A Breakthrough Into Forex Expert Advisor | Automated Forex Trading System

Turn Pyramiding Strategy Into Mechanical Trading

by admin on 27/05/09 at 6:10 am

This is a quick overview of the system logic and how to implement a pyramiding strategy into auto-trade program. I know It’s a little teachies, but I’ll try to explain it in as easy as possible. Just please feel free to ask should you have any trouble to comprehend the content of this article. Ok. Let’s start.

BASIC LOGIC

The idea behind this method has been around for a long time and we are not the creators of the logic. What we have done though is add some basic tweaks and personal ideas the general logic.

The system was developed with the understanding that the market goes where it wants to AND you and I as traders don’t know and can’t predict with long term accuracy which direction it will go. With this in mind, our goal is to go with the market. Pretty simple.

How do you take advantage of a market moving regardless of the direction? You add long positions as the market is moving higher, and as the market is moving lower, you add short positions. With the Forex, you can have both a long position and a short position in a currency at the same time from different levels. I’ll get to what this means later in the article. As a market is moving in one direction or the other, once the net profit from all longs and shorts equal some predetermined minimum, you exit all positions.

This logic is called pyramiding. It has been around for a long time, but is dramatically misapplied in most instances. Pyramiding is a popular technique of adding to positions as the market is moving in your favor based on technical analysis. Most of the time, protective stops are used with positions. For example:

Market is at 100. As it moves higher, you add a position every 10 points:

100 = 1 position
110 = 1 additional position
120 = 1 additional position
130 = 1 additional position

At 130, you have a total of 4 positions at an average cost of 115. If you use a protective stop at 100, you will lose 60 points. At 130, you have a profit of 60 points. If your profit objective (total) is 100 points, the market needs to hit 140 and instead of adding another position, you simply exit all 4 long positions. Here, the market moved higher by 40 points and you made 100. If you started with 1 position and a protective stop at 90, you were risking 10 points. But if that protective stop raises to 100 once the market hits 130, your risk is at 60 points, not 10.

So, there is power in the profit potential with pyramiding, but it also carries drawbacks as well. It isn’t long before the risk of holding become huge.

There is another scenario you have to think about too. What if the market hits 131 and then drops to 100, and then moves back up to 140? You were stopped out at 100 for a 60 point loss and the market moved back up to the initial profit target. How do you prevent that from happening? You don’t use protective stops. But, in this example, not using protective stops means that the risk balloons by 40 points for every 10 points the market moves below 100. At 60, the loss is at 220 points!

In other words, there are a lot of problems that are associated with pyramiding that must be addressed before a trader can properly potentially reap the benefits associated with this method.

The one absolute KEY element to any potential success with pyramiding is that you do NOT OVERTRADE! This is why this Pyramiding strategy  can only be traded on the Forex.

In order to do it properly, you must be able to continue to build a position and not use protective stops. With the Forex markets, you can trade very, very small. You can add many positions without adding huge risks. At some point, no matter how small the trade size, you can get to a position size that is too risky for your account size, so the key is to make that as unlikely as possible.

RULES

When a cycle is started, wherever the current price is will become the 0 line. It doesn’t matter where the 0 line is. The idea behind the concept is that the market will eventually move higher or lower from it’s current price.

A cycle is a series of trades that are placed and accumulated until the total net profit target from all trades combined is hit, exiting all trades at that level.

1. Inverted rule – A large percentage of the time – the market will trade 4-5 ticks above and 4-5 ticks below the 0 line. These are the only prices that will be inverted from the rules.

For each tick 1 – 4 above the -0- line, you will sell one position.

For each tick 1 – 4 below the -0- line, you will buy one position.

2. Pyramiding Rule – As the market begins to move beyond 4 ticks above or below the -0- line, you will begin to add positions in favor of the direction of the market. Accordingly, as the market moves down, you will sell one position for every point below the -0- line – 4 ticks (remember, the first 4 ticks below you are buying one position, not selling). Likewise, for each tick above the -0- line + 4 ticks, you will be buying one position.

