Triple-zone Strategy

[expiated]

(Notes to Self: Highest probability setups at this time…)

Enter a long position when these assets trigger a buy signal (listed in order of statistical odds of constituting a successful trade):

1. AUDJPY
2. EURJPY
3. USDJPY
4. CADJPY
5. AUDUSD
6. NZDJPY
7. NZDUSD
8. GBPJPY (Not to be trusted given the current economic environment with Brexit)

 

[expiated]

I'm pocketing the profit offered by the Euro pairs right now, while it is available. Though USDJPY was a confirmed trade, the short-term trend has decided to turn against me, so I'm exiting the position now while the loss is still relatively small, even though my confirmation lines are holding out hope that the short-term trend might yet resume a northbound trajectory. Structurally, AUDJPY is primed for a trip north, but appears to be hours away from confirmation, so the final outcome of getting involved with this pair is very much up in the air.

 

[expiated]

Though USDJPY was a confirmed trade, the short-term trend has decided to turn against me, so I'm exiting the position now while the loss is still relatively small, even though my confirmation lines are holding out hope that the short-term trend might yet resume a northbound trajectory.

So of course, USDJPY does indeed turn north AFTER I exit the trade. But at least I held onto the position in my traditional Forex account...



Whereas AUDJPY said, "Forget about structure!" and continued heading south, suggesting to me that perhaps confirmation lines should trump short-term trend.

On a more positive note, it might very well be that banking the profits from the Euro pairs while I had the chance was the right move to make in that they too plunged to the downside.

 

[expiated]

USDCAD is pretty much in the same place it has been for the last four or five hours, right on the edge in between in-the-money and out-of-the-money. There was no way I was going to risk losing $50 for a mere 50/50 chance of winning $50 when I could get out of the whole thing for a measly -$4.25 loss, so I decided to close the contract now.

However, when I went to do so, it was actually worth about +$3.50, so after subtracting the $2 it cost me to place the opening and closing orders ($1 for each), I got out of the trade at about breakeven.

I then immediately purchased another put contract with expiry about 20 hours away since my forecast model suggests it would be extremely bizarre for USDCAD to remain in this neighborhood for an extended period of time or to climb even higher.

 

[expiated]

I was stopped out of CADJPY, which prompted me to want to see things from more of a bird’s-eye view, and this in turn led me to try something I’ve never done before, which is to not only consult a four-hour chart, but to also rely on it as the main chart for regulating market entries.

NOTES TO SELF:

The four-hour candlesticks on my OANDA MT4 charts form at 2AM, 6AM, 10AM, 2PM, 6PM, and 10PM in my time zone. (If you wish, you only have to check on how things are progressing at these six points during the day.)

There are three levels of extreme separation from the core moving average. The most conservative method for making the decision to execute a trade based on these extremes is to do so when a candlestick forms on the side of the shorter-term moving average that is nearer to the core moving average.

A more aggressive method for making this decision is when the initial candlestick of the opposite color forms within these extreme zones.

AUDJPY is currently at the outer extreme, so try entering a long position following the formation of a green candlestick. The conservative “let your profits run” take profit-target is the shorter-term moving average. (This only applies if the more aggressive method of entering positions is used.) When you are ready to test a more ambitious target, use the core moving average.

AUDUSD is currently at the second level of extreme deviation, as is CADJPY.

EURAUD is at the second level of extreme deviation to the north.

NZDJPY is at the first level to the south, and believe it or not, @ 1.3388 USDCAD is only at the first level to the north. It would actually have to climb all the way up to 1.3481 before the numbers would suggest it more than likely was being compelled by maximum pressure to regress toward the mean.

The third method of judging when to execute trades is following a reversal in the core trendline, but to maximize safety, when it is believed that this is occurring, probably the only type of trade that should be executed is one of the “touch and go” variety.

 

[expiated]

A more aggressive method for making this decision is when the initial candlestick of the opposite color forms within these extreme zones.

This is not going to work. Reject this method as pure folly.

 

[expiated]

Though the exchange rate has yet to cross the short-term moving average, I have entered a CADJPY long position in that the pair is evidencing the “appearance” of having reversed direction, and to wait until the moving average is crossed “feels” like it would be indulging too much lag.



It’s possible that while regarding “one 4-hour candlestick of the opposite color” as a trigger for executing trades was folly, viewing two or three candlesticks as such might be acceptable. On the other hand, it could turn out that the moving average cross is the only way to go. In the final analysis, statistical probability is the name of the game, so whichever option leads to a near 100% success rate will be the obvious choice.

The losses incurred due to the mistaken parameters from earlier “forced” to me to purchase ten in-the-money USDCHF call contracts at a ridiculous 9:1 risk-to-reward ratio to return my accumulative gains to $325.25, which is still more than $100 behind where I was at $442.75.

But hopefully the insights gained in the process of trying to raise this pseudo-swing style of trading’s level of ambition will empower me to quickly make up the difference.

(I was going to take a screen shot showing how the Profit/Loss suddenly went to approximately $-665.00 a minute before expiry for no apparent reason! [What a crazy platform.] But I was an instant too late.)

 

[expiated]

It's likely that if CADJPY is reversing direction, then AUDPY and AUDUSD are doing the same. So given that I don't currently have the luxury of monitoring the markets closely, I went ahead and purchased (without waiting until the ideal moment) a total of four call contracts (two each) with expiry 20 hours away to provide plenty of time for everything to develop and hopefully bring my demo account balance back up above its previous high.

 

[expiated]

The most I can make off EURJPY is about $27, so I'm going to pocket what it's offering me now since I don't consider it worth it to risk losing $73 just for a mere potential $7 more on top of an already guaranteed $20.

 

[expiated]

So far I'm not liking the triple-zone strategy. The market has been in about the same place for the last 16 hours. Waiting for "big moves" wastes a lot of time that could be spent accumulating little moves which add up to big profits, but so be it...

I'll take the $10.00 from USDCHF now, while it's there, and close the AUDJPY contract at pretty much breakeven. I'll have to HOPE the rate rises on AUDUSD in the next two hours, which is not a good position to be in. I never want to have to "hope" an asset does anything. (I want to be able to capitalize on the "logic" behind price action.)

UPDATE: It's a good thing I cashed in on USDCHF when I did. Rates jumped at 5:30 a.m. (here on the Pacific coast) which made AUDUSD worth $50.00, and shifted USDCHF to out-of-the-money. However, while I was capturing the image below instead of cashing out, the value of AUDUSD dropped significantly.

I'm closing the contract now, which still leaves me short of $442.75 (with a current total of only $389.50).