‘Trading for a retail trader is the best job in the world, and if you can perform it without a PhD in statistics… how much time you have saved!” — Emilio Tomasini

Hello:

The Euro is the strongest currency in the world at the present. Last week saw some crazy bullish continuations on the markets, but no matter what happened, we stuck to our plans. While on the market there are many things under your control, except the market itself. These are what happened last week:

AUDUSD was bought on Thursday after the market hit our adjusted pullback entry price target. It moved for over 100 pips in our favor. We closed 80% of the trade, after which our Stop was moved to breakeven before it was hit. NZDUSD also hit our adjusted pullback entry price target on Friday (it was an extremely serious reversal). Either our Stop would be hit or it’d move in our favor. The trade is still open and negative with a potential risk of 1%. Our trade on EURAUD was a failure; our Stop was hit with nearly 2% loss. We had similar experience on EURNZD and AUDJPY with nearly 2% loss on each cross. EURCAD is still not traded since we’re looking only for a secondary signal on the cross. Our last trade on it was closed with nearly 4% profit. Generally last week wasn’t that favorable, but the risk was strictly controlled. It was a satisfactorily tolerable experience. This is a classic example of how we survive on the markets. Great trades are ahead.

Welcome to an exiting world. This week will be very interesting. We’ve already gotten clean signals on AUDJPY, EURAUD and EURNZD (we want to enter at the opening prices of these crosses on Monday), plus we’re looking for possible secondary signals on AUDUSD and EURCAD. We got different risk management and exit strategies for our open positions, depending on what happens on the markets after a trade is opened. Risk management is the real McCoy, without which any trading system is doomed.

An Observer’s Trading Results: One of my readers opened a demo account at FXOpen on June 15, 2010, and started placing trades based on my signals (he named the demo after my strategy). He places trades according to my most recent signals. The difference is that he uses no trailing stops; he rides the trends until there are significant changes (I personally use trailing stops especially after some 200-pip profits). He has also decided that his stops won’t be fixed, so he’ll be moving them gradually in a situation of profits. At the present he has these profits/losses:

AUDUSD Buy Limit: 100 pips (closed)

NZDUSD Buy Limit: -70 pips (open)

EURCAD Buy: 808 pips (open)

EURNZD Sell: -200 pips (closed)

EURAUD Sell: -200 pips (closed)

AUDJPY Buy: -200 pips (closed)

Dealing With Secondary Trading Signals

I just feel a need to explain more to you about our primary and secondary signals, and our predetermined rules of dealing with the risk on each trade. Remember: we are no scalpers.

A primary signal is based on our entry rules which give us a long trade after a bear market or a short trade after a bull market. This is based only on daily charts. Position sizing remains 0.01 for each $1,000. There’s no predetermined exit. The initial risk on the trade is 2%, with an initial 200-pip Stop (to allow room for the market noises). But if the market moves in our direction by 100 pips, we move our Stop by 100 pips (thus reducing the risk to 1%). If it moves to 200 pips, we use a 100-pip Trailing Stop. We increase the Trailing Stop by 50 pips for every 100 pips gained until the Trailing Stop reaches 500 pips (after we moves it no further). In some occasional strong trend continuations, we’ll be in a free trade for as long as there’s no 500-pip reversal against us. The big TS gap is to make allowances for noises and temporary corrections in the midst of a trend.

A secondary signal is based on buying a pullback on an existing bull market or selling a rally on an existing bear market. For this to be valid, the Moving Average must be suggesting the same thing on both daily and hourly charts. The optimal entry price is based on the hourly chart (When the RSI>70 in a bear market or