Share
Hi collingwood, I'll just post my latest trade update and see if I can explain it better this time around. Don't think anyone will mind that this is not the GBP (well, I hope not at least).
This time, this is the USDCHF.
The chart(attached) has 5 lines -
i. Resistance and Support
ii. Pivot Line (Red)
iii. High and Low indicator
The resistance and support is a volatility arbitrage measurement. I can't explain this any more simply since it is a mathematical equation. What it does however is tell you whether the instrument is suitable for range trading. Within the resistance and support, safe trades would be trading the fibonacci retracements within the range. Once it breaks the range, you would consider being either bullish or bearish dependent on the signal.
Pivot Line is a widely accepted term for the average of the high, low and close of the previous day. In stocks, people consider a relevant measurement as VWAP but currencies don't provide you with accurate volumes (if any) so you result to using pivot lines. I used this as an anchor. If movements reverse at this point, it means that the original (previous) trend remains and can find that an opportune time to add positions.
High and low indicator is really just to reduce the risk. It's a quantitative measurement again that from backtesting has improved probability of wins by 11.5% on average which I personally think is massive. More importantly, it provides me with a stop loss target as well to cut my losses earlier.
In all honesty, I actually have 11 lines on my full system but It gets too messy so I unchecked the others.
Back to my trade, I am long the USDCHF. As you can tell from the chart, we tested the high line and reversed, which implies we should follow the previous trend which in this case is still long since we don't have a lower bottom. Note, we aren't exactly that far from a bottom hence I have my stop loss just below the blue line at 0.9862 (3 pips lower).
I took the trade at the green line and doubled at the pivot line of 0.9896. Once it breaks above the support (orange line), I will add another position and have a stop loss for this "parcel" at 0.9893 (3 pips below pivot).
Final piece of the parcel is the target. If it gets above the support, we are in a range trade from 0.9909 (support) to 1.0007 (resistance). My target is firstly the 61.8% of the range at 0.9970 and the finally the 1.0004 (3 pips below resistance).
Pretty long post and again, I apologise for this. I wish winkinatcha was here to help me :)
