02-09-2007, 06:58 AM
Yesterday in the RT discussion - Marc addressed the issue of potential ways to improve on the relatively low RRRs with Forex trades. One method mentioned was to improve RRR by waiting for the trade to trigger and then to watch for backfilling during the late entry boxes and initial period of the kickout. An example from the GBPUSD DD room is presented below that shows how this might work. We had thought about this for several weeks and yesterdays clarifications allowed us to be more concrete in our approach to the trades we anticipated this early morning)
(Sorry we did not save the picture of the DTP trade Profile Setup in the rooms when this happened. The DTP software is rather poorly equipped to print/save/generate (.png) pictures. Thus effective show and tell involves a lot of extra work. Case history presentations are indeed an investment of the authors as we have learned in doing this.)
DTP TRADE SPECS:
Quality setup
DD 15 5 0 with good near room and upper rooms weakness (short).
RRR: This was the crux of the problem to address in this example.
The DTP RRR was 1.42. Our objective was an RRR of 3 (or no trade participation).
This meant it had to backfill to an entry @ 1.9596 vs DTP trigger 1.9584.
We entered the trade Short @ 1.9597 for a RRR of 3.2.
This happened about an hour (we think) after the DTP trade profile was showing "short at"
50% Target: (Not used in this case.)
We prefer on short and in particular early morning trades (in the Day rooms) NOT to set a target initially in the programmed IF DONE trade conditions. Instead - with a substantial investment as was this case, we followed the trade using the hourly group rotation for the pair open in one window and as well charts consisting of:
Parallel 5-min and 60-min charts showing:
1) MACD,
2) Stochastic oscillator and
3) RSI indicators
We ran the trade according to the three responses and using parallel 5-min and 1-hour windows, within the context of the DTP Stop and Final Target parameters and the evolution of the pair responses in the DTP Group Rotation window on the hourly scale.
Meeting the Target - and its extension:
We set the initial target for the trade according to the DTP parameters.
We reviewed the chart - saw that the downtrend from yesterdays GBP selloff could likely result in a trade extending well below the Final trade objective of 1.9540. The bottom of the daily trendline channel from March 2006 is currently at about 1.9300 - and could be at about 1.9400 in the next 21 days. So with a successful trade entry - we could imagine holding 50% of the trade for the next few days or weeks and using a tightening stop along the way.
TRADE RESULTS:
SELL 550,000 @ 1.9497 (Fb09, 07:05h CET)
STOP from start: 1.9615
DTP target met @ 1.9540 (Fb09, 08:25h CET)
50% taken out @ 1.9489 (Fb09, 09:40h CET ,5min Stoc 2nd>20 Xu)
(RRR of 6 on the 50% removed)
PLANNED ACTIONS:
Moved Stop down 1.9445 (Just above resistance at last low)
This ensures average RRR of ~ 4.5 on the entire trade if stopped out.
No major risk considered with this pair related to the G7 meeting this weekend. Therefore will risk holding the position over the weekend.
Watch evolution of the Pair conditions in DTP Group rotation.
CLOSING THE POSITION:
Buy back short position targeting the base of the daily channel at 1.9300 or higher over the next 5 to 10 days. At a target of 1.9350 for the remaining 50% of the position, the average RRR for the entire trade is (6+13.7)/2=~10.
CAVEATS:
Not all trades have setups that will result in backfills.
It seems pertinent to NOT use this approach until the trade is near the end of the 2nd setup box or in the 1st box of the Kickout phase. If done before that, then the risk is the trade setup will not evolve correctly.
Trade Management re Finances:
Amount of GBPUSD Traded: ............ USD 550,000 SOLD
Investment amount put at risk: .....~ USD 1,822 (Entry minus stop)
Initial Margin requirement: .............~ USD 11,000
Margin Interest per day: ..............~ USD ......25
50% position booked now:
50% Position at 1.2489 .............~ USD 5,820 (Booked now)
Remaining 50% Position:
50% Position if Stopped out .......~ USD 2,800 Stop 1.9445
50% Position at 10 day target ....~ USD 13,310 Trgt 1.9350
50% position if closed right now ..~ USD 7,380 (9 Feb@11:00 1.9460)
TOTAL RETURN:
Trade costs and margin interest ~ USD -150 (1dy@$25, 9d@$13)
--------------
ROI Range estimates:
Right now Profit ________ ~ USD 13,150
Minimum Profit _________ ~ USD _8,470
Maximum Profit _________~ USD 18,980
(NOTE: As This is written - the trade position has improved and the Pair are now at 1.9460. Is it worth waiting for the daily channel for an additional trade income of ~ $6K??
We prefer to watch the technical parameters and the DTP group rotation hourly window to see how the evolution occurs over the next few days.)
Now - Who said FOREX trading on a Friday was supposed to be boring???
FEEDBACK APPRECIATED:
Any comments would be appreciated as we are new to FOREX trading and certainly are trying to maximize our RRR but not throw out good setups which are good opportunities.
