Patrick's Outlook 7/14/21
Patrick put a short order out for AUD/CHF due to the daily being in a grinding downtrend and recently showing a sharp momentum further to the downside. The bounce had been hesitant and the 4hr was showing consolidation and buyers didn't seem convinced to get into the market.
Patrick's Expectation:
AUD/CHF - Daily pullback with 4hr breakdown trigger
SELL STOP: 0.682, SL: 0.68675, TP: 1/2 off at previous 4hr pivot (~0.6797);
Trail remainder on daily price action (daily bar-by-bar if momentum shows or on significant pivots).
Patrick's Trade 7/19/21
Patrick took 1/2 of his position off as seen below.
He decided to hold for a bit more than the originally intended target because price was showing such nice follow through to the downside.He trailed the remaining 1/2 on the daily bar-by-bar. So hypothetically if each day were to close like these do, he would just trail his stop to a few pips above each day's high.
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A Carry Trade involves selling a currency at a low interest rate and purchasing a currency that has a a high interest rate with the intention of gradually yielding a profit over time. You can think about it like buying a stock for dividends.
At the moment interest rates are near all time lows as Banks around the world tried to spur spending. This means that carry trading holds a low incentive as the biggest range in interest rates you can currently trade is 1%. This is historically very low and means carry trading is not very lucrative.
However as economic growth picks up and inflation rises, Central Banks around the world are looking at the possibility of re-raising interest rates. This opens the opportunity to carry trade.
The incentive behind carry trading is that the odds are always in your favour. We know that interest rates are the biggest influencer of currency markets, so by trading in the direction of the currency with higher interest rates, we not only stand to profit from interest, but also stand a high chance of profiting by the currency we've bought appreciating while we hold it.
To enter a carry trade you can either find a currency pair with a large difference in rates or try to predict future rate changes, this is more risky but carries more potential for profit as shown by the incredible dollar bull run after the Fed announce they intend to hike interest rates.
Your broker will give you a quote for overnight swap, if your buying a currency with a higher rate than the one your selling this will be likely be positive meaning you will be paid and vice versa.
You should also check for economic news related to the currency your selling, high CPI and retail sales figures may be signs you should look for a different pair.
Developing and trading with a strategy is the easiest way to improve your trading. Emotions are one of the hardest barriers to overcome in trading, but by trading with a plan you not only remove your emotions from the equation but also guarantee more consistency. You will be able to see what doesn't work and can fine tune your strategy accordingly. Its highly recommend that you start off in a demo account to develop a strategy.
Ask any trader what the most important aspect of trading is and they will say risk management. Risk management isn't just keeping your losses small and not risking more than x percent of your account in one trade. In fact one of the easiest mistakes to make is being too cautious. Too often people see their trade run into profit and instantly move their stop loss to break even or just close the position. Its important that you give the market the respect to run you into a proper profit at which point you can consider moving your stop. This is another reason why sticking to a plan is really important .
When starting out it can be easy to get wrapped up in the charts, analysing the candles, looking for the perfect technical pattern, it's easy to forget what drives the currency markets: Banks and large institutions moving their money around to invest and get the highest interest on their capital. And while its less relevant on the lower timeframes, the impact of fundamentals should never be underestimated. I wrote an article on the main factors that influence the markets here.
Trading off signals is a trap. Like many other 'get rich quick' schemes on social media, if you get lucky they may work for you in the short term but are almost never viable long term. Even if you find some consistent signals, your not actually learning anything, and in the long run you are setting yourself up for failure. Signals can be a good way of learning if you understand exactly why the person making the trade is doing so and how you can apply it to your own trading.
I wanted to talk about rushing the trading journey because this was a significant challenge I had very early on in my journey, and it is one I see the majority of traders make often unknowingly. That is the danger of rushing, you have no idea you are even doing it.
