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Complex trading system #21 (Trapping the price)

Submitted by Eric

Set up.

Pick a price level. (eg 1.5000)
Place 3 long limit orders above the chosen middle line at equal increment. (1.5050, 1.5100 and 1.5150) (50 pips increment)
Place 3 short limit orders below the chosen middle line at the same increment (1.4950, 1.4900 and 1.4850) ( 50 pips increment)
All long limit orders have a target profit of 1.5200.
All short limit orders have a target profit of 1.4800.

Mechanics.

If the first long limit order (1.5050) is triggered, place additional SHORT limit orders at the same levels (1.4950, 1.4900 and 1.4850).
If the second limit order (1.5100) is triggered, do the same as above.
If the third limit order (1.5150) is triggered, do the same as above.

Hopefully, the price goes on and hit the target profit for your long limit orders. In which case, cancel all short limit orders.

However, at any given time that price reverses and goes down before hitting your long target profit and goes all the way down and trigger your short limit orders, you must compute at every triggered short limit orders and place additional LONG limit orders.

Logic.

It's like trapping the price between 1.200 and 1.4800. The price cannot stay within those levels infinitely, it will break away. Your job is to make sure that when the price decides which level to break, make sure that more orders are at that side than the active orders at the opposite side. So in theory, you cannot lose.

I was doing rather well using the following set up:
Daily chart
12 pairs
increment at 60% of ATR
small positions (Oanda)
It was taking one week for the target profits to get hit.

I have been using a system successfully for two months then when I shifted to smaller time frame, let's just say it the result set me back for almost half a year's profit... Thus decreasing the increment and focusing on a few pairs wouldn't cash in faster.

Eric

child soldiers - Vietnam
please show how you stop losses?
complement one another:
If we just this strategy as a one-way rules?
example:
just buy the part on the MA 50 and only the part below the 50 MA
Dear!

Hi Eric, interesting method, i have tried on a few pairs and seems to work well on the 4 hour and using 1/3 atr for each side of the setup. Thanks for sharing, the forex seems pretty random on occasions and this method seems to catch many good trades.

Hi Eric, interesting method, i have tried on a few pairs and seems to work well, the forex seems pretty random on occasions and this method seems to catch many good trades.
-MSD

How do you pick a price level to begin with?

ur pick...

just try to avoid ranging price action

rgds,

eric

as long as you keep yo0ur positions reasonable and u have a good account size u should see a steady increase in equity

eric

Looks promising :) ... did some papertrade backtests ... StopLoss for all long trades should be the TakeProfit level of the short trades ... and StopLoss for all short trades should be the TakeProfit level of the long trades. I modified the fib tool in MT4 like this

so it shows all levels and price of each level

Greetings from Hamburg/Germany, Dietmar, DL4HAO

Eric,

You say that in theory you should not lose. But, to keep the numbers you gave in your example, what if price goes up to 1.5190 all the way down to 1.4810. Up and down like that three times? Extremely unlikely situation for sure. But for the sake of the argument, do you still think you would come up ahead when it finally reaches your profit target? I havent done the math...just asking.

I just want to clarify something. When a trigger level is reached, do you add a limit order on ther other side on ALL THREE levels, or just on the corresponding level?

One more thing. Say your short limit order is triggered at 1.4950, price goes against you and the long limit order is triggered at 1.5050. You are supposed to add to the short limit order (beit just the one or all three). The thing is your short limit at 1.4950 is no longer there since it was triggered before. Are you supposed to place two orders at that level now?

Claude