Another jewel set of indicators to SEE the emotions of the market. Thanks!
It's so funny...all these indicators to SEE the same thing. I've been trading this way for awhile, but this indicators make it clear.
For those of you who are struggling to figure this out from a money management perspective try this on for size.
Your theoretical account is $10000. You want to risk 4% per trade. That's $400. Start your first trade at 10K units, the second at 30K and the final trade at 90K. I personally like to target 15 pips on the EUR, with a total trade risk of 30 pips (I don't start my count until all 3 positions are on, and from my average position if the market moves 31 pips against me I'm out). All you need to make money with this setup is to win 7/10 trades. Personally, I'm finding the win ratio closer to 90%. I've been trading this type of setup for awhile, but without the indicators (just what I SEE). Using the indicators just makes it that more clear to me, that fading EXTREME MARKET EMOTION is the key to consistent profitability.
If you are wondering, the reason why we are martingaling into this position is because the further price moves on an extreme high or low, the greater the probability that it will reverse meaningfully. Does this work all the time? No, but it doesn't need to. Before anyone asks, yes this is the opposite of what you are told to do in all the trading books. Funny how that works, huh?
I Martingaled this morning on cable and had a huge, huge down day.