Forex Strategy Spring - Feel Like a Market Maker
The trading system is not suitable for beginners and traders with an unbalanced psyche!
Hello ladies and gentlemen, comrades forex traders!
Today we’ll talk about a strategy called Spring. The strategy is based on those moments that market makers use in their trading. At the same time, speaking of market makers, I do not mean the very all-seeing and omnipotent Dolls that you probably imagined now. We are talking about those who make money on the spread, that is, creates a market, acting as the opposite side in the transaction. We will try to use the nuances that they use to obtain our own benefit.
Platform: MetaTrader 4
Currency pairs: GBPUSD, GBPAUD, GBPCAD, GBPJPY, EURUSD, EURGBP, EURAUD, EURCAD, EURJPY, AUDUSD, AUDNZD, AUDCAD, AUDJPY, NZDUSD, NZDCAD, USDCAD, USDJPY
Timeframe: W1 (weekly candles)
Trading time: From market opening on Monday to closing deals
Recommended brokers: RoboForex, Forex4You, FortFS
Attention! The strategy uses averaging tactics through a grid of orders. Strict observance of money management is necessary!
The basis of the vehicle
First of all, I would like to thank the user Old Oleg, who shared a strategy on our forum. The strategy is based on the good old Va-Bank, one of the most popular systems on the site, but with some changes.
The essence of the Wa-Bank strategy is as follows: if the size of the weekly candle is very large, that is, the pair has traveled a great distance in a week, then at the beginning of next week it is expected to roll back in the opposite direction by at least 50 points.
This rule works quite often, but there are situations when the rollback is delayed or insufficient. As a result, the position closes in the stop. It is with this dilemma that the Spring system is trying to cope.
A bit of theory
In the market, in addition to retail players, hedge funds, reptiles, masons and others, there are market makers - those who earn on the spread, overlapping our orders with you. Since at any time you can give a purchase order at the price of X and this order is executed.
At the same time, at this price there could be no offers for sale, that is, those who would act as the second party to the transaction. The question is, what will the market maker do with the order that they have already sold and earned on the spread? The market maker takes the risk, because he knows that the price is likely to return. That is, he can hold the position for a long time, knowing that in the end she will return anyway. If the price does not return, it will still make good money on the hype caused by any strong trends.
As an analogy, one can imagine exchangers who buy / sell dollars and euros, exchanging them for rubles. So, when there is a strong growth of the ruble or the dollar, then naturally, they still have some mass of rubles and a lot of dollars. They take risks by selling you a dollar, and you give them rubles. After that, the dollar exchange rate can grow significantly, but the exchanger will still earn on the difference between the sale and purchase prices.
What lesson can we take from this business? We can take risks to certain levels in the same way, knowing that in the long term we will still earn more on kickbacks. Spring's strategy uses the same approach. We will trade without stops using averaging. It sounds scary, of course, but the strategy was not created for beginners. With good money management and competent risks, it turns almost into a grail, one might say, it breaks even.
At the weekend, before the market opens, we are looking for a weekly candle with a body of 200 points (4 signs). This can be done using the indicator “candle_body_size”. This indicator displays the value of the body of each candle on the chart, so it will need to be hung on all traded pairs.
A more advanced option is an indicator from Va-Bank. The only thing in the parameters will need to enter the necessary currency pairs. On the chart, the indicator displays information immediately for all pairs, where you can also see the results of the previous week for comparison.
So we find a pair, the candle on which passed 200 points or more. At the market opening on Monday, we enter against the weekly candle. That is, if there was a candle up - we sell, a candle down - we buy.
Take profit - 50 points, the same as in All-In. But there are no stops. We are averaged if the take does not work out. We enter the same lot, after 100 points. Opening a second order, the total take profit is transferred to the opening point of the first order. Thus, if the price returns to our entry point, we get 100 points of profit.
So, the weekly candle closed with a body of 200 points. At the market opening, we enter the sale without stop loss, and set a take profit of 50 points.Further, the price goes another 100 points up. At the level of 100 points, open an additional order of the same volume and direction. Thus, the breakeven level will be exactly between two orders. At this level, the first order will have -50 points of loss, and the second +50 profit.We want to make a profit, so we set the profit at breakeven + 50 points. This wording will come in handy when setting up an auxiliary adviser. In fact, in this case, the take profit of both orders needs to be transferred to the opening level of the first order. When the price returns, we get a profit equal to the take profit from the first order.In the event that the price rises by another 100 points, open another order. The breakeven is now at the level of opening the second order, and the breakeven + 50 points approximately between the first and second orders. It turns out that on the third order we have +150 points, on the second +50 points, and on the first -50 points. Thus, at the breakeven level + 50 points, we will have +150 points of profit.And so on until the closing of positions in plus. Our goal is not just breaking even, but also getting profit
Automation of routine processes
The Argo Averager auxiliary adviser will help us automate the process of position averaging so that we don’t have to do all the calculations manually.
You open the first order manually, and the adviser will place all additional orders with the necessary TP levels. You only need to attach it to the chart and configure it correctly.
You can configure the adviser either manually or by downloading a special .set file from the archive at the end of the article. Do not forget to put out a lot suitable for your deposit size (see table below).
Advisor settings screen:
There is a rule regarding gaps. If at the market opening there is a gap towards opening a position (more than 15 points), the transaction is canceled. That is, if the price has already passed in our direction at the opening, then we miss such a deal. For example, see how this rule worked on EURCAD.
Also, according to the Va-Bank rule, if there is no profit within 48 hours, we transfer the take-profit to the breakeven level. In principle, if the situation is difficult, there are many knees, transfer the take of all orders to breakeven.
The author of the strategy in the branch on the form uploads weekly reports on transactions. Accordingly, the information may be interesting. In the same place, one of the members of the forum gave an interesting analysis for different pairs for 2016. GBPAUD turned out to be the most dangerous pair, so it can be excluded from trade.
Considering that additional orders will be opened and entrances without stops will be applied, drawdowns can be noticeable. That is why, the most important part of the strategy is money management. Our task is to ensure that drawdowns are less noticeable, but at the same time profitability is maintained.
According to the latest research of our members of the forum, the optimal level would be the following: 0.01 lots per 3000 units of deposit, or 0.1 per 30,000 units of deposit. With such money management, the drawdown should not exceed 20% of the deposit, which I think is the norm on Forex, and this is considered moderate risk. Profitability of about 100% per annum or more.
This does not mean that you need to deposit $ 3000 or $ 30,000 into your account. Just open a cent account. There is an opinion that cent accounts were created for those who do not have enough money even for a bottle of beer. But, such accounts are also used for martingale-based advisers, and for all similar strategies using averaging. And all this for compliance with money management. Suppose, having $ 100 on a standard account, on a cent account they turn into 10,000 deposit units.
Following a simple calculation, we conclude that for trading 0.1 lots you need $ 300, and for trading 0.01 lots, only $ 30 is enough. Thus, if you do not have the required amount in a standard account, use cent. For example, there are good cent accounts on Roboforex and Forex4You.
For clarity, below we have compiled a table with the sizes of the lot, deposit and the corresponding type of account.
|Account type||Minimum lot and lot step||Min starting deposit||Brokers Examples|
|Cent (with mini lots)||0.01||$ 30 (3,000 cents)||Forex4you|
|Cent||0.1||$ 300 (30,000 cents)||Roboforex|