We study the peculiarities of climax trading according to the popular model
In order to learn how to earn, you must first learn how to lose. This principle does not mean at all that in order to increase your deposit by a million, you should give up the previous several hundred thousand each. It is about competent risk management, about accepting the inevitable, about understanding that whatever the trading system is, it cannot give a 100% guarantee of profit in each specific transaction. Sample strategies are best suited for practicing such skills, including trading based on the Anti-Turtles pattern described in the previous article. At the same time, samples often require a quick response, which implies a rather long presence at the monitor screen. Many traders cannot afford this. In addition, who said that a balanced approach to trading is less effective than aggressive trading?
It is not a fact that choleric or sanguine people live on the market longer than phlegmatic or melancholic people. The latter need time to think. They are more appropriate climax than the sample. And the Anti-Turtles pattern allows you to satisfy the needs of a trader with any temperament. The most conservative approach to trading with its use was applied by Larry Williams, who for a long time was called the world champion among traders. He took a position on the breakthrough of the correctional extreme at point 2. The inability of the “bears” to resume the downtrend was perceived by the celebrity as a sign of their weakness. At the same time, the return of USD / CHF quotes to the correctional maximum activated a buy signal.
The exit point from a long position can be determined on the basis of the principle of multiple R (profit factor): in order to get a positive financial result on a long-term investment horizon, the size of potential profit should be at least twice as high as possible losses.
Victor Sperandeo, another popular trader, consultant of well-known companies and a teacher, in his 2B Ground / Top strategy describes more aggressive trading on the Anti-Turtles pattern than Larry Williams. A long position is opened if EUR / USD quotes return to the maximum of bar No. 1. To help you find a way out of the long comes the previously described profit factor.
This approach allows you to narrow the stop order and quickly achieve a positive financial result. In addition, the trader is likely to avoid the traps for plankton. Well aware of the classic principles of the Anti-Turtles pattern that Larry Williams preached, large players do not hesitate to set traps for small opponents.
For traders who find the first of the described methods too conservative and the second too aggressive, there is a compromise solution. The entrance to the short position on GBP / USD is carried out at the breakdown point of diagonal support. The protective stop order, as in previous cases, is placed at the level of the last (highest for the “bull” market and lowest for the “bear”) extremum. The potential profit should be at least two times greater than the possible losses.
From the previous materials, it follows that the use of the profit factor allows you to effectively manage the open position by transferring the stop order to the breakeven point or closing part of the transaction. At the same time, the trader can use other methods of getting out of a long or short.
Further improvement of the trading system based on the Anti-Turtles pattern involves the use of a filter system to focus on potentially profitable transactions, as well as the use of harmonious trading principles. We will talk about this in our next posts.