The 3 Duck's Trading System

I have been successfully trading the 3-ducks methodology, so I feel I can contribute my 2c.

[B][U]TREND[/U][/B]

  1. First, I look to [B]trade in the general direction of the trend[/B] - meaning, I also look for confirmation on the Daily chart. This could be as simple as above/below the 200SMA on the Daily. I avoid counter-trend trades.

Currently, for me, this trend means US-dollar bullish. I have been shorting EURUSD, GBPUSD, AUDUSD and long USDCAD for the past 6+ months. I had minimal involvement in the March-April bullish rally, just sat it out.

Furthermore, [B]I almost never look at the 5 min chart[/B], as I find it leads me to overtrading. I focus on the D, 4hr and 1hr charts.

[B][U]TRADING[/U][/B]

  1. The [B]majority of my monthly profits will arise from 3-4 good trades[/B] (100-150 pips). Another good portion will achieve 50-70 pips. Therefore I wait for these good setups. This usually means 2-3 good trades per week. It pays to be patient.

  2. As a corollary, [B]you don’t have to trade every day[/B] on this method. For example, Mondays are usually very slow and whipsawy, never gaining momentum, thus I take them off. I often start my trading week on Tuesday. I also reduce my trading significantly on the first week of each month, when it’s high-impact news time.

If I come into a day and I have no signals, I prefer to take the day off rather than sit around the computer forcing opportunities, which usually leads to whipsaws. The good ones jump off the screen, you will know them.

[B]It pays to be patient.[/B] In our “day jobs”, we are trained to be always on the go, and measure our success by our productivity - how many widgets (emails, reports, presentations, deliverables etc) we push out.

[B]In trading, the game is won by waiting for the right setups.[/B] Our success is measured by the discipline to [U]“sit on yer hands”[/U], as Andy likes to say.

  1. [B]Good trades take off and never look back.[/B] The good ones will give 30+pips at least right off the breakout (within the first hour) and thus the opportunity to bring my stop to breakeven. Then they will run to my profit target of 100 pips smoothly.

  2. If a trade backfills and trades sideways following the breakout, it’s usually a wash or a losing one. If the market can’t get any momentum going within an hour or two of the breakout, I look to [B]minimize my losses[/B] on these.

[B][U]RISK MANAGEMENT[/U][/B]

  1. I tend to [B]move my stops to breakeven+5 after I have unrealized profits of about 30-40 pips[/B]. This is against what Andy teaches, but I like the concept of a “free trade”. This is inline with my observation (4), that good trades will just keep going. Thus, I minimize losses on the loss-making trades in this way.

Once I am in a trade, I often use a [B]trailing stop off the 1hr chart[/B] - I close my positions if I have a break of the high (for shorts) or low (for longs) of the last 3 bars on the 1hr chart.

  1. You have to be disciplined with your [B]money management methodology[/B]. Usually my risk is 1% of my account NAV per trade. I take positions of up to 2% when I have high conviction on a trade (say 3-4 times per month). I also usually never have open more than 3 positions at a time, but usually just 2.

[B][U]PSYCHOLOGY[/U][/B]

  1. [B]When I have a significantly positive day[/B] (which means the market has moved over 100+pips in my favor and I have earned >5%), [B]I take the next day off[/B], for two reasons: (i) This keeps me humble, so that I don’t give back the profits from overconfidence and (ii) wide range days are often followed by consolidating days / reversals. I want to enjoy my profits.

  2. [B]My aim is to end the month green[/B] - ie. with a higher balance than I started the month. Not a certain % return, not a certain pips amount, not a certain number of profitable days per week. Just profitable at the end of each month. This keeps me focused and not chasing trades.

“Take care of the downside and the profits will take care of themselves”.


If you can, I would suggest you look into and [B]take Andy’s Advanced 3 ducks course[/B].

I cannot recommend it highly enough. His material is clear, concise and simple. It was highly valuable to clarify some concepts for me and setting me on the right course. The cost of 300eur is more than made up by a single successful trade, if you are trading full lots. I am a happy customer.

Then, the most important step is to trust that this system works (it works for me) and follow it, rather than trying to change it. Minor tweaks are recommended to personalize it, but the core trend-following idea is solid.

[QUOTE=“BobForex;702294”]How have people made “3 ducks” work for them? I have looked through many posts… And some people are using a Stochastic hook on the 5 min, which turns the 3 ducks into more of a pullback system. Others play more of breakout system of the 1 hour (support/resistance). As a base system…Adam Grimes feels this methodology really has no significant edge…and might be hurting you rather than helping you. Adam Grimes has blog entry called “That Trend Indicator, Is it Helping or Hurting?” So how are the people in this group creating an edge for themselves? You can see posts where people are posting insane returns…when the markets are trending…and they are giddy…and soon they disappear from posting…never to describe the drawdowns. There was one member you created his own babypips journal called “3 Ducks with Envelopes Journal” I really appreciate his honesty, and his results were lackluster at best. It would be great if Captain Currency had a forum for paid members to share amongst each other and learn from each other. I have trouble finding anyone using “3 ducks” successfully long term on the internet. Other than a few nice posts here when the market is really trending. Just curious how everyone is making this work for them. Thanks Bob[/QUOTE]

I think the key is in one of your last statements. This is a trending strategy so obviously there will be successful posts when markets are trending. If you are doing it right you won’t get many trades - as fx snowball says above, the majority of profit comes from a handful a month.

