Forex trading strategies - bunny cross, woodies cci, 10 pips a day

• Coders Short Term Trade Management Ideas ***

1/ BREAKEVEN AFTER X PIPS

The concept here is that after the price has moved X pips in profit, the stoploss is moved to breakeven + 1 pip.

Basically stops a profit from turning into a loss.

2/ REDUCE LOSS AFTER X PIPS

This concept allows you to have a greater stop loss gap than limit gap and still have the loss equal the same amount as the profit if it gets hit. This one needs an example:

Buy 1 lot @ 1.2000, Limit 1.2015, Stop 1.1980
We have a 15pip limit with a 20pip stop loss.
The price moves down to 1.1990. At this level we are 10pips down. Close out half of the position at this level. If the stop gets hit, you have lost -$150 instead of -$200. If you limit is hit, you still make money.

3/ TAKE PROFIT AFTER X PIPS PROFIT
This one is self explanitory. Entry with 1 lot and close out half after X pips profit.

4/ REDUCE LIMIT AFTER X PIPS LOSS

In my opinion, it’s better to have a 1 pip profit than a 20 pip loss. By reducing your limit price if the trade moves against you by X pips, there is more chance that it will be hit than if you left the limit at the open price + limit level. For example:

Buy 1 lot @ 1.2000, Limit 1.2015, Stop 1.1980
We have a 15pip limit with a 20pip stop loss.
The price moves down to 1.1990. At this level we are 10pips down. Move you limit from 1.2015 down to 1.2001. There is a greater chance that the limit at 1.2001 will be hit, than if you left it at the 1.2015 level.

The examples don’t take into consideration the cost of spreads.

Please post any other short term trade management ideas that you may have.

Comments welcome…

Please keep in mind that no technical analysis (TA) is 100%. It’s all about trying to find an edge to put the odds in your favor. Remember, it’s really all about expectancy and money management. The TA just gives you an excuse (or you could say ‘the confidence’) to initiate (and exit) trades. It also allows traders the necessary flexibility to change their minds at the drop of a hat.

Rants:
I’ve been a programmer for 10+ years now. This has involved working with many other programmers both old and new. Know what the most common fault I have witnessed over these 10 years? The failure to test ideas. The failure to test programs. We think it should work, so it must. Ha!

Just what do we have against testing? Why do we feel the need to pontificate on things that can easily be tested? It’s a really strange phenomenon that even I’m guilty of from time to time. And I know better!

I think the key is this: Avoid trying to prove an idea with logic and speculation. Use logic and speculation to create ideas and use testing to prove whether those ideas are indeed valid. Maybe logic is not the correct term here. But, I hope you get my meaning.

http://taylortree.com/2005/07/part-ii-scale-fish-not-tra_112262102882143573.html

In summary, each investor must look at himself in the mirror and ask what is more important – being right or making money? If profit is the ultimate goal and not pumping the ego, then understand that a smaller losing percentage is not only OK, it often is necessary for success.

http://www.sfomag.com/homefeaturedetail.asp?ID=-170744115&MonthNameID=August&YearID=2005

I think people are having far too rigid opinions here. Also people automatically assume that scaling/averaging down means something that it does not necessarely mean i.e. the kind of action that the starter of the thread described.

If done as a part of a good trading plan which definately has a stop loss point and good money management (neither of which the thread starter seemed to have) scaling in when price moves against you is a very viable option when doing fade trades and does not increase risk at all.

In my trading when doing fade trades (by which I mean fading the most immediate price action) I sometimes scale in. I have a “price window” of x ticks inside of which I do the scaling and a definite stop loss few ticks outside the price window. So if I trade for example 3 lots I take the 3 lots at 3 different prices one lot at the time as the price moves against my position inside the price window instead of taking 3 lots at one price, such as at the midle of the window.

There is no more risk in this compared to taking the whole lot at a single price.

