SLOWHAND (a method for trading slow market times) Read more: http://forums.babypips.com/free-forex-trading-systems/#ixzz3g3OIGk4A

INTRODUCTION

Consensus has it that fx markets trend only some 20-30% of the time. Interestingly, conversely, perhaps paradoxically, some 70-80% of trading methods are designed around efforts to capture those trend moves. In that context, we will see advice to trade only the most active pairs during only the most active time frames, i.e., try to catch the markets when they are moving.

Moreover, from the standpoint of looking for movement, you may have also heard that Mondays are difficult to trade because, presumably, the markets are just warming up. Friday afternoons are difficult to trade because traders are closing down early for the weekend. Holidays are supposed to be difficult as well as summers. Maybe it was Will Rogers who said, “Monday is a risky day to trade stocks. The other risky days are those ending in ‘y’.”

We can conclude, and the Baby Pips school confirms, that, if we are looking for movement, the best time to trade is probably during the London session on Tuesday, Wednesday, Thursday, and, maybe, Friday morning. For me, in the central time zone, this would mean that I am either using a robot or a set-and-forget method or I am at my computer starting 2:00 am. May not work for me. What about the other 70-80% of the time when markets are not moving? Would there be opportunities?

Even when the markets are supposed to move, think about how many times this has happened to you. Your favorite indicator, ea, or pa says here’s a movement, enter. Once entered, it’s like everybody went home. Elvis left the building and you watch while prices meander, wander, drift aimlessly, and drive us to the point of just wanting some relief, even if it’s hitting our stop. The point being, prices don’t move more often than they do move.

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SLOWHAND CONDITIONS

What if we’re not looking for movement? At least, not the dramatic 50-250 pip moves the trend seekers are hoping for. What if we want a market that isn’t going much of anywhere for a while, maybe ten or twenty pips here and there? Why would we want that and what kind of trading method would exploit slow market times? If the most active trading occurs during the London and on Tuesday through Friday morning, then the most INACTIVE would be Mondays, Friday afternoons, or any day after the London close.

If we want inactive trading, slow movement, we might also prefer to avoid the New York open and start looking when NY settles down, usually by 10:00 am to noon, my time. Considering London and the first part of New York, we have a closed window to avoid trading from about 6 to 15 gmt, which would be midnight to 9 am eastern, or 1 am to 10 am central time. Don’t get too fixated on the exact times. Observe the market. Are you seeing small range bars? One red, next blue, another red? Is it indecisive? Is it sleepy? Because of the time of day, is that sleepiness likely to continue?

Next, avoid news. We are trying to stay away from serious movement. News that affects the pair you are watching is likely to create movement. Do not trade for a couple of hours either side of a major announcement.

To summarize our SLOWHAND conditions for trading:

1. Avoid the most active market times, i.e., midnight to 9 am eastern.

2. Avoid news, probably a couple of hours either side of a major announcement.

3. Observe price movement. Satisfy yourself that it is slow and will probably continue to be slow for at least a while longer.



TRADING

We are going to straddle the slow market with limit orders placed at quarter-points. Quarter-points are 00, 25, 50, and 75. These points are places of minor resistance where the market may at least hesitate, if not reverse. The little research I have done has been only with the eur/usd, so everything following will be regarding that pair. Let’s say the e/u is at 1.4010. The nearest quarter-point up is 1.4025 and the nearest quarter-point down is 1.4000. We will place a one-unit sell limit order at 1.4025 and a one-unit buy limit order at 1.4000. We are hoping that price movement will be contained within this twenty-five pip range, that the market will drift one way just enough to put us in a trade, and then drift the other way just enough to get us a profit. Once entered, we do not want sharp, decisive moves. We want the meandering indecisiveness typical of a slow market.

More to come in additional posts.

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RISKS AND REWARDS

Our profit target is 10 pips and our stop-loss is 25. If the market moves enough to trigger our entry, we will then make money if it moves suddenly in our favor or if it slowly, undecidedly wanders far enough to trigger our profit. While this creates a 2.5:1 risk/reward ratio, we are looking for a high winning percentage to compensate.

RESULTS

Given the numbers, can this method work for us? The simple answer is that we will succeed if price vacillates within our determined ranges. How likely that is to happen requires some guesswork. At least from my perspective as I am not sophisticated enough to evaluate the complexities. In the way of results, I will offer this:

1. Looking at the hours excluding our avoid trading times midnight to 9 am eastern, from 8/6/12 to 6/18/15, we have 10,935 hourly data points. Within each of those hours, price remained in a fifty-pip range overall 10,815 times and broke the range 120 times. Now, this is hourly data and doesn’t mean we would have had the oscillations to trigger our entry and take profit. Some trades, especially during these slow market times will require significantly more than an hour and ranges may increase dramatically. Still, the evidence supports our notion that we have selected times when the market usually doesn’t go very far very fast.

2. I will be trading this on a live account and will set the date as of today. Entries are not planned and won't follow any kind of schedule. I will enter if I happen to be at the computer and think the market looks particularly slow. http://www.myfxbook.com/members/pipw...owhand/1235084

INDICATORS AND EA

We can make this pretty easy to trade with the help of a few programs, which I will be attaching. First, is a news feed I like. It plots a vertical line on the chart so you can actually see the news coming. Trading the e/u, my personal preference is to plot only high-impact news affecting that pair. Second is a simple trade session indicator which I program to show the no-trade time frame. Third is a really nifty ea called “close at profit.” We tell this ea to close at $10 profit or $25 loss and we tell it to close all positions, open and pending, when either mark is hit. In case we have other trades going in this account, we also tell it to function on only this pair. So:

Use profit to close, true
Profit to close, 10
Use loss to close, true
Loss to close, 25
All symbols, false
Pending orders, true

We can attach the ea to the chart, place our pending limit orders, and let the ea manage. I am also attaching a template that has my preferred configurations of these programs, but there are many adjustments you can make to suit yourself.

Copy “close at profit” to your experts folder, copy “forex news market clock” and “market sessions” to your indicators folder, and copy “slowhand template” to your templates folder. Of course, restart your mt4 platform, pull up an e/u chart and attach the template. I usually watch the h1, but it’s more fun to watch the m5.

IMPORTANT NOTE! This post applies to the specifics that were previously posted. They have since been changed and above posts now reflect the current working approach.

Arghh! So, after a month of messin’ with this and thinking I might be onto something, I finally decide to put it on BP. Next day, I take a hit that butt-wipes the profits to date. Because, yesterday, the e/u decided to pretty much go straight down after my long entry. Sigh.

But, not ready to give up on the observation that slow markets have an inherent low-target opportunity, I reviewed the 134 trades made with this method since May 29. It looks like 107 of those cashed profitably at x1 and 27 found it necessary to go to the x3 recovery trade. So, let’s consider eliminating the recovery dynamic altogether and trade a single position with a tp 10 and sl 25. Had we done that, our brief history suggests: (107 X 10) – (27 X 25) = net 395, or (can you believe?) about 15 pips per trading day.

I will also try some tighter stops, maybe 20 or 15, but…

Thanks for your support and help with this. Bobkat! Still kickin’ and just managing to pay the bills with fx.