range trading or trend trading?

These two trading approaches are most preferred ones in technical analysis based trading. The trends are easier to recognise ( higher highs or lower lows on hourly (or anything else) bars, for price to go lower/higher of a simple moving average line). Additionaly, if a trend is recognised at the beginning phase, it can give a huge profit or look at the other side, catching a trend in the beginning, lowers the loss for being caught on the wrong side.

Trades based on ranges require more discipline and less emotion. Catching a range is also a skill and if it is properly used, it gives more profit than trend trading since the markets are moving in sideways 70-80% of the time in general.

Check out the chart above. You can see some examples for these two styles. They can be not perfect since I just opened a chart and signed the examples I've found.

quantitative easing

There is a good article about quantitative easing at dailyfx.com . For Turkish readers, I also suggest reading this article.

maximum adverse execution

Dailyfx , which is my one of favorite forex related web site, has started to publish series of articles about designing trading systems. In this series the writer mentioned about an important point of trading systems: Maximum adverse execution. Maximum Adverse Excursion is the maximum loss of a trade after entry. If you are long then it is the lowest low after your entry bar. If you are short then it is the highest high after your entry bar.

Setting your stop losses using this data, is very crucial for your systems. I am using this tecnique in my systems but I've never heard of this term before. Sounds cool :)

Here are the links for the read:
one


two


three

four

trade hours

if you are not a professional trader, according yo you trade style, you may have to make a desicion. For example, if you are opening and /or closing your trades in current value of a currency pair, you somehow reach the current value, evaluate it according to your strategy (or system) and apply the desicion. Using %100 automated system such as Metatrader, is out of this context of course. But for majority, this is not the case.

In this situation, you should trade in your available times. But, if you have some kind of freedom to choose your available times, which times are the best for trading? The main subject of the article.

Forex trading starts at sunday evening (in european time ) and ends at friday evening. Between this approximately 120 hours, the trading session in uninterrupted(Christmas day and such big occasions are exceptions).

So you can trade morning, noon, afternoon, evening or night. But which is the best time for trading. It would be a cliche but it depends. It depends on your trading style. You may trade using 5min charts using momentum indicators. Or you may trade using 1 hour chart for range trading.

I usually prefer momentum and trend based trading. So I should seek high volatility and volume, but not the peak times.

High volume and volatility occurs in overlapping hours of different markets:

New York 8am to 5pm EST
Tokyo 7pm to 4am EST
Sydney 5pm to 2am EST
London 3am to 12 noon EST

So, morning hours 6 am - 9 am (gmt) and afternoon (12-16 gmt) are the most critical overlapping hours. This hours are like pivot points. They indicates many things to enter a trade or closing a trade.

Big turns in trends and momentum accelerations happens in these hours generally. So if you use these hours carefully, your chance for being the correct side of the market increases dramatically.

I am using these hours in 1 hour time framed trades. I usually use morning hours to choose a side (to enter a trade) and generally close at afternoon overlapped hours.

2 systems of mine obeying these rules doing pretty well in these days. If they can prove it for a longer period, i will post them.

drawdowns

I've been busy on designing new systems that would be profitable since the last post. For now, 4 (amybe 5?) different systems are in my lab and I am using 2 of them in real trading, and the other 2 are waiting in the line. Why? Because the combination of all of 4 requires a big account that could save itself from big drawdowns. Drawdowns are one of the main threats (why not "only" but "one of them", I will explain later) for a system. Sooner or later, an average system will produce positive outcomes. But for small traders who are trying to follow a system, entry point (not of a trade but of a system) could be very important.

What is drawdown? There are some info in here and here. Check them out. I will share my ideas about systems and my trade results later.