Also we know this was an exceptional move this AM - following yesterdays exceptional sell off of the GBP. Perhaps the slightly lower than predicted negative UK/GBP trade balance accelerated this today as a further leg down occurred just after the announcement and we were fortunate to be on that side of the move.
PKI
(Sorry we did not save the picture of the DTP trade Profile Setup in the rooms when this happened. The DTP software is rather poorly equipped to print/save/generate (.png) pictures. Thus effective show and tell involves a lot of extra work. Case history presentations are indeed an investment of the authors as we have learned in doing this.)
DTP TRADE SPECS:
Quality setup
DD 15 5 0 with good near room and upper rooms weakness (short).
RRR: This was the crux of the problem to address in this example.
The DTP RRR was 1.42. Our objective was an RRR of 3 (or no trade participation).
This meant it had to backfill to an entry @ 1.9596 vs DTP trigger 1.9584.
We entered the trade Short @ 1.9597 for a RRR of 3.2.
This happened about an hour (we think) after the DTP trade profile was showing "short at"
50% Target: (Not used in this case.)
We prefer on short and in particular early morning trades (in the Day rooms) NOT to set a target initially in the programmed IF DONE trade conditions. Instead - with a substantial investment as was this case, we followed the trade using the hourly group rotation for the pair open in one window and as well charts consisting of:
Parallel 5-min and 60-min charts showing:
1) MACD,
2) Stochastic oscillator and
3) RSI indicators
We ran the trade according to the three responses and using parallel 5-min and 1-hour windows, within the context of the DTP Stop and Final Target parameters and the evolution of the pair responses in the DTP Group Rotation window on the hourly scale.
Meeting the Target - and its extension:
We set the initial target for the trade according to the DTP parameters.
We reviewed the chart - saw that the downtrend from yesterdays GBP selloff could likely result in a trade extending well below the Final trade objective of 1.9540. The bottom of the daily trendline channel from March 2006 is currently at about 1.9300 - and could be at about 1.9400 in the next 21 days. So with a successful trade entry - we could imagine holding 50% of the trade for the next few days or weeks and using a tightening stop along the way.
TRADE RESULTS:
SELL 550,000 @ 1.9497 (Fb09, 07:05h CET)
STOP from start: 1.9615
DTP target met @ 1.9540 (Fb09, 08:25h CET)
50% taken out @ 1.9489 (Fb09, 09:40h CET ,5min Stoc 2nd>20 Xu)
(RRR of 6 on the 50% removed)
PLANNED ACTIONS:
Moved Stop down 1.9445 (Just above resistance at last low)
This ensures average RRR of ~ 4.5 on the entire trade if stopped out.
No major risk considered with this pair related to the G7 meeting this weekend. Therefore will risk holding the position over the weekend.
Watch evolution of the Pair conditions in DTP Group rotation.
CLOSING THE POSITION:
Buy back short position targeting the base of the daily channel at 1.9300 or higher over the next 5 to 10 days. At a target of 1.9350 for the remaining 50% of the position, the average RRR for the entire trade is (6+13.7)/2=~10.
CAVEATS:
Not all trades have setups that will result in backfills.
It seems pertinent to NOT use this approach until the trade is near the end of the 2nd setup box or in the 1st box of the Kickout phase. If done before that, then the risk is the trade setup will not evolve correctly.
Trade Management re Finances:
Amount of GBPUSD Traded: ............ USD 550,000 SOLD
Investment amount put at risk: .....~ USD 1,822 (Entry minus stop)
Initial Margin requirement: .............~ USD 11,000
Margin Interest per day: ..............~ USD ......25
50% position booked now:
50% Position at 1.2489 .............~ USD 5,820 (Booked now)
Remaining 50% Position:
50% Position if Stopped out .......~ USD 2,800 Stop 1.9445
50% Position at 10 day target ....~ USD 13,310 Trgt 1.9350
50% position if closed right now ..~ USD 7,380 (9 Feb@11:00 1.9460)
TOTAL RETURN:
Trade costs and margin interest ~ USD -150 (1dy@$25, 9d@$13)
--------------
ROI Range estimates:
Right now Profit ________ ~ USD 13,150
Minimum Profit _________ ~ USD _8,470
Maximum Profit _________~ USD 18,980
(NOTE: As This is written - the trade position has improved and the Pair are now at 1.9460. Is it worth waiting for the daily channel for an additional trade income of ~ $6K??
We prefer to watch the technical parameters and the DTP group rotation hourly window to see how the evolution occurs over the next few days.)
Now - Who said FOREX trading on a Friday was supposed to be boring???
FEEDBACK APPRECIATED:
Any comments would be appreciated as we are new to FOREX trading and certainly are trying to maximize our RRR but not throw out good setups which are good opportunities.
Also we know this was an exceptional move this AM - following yesterdays exceptional sell off of the GBP. Perhaps the slightly lower than predicted negative UK/GBP trade balance accelerated this today as a further leg down occurred just after the announcement and we were fortunate to be on that side of the move.
PKI