It's simple, All you need is an EDGE right?

Beginner Questions
1

Due to circumstances it is a good time for me to test out something like the following strategy.

In my book, the simpler the better, nearly always, and I’ve had it in the back of my mind to employ a solid 50/50 ish trading strategy with an edge.

What I mean is that from any point, any currency will move a number of pips either way, say 30 pips for instance, the market will either move 30 PIPS up or 30 PIPS down, all you is to get better than a 50% success rate, I appreciate that some of you will have seen some similar discussions before.

My thinking is that a fixed trade eliminates the psychological element, it well be more like betting, but the fact remains that the price will do as above, either move 30 PIPS down or UP.

To eliminate any further psychology from the equation I will only trade after the London Open, between 9 - 10, depending on when I finish my breakfast, but not before 9, the idea behind this, is that if the market is going to have a reversal it will have happened by now and my intention is to go with the trend.

I will always put trade on unless there is still one open from the day before, this removes the will I, won’t I trade from the psychological equation.

The only thing that remains is to pick a currency and which way it is likely to go, so I will look at 7 or 8 pairs and pick the one I like most, this will be the only psychological element to the trading and where the edge comes from to improve the likely hood of a successful trade. I will assume that I have enough of an edge to either loose 25 PIPS or gain 30 PIPS, so including spread all I need is about a 3 PIP edge on the market to come out a winner in the long run.

I’ve dabbled with 50/50 strategies in the past, but with no real framework.

Unfortunately I can’t see an easy way to test this on a simulator due to looking at multiple currencies at one point in time.

We’ll see how it goes, but this is one I have to try out, even if it will prove to me that it’s won’t work, I have to know :slight_smile:

2

What if the entry doesn’t matter ? It will be a bad one anyway.

3

This is exactly the point I’m making with this, you don’t know if an entry is good or not when you enter, it’s all about probabilities, you don’t ‘know’ anything about future price, only it’s probability, and if I stick a trade on with the longer term trend, I increase my probability of a winning trade since everything else is equal no matter where the entry is.

4

I agree 100%.
I heard, that winning your bad entries is what makes you an expert. Good entries do not matter because they are too easy.

In the spirit of this principle I entered totally disorganized, and in the worse possible situation. Now I am trying to take it in control.

5

Yes, if it’s possible to avoid too long a run of losses then what could be simpler, less stressful and less time consuming… :slight_smile:

6

No losses. Break even worst case.
Anyway, this is mostly on paper. I hope I will get alive out of my trade. Good luck to you too.

7

Merrytrader,

3sma
8ema
Momentum indicator (2 period)
Atr (28 period)

When 3sma is above 8ema and momentum closes below 0, go long with stop loss set at 1 x atr and profit target at 1 x atr.

When 3sma is below 8ema and momentum closes above 0, go short with stop loss set at 1 x atr and profit target at 1 x atr.

8

It works a dream on the daily time frame

9

You will need to remove sunday candles from your chart though.

10

An edge and good money management.

11

Your post was right on time I must say !
I am about to test something pretty similar to what you just described.

But i haven’t come up with a clear blueprint of that plan as you have.

Basically what I’m going to do is I’ll trade off of support and resistance. But I won’t be waiting too long for confirmation candle /like second or third candles to the direction that I want to trade/ to form usually by then /it happened to me couple of times in the past/ it was abit too late according to how I wanted to have my risk reward ratio. I was taking on too much risk as opposed to my profit and not only that half the time I got stopped out if my SL was placed just below or above my entry point in cases where I didn’t want to take on too much risk.

I have been pondering what was really wrong. And just this morning I finally have reached a clarity /or maybe I haven’t only time will tell/. I thought to myself just like you said after all forex is a game of probabilities or any sort of instrument as long as you employ technicals. Just then I spotted two pairs where bullish/bearish trend was losing it’s hear with opposite candle forming on key support/resistance candle I placed my order with SL just below/above the key levels. *Note I use daily TFs.

This basically enables me to take on trades that has high reward to risk ratio 2:1 and above. I guess you could call than an edge? (I would :59:). We’ve all have heard let your profits run and cut your losers short.

All in all I think it doesn’t hurt to test your plan. Let us know how it goes!:57: By the way there were few good points that I will pick up from your post since we’re testing something pretty similar. Thanks for the post !

Good luck !!

12

It won’t. You need a lot better than 50/50 because of the spread. Let’s assume a 3 pip spread.
If the market moves 30 pips in your favour you make 27 pips profit if it moves 30 pips against you make a 33 pip loss.
Therefore if you do the math, you need a win/loss ratio of 54.5/45.5 just to break even.

13

If the strategy is simple enough and purely technical (judging from what you’ve written) then it should be pretty easy to backtest.

14

But it’s far from what I’m aiming to do here, there are too many when’s meaning you have to be at your computer to wait for a trade, and there are too many if’s and ‘ands’.

This is the simplest possible system I can think of that has a real possibility of being profitable, it’s simply pick a pair and place trade with 25 PIP SL and 30 PIP TP.

When I place a trade I will give the results of the previous and state which pair I have placed the trade on.

So far, last week I placed a trade on THE USDCAD on Thursday last week which won.

Yesterday it was GBPUSD and it has just closed in profit.

I will not place a trade today since I still had a trade on, I will place a trade tomorrow and I will state which pair it is.

Oh and the current running total +60PIPS.

Let’s see how it works.

15

I would have to have my 7 pairs set up in sync for every 24 hours @ 9 am British time, sounds tricky to me.

16

or an edge, smart risk management and a tonne load of discpline

17

The MM is smart but simple, my edge is picking the best from 8ish pairs, and if I can’t keep to the simple rules I’ve set of a trade between 9 and 10 and only put on one if the other has closed then I shouldn’t be anywhere near forex:)

18

Confidence
&
Respect / Fear of risk

19

I have the confidence that it will work to try it out, but otherwise is pretty much mechanical, so it not much of an issue thereafter.

Respect / Fear and risk, is fixed, so no variables there.

Well that’s my thinking with it anyway, if most of trading is emotional, then remove it?

20

“Everybody gets what they want out of the market.”

  • Ed Seykota

Its all about risk baby