This is a profitable strategy. My success rate at turning profitable strategies into profitable systems is zero; nevertheless, here are the rules for day trading the EURUSD. I have not traded this methodology on any other pairs.
This is the setup and trigger:
- Trading starts 30 minutes after the UK Open -- 0830 GMT.
- Trades are made from a thirty-minute chart (M30).
- Mark the High and Low for the first 30 minutes of trading.
- The first bar that closes outside the 30-min opening range signals the trade direction.
- Enter the market on the Open of the next bar.
- Place a StopLoss 3XATR beyond the Close of the entry bar.
CAUTION:
The market often breaks beyond this range for awhile only to reverse itself (breaking beyond the opposite end of the range) and go substantially in the other direction. This is one of those "fakeouts" that you must endure to trade this strategy.
Therefore, it is important to do the following four things:
- Reverse your position, if this reversal takes place.
- As soon as you have about 10 pips profit, place a breakeven stop UNLESS THE B/E STOP IS OUTSIDE THE OPENING RANGE.
- If you are stopped out but no reversal occurs and another break in the original direction happens, re-enter the market.
- If you are whipsawed more than once, stop trading for the session UNLESS YOU HAVE MADE MISTAKES WITH THE RULES.
Here is how to manage the position, assuming you are Long (opposite for Short):
- When price makes a new high (from the time you took your position), move a trailing stop to 3XATR below the Close of the bar that made that new high (this will sometimes cause you to move the stop down, against conventional wisdom).
- Attach the MetaTrader4 Linear Regression Channel tool to the chart, anchoring it on the 0800 bar.
The Linear Regression Channel tool will be used to keep you calmly in the trade until a real change in direction occurs. You will seldom be stopped out by the trailing stop before this indicator signals an exit. You need not pay any attention to anything else except the trailing stop and the linear regression line to successfully manage this trade. But first, you must construct a derivative of the linear regression line (the channel itself is not important to the strategy).
I have the instructions (not code) for calculating this derivative indicator, but they would be too confusing for now. If anyone is interested in pursuing this, I will post them separately. I currently manage this with an Excel spreadsheet, but I wish I had a custom indicator. There is a custom indicator for the Linear Regression Slope somewhere in this community, but it does not work for my purposes. I'm not a programmer, so I don't know why; but I've tried it, and I know it doesn't work for this strategy.
Nevertheless, a 3-period moving average of the linear regression line's slope keeps you in the trade for substantial moves. It absolves you of worrying about candlestick patterns, Fibonacci retracements, support & resistance lines, etc. Your exit is signaled with a change in direction of this line.
There is a bit more to it, but this is the core of the strategy. I will save further instructions until I see what interest there is in pursuing this.
The methodology trades the UK and US sessions and produces 1-3 trades per day, averaging more than 50 pips daily in the EURUSD.
Linear Mode
