When market conditions meet certain criteria in
our analysis techniques the
trading system generates STF, which is delivered to clients via email
as a
price chart snapshot. The image is delivered as an attached file in a GIF format.
The STF image with an entry signal contains the price and the time
at which the signal is generated. At this price level the entry criteria of our trading system is triggered.
It is recommended to enter a trade by market order as soon as possible
after receiving STF (which is usually sent within 1-5 min after generation).
Also, an SMS alert can be sent notifying about an STF
email delivery. It contains just two words "STF BUY" or "STF
SELL", so one should have access to his email box to get more detailed
information.
The profit target forecasting lines (Targetmin
and Targetmax) give a trader
an early indication of where potential opportunities are forming. They are visual investment tools that provide a precise, calculated way to measure a
potential market's price movement. In most cases an exit signal is
generated when the market reaches the Targetmin line.
The most important thing for a trader should be a
drawdown (DD). Our trading system enables you to identify a potential
drawdown from the trade entry point.
The
DDMax and DDMin drawdown lines (rays) begin at different points in the imaginary vertical line drawn
through
the last price bar on the
chart and, throughout the time period, either converge, diverge or remain
parallel. As usual an opposite DD line has the same slope but with the negative
sign. In
most cases the drawdown forecasting lines (DD lines) have got
the same forecasting power as the profit targets forecasting lines (Target
lines). It means that there exist a rather high probability that the market
can first hit the DD lines. A trader can use these lines to determining the risk/reward of a potential position, to apply a pyramiding strategy or a stop-loss
strategy.
The STF image with an exit signal contains the price and the time
at which the signal is generated.
It is recommended to exit a trade by market order as soon as possible
after receiving an exit signal (which is usually sent within 1-5 min after
generation).
Initially the trading system was configured to generate
exit signals when either the Targetmin (more often) or Targetmax line (more
rarely) was hit or, in other words, when either the prediction of the minimum
or maximum profit target level was fulfilled. The
choice between the minimum and maximum target depended on market behavior in
each case, i.e., when the market met an exiting criteria of the system by
hitting any of the profit target lines, an exit signal was generated. In most
cases an exit signal occurred when the price hit the Targetmin line.
In March 2010, the system was re-configured to
determine the trade exits by market price activity not only at the moment it
hit any of the profit target lines,
but at any other times. It means that now the exits can also
be triggered at any place between the entry level and the Targetmin line or
between the Targetmin and Targetmax lines.
It is crucial to have good timing in trading. This
new system function enables to identify the likelihood of a change in price
movement at the exact moment it begins, and thus helps avoiding sometimes a
considerable drawdown before the market will reach the profit target. These
signals can be thought of as early exit signals.
It's important to realize that stop-loss orders do not guarantee you'll make money in the
forex market; you still have to make or follow intelligent investment decisions. If you don't, you'll lose just as much money as you would without a stop loss, only at a slower rate.
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Although a choice of where to place a stop-loss order
is always up to a trader, you can also take advantage of the drawdown forecasting
lines when placing a stop-loss or making a decision of exiting out of a
position. We, for example, set the stop-loss level 60 pips away from the
DDMax line's starting point and thus consider a trade as lost if this level is
hit before you will reach a profit target or before a profit exit signal will
be generated.
Below we suggest another concept of stops placement
(more tight) that is connected with the DD lines geometry.
1.Symmetrical
triangle As the
two converging DD lines meet to form an angle, the pattern resembles a symmetrical
triangle. In this case it is recommended to place a stop-loss order not less than 50 pips
outside of the DDMax line and shift it in dependence with the slope of this line.
1.Reverse symmetrical
triangleAs the two DD lines can be extended to the left to form an angle with a
common point at which they diverge, the pattern resembles a reverse version of a symmetrical triangle.
If the vertex angle of a triangle is relatively small, it is recommended to place a stop-loss order
min 50 pips from the starting point of the DDMax line. In case the vertex
angle is rather big, you can shift the stop order parallel to the DDMin
line.
3.
Broadening and narrowing formationsThese
formations differ from the triangular ones because (1) The DD lines (rays)
starting points are usually more distant from each other, and thus the
formation's width is bigger; (2) The lines have a smaller inclination
angle.
The most important is
that the DD lines forming those formations have the same forecasting power as
the Target lines.
This concept would
be useful to those who prefer an aggressive way of trading, or to those who want
to breakeven or increase their profit. Our trading system ideally fits such a
style of trading.
Pyramiding refers to adding lots/contracts to existing positions within a market.
An investor may consider taking a new entry (entries) in the same direction as an already open position
when the market moves against this position in the direction of the drawdown
forecasting lines (DDLines).
The fact of drawdown should not mean that the initial
profit target forecast was incorrect and the position will not be able to
recover. While the profit target forecasting lines model the positions of
future market's highs (in case of the long entry) or lows (in case of the
short entry) through time, the probability that they are penetrated only increases
with time .
In this situation pyramiding can be used to either
increase profit or to breakeven. The best time to take a new entry is when the
price has reached the DDMax forecasting line, although it can be done at any
moment when the price is on its way to the drawdown targets.
- Did you send the exit signals only for targetmax or did you send two exit signals (targetmin and targetmax)? The reason I asked because, lets say I got the entry signal and took the position. Then when the targetmin is hit, lets say you send the exit signal. Now should I exit the trade or should I wait thinking that the trade will hit targetmax ?
Only one exit signal is always sent. It can happen
anytime when the market is between the entry level and the targetmax
forecasting line. The profit target forecasting lines are given to enable you
to assess the perspectives of the trade and are not strictly connected with
the exit signal. We are concentrating on the trading signals, while the
forecasts are being given with the informational purpose only.
- Once the
targetmin is hit, does the system generates new signal or does it wait until
the targetmax or stoploss is hit?
Again, an exit
signal can be generated anywhere (in most cases it happens when the targetmin
is hit). In case an exit signal is triggered at the targetmin, the system can
then wait until the targetmax is hit, or it can generate new entry signal of
any direction. It is very easy: you receive an entry signal and open a
position, then you receive the exit signal and close your position. That's
it.