Features of peak trading according to the popular pattern
To learn gaining, you need to learn losing first. This principle doesn’t at all mean that, if you want to increase your deposit by a million, first, you need to lose a few ones of a hundred thousand each. It is about wise managing the risks, accepting what is inevitable, and about understanding that whatever a trading system may be, it can’t 100% guarantee that each trade will be profitable. These skills are trained the best with tests strategies, including previously described system, based on Anti-Turtles pattern. However, tests often suggest reacting quickly, so, you have to spend rather much time in front of your computer. Many traders just can’t afford it. Anyway, who said that an informed, considered approach to trading is less efficient than aggressive trading?
Cholerics and sanguines do not necessarily stay successful in the market longer than phlegmatics and melancholics. The latter just need more time to think. Peak strategies will suit them more than tests. And Anti-Turtles pattern allows them to meet the needs of a trader with any type of temperament. The most conservative approach to the pattern application was used by Larry Williams, who had been called the world champion among traders for a long time. He opened a position on the breakout of the correction extreme at point 2. If bears couldn’t restore the downtrend, the famous trader thought them to be weak. Besides, when the USDCHF quotes returned to the correction high, the buy signal was activated.
The point to close this position can be identified, according to the R-multiple (Profit Factor) rule: to receive a positive financial result on the long-term investment scope, the potential profit amount must be at least three times more than the amount of possible losses (Risks).
Another famous trader, a consultant for well-known corporations and a coach Victor Sperandeo describes a more aggressive trading approach in his strategy 2B Bottom/Top. He enters a long trade if EUR/USD quotes go back to bar 1 high. The Profit Factor, described above, will help to identify the point to exit the long.
This approach enables to reduce stop loss size and achieve the positive financial result sooner. In addition, this trader is likely to avoid the plankton trap. Big traders, who know classical principles Anti-Turtles pattern, suggested by Larry Williams, may set the traps for smaller opponents.
For traders, who think the first method to be too conservative, and the second one – too aggressive, there is a compromise. The short GBPUSD position is opened at the point of diagonal support breakout. The protective stop order, like in previous examples, is put at the level of the last (the highest for a bullish market, and the lowest for a bearish one) extreme. The potential profit must be at least two times more than possible losses.
According to my previous articles, using the Profit Factor enables a trader to efficiently manage the entered trade by means of moving the stop loss to the breakeven or closing a part of the positions. In addition, a trader can apply any other methodologies to exit both a short and a long.
Further development and improvement of the trading system, based on Anti-Turtles pattern, suggests using a system of filters that allow focusing on potentially profitable trades, as well as applying the rules trading Harmonic Patterns. I will describe it in my next articles.
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Real-time price chart of USDCHF
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.