I would like to share with you one of my trading strategy, which i call pyramide. I open not only one but up to three positions. It depends on market situation. The advantage of this strategy is that every other position risk is less and less and can make more profit, so TP:SL ratio is increased. I will explain how to trade my strategy and my set up of money management and TP:SL ratio, its up to you how you will set up your money management and TP:SL of this trading strategy, this article should give you basic explanation and i think some good ideas.
My strategy is based at technical analysis, im looking for double top and double bottom. I trade these formations only at these pairs: EUR/USD, USD/CHF and USD/JPY, because i really like volatility at these pairs and low spread. I have three types of these formations. The best type are from H1 and H4 charts, second category M15 and lowest one M5. It is really important to divide these formations in to categories, because H1 and H4 are much more better than others, so why should i risk the same amount as in case M5 formation.
Money management – mainly is adviced to risk around 2 – 5% per trade, depends on your initial deposit and trading strategy, but for this strategy i have special set up, i RISK 10% of my equity at H4 and H1 double top, 5% of my equity at M15 double top and 2% of equity at M5 double top.
How to trade these formations? Wait for first top, find a high price of this top and wait for finding support after retracement. It is really important to trade only quality, that means than you should trade only double tops formations, where retracement will be more than 50 – 60 pips, because this double top formation can let you make better TP:SL ratio. Very good double top formations are after big bulls movement, very important is watch 50% Fib retracement level. After the market seems to go back to testing for second time the top, set up 3 pending orders at these levels: in case M15 double top → first 2 lots at 5 pips before first top level, second 4 lots at 5 pips upper than first top and third 6 lot position 15 pips upper the first top and SL setup for all these pending orders at 25 pips upper first top. TP set up 60 pips for first position, 70 pips for second position, 80 pips for third position and after 20 pips move in your direction move SL to zero loss level.
1) only first position will be executed:
TP → 1 200$ profit
2) only first and second position will be executed:
TP → 1 200$ + 2 800$ = 4 000$
3) all three positions will be executed:
TP → 1 200$ + 2 800$ + 5 600$ = 9 600$
4) in case SL hitted:
SL → - 600$ - 800$ - 600$ = 2000 $
As you can see from the example above, thanks to this set up, we can increase own TP:SL ratio, because first position have ratio 2:1, second 7:2 and third 8:1. Lets calculate, that at average, from 10 trades will be 5 with SL, 2 with 1 case, 1 with second case and 2 with third case.
------------------------sum = 15 600$ of profit
2.56 : 1, TP : SL
At this M15 graph you can see very good double top, market was bullish at EUR/USD from 1.4069 to 1.4217 and very important support level on retracement was 50% FIB, you can see that difference between top and 50% retracement is 74 pips, which is very good space for profit.
From my own experiences, the best results i have with H1 and H4 double tops, when in 70% im making profits, with M15 i have profit at average in 58% of trades and in case M5 in 47% i have profit. Its all about finding. For trading double bottom, you can use the same rules vice versa. If you have any question, feel free to write it to comment and i will try to answer as soon as possible.