The 3 Trailing stop Forex trading system and risk management technique.

 

The 3 Trailing stop Forex trading system and risk management technique.

 

Recently we introduced a 3 Trailing stop system into one of our Expert Advisors. It dramatically changes the results of the EA in many ways.

Suddenly many of the settings became profitable when reversed. This means that even when one set of settings produced positive results. The results will remain positive even if the direction of trade was reversed.

The consequences of this are 2 fold.

  1. It means that one could enter a buy and a sell at the same time and be positive in both. At leastr the total of the 2 results would be positive. A perfect way of hedging to not only reduce risk but increase income
  2. It also means that the door to directionless trading has been opened. By entering a buy and a sell at the same time you are trading in a directionless basis.

What makes this possible?

It is a well-known fact that one way to succeed in Forex trading is to cut your losers short (Small stops) and let your winners run (bigger targets). The 3 trailing stop method makes this possible.

This is achieved when using the 3 trailing stop method which uses no target.

  1. The first trailing stop activates immediately and follows the price up (using the initial stop size as its following size) when it goes positive. It remains where it is when the price retraces.
  2. The next following stop takes over from this following at a certain point with a smaller following size and large steps.
  3. The last following stop takes over from the 2nd trailing stop at certain point with an even smaller following size and smaller stops.

This way the stops are reduced and the transaction is given room to run to a point much further than where a normal stop is placed. Because this happens to both the sell and buy legs the average loss becomes smaller. The average gain also becomes bigger that they normally would be.

 

 

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