3. Once all the trades that are open total a profit target that you set, all the trades will be closed out within seconds, thus locking in your profits.

Let’s take a look at how this works:

Buy 1 etc until profit is reached
Buy 1
Buy 1
Buy 1
Buy 1
Buy 1
Buy 1
Sell 1
Sell 1
Sell 1
Sell 1
Sell 1
0 LINE——————————
Buy 1
Buy 1
Buy 1
Buy 1
Buy 1
Sell 1
Sell 1
Sell 1
Sell 1
Sell 1
Sell 1
Sell etc until profit is reached.

In the example above – you can see the 0 line. This is the price at the time you start the system. Let’s assume for example sake that we are trading the EURO (EURUSD) and that the moment we start the system, the bid price on our chart is 1.2100

Since a large percentage of the time the price will oscillate 4 or 5 ticks above and below the 0 line before a profit target is hit, we can capitalize on this range. After those first 4 or 5 ticks, we want to join in the direction the market is moving in hopes that we catch a trend to get us to our profit target.

It doesn’t take a large move in one direction or the other to hit the profit target. Obviously the smaller the profit target, the smaller the required move.

For the EUR/USD, the suggested profit target can be 100 points (total from all positions). Assume for a minute that we are not using the inverted rule, and are instead simply buying for every tick above the -0- line and/or selling for every tick below the -0- line. Here is what it would look like if the market immediately moved lower without ever moving higher from the -0- line:

-0- Line = 120.00	(Total Points)
Sell 1 @119.99	0
Sell 1 @119.98	+1
Sell 1 @119.97	+3
Sell 1 @119.96	+6
Sell 1 @119.95	+10
Sell 1 @119.94	+15
Sell 1 @119.93	+21
Sell 1 @119.92	+28
Sell 1 @119.91	+36
Sell 1 @119.90	+45
Sell 1 @119.89	+55
Sell 1 @119.88	+66
Sell 1 @119.87	+78
Sell 1 @119.86	+91
Sell 1 @119.85	+105

Without using the inverted rule of buying the first 4 ticks the market moves down and then selling, the market only has to move 15 ticks to pull the 100 points in total profit. If the profit target is set at 50 points, then the market only needs to move 11 points from the -0- line (again, without having moved above the -0- line).

If the market moves above the -0- line in the above scenario by 5 ticks first (again, not using the inverted rule), and then moves down by 15 ticks, the net profit will not be the same as above. That is because at -15 ticks (below the -0- line), the 5 long positions are losing (remember, you can be long and short positions at the same time in the Forex). At -15, this is what the 5 long positions are losing:

Buy 1 = (-16 points)
Buy 2 = (-17 points)
Buy 3 = (-18 points)
Buy 4 = (-19 points)
Buy 5 = (-20 points)
Total = (-90 points total)

Since the total short positions = 105 points profit, the net is only at 15 points profit. Therefore, the target price increases to 22 points to the downside. It looks like this:

Sell 1 @119.85	+15
Sell 1 @119.84	+25
Sell 1 @119.83	+36
Sell 1 @119.82	+48
Sell 1 @119.81	+61
Sell 1 @119.80	+75
Sell 1 @119.79	+90
Sell 1 @119.78	+106

The process is that for every opposite position, the target increases by a factor of greater than 1 to 1. There were 5 long positions that moved the profit target 7 points lower to reach the total 100 point net profit.

Below is the table that works, and it works in both directions:

Column 1 = positions in one side or the other.
Column 2 = positions on the other side.
Column 3 = total points with the combination of column 1 & 2

Notice that if you have 15 long positions and no short positions, the net profit is 105 points.

If you have 5 short positions (column 2), you need 22 long positions to exceed the 100 point net profit level (market needs to go 22 points above -0- line).

If you have 10 shorts and the market begins moving higher, you need the market to move 31 points above the 0 line to exceed the total 100 point profit. You get the idea.

