Deep Pullback: 3 MA Pullback Trade• Three moving averages (simple: 200, 100, 50)• Only trade with the trend when three are in correct order• Enter only when Stochastics pullback coincides with price pulling back to 100 MA or more.• Stop-loss at last swing.• Target 2-3 times RISK or better.• (Optional) Trail SL to lock in breakeven and further profits.
Position Sizing and Taking Profit• Stop-loss is right above/below the last swing high/low. Measure the number of pips from entry to the stop loss. Call that 1T.• Size trading position so that the dollar amount of 1T does not exceed 2% of your overall trading equity.• Set your overall profit target at 2T-3T.• (Optional) At 1T profit, bring stop-loss to breakeven.• (Optional) At 2T profit, bring stop-loss to 1T profit.• (Optional) At 2½T profit, bring stop-loss to 2T profit.• (Alternatively) Enter trade with 3 positions and stagger exits.
James Chen, CTA, CMT• Director, Technical Research and Education at FXDD, a global forex broker• Active forex trader/analyst since inception of retail forex, using primarily technical analysis. Traded equities and futures.• Chartered Market Technician (CMT)• Registered Commodity Trading Advisor (CTA)• Publish daily and intraday currency analysis at TradersLog.com, FXDD.com• Authored numerous articles in Forbes.com, Futures Magazine, Technical Analysis of Stocks & Commodities Magazine, SFO magazine, etc.• Quoted by Reuters News, Dow Jones, Bloomberg, Associated Press (AP), International Herald Tribune, etc.• Author of Essentials of Foreign Exchange Trading (John Wiley & Sons, 2009), Essentials of Technical Analysis for Financial Markets (John Wiley & Sons, 2010), and High-Probability Trend Following in the Forex Market (FX Street, 2010) DVD set