Tips & Trading Strategies Tips & Trading Strategies for the Currency Marketfor the Currency Market
Boris Schlossberg Boris Schlossberg Senior StrategistSenior Strategist
DisclaimerDisclaimerLeveraged foreign exchange and options trading carries a significant level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. You should be aware of all the risks associated with foreign exchange and option trading, and seek advice from an independent financial advisor if you have any doubts.The contents provided in this seminar are subject to change at any time without notice.
There is no guarantee that the systems, trading techniques, FX PowerCourse, trading methods, indicators or other information presented at this seminar will result in profits or not result in losses. The content is provided for informational purposes only and is not intended as a trading recommendation.
B
Learn the Discipline of Learn the Discipline of Trading ProsTrading Pros
B
1) Define a Strategy
2) Money Management Rules
3) TEST, TEST, TEST
4) Understand Performance
5) Understand Drawdown
6) Improvement
Important ConsiderationsImportant Considerations
• Fundamental or Technical
• Range / Trend or Breakout
• Long Term, Medium Term or Short Term
1) Define a Strategy 1) Define a Strategy –– Part 1Part 1
• What Currencies Will You Trade?
• Majors vs. Crosses
• What Time Frame Will You Trade?
• 15 Min, Hourly or Daily Charts?
• Will You Hold Positions After 5pm
EST, Over the Weekend?
1) Define a Strategy 1) Define a Strategy –– Part 2Part 2
• Multiple Entry / Multiple Exits?
• How Low are You Willing to Buy?
• What Risk / Reward Parameters?
• When to Take Profits, Trail Stops,
Close the Position
2) Money Management Rules2) Money Management Rules
• Everything Needs to be Back Tested!
• Coding – Easy Language
• Review the Charts, Look for at Least 15-20
Examples > What Happened?
• Look at a More Granular Time Frame
• If it doesnIf it doesn’’t make money on a demo account, it t make money on a demo account, it
probably wonprobably won’’t make money trading a live accountt make money trading a live account
3) TEST, TEST, TEST3) TEST, TEST, TEST
• What is the Percentage of Profitable
Trades that you can Expect?
• What is the Profit Factor?
4) Understand Performance4) Understand Performance
• What is the average drawdown needed on
the trade?
• What is the Biggest Drawdown?
• Is that on the Close of the Trade or
Intraday?
5) Understand Drawdown5) Understand Drawdown
The Table of DoomThe Table of Doom
Amount of Equity Lost
Amount of Return Necessary to Restore to Original Equity Value
25% 33%
50% 100%
75% 400%
90% 1000%
Figure 1 - This table shows just how difficult it is to recover from a debilitating loss.
The Table of DoomThe Table of Doom
No Leverage
2:1 Leverage
5:1 Leverage
10:1 Leverage
Starting Value $10,000.00 $10,000.00 $10,000.00 $10,000.001% Loss $9,900.00 $9,800.00 $9,500.00 $9,000.001% Loss $9,801.00 $9,604.00 $9,025.00 $8,100.001% Loss $9,702.99 $9,411.92 $8,573.75 $7,290.001% Loss $9,605.96 $9,223.68 $8,145.06 $6,561.001% Loss $9,509.90 $9,039.21 $7,737.81 $5,904.90
5% To Recover 5% To Recover $10,000$10,000
70% To Recover70% To Recover$10,000$10,000
• ‘‘What worksWhat works’’ and and ‘‘What doesnWhat doesn’’tt’’
• When are the Losing Trades Usually
Made?
• Avoid News
• Limit Trading to Specific Time of Day
• Cutting Losses Earlier
6) Improvement6) Improvement
:Establish realistic goals
Top money managers risk no more than 2Top money managers risk no more than 2--5% of 5% of total account equitytotal account equity
Professional money managers (try) to beat the Professional money managers (try) to beat the S&P which averages around 8S&P which averages around 8--12% annually12% annually
How much do I hope to make every day, month, How much do I hope to make every day, month, and year?and year?
Realistic ResultsRealistic Results
Barclay Currency Traders IndexBarclay Currency Traders Index
StrategiesStrategies
Setups, Setups, Setups!Setups, Setups, Setups!
