(A deeper discussion can be found from the book Uncharted Stratagems)
I once said to my Forex Trading group that "There is always a simple solution for everything. We just have the faith to believe that there is and never stop looking and trying."
I used to be an engineering professor in one of the top universities in the Philippines. As I teach circuit designing, some of my students were asking why they couldn't find the methods and formula that I had been teaching them in text books and books in the library. My answer was "You won't find it anywhere because I developed them on my own to simplify the process. Even if you will double check it with the long methods in the books, you will get the same answer". This is how I look at everything. I always believe that there are always simple ways to solve any problem. All you need is to believe and never stop exploring and experimenting on how to achieve it.
I have carried this belief in my entire 17-year life as a Forex Trader. You know what? It is true in every meaning of each word. If I am going to describe in one word the Forex Strategies and "Secret Sauces" that I have discovered, that would be "SOLID".
I will give you some tips about it in here...
There are 4 focuses in our methods; Entry Plan, Money Management Plan, Exit Plan, and the Attitude/Behavior (Psychology) in implementing those plans. Let's discuss entry plan here...
Entry Plan
There are 3 categories of entry plan analysis.
1) Weak - to tell you the truth there are so many weak entry analysis out there. These are the type of entry plans that make the traders disappointed most of the time. Weak entry analysis is bad to your trading plan because no matter how good your money management, exit plan, and attitude, your chance to profit is almost zero. Meaning it has no chance at all. If you keep doing it, you will see your account to burn. There are 2 ways to check, manual or automated forward testing, and automated backtesting. If you are hoping to find a method that you can use a stop-loss without a script/robot, you have to have a patience to forward test your entry strategies for at least two years. Why 2 years? Because in a successful entry strategy that uses a stop-loss, you will experience weeks, months or even a year with a negative profit. Not all the time of course, but once you encounter it, you may doubt your plan and may stop the testing process or change the plan in the middle of it. Changing plan in the middle of the test is as bad as stopping it. That's the truth on Trend-Following type of trading plan. For scalping with 2 to 10 pips of target profit and with a tight stop-loss, that has long been made difficult by the brokers platform due to high spread volatility, or calculated fixed commission on low or zero spread platform. This is a fix on brokers problems more than a decade ago on scalping expert advisors that can turn $100 to $1M in less than a year.
If you trade with fundamentals, you have no choice but to manually forward test your strategy. You can not fully automate it, but you can create tools to semi-automate and make trade entries and exits faster. There are still many fundamentals traders out there because it is one of the best strategies that you can learn. Some combine it with technical analysis to create a strong entry plan. But whatever you do with fundamentals, you can only forward test it manually. This is the reason why there are more pure technical traders nowadays. There have been even debates and battles going on between the 2 purists; the fundamentals and technical traders. Let's just respect these 2 group of traders. Opinions of traders are limited to what they have experienced so far, so let's just respect if they don't want to explore more and if they just believe that their methods are the only best methods of all methods. Me? I purely trade technically by choice but I do believe that there are still more better strategies out there than mine. That made me keep going and never stop learning more everyday.
2) Moderately Strong - This kind of entry plan is the one that will make you confused. As you use it, you can feel that it is good and has a potential but when you use a Stop-Loss with it, you get hurt all the time. This kind of entry and exit strategy when you create and use a robot for it, you will see that there is no way that you can profit from it when you use a Stop-Loss. These are the kind of entry plans that are discovered and being used by traders that doesn't use a Stop-Loss and promised that they will never ever use a Stop-Loss again. (Let's just respect that) You can still use this kind of entry plans, but you have to use a different approach with your exit plan. I have plenty of these entry methods and they are ones of the the "SOLID" ones. To give you some tips, confirm your analysis at a multi-timeframes and multi-pairs level (a bit like a correlation analysis approach). Also backtest all the possible parameters you can think of to protect your fund like tracking and controlling the "Margin Level %" (Yes, it can be controlled :) ). Two approaches are best for this "Grid" and "Hedging". You just have to choose which one to choose but the safest in most moderately strong entry plans is "Hedging". In my book Uncharted Stratagems, I listed some SOLID moderately strong entry plans that I have been using, and also the SOLID but simple solutions on money management and exit plans without using stop-loss, "Grid" and "Hedging". Plus, the expectation on each method so you can behave appropriately to avoid unnecessary false action that you may do when in fear or in greed. To know more about the book to be released in the 4th quarter of 2019, please click here https://mailchi.mp/d9894b4a4db8/unchartedstratagems.
With this entry plan, you can fully automate this but you may not fully backtest it because some strategies need a correlation analysis to become more powerful and successful, so you need to forward test.
3) Strong - This has been the "Secret Sauce" that have been looking by traders all the time to make them trade deliciously. This is the kind of entry analysis that you can use a stop-loss. If you discovered a very good one, you can even use a fixed stop-loss. In my experience, some that I discovered, you can use as low as 20pips but can still be successful in the the LONG-TERM. It is not easy to discover this because you have to have a heart of steel, or a balls of steel if you prefer it hehe, especially if you are forward testing it. I haven't released my Expert Advisors (I have 4 working EAs) on these even in the Inner Circle as I have been still filtering who deserve to have these. In my book Uncharted Stratagems, I discuss how to manually trade one of these EAs in full details, including expectation so traders can behave appropriately. To give you one keyword as a tip to discover your own strong entry plan is "BREAKOUT". All strong entry strategies that I discovered are all breakout strategies, and you can use it all for Trend Following exit plan and not on "scalping'. It is a pure technical analysis approach that you can automate and backtest for up to 10 years.
So that's it. These are all based on experience. I hope I gave you some insight on how to design your own.
