Notice the following:
Price Levels Week of July 27th to August 02nd.docx 213 KB | 707 downloads
If you sell the Previous Week High (PWH-Sell) and buy the Previous Week Low (PWL-Buy), you can get some decent results.
This is how I do it: I place for the following pairs Buy limit and sell limit orders: EURUSD, EURGBP, USDJPY, GBPJPY, GBPUSD, EURJPY.
In order to determine the stop loss I use (currently) 20% of the Weekly ATR (4). This percentage is the same for all six pairs.
Basically what happens is that on Sunday Evening I put in the Prices of the Previous Week High and Previous Week Low into an Excel spreadsheet together with the ATR (4) and then using a 1,5 Risk to Reward Ration (RRR) I place one Sell-Limit Order and One Buy Limit Order per pair. Which is a total of 2*6= 12 Orders per week.
Usually I get triggered between 4 and six trades per week, but I don't take this number to serious due to the fact that the sample size of 4 weeks is to small.
By the way if someone is interested I can post the Excel document.
Important: All the trades expire at the London Close on Friday and if any trade is open, no matter if profitable or not or Break Even, I close them manually. For any questions, for me living in Switzerland this is 6pm.
OK so now here is my point:
For example the last two weeks I had 2*6 = 12 trades total with 5 winners and 7 losers. The equation goes like this: 5 times 1.5 winning units minus 7 times 1 losing unit. So: (5*1.5) - (7*1) = 7.5-7= + 0.5 units won. For example If I risked 50 € on every trade, I would be up 25 € at the and of this two week period.
Attention: This calculation is wrong for two reasons: The spread is not included, and the Swap is neither. But this is pretty much the gist of it.
This approach to trading has losing trades BECAUSE it is based on the hypothesis that the range which I imposed on the pair (the PWH and the PWL) will be respected. But of course we do not always have ranging markets, we have to deal with breakouts. So what I want to do is to refine this approach by eliminating the one or the other trade hitting my stop loss.
There are several reasons why my SL, which is determined by the percentage of the Weekly ATR (4) is hit:
1. The percentage was too small. PROBLEM: If I give the trade a bigger SL, It has also to run for a wider distance to hit my Target-Profit. the SL is at a 20% rate of the ATR quite big, as you will see in the attached word document. I have SLs which go from 226 Pips to 684 Pips which is quite a lot. The trades run for more then one or two days usually.
2. We do have a breakout. This is my major issue. How can I "know" in advance that this time the Pair will not bounce off the PWH or the PWL? Of course there is no way of knowing because if there was, I would not post here on FF but sell my forecasting abilities to some rich guy on Wall Street or somewhere else. BUT: I want to be able to cut of the one or the other loser. Which means to not even place the sell or buy limit order initially.
(In simple terms having had over this period of 2 weeks only one loser less per week would have made the following: (5*1.5)-(5*1)= + 2.5 units. Quite decent if you ask me. Simply put this would be (yes I didn't take compounding into account, but lets keep it a little bit simpler for now) 2.5 % in TWO WEEKS if I risked 1% per trade. Knowing that a savings account rewards you with somewhere between 0.5 and 2.0 % PER YEAR ( and inflation eating away between 2.0 and 3 % - apart from maybe Switzerland where we have a negative inflation or deflation), this is ACTUALLY GOOD.)
So: I need something to make me decide weather to take a trade, believing it will bounce of that High or Low or not.
I was thinking about something that appeared in Seneca Pilots thread: The Session close of the Last week.
Apparently there are two of the four sessions which are important and these are New York and London.
I prefer London but if you can help me with this be invited to write here.
Here is my Idea which I will test:
If we put it simple we can say that the High of a pair was at 20$ and the low at 10$ for the last week.
Several things can happen now: I placed a trade Selling the 20$ and a trade buying the 10 $ right? I gave it for example 2 $ to run up to 22$ in case of the PWH-Sell and 2$ again to run down to 8$ in case of the PWL-Buy in order to hit the SL. Targets are respectively with a RRR of 1.5: 17$ for the Short and 13 $ for the Long.
So far so good.
Now: Let's imagine the London Session Close is somewhere near the PWH (here in this example: 20$) for example it somewhere at 18$ or 19$.
QUESTION: Is this an indicator enough for itself, that I will see a breakout? (Nope no need for 100 % accuracy, as I said, one losing trade per week to avoid and I'm happy...).
I do not work with indicators (the ATR does not count here, on my screen it is mashed down I only watch the number it gives me I do not care about some visual formation or whatsoever).
And if the London close contains some approximate Infos about the next moves, how can we define it? is there a ratio we can trust more often than distrust?.
It would look like this maybe: The further away the Weekly Close from a PWH or a PWL is, the more likely it will just touch it. So a ratio could be something like:
Last Week London Close: 17$ --> I don't take the Short from the PWH.
OOORRR: We could look at the way the close formed: If we check out the daily candles, was there a significant price move to the close during the last week, or did it progressively go up to the Close (or down, in case of a rather bearish week)? My feeling is, that if it sharply goes up with a significant price move, then it will more likely bounce off than break through the level, for reasons of order flow (For example some player with bigger pockets (swiss bank or some other institution) is trying to push the price to a certain level by buying in BBIIGGG and then shorting it the hell down.
OK this is how I see it. Can you help me with this?
Again, please no spamming with advertising, You guys know I don't like your get-rich-quick-over-night-give-me-99-bucks-and-become-a-millionaire-till-next-week-products.
Thank you very much.
In attached you will find a screenshot of the Prices for the last week.