Difficulty Level: Simple Chef
History of the Recipe
This strategy was devised by a novice and so should be simple enough for novices to apply. The principle is ‘mean-reverting’ – that is the price 90% of the time does not move in any trend but just back and forth.
- The rules
- Web charting
- Go long as price falls (or vice versa)
- Start with small $1 per point move profit or loss for example if GBPUSD rate moves 0.0001 you should make $1.
- If price hits $25 gain then exit or a $200 loss, whichever comes first
Money and Risk Management
- Since the stop-loss is so far away and we expect 90% of the time the market not to trend in a particular direction, the win-loss ratio is 9 to 1 ie for every 9 wins we get 1 loss. So our wins are 9x$25 and losses are 1 x $200.
Variations to the recipe
The stop loss can be reduced from $200.
Here’s one I made earlier
Below are the results from the strategy using actual trading results.