高波动性 (High volatility)

Dear Traders,

I have developed a new trading strategy. I will explain the system now in further detail. It distinquies in a few elements:

Where to trade
EURCAD H4 chart 10/10/2024:

1. We trade in the blue zones. We can trade outside the zones, though only with the trend.
2. The range is set by taking the maximum of the last 5 weeks and last 5 days. Trading in the zones 100-75% and 0-25% if you use a fibonacci of that range. Meaning we might get potential reversals in these areas.

When to trade:

1. We always SELL a bullish candle and BUY a bearish candle
2. We trade only with a lot of volaitlty using theVolatility Efficiency Ratio (VER from the h1 chart . (High-Low)/(Daily ATR 10 shift 1) in percentage. As a minimum value a like to set it at 30% . For exampe if eurusd has an atr of 100 pips and the candle size is 30 pips we reached that 30%;
3. Furthermore we need a full body of the H1 candle which can mean a chart with no wick on the bottom or top depening on the direction for sell no wick at the top for buys no wick at the bottom.

Trade management

1. Scaling In: Additional entries can be made if the price moves further against the initial position, averaging in at 40% and 50% VER. In cases of extreme volatility, these levels might extend to 70%, 80%, or beyond. It is important to start with a smaller initial lot size to manage risk effectively.
2. Exiting Trades Early: Trades are usually closed quickly, typically within 20-30 minutes, and sometimes within just a few minutes or even seconds, depending on the instrument's volatility. The goal is to secure profit without waiting for a complete reversal.
3. Alternative Exit Strategy: As an option, you can use the midpoint of the Bollinger Bands or the midpoint of the last 24 M5 candles as a 50% retracement level. Significant price movements often reverse to the 50% level.
4. I generally avoid using stop-losses, but as a rule of thumb, I use either a 20% ATR of the daily range or a 20% VER ratio above or below the price. If the price moves against me, I tend to buy or sell more. However, there are times when I’m simply wrong, and I close the trade. The key is not to hold on too long if the market is clearly against your position. It's not about being right in predicting the direction, but about being right at the right moment. Ask yourself: do you want to be right about the direction of the market, or do you want to make money?

Example
In a recent example on the EURCAD H1 chart, the price was above the defined range, which meant only bullish trades were considered. A large bearish candle occurred, reaching a 41% VER ratio.

At this point, I monitored the 5-minute chart, observing a slight retracement away from the trade's low points. My primary focus is on the P&L. Once a trade becomes profitable, I aim to close it quickly and either move on to the next opportunity or exit trading for the day.

I will give you daily/weekly updates.

Cheers for now