Simple Forex System Trading

Last night, shortly after London open, Euro Yen changed course of action.  After failing to break higher than 105, actually it didn’t even come close, it headed south.  After the huge run up yesterday, it spent most of day trading between 104.38 and 104.7.  So when I saw the zigzag confirming the downtrend at around 8 AM GMT, I decided to place the sell stop order.  At that time, the price was at around 104.60.  I placed the sell stop at 104.39.  Granted.  It was not the correct sell top by the book.  It was supposed to be below 104.38.  But I thought during most of the Asian session, the price was above 104.44.  So I gave it a 5-pip buffer; hence, 104.39.

After the order was filled, the price went down to 104.25 or so and took a break.  I moved the stop loss to break even and set take-profit @ 104.09.  30 pips.  Then I went to bed.  I was dead tired as it was almost 2 AM in the west coast.

Woke up this morning, checked the order, 30 pips of profit were pocketed.  Excellent.

Again, the strategy I use is very simple.  Williams’ Percent Range.  When it dips below -70, sell; breaks above -30, buy.  Wait till the next candle to confirm that previous candle closes either above or below the threshold.  I normally enter a limit order and wait for 50% retracement.  I leave the order pending for about 15 minutes.  If it’s not filled, then I cancel it and no trade.   I set the take profit target at 20 pips.  Stop loss depends on the change of trend.  Trailing stops is 10 pips.   I also don’t trade every signal.

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Thanks to Greece.  Euro has been a wide ride.  Today’s up and tomorrow’s down.  Currently, on a 5 minute chart, I am shorting euro at 1.35831.  A protective stop has been placed to prevent loss.  Let’s see what happens.  The trend indicator I am using on the chart where you see the red and blue arrows are Williams’ Percent Range.  When it’s below -30, it paints a down arrow; thus, a short order is in order.  Above -70, it produces a up arrow; hence, a buy order.

Trade within ranges

Look out for flat range, not uptrend or downtrend channels.

In this pattern, it is important not to be greedy: don’t try to maximize your profit with the full range.  Getting part of the move is good enough and sustainable.

This kind of trading has a better chance to succeed when it goes together with the general trend, if there is such.  If the smaller time frame points to a steady range, but a wider look is bullish, buying in the low end is more favorable.  When the bigger trend is bearish, selling at the top is more favorable.

Breakouts

Other traders prefer a different strategy – they watch the flat range trading and wait for a breakout.  A breakout will usually yield a sharp move.  In some cases, the extent of the move is equal to the extent of the range.  This isn’t always the case though.

This pattern usually means more waiting and less trading – breakouts take a long time to boil, and they tend to be sharp and swift.

But, there are often false breaks, whereas the first move is just an initial test before the actual move.