Range and
Trend Trading
This is a typical picture of a frustrated trader... his trade
gets stopped out before it turns around to produce a profit.
There are many reasons why a good trade turns bad. Chief among the reasons is
Impatience.
A good trade setup doesn't guarantee a profitable trade outcome.
It has to begin with a desirable price entry and followed by effective closings that
minimize the chances of a loss and maximize the profit potentials.
Most manual traders are prone to impatience for actions
that result in poor trade entries
and premature exits.
The best way to prevent a good trade from
turning bad is to automate your trading.
You will no longer have the urge nor the chance to trade indiscriminately.
Why just trend trade when you can also
trade the ranges?
Please visit
http://www.facebook.com/video/video.php?v=10150161603809501
if you have problem viewing the video here.
Risking only 0.05 lots per trade, one
of my EAs makes $400 with just 8 trades from 1 Jan to
17 April 11 trading on EURUSD Daily in the Fxprimus' Strategy Tester.
This $400 profit is the equivalent of a gain of 800 Pips ($400/$10 a Pip/0.05
lots per trade).
This video proves that there is no
need to lose more often albeit smaller amounts to win
big in trend trading.
Turtles and
Turtle Soup
While trading on breakouts like the Turtles offers the
traders the opportunities to huge profits by riding the trend, the problem is
that the market ranges more often than it trends!
It also takes a lot of nerve for a
trend trader to want to continue to ride the wave with huge stop losses and not
knowing for sure when the trend ceases.
As can be seen from
the chart, prices tend to bounce off between the support and resistance levels.
Since the market ranges 70% of the
time, this implies that the Turtles' trades are being stopped
out i.e. become Turtle Soups, 7 out of 10 times!
Therefore, it
makes sense to trade the ranges by Buying at the Bottom and Selling at the Top,
and letting the profits run when the market decides to trend at price breakouts.
Trading the ranges
can also catch the very start of a new trend when the market reverses by letting
your remaining lots ride the wave up or down.
It is also
statistically favorable to trade the ranges than the trends!
What is a sound trading plan?
My definition of a sound trading plan is a system that can adapt automatically
to changing market conditions.
Since the market condition is either ranging or trending, the range or trend
traders will be in trouble when the market condition persists and is not in
their favor.
To profit consistently, our trading system must be able to identify and react
correctly to changing market conditions.
A potential change in market condition usually occurs at or near
support and resistance levels.
Reacting correctly to price patterns at these action areas will provide us with
an edge in our trade entries and exits.
More importantly, we must prioritize the conservation of our capital
over the potentials of our trading profits to stay afloat in
trading.
If we can lose little and win big consistently in our
trading, we cannot fail but to profit from the market, in the long run.
Automated
Trading
Although it is possible to
stay around to manual trade
successfully with high probability trade entries, it can be tedious and
stressful to manage the trade efficiently and effectively thereafter...
An EA or trading robots can be programmed to automatically:
