Pyramiding, or adding to the winner is one of the most profitable method of money management in forex. However unstable wave structure of the price in forex makes it difficult to establish stop loss that is tight enough for strategy to survive losing streaks and at the same time wide enough to let the position develop on its own.
Task of properly setting stop loss gets easier with growing experience. Established trader may develop an eye for a wave structure that will allow him to place his profit and loss targets just right.
Method suggested in this forex strategy allows even the less experienced trader to profit with multiple opened positions by adding to the winner.
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In suitable market conditions this forex strategy manages to open up to 20 positions, out of which most will be risk free, opened only after protecting profits of previous positions. It can literally double the account in 48 hours, without any additional risk (of course except exposure).
Used indicators
MACD (moving average convergence divergence) 60,130,40. Purpose: MACD with slow period works very well in filtering out almost all the trades that would go against the main trend in our timeframe. Thanks to this tool we will be trading with the flow most of the time.
Bollinger bands period 20, with deviation 1.5. Purpose: Breakout of Bollinger bands tunnel will serve as highly accurate entry signal. Bands will also provide suitable points for stop loss placement, which is crucial for any pyramiding forex strategy.
Forex strategy rules
SELL:
We will sell only on negative MACD histogram (closing below zero). This will be interpreted as a downtrend.
Sell signal: Strong bearish candle closing below bottom Bollinger band. Once the candle closes we enter the trade short placing stop loss at the upper Bollinger band (position of BB at moment of entry).
Pyramiding: Next trade into the same direction can only be opened on price lower than any of currently opened short trades. Next trade can only be opened if at least one candle was fully formed withing BB tunnel (opened and closed).
Stop loss of all opened positions is always lowered by placing it above last short entry signal (marked by upper BB at the moment of most recent entry).
Take profit: triggered by last stop loss. It is also possible to exit the position if price touches upper BB and we have already reached significant profit, including last opened position.
BUY:
We will buy only on positive MACD histogram (closing above zero). This will be interpreted as a uptrend.
Buy signal: Strong bullish candle closing above upper Bollinger band. Once the candle closes we enter the trade long placing stop loss at the bottom Bollinger band (position of BB at moment of entry).
Pyramiding: Next trade into the same direction can only be opened on price higher than any of currently opened short trades. Next trade can only be opened if at least one candle was fully formed withing BB tunnel (opened and closed).
Stop loss of all opened positions is always moved higher by placing it above last long entry signal (marked by bottom BB at the moment of most recent entry).
Take profit: triggered by last stop loss. It is also possible to exit the position if price touches bottom BB and we have already reached significant profit, including last opened position.
