Trading market extremes: The Guaranteed Pips

[topchess]

Originally Posted by willsucceed

Good post Topchess. I agree with you on keeping it simple and i tried trading this briefly a little while ago. I failed simply because my demo only permitted me to buy full lots (my balance was 5k) so that when the price kept going more extreme i went into big drawdown. However like you say if you keep you trades small, say 1/10th of a lot on a 5k account this system would probably be quite profitable as long as you were not greedy on the profit taking.

My question is what about chart time periods? YOu seem to change to weekly, daily and 4hour. So you don't just use one period? Do you use different time periods to back up your trade? I would have thought you would be receiving mixed signals by looking at the RSI on different time periods.

Hello,

The price will keep going more extreme, AUDUSD is a recent example, but with simple basics of money management you are winner, no doubt.
profit won't be big, and trades are quite low, it is not scalping. it's like a swing entry. so it fit someone with 5k or 10k account with micro lots and need to make small profits.

This also offset the nerves and risks of capital loss while you trade. You do not really care it goes up or down.. if it goes against you, no problem, it's turning back in your favour. If not, you enjoy little profit.

This is the whole idea behind this system.

Time Charts
Ok.. I won't go lower than 4hr, nor higher than 1w. Simply, when trading the rsi value you see, you do not care about other timeframes. If the daily RSI is 83 and 4hr rsi is 66.. this means I can short based on the higher and more extreme reading.

So my profit target depends largely on the timeframe I use for entry. and I exit with market sense or little profit. no greed.

on daily chart for example, the profit can be 50-100 pips. sometimes more if the extreme is really high (+85)

on 4hr chart, you can hope for 20-30 pips on majors.

on 1w chart, this is very rare, but usually more than 200+ pips.

Please be prepared that you will add to your positions. and that you will have losses when you enter.. but at the end you can cover and close in profit in 95% of cases when managed probably.

[willsucceed]

Hey Topchess

Last night i started a new demo just for this purpose. It was fun as i had some signals on certain yen pairs. I am not at home right now but i know i made 7 transactions and all were winners. I bought when the RSI was under 25 and i sold once i was in profit. I have to experiement with my tp but i am thinking it will only be around 10 or 15 pips at the most. So i increased my 5k account well over 1%. The reality is that you won't be able to trade everyday with this system even if you follow many pairs but like you say it is one of the safer systems out there.

What do you think about the following?

1) since this is a "safe" system that won't generate alot of trades would you increase your margin so your pip value is greater when you do have a signal

2) code a EA to buy and sell at extremes so you don't have to watch it all the time?

[topchess]

Thanks for your visit!

For those who shorted AUDUSD rally again, it dropped about 55 pips from 0.8870 straight down to 0.8815.

Let me tell you something short

With this system, I have fewer trades. Yes, opportunities may come when I am not watching at all. But use your market feeling when a big move happens, and after a big move make sure you check charts for any OB or OS pair.

At this time, I do not know the risks of increasing pip value. As the pair goes into more and more extreme. But this is something we should test.

I want to make it as simple as possible
It is very easy to call for a correction when a pair trends into overbought or oversold area. By backtesting charts, it seems that 30 and 70 levels are really not the best levels for your decision. So make it 20 and 80. with little room above 80 and under 20. 80-85, 20-15.

Put in your mind, that some crosses can have a 90 rsi reading like EURCAD just recently, before dropping 1600 pips. So the drawdawn was 600 pips before you make profit.

So we need an indicator or something, I really do not know coding.
The indicator can simply show to us the RSI values for some pairs in certain timeframes without watching chart all time. and for example give a sound alert when a value exceeds 80 or 20 on the first check.

From my experience with this type of trading, it's agressive and it's against the trend. you offset this with smaller lots.

I will try to increase the pip value and tell you the results!
Cheers

[topchess]

Place this limit

Let us try to take a chance in the AUDUSD again, and put a limit Sell order at 0.8850 ($0.25 a pip or 2500 units in Oanda).

[topchess]

Sold first lot at 0.8845
limit sell same size at 0.8870
limit sell same size at 0.8900

take profit 0.8800
this is my strategy on audusd tomorrow

[Airborne]

Nice job with this thread. One could also play with trend lines placed in the RS indicator. In fact you might find that these lines often offer entry and exit in the positions. Just like in the price chart. RSI is one indicator I have used. Try it out and place some trend lines in the RSI area and play with it. Use horizontal lines to see areas of R/S..

You will also find patterns.. double bottoms/tops..etc..

Keep up the good work TopChess

[Airborne]

Current chart on AUD/JPY

[topchess]

Thanks for your contribution.
Keep posting any valuable information you may see.

[topchess]

That's good for a 30 pips ride. Even more if you added to your positions from 0.8866 high. missed limit by 4 pips

unlucky!

[willsucceed]

Well today was a great day for this system. The yen pairs were really oversold (under 25 which is my signal) and i placed various yen orders as well as NZD/USD. I don't know how many pips i made but it was over a hundred for sure. So far 20 trades on this system and all are winners. The yen crosses are a blast for this system, volatile but yet predictable and they move when i get home from work!