Complex trading system #21 (Trapping the price)
Submitted by User on October 7, 2011 - 10:41.
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
Edward Revy,
http://forex-strategies-revealed.com/
Copyright © Forex Strategies Revealed
does anybody have this EA ?
Hello Eric,
I have tried this technique and the only way it appears to be winning is the following:
We have threee levels of long (BL-1, BL-2 and BL-3 with ascenting opening price) and three levels of short (SL-1, SL-2 and SL-3 with descenting price order).
Everytime a trigger fires or a level is being crossed (from below if it is a BL and from above if it is a SL) there is a simple algorithm to go through to check if there is a need to open a new position and also to calculate the lotsize:
Do I open a new position? Yes if the current open lots in the current level are less than the respective open lots in the opposite level. For example if your price hits the SL-1 level you check how many positions you have open in the BL-1 position. If you have more in the BL-1 position then yes you open new short position.
The LOT? - If in the above example we hit SL-1 and we have one open short in this level and 4 long in BL-1. Use the formula:
New LOT = BL-1totallots * 3 + 1 - Current SL-1totallots.
With this method you assure that on every close you at least profit 6*increament*initial Lot or even more. However this method has its drawbacks. And that is when the price is swinging between the two levels (up and down) withput hitting a stop for quite enough times to lead to margin call. Therefore you need to very carefully select the increment as well as the initial lotsize.
Just my 2 cents.
Hi Eric, Your System makes alot of sense. Iam gonna try it. Best of luck and Happy trading to you and myself. Sae
Realy YOU are doing GREAT SERVICE.
Vikram...
The best way to do this is to trade small but trade across numerous pairs...
If u sense anything ugly going on then abort all positions, chances are u would have some losses but also some gains...
With several trades across numerous pairs, the chances of having a blown account is mitigated...
One more thing, if price has oscillated several times and is not hitting any of your target profits, try to exit at break even or even at a small loss...trust me, u have to control urself when this happens...
rgds,
Eric
Sasa,
I may have overlooked the mechanics...
The gist of the strategy is to make sure that u have more orders on the winning side that the price will eventually choose to go...
eric
Dear Eric, This is Vikram from India. i Came across this website while seaching for strategies for forex or Stock trading. Just today i came across this strategy and found it quite interesting, though i had not tested it with live trading session. If u kindly put some light on the practical aspect of this trategy while trading in live session, that will be of great help. Certainly for sure, this strategy will require to have sufficient margin, if the trade is stuch in a rangebound condition. Thanks again. I m eager to test this method. Are there any additional parameters i should consider while applying this method. waiting for ur reply. urs Vikram
helllo,
anyone trade this strategie?
steve
Dear Eric,
If you want to have always more orders on the wining side your mechanics are not good.
For example if you add 1 buy position every time it hits one of you sell levels, after second sell level you will have 3 buy order on top of only 1 sell order for each level (you did not add sell orders since sell is the wining direction).
Now if the price retreats to first buy level triggering 3 buy orders, in your mechanics you add 1 more sell order set. Now you have 3 buy order sets and only 2 sell order sets. So you would have to add 2 sell order sets in this case just to be on same level as buy orders.
I hope you understand what I mean.
Your mechanics work as long as only first levels are hit. In case second and third levels are hit and price retreats to opposite direction you will have to adjust with more then one orders.
Sasa
Hi Eric..
Thank's For Sharing ur sistem
I have read your sistem..it's very nice..
regards profit
PS:Sorry for my english bad :)
Hi Eric,
Thanks for sharing ur technique....
I found this is almost similar to Sure-Fire Hedging system (SFHS) introduced by some trader some time ago..... and I'm trading with this system in lower time frame
For those who wonder whether this kind of system will work or not, my answer would be yes....try to do some excel computation with the lot sizing and u will find that as long as the price makes big movement u will gain profit....
the only drawback of SFHS is that when price keep oscillating between your buy and sell orders....with bad MM, there will be time when u wont have sufficient margin to open an order....in this kind of situation ur experience in trade management is crucial
PS: i think i will give ERIC's System a try :)
I am ramakrishna from INDIA.Thanks very very much eric for posting this strategy.
Let's try this...
Where is Eur/Usd right now? 1.3800
Decide on the increment level. Let's say u have a day job so a good increment would be 1 ATR. This will give u enough leeway to monitor ur trades.
Place 3 buy limit orders above. Let's name them L1 at 1.3900, L2 at 1.4000 and L3 at 1.4100.
Place 3 sell limit orders below. Let's name them S1 at 1.3700, S2 at 1.3600 and S3 at 1.3500.
The target profit of all buy positions is at 1.4200.
The target profit of all sell positions is at 1.3400.
The stop loss of all buy positions is at 1.3400.
The stop loss of all sell positions is at 1.4200.
This is how i go abt it...
If L1 gets triggered, i will place additional orders at S2 and S3 only.
If L2 gets triggered, i will place additional orders at S1 and S2 only.
If L3 gets triggered, i will place additional orders at S1, S2 and S3.
I try my best to make price work hard or travel far just to eat my margin thus the sequence above.
Also, using 3 levels is more efficient and margin-friendly than 1 or 2 levels as offered above by another trader.
Now let's say price have oscillated several legs already and ur getting uncomfortable. What i do is cancel the target profit and stop loss orders, make sure that the currently favored position (long or short) has more orders than the opposite side and then just wait until both positions are become neutral (or may even go into profit)and then close all positions.
This is just one way of handling the system's inherent flaw. If an EA traded this for me, my account will surely blow up as it will indiscriminately open orders left and right.
Eric
This is better for me than endlessly worrying abt news, moving averages, sentiments, fibs etc....
My chart has only 1 single line in the middle, nothing else...
All i monitor is the current ATR, nothing more...
Eric
The way i trade this set up is small positions but across several pairs...
This way, i get a relatively steady influx of profits as some pairs shoot straight up w/o looking back while some pairs take their time and trigger orders at both sides before finally hitting a target profit/stop loss level...
Actually, u can even trade correlated pairs as long as a some are already active, like on the 2nd level of ur long positions, u can then enter a correlated pair starting at 0 level...This allows me to trade up to 20 pairs, again w/ small positions...
It's like a huge vacuum cleaner sucking dimes and nickels...haha
And then, if a pair seems to be eating up a lot of margin, i start to monitor it and kill potentially unnecessary positions within the pair (wink) or stop trading other pairs just to make the necessary allocations for the problematic pair...
Several discussions have already been made on this and some argue that while this will work for some time, it will eventually blow up ur account when the so-called "death trade" comes. The said trade is supposed to be the trade wherein the pair oscillates continuously eating up ur margin until a margin call is triggered.
That is why i said earlier to "Change the parameters, experiment w/ the position sizing, play with it." As there are several simple and some not so simple ways of preventing the dreaded "death trade".
Eric
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