Mid-2018 I made the decision that I wanted to leave my corporate graduate job and seriously pursue a career in trading. I was so tired of seeing YouTube advertise 2 day trading workshops that would magically turn me into a trader... you can just smell the bullshit on these guys. If you have even a smidge of common sense, you know that if you want to become successful in any industry it is going to take time. And I knew I would have to invest in my education (FYI I was super sceptical about this, and even though the trading platform I joined was one that had a coach I saw as genuine, I still only signed up to a month initially in case it was a scam.)
Anyway, once I had joined a reputable trading educator platform and began to work through their content, I still found myself rushing through learning how to read a price chart and backtesting, all because I was driven by a desire of wanting to live trade. Every day all I focused on was: WHEN AM I GOING TO GET TO LIVE TRADING? I just thought that I could figure out how to trade once I was on a live trading account.
And I genuinely thought my attitude was one of ambition and being driven rather than just rushing because I was impatient with the process.
Senior traders in the community I was in were telling me, “SLOW DOWN NAOMI. YOU ARE RUSHING. THIS WILL BITE YOU IN THE ASS LATER ON.”
I did not listen to them. And to be honest, I thought what the hell do they know? They aren’t sat here with me. Just because they took ages it doesn’t mean I will.
Oh how I was wrong! During an accountability session with my coach, he asked me what I wanted to achieve next year (2019). I could not answer the question. This was a major wakeup call for me. It was embarrassing. But feeling that embarrassment is what woke me up.
I knew I was going to have to start my learning from the beginning (after spending 3 months rushing). Below is what I did to rectify the situation and to ensure (to the best of my ability) that I would not rush through it again.
I spent half a day sat in my room thinking, ‘forget trading. what is your end goal? what do you even want to use trading for?’ Once I got clear on that I began reverse engineering my end goal back in stages to present day. I had my road map of every step I needed to follow.
This was a game changer for me because I finally had short term milestones to focus on. This meant I was no longer focusing solely on live trading, because there were several milestones that came prior to this.
They were:
1. Build a solid foundation: learn how to read a price chart, understand the different concepts of reading price individually.
2. Put it all together: put the different pieces of reading a price chart together so you can see the story that it is telling you.
3. Explore different strategies: review the strategies available.
4. Select a strategy: select a strategy depending on your lifestyle and time commitments.
5. Develop a strategy: get clear and write the rules out for your strategy, and purchase or create a backtesting spreadsheet.
6. Backtest that strategy: go through historic data and ensure your edge is profitable.
7. Execute that strategy: demo trade and then live trade!
I then broke down this broad plan into monthly and daily tasks. I also figured out ways to stop me from rushing. If I could devise some objective way to measure my progress then the chances of me unconsciously rushing again would be greatly reduced. What really forced me to follow a method that would actually have a high probability of working was:
Having clear and realistic deadlines that were realistic according to MY PERSONAL LIFESTYLE (we are all different, whilst I may have 10 hours a day to commit to my journey, someone else may have 1 hour. It is just reality...hence our target deadlines will be different.)
Clear methodical ways to test myself (I created objective ways to test myself so that I could see whether or not I had progresses rather than my subjective ‘wanting to live trade’ self was not the one making all the decisions.)
An overview of the trading journey. This was complete belief transference because I knew (and still know) that by following it I will reach my goals. I knew if I did not follow it then I could kiss bye bye to my big dreams of what I want to use trading for.
Did all these things completely abolish my results driven mindset?
NO.
But it was definitely the start of at least being on the right track.
The irony behind everything mentioned is that focusing on the process is actually the quickest way to get the result. Focusing on the result is the slowest way to achieve it.
Naomi Gorta-Slight
Instagram and Twitter: @naomigslight
Podcast: The Trading Journey Podcast
Our team has unfortunately received many reports of scammers using our content and pretending to be us. While we will continue to report these accounts to the authorities as we receive reports, we may not always catch them in time. Below our a list of things to look out for before making a purchase to any platform.
