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Posts Tagged ‘currency trading’

#1—This only works on Daily Charts.

What this entails is being short on a pair when the 14 day Moving Average (MA) crosses below the 100 day MA, or vice versa, being long when the 14 day MA crosses above the 100 day MA.

When I do enter a trade using this method, I want to be able to put a stop loss in at 100-200 points below the previous day’s close—This is how I will calculate my risk—If I need to place my stop loss 200 points below my entry, then I adjust my trade size accordingly.

Finding the best entry point of 100-200 points stop loss (your 100-200 point stop being outside the previous day’s range being the crucial factor), is part and parcel of this advanced strategy……

Placing pending orders that only get filled if the price lands within this crucial risk-management range…..then just taking some time off and checking back 12 hours later to see if it got filled is another crucial method that would have to be employed here ie: patience and discipline.

According to all my scenarios that I have back-tested (I back tested them candlestick by candlestick by hand, just advancing my screen so I only see one candlestick at a time using daily candlesticks only), in that if you can enter a position and keep your stop outside of the previous day’s range then good. If you can enter a position and you are able to keep your stop outside of the previous 3 day’s ranges, then great.

Using that mindset as a guide, I went back on 6 pairs starting August 2008 using daily bars (candlestick) by daily bar, and rolled my stops up to just below (assuming it was a bullish trade) the last 3 days’ range——

Almost without fail that would have kept me in trades right up to very close to the point where they crossed the 14 MA going against me, and would have earned me 500 to 1000+ points every month—only when the 14 ma was on my side of the 100 ma though…..

14 MA is Bear of the 100 MA–I bet Bear.

14 MA is Bull of the 100 MA I bet Bull.

This works on all pairs traded against the USD…it works in theory on every chart I’ve tried it on…….It works on crude, corn, sugar, wheat, pork bellies you name it…Thing is in Forex it needs to have a close par value with the USD.

Take the South African Rand for example (USDZAR)…

It had a 27,500 point move in October 2008 against the USD, but it was only worth around $.08 cents USD per point.

EUR, GBP, CHF, SGD, AUD, NZD, JPY & CAD are all close enough to being 1-on-1 with the USD to make each point worth your time.

Let’s say I risk 3% of my account on EURUSD and it takes off, and I am able to roll my stop up to a guaranteed profit by following my rules above….that means that money is no longer at risk, so I should be looking to ADD to (pyramid) that position.

Imagine trading 8 pairs and pyramiding each one over a 2-3 month period, and doing that 2-3 times a year.

This isn’t the Holy Grail–keeping a sharp eye on the fundamentals along with being able to see what a “selling wick” or “buying wick” is & a few other basics though, can enhance this strategy.

Brought to you courtesy of ForexCornerstone.com

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