Three Ducks Strategy - Realistic (SL, TP & Pips)

Clint · May 22, 2019, 6:09am

Sorry, I beg to differ. The 3 Ducks Trading System is not “a day-trading strategy”.

In a post back in January 2016 on Andy Perry’s thread, I replied to a question about using longer time-frames than the 4-hr, 1-hr, and 5-min time-frames on which Andy’s system is based.

The point of my post was that The 3 Ducks Trading System will put you into trades which might work out as day trades, or short-term trades, or swing trades, or position trades — depending on the market, and your ability to stay in sync with it

Here’s that post from 3 years ago --.

The 3 Duck's Trading System

The 3 Duck's Trading System

I was wondering if this method could work on longer time frames. Lets say 1D, 4H and 1H for entry point (when I don`t have time to look at charts every 5 minutes). Did anyone try that?

Thanks.

I would suggest (1) using The 3 Ducks Trading System exactly as taught, in order to gain a high-probability entry into the market — and then (2) letting market dynamics determine whether your position ends as a day-trade, or develops into a short-term trade (lasting a couple of days), a swing trade (lasting a couple of weeks), or a position trade (lasting months, or longer).

The methodology you are contemplating essentially relies on the 1-hour chart to trigger an entry, as opposed to the 5-minute chart as taught in The 3 Ducks. The 1-hour time-frame gathers twelve 5-minute candles into each 1-hour candle, obscuring the price action which occurs within each 60-minute period. So, when you base your entry on the price-action you see on the 1-hour chart, you are basically blind to the price-action on lower time-frames.

Your entry on a 1-hour chart may catch a valid move in your desired direction on your 1-hour trigger chart, while at the same time catching a significant counter-move on a smaller time-frame. As a result, you have to endure the counter-move on the smaller time-frame, taking the temporary loss (presumably on paper) produced by that counter-move.

On the other hand, entering on a smaller time-frame can help you avoid some of these temporary losses — without, in any way, preventing your trade from running as long and as far as market dynamics will allow.

Ideally, when going long, you would like to catch an up-wave on your smallest time-frame, which then rolls into an up-wave on your intermediate time-frame, and finally rolls into up-waves on longer time-frames. This sort of entry, when you get it right, has the wonderful characteristic of moving immediately into profit, never threatening your initial stop-loss.

Years ago, a very smart trader taught me a valuable lesson on entries.

She said, “Every trade begins as a scalp.”

It took a while for me to understand the depth of that short statement. My take on it is this: No matter which time-frame you think you are trading (meaning entering), price-action on the scalping time-frames (tick, 1-minute, maybe 5-minute) will determine what happens to your trade in the first seconds, or minutes, after entry. Then, price-action on the longer time-frames will determine what happens to your trade over the next few hours, over the remainder of the day, over the rest of the week, and beyond.

Clearly, if you have the good fortune to enter a day-trade that has “legs” — one that develops into a successful longer-term trade — then, you will want to look at longer-term charts. That’s when you should widen your view to the Daily or Weekly charts. But, this is should happen in the trade management phase in your trade — not at the entry.

Finally, contrary to the statement in your post, The 3 Ducks as taught (using H4-H1-m5 charts) does not require you to “look at charts every 5 minutes”. There is no need for that.

Andy Perry’s eBook, titled The 3 Ducks Trading System outlines his methodology for entering trades in the direction of the trend, without specifying a trading style (day trader, swing trader, etc.).

A trader’s style is his own choice. Furthermore, stop-loss placement, profit targets, and every other aspect of trade design and management are similarly each trader’s personal choices. The 3 Ducks System does not specify these things.

Here are Andy Perry’s notes from page 12 of his eBook. (I have added the bold type for emphasis.)

"Every trader is different – some traders like to try and take small frequent bites out of a trend without risking too many of their pips on a stop-loss. Other traders prefer to take less frequent bigger chunks out of a trend while having a bigger cushion with their stop-loss size.

"Some traders will use fixed stop-losses (a certain amount of pips) while others will use technical levels such as support and resistance or pivot points to put their stoploss above or below.

"Some traders will have fixed profit target, some traders will use technical levels for their profit targets and some traders will even leave their profit target open for a certain period of time.

"Day traders could use technical levels from a 1 hour or 5 minute chart for their stoplosses and profit targets. A swing or position trader may prefer to use technical levels from the 4 hour or even daily chart.

"Some traders will focus on having a positive risk versus reward ratio. Other traders will be less concerned about short term results and risk versus reward ratios and more focused on the longer term performance.

"Some traders will manually exit a losing position like in the “Cutting a Losing Trade” Example on page 11.

"Some traders will manually exit a winning position like in the “Running a Winning Trade” Example on page 10.

“Make your own choices in this department and you will see what works best for you.”