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Average Daily Trading Range Templates
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The templates that I'm about to present you represent the systematic component of my discrete-systematic trading method. These tem plates were created to organize the trading process in the most effec tive, simple, and timesaving way, reduce stress, and save traders worry and money. Actual trading with use of the templates is based on recognition of certain market behavioral patterns.
To make a trade, you have to choose the correct template that corre sponds with the current market outlook, and then follow the prescribed procedure automatically. Almost all of the templates can be customized to fit the needs of the majority of traders in terms of capital size and risk ac ceptance. Despite the fact that all the templates described here are divided into chapters devoted to different kinds of trading signals, the borderlines between templates from different categories are not so clear. Combina tions composed by parts taken from two or more different templates can also be used. I believe that such an approach will eventually allow every trader to create his or her own individual and unique trading style and technique.
Start creating your own trading templates by using the basic ideas and principles described in the book and this particular part of it. As you understand, it was absolutely impossible to research and describe all possible options based on the ideas of this book, and turn them into different templates. Therefore, I have used only those basic ideas that should give you the ability to start making money from the very beginning. It has to give you a solid basis on which you can build your own trading style and technique, without risking too much and wasting money for testing something that may not even work properly.
Guide to Trade Templates: |
1. Potential profit and risks |
1. Very low |
2. Low |
3. Below average |
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4. Average |
5. Above average |
6. High |
7. Very high |
2. Points to take profit (Target): |
PI, P2, P3 etc. |
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P>L |
Positive |
P=L |
Neutral |
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P<L |
Negative |
Brief situation description: |
From the day opening and throughout the Asian session, the market is drifting up and down on both sides from the opening price within a 30 to 50-pip range but without forming any specific pattern. |
Currency recommended for a trade: |
USD/CHF, USD/JPY, EUR/USD, EUR/JPY and other Euro crosses. |
Trade characteristics: |
Basic (conservative). |
Trade (entry point) suggestions: |
Take a position in the direction of the move on the break of the opposite side of the range: A. Buy on the break of the previous range as soon as the market reaches the top and makes a new high directly after forming the bottom of the range, OR B. Sell on the break of the previous range as soon as the market reaches the bottom and makes a new low directly after forming the top of the range. |
Entry time: |
The beginning of the European session, but not later than 2 to 3 hours into it. |
Entry execution: |
Entry-stop or market order. |
Stop loss placed: |
At the opposite side of the range. (Below the previous range low or above the previous range high.) |
Reverse if stops triggered: |
Recommended with automatic entry stops. |
Target (custom choice): |
30 to 40 pips (PI) |
Average daily range (P2) |
End of the day (P3) |
Potential profit estimation: |
30 to 100 pips |
Profit probability evaluation: |
High |
Risk evaluation: |
Low |
P/L ratio: |
Negative to Positive |
favor of the open position: |
The position was open in the direction of the most current medium- term trend. (In this case P2 and P3 schemes are preferable.) |
The market has formed a flat surface on the opposite side of the range, where the stops are placed. This is a potential risk warning. Taking profit as soon as possible can solve the problem. |
Possible complications, disadvantages, and risk warnings, and advice to avoid them: |
RW: The position was open against the direction of the most current medium-term trend. |
A: Limit your profit with 30 to 40 pips or do not take a position at all. |
Additional notices, recommendations, and trading tips: |
If the market did not give you the opportunity to pocket a profit or you did not take it for some other reason, then there is a high probability that, after the stops were triggered and position reversed, you will be able to cover the initial loss within the same trading day. |
Box 18.2 |
Brief situation |
From the day opening during the Asian session, the market was drifting |
description: |
slowly in only one direction from the open price at a distance 40 to 60 pips |
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without forming any specific pattern. |
Currency |
USD/CHF, USD/JPY, EUR/USD, EUR/JPY and other Euro crosses. |
recommended |
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for a trade: |
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Trade |
Basic (conservative). |
characteristics: |
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Trade (entry point) |
Take a position in the direction of the move on the break of the opposite |
suggestions: |
side of the range: |
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A. Buy on the break of the previous range as soon as the market reaches the |
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top and makes a new high directly after forming the bottom of the range, |
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OR |
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B. Sell on the break of the previous range as soon as the market reaches the |
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bottom and makes a new low directly after forming the top of the range. |
Entry time: |
European or NY session. |
Entry execution: |
Entry-stop order. |
Stop loss placed: |
On the opposite side of the range. (Above the previous day high or below |
(Cannot be chosen |
the previous day low.) |
in accordance with |
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a trader's |
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individual |
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situation and |
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preferences. |
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Money |
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management |
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principles must |
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apply.) |
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Reverse if stops |
Recommended. (Automatic and simultaneous with stops.) |
triggered: |
