Buying Dips and Selling Rallies

One of the weakness in my trading is not holding myself accountable to my plan, therefore, I am going to maintain this journal as a tool to help in maintaining good discipline.

Here is the general plan I will be following:

Set-up<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /><o></o>

1. There needs to be a trend!
2. Look for both a rising/falling 20 and 100 period simple moving averages
3. Identify strength of trend
4. Steeper and longer slopes identify stronger trends
5. I like to use the Guppy Multiple Moving Average also to identify trends and trend strength. Plot these EMA's:
   Short Term (blue): 3,5,7,10,15
   Longer Term (red): 30,35,40,50,60<o></o>
6. The stronger the trend the smaller the retracement is usually<o></o>
7. You don't necessarily have to know the exact strength of the trend because we will define a “minimum” retracement so that we can catch small dips as well as any bigger dips. This procedure will allow you to catch the ideal trades as well as those highly profitable trades that are less than ideal. The most important point to remember here is that if you demand too great a retracement you will be missing some of the best trades.
8. Some examples of how you might identify a minimum retracement:

1. The low of the last 2 or 3 days has gone below a short term moving average, i.e. 7 period SMA<o></o>

2. The slope of a short term moving average has turned down

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The ideal “retracement” is a very small pullback in a very strong trend. These set-ups allow for better entries as they have the lowest risk and the highest profit potential.

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Entry Triggers<o></o>

1. Enter when the close is the highest close of the last 3 periods
2. Enter on a higher close when the daily range has expanded. (Today's True range is greater than the 3 period ATR)
3. Place a buy stop at last period’s high<o></o>

You are not trying to buy on the lows. What you want to see is some evidence that the correction is over and that the trend has resumed. This form of set-up along with our reliable identification of the underlying trend will give your trades a very high probability of success.<o></o>

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If you are making sure that the short, intermediate and long term trends are all going in our favor you should expect to have your trades showing profits right from the start.

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Exit Strategies<o></o>

1. Exit the long trade when the close is the lowest close of the last 3 days<o></o>
2. Exit the short trade when the close is the highest close of the last 3 days<o></o>
3. Trailing Stop, i.e. Chandelier Exit
4. Scale out using profit targets. Trade usually initiated with 3 units. Method that Vegas uses for 1 hour Tunnel is a good example.
5. Exit the long trade if the candle turns red and more than 75% of its body is below the upper Bollinger bands (20,1). <o></o>
6. Exit the short trade if the candle turns blue and more than 75% of its body is above the lower Bollinger bands (20,1).
   
   

I am using daily chart period for set-up and entries

EUR/CHF: Long at 1.5768
AUD/USD: Long at .7646

EUR/CHF, Long at 1.5768: +40
AUD/USD, Long at .7646: +60

Moved stop loss to break even.

Let's see if this works.

EUR/CHF, Long at 1.5768: +50
AUD/USD, Long at .7646: +66

EUR/CHF, Long at 1.5768: +61

Closed AUD/USD at .7672 from long entry of .7646 for +26

Went long EUR/JPY 149.80 last night.

Closed postion this morning at 148.21 for -159.

Set-up

Trend: UP per upward sloping SMA 20 and SMA 100

Trend Strength: Both MAs pretty steep and GMMA showed strong uptrend for longer terms MAs and shorter term MAs had bunched to together and close of entry candle was above all shorter term MAs

Minimum Retracement: The low of the last 2 or 3 days went below a short term moving average, EMA 5 in this case

Trigger for Entry

Entered when the close was the highest close of the last 3 periods.

