How to find entry into a position with low risk (15 to 30 pip's) while you can achieve quality money management?
First of all we need to determine weather we need high or low volatility for this kind of strategy.
For this setup we need high volatility. First question that we come by:"When do we have high volatility?"
Of course that depends from currency pair to pair.
Highest average volatility pairs by sessions:
-At London session GBP/USD
-At New York session EUR/USD, USD/CAD, USD/CHF, GBP/USD
-At Asian session USD/JPY, AUD/USD
We need to search our entry into position at the beginning of the session because there is high volatility which is indicator of further price movement direction till the end of the session.
One little but very important detail is that entry into the position has to be looked for half an hour after session opening because price has defined the direction and volatility is still high.
Next step is to determine fresh support and resistance line on 1 min chart which spread should be from 15 to 30 pip's (stop loss).
Upon price break trough one of the lines we should keep an eye on volatility because if there is low volatility we need to pass that chance.
If volatility is high or medium we need to enter into the position with stop loss 2 pip's under or above the opposite line.
That is how we accomplish short stop loss.
Take profit should be determined with money management 1:3, 1:4 which will allow us to be profitable even if we are right in only 25 to 30 percent of cases.
For taking the profit there is a certain hour to close the position without consideration of profit or loss. Exact time is one hour before session close.
Because all day traders will close their positions at that time and correction will show up.
We must use active position management. If you see that price has turned against you don't wait for stop loss to be hit, but when you get confirmation of turn, flat the position (get out of the position).
This strategy has been mostly effective if you don't trail with stop loss.
This strategy should be traded every day except holidays and days when we have FOMC meeting!
