Magic 100 short question

I’ve started backtesting this strategy. I think I’ve got the long positions down, but I don’t understand the signals for the short positions. I understand you should look for entries below the 100ema.

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They are the inverse (exact opposite) of long positions.

It doesn’t have to be specifically a 100 EMA. You can use any reasonable number, or even use two if you want.

The important principle is to enter a tick above the high of a retracement bar in a local uptrend and a tick below the low of one in a local downtrend. Basic price action.


Thanks! I’m not at the point where I understand which settings or even indicators to use for which situations. So I just stick with the recipe until I’ve got a better understanding :sweat_smile:


This. Exactly. That’s why that system works reliably. And the (similar) Camelback one, too, of course: the indicators are only to define “local trend”, not to time the entries.

The same as Al Brooks teaches. The same as Bob Volman teaches. The same as any reliable price action author teaches.


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So I enter on the first retracement candle? And if it is another retracement, I modify SL and entry? And if the trend is reversing, I just cancel. Is that correct?

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After the first retracement one, you put your buy-stop/sell-stop order in (it may not be triggered!).

Correct/ :slight_smile:

Yes, indeed. You have it.


I’ve spent about 4 hours of demo trading this strategy this weekend. What I experience is that I’m getting a feel for how the market moves during the trades. As a beginner who’s just starting out, should I just stick to the strategy mechanically or is it ok to start following my intuition? Like, I modify the stop loss, set higher take profits etc. I don’t want to develop bad habits :wink:

Apologies for butting in. I know you weren’t asking me.

I would say definitely “mechanically.”

Even if your intuitions are good, as a beginner you need to try to start out confidently with a system that you KNOW works properly.

If you allow yourself “intuition” in the early stages, and a wheel comes off at some point (which it probably will) you won’t know whether or not you’re doing the right thing, whether you’ve “just been unlucky,” whehter you’ve done something wrong (let alone “what”), and a whole bunch of answers to other questions that it’s important to know and learn. These are problems you must avoid. They’re exactly how most people go wrong.

I would say start trading slowly and gently, very mechanically indeed. After 3 or 4 months steady progess, then maybe try a little the “intuition way,” separately, on a demo account (or a “separate demo account” if you’re on a demo account anyway), and monitor that independently for another 3 or 4 months.

Then start thinking about maybe varying things a little.

But don’t try to take the R above 1.0: that will not work well, for you, overall. And overall is all that matters.

My perspective, anyway.

If you do this well, efficiently, accurately, smoothly, reliably etc, etc, after a few months you’re going to be WELL ahead of where most beginners are. Which is where you need to be. Very, very few people make it, remember. But you ought to, because judging by your whole approach and the questions you ask, you are - even just starting out - way ahead of the field anyway. :sunglasses:

It would be sad indeed to see you led astray by misguided/ill-informed folk in any forums!


By all means, please butt in. Your replies are highly appreciated. I’m a beginner to this in so many ways. Hence all the questions. I’ve never truly analyzed things this way before and I now see that gathering data is very important.

I asked the above question because I had 2 very different trading sessions. The first was a market that was intuitively easy to read. Very bullish. And I saw that I could start modifying to enhance profits and minimize losses. Then I started trading a market that was very volatile and difficult to read. Based on your answer above, I realize the importance of doing this mechanically for quite some time and gather data. My mind really wants to jump ahead and get down to making money. But all past experiences tells me I need to commit to the long run. It’s not a sprint, but a marathon.

I trust that when I’ve gathered data over several months, I can see which pairs are good for me, what times that are beneficial, what kind of trend in most comfortable with etc. And for that I just need a good system for gathering the data and later analyze for patterns. Right now in using c trader and screenshot the sessions history together with the results from the session. If there are suggestions one how to improve, please butt in :wink:


I don’t want to say anything that might detract from what @Pipsteroid and @TruncatedUsernam have said above, and I don’t intend to, because they know more than I do.

But if you want to start varying stuff, experimentally, with that Magic-100 method (after a few months, I mean, certainly not now!) the thing to try and vary might be the MA-100 itself.

For example, there’s an only slightly different version of that method which uses two MAs set at 30 and 70, or 30 and 75, instead of one MA set at 100. The bias is long only when the 30 is above the 75 and both are rising, and short only when the 30 is below the 75 and both are falling.

These parameters have - as you would expect (I hope) - a higher win-rate but fewer trades than the original MA-100 method. What that means, in practice, is that you can do it, that way, with a slightly higher position-size than you might use with the MA-100 described there.

But don’t try to expand the take-profit target so that you have a higher R: this is the way to have accidents, but it really takes a lot of experience and a huge sample-size to appreciate this point.

FOMO is damaging traders everywhere!!

In different ways it’s a fortunate and unfortunate thread, there. Fortunate because it’s based on something real and objective about financial markets and price action, and unfortunate because probably only 5% of the people posting in the thread there really have any understanding at all of what it’s about: they’re nearly all just people looking for something easy that they can just copy that will just work for them, but many of them also then try to complicate it and even automate it. These, I trust you appreciate, are the people “making up the numbers” (probably in more than one sense of those words!!).


I would like to add once you start thinking you can predict where the market is going, that this is a slippery slope to compounding bad habits. Even professionals know this, which is why it is so important to follow your strategy. Instead of following your intuition, follow your strategy and when you’ve gained some experience you can tweak your strategy so that it works better for you based on past actions.

Nobody knows what the market will do. Nobody.


Been rereading and I don’t know what the R stands for. I understand it’s part of risk reward.

Reward divided by Risk = R. It’s what will correlate your win % to.

Below 1R, your target is closer than the stop loss distance, and your win streaks will be greater than the losing streaks.


Thank you!

So, I’ve been thinking and reading a bit. The magic 100 system says to set TP at 2x the SL. The R:R is 1:2. What you are saying it’s that I should set TP closer than my SL in order to have a higher win rate. It makes sense. I just wonder if I should implement that from now on instead of following the system to the t.

1:1 is ok, but definitely not 1:2, IMO.

I would, certainly.

In institutional circles where broadly similar methods are used, about 0.75:1 or 0.8:1 is very common. Give or take.


Oanda’s bread & butter. All clients use 2R+ and Oanda gets a diversified book of high probability trades. Then pay Babypips to advertise 3R trades.


This is a bit concerning. It’s almost being touted as gospel to us beginners that a trade with an R of 2 is not worth taking. Thanks for clearing that up for me​:slightly_smiling_face::+1:

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EE is absolutely right, of course.

Most of what is touted to beginners almost as gospel is, at the very least, highly questionable, and a lot of it is plain wrong.

But this shouldn’t really surprise you.

Look at who is doing the touting!

Three main groups.

  1. People who are your counterparty (and people whose interests flow with theirs)

  2. People who know very little (other beginners, who instinctively believe “majority opinions”)

  3. People who are making a living “selling stuff” (products and/or services), a far easier way to make money than trading is, and need to feed the public demand for the type of information people want to hear (and some of this group overlap with one or both of the other two, too).