I think the key differences are: Having a definite stop loss and not exceeding your intended trade size (i.e. you scale INTO your intended size, you dont “average” a trade that allready is at your intended size).
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I agree with Albert. If you still believe you want to average into a position it would be in your best interest to become a systematic trader. You could still use your discretion to pick your entry time/point. Then you must allow your ats(automatic trading system) to take over. I believe this is the only way you will not self destruct.

http://elitetrader.com/vb/showthread.php?s=&threadid=53116&perpage=6&pagenumber=1

In foreign exchange, we have a divide between position traders (longer than three days) and swing traders (three minutes to three days). Position trading generally delivers the highest returns because FX is a highly trending market, and this is what attracts newcomers.

After all, trading is not actually about making money – it’s about managing risk.

A dandy trick is to enter when the 15-minute, 60-minute and daily stochastic oscillator are coming up off an oversold bottom. In this situation, you target double or triple the average true range of the 60-minute bar as a profit goal and the average range as the stop. The secret lies in the confirmation of the same indicator in different time frames instead of multiple indicators in the same time frame, as in regular daily trading. Some traders use the weekly form of indicators to confirm buy/sell signals on daily data, but we have never found that useful in trading foreign exchange.

While multiple stochastic oscillator confirmations are useful in intraday time frames, do not neglect confirmation by other indicators, including breakouts. Support and resistance lines, moving averages (especially the magic 20-period moving average, which seems to work in all periods over two minutes) and momentum are all as valid on the intraday chart as on the daily chart. If you see your price retrace through a support line, for example, you can exit early for a smaller loss or even a small gain – even if your stop has not been hit. You don’t have to make every stop the worst-case stop.

The first rule of successful gambling, says Pearson, is to not gamble (in the strictest sense of the word) at all.

No, he’s not condemning all games of chance as hopeless. Instead, he means that you should only bet when the odds are clearly in your favor. Or, as he puts it, “You got to know when you have the best of it. A little bit or a lot. I like a lot.”

If your odds are too good, of course, no one will take your bet. So even the best situations afford only a small advantage—at best, by Pearson’s reckoning, a 60 percent chance of winning vs. a 40 percent chance of losing (thus the name of the rule).

You won’t win every time. But if you are disciplined enough to wager only on advantageous odds, and you do so repeatedly over the long haul, the chances are very good that you’ll come out ahead in the long run.

Finally, there’s the right way to play poker, the way poker is played by successful pros. These players go into pots only with strong hands, and bet a lot when they do. They’ll also stay in with a mediocre hand, if they can do so cheaply. Inevitably they still lose some hands on which they bet big. But ultimately the odds work in their favor, and over time they minimize losses and maximize gains.

http://money.cnn.com/2005/04/27/pf/poker1_0505/index.htm

by robbooker

I’m not sure that people realize how fast they are going to lose all of their money in currency trading if they move their stops to take bigger losses on a trade—hoping that the currency pair will come back and give them some profit.

Stops—whether mental or actually programmed into your trading software—are absolutely critical. Not having a plan to exit at a loss is simply pure hope. Hope does not turn into profits easily.
————
PURE GOLD

by sbenard

The finest trader I know, who has been trading for 35 years, uses DOUBLE stops.

He uses a hard stop loss order just in case of a market catastrophe (a la 9/11) or sudden, unexpected reversal. Adding to what Dr. Forex has explained regarding this high leverage industry, a fall of several hundred pips within a short period IS possible and is likely to occur again in a dangerous world, infrequent as it would be. A loss of several hundred pips on a heavily-leveraged account could do severe damage, potentially even leaving the account owner in the hole. Other bigger fish than I have learned this the hard way.