Seven Day Extension Fade – Statistical Significance
Trading Rules
• Look for 7 consecutive bars of weakness (where each bar’s close is below the prior)
• Buy at the open of the next bar• Place stop at the low of the seventh bar minus 10 pips• First target is amount risked, move stop on remaining half to
breakeven • Second target is three times the amount risked
**Reverse for Short
B
Seven Day Extension Fade Seven Day Extension Fade –– AUD/CADAUD/CAD
Seven Day Extension Fade Seven Day Extension Fade –– NZD/USDNZD/USD
B
Seven Day Extension Fade Seven Day Extension Fade –– GBP/USDGBP/USD
B
Seven Day Extension Fade Seven Day Extension Fade ––GBP/USD HourlyGBP/USD Hourly
B
Seven Day Extension Fade Seven Day Extension Fade –– Failed TradeFailed Trade
B
- 17 pips
Stop at 1.2974
Strategy # 3
RSI Roller coaster
Rule 1
RSI Reading Must Be Above 70
Wait For Candle to Close With Reading < 70
Rule 2
Go Short At Market on the Open of The Next Candle
Place Stop +10 Pips Above Swing High
Place Stop 10 pips Above Swing High
Rule 3
Take Profit on ½ Position When Target Reaches ½ Risk
Move Stop To Breakeven
Take Profits on ½ Position and Move Stop To Breakeven
Rule 4
Exit 2nd Half After RSI
Drops Below 30 On A Closing Basis
1131 Pips Profit on 2nd Half
RSI 29.73
Does RSI RollerCoaster Work
On Short Term Charts?
Yes. But Differently
Rule 1
RSI Reading Must Be Above 70
Wait For Candle to Close With Reading < 70
Rule 2
Go Short At Market on the Open of The Next Candle
Place Stop +5 Pips Above Swing High
Rule 3
Move Stop To Breakeven When Target Reaches ½ Risk
Rule 4
Exit After RSI
Drops Below 30 On A Closing Basis
Why 1 Lot on Short Term Time
Frames?
Many More Misses
Strategy # 5
Inside Days
What are Inside Days?
Rule 1
Look for at least 2 Inside Days
Look for TWO Inside Days
Rule 2:
Place 2 Orders:
1) Buy at the High of the Most Recent Inside Day
2) Sell at the Low of the Most Recent Inside Day
Go Long Above the High
Rule 3:
Place Stop and Reverse Order at Least 10 Pips Below Low of
Nearest Inside Day
(Long Trade)
Go Long Above the High
Place Stop 10 Pips Below this Low
Rule 4:
Take Profit at 1x Risk,
Trail Stop on Second Lot by
2 Bar High or Low
Strategy 2
on Hourly Charts?
No.
- Stops are Too Tight
- Subject to Sharp Volatility
Our Motto:Our Motto:Combining Technical Combining Technical With FundamentalsWith Fundamentals
Trading in Action = Anatomy of a TradeTrading in Action = Anatomy of a TradeShort AUD/USD
Fundamental Reasons
• Looking for a strong October non-farm payrolls – Recent Jobless claims, ADP and Hudson Employment Reports were very strong
Technical Reasons
• Statistical Significance – Over Past 10 Yrs, AUD/USD saw a 7 day move 14 times, with only 3 of those 14 lasting for longer than 7 days
AUD/USD ChartAUD/USD Chart
BK
Went short AUD/USD at 0.7735, 0.7765 stop, exited ½ at 0.7712, ½ at 0.7687 = 58 pips in 24 hours.
Intelligent Tools From DailyFX.comIntelligent Tools From DailyFX.com
The Pairs To Range Trade This WeekThe Pairs To Range Trade This Week
1. Uses Technical and Fundamental Filters
2. Technical's Include: S/R, Fib Analysis etc.
3. Fundamentals Include: Careful Analysis of Event Risk
The Pairs To Range Trade This WeekThe Pairs To Range Trade This Week
The Pairs To Range Trade This WeekThe Pairs To Range Trade This Week
Picking Tops and BottomsPicking Tops and Bottoms
1. Picking Turn Trades Can be Dangerous and Frustrating
2. Simple Overbought and Oversold Measures are not Enough
3. Yet Taken Properly these Trades Can be Very Lucrative
Picking Tops and BottomsPicking Tops and Bottoms
Picking Tops and BottomsPicking Tops and Bottoms
Hedging RadarHedging Radar
• What is Hedging? - Buying and Selling the Same Currency Pair at the Same Time
• Why Hedge?
• Continuous Position in the Market
• 2 Positions but 1 Margin
Hedging RadarHedging Radar
Hedging RadarHedging Radar
Dynamic Carry Trade IndexDynamic Carry Trade Index
• Why Trade the Carry?
• Most Successful Strategy Over Last 3 Years
• Generates Positive Interest Every Day
Dynamic Carry Trade IndexDynamic Carry Trade Index
Trading the NewsTrading the News
1. Shows the Past Three Event and its Price Reaction
2. Uses Highly Disciplined Approach for Both Entry and Exit
3. Provides Possible Scenarios for both Upward and Downward Surprises
Trading the NewsTrading the News
Trading the NewsTrading the News
Trading the NewsTrading the News
Durable Goods
-7.8%a vs. -3.0%e
Ex trans
-3.1% vs -0.2%e
60 pips in 12 hours
Why Wait? Why Wait?
Get these Ideas on a Get these Ideas on a DAILY Basis!DAILY Basis!
Thank You,Thank You,Good Luck And Good TradingGood Luck And Good Trading