The 3 Duck's Trading System

The 3 Duck’s Trading System

The system is fairly straight forward and easy to use. Like a lot of trading systems it will be more productive when prices are moving in one direction and not stuck in a tight trading range. Of course this system has losing trade and losing runs, but with proper money management and good discipline I’m sure this system will keep you out of bad trades and give you a great chance to make profits in the Fx market. One of the nice things about this system is it will quickly tell you if prices are in an up or down swing phase and stop you from guessing! It will also allow you to decide to be a bull or a bear and trade in the direction of that trend. There are 3 charts involved in this system: a 4hr chart, a 1hr chart and a 5min chart. There is 1 indicator, a 60 period simple moving average (60 sma) plotted on each chart. There you go, its that simple.

How it works:

Step 1 - First Duck
The first thing we need to do is look at our largest time-frame (4hr chart) and see if current prices are above or below the 60 sma. From this chart we can see that current price is below the 60 sma. This tells us that we maybe looking to sell.

Step 2 - Second Duck
The second thing we need to do is drop down to our 1hr chart. We need to see the current price below the 60 sma on this chart also, this gives us confirmation.
Important: If the current price was to be above the 60 sma on this chart we could not move on to step 3.

Step 3 - Third Duck
From step 1 and 2, current prices need to be below their 60 sma’s on each chart. We are now on the 5 min chart and we are looking to sell when price crosses below the 60 sma. For extra confirmation we should let prices break the last low on the 5 min chart. This would mean that prices will be below their 60 sma on all 3 time-frames, therefore all 3 Ducks are lined up in the same direction.

Stop-Losses: This is where you can make this system your own. If you are a short term trader you may want to put your stop-loss above the highs on the 5 min or the 1 hr chart. If you are more of a positional trader you may wish to put your stop-loss above a high on the 4 hr chart. You could also use a fixed stop-loss, maybe 25-30 pips or more from entry. It all depends what type of a trader you are, so you decide! Another “trick” that may help you preserve capital, If you do sell and prices get back above the 5 min 60 sma by 10 pips (not a good sign) you may want to cut your losses short before your stop-loss. But if you are a longer term trader this may not be a big deal for you.

Targets: Same again, depends what type of a trader you are but target can be support or resistance levels.

Summary: The above example was carried out when the gbp/usd was trading lower so obviously we where selling - the system works just as well for buying opportunities, just look for prices to be above the 60 sma on all 3 time-frames, starting with step 1 again. I like this system a lot as it does not try to out-guess the markets movements and pick tops and bottoms. The system will quickly tell you to be a buyer or a seller. Its a good honest system that tries to follow prices. This system works better on currency pairs such as the Eur/Usd and Gbp/Usd, but there is nothing stopping you from plotting this system on any pair, but as we know some pairs act differently to others. The best time I found for trading this system is the European and US sessions. Take care to watch what is going on around you - economic new releases, holidays etc.

Good Luck with the 3 Duck’s Trading System.

Captain Currency.

PS: There are some chart examples on my homepage that may help you.

53 Likes

Do you have any backtest and live testing data to support the system Captain?

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Hello Tony,

I have forward tested it and traded it with my own money. Its a steady-straight forward system/guide that has made more than it has lost overall for me. Like all systems and traders it does have losing trades and losing runs. It works well for me, but every trader will trade it differently. My advice to you would be to forward test it on a demo and make it your own. My results from trading this system may not be of great benefit to you, as I say every trader will trade it their own way - stops, targets, enteries, pairs etc.

Kind Regards,

Captain Currency.

4 Likes

Is there any clear advantage to using a 5min chart as your short-term chart? It seems to me that 5min could introduce a huge amount of noise on the charts.

Any thoughts about using the 15mins instead of the 5?

Hello PipsiCola,

Good question, it’s great to see traders thinking outside of the box!
Will there be a clear advantage? I would’nt think so, but I havent tried it with the 15m chart as my smallest time-frame, maybe you could and see if your results differ. If you follow the “rules” and allow prices to cross the MA on the 5 min chart and also get above the previous high (2 candles to the left with lower value & 2 candles to the right with lower value) I think this will help you filter a lot of the noise. Another point, after you use this system or guide as I like to call it, you get a feel for the currency pair, therefore if you suspect the pair is in a tight choppy range - simple chose another pair to trade the system on or dont trade until things become clearer. Here is a real example for you: yesterday afternoon (19th of September '07 GMT) the eur/usd was in a choppy range, I choose not to trade Eur/Usd yesterday afternoon as I was not getting a clear signal. BTW I would have been looking for buying oppertunities, its has now gone up over 100 pips. What I did instead was look at the Usd/Jpy - all 3 duck’s where lined up in the same direction and I got a break above the last high on the 5min chart for confirmation. The trade was successful. So I think to get the best out of the system you need to get some experience using in in a live market, (demo account) get the feel for it and make it your own.
Sorry for such a long post, but I think a good explanation is required for PipsiCola’s initial question.