15	0	105
16	1	103
17	2	99
19	3	108
20	4	100
22	5	106
24	6	111
26	7	115
28	8	118
29	9	100
31	10	100
34	11	121
36	12	120
38	13	118
40	14	115
42	15	111
44	16	106
46	17	100
49	18	123
51	19	116
53	20	108
56	21	133
58	22	124
60	23	114
62	24	103
65	25	130
67	26	118
69	27	105
72	28	134
74	29	120
76	30	105
79	31	136
81	32	120
83	33	103
86	34	136
88	35	118
91	36	153
93	37	134
95	38	114
98	39	151
100	40	130
102	41	108
105	42	147
107	43	124
109	44	100
112	45	141
114	46	116
117	47	159
119	48	133
121	49	106
124	50	151

Once the net profit from all positions exceeds 100 points, all positions are exited within seconds. This ends the cycle. Once the cycle ends, a new -0- line is immediately established and the cycle begins all over again. This goes on continuously until you turn the system off, or unless the range increases so large that you become at risk of being over-margined and forced out of positions. This will be discussed later on in this manual.

Remember, all of the above is without the inverted rule.

Recap of Rules –

As a market is moving higher above the -0- line, add long positions until the total net profit from all positions hits the target level. As the market moves below the -0- line, add short positions until the total net profit from all positions hits the target level.

Probabilities:

The key to this strategy is to not exit a cycle until the profit target is hit. Based on this theory, it can only work if you have the funds to hold onto the times where the market is in choppy action. Based on the size of the profit, the probability of this happening without a serious drawdown occurring is extremely good. However, there is one problem with this strategy that needs to be understood. It is possible that the drawdown becomes so big that the probability of hitting the profit level diminishes and the probability of the drawdown growing increases. It is this possibility, regardless of how small, that you must prepare for. You must prepare for it because it only has to happen once for the drawdown potential to hit 50% or more. At that point, the probabilities are not nearly as favorable of coming out of the drawdown. They are still favorable, but it is only by 58%.

To illustrate this, I have included an example of number of positions and size of drawdown. Below, the first column represents long positions and the second column represents short positions. The third column represents drawdown in points.

To make sure you understand, this is not a likely event. It is possible, but not likely. Further, this is just an example where the number of longs and shorts are the same. This is also very, very unlikely. By the time you hit 175 on either side, it is most likely will have hit the 100 point profit long before. But, should it happen, notice that you would be in a drawdown of 30,800 points.

150	150	-22650
151	151	-22952
152	152	-23256
153	153	-23562
154	154	-23870
155	155	-24180
156	156	-24492
157	157	-24806
158	158	-25122
159	159	-25440
160	160	-25760
161	161	-26082
162	162	-26406
163	163	-26732
164	164	-27060
165	165	-27390
166	166	-27722
167	167	-28056
168	168	-28392
169	169	-28730
170	170	-29070
171	171	-29412
172	172	-29756
173	173	-30102
174	174	-30450
175	175	-30800

(Note – this is why you must trade small with this strategy. With 1 micro mini, the drawdown exceeds $3,000 in this situation). Assume that you are in this position. You have 175 longs and 175 shorts. The drawdown is at 30,800 points. Just to make back this drawdown and hit the 100 point profit target, the market has to move beyond the -0- line by 425 points. This means that if you have 175 longs and 175 shorts and you are 175 points above the -0- line, you will continue adding longs as the market moves up. The market has to move up an additional 250 points to offset the shorts and hit the 100 point net profit.

There is a lot that can happen here. First, the market can move up another 100 points, adding 100 positions to the long side so that you are now 275 longs and 175 shorts. As soon as the market comes off the highs, the drawdown will resume and potentially increase if the market moves too much further down. If the market then makes a long- term move to the downside so that it reaches 175 points below the -0- line, the drawdown is at 70,000 points. Further, just to come out of that drawdown, the market would have to move an additional 500 points to the downside.

As you can see, the wider the range becomes, the less probable coming out of the drawdown becomes. This is the risk of this method.

