Super Support & Resistance

[bluepharley]

In summary, my strategy is to identify Support & resistance levels - made much easier by Scorps indicator. I trade the break of either of those, so to do that I place limit orders each side of the range at +/- 5 pips. I know Scorp recommends waiting until a candle closes outside this range and that's fine as well, but I trade with the 5 pip buffer and it seems to work around 70% of the time.

I set a stop at the other side of the range (eg if long triggers, my stop is at the support), then let it ride a while. Once it reaches about 80% of the way (or you could choose a number of pips - 20,30,40 etc) I sell 80% of the units held for a profit. Then I change the remaining 20% to a trailing stop loss and let it run. Trailing stop should be set according to how volatile your pair is. (Tip - look how much a pair moves around in the day to get an average).

I just did that tonight (4th Feb 2010) going short on the GBP/JPY and got 30 pips in about 25 mins and then got out of it. At the time I got out it hadn't hit the original target, but I had to go do something else, so I took the profit at 30 pips all up and I'm happy with that. Besides which, at the time of writing, a candle is forming a bit like a bullish harami indicating it could go back up.

A note about money mgt - a crucial area. If my original stop is placed at the other side of the range and it goes against me, I will only lose 3% of the pot. I set myself up a spreadhseet to calculate how many units to buy. You can do it too - easy. You need the figures for the range, how much in your pot, how many pips per $ your pair is trading at.

Let's take an example - Say range = 40 pips and you have $5,000 in your pot. If you're trading EUR/USD, currently it's quoted as 8784 units make $1 AUD. (I trade with and Aussie account). 3% of the account is $150 and $150 divided by the 40 pips is $3.75. That means I can risk $3.75 per pip. So if it goes against me and hits the stop, I lose 40 pips x $3.75 = $150. If 8784 units = $1 per pip, I need to multiply this by 3.75 to get how many units I can buy, which is 32,940. I hope that's all clear! You may also notice I'm only keeping the leverage down low. In this case with a $5,000 pot, I'm only buying 32,940 units. With leverage at 100:1 you'd be looking at 500,000 units, but I'm way more careful than that. If you're learning, choose 1% risk or so.

With this strategy, it's also really useful to learn to recognise some candlesticks. Google "channel break out forex strategies" to get a good read around it. After all, the S & R are forming a channel - the longer the channel, the bigger the breakout.

Good luck to all and here's hoping we all make heaps of pips this year!
Cheers
Phil

[bluepharley]

Another quick update - whiel I was writing the above post, price went down to within 5 pips of target! I like it!

[bluepharley]

OK, another update after I just got back to the PC. Price went down and hit the target, went 3 pips past it came back. Check the 10:30 GMT candle on GBP/JPY on 4th Feb 10. Channel was solidly forming from around 3am GMT onwards.

The $ amount and pips you can make each day with this strategy vary because the range varies, but I always trade the open of the UK markets with it and gain from around 1% to 3% per day. Sometimes I get up to 5% but I'm keen on being in it for the long term, and so I don't go for broke and big $ - otherwise I certainly will end up broke!
Hope it helps someone.
Cheers
Phil

[mcmillan]

Scorpion,

This is my first post. Mahalo (thanks in Hawaiian) for the SR7 Fast indicator! I've already used it successfully in Cable, Euro/Dollar, and Dollar/Yen. Living in Honolulu, I usually trade the Asian Session and the Frankfurt/London Opening. Would love to trade the New York Opening, but that's 3AM here Hey, got to sleep sometime... I fiddled around with the settings and I use 110,5,1 on the M15 charts , looking for breakouts. Will consider the M30 charts which you prefer.

Cheers,
Jack

[scorpion]

Thanks to bluepharley for providing trade updates. Keep 'em coming...

[scorpion]

mcmillan, I'm glad to hear that. Keep us posted on your results. Until then, good night to you.

[Forexchequer]

Scorpion, thanks for the indi and explanation. Bluepharley thanks for your input much appreciated. I'll try out on demo on from Monday

[Mohd Rosidi]

Very good indicator.Very nice I'll try it....

[amdegia]

Originally Posted by bluepharley

Oh, I forgot to say - don't forget that a resistance line once crossed can become your next support line.

Have you got this strategy in EA? please send if you do

[70news2]

Thanks for explanation.Keep it up.