Nick will NOT direct message our customers on social media! While Nick may respond to messages he receives on his accounts, he DOES NOT message followers first. If you receive a message from a trader nick account that you have not previously messaged, this may be a sign of a scammer. (See example of a message from a scammer below). Please note: Nick's ONLY instagram account is @tradernickfx, please be sure to look closely at the username to find any letter differences. Nick DOES NOT have a backup account.
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Scammers also tend to be more pushy for a sale and unprofessional. A scammer may ask you multiple times to send them money or say they cannot help you until you send them money. We are not this desperate and quite honestly, we do not have the time to beg for a sale. If something feels off, go with your gut.
This goes for pretty much everything in life, If it's too good to be true, IT IS. Unfortunately, nothing in life is going to make you large amounts of money instantly. If it did, everyone else would already be doing it! Any successful person will tell you it took hard work and dedication to get where they are today. They won't tell you someone direct messaged them on social media and sold them a membership that made them thousands instantly. Use your gut! If someone is promising large amounts of money if you pay them, there is something wrong.
Telegram Scammers
There are multiple telegram channels using our images that are particularly hard to get removed . If you see any messages that look similar to the one below this is a huge red flag. We DO NOT offer investment plans or account management. We will NEVER ask you to send us money with a guarantee that we will make huge returns. If anyone guarantees huge profits if you give them money avoid them. Although it sounds nice, no one can guarantee anything in the markets no matter how knowledgable they are.
There are a few things that you can look out for in a profile that is a red flag and is most likely a fake account.
First, check the date of their posts. Scammers, unfortunately, are creating thousands of these accounts. If the posts were all created on the same day, this is a red flag! Scammers often post lots of posts to fill up their profile to make them seem more legitimate.
Second, read the captions. Because these scammers are busy direct messaging people and creating lots of accounts, they usually do not put much time into their profile. Usually, their posts will have no captions, very short captions or captions with some emojis. Real accounts are more genuine and captions are more personal and thought out.
Third, look at their stories. Real accounts usually post live videos on their stories. Scammers post screenshots of other stories or videos that do not show them or their voice. When deciding if an account is a real, look in their stories for videos of them.
Lastly, weird fonts seem to be a signature for scammers. If you see a comment or caption that has a weird font, be skeptical.
Below are screenshots of a fake account with examples of the red flags:
Unfortunately, there are scammers everywhere. They are scamming people in every business, not just ours. Here is a checklist of things to ask yourself before sending anyone money.
1. Is it too good to be true? Are they promising me way more than I am paying?
2. Are they being too pushy for a sale or unprofessional?
3. Is their profile legitimate? Do they share real videos and genuine posts?
4. Are they sharing a legitimate website to make a payment or am I sending money to their personal money transfer account?
5. Does something seem off?
If you feel that something seems off and want to ensure your money is going to a legitimate person, reach out to our support team on our website. Contact our Support Team Here
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Youtube
TraderNick
Guide
Pros and Cons
Overview
Immediate Concerns and Disclaimer
Overbought vs Oversold
Entries and Exits
Risk Management and Adjusting Trades
Conclusion
Pros & Cons
Pros Cons
| - Some time periods are highly effective | - Certain Periods do not work well on other time frames | |
| - Catch long term swings | - Can tie up positions for longer term | |
| - Easy to find long//short indications | - Losing trades must adjust to changing RSI |
Overview
The RSI strategy is mainly focused on patterns and reversions based on overbought or oversold conditions marked by the indicator. It's designed to take less trades, but it is a powerful tool in measuring market conditions and, most of the time, is accurate if traded correctly. What you may notice further into the guide, is that these set ups are meant for long term swings on small lot sizes at first to scale in to individual positions without overrisking (that's not a word) your account. The 14-Day RSI, or Relative Strength Index, measures the overall 'strength' of the market by taking the average of the last 14 days' closing price. By definition, RSI shows you the relative strength or weakness in a market.
