Now that the strategy has been revealed to be easy, simple and straightforward (just 50 SMA and 100 SMA crossing over), lets see how to trade it....There are various ways of trading it by the way i trade it is that i always look to take trades in the direction of the trend. I see that after the cross over, euro is going to go up. Thats the conclusion that i make cos i trust my system fully. I know that there is a whole lot of negative news swirling around about the euro but i just trust my system, nothing else. If my system hits SL and takes me out of the trade, thats fine. I will still take the next trade according to my system.
So, my system asks me to go long on the euro. Since the system is based on daily timeframe, the stop loss on any trade would be a minimum of 200 pips to a maximum of 300 pips and i will be looking to add a maximum of 4 positions, all in the direction of the trade. So, the way i do it is, switch to the hourly chart, find a good support region, wait for the euro to reach there, take the first 1/4 position. If the support is strong and i can afford to have a smaller SL than 200 pips, then i take more than 1/4 position. This kind of trading is all about lot sizing/money management. If i am convinced of the trend, i will go in with small lots and bigger SLs and continue to add position as the price falls, all within my money management strategy. I will never choose to risk more than 0.5% of my balance on any trade and so i plan my lot sizes, entry positions and SLs accordingly.
For eg., in the most recent case, i would see that 1.3050 was a very good support region which was not properly broken for several days. So, i entered a large long position on the euro with SL as 1.3000 cos i know that if 1.3050 is convincingly broken, it would start falling down a lot. So, my SL was just 50 pips and my target is the next resistance region on the hourly chart which is at 1.3190. I choose to either exit fully there or a part of my position there depending on PA. Most of the time, it will be only part of the position. I would also be looking to load on my new longs at small support regions like 1.3130. As long as i am convinced of the uptrend, i will continue to load longs at each and every support region on the hourly and will choose to exit part of these longs at each and every resistance region. All within strict money management rules.
There is a lot more intricacies to this trading but basically the idea is to trade in the direction of the trend with good money management. So, i will always have a few positions open of varying sizes and will keep taking profits at all the correct points. So, i will have profits in the bank, some negative positions and some positibe positions but all of them will be within the right money management rules and sum of the positions will never cross 0.5% of the balance, as far as a single pair is concerned.
So, my system asks me to go long on the euro. Since the system is based on daily timeframe, the stop loss on any trade would be a minimum of 200 pips to a maximum of 300 pips and i will be looking to add a maximum of 4 positions, all in the direction of the trade. So, the way i do it is, switch to the hourly chart, find a good support region, wait for the euro to reach there, take the first 1/4 position. If the support is strong and i can afford to have a smaller SL than 200 pips, then i take more than 1/4 position. This kind of trading is all about lot sizing/money management. If i am convinced of the trend, i will go in with small lots and bigger SLs and continue to add position as the price falls, all within my money management strategy. I will never choose to risk more than 0.5% of my balance on any trade and so i plan my lot sizes, entry positions and SLs accordingly.
For eg., in the most recent case, i would see that 1.3050 was a very good support region which was not properly broken for several days. So, i entered a large long position on the euro with SL as 1.3000 cos i know that if 1.3050 is convincingly broken, it would start falling down a lot. So, my SL was just 50 pips and my target is the next resistance region on the hourly chart which is at 1.3190. I choose to either exit fully there or a part of my position there depending on PA. Most of the time, it will be only part of the position. I would also be looking to load on my new longs at small support regions like 1.3130. As long as i am convinced of the uptrend, i will continue to load longs at each and every support region on the hourly and will choose to exit part of these longs at each and every resistance region. All within strict money management rules.
There is a lot more intricacies to this trading but basically the idea is to trade in the direction of the trend with good money management. So, i will always have a few positions open of varying sizes and will keep taking profits at all the correct points. So, i will have profits in the bank, some negative positions and some positibe positions but all of them will be within the right money management rules and sum of the positions will never cross 0.5% of the balance, as far as a single pair is concerned.