What may have been an entry error, too, was that the daily range had NOT expanded. (The entry candle's True range was not greater than the 3 period ATR)

Exit Reason

New close that was the lowest close of the last 3 days and surprise news that was not anticipated on Economic Calendars that I view:

Euro Down on Cross Flows

Thursday, 07 September 2006 10:30:56 GMT

Written by Terri Belkas, FXCM Junior Currency Analyst
The euro dropped sharply in European trading on cross flows, with EUR/JPY diving from 149.79 to 148.25 and EUR/USD falling from 1.2828 to 1.2772. Commentary from German Finance Minister Thomas Mirow drove the yen higher against the euro when he said the Japanese currency's weakness will be discussed when the G7 meet in Singapore next week. In economic news, German industrial production in the month of July rebounded a solid 1.2% versus an expected gain 0.5%. The reading is huge compared to June’s fall of 0.4% and comes as a result of increased demand for household appliances and construction. Additionally, the rise in production reports in line with yesterday's jump in German factory orders. The data provides support for the ECB to raise rates to 3.25% in October, especially as central bankers have been particularly hawkish and continue to cite the need for “strong vigilance.” As of 10:28GMT, EUR/USD trades at 1.2780, down from Wednesday’s New York close of 1.2804.

European equities fell on Thursday as interest rate concerns resurfaced, with comments due from US Federal Reserve and European Central Bank officials, while the Bank of England is seen keeping UK rates on hold. By mid morning the losses had widened, and the FTSE Eurofirst 300 fell 0.9% to 1,352.2, while Frankfurt’s Xetra Dax shed 0.8% to 5,769.16. In Paris, the CAC 40 lost 1% to 5,063.01 and London’s FTSE 100 slipped 1% to 5,870.3. PPR rose 0.7% to €108.80 after a 27% rise in first-half operating profit thanks to strong gains at its luxury goods brands, which include Gucci and Bottega Veneta. Ahold climbed 4% to €7.64 after its 60% rise in second-quarter net profit easily beat forecasts and highlighted the recovery at the world’s fourth-largest food retailer following several quarters of uncertainty. Solace was also to be found in beer as Inbev, the Belgian brewer, reported better-than-expected second-quarter earnings, which may enable it to hit its profit margin target of 30% by the end of 2006, a year earlier than initially forecast. Shares in Inbev rose 3% to €41.85. Heineken, the Dutch brewer, gained 1.1% to €36.38 after it reported forecast-beating results in the previous session. EADS fell 2.1% to €22.31 after BAE Systems, its British partner in Airbus, said late on Wednesday it was selling its 20% stake in the aircraft maker to EADS for €2.75bn. The future of Alcatel’s merger with US rival Lucent will become clearer on Thursday as shareholders vote on the deal at the French telecom equipment maker’s annual general meeting. Shares fell 0.7% to €9.51. SGS, the Swiss inspection services company, fell 4.1% to SFr1,113 after Sequana Capital, the French holding company, said it was to sell its stake in the company, worth SFr2.055bn (€1.3bn).

Yields on 10-year German bunds were relatively unchanged at 3.827% with prices down slightly to 101.370.

EUR/CHF, Long at 1.5768: +67

at 1.5807 from long entry at 1.5768 for +39.

Reason for exit:

Close was lowest close for current 3 periods.

Mixed results for first 3 trades:

2 positive outcomes and 1 negative, but the loss was significant and wiped out the gains of the winning trades.

Closed AUD/USD at .7672 from long entry of .7646 for +26<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /><o></o>

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Closed EUR/CHF at 1.5807 from long entry at 1.5768 for +39<o></o>


Closed EUR/JPY at 148.21 from long entry of 149.80 for -159<o></o>

Went long on GBP/JPY at 219.846 based on 3 hour chart trend line break.
Profit objective is 81 pips.

Daily chart is in uptrend with current period getting ready to close at 3 period high close.

don't you have a stop loss?

Absolutely. It is generally half of my profit objective.

Whenever possible I try to keep a 2:1 Reward to Risk ratio.

Went long on USD/CHF at 124.42 846 based on 3 hour chart trend line break.
Profit objective is 91 pips.

Daily chart is making higher highs and higher lows & short-term GMMAs have crossed above longer-term GMMAs.

Moved stop-loss up to breakeven this morning, since price moved into profit by amount of initial stop loss times 1/2 of profit objective.

Went long at 219.85. Currently +85 pips

Moved stop-loss to breakevent this morning as price move postively more than 1/2 of my initial price objective of 101 pips.

MJ


I have been following a system similiar to this and working out well for me.

Hi Ptournis,

I'm curious about the system you are following.

Would you mind elaborating on it?

Thanks,
MJ