Very similar to the XMR Strategy, which uses the averages of multiple RSI's, however this strategy only uses one time period of 14 days.
As you can see from the chart above, the trade set ups are meant to look like this. When RSI crosses above or below a certain level, trade set ups are made clear on the chart looking at EUR/USD.
Immediate Concerns & Disclaimer
Because this strategy is not designed to incorporate a strict stop loss like other strategies, I do not suggest it for everyone. If you are someone who does not feel comfortable without a stop loss on your trades, I would suggest trying another concept than this one. That being said, trading with a stop loss is not the only way to manage risk, in my view.
We will cover some of the built in alternatives used in this strategy later on. Of course, any exposure to the market can result in significant loss, and trading is not for everyone. This strategy involves mostly strict rules, with a touch of discretion involved. That being said, let’s continue!
Overbought vs Oversold
Technically, any RSI reading of 30 or under means that the price is oversold and any reading at or above 70 is overbought. It's hard to say when price will turn back around in the other direction, but entering a trade once RSI crosses over 70 or below 30 does not always guarantee that price will follow.
Here is an example of getting tied up in a trade after RSI reads oversold. As you can see, new trades weren't made until RSI charted a lower number than before. This trade would have ended profitable if the trader closed out of the trade once RSI hit 50 assuming all lot sizes were the same. The trader would have also been stuck in the trade for weeks before they closed out, but this happens in trading as no strategy is pitch perfect. That is why it is important to adjust entries as well as knowing when to get in.
Entries & Exits
Figuring out a good entry is not ever easy, so it's best to come up with a plan before you enter a trade. One method that I could use is by starting small (lot sizes). Let's say I was in this EUR/USD trade for a swing, as in maybe a month. If I recognized that my money could be tied up for a while, I would start with small lot sizes relative to your account. Another approach to taking this trade could be to buy once RSI crosses below 30 and closing at the most recent upswing.
This is more of a short term rinse-and-repeat strategy where you can take quick trades (1-2 days) just by trading off the RSI levels. I like to trade this way as well because deciding that your money will not be in the trade for long, whether the price swings in either direction, you know that you will close before you are forced to hold positions in drawdown.
However, in extreme conditions of being overbought/oversold, you can catch great moves like this on USD/CAD. An entry on oversold conditions (<30 RSI) and a close at overbought conditions (>70 RSI) resulted in a great swing in profits. Something important to realize regarding this strategy is that not every entry is going to be exactly the same. In cases like the COVID crash in March, some pairs went well oversold and continued to push down passed those levels. In times of big market swings, no strategy will work as planned, and picking the momentum becomes more important than entering at extreme levels.
When the market moves this hard in one direction, buying at the first signs of overbought would end up being a significant loss, although you would have been profitable in your account. This strategy should never put you in a position of negative equity for the risk of being margin called. This was a very rare circumstance, but it must be addressed because situations like this are clearly possible. The previous example was based on 'normal market conditions' where there was not an immediate threat to global economies all at once. So, once you start seeing huge swings on the daily candle, it's probably not a good time to gauge an entry until the volatility has cooled down.
Risk Management and Adjusting Trades
That leads me into how to mange your risk when trading this strategy. Just to be clear, by no means is this a strategy that I created; I do not coin this as my own. In fact, it's a very common strategy that many traders like to use, but I have concocted some ideas that are different from regular RSI traders.
Because we're trying to make long term swings (several days, weeks, months, etc.), I like to start really really small in lot size. We're talking a .01 lot to start off with and gradually reaching a .05 lot if needed. Accumulating small positions may sound unattractive to the trader that wants a get-rich-quick scheme, but let me tell you: with greater reward comes greater risk. Starting with big lots can absolutely destroy any size account. Believe me on this because I have made lots of mistakes in my past, so I'm letting you know before you learn the hard way like I did.
Let me show you an example on how I would use my drawdown to my advantage.
