After years of fiddling around with various trading strategies that have only made my beloved brokers richer and me poorer, I believe that I have found the approach that can generate large and consistent monthly returns. Instead of battling the market’s daily volatility, Weekly Range trading appears to be the best bet to achieving realistic monetary targets when several other factors are considered. The key is to find the setups that give the highest probability of success and to risk more than the conventional 2% to 5%.

After showing you the benefits and drawbacks of previous Daily and Weekly strategies, I´ll show you the one that can generate 800% with only 4 trades. (Not recommended for the novice trader). Even if you do not trade with my setups, you can still apply it to your trading as long you trade the Weekly Ranges.


DAY TRADING STRATEGIES 


STRATEGY 1

The first approach to day trading involved the following trade setup.


  • Waiting for the Daily Chart’s Candlestick Formation
  • Waiting for the 4 Hour Chart to respond to that signal
  • Trading the 30 Minute signal that followed
  • Aiming for the next major target to be hit during the day

 

This approach was used when I discovered that the market obeyed this sequence from the Daily Chart down to the 30 Minute Chart for trends that are correctly identified. If this sequence did not appear, then it usually meant that the trend had ended for the Daily Chart. Unfortunately the gains were not enough because

 

  • The trends were affected by volatility from fundamental announcements
  • Trades were missed and profits were smaller when the 30 Minute Signal was too large 
  • Focusing on the daily movements made me miss important things on the larger charts that were making me lose
  • The chosen currency sometimes moved very little for the day
  • The pressure to recover from losses or missed opportunities affected my decisions.
STRATEGY 2

I then tried Support and Resistance and Fibonacci price points for better entries, but it was difficult to predict the one that would start the trend. Also, the gains from entering with a smaller stop loss were larger but not large enough to cover the losses from re-entering several times for a single trade at different price points.


STRATEGY 3

The last day trading strategy involved Breakout trading of Consolidation patterns (see previous Article). This involved aggressively maximizing on each daily range movement that started with a Consolidation by adding lots to each signal in the direction of the trend. Unfortunately the net gains after losses were not large enough and the stress from constantly monitoring the chart in expectation of new entries was unbearable.

Eventually my balances declined steadily with these strategies, emptying many trading accounts in the process. Not only were they inadequate financially, but they could not compensate for the emotional toll of trading in this highly-stressed financial market on a daily basis. Then came Weekly Range trading.

 

WEEKLY RANGE TRADING

Weekly trading involves capturing part of the average weekly trading range of a currency over a 5-7 day period. While most currencies have daily ranges of 80 to 140 pips, weekly ranges are on average between 300 and 500 pips. 


STRATEGY 1 - 4H CHART ENTRIES

After identifying the weekly range patterns, I started trading them on a demo account (Dukascopy competition) with fairly good results using the 4H Chart. Among the benefits of this approach were that,

 

  • The 4H entries appeared at predictable times
  • Less time was spent monitoring the market on the smaller charts
  • The patterns that started the weekly ranges were best seen on the 4H charts
  • You could focus on the bigger trends and patterns

 

This appeared to be the best way of trading the larger ranges and capturing greater profits relative to day trading. It even led to two months of top ten finishes in February and March this year. Nevertheless, this strategy only provided at most 500 pips per month because

 

  • The gains from each trade were not enough relative to the much larger stop losses of 4H Charts
  • Losses were frequent since I was essentially anticipating the more reliable signal of the Daily Chart

 

After experimenting once again with various weekly range setups, I came across the combination that provided larger profits more consistently.


STRATEGY 2 - HIGH PROBABILITY 800% RETURN PLAN


This strategy involves

  

  • Waiting for High Probability Daily Signals 
  • Identifying the Weekly Range target
  • Looking for an entry on a smaller time frame using chart patterns  
  • Trading only if it provides a risk-reward of at least 5 times
  • Risking 15% per trade

 

JUSTIFICATION


HIGH PROBABILITY DAILY SIGNALS

Weekly trends can either be normal, slow and steady or can break much quicker with larger ranges.  What I have noticed is that whenever the setup and signals on the Daily Chart point to a faster than normal breakout, the trade has a greater chance of getting to its target. The ranges are also usually larger than average and the entries on the smaller charts are more reliable and less volatile. Examples are


  • Breaks of Consolidation
  • Sharp and Large U-turns at major Price Targets 


RISK-REWARD RATIO OF 5 - 1

Weekly range trading has a high degree of difficulty, takes a longer time (5-10 days), and require a lot more patience and self-control. Therefore, I believe that a trade should provide a wide gap between losses and gains to justify the effort involved. Using the smaller charts helps in reducing your stops and increasing your gains.


RISK CAPITAL - 15% PER TRADE

Given that you would be trading a high probability setup with a large risk-reward ratio, a higher percentage of capital to risk per trade seems appropriate. By going after a larger profit per trade, you are compensating for the various risk factors associated with trading in what is really an artificial work environment. These risks include,

 

  • Operational, Market and Liquidity risks (stated by your broker in your Client Agreement)
  • Event risks outside the control of you or your broker such as natural disasters (Hurricane Irene in New York of all places)
  • Computer problems, internet problems or even sickness
  • The fairly high stress level associated with Forex trading
  • Unexpected changes in market regulations that could affect retail traders
  • Other factors that can easily affect your focus and emotions

 

Among the benefits of this type of trading are

 

  • You only need to be right 4 times
  • Larger monetary cushion
  • More downtime in between trades to do other things
  • The option to take a break from trading when desired
  • Less trading-related stress
  • You become an ¨income-earner¨ rather than a ¨trader¨ 

 

If you were to put this trading strategy into an excel sheet, you would get to that 800% mark if 4 trades were done perfectly. However, if you then accounted for losses, you could still earn between 400% and 600% as long as you achieve 4 successful trades.

 

CONCLUSION

 

Day trading might represent a nice challenge for many traders, but I believe trading the larger trends are more rewarding. By risking more than the traditional 5% per trade, the trader stands a greater chance of supplementing or replacing traditional income sources given the risks of Forex trading. The important thing is to find the highest probability trades and to build up to a comfort level in order to make these trades. I have traded the 1st of 4 on my real account, waiting patiently for the next 3. Wish me luck.

 

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