- Use discretion. Sometimes less is more, trading with a higher rate of accuracy (establishing that an accurate trade is a profitable one) means you can spend less time placing orders while generating more growth.
- Tend to rely on the
principle of "buy low, sell high" in relation to a 3 month time-frame.
For example, if the Japanese Yen is trending relatively high on the 3
month time-frame and the Swiss Franc is trending relatively low on the 3
month time-frame then building a position long on the CHFJPY would
likely become profitable at some point in the future.
Expanding on the previous example of a long position on the CHFJPY,
don't put all your eggs in one basket. This enables a trader to take
advantage of somewhat random volatility constantly illustrated by the
currency market thus utilizing liquidity to gain liquidity. For instance, if choosing to open a long position on
the CHFJPY, also consider opening a position short on the USDCHF as well
as one long on the USDJPY.
how much tolerance you have for losses. Considering this strategy is
dependent on a traders general aptitude and competence more competent
traders should feel more comfortable taking more risk while less
competent traders should feel more comfortable taking less risk. For the
included CHFJPY hedge example I'll use an appropriate loss tolerance of
- Allocate maximum limits for leverage for each pair in
order to limit risk. This can be done with simple calculations. Choose a
pair and locate the nearest distant price opposite of the direction of
the proposed position which you are confident the price will definitely
not reach within a 1 year time-frame. Calculate the difference between
that price and the current spot price (or your proposed strike price)
and relate it to your risk tolerance. For example if I calculate a
maximum downside of 7% on the USDJPY and I'm willing to risk a 5% loss
on that position then I've established the limit of the size of that
position as 70% of the equity in the account, determined by the simple
division of .05/.07. Do the same calculation with the CHFJPY and USDCHF
considering a maximum downside of 5% and a 10% risk each and the result
is a position size equal to double the accounts equity per pair. Add the risk
for all 3 pairs together and the result is 25%, exactly the
aforementioned "appropriate loss tolerance" meaning no additional
positions can be taken until a position is liquidated.
Technical Tactics And Strategy
- Analyze the chart visualizing the multitude of plausible future outcomes. Scan for recent bullish or bearish signals on the 1-day and 1-hour charts. Consider using an indicator such as the Average Directional Movement Index (I like the ADX(13)) but maintain perception of the price chart as a priority.
- Determine a functional lot size by dividing the
equity allocation for a pair into a number of segments. For example, on
the CHFJPY pair a position size of 100% equity was determined. If the
account has $10,000 in equity we can determine a lot size of 1/4th of
that, the equivalent of $2,000 or 0.02 lots.
significant supports and resistances on the 30-minute and 4-hour charts
and set buy-limits accordingly. For example, if the most local support
for the CHFJPY is .005% below the ask price then set a buy-limit .004%
on .02 lots.
- Average down. Since this strategy already
implemented risk management controls there's no need to worry about
temporary losses, all a trader needs to worry about is his/her own
incompetence. Continuing the CHFJPY example one buy-limit was set .004%
below the ask, set 2 more buy-limits sized .02 lots: .006% down and .01%
down from the ask price. Then with the remaining allotted .02 lot a
trader can choose to buy at the ask or wait for a better price - or a
- Set a take-profit limit. Depending on how
much time you spend implementing the strategy or how confident you are in your position this can
vary from local supports/resistances to YTD highs/lows or even
Sustaining Equity Growth
- If a trader manages risk properly and utilizes discretion equity growth can remain consistent even after the account equity has doubled multiple times over.
- Size up lots according to loss tolerance in
percentage terms and keep that loss tolerance consistent even as the
account grows. Instead of reducing loss tolerance as the account grows,
withdraw it instead if you begin to feel uncomfortable with the sheer
amount of individual dollars and cents at risk.
traders have proven that any person who learns patience and competence
in analyzing price charts and executing orders can return a higher yield
than the Dow Jones Industrial Average (DJIA) or NASDAQ with less risk
consistently on a yearly basis. It only takes an hour a week, but
optimally it takes around 2 hours a day to maximize returns using this
basic strategy. Realistically a trader can achieve growth exceeding 10%
per month with a maximum drawdown not exceeding 5%.
It's so easy that I've made a FREE signal that returned 7.2% in 2 weeks with a maximum drawdown under 3% - here's a link to it https://www.mql5.com/en/signals/217797