If the market is not trending then stay out - probably why people don’t post successful trades when the market is ranging more. If you want to trade non trending pairs then use another strategy.

Hi fxsnowball

Thanks for your excellent post. You have rekindled my interest in the 3 Ducks. Its good to see you have made it your own as Andy say’s we should.

FxSnowBall,

Thank for taking the time to write this…really helpful post.

Nice post, thank you for that.

May I ask how you choose your entries? Still the same “3 ducks lined up and price breaks the recent High / Low” but with H1+H4+D1 instead of M5+H1+H4? Or do you use something else?

Core of the system remains H4 and H1. I just only take trades in the direction of the longer term trend, from the D in my case.

Entries:
Once I have decided to enter a trade, I look for a break of the last 3 bars on the 1hr chart. Ideally we should have some sort of consolidation (a couple of sideways bars) and a break above/below.

GbpNzd has been a sure buy on 3 ducks for most of the last 2 months, still looking good for more - just watch the spread, its a biggie!

3 Pips isn’t that big.

Its 8 with fxpro…who do you use?

8? …My main broker has 12! OMG! :stuck_out_tongue: …never trade gbpnzd for short term anyway…so…but…aheeemm… yeah, anyway :stuck_out_tongue: my other broker is around 8 too…just checked to see :wink:

I use Global Prime. JFD Brokers might also have around 3 Pips. They have low spreads and even more important, the spreads are relatively consistent low. They don’t blow up the spreads before news announcements etc. It’s very obvious with the exotics, sometimes the spread of other brokers where 6 or 7 times bigger then with Global Prime.

I assume that other “STP-Brokers” as they call themselves manipulate the spreads. Not for stop hunting or something like that, just to squeeze some extra cash.

Edit:
Just looked, now in the evening, the spread is up to 5 pips, but that’s still ok. EUR/USD for example is currently around 0.6 pips.

Here are a couple of trades I took this week on GBPUSD, good for 50+ pips and what I am focusing on for this morning. First line is aggressive entry at 1.5325 and 2nd line a more secure entry at 1.5305, with a possibly wider stop to the highs.

I have added the Stoch(14,3,3) to show how clean the retracements to the 60SMA were recently. Simplifying things down, you just wait for a break of a 3-bar formation, once we’ve had a decent retracement close to the SMA on the 1hr. Set your initial stop loss and then follow the trade down, again using a 3-bar formation as a trailing stop.

I have a similar chart posted next to my screen, to keep me focused. These are the bread and butter trades of this system in my opinion: pullbacks to the moving average, in the direction of the trend as specified by 3-ducks. If you don’t have one of these, there’s no need to trade. You have a version of these setups at least a few times monthly, like clock-work.

Contrast the below chart with EURUSD and USDCAD this morning (Friday 29May), to see where the 3-ducks saves your bacon. Both of the latter have crossed over their 1hr SMA and are not eligible for a trade today. Will they give some pips? Sure, maybe. However, the GBPUSD is higher probability to give a smooth directional move with minimal pullbacks against my stop, in my opinion. Thus, they are off my list for this morning.

At the end of the day, we are employing a trend-following system using breakouts for entry. Its power is in its simplicity to define the trend, in my mind, which keeps you out of a lot of non-sense.

Hope this helps.


For those following along this morning’s (bus) ride, my stop is around 1.5345, for a risk of 20 pips.

I have also set a TP target of 100 pips, just because it’s Friday and the last day of the month.

Let’s watch a live trade unfold.


+35 and stops now at breakeven for me.

A free trade from now on.

Can the market come back and hit my tighter stop? Sure. That’s ok though. If it does run, I can bag some risk free profits. The momentum is on my side.


Hi all Duckies

I have tried this system twice this week and took profit on both trades, in fact looking back I left plenty of pips on the tble. But being new to trading and this system, I must say that I am happy with the simplicity of set up and filtering quickly through charts .

Hi fxsnowball

Thanks for your posts. Very helpful to see your way of thinking

Price action a bit slow this morning. Some cross currents from EURUSD which is still correcting to the upside.

Fortunately, the pullback never challenged our stop and we are back in business, with another leg down.

Even if we were stopped out though, this is the benefit of a “free trade”. Nothing to lose. There’s opportunity cost, you might say, and I agree. Nonetheless, more often than not, this this will work out and make up a good income.

Once the current candle closes, if we are still in the trade, I might move my stop to 1.5315 for +10pips, to lock some profits too. That’ll be the high of the last 3 candles. Usually I also leave a few pips for the spread and breathing space, it’ll be tight this time around.

This method works through its simplicity, for me. The more you use it, the more you trust it to ride the waves.


AUDUSD another good candidate this morning


I always enjoy reading posts like this one #2192 by fxsnowball. The guy is clearly in control of his trading and progressing month by month.

Can we get a few more posts like that one? I hope so!

Have a great weekend Duck Hunters,

[B]Andy
Captain Currency[/B]

Hey Andy, good to see you here!

Using the 3-ducks to push the FX snowball down the hill and grow it bigger! :wink: