I am working on a system based on very limited losses (and probably fewer trading opportunities). I will share the theory with you and keep this updated to let you know how I get on.
The premise is simple and based on my available time to actually trade. I cannot be watching charts all day every day. I have a day job (European time) so have tended to jump in and make a trade based on the market I see in front of me at that time or around data releases rather than looking for the right times/price levels to trade.
I do have time to look at price levels in the mornings/evenings and weekends. The premise is as follows.
Step 1 - Look at the overall trend of various currency pairs on 4 hour, daily and weekly charts. Probably the main 4 pairs plus EUR/GBP and AUD/JPY. Maybe EUR/CHF to test the theory in a consistently ranging pair too.
Step 2 - Draw the price channels on these charts with parallel lines
Step 3 - Cross reference these prices with fibo levels on these timeframes and support/resistance. Apply the same to the shorter timeframe charts. Look for the price entry points to buy/sell at retracement end areas where the trend recommences.
Step 4 - Verify the entry points by ensuring they are at the ends of the channels in various timeframes. Use indicators MACD/Stoch, 5 & 10MA crossover as per the cowabunga system to verify the short timeframe entry points;
Step 5 - Position should normally re-enter the channel so use fairly close stop loss. Once position has moved close to the centre of the channel, bring stop loss in to breakeven. Take 50% profit in centre of channel then leave remaining position open to aim for a final TP close to bottom of channel (define target using fibo extension levels).
Step 6 - Also look for first time movements outside of the channel and against the trend as market invariably aims to return to normality. Take 100% profits on these as soon as a reasonable target is met. Smaller position size.
This is where the fun part begins… I will be marking push alerts at certain prices to alert me to a potential entry point. This will trigger me to look at the charts and see if everything is as expected and then enter the trade (or not) from there.
I am no expert trader so would appreciate any pointers or advice anyone can give. I will begin trading this system and post results (and modifications) as I go.