This is what I mean when I say you have to be prepared for adjusting your entries. When RSI turned to create a new low, a buy position was entered with a larger lot size. Sticking to the strategy may require a lot of patients sometimes, and you may have to deal with some drawdown, but that is the purpose of starting with small lot sizes.
Conclusion
For the traders that like to search for reversal trading, the RSI strategy is a great tool for looking at when it's time to long or short and how to adjust to the trade if things don't work out in the beginning. In a way, this strategy is best when adjusting trades. No one wants to miss a reversal move, so getting in on the first sign can only work out if you recognize that you could be in drawdown and another buy/sell position may have to happen. Overall, the strategy works well if traded the way I've mentioned above. If you're not an RSI trader, I still think using this tool is great for analyzing markets for any strategy you wish to use.
The LINDEX team has been developing another trading tool that we believe will be very helpful in finding extreme readings in the markets. The scanner is fundamentally volatility reader on multiple periods. The user has the choice to select 5 "lookback" periods, which basically read the volatility of each period set, and compute a total reading, -5 to 5. For example, if the 4 day lookback period, the 7 day lookback period, and the 14 day lookback period all show signs of overbought, the indicator may print a +3 reading on the indicator. A +5 would mean that all lookback periods are printing overbought.
The XMR Indicator
The extreme mean reversion indicator (XMR) is a chart indicator used to identify potential reversals in a financial market. The XMR indicator specializes in scanning previous price action in order to signal potential overbought or oversold conditions in a market. The XMR is displayed as a bar chart, with a set range from -5 to +5. +5 is considered extremely overbought, and -5 being extremely oversold (dark gray)
The tool was built with the concept of mean reversion in mind, meaning that markets often return to historical means. With this in mind, this tool can be utilized to look for markets that have significantly moved away from their historical means and may be due for a reversal.
The available range for the XMR Indicator is -5 to +5. A reading of -5 is considered extremely oversold, while a reading of +5 is considered extremely overbought. However, these readings are rare, and are not the only levels to consider.
The XMR indicator has a wide range of potential uses. It can be a great tool for both trading range bound markets, or finding pullback setups in a trending market condition.
A reading on the XMR indicator of +1 to +5 is considered a market in which price is overbought, with +5 being more overbought than a reading of +1. Inversely, a reading of -1 to -5 is considered a market in which price is oversold, with -5 being more oversold than a reading of -1.
With this information, the XMR indicator can help spot a potential reversal in a market. Combining this information with other signals, such as a price action patterns, a fundamental bias, or other technical pattern could be useful in finding profitable trading setups.
Example 1 - Trading Ranges:
The XMR indicator usually excels in a range bound market. The XMR indicator does a decent job at finding tops and bottoms in the range. A trader using the tool could look for readings indicating that markets may be stretched, combine it with additional technical signals, and take trades accordingly.
Example 2 - Trading Trends:
When a market is trending strongly, looking for reversals may be less profitable. However, the XMR indicator may be a great way to spot and time pullbacks that have a strong likelihood of failing in favor of the dominant trend.
The scanner already has lookback periods built in to the input, but you can choose whatever time periods as well as whatever design you want.
Once the indicator is running, you can right click on the indicator and click 'Indicator Properties'.
There, you can change the lookback periods or design of the chart.
The purpose in making this scanner was to help traders see one of the strategies our team uses. We believe this to be very helpful and accurate for traders of all levels, who like to trade on mean reversions or reversals. Not every indicator is perfect, but they can be used as tools for insight on any kind of market you want to trade. This scanner is meant to help the user gauge their trade or alert them when prices enter a new territory of overbought or oversold. Overall, it's a great tool and hopefully our users will find it helpful as well.
Hope you all enjoy it! We will be using this tool in action for more of our trades so stay tuned!
To get a copy of the XMR indicator, you can purchase the software here OR you can get a copy of the XMR indicator for free with a purchase of the Gold Membership!
