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1.
2. Outline
• Strategy from my Trade Launch Systems
• Using Automated Trading to eliminate emotions
• Putting it all Together
3. Ways to Trade
• Following momentum (go with)
• Trading at extremes (regressive)
• Entering pullbacks in trends (retracement)
• We need to match signals for these three concepts
Trading Strategy
4. Introduction to Strategies
• Be prepared to zoom out to gain perspective
• Trade with the most obvious direction
• Don’t trade every signal nor strategy
• Specialise (master 1 strategy first)
Trading Strategy
5. Introduction to Strategies
• No hard and fast rules
• Very few perfect patterns
• Reduce your trade frequency (quality over quantity)
Trading Strategy
6. Introduction to Strategies
• Higher time frames produce more accurate trading
signals
• Avoid intraday charts
• there is too much noise
• the smaller the time frame, the closer you get to gambling.
• There is no logic or flow in 1 min charts
• 4 hourly and daily are most effective
Trading Strategy
7. Introduction to Strategies
• let them run their course / leave trades alone
• illusion of control when you stare at charts
• It can become an addiction to stare at charts
• you start to second guess yourself and change your
rules accordingly
• good trades take time to payoff
Trading Strategy
8. Introduction to Strategies
• Gaining a single edge
• Believing in your edge
• Discipline to stick with what is important
• Don’t complicate things
Trading Strategy
9. Trading Philosophy / Beliefs
• Trading is a process
• Aim for consistency
• Less is more
• Best trades will take time
• Don’t use things in isolation
• Keep it Simple
• Data Driven Decisions
Trading Strategy
10. • Ignition Strategy (8 / 21)
• Trend following strategy
• Trend alignment is critical
• Simple rules to implement
• Use some discretion (e.g. S / R)
• Periodicity
• Dynamic support and resistance
Trade Launch Systems
11. • Strategy 8 / 21 Entry Rules
• Signal
• Use 8-period EMA and 21-period EMA
• Crossover signals short term trend
• Don’t trade every single signal
• Filters
• Use 125-period EMA to identify bias
• Price in relationship to EMA
• Direction of EMA
Trade Launch Systems
12. • Strategy 8 / 21 Entry Rules
• Long
• 8-period EMA crosses above 21-period EMA
• Price is trading above 125-period EMA
• 125-period EMA is rising
• Short
• 8-period EMA crosses below 21-period EMA
• Price is trading below 125-period EMA
• 125-period EMA is falling
Trade Launch Systems
13. • Strategy 8 / 21 Entry Rules
• Long
• 8-period EMA crosses above 21-period EMA
• Price is trading above 125-period EMA
• 125-period EMA is rising
• Short
• 8-period EMA crosses below 21-period EMA
• Price is trading below 125-period EMA
• 125-period EMA is falling
Trade Launch Systems
17. • Strategy 8 / 21 Exit Rules
• Stop Losses
• Consider key levels
• Consider ATR
• Use technical levels
• Profit Targets
• Use multiple of stop loss (Reward to Risk)
• Consider key levels
• Trailing Stops
• Consider use of initial stop loss
Trade Launch Systems
18. • 8 / 21 Entry Rules
• Long
• 8-period EMA crosses
above 21-period EMA
• Price is trading above 125-
period EMA
• 125-period EMA is rising
• Short
• 8-period EMA crosses below
21-period EMA
• Price is trading below 125-
period EMA
• 125-period EMA is falling
Trade Launch Systems
• 8 / 21 Exit Rules
• Stop Losses
• Consider key levels
• Consider ATR
• Use technical levels
• Profit Targets
• Use multiple of stop loss
(Reward to Risk)
• Consider key levels
• Trailing Stops
• Consider use of initial stop
loss
22. • Traders across the globe all
face the same 3 challenges:
1. Abundance of data creates
information overload
2. Emotions drive poor
trading decisions
3. 24-hour nature of FX
markets make efficient
human trading impossible
Automated Trading
Institutional
Retail
Adoption of automated FX trading
(% of total volume)80
70
60
50
30
20
10
2004 2007 2010 2013
23. • One solution is automated
trading systems.
• While about 75% of the
institutional FX trading
volume is automated,
automation only accounts
for about 25% of the retail
volume.
Automated Trading
Institutional
Retail
Adoption of automated FX trading
(% of total volume)80
70
60
50
30
20
10
2004 2007 2010 2013
24. • Trade unemotionally
based on data and rules
• Objectively monitor
performance
• Assess each system’s
metrics and employ as
you see fit
Automated Trading
Design
Test
Trade
Analyse
25. • MT4/5 is most widely
used
• Many options available:
• Custom Exits or PIPs
• Maximum trades / lots
• Money Management
options
• Trading sessions
• Allows strategy / back
testing
Automated Trading
Design
Test
Trade
Analyse
26. Back testing
• The application of a set of
rules to historical data
• Determining likely historical
profitability and overall
performance
• Time taken vs accuracy
• Does have limitations
Automated Trading
Design
Test
Trade
Analyse
27. Back testing
• Detailed and summary
statistics
• Number of trades
• # of profit and loss
• Average profit and loss
• Average time in trade
• Detailed trade history
• Balance and Drawdown
chart
Automated Trading
Design
Test
Trade
Analyse
28. Forward testing on
demo account
• Consider forward testing
• Detailed performance
analytics / trading statistics
• Continue to review / modify
• Similar results to back
testing
Automated Trading
Design
Test
Trade
Analyse
29.
30. • Bollinger Bands (BB) Strategy
• BB1
• 10 minute chart, applied to close using 20 periods and
1 standard deviation
• BB4
• 10 minute chart, applied to close using 20 periods and
4 standard deviations
• EURUSD
• This strategy has been tested on and designed for the
EURUSD
Automated Trading
31. • Bollinger Bands Strategy Entry Rules
• Long
• price crosses from above to below the lower band of
BB4, as measured on the previous bar
• Short
• price crosses from below to above the upper band of
BB4, as measured on the previous bar
Automated Trading
32. • Bollinger Bands Strategy Exit Rules
• Long
• price crosses from below to above the upper band of
BB1, as measured on the previous bar
• Short
• price crosses from above to below the lower band of
BB1, as measured on the previous bar
• Long and Short
• Stop loss set at 25 pips
Automated Trading
35. • RSI Strategy Entry Rules
• Long
• RSI is below 30
• Short
• RSI is above 70
• This strategy is always in a position
• 5 minutes chart
• This strategy has been tested on and designed
for the USDCAD
Automated Trading
37. • Stochastic Oscillator Entry Rules
• Long
• Stochastic is below 20
• Short
• Stochastic is above 80
• This strategy is always in a position
• 5 minutes chart
• This strategy has been tested on and designed
for the USDCAD
Automated Trading
39. Reward / Risk
• Strike rate is less important in building a healthy
equity curve
• Risk / reward and its relationship to strike rate is
more important
• Big losses can have a big impact on our equity
curve and need to be avoided at all costs
• Controlling our risk and consistency is the key
Automated Trading