Kind Regards,

Captain Currency

4 Likes

IDEM:

Insert on M5, 60 sma, 720 sma and 2880 sma …

Bye

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Hello Maje,

Yes, you are correct, you can view all sma’s from the 5 min chart. I personally prefer the 3 charts.

Kind Regards,

Captain Currency.

1 Like

Earlier today prices for the Usd/Cad where below the 60 period sma on the 4hr & 1 hr time-frames (steps 1&2 of the Duck’s system). So we where looking to short this pair at some point when prices crossed below the 60 period sma on the 5min chart (step 3). We got the green light when prices dropped down to 1.0105, all our ducks where lined up in the same direction. Our target was suggested at parity - 1.0000 from our resident Economist, Eric. Well done Eric, your job is safe for another week!

Here is how the trade looked:

Important:By the way, we are not saying that The 3 Duck’s Trading System is the “Holy Grail” of trading, of course it has it’s losing trades & losing runs. We like to use it with our own market knowledge and view it as a common sense approach to price observation.

Enjoy,

Captain Currency.

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Just read your thread and tried your methodology, works pretty nice… well done. :slight_smile: how do you set your TP or exits?

thanks. dave:)

It’s all in the o/p’s intial post.

Stop-Losses: This is where you can make this system your own. If you are a short term trader you may want to put your stop-loss above the highs on the 5 min or the 1 hr chart. If you are more of a positional trader you may wish to put your stop-loss above a high on the 4 hr chart. You could also use a fixed stop-loss, maybe 25-30 pips or more from entry. It all depends what type of a trader you are, so you decide! Another “trick” that may help you preserve capital, If you do sell and prices get back above the 5 min 60 sma by 10 pips (not a good sign) you may want to cut your losses short before your stop-loss. But if you are a longer term trader this may not be a big deal for you.

Targets: Same again, depends what type of a trader you are but target can be support or resistance levels.

2 Likes

Very useful to have the trade charts Captain. If you are going to make this a regular feature I very much look forward to following along

Hello Tony,

Sorry, no I cant see it been a regular feature to be posting trades from The 3 Duck’s Trading System here on the forum, as much as I would like to - its very time consuming and I think my other work would suffer greatly! I think I even said similiar on the Captain Currency blog. But there is nothing stopping you or any of the other guys from posting trades, I will be certainly keeping an eye on the posts and “drop in” every now and again.

Kind Regards,

Captain Currency.

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Typical Friday afternoon type of trading - not much happening!
The 3 Duck’s Trading System got a few chances to trade in the last few hours. The EUR/USD got a buy, the USD/CAD got a sell, the USD/AUD got a buy. I bought USD/AUD at .8648 with a stop-loss at .8624ish, the target was open but I’d say I would have looked to take profit around .8695. But the move up is sluggish and the trade has been stopped out at breakeven - it was up +22 pips at one stage.

Have a good weekend,

PS: Its not possible for me to post trades as they happen, but I will try and post some of the trades I do using The 3 Duck’s Trading System. (the good ones and the bad ones!!)


Captain,

Thanks for sharing this system. I like it’s simplicity.

For a bit of fun, I demo-ed this on Thursday and Friday during the European session and using mostly EUR/USD, USD/JPY and GBP/USD pairs, I had about 10 winners in a row and only 2 losing trades in all. I will continue next week and see how it goes.

Thanks again.

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Hello Bocajunior,

WOW, you did 12 trades between Thursday & Friday? I did’nt think it gave that many signals. Are you following the “rules” - steps 1,2&3? Gbp/Usd the 4hr was below the sma on Thur and above the 1hr sma, so the Ducks where not lined up on Thursday for cable. Glad to hear you had success with The 3 Ducks Trading Systems, well done, but just make sure you understand and follow the rules.:slight_smile:
I know from past experiences that a trader might overlook some of the rules and this can cause problems futher down the road as he is bascially trading something different to me and others that follow the system. When I say “make the system your own” I mean enteries, stops, targets, adding to winning positions etc. Dont change the bones of the system., the Ducks dont like that!

Have a great weekend,

Captain Currency.

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Of course thats fair enough.

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Folks,

I dont think I was misreading the signals. I maybe confused with the pairs. I’ll post them here after the weekend.

Just to be clear, I was taking trades when the price on all 3 time frames was on the same side of the line.

If they were, on the 5 min chart, I set an entry order slightly above or below the most recent high/ low, with TP at 10 pips and SL about 7 pips. These trades were only open for minutes rather than hours. Maybe I was lucky Thursday and Friday.

Regards

Hello Traders,

Thanks Tess agreed, Bocajunior - not picking on you:), yes you could have been buying a few times when prices where going higher above the ma on the 5min chart - thats not really how I would trade the system, I like to get in on the first move - so to speak. Hope that helps a bit.

Kind Regards,

Captain Currency.

Hello Traders,

Nice trade on The 3 Duck’s Trading System today. A good place to buy was on the small pullback after it broke the high, stop-loss at the last low and the target at the highs. Straight forward enough!

Kind Regards,


1 Like

What pair captain?