In the community, I have been getting a lot of questions as to exactly what a trailing stop is and how to use it in certain trades. In this article, I'm going to go over the simple definition of a trailing stop as well as when it can be used to help improve traders' profits.
What is a Trailing Stop?
A trailing stop, or TS, defined by Investopedia is "a modification of a typical stop order that can be set at a defined percentage or dollar amount away from a security's current market price. " In other words, a TS is something you can set on MetaTrader that will lock in profits if your trade goes in the direction you want. The user can activate a trailing stop and set it to however many points away from the price they want. I don't know exactly why MetaTrader does it this way, but you have to set your Trailing Stop through units of points. For every 10 points your trade moves, that's 1 pip. So a 100 point move would be 10 pips. For example, if you're long on any pair and you set a 100 point TS, your TS will activate after the price moves up 10 pips, moving your stop order to break even. However, if prices continues up another 10 pips, you are at 20 pips in profit, and now your TS lags 10 pips behind, locking 10 pips in overall profit.
Here is an example trade on GBP/USD. The blue line represents what my TS would have been for this trade. If my sell limit got filled and prices made a 100 pip move, which this is, a 100 point trailing stop would lag 10 pips behind profit, locking in 90 pips profit if prices don't continue further down. I didn't draw the TS exactly 100 points behind the price, but hopefully this gives you an idea of what a TS is and how it operates.
Pros
The best part about this feature is that you can guarantee yourself profits at any point in the trade when it moves in your favor. Another cool thing is that you can choose however many pips you want to risk. Once the trade moves in the direction you chose, it can eliminate the risk:reward and establish a reward:greater reward ratio. In a good trade with a TS, you're no longer risking losses, rather you're risking how much profit you want. On that fake GU trade, you could have decided to lock 50 pips (500 points) in profit, giving the trade more room to move. Or, you could be ready to close the trade, but don't want to miss out on an opportunity to see GU slide further down. So you set a more aggressive TS of 100 points (90 pips in profit).
Cons
The problem that you can run into when trading with a TS is that it will limit price action. So, if prices moved just like that GU trade, my TS would've been hit much earlier as prices came up for a retest before continuing downward. The key to trading with trailing stops is to pick a direction on your trades. You don't have to set TS before you make the trade; it can be done at any point during the trade. Maybe you want to lock 20 pips profit but do not set a TS until the price has moved 40 pips. Then you could set a 200 point TS that will lock 20 out of the 40 pips to guarantee profit. I know your possibly cutting your profit by half, but you can never go broke from taking a profit. And if you realize that you are happy with a 40 pip move, you can always just close the trade for full profit.
Conclusion
Trailing Stops are very helpful in my opinion, and I like to use them when pairs can't pick a direction for the short term. I especially like TS when I trade indices like the US30 because it's so heavily leveraged. Traders might think that TS is an offensive way to trade for those who are ready to take profit, but really it's a defensive scheme and a very helpful tool in risk management. Sure, you can limit profits, but there is nothing wrong with protecting your money.
Featured Pic: https://rhino-report.tradeviewforex.com/wp-content/uploads/2019/03/Trailing-Stop-on-Mt4-.png
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Disclaimer:
Please note that this email is my personal opinion only. I am not a licensed financial advisor, and any information shared or discussed is not to be construed as investment advice. Trading and investing involves a degree of risk, and is not suitable to all investors. Please consult with your financial advisor before making any sort of investment decisions.
Last week, I proposed an idea to Nick about a strategy that trades the US30, a highly leveraged index that can generate immense gains as well as immense losses. In a time of high volatility, it's hard to keep your trades in something that moves heavily on an already highly leveraged chart. If you have ever traded the US30 as well as other US indices like SPX500 or NAS100, you have probably seen how large they show gains/losses in even the smallest of moves. But if you guess right, some of these trades can work out big for you. One of our members followed a short signal on US30 in the group and made over $100 on a .01 lot in a matter of 1-2 hours. This is because these indices trade up to only two decimal places (the hundredths place) on the index where as an average currency pair like EUR/USD trades up to five decimal places. There are many pips moving in each cent that the index moves, which means lots of pips go up or down on even the smallest lot size. With such a high leverage, I wanted to find a way to take advantage of these moves.
