The strategy contains both systematic and discretionary components. The systematic elements cannot be changed under any circumstances, but the discretionary elements can be modified depending on a trader’s specific money management rules, trading preferences, and market conditions.
The systematic rules are:
1. The position must be opened in the direction of the main move early in the New York session.
2. The initial position should be taken only if the current intraday trading range is less than 70 percent of the average daily trading range for the currency pair over the past two months.
3. Place a protective stop on the opposite side of the current intraday trading range — i.e., above the current intraday high (for short trades) or below the current intraday low (for long trades).
4. The risk on a single trade must not exceed 40 percent of the two-month average daily range for a particular currency pair.
5. Profit target: Liquidate the position when the currency pair matches its two-month average daily trading range.
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