I stated this part first because I did not want you to minimize it with the next section. You must prepare for the above scenario regardless of how small the probabilities are, an they are small.

To even get to 175 longs and 175 shorts, the market has to not just do one thing, but a combination of things that are just bizarre. Let me show you the probability of the range expanding beyond 22 points away from the -0- line with 5 longs and 5 shorts open (in other words, the cycle has just started).

At 5 longs and 5 shorts, the market has to move 22 points above or below the -0- line to hit the 100 point net profit. For the market to not hit the target level, it has to keep expanding that target level on a continual basis before making a nominal run to one side or the other.

The illustration above shows a sequence for an expanding range and the probability of the range to expand again. From the -0- line, the market moves down 5 points initiating 5 short positions (not using the inverted rule for this example). The market needs to continue moving to -15 in order to take the profit. Therefore, it has to move down an additional 10 points. If the market goes above the zero line at all, that level expands. If the market drop to -5 and then increases to +5, the market needs to continue moving up an additional 17 points to take the profit, or move down 11 points to expand the range. Accordingly, the probability is greater that the market will move back down and increase the range than hitting the profit point. The pure probability of hitting the target (not including any kind of momentum affect), is 39% compared to 61% probability that the market will drop back down to at least -6, thereby expanding the range.

This is the main reason for the inverted rule. If we are buying the first 4 ticks down, then the target level after the market moves back higher drops to +10. I’ll get to this illustration in a minute

Compare this with the market moving first from the -0- line down to -5. It needs to hit only -15 to take the profit, which is only 10 points away. In order to expand the range to +5 it needs to move up 10 points. Therefore, the probability of hitting the profit target at -15 is exactly the same as hitting +5.

If the market drops back down to -10, then it needs to continue dropping another 12 points down to hit the profit level which is now at -22 (we are only long 5). On the flip side, it only needs to increase 16 points to expand the range. It has a 57% probability of hitting the target level before it goes back up to expand the range (43% probability).

If the market then moves to +10, it needs to continue moving to +31 in order to take the profit target. This is an additional 21 points to the upside. Likewise, it can expand the range once again by moving down to -21 below the -0- line. Accordingly, there is an equal probability of seeing the target hit or seeing the range expand.

If it runs to the upside and expands the range to +15, the market needs to continue moving higher by an additional 21 points (+31 above -0- line) to hit the target (60% probability). The market would have to move down 31 points to expand the range again (40% probability).

Again, if the market drops to the downside to -20 to expand the range, it needs to continue dropping an additional 22 points (target now at -42 below -0- line) to hit the profit (62% probability). It would have to move up 36 points in order to expand the range again (38% probability).

Finally, If the market moves higher to +20 above the -0- line to expand the range yet again, the market would have to move an additional 33 points to the upside to hit the target (54% probability) verses 41 points to the downside to expand the range yet again (46% probability).

The drawdown at 20 longs and 20 shorts is approximately 420 points at the top or bottom of the range. This is approximately $42 on a micro mini.

If all were 50/50, there would be a 1 in 256 probability of the range expanding similar to above 8 different times without hitting the profit target. However, the odds are better than that because things are not 50/50. From -15 on, the probability is in favor of hitting the target.

Nonetheless, the probability of not hitting the profit target after 20 range expansions (based on a similar scenario as above) is better than 1 in 1,048,576.

At 20 range expansions based on a similar situation, there would be a minimum of 55 longs verses 55 shorts. The drawdown at 55 longs and 55 shorts is approximately 3,080 points. This means that trading 1 micro mini, the drawdown would be approximately $310.

There is one last scenario that I want to provide before moving on. Obviously, my goal is that you understand as fully as possible the probabilities in various circumstances. Below is the worst circumstance that can happen. This means that the market comes within 1 tick of hitting the profit target and then turning around and coming within 1 tick of hitting the other side of the profit target. If it continues to do this, losses mount up faster with fewer range expansions.