My friend’s second stop loss is a mental one—and he keeps it extremely tight, less than 10 pips. He says that in Forex, he who loses least, ultimately wins. Rule #1 for him is to stay in the ballgame, and tight stops guarantee he’ll return to play again tomorrow. With only 3-5 pip spreads, its better to exit early on a bad trade and look for a better reentry. A 3-5 pip spread sounds much better to me than a 25-50 pip dip hanging on a prayer that the market will turn again. A mental stop takes great discipline, of course. He has it. He also says that when a losing position starts to create stress for you, it’s time to get out and wait for a better opportunity. When stressed, a trader tends to make mistakes. If a small losing position is closed, the trader can clear his/her head and analyze the market without the stress, making better decisions.

Another phenomenally-successful trader that I don’t know personally has also expressed (in a video I saw of him) a strong sentiment toward stops, including a tight time-related stop. He says if the market doesn’t go quickly in your direction, don’t even wait in a flat market, just get OUT and wait for better conditions. He says that after good analysis, if your position doesn’t prove out, the longer you stay in it, the longer you expose yourself to market surprises that will probably move against you. Thus, better to exit early. His time-oriented stop limits his losses also. Besides, he says, if you exit a stagnant or losing position, then you have more capital to put toward a good one and can devote your mental and emotional energy to finding the good one instead of managing or stressing over a loser.

Risk management is at least as important as psychology and strategy, and stops are part of that. At least that’s what the pros say that I know.

by phreak

Less than 10 pips stop loss… Amazing! The guy probably doesn’t trade forex. He trades market noise instead. If you are a serious trader, your stop losses are not defined by the number of pips, but by support and resistance. In other words your stop loss should be below support and above resistance. How many pips should you stop loss be? It depends of the point of entry. Though you can try to minimize your stop loss by choosing a point of entry close to support or resistance, it shouldn’t be too tight. Be sure market noise won’t hit your stop loss. That’s the biggest disappointment when your position is closed by market noise and then the market moves according to your expectation big time. Tight stop losses kill too many profitable trades, and you can end up in a hole with tight stops just like as without them. When it comes to pips… well, you can try to make them less than 50. But it depends of a currency pair. For example, in case of GBP/USD you may need even more.

by sbenard

First, let me say that I know a few people who have made large sums of money in Forex. ALL use stop losses without exception. One, who someone earlier suggested must not trade currencies, does indeed trade currencies. This is the same person that uses double stops. In another forum in Moneytec, a few foolish know-it-alls challenged his trading method. He set up an live account (no demo), gave his trading system to another trader to trade, and after 200 consecutive trades without a loss and more than doubling the size of his account, he had proved his point.

http://www.moneytec.com/forums/showthread.php?t=10208&page=4&pp=8

Try to figure out what type of day you’re dealing with in the market you’re trading.

Trend vs. range vs. not tradeable at all.

Adjust accordingly. On a trend day you need to let it ride. On a range day you gotta take your profits sooner.

Now the million dollar question is how to know. The answer is statistics and a little help from from subtle market tells.

http://elitetrader.com/vb/showthread.php?threadid=48472

what i do is i take the avereage daily ranges for the currency pairs im trading in over the last 5 days (i update it everyday), and aim for 10% of that as my first target and double that for my second target and let my 3 lot run (i trade 3 lots usually) for every trade i take. For example first target 10pips ,second 20pips ,third run.

I find this gives me a target to aim for and if the move is really good i go along for the ride.

yes i do use stop losses. what i do is if i enter a trade on a 60 minute chart ill manage my trade using the 20 min chart or enter a trade based on 30 min chart i manage the trade on the 10 min chart, ie a 3 to 1 basis.

For example if i go short ill place my stop at 1pip above the high of the previous 20min bar moving my stop with every new 20min bar that forms. I do this until my trade hits my first target ie 10pips than i move my stop to break even. Once my stop is at breakeven and the trade really goes my way ill than trail my stop on 1pip above the the high of the 60min bars or candles ( so if i entered a 1.2100 and it goes to 1.2000 but the previous 60min bar closed with a high at 1.2050 ill put my stop 1 pip above that figure) .

if the trade goes against me my loss is therefore very limited.

http://www.trade2win.com/boards/showthread.php?t=11074&page=2&pp=10