but to be honest with you over the years, i have pretty much tweaked it a little that i am not sure if i should call it 'holy grail' but regardless.
I always use 5 min. for day trading. Holy grail works on ALL time frames 1 min. bars to weekly or monthly bars. You just have to choose a timeframe and trade that specific timeframe without zooming in and out of timeframes to justify your trading decision. Always trade one time frame. Don't swing trade a position if you got a buy signal on the 1 min. timeframe. Each timeframe works on it's own merit.

She uses ADX and I use RSI. I love the MACD and RSi and they are my fav. indicators but as long you see strength in the move either high RSI or high ADX, either one works.
As far as holy grail on multiple timeframes, i am not sure if that is possible. feel free to send me a chart of what you are describing.
you can email me a chart at:

hope it helps! good trading!

Stewie said...

that last comment was from me....

Marvinmee said...

Excellent post and explanation Stewie. Thanks allot!

Ragin' Cajun said...

Great post, thanks!

ainkurn said...

thanks for the post Stewie. I know you had to put a lot of work in this and its much appreciated. Oddly enough, I have some of the exact same charts up on 10kthrownaway that I have traded. I still can't get over that chart of AGU from late December. There were 6 signals on the stock that day and I was watching it the whole time never taking a trade. I am doing well trading the Holy Grail so far, and I can see much more potential.

btw... I have posted my charts for today if you want to check them out. sorry I was so late getting them up.

Unknown said...

Thanks for the response. If I can find a Holier or Holiest Grail out there, I'll definitely send you the chart.

Bluedog said...

Excellent post, Stewie. Thanks for taking the time with all the charts. That was very helpful to spot the pattern.


Anonymous said...

Thanks for the great post. I've recently returned to the market after a long absence and am just trying to learn as much as I can about all these different methods (funny how you want to learn when you grow up).

Thanks for the post & a great site.

Anonymous said...

you are a consummate pro,very nice post


Dinosaur Trader said...


I still don't get it. Can you explain it again?

Nice post, thanks.


Anonymous said...

This post is extremely useful to me. I trade solar too. The Holy of Holy Grails is an indicator that can say short FSLR at 280 with conviction. I'd pay for that!

I found something curious. I've been using a 26ema, and plugged your 20ma into my charts instead. It matches the median line of a 20/10 price channel exactly. So the 20ma correlates to a 10% correction in the channel.

I don't understand how RSI and MACD help with this method. Could you make this work with just price, volume, and the 20ma?

Thanks for all your work, it makes a difference.

Anonymous said...

Great post. But how does this setup work in a choppy market on your timeframe?

Stewie said...

in a choppy mrkt, you wanna avoid this pattern and instead focus on trading double bottom divergences. Look thru my archives. holy grail patterns work really well in trending mrkt but no so much in choppy ones. Look thru my archives or i will try and dig it up later.

Jtrend said...

Thank you so much for very informative post. I'm getting stuck on a few things. If you have a few minutes I would love a little detail. If the signal at the 20 SMA is at 21, where to do you place your stop or get out if you think you are wrong, essentially how much play do you give the entry near the 20 SMA. Second I know you buy half at the 20 SMA, where do buy second part.

Thank You so much for your Excellent Blog

Anonymous said...

Thank you for the new spread on the 'StewieGrail'. I always find some nugget of info in your work to add to my own trading. - longstems

Salsaman said...

Ah.. the days of the complete trending day.. I miss them so much.

jamiemc101 said...

Awesome website and so many ways to learn from you, Stewie! Worth the cost of admittion!

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