A member of the chat room asked me yesterday about drawdown figures, which is a very good question. As I’ve always stressed, this system is not the Holy Grail of Forex....because there isn’t one..... but what it does do (when mixed with common sense) is increase the probabilities of a successful trade. As with any system, there will be drawdown & the amount will depend on your trading plan, the timeframe you trade on & also on your own psychology. I don’t list all drawdown because there are too many variables dependant on each trader. My trading style is active so I list the figures that are relevant to that style.
If for example you can only look at the charts every hour or so, then you will have to set your targets & stop loss & manage them every hour & your drawdown will be different to an active trader who watches the charts for signs of reversal on smaller time frames & closes positions with profits where possible. A set and forget style will also have a different set of results.
To demonstrate an example of variable outcome depending on trading style, I'll use the signal from yesterday which the question of drawdown was raised on. The 1h CP gave a Triple Play short signal at point 1 on the charts (when the signal was produced all the 6 pairs formed a Bearish signal), GU had rejected the DR3 & the Weekly pivot & EU had rejected R1 & 740 resistance, AU was under R1 but had not rejected it. This looked like a high probability set up & potentially a reversal to previous lows (WS1) which would offer excellent RR with SL’s being above the signal candles, using Pivots, S+R levels & fibs for targets on the way down.
The trades played out for a few hours & neither first targets nor stop losses (above signal candles) were hit. The US jobless claims announcement was due @1.30 GMT+1 & that had the potential to move the market so it made sense to manage the stops on any positions that were still open. 5 minutes before the news, from the 1h Triple sell signal AU was +20, EU was +25 & GU was +20.
There are several courses of action that could have been taken here but my preferred one is to remove a portion of the trade before the news release & move stops to break even. If the news moves price against your trade, then you will get stopped out but will still have taken some profit from the trade & if the news moves price in favour of your trade then your remaining portion if free to move on to your profit targets (usually very quickly).
What happened next: AU reversed & hit stop loss at be, EU dropped quickly to target 1 for +50 at the Pivot & then reversed hitting stop loss at be & GU formed a Double play long signal (against the short position) so the remaining portion could have been closed there for +20 or closed when price revered & hit stop loss @ break even.
All outcomes depend on how you trade & where you place your stops. For example if you have placed your GU stop above the signal candle & the next resistance level a few pips above DR3 & 600 double zero then you would still be in the trade at +40. If you had placed your EU stop above the signal candle then you would have been stopped out for -30 but if you had placed it above the next resistance level (weekly Pivot) then you would still be in the trade @-10. With AU if you had placed stop above the signal candle then you would have been stopped out for -20 but if you had placed it above the next resistance level R1 & sinking 4h resistance then you would still be in the trade @+5.
With the active trading technique, in this instance, all trades closed in profit & the pairs then produced another profitable Triple short signal 8 hours later.However the active trading style is a lot more stressful than others & requires you be at your screen full time & is definitely not for everybody.
My advice is for every trader to trade the style that suits them but I would suggest that new traders use only Marks daily trading ideas.