Each day signals are generated between 6PM to 8AM EST ( 8AM to 10PM AEST, 7AM to 9PM JST, 10PM to 12PM GMT) It may vary slightly depending on daylight saving time. On FXDD charting platform it would be 0000 to 1500. Read here to understand why we use FXDD charts. This include complete Asian and European Session and few hours into US session. From my experience I’ve noticed that market would trend in one direction during these hours and would likely to reverse after that. Our goal is to catch trending market and hence later hours of US session are not very ideal. The pairs we will trade are GBP/USD, EUR/USD , A DUSD, USD/CHF, USD/JPY, AUD/JPY, CHF/JPY.
The signals will consist of Order ID, Entry Point, Stop Loss and Take Profit Level 1 and Level 2. Updates would be send out if the order is filled and if it hits Stop Loss or Take Profit. I will update blog at the end of the our trading day with the summary of trades. To receive timely updates I would suggest using Twitter. http://twitter.com/FirePips
Some orders may not get filled in time and those orders would need to be cancelled. I’ll send updates to keep you informed. Open trades at the end of the our trading day would be managed on per trade basis and I’ll send update for those as well.
Stop Loss and Take Profit levels include spreads already. I’ll assume 2 Pips spreads for GBP/USD, EUR/USD, AUD/USD, USD/CHF, USD/JPY and 3 pips for AUD/JPY and CHF/JPY. If your broker has higher spread then you would need to add the difference. See the example below.
Each signal would consist of two Take Profit Levels. Once the Level 1 has been reached we would then move the Stop Loss close to Break Even point. We leave a margin of two pips so that we don’t get stopped out due to a sudden pullback. See example below. For sake of consistent record keeping we will use Bid price from FXDD platform.
For each trade risk not more than 1% of your account equity. The easiest way to find out how many lots you can trade is by multiply your account equity by 0.01. Divide that number by pips of Stop Loss.
Further to be very accurate divide the resulting number with the Pip Cost. This will give you the exact number of lots that you can trade.
Most brokers would list Pip Cost on their trading platform. A Pip Cost is different from general assumption that 1pip=$10 on a standard account. These days it is between $11 to $14. It is quite important if you are trading with large account.
Lets say there is a Sell signal on EUR/USD. Signal would look like this:
Order ID: 1
Entry: EUR/USD Sell 1.4100
Stop Loss: 1.4150
Take Profit 1: 1.4050
Take Profit 2: 1.4010
When placing trade divide the total lots (derived from Money Management section above) by 2. Set the same Stop Loss initially for both and different Take Profit levels. If the Order gets filled and reaches Take Profit 1 we need to move Stop Loss for second half of the position. In example above once the price reaches 1.4050 we then move the Stop Loss to 1.4104 ( 2 pips for safety margin and 2 pips for spreads).
Remember to add more pips if you broker has higher spread. Say your broker has 3 pips spread then your initial stop loss would be 1.4151. After the Take Profit 1 is reached your Stop Loss would move to 1.4105. Same goes for Take Profit level. Take Profit 1 would then become 1.4051 and Take Profit 2 to 1.4011. Remember that I’ve already added 2 Pips for spread at the time of sending the signal.
In case of a Buy order only the Entry price needs to be modified if your broker has higher spreads. So if the order is to Buy at 1.4100 then you buy at 1.4101. There is no need to modify Stop Loss or Take Profit levels.
Regardless of an Order gets filled or not I’ll send an update to let everyone know. There would be regular updates via Twitter as we go along the trading day. Updates would look like this:
- Order ID: 1 Filled at Entry.
- Order ID: 1 Reached Take Profit Level 1. Move Stop Loss to 1.4104
- Order ID: 1 Reached Take Profit Level 2.
- Order ID: 1 No Fill. Cancel.
- Summary 07/14: 90 Pips Profit.
That’s all there is to it. Lets get started.