The Strategy
The strategy is fairly simple: We're going to look at bollinger bands to understand the 14-day average volatility by looking at the distance between the upper and lower bollinger bands. With that in mind, trades will be taken every time the price hits the lower band or upper band, and will look to close when the price hits in the middle of the bands. It will also take a short position on the top of the bands and won't close until it hits the center of the band.
This chart is basically what each trade would look like. As you can see, there have been a lot more winners than losers on this period of time. However, within this period, especially the last short taken, you can be stuck in these trades for days or weeks depending on where the prices move. Notice how all the trades close in the middle of the bands. All trades are taken either on the top band or the bottom band, and all closes are in the middle. Although some of these trades look short with little movement, that is exactly why I chose the US30. The first demo trade on that chart is about a 2.87% gain on the trade, which is good on any currency pair. But on the US30, that kind of trade is great.
For this study, at least in phase one, we don't want to include any other indicators. RSI doesn't matter, support and resistance doesn't matter, fibs and moving averages don't matter, etc. Here is a raw study of the strategy to see how it will do on its own. After finding more results, we will be likely to tweak some things. We might even trash the whole idea, but not after some careful study and testing.
The Risk Management
Earlier in the article, I said we would use the bollinger bands to measure volatility and trade off that gauge. To better understand what I'm getting at, let's say that the distance between the top and bottom bands are 4% apart; so a 4% move in price from the bottom band will take you to the top band. That is now considered our gauge that we will trade in.
But what happens when the bands inevitably expand or contract? That is where our risk management comes into play. If the distance were to double, the strategy shuts off and will not look for trades to enter until the 14-day range has stabilized. So, if the US30 became more volatile and the 4% distance turned into an 8% distance, the bot will shut off and the open trade(s) will close.
This is meant to protect us from horrible sell offs like this one in March during the economic shutdown. Now, let's say that the bands move from 4% apart to 8% apart, and for 14 days, the bands have been maintaining their distance at 8% apart. If that happens, the bot will turn back on and use the 8% range (give or take 2%) as its new gauge. Not only will we have a shut off switch during periods of high volatility, but stop losses placed for every trade. I'd like to see if this is more profitable with or without stop losses placed. The SLs will be placed 1.5 times the distance between the center and the top of the bollinger bands at the time the trade is taken. These are fixed positions that will not adjust to future price action. Whatever the distance between the red center line and the upper or lower boundary is at the time of the executed trade, the stop loss will be 1.5X the distance.
Hopefully, this picture will make things clearer. At this particular time, the center of the two bands is 2.7% away from the bottom band. Because this is a buy entry, the stop loss will be below the entry at 1.5X the distance which is 4.05% away from the center. If I took a short, and the distance from the center to the top was 2.7%, the stop loss would be 4.05% from the center to the stop loss.
Next Steps
This idea is, as of now, in it's very early stages of development. We haven't decided to make this an automated trading bot or a scanner with long and short alerts including the recommended stop losses. Obviously, I'm expecting to see lots of holes in the strategy, but that's all part of the process. I have never published my trading strategies while they're in the process of being developed, so this is a first for me. However, I am really excited to see what will come out of it. What will be wrong with it? What should be added and what should be taken out? Will certain time frames work better than others? The next steps will include more research and backtesting, as well as more questions, to show what this idea will look like if we were to trade the US30's past to profit in the future.
I will update this with a part two once we've done more research.
Featured Photo: https://cryptocurrencyfacts.com/wp-content/uploads/2019/06/bollinger-bands-2.jpg
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