The first move is down. The market needs to hit -15 to take the profit. It only goes to -14 and then turns around. In order to take the profit from an up move, it now has to move all the way up to +40. If it hits 39 and turns around, the market then needs to drop to -100 below the -0- line to take the profit. If it hits 99 and turns around, it then needs to hit +241 to take the profit on the upside. If it hits 240 and turns around, it is going to have to travel all the way down to 581 to take the profit on the downside.

At 240 long positions and 99 shorts, as the market is moving down and hits the -99 level again, the drawdown is at 47,829 points. This is approximately $5,000 with a single micro mini.

The question is, what is the probability of the above scenario happening? Very, very slim. There is only a 1.8% chance that the market at -14 will not hit -15 before it hits +39.

There is only a .7% (as in 7/10ths of a percent) chance that the market at +39 will not hit +40 before it hits -99.

There is only a .4% (as in 4/10ths of a percent) chance that the market at -99 will not hit – 100 before hitting +240. There is only a .1% (as in 1/10th of a percent) chance that the market at +240 will not hit 241 before it travels down to 581.

If these were 50/50, there would only be a 6.25% chance that all four of the above moves would happen in a row. Obviously, the probability is closer to 99.99% that all four of the above moves will not happen because of the high, high probability of each single event not happening.

My point is that if it the range expansion happens slowly, creating many, many range expansions by a small amount, or if it happens based on the largest possible expansions without hitting the profit target, the probability of increasing to the point of knocking out more than $5,000 – $7,000 in the account based on a micro-mini is very, very, very small.

Again, not impossible, but show me another strategy that has a probability better than this of NOT hitting a $5,000 drawdown. I do not know of any system that has a better probability of not hitting the $5,000 drawdown (again, based on a single micro-mini).

It is based on the above probabilities that the maximum largest expected drawdown is about $3,000 with on micro mini. As explained above, it is not impossible to exceed this drawdown (and exceed it fast if it hits), it is simply very, very unlikely.

(Note – The probability of an event with the probability 60% NOT occurring 10 times in a row is 1/100th of 1%. The probability of an event with a probability of 99% of NOT occurring 4 times in a row is 1/100,000th of 1%)

Staggering Cycles

What you are about to read is probably one of the most important sections of this article.The above probabilities are based on indisputable mathematics. However, it is practically impossible to take into account every single possible scenario and assign a probability with it (and come to a finale conclusion as to the final overall probability of success). We know it is high.

There is a bit of a paradox with this system though. That paradox is that one the one hand, as the volatility of the underlying market increases, so does the potential number of closed out cycles and so does the potential profit. On the other hand, as the volatility increases, so does the probability of getting stuck in a larger drawdown with an expanding range cycle.

We have seen an increase in drawdowns around 10% or more during higher volatility time periods. Because this system will perform different over the short-term because of when you start a cycle, you may go into a drawdown when others are racking up closed out cycles. However, over the long-term, it is only a matter of time before you get stuck in one of these expanding range cycles that could last for weeks in bad situations.

Accordingly, if you have the ability run more than a single cycle at a time, but with different zero lines (starting times) so that while one is in a drawdown, the second one is closing out numerous cycles, you will be creating a probability of success that is many times greater than if you were to simply keep only one cycle running at a time.

For example, if you have a $20k account and you decide to trade 2-micro minis, you would start one cycle with 1 micro, wait for it to go into a bit of a drawdown and then start the second cycle with the second micro-mini. This way, the probability increases dramatically that the second cycle will start closing out profits if the first cycle gets caught into a bit of a loop. If both series of cycles end up closing relatively closely, then you start the process over again. Start one and wait for it to hit a bit of a drawdown, then start the second.

There may be times when the first cycle just keeps pumping out closed trade profits and doesn’t go into a drawdown, but it will only be a short period of time before it goes into some sort of drawdown.

This begs the question of when to start the second series of cycles. The long answer is based on the next section which is called “Cycles Within Cycles”. The short answer is anytime the max number of buys or sells reaches around 30, start a second cycle at about 2/3rds of where the max buys or sells exist.

