01/29/09 EURUSD Trade

Written by Hugh, on January 28th, 2009

Here is my version of the triple screen. In his book Trading for a Living, Alexander Elder outlines his primary trading method, the Triple Screen. I don’t use it in the same way, but I do like the fact that he uses three simple indicators to setup his entry. I have tested this trade and it tests well, especially on this pair (results in a separate post).

My triple screen consists of the Williams %R with 62 periods and 10/90 levels; MACD with the default 12,26,9 setting and of course price, when it gets near support and resistance points.

The idea is to look for MACD divergence at points of support and resistance. Then I look to see if %R is outside the 10/90 boundries. If it is, I wait for it to roll out of the extremes before taking the trade. If it is NOT in over bought/sold then I pass on the trade.

I start with two lots. I target the first lot at the next closest support/resistance level. If the reward/risk isn’t equal or greater than 1/1, I pass on the trade. If the first lot hits the target, I move the second lot’s stop to +5 pips and I let it run it’s course. I move the stop as the market forms support/resistance levels during the move. In my testing, I was able to get 1,500 with this one lot sometimes.

The next step would be to figure out how to stack when I am in on those big moves.

Click above for larger image

Short 1 (300) EURUSD @ 3251
Stop @ 3330 (-79)
Target @ 3150 (+101)

I liked this trade becuase of the nice separation of the peaks and the very pronounced divergence on the MACD. What was the only problem? I set the stop too tight of course! As you can see, the trade woud have done very well! Instead, I got stopped out for -a 79 pip loss. I should have known better. Next time I will put it above the previous peak. In addition, I should have re-entered the trade because it was still a valid trade.

If you enjoyed this article, you might also like: