I’ve recently posted on here asking about my first strategy. All the comments were very helpful, one in particular mentioned that it should be simply enough to write down. I’ve written down what I believe could be working TREND RIDING strategy. Im currently reading Steve Nisons book on candles and im looking to lean on candle analysis as my main source of input; using RSI secondary to guage momentum. My proposed stratagy is as follows…
Stick to majors avoiding Yen.
If there is a current trend already formed try and gauge what stage it is in and decide if it’s worth jumping in.
Look for a trend forming in the 1hr chart, refer to patterns and candles to do this.
Look back over the months to see if this same trigger has occurred, also look for psychological levels. If I plan to go long see how this set-up fits in with historical price action. If I can’t find anything worth trading, try looking for a different trigger and/or a different pair.
Draw out the basic support and resistance levels. Enter a position accordingly.
Don’t choke the trade by putting the stop loss too close, add a trailing stop min 20 pips.
If I find myself in a good trade, consider adding to the position.
My exit strategy simply being to monitor the chart hour by hour. Either exiting if I see candles suggesting a reversal OR if it’s reached the end of the trading day.
This is my very first draft of a trading stratagy. If there are any seasoned traders out there that could tell me what they think, tell me what its lacking etc id really appreciate it!
I fully endorse your points 1, 3, 4, 5 and 7 above (and some of point 6), and will therefore limit my comments to the other few parts.
How? They don’t have set “stages”.
Generally, don’t imagine they’re all structured the same way; specifically, don’t fall into the very widespread trap of imagining that a trend in what looks like “an early stage” is more likely to continue while one in what looks like “a late stage” is more likely to end.
This is a very common and big mistake, important to avoid.
Definitely right!
Another very common and big mistake, important to avoid.
Two big issues, here.
I strongly advise you against using an automated trailing stop, for the reasons explained HERE (read that post really carefully - it will help you!).
I strongly advise you against ever measuring SL-distances in terms of “pips”. The best way is “by price action/SR” (I.e. just above/below swings-high/low). The second-best way is “by volatility (e.g. ATR-multiple). A “number of pips” is a very bad way, and of course that’s one of the many reasons not to use an automated trailing stop.
I don’t understand this point. You’re trading from a 1-hour chart but closing at EOD? What will your average trade-duration be? During how many/few hours of the day will you actually be able to open positions?
I have seriously understated this, in my post above.
What I should have gone on to explain, but forgot to because I was having lunch at the same time as writing, is that if anything (and completely contrary to everything most aspiring traders believe and are taught by most of the online sources where they typically try to learn) it tends to be exactly the opposite way round: well-established trends are actually more likely to continue, while recently-formed ones are more likely to fizzle out or to reverse.
As some experts have explained here, over the years, life insurance actuaries understand why slightly older people often have a longer life expectancy than slightly younger people, but they’re trained in statistics and probability (totally counterintuitive subjects!) and aspiring traders usually aren’t.
There are good reasons why investment banks and hedge funds employ people with top-class maths degrees as trainee traders.
When I mentioned the ‘stages’ of a trend, i was refering to what I read in ‘7 Winning stratagies for trading forex’ the author, Grace Cheng describes the 4 stages of a trend. Nascent trend, fully charged trend, ageing trend and end of trend. But im assuming this can be a fairly subjective way of looking at it.
As for my exit strategy, my aim is to be a day tradrer. My job allows me to have 1 day off through the week, this will be my trading day. Any other spare time is used to study and plan. So on a trading day i could hold a position open for around 8 hours.
Ok, thanks. I haven’t heard of it. Or the book, or the author. So I can’t help there, sorry.
Doubtless it’s subjective, but that’s not my main worry about it. My concern is that it all sounds like “with hindsight analysis” and may therefore not help at the time you’re thinking of entering a position.
I can only repeat that IMO entering later in a trend is better than earlier, and mention that this is also the view of other people I know who trade successfully for a living.
I hear you, thanks.
I suspect 1-hour charts may not be all that easy for you, on that basis.
You might be much better off, if you could spend half an hour per day on all the other days, as well, trading from “slow charts”?
So you suggest taking a position over the course of say a week, on a 1 hour chart and monitoring it for a half hour each day?.. As apose to trading using 1 hour charts over the course of 1 day?..
Sorry, it was a vague term. I should have been more precise.
Not necessarily on a 1-hour chart, but similar. There are 2-hour and 3-hour charts too, you know?
For myself, I would find using 1-hour charts only one day of the week terribly frustrating! What if there’s no good trade available on whatever happens to be “your day”? “Another week gone and nothing done?” Maybe. What if there’s an entry 2 hours before the end of the day, and then you’ll “have to close it”?
There are two different approaches to trading for people who work full-time or more-or-less full-time. Either can work.
Dedicate your one day a week or whatever just to trading, use a “fast system” and “fast charts” (3-minute charts? 5-minute charts?) and get plenty of trades in. I would try this, myself. Most people would try (and will recommend) the other one.
Use “slower charts” but hold positions open for much longer (most people would recommend this way, and it may be easier for most people). Maybe 4-hour charts? Maybe daily charts? Ask @tommor - his posts are extremely reliable, he gives great advice here, he trades this way. (I mean from daily charts, not “only one day a week”).
IMO it’s just not going to be easy to trade 1 day a week from 1-hour charts and close at EOD. I may be wrong!
