There are many in the industry who have taught traders a far too simplistic novice approach to entering and exiting positions. I’m not sure how or exactly why this style of market play has become so pervasive, but it has. Often times I am asked about a particular trade or I am asked about the direction of a particular security and it is usually followed up with a need for specific “price targets”. See the problem with most traders mentality and their approach to the market is they rely on just 1 entry and 2-3 exit points or price targets. This style of market play is very restrictive and binds the traders optionality limiting their odds of success. Let me explain…
The beginner or novice trader tends to plunge all of his or her capital allocated for a particualr trade, into the market all at once – at one particular price, at one specific moment in time. If you truly think about this concept, it is quite naive or overconfident to say the least. Trading is hard enough as it is to try and get both direction and time right, yet why is it that some traders think they can pin point the exact moment in time at the exact price point to commit ALL of their hard earned capital? This style of market play limits your odds of success right from the beginning. But it’s not just the 1 entry method that restricts your probability of success, it’s this concept of 1-3 “price targets” after your enter that is again attributed to some magical price point with no concept of the time it takes or how a security goes about reaching that particular price target. Let me explain further….
What if you enter say the EURUSD short precisely on the high of an intermediate-term move on the hourly chart at 1.08 and you then set your predefined stop say 50 pips above the market at 1.0850 and you then move to setting your “price targets”. You then choose these price targets most likely at some support level or some Fibonacci retracement level for example below the market – at 1.0750 and then do the same for 2 more targets lower. The novice trader then waits and hopes for their specific price targets to be achieved and or their stop is triggered with a move higher after their initial short entry. In this example, what if the Euro begins to fail and after several hours after being oversold, the price comes just within reach of your 1st target at 1.0750 stopping just shy at 1.0755 and then immediately retreats only to reverse back on you and then run your stop triggering your stop level at 1.0850 and you take your loss. This is a perfect example of how the price target fails to take in account the oversold nature of the EURUSD pair prior to just missing your target and also more importantly – “price target” trading takes in no account of time. How much TIME has gone by matters. If a full cycle of 8 hours goes by and your target has not been met and the cycle begins to turn up – the trader who has a cyclical approach and a cyclical model and process will realize the profit before the cycle turns even though his prior magical price target has not been met.
This is how we want to trade at Jenkins Risk Management, this is how are team trades based on oversold/overbought and based on the cycles and TIME. We also employ a strategy where we DO NOT buy in one lump some at one price but we scale in over several entries and we also add and reduce the size of our plays further compounding our results. We then exit based on the cycle and time as well as when a market or security becomes overbought and oversold, not just based on specific price targets.
Here’s an example of a day-trade we took last week on our global trading team. We began our trade on GBPJPY with the 30min and 15min cycles based on both trend and time, we then play our size accordingly to a proprietary trading method we teach, and we then exit the majority of our position at the top of the cycles. Here’s an example of our timing method with the cycles in the below charts…
And here is the 15min cycle for GBPJPY on that same morning….
Then here is a look at us adding and reducing to our play – this style of market play is far superior then just one entry and 2-3 exit points or “price targets”. Here we see successful long entries followed by profit taking into the highs and then reversing short with the cycle and adding and reducing on the way down from the short side.
All green arrows showing a string of winning trades – not one loss in these two cycles. This again is the proper way to trade instead of plunging in at one price and praying for your targets to be hit, this is a method based on time first and price and trend second. If you are interested in trading forex with us and or learning to trade with this method, check us out at www.JenkinsRM.com you can also follow more of our work and learn this trading model and process across a variety of markets.