James Chen - Deep Pullback Strategy
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Transcript of James Chen - Deep Pullback Strategy
Deep Pullback Strategy
James Chen, CTA, CMTDirector of Technical Research and Education
FXDD
Key Principle: Trade T.P.B.Identify the TREND. Watch for PULLBACK. Trade the
BREAKOUT.
Risk
Reward
Underlying Principle: RISK CONTROL through stop-loss
1) Trend
2) Pullback
3) Breakout
Strategy:
Deep Pullback
Deep Pullback: 3 MA Pullback Trade
• Three moving averages (simple: 200, 100, 50)• Only trade with the trend when three are in correct
order• Enter only when Stochastics pullback coincides with
price pulling back to 100 MA or more.• Stop-loss at last swing.• Target 2-3 times RISK or better.• (Optional) Trail SL to lock in breakeven and further
profits.
Position Sizing and Taking Profit
• Stop-loss is right above/below the last swing high/low. Measure the number of pips from entry to the stop loss. Call that 1T.
• Size trading position so that the dollar amount of 1T does not exceed 2% of your overall trading equity.
• Set your overall profit target at 2T-3T.• (Optional) At 1T profit, bring stop-loss to breakeven.• (Optional) At 2T profit, bring stop-loss to 1T profit.• (Optional) At 2½T profit, bring stop-loss to 2T profit.• (Alternatively) Enter trade with 3 positions and stagger exits.
James Chen, CTA, CMT
• Director, Technical Research and Education at FXDD, a global forex broker
• Active forex trader/analyst since inception of retail forex, using primarily technical analysis. Traded equities and futures.
• Chartered Market Technician (CMT)• Registered Commodity Trading Advisor (CTA)• Publish daily and intraday currency analysis at TradersLog.com,
FXDD.com• Authored numerous articles in Forbes.com, Futures Magazine,
Technical Analysis of Stocks & Commodities Magazine, SFO magazine, etc.
• Quoted by Reuters News, Dow Jones, Bloomberg, Associated Press (AP), International Herald Tribune, etc.
• Author of Essentials of Foreign Exchange Trading (John Wiley & Sons, 2009), Essentials of Technical Analysis for Financial Markets (John Wiley & Sons, 2010), and High-Probability Trend Following in the Forex Market (FX Street, 2010) DVD set