Now at last, after all these posts, the conclusions :
1) We must search for
quality patterns on the Bolinger bands to have a reliable trade. With poor patterns anything could happen.
2) The Bolinger band must not be "trumpeting" but rather, be mild in rising or level or even falling. Trading evening stars on a trumpeting BB is fraught with danger. This is the place to trade
3 green soldiers (long) or
3 red crows. (short).
3) We set the stop loss according to the above 2 conditions, be it large, medium or low risk.
4) We trade 2 lots to give a superior win/loss ratio.
5) We enter using a short term Keltner chart with a MACD and Bolinger band to get the best entry. The best entry is often the opening price but not always. This short term chart is about 1/4 of the length of the main chart.
6) We choose target profits rather than bottom and top fishing.
7) We do not know whether the price action will go up or down immediately after entering. Therfore the diagram below is proposed to get the maximum out of every trade increasing our win/loss ratio and also improving our risk/reward ratio.
This diagram is the result of all the considerations of the trades posted so far as well as the material in the hyperlink I gave to read.
The diagram - notes below >>>
By
tymen1 at 2008-05-02
This diagram shows 2 separate drawings with a short entry at the bottom of a red candle (evening star).
The stop loss is placed above the candle and two target profit lines are placed, the 1st close by, the 2nd looks for larger profit.
In short term trading, these may be say 7 pips and 25 pips respectively. The choice is yours.
Since we do not know which way the price action will go first, we enter with just 1 lot in both cases.
The 1st drawing shows a short entry of
1 lot that makes it way to the 1st target profit where the trade is automatically closed by the computer. (leg 1)
The trade goes a little further down then right up to a retrace. But at this stage you really do not care what it does because you are
not in the trade and there is
no stop loss active. (leg 2)
Then using the Starc or Keltner channels, together with the BB we re-enter short
2 lots at what we believe is near or at the top of the retrace.
We wait for the trade to eventually close out at the larger 2nd profit target.
(leg 3)
If this second entry goes haywire by hitting the stop loss instead, then we have a loss from the 2 lots. But this loss is small because the pip distance from the second entry to the stop loss line is small. Now the 1st entry has a longer pip distance to its target profit.
So the two tend to cancel each other out...............2 lots, few pips -ve versus 1 lot many pips +ve. (riskless or nearly riskless trade).
* * * *
The 2nd drawing shows a short entry of
1 lot with the price action going against us and doing a
retrace first. (leg 1)
As before, we attempt to find the top or close to top of this retrace and then add our 2nd lot.
The computer averages our entry.
We then hope that our trade marches to the 2nd larger profit target with the 2 lots (leg 2)
At this point we could set a
target 1 for one lot as an alternative. The pip profit from this is from the word "averaged" to the light green line in the diagram. We perservere with the 2nd lot trusting it will hit target 2.
Next post.
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