Forex Strategy 80-20

Forex Strategy 80-20 - another very simple and quite an interesting strategy forex Linda Raschke (previously we looked at two of its strategy: Turtle Soup, Turtle Soup plus One), in which trade is conducted only on the daily range (D1) and the trading signals are only valid in during the 1st trading day.
To trade forex you can use any broker, but I recommend to choose a broker with Metatrader 4

Exploring the patterns of financial markets, it was noted that if the market price rose to the top or bottom 10% -20% of its daily range, there is a risk and it is 80% -90%, the next morning, the price will continue moving in the same direction (ie in the direction of the closing day candles), but eventually the price closes above or below this candle in only 50% of the time! That's a given fact (chance of a reversal in the middle of the 2nd day after the close of the 1st day candles) and allowed 80-20 strategy exist and be in demand in the financial markets.

So, let's look at how deals are made in Forex Strategy 80-20, by the example of a deal to buy.

Suppose we open a trading platform MT4 today and notice that:

1) Yesterday's daily candle was discovered in the upper 20% of its daily range and closed at the lower 20% of its daily range. That is, If the daily candle divided into 5 parts, the opening price of yesterday's daily candle is in the top fifth of the closed candles. A closing price at the bottom fifth of the daily candle closed.

Figure 1. Dedicated bearish candle was opened in fifth upper range and closed at 1 / 5 of its lower range

2) Today's daily candle was opened and the market price has gone in the same direction as the previous daily candle closed - that is, to sell, presumably at least 10-15 points.

3) At this moment, when the price is already below yesterday's low and we have a gap to be placed pending order, we set aside such an order to buy Buy Stop at yesterday's low price!

Figure 2. This is the same spark as in Figure 1, only the hourly interval. Expose the pending order to buy at a time when the price of the 2nd hour candles falls below yesterday's low.

4) After the opening of the trading position to buy, we install a safety stop-loss below a few points (3-5) for today's low.

5) Next, we use a trailing stop (Universal trailing stop in Metatrader 4 standard or a trailing stop on the 1 st paragraph) to lock in profits and tighten our stop-loss order at a safe distance that you define for themselves, depending on the chosen currency pair and volatility in the forex market.

For example, if the size of the daily candle 100-200 points, and trailing stops should be placed at a distance of 50-70-100 points. Candle 50-70 points - tryling-stop: 25-30 points.

6) If desired, you can put a profit target at a distance of at least 2-3 times the initial stop (as it requires us to money management forex). Or to take profits on the important Fibonacci levels, built by the first candle (38.2%, 61.8%)

7) Or you can simply rearrange the position of the level bezubytka as soon as you see fit and leave the transaction before the end of the trading day, and then look to close it or leave open. But I personally believe that it is better to use a trailing stop to lock in profits.

For transactions on SALE - rules the opposite!


Figure 3. Vystalyaem pending order for sale Sell Stop, at a time when the price broke through yesterday makismum. Stop-loss is 10-15 points higher than this maximum, since price is not too moved away from him and turned around.

Note: The transactions in this strategy are not so often, but if you observe the laws of several currency pairs, the probability of the conditions and entry into the market will garazdo above!

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Advisor to the 80-20 strategy - price from $ 10

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Subject to strict adherence to the rules of the forex strategy 80-20, we obtain the following results about trade (Test results Adviser 80-20 strategy):