TRADING STRATEGy
our potentially profitable exit upon. Oſten a single SRV serves as both our entry point and our stop loss basis – another SRV provides our exit target. Tat is why we call our method, “trading between the lines”.
PATIENCE + QUALITY QUICKNESS = PROFIT
A QUALITY trade will provide the trader with the highest probability of success. Te qualities we look for in a potential trade were discussed in detail in our previous article, “Seeing the music of the market”. Simply stated, we want to “see” a potential trade that offers the probability of a good profit (more” Ps” to mind!) with an acceptable risk level.
We had just finished placing our SRVs for the coming week (late aſternoon, Sunday, February 12, 2012) when we noticed that the EUR/USD pair had produced a sell signal from our system. We do not trade all of these signals but we look at each one carefully, and we really liked this one very much.
We noted on our trading chart (shown below) that the euro had made a strong move up against the US dollar. Te EUR/USD pair had moved well beyond the top Bollinger Band. In addition, it had been rejected by a secondary SRV at 1.32349. Tis looks like a classic shorting opportunity. We enter an order to sell the EUR/USD, placed our stop a little above the SRV at 1.32349 and let it ride over night. We do not usually make these trades, but the technical setup was especially good
FX TRADER MAGAZINE April - June 2012 73 +
and the fundamentals favored the trade (the Eurozone leaders still groping with the Greek problem). Te profit potential of this trade was just to great to resist.
Note the chart below – the music of the market played out just as the SRVs indicated it should.
Te trade we constructed worked out the way it was supposed to. We collected a very nice profit on this trade (about 50% on our margin requirement). As price neared our primary SRV at 1.30791, with two secondary SRVs just
FX below, it was time to take our profit.
Unfortunately we had an outside appointment to fulfill Monday morning, or we would have likely considered going long off the SRV at 1.03791 – with two primary SRVs just below it, and the next SRV above it at 1.31160, a pretty decent trade could have been made between those lines. And later, as you can see on the chart, it would have been a really good trade, as the SRV at 1.31160 was eventually breached and price moved right on up. We usually try to be very short-term traders when we trade forex because of
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