For example, let’s say we have a loop of 30 buys and 20 sells. In order for the cycle to start another cycle at around the 20th out string of cycles if the first one moves higher, to say 40 buys, and then starts to move lower. If the market moves higher and generates 40 buys with the first cycle, the second cycle will have 20 buys. If the market then drops, the market would then need to pack on cycles may have closed out a profit and started another cycle around the 40th first. If the market tanks and moves 100 pips to the downside, there would be total of 40 buys and 60 sells on the first series of cycles while the second series of cycles probably closed 3 or 4 profitable cycles.

There are several benefits to this in addition to the obvious. Another benefit of staggering start cycles is the fact that when one goes into a drawdown, it is only with half the trade size. Let’s say you get stuck in a 30% drawdown with a single cycle. Since you have a $20k account and are only trading 1 micro per cycle, a serious drawdown is not 30%, but 15%. Further, another benefit is that the probability is strongly in favor that the second cycle has been closing out profitable trades which further cut that 15% drawdown to something smaller. Finally, during small drawdowns, second cycles have the possibility to completely offset them.

It most certainly is possible that both cycles get into a drawdown. In fact, it is impossible for both cycles to NOT be in drawdown at the same time. However, the probability of both cycles going into an extended drawdown at the same time is extremely small, especially when you wait to start the second series based on a little logic. Don’t get too caught up in when to start a series of staggered cycles as you will never know what the market is going to do and will never be able to pick the optimum time to start the second series. The “Cycles Within Cycles” section below talks about how to take advantage of exact situations.

In conclusion of this section, it is my strong suggestion that you put yourself in a position to stagger cycles, especially when volatility is higher. The easiest way to do this is to set up two accounts and be running the Pyramiding strategy on two different machines. When one is in a drawdown, you simply start the second machine. (you can also run two copies of the platform on a single computer each assigned to a different account).

On a side note, if you open up an account to have this traded for you, the broker implements the staggered cycles. But you have to have the $20k account to do it.

Also, you can be as creative with this as you want. There is nothing to prevent you from taking a $30k account and starting 3 series of cycles, etc.

Cycles within Cycles:

This section is slightly different than the Staggered Cycles section. This section deals with starting new (and second) cycle while there is an original cycle going. The difference is that there are only specific times to start the second cycle and when it is done, you do not start another cycle. In other words, it is not a new series of cycles, it is a cycle strictly limited to be executed at a certain point during the first cycle.

The theory of having a cycle within a cycle is based on being assured of closing one cycle at a profit if a previously started cycle does not reach the profit. For example: If you start a cycle at 120.00 and the market immediately drops to -5 and then pops up to +16. The target is at +22. The market needs to make a 6 point move to the upside to hit the target. If it moves to -6, it will expand the range. If you start a new cycle when the first cycle hits +16 in this scenario, you are assured of closing out either the first cycle or if not, the second cycle before the range expands on the first.

22 (target for first cycle)
21
20
19
18
17
16 (start second cycle here)	-0-
15	-1
14	-2
13	-3
12	-4
11	-5
10	-6
9	-7
8	-8
7	-9
6	-10
5	-11
4	-12
3	-13
2	-14
1	-15 (second target 100 point target is hit)
-0- (The market goes down to –5 first making the upside target at -22
-1
-2
-3
-4
-5
-6

In this example, you are starting a cycle with zero additional risk. In fact, you are guaranteed to take a 100 point profit from one of the two cycles, thereby hedging a bit against a growing drawdown. This second cycle can be implemented multiple times during a single cycle at any time where the movement would guarantee the closure of one of the two cycles.

When the range is larger, you can start the cycle within 15 points of the highest or lowest point of the range. If the market moves up 15 points, you are guaranteed the closure of 2 cycles. If the market moves up 10 on the second cycle and then drops, it only has to move down 31 points below the second -0- line, far from expanding the range on the second cycle. At that point, the only way the range can expand on the second cycle is by taking the profit of the first.

