Selling the Rallies and Buying the Dips in Direction of
Dominant Biases
“All you can do in the end is do your best, and keep
building up your trading skills. If you keep trying to excel, but stay realistic,
you'll eventually achieve lasting success.” – Joe Ross
In a recent article titled ‘An Introduction to a Demand and
Supply Signals Strategy - Long-term Pending Orders at Effective Demand and
Supply Zones,’ it’s mentioned that the signals from the strategy would be
coming on a monthly basis. Another trading method explained here makes you
trade like Smart Money does. It’s also the 2nd signals strategy that
would be used to send signals and therefore, it is better to familiarize
yourself with the strategy, so that when the signals come, you’ll know the
principles and reasons behind them.
Since the currency markets are the best trending markets
that exist, it is rational to follow the dominant trends, also in a logical
way. When a pair, say the GBPJPY, is dropping like a stone, it’s more likely
that it’ll continue dropping for its loss of stamina. But the drop in price
would be accompanied by occasional transient rallies in the context of the
southward propensity. Someone who goes short on the GBPJPY could be stopped out
by a transient rally before the price continues to go further downward in their
favor. This would happen because a stop may be too tight and because the price
doesn’t go in a straight line.
With this trading method, we’d be speculating on JPY pairs:
USDJPY, EURJPY, GBPJPY, AUDJPY, NZDJPY, CADJPY, and CHFJPY. The JPY pairs tend
to move in noteworthy manners; and since they tend to be positively correlated
to one another, they’re easier to predict. We buy a pullback in the context of
an uptrend or sell a rally in the context of a downtrend. This makes us sell
dearer on weak instruments and buy cheaper on strong instruments – really good
bargains!
This method doesn’t do well when a trend is changing. But
soon the change would be confirmed and we’ll prepare to take signals in respect
of that. This means a rally may signal the end of a downtrend, and vice versa
for an uptrend. It also means either the hegemony of the bull or the bear is
over. We would be behaving like the majority when we allow ourselves to be
carried away by irrationality; for trading with irrationality can prevent us
from realizing our goals, as it happens to the majority. We just want to make
sure that the vagaries of the markets don’t have adverse effects on our portfolios.
We can face transitory negativity triumphantly (negativity would always be
transitory), and later recover quickly and move ahead when the markets smile on
us. Such is trading.
In order to understand this trading method, please see the
details below.
Details of the
Strategy
Strategy name: JPY Pairs Pullbacks Trading Method
Strategy type: Swing trading
Trading style: Systematic
Suitability: For full-time and part-time traders
Time horizons: Hourly chart
Currency instruments: JPY pairs
Order type: Instant execution
Signal days: Mondays
Period: Evening
Entry rules: Buy a pullback in the context of an uptrend or
sell a rally in a context of a downtrend
Stop loss: 100 pips
Take profit: 200 pips
Position sizing: Please use 0.01 lots for each $2000 (and
thus making it 0.05 lots for $20000); or 0.5 lots for each $100000
Risk per trade: 0.5% per trade minimum, depends on equity
ratio
Risk to reward ratio: 1:2
Exit: Close any open positive trade which is 2 weeks old
Breakeven: You can move you stop to breakeven after you gain
up to 70 pips
Trailing stop: You can set up to a 50% trailing stop after
you’ve gained up to 170 pips
Maximum signals per week: 7
Duration: 2 weeks
More Explanation
Based on my experience, this would be done only on
Mondays. If there is a Monday in which
the entry criteria aren’t fulfilled, no trades would be taken. Sometimes, it
may even take a few Mondays before there are tradable signals. That is the
peculiarity of the strategy. When the entry criteria are met, you’d know when
to place your orders since you know the setups are clean. It’s when you smooth
your orders that your account balance can be increased and therefore your exit
criteria must be taken serious. This method netted me a profit of 500 pips (5%)
in December 2013. Of course, there were losses which were smaller than the
profits. Understandably, there’d be negative months or months when there would
be flat performances. However, there’d be profits to show in the long run.
Below is an example of how a JPY pair order signal looks
like:
Instrument: EURJPY
Order: Buy
Entry date: November 25, 2013
Entry price: 137.300
Stop loss: 136.300
Take profit: 139.300
The signals would be published on this website. The signals
would also be traded live for Tallinex clients to see. These signals will
initially be emailed to subscribers, but will soon be offered via the automatic
trade-following feature of our upcoming social trading platform.
Conclusion: The
aim of this trading method is to buy dips in an uptrend or sell rallies in a
downtrend. We need to respect the major
bias always.
This piece is ended with the quote below:
“It is by watching and managing the losing trades that
you will make money. The winning trades can be left alone (never, never, close
out too soon).” – Alan Saunders
Source: www.tallinex.com
Eye-opening trading lessons: Lessons from Expert Traders
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