Hello, I have started my FX trading journey recently and after reading, learning and backtesting extensively I have started demo trading and small money real trading. While learning and backtesting strategies I have come to a personal preference of trading the 1 hour charts (4hr for context and 15m for entries) with trades usually being around a 2/2.5 RRR with around 30 pip SL and 60-75 pip TP.
Those trades take around 1-4 days to play out usually so the problem that I have encountered is the widening of the spreads after 10PM UK time. As spreads go to 7.5-15 pips depending on pairs my stoploss is likely to be triggered over night when its not even close to it and it creates a losing strategy out of a winning one.
My broker is CMC but have tried a few others and have noticed the same thing so guessing its not broker specific.
So my question is how are you adjusting and solving that issue? Closing all trades and opening them again in the morning seems costly and misses a fair few market moves I guess?
If you’re taking entries from the 15min chart you are trading the 15min chart. A holding period up to 4 days based off that time-frame is way too long. Close all 15min chart trades by the NY close at the latest.
Or, increase your minimum time-frame to 4hrs and use the daily for set-up.
Thank you for the feedback, appreciate it. My setups are charted on the 1hr and the targets are derived form fib ext, S/R, patterns on the 1hr chart so let`s disregard the 15m thing. My first two ideas were going to 4hr/daily as you said and going down to the 15m but both of them didnt appeal to me at the time for different reasons.
So, are you just saying that 1hr timeframe is just in that shitty spot that nothing can be done and its better to avoid it because of that or?
Pretty much, yes. I would definitely exit any trades off charts less then 4H by the NY close at latest.
15min chart patterns, signals etc. are borderline random. Obviously you’ll get any candlestick or chart pattern that can be named off such short time-frame charts but that doesn’t mean the underlying market behaviours that generate those patterns are what is doing so by the minute. Remember that all patterns were originally identified off daily charts.
The thing you said about the 15m chart signals is definitely my reason against going down to the 15m. Thanks for the input, will try looking at higher timeframes even though it means fewer trades (and higher variance)
Personally I’m a day trader so I close all my trades before this period. There are 2 things you can do if you want to keep your trades open at this time. Either you can increase your stoploss to account for the increase in spread or just remove your stoploss for those hours then put it back in after.
You can call your broker and ask what the max spread could be for a particular pair. They should be able to tell you that. Then, adjust your position size for max spread in the event that you are stopped out.
At session close, adjust your stop to accommodate the max spread. Note that you only need to account for 1/2 the spread plus a 3 or 4 pips just in case. So, if the max spread for a pair is 20 pips then you will adjust your SL to cover 10+3 pips or about 13 to 14 pips.
When you get the chance I suggest moving your SL to break even when possible. This simple step has saved me many times. I do not subscribe to leaving your SL untouched. I move mine as and when I feel it could be safely moved to reduce potential loss.
Hi,
Did you back test this strategy and add in the Asian session spread creep to the results? If your PIPs at risk are 30 and the spread widens out by nearly half of that, your PIPs at risk are effectively 15 not 30, so your probability of obtaining a 2.5 reward/risk ratio goes out to one in five, not one in 2.5. Not sure I have explained that very well, but it looks to me that the change in spread halves your probability of winning a trade.
I know what youre saying. I have backtested my discretionary trading so have done it in tradingview and havent accounted for the split widening.
Yeah, it just makes your S/L tighter and just demolishes your winrate (wouldnt know the exact number as I havent measured it on a significant sample and dont think you can that easily as spreads change and don`t stay the same during the night). I am pretty sure it becomes a massively losing strategy.
Thanks for all the input guys, probably will have to change timeframes, not sure what else to do