If the market moves down first, you will be able to take the profit on the first cycle but may still be in the second cycle as the profit target may have increased. For example: The target on the first cycle is now at +53. At +38, you start a second cycle. If the market continues to move up, you will close out two profitable cycles at +53 instead of one. If you start the second cycle at +38 and it drops down 5 points first, then the target on the second cycle moves up to +60 instead of +53. Therefore, if the market moves to +53 and you take the profit on the first cycle, you will still have the second cycle open.

You can then begin to play second cycles on the second cycle. =0) You can immediately begin another cycle at +55. If the market moves up to +60, you will take another profit. If the market moves down to +40, you will take the profit target on the second, second cycle.

To implement manually, you could simply open two accounts and start the second cycle at the appropriate time level. Obviously, the problem with this is that you would have to monitor each original cycle to know when to start the second one.

The ultimate execution of this method that will give the absolute highest probability of long-term success, the least amount of drawdown and the highest profit potential is to be able to have a combination of staggering cycles and additional cycles within cycles be executed within each staggered cycles. The probability of success in that situation is astronomical.

NOTE – Understand that if you start a cycle within a cycle and fast market conditions hit, you may not be able to generate a buy with each tick. From time to time, this may cause the target level to change and the guaranteed profit doesn’t occur. It shouldn’t change dramatically and only ever so slightly increases the risk of getting stuck in two cycles, but you should be aware of it nonetheless.

Money Management Calculations:

Based on the risk analysis provided previously in this manual, trading more than 1 micro mini per $10,000 is strongly discouraged. The first rule in trading is survival if at all possible. Fortunately, money management can be used with this scenario. If you start with $10,000, you can increase to 2 micro minis at $15,000. You will still be risking $5,000 per micro mini, so you are risking all of the profits and still $5,000 of the original, but after this, the worst case level begins to increase:

$10,000 = 1 micro mini. ($5,000 risk based on above worst case scenario)
$15,000 = 2 micro minis ($10,000 risk) (can start staggered cycles)
$25,000 = 3 micro minis ($15,000 risk)
$40,000 = 4 micro minis ($20,000 risk)
$60,000 = 5 micro minis ($25,000 risk)
$85,000 = 6 micro minis ($30,000 risk)
$115,000 = 7 micro minis ($35,000 risk)
$150,000 = 8 micro minis ($40,000 risk)

$100,000 = 1 mini ($50,000 risk)
$102,500 = 1 mini + 1 micro mini)
$107,500 = 1 mini + 2 micro mini)
$115,000 = 1 mini + 3 micro minis)
$125,000 = 1 mini + 4 micro minis)
$140,000 = 1 mini + 5 micro minis)

These are example suggestions only. You need to understand money management principles.

TIPS

We can’t stress enough to use LOW leverage. Even with low leverage you are at risk still. There are no guarantees in trading. We hope this method gives you an edge for making it!

This method makes its money when the market moves – and it doesn’t matter in which direction. One way you might want to trade it is by opening up new cycles at the London session open (2 AM EST) and stopping it after cycles have been closed. Also – open new cycles if you don’t have any working before major USD news announcements like the GDP or non-farm payrolls. If you are stuck in a cycle – just let it sit there and eventually, when the market moves and barring a series of highly unlikely events, you will close out the cycle in profit.

Finally, you must understand that with any auto-trading situation, the success is dependant on the reliability of the technology being used to auto trade the strategy. If you internet connection goes down, you need to have a back up in place so that down time is as short as possible. You will either need to call in the broker to offset all open positions immediately, and/or get the system back online as soon as possible. If you are short 10 positions and long 5 with the market moving higher, and your connection goes down, you will be losing on 10 short positions without adding longs to offset.

Obviously, if that happens and you are short 50, you are looking at a serious potential problem. It could go either way (and pop you a nice profit), but you do not want to take the risk, so make sure you understand this importance and have a back up plan in place. This is another reason why watching a demo account trade this for a few months is so important.