MYFXPT Trading Strategy

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MYFXPT Trading Strategy

Postby myfxpt » Wed Jan 07, 2015 7:26 pm

THE BASICS

Daily Time-Frame: We trade the daily time-frame because signal accuracy is at its best in this zone, producing bigger profits from profitable trades, and providing more time to react to market movements without the need to be tied to a computer screen all day.

Start Capital: Whilst the MYFXPT Trading Strategy is based on $10,000 USD start capital, this is easily scaled-down to as little as $100 USD with no loss of performance. This is possible because lot size is directly tied to the amount of funds in the account. See below.

Lot Size: Our lot size is calculated at 1 x Standard Lot per $10,000 USD account balance. Lot size can be scaled up and down from here according to the account balance at time of opening a trade, so that with a $50,000 balance we can trade 5 x Standard Lots, with $1,000 we can trade 0.10 Lots, and with $100 we can trade 0.01 Lots.

Leverage: This strategy uses 1:100 leverage, which approximately equates to $1,000 USD margin on a Standard Lot ($100,000 USD contract), $100 USD margin on a Mini Lot ($10,000 USD contract), and $10 USD on a Micro Lot ($1,000 USD contract).

Instruments Traded: In this overview we have highlighted 8 key instruments that demonstrate the possibilities available via the MYFXPT Trading Strategy (see Symbol Profiles), but this strategy can be applied to any tradeable instrument including Forex, Precious Metals, Industrial Metals, Agricultural Commodities, Stock Indices, and Shares. Opportunities are abundantly available.

STRATEGY COMPONENTS

This strategy combines five components:

ONE: Monthly Overlay Bars

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The trend is your friend, or so the saying goes, so it is important to trade with the trend.

Monthly Overlay Bars provide simple visual confirmation of the underlying trend direction, and a screening mechanism for filtering-out trade signals that go against the prevailing trend. This is a simple indicator, yet very effective.

If a buy signal is received within a red monthly bar, it is ignored. Only those buy signals received during a green bar are considered valid. Conversely, if a sell signal is received within a green monthly bar, it is ignored. Only those sell signals received within a red bar are considered valid.

TWO: MTF Support & Resistance

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Support and resistance is a concept in technical analysis where the movement of the price of a security will tend to stop and reverse at certain predetermined price levels. These levels are denoted by multiple touches of price without a breakthrough of the level.

If price does breakthrough support or resistance it is called a breakout, and generally indicates that price action will continue in the direction of the breakout. The MTF Support Resistance Indicator pinpoints entry and exit points, and plays a key role in trade position and money management.

We buy breakouts through daily resistance levels, and sell breakouts through daily support levels. We use daily support levels as our stop-loss on buy positions, and use daily resistance levels as our stop-loss on sell positions. Entry and exit is clearly defined.

For the duration of a buy position we use breakouts through newly formed daily resistance levels to add to the buy position, and we use newly formed daily support levels to modify the stop-loss. Likewise, for the duration of a sell position we use breakouts through newly formed daily support levels to add to the sell position, and we use newly formed daily resistance levels to modify the stop-loss. Trade position and money management is clearly defined. This process is repeated until our stop-loss is triggered and positions are closed-out.


Monthly support and resistance levels are added as a guide only, and warn of potential key reversal and/or continuation points. A breakout through monthly support and resistance levels can be a significant indication that price action will continue in the same direction for the medium to long term. The USDJPY chart above is a classic example. Between March and August 2014, prices have bounced between monthly support and resistance, but look what happened once prices broke through monthly resistance.

Alternatively, if price action bounces off monthly support and resistance, and begins to reverse, this can be an indication of a price reversal. Again, the USDJPY chart demonstrates this between March and August 2014. We can trade successfully between monthly support and resistance levels, but we should always exercise caution as price action approaches these levels. We cannot be certain of future price direction until either a breakout or reversal occurs.

THREE: Correlation Indicator

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In the Forex market, currency correlation is one of the most important fundamental concepts.

Correlation means that two sets of data influence each other to a certain degree, i.e. they are dependent and not statistically independent. For currency correlation, the data sets are the price action of two different currency pairs.

The correlation is based mostly on economic dependencies and monetary policy. For example, the economies of Switzerland, the European Union and the United Kingdom are strongly interwoven. This means that when one of their currencies (Swiss franc, euro and British pound) wins or loses against the dollar, it is likely that the other two currencies develop similarly.

Please note that because of the order of the base currency and quote currency in the currency pairs, USD/CHF is negatively correlated with EUR/USD, even though the EUR and the CHF are positively correlated with each other.

Simple buy and sell signals occur when the red and green lines cross, with green crossing above red signalling a buy, and red crossing above green signalling a sell. See Trade Management examples and Trade Logic Chart for further insight.

FOUR: Momentum Indicator

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This is a fairly simple histogram indicator, which determines the direction and strength of the trend and signals a trend change.

It does thi by calculating the maximum and minimum prices for the previous periods, using sophisticated mathematical computations to the relationships between current price and the minimum / maximum price. Trend change signals are crisp and clean.

Simple buy and sell signals occur when the histogram crosses the zero line and changes colour from red to green, or green to red, as the case may be. Deeper analysis through observation of histogram bars trending up or trending down at time of receiving a trade signal, and convergence/divergence activity between price action and the histogram trend direction, can confirm signal activity from other indicators and warn of market weakness developing. See Trade Management examples and Trade Logic Chart for further insight.

FIVE: Risk & Trade Management

Risk Factor = 5.71%

Win/Lose Ratio = 2:1

Risk/Reward Ratio = 1:3

Longest Losing Streak = 3 / $2,252

Largest Losing Trade = $2,310

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In 2014, starting with $10,000 capital and trading 1 x Standard Lot ($100,000 USD), the MYFXPT Trading Strategy made 65 trades. Of these there were 42 winners (64%), 21 losers (32%), and 2 breakeven trades(4%). This gives the strategy a 2:1 win/lose ratio, so on average, for every 3 trades we win on 2 and lose on 1, which is a reasonable batting average. More enlightening, however, is the dollar value of winning and losing trades.

Losing trades totaled $11,996, or an average $571 loss per losing trade, or a 5.71% risk factor. Our 42 winning trades produced a profit of $104,965, or an average $2,499 profit per winning trade. Hence, the strategy generated a risk/reward ratio of 1:4.87, which is above average.

Our Longest Losing Streak (LLS) is 3 losing trades in a row between 20th August and 8th September 2014. These 3 losing trades generated a $2,252 total loss. The Largest Losing Trade (LLT) that occurred over the historical trading period was $2,310 on 18th February 2014.

These results have been achieved using an active trade management approach that seeks to contain risk, and maximise profit potential through position building. See underlined section of MTF Support & Resistance above.

APPLICATION
If you would like to learn more about the MYFXPT Trading Strategy http://www.myfxpt.com

Signal Logic
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Buy Signals
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Sell Signals
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myfxpt
 
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Location: Melbourne, Australia

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