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Target (custom |
Average daily range (PI) |
End of the day (P2) |
choice): |
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Potential profit |
50 to 100 pips |
estimation: |
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Profit probability |
Average to High |
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Average to Low |
P/L ratio: |
Neutral to Positive |
Potential |
The position was open |
The position was open |
The market broke |
advantages in |
in the direction of the |
in the direction of the |
an important |
favor of the open |
medium-term trend. |
main move of the |
trendline, support |
position: |
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previous day. |
or resistance. |
The most probable |
RW#1: The position was |
A#l: Move your stops closer and place |
complications, |
open against the direction |
them above (below) the previous local |
disadvantages, |
of the medium-term trend. |
extreme formed the same day. |
and risk warnings, |
RW#2: The position was |
A#2: Same as above. |
and advice to |
open against the main |
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avoid them: |
move of the previous day. |
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RW#3: The market has |
A#3: Accept the risk. |
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formed a "flat surface" |
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on the opposite side of |
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the range. |
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Brief situation description: |
From the day opening during the Asian session, the market was drifting slowly in only one direction from the open price at a distance 40 to 60 pips without forming any specific pattern. |
Currency recommended for a trade: |
Cable, USD/CHF, USD/JPY, EUR/USD, EUR/JPYand other Euro crosses. |
Trade characteristics: |
Optional (risky). |
Trade (entry point) suggestions: |
Take a position in the opposite direction of the move and toward the open price of the day. |
Entry time: |
A. End of the Asian session — beginning of the European session; OR B. As soon as the range of 40 to 60 pips is formed, but not later than 2 to 3 hours into the European session. |
Entry execution: |
Market order. |
Stop loss placed: (Can be chosen in accordance with a trader's individual situation and preferences. Money management principles must apply.) |
50 pips from the position opening price. |
Below the nearest obvious support or above the nearest resistance. |
Above the previous day high (below the previous day low). |
Behind the nearest major trendline (if applied). |
Reverse if stops triggered: |
Not recommended. |
Target (custom choice): |
The day open price (PI) |
Average daily range (P2) |
End of the day (P3) |
Potential profit estimation: |
50 to 160 pips |
Profit probability |
Average to Above average |
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Below average to Average |
P/L ratio: |
Neutral to Positive |
Potential advantages in favor of the open position: |
A flat surface on the opposite side of the range is formed. |
Common gaps near the day open price are formed. |
The main move of the previous day was in the same direction as your position is. |
Possible complications, disadvantages, and risk warnings, and advice to avoid them: |
RW#1: The position was open against the direction of the medium-term trend. RW#2: The position was open against the main move of the previous day. |
A#l : Take profit at the day open price. A#2: Take profit at the day open price. |
Additional notices, recommendations, and trading tips: |
If the market after a position was open comes to the day open price, you can move your stops closer and place them right on the opposite side of the range. In this case, the target to take profit can also be moved further and placed at the end of the day or at average day range. |
Box 18.4 |
Brief situation description: |
The market has formed the day range 80 to 100 pips by the end of the European session — beginning of the NY session. Now it's closer to the end of the range, which is opposite to the previous day's main move direction (or the medium-term trend direction) after going all the way from the opposite side of the range. |
Currency recommended for a trade: |
USD/CHF, USD/JPY, Cable, EUR/USD, EUR/JPYand other Euro crosses. |
Trade characteristics: |
Trade of opportunity. |
Trade (entry point) suggestions: |
Open a position in the direction of the main move of the previous day (or the medium-term trend) at 30 pips ahead of the day high or low. |
Entry time: |
Very late European session and/or NY session. |
Entry execution: |
Entry-stop order. |
Stop loss placed: |
At the closest side of the range. |
Reverse if stops triggered: |
Recommended with automatic entry-stops. |
Target (custom choice): |
Average daily range (PI) |
End of the day (P2) |
Potential profit estimation: |
100 to 140 pips |
Profit probability evaluation: |
Average |
Risk evaluation: |
Below average |
P/L ratio: |
Positive |
Potential advantages in favor of the open position: |
N/A |
Possible complications, disadvantages, and risk warnings, and advice to avoid them: |
N/A |
Additional notices, recommendations, and trading tips: |
If the stops were triggered before the profit is taken, there is a good probability to cover the initial loss within the same trading day. |
Brief situation description: |
The market makes a new intraday high or low after going all the way from the opposite side of the intraday range. At this moment the range is 2 / 3 or more of the size of an average daily range. Just 3 to 5 hours or less are left till the end of the trading day. |
Currency recommended for a trade: |
USD/CHF, EUR/USD, EUR/JPYand other Euro crosses. |
Trade characteristics: |
Basic (conservative). |
Trade (entry point) suggestions: |
Enter a position in the direction of the move on the break of the previous intraday high or low. |
Entry time: |
Late NY session. |
Entry execution: |
Entry-stop order. |
Stop loss placed: |
On the other side of the previous range. |
On the previous intraday swing top/bottom. |
Reverse if stops triggered: |
Recommended with automatic entry-stop. |
Cautiously recommended. |
Target (custom choice): |
Average daily range (PI) |
End of the day (P2) |
Major trendline, support or resistance (P3) |
Potential profit estimation: |
30 to 60 pips |
Profit probability evaluation: |
Very high |
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Very low |
P/L ratio: |
Negative |
Potential advantages in favor of the open position: |
N/A |
Possible complications, disadvantages, and risk warnings, and solutions to avoid them: |
N/A |
Additional notices, recommendations, and trading tips: |
N/A |
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