When to stop the pendulum

‘strategy no.1 – lay low, back high’ 

It’s one of the first bits of trading advice I got 7 years ago. Good advice but a bit of an empty statement. Do I back all markets low? When do I trade out?

The latter of these two questions is something I’ve been considering recently with some old bots I’m looking to revamp. You always see traders talking about laying low, none talk about the back part to exit the trade. Conscious they are exiting early and not profiting as much as their peers, perhaps not trading out and watching the market slide back to 1.01.

Back in July I set target profits for these bots but in truth didn’t know if it was right or not. It felt right, based on the number of trades possible in the time the market existed.

Last month, I screwed the target and set it to run infinite, the more it hit, the more my potential loss was reduced. What I have now is a month worth of results and I can calculate the average p/l per trade on which I can estimate p/l targets if I introduce that in the future.

Rather than having to concentrate on an exit price per trade (that is set), I am confident I can collect more data to make this more accurate over the coming months.

I am a big fan of graph analysis, it shows resistance, support and price around which the market pivots. I think of it link a pendulum, sometimes it swings big, sometimes small.

I mentioned the pendulum as it’s going to play a part in the next series of blogs where I’ll detail building, testing and implementing a new bot from scratch. Let’s see how it goes, any requests?…

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