Purpose of this Journal is to record my trades. Follow along if you wish.
Trading Methodology:
This system tries to capture several concepts of trading. The most important being trading in the direction of the fundamental trend. Secondly, it tries to capture "reversion to the mean" by entering positions when they are slightly technically countertrending. Third it looks to minimize the effect of spreads by trading on large time frames and accepting big price swings.
1. Measure each weekly candle length, as well as the average slope for the last 20 weeks.
2. When FOREX closes for the weekend, use the measurements you gathered in step 1 to project where next week's price will range. Figure out the projected midpoint, the projected min and projected max, as well as the 20% and 80% levels within the candle.
3. Only enter positions in the direction of the trend. AS OF 15 JUN 2008, WE STARTED TRADING THIS SYSTEM IN BOTH DIRECTIONS. WHY NOT COLLECT ON THE RETRACEMENT AS WELL AS THE TREND? SHOULD PRODUCE TWICE AS MANY TRADES. AS OF 26 OCT 2008, WE'RE SWITCHING BACK TO TRADING ONLY IN THE DIRECTION OF THE FUNDAMENTAL TREND. FUNDAMENTAL TREND WILL BE DEFINED BY ME AND POSTED ON THIS TRADE DIARY AS I SEE THE TRENDS CHANGE. (SEE POST #490)
4. Enter position when price is at the 20% or 80% level against your trend, then sell when it hits the opposite 20% or 80%.
5. Do not enter a stop loss.
6. Sit back and start collecting pips.
7. When the trading week ends, delete weekly data from week 1, and add data from the last week as week 20. This system uses a 20-wk average to compute projected candle size and slope.
As an example, lets look at USDJPY.
1. Average weekly candle length in trend is 2.36% of weekly midpoint price. The weekly midpoint price has been trading approximately 0.46% lower each week.
2. Based on last week's midpoint price (107.445), I projected this week's candle to be:
High: 108.21
80%: 107.71
Mid: 106.95
20%: 106.19
Low: 105.69
3&4. Since I want to trade this pair lower, I set an entry level at 107.71 with a TP of 106.19.
(As of this posting, the USDJPY has not traded up to this week's entry price yet).
Some orders are never triggered with this system. Some triggered orders are often held longer than one week. Each weekend, the new projected candles will be computed, which will alter entry and exit levels.
This is intended to be a "set and forget" type system where orders are placed on the weekend with a one week expiration.
Gathering the data initially takes some effort, but once you have the trend's slope and average candle data, updating the info at the end of each week is a snap.
With the big price swings this system seeks to capture, proper money management cannot be overemphasized. 1-3% of total capital per trade is a good place to start, depending on how much leverage you are using.
Starting with Post #2, I will lay out which pairs I am currently trading and what the trade values are for the current week. Obviously, we are well into the week as I post this, but you will get the idea as I progress through this journal.
I look forward to any constructive comments.
Trading Methodology:
This system tries to capture several concepts of trading. The most important being trading in the direction of the fundamental trend. Secondly, it tries to capture "reversion to the mean" by entering positions when they are slightly technically countertrending. Third it looks to minimize the effect of spreads by trading on large time frames and accepting big price swings.
1. Measure each weekly candle length, as well as the average slope for the last 20 weeks.
2. When FOREX closes for the weekend, use the measurements you gathered in step 1 to project where next week's price will range. Figure out the projected midpoint, the projected min and projected max, as well as the 20% and 80% levels within the candle.
3. Only enter positions in the direction of the trend. AS OF 15 JUN 2008, WE STARTED TRADING THIS SYSTEM IN BOTH DIRECTIONS. WHY NOT COLLECT ON THE RETRACEMENT AS WELL AS THE TREND? SHOULD PRODUCE TWICE AS MANY TRADES. AS OF 26 OCT 2008, WE'RE SWITCHING BACK TO TRADING ONLY IN THE DIRECTION OF THE FUNDAMENTAL TREND. FUNDAMENTAL TREND WILL BE DEFINED BY ME AND POSTED ON THIS TRADE DIARY AS I SEE THE TRENDS CHANGE. (SEE POST #490)
4. Enter position when price is at the 20% or 80% level against your trend, then sell when it hits the opposite 20% or 80%.
5. Do not enter a stop loss.
6. Sit back and start collecting pips.
7. When the trading week ends, delete weekly data from week 1, and add data from the last week as week 20. This system uses a 20-wk average to compute projected candle size and slope.
As an example, lets look at USDJPY.
1. Average weekly candle length in trend is 2.36% of weekly midpoint price. The weekly midpoint price has been trading approximately 0.46% lower each week.
2. Based on last week's midpoint price (107.445), I projected this week's candle to be:
High: 108.21
80%: 107.71
Mid: 106.95
20%: 106.19
Low: 105.69
3&4. Since I want to trade this pair lower, I set an entry level at 107.71 with a TP of 106.19.
(As of this posting, the USDJPY has not traded up to this week's entry price yet).
Some orders are never triggered with this system. Some triggered orders are often held longer than one week. Each weekend, the new projected candles will be computed, which will alter entry and exit levels.
This is intended to be a "set and forget" type system where orders are placed on the weekend with a one week expiration.
Gathering the data initially takes some effort, but once you have the trend's slope and average candle data, updating the info at the end of each week is a snap.
With the big price swings this system seeks to capture, proper money management cannot be overemphasized. 1-3% of total capital per trade is a good place to start, depending on how much leverage you are using.
Starting with Post #2, I will lay out which pairs I am currently trading and what the trade values are for the current week. Obviously, we are well into the week as I post this, but you will get the idea as I progress through this journal.
I look forward to any constructive comments.