Momentum Factor | Foreign exchange EA download-MT4/MT5 resources-MetaTrader 5 resources
Imagine that you get into a position signaled by your system or method, and then you find out later that you are following a good trend and it looks like it will continue for days or even weeks. There is a temptation within you (greed) to add more positions, but your gut (fear) tells you that this is not good money management. What should you do? Take a look at this:
I've been doing your system this month and last week I did something a little different. When my position moves in my direction, I add to the position based on the strength of the trend. Last week I took long positions on GBP/USD and GBP/JPY. Like you, I adjust my stops based on daily technicals. Sometimes, due to volatility on major news, my stop loss on GBP/USD is 200 pips. Last night I adjusted my GBP/USD stop loss to 1.9660 and GBP/JPY to 238.55. The results are as follows:
GBP/JPY If my stop loss is at 238.55 then:
2 lots 232.36 = 1238 pips (619 x 2)
1 lot 234.05 = 450 points
1 lot 235.22 = 333 points
1 lot 236.42 = 213 points
1 lot 237.32 = 123 points total = 3038 points
GBP/USD if my stop loss is at 1.9660
2 lots 1.9474 = 372 pips (186 x 2)
1 lot 1.9566 = 94 points
1 lot 1.9641 = 19 points
1 lot 1.9677 = -17 points total = 468 points
Are you doing this too?
Rick
As of the close on Friday, January 19th, my position was still open. So, let me show you how I decide to increase my position while going with the trend.
First: I find that certain patterns have a higher probability of adding to a position during a trend. This is on the 4 hour chart. The pattern looks like a staircase and only that pattern works . Check the pictures.
Second: You can draw horizontal lines on each step which is forming support and resistance.
Third: Only place placement orders entered 30 - 50 pips above the resistance level (for an uptrend), and set the stop loss for this order only 30 - 50 pips below the support level. (The opposite is true for a downtrend) Lot size depends on your risk tolerance or money management. Another stop loss can be the daily low (uptrend) or the high (downtrend)
Fourth: If the trend continues, your position will be closed, and you will not adjust the stop loss on that position until the stop losses on the rest of your positions catch up. If the trend reverses, your order will remain, but don't forget to cancel it.
Q: What is the target price? No, I cut my losses and let the profits run. The market kicked me out of the game.
Q: Can this be done on GBP/USD? it depends. I've noticed it's hard when GBP/USD moves. You can check and see if you can find the stairs. I do have a hard time adding positions that use the daily low as a stop loss.
Question: Is it likely that they will trend in my favor after I place my order? What are some good indicators? This is where the momentum factor is important. According to Wells Wilder Jr, the momentum factor is a measure of trend acceleration and deceleration. You can use DMI/ADX and other momentum indicators. I am using the EJ 4H method from euroousdtrader. The indicator name is EJ_Trend.mq4 and you can find it in FF's trading system forum. View GBP_JPY_1_19 image. Blue indicates bullishness, red indicates bearishness, and green indicates a possible reversal. You'll notice that steps 1, 2, and 4 are all blue, which makes it easy to decide... the probability of a strong trend is high. Step 3 and mix on top.
So, you might say, I made this up to my liking since I used historical data. Well, that’s why I’m trying to publish this article before the market opens. Image GBP_JPY_1_19 is current, you and I make the decision together. Rather than tell you what I think, let's start a discussion.
· There are no right or wrong answers. The market will tell us later.
· You can indicate to any method or system that the probability is increasing or is about to reverse.
· Please do not criticize someone.
· Let us learn from each other.
greeting,
Rick
Hi Steve, (January 19, 2007)
I've been doing your system this month and last week I did something a little different. When my position moves in my direction, I add to the position based on the strength of the trend. Last week I took long positions on GBP/USD and GBP/JPY. Like you, I adjust my stops based on daily technicals. Sometimes, due to volatility on major news, my stop loss on GBP/USD is 200 pips. Last night I adjusted my GBP/USD stop loss to 1.9660 and GBP/JPY to 238.55. The results are as follows:
GBP/JPY If my stop loss is at 238.55 then:
2 lots 232.36 = 1238 pips (619 x 2)
1 lot 234.05 = 450 points
1 lot 235.22 = 333 points
1 lot 236.42 = 213 points
1 lot 237.32 = 123 points total = 3038 points
GBP/USD if my stop loss is at 1.9660
2 lots 1.9474 = 372 pips (186 x 2)
1 lot 1.9566 = 94 points
1 lot 1.9641 = 19 points
1 lot 1.9677 = -17 points total = 468 points
Are you doing this too?
Rick
As of the close on Friday, January 19th, my position was still open. So, let me show you how I decide to increase my position while going with the trend.
First: I find that certain patterns have a higher probability of adding to a position during a trend. This is on the 4 hour chart. The pattern looks like a staircase and only that pattern works . Check the pictures.
Second: You can draw horizontal lines on each step which is forming support and resistance.
Third: Only place placement orders entered 30 - 50 pips above the resistance level (for an uptrend), and set the stop loss for this order only 30 - 50 pips below the support level. (The opposite is true for a downtrend) Lot size depends on your risk tolerance or money management. Another stop loss can be the daily low (uptrend) or the high (downtrend)
Fourth: If the trend continues, your position will be closed, and you will not adjust the stop loss on that position until the stop losses on the rest of your positions catch up. If the trend reverses, your order will remain, but don't forget to cancel it.
Q: What is the target price? No, I cut my losses and let the profits run. The market kicked me out of the game.
Q: Can this be done on GBP/USD? it depends. I've noticed it's hard when GBP/USD moves. You can check and see if you can find the stairs. I do have a hard time adding positions that use the daily low as a stop loss.
Question: Is it likely that they will trend in my favor after I place my order? What are some good indicators? This is where the momentum factor is important. According to Wells Wilder Jr, the momentum factor is a measure of trend acceleration and deceleration. You can use DMI/ADX and other momentum indicators. I am using the EJ 4H method from euroousdtrader. The indicator name is EJ_Trend.mq4 and you can find it in FF's trading system forum. View GBP_JPY_1_19 image. Blue indicates bullishness, red indicates bearishness, and green indicates a possible reversal. You'll notice that steps 1, 2, and 4 are all blue, which makes it easy to decide... the probability of a strong trend is high. Step 3 and mix on top.
So, you might say, I made this up to my liking since I used historical data. Well, that’s why I’m trying to publish this article before the market opens. Image GBP_JPY_1_19 is current, you and I make the decision together. Rather than tell you what I think, let's start a discussion.
· There are no right or wrong answers. The market will tell us later.
· You can indicate to any method or system that the probability is increasing or is about to reverse.
· Please do not criticize someone.
· Let us learn from each other.
greeting,
Rick
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