43# Proactive and Reactive Trading
Submit by Janus trader 03/04/2011
(Strategy by Kathy Lien pages 146-148Day Trading and Swing Trading)
Time Frame: 5 min
Pairs: Majors
Long
1. Enter into half of the position no more than 20 minutes before a major
news report will be released.
2. Place a stop 10 pips below the range low or 30 pips below your entry
price, whichever is smaller.
If the economic data is in line with the initial proactive trade:
3. Enter the second half of the position 5 minutes after a major news
report is released.
4. Put a stop for the entire position at 45 pips below the second entry
price, and then trail by 20-day SMA.
5. Take your profit on half of the position when it moves in your favor by
45 pips.
6. Trail stop on the remainder of the position by the 20-day SMA.
Short
1. Enter into half of the position no more than 20 minutes before a major
news report will be released.
2. Place a stop 10 pips above the range high or 30 pips above your entry price, whichever is smaller.
If the economic data is in line with the initial proactive trade:
3. Enter the second half of the position 5 minutes after a major news report is released.
4. Put a stop for the entire position at 45 pips below the second entry
price, and then trail by 20-day SMA.
5. Take your profit on half of the position when it moves in your favor by
45 pips.
6. Trail stop on the remainder of the position by the 20-day SMA.
Practive and Reactive trading example
In the USD/CAD example, the first half of the position would be initiated
at 1.0081 with a stop of 1.0095 . After the economic
data report is released, the second half of the position should be initiated
at 1.0015 for a blended price of 1.0048.
The stop of the entire position is then lowered to 1.0060 or 45 pips away from the second entry price (this is a rule that you can alter to your own trading style). Half of the position is taken off when the trade moves in your favor by 45 pips, or hits 0.9970. The
remainder of the position is then exited when the price moves back above the 20-day SMA or 0.9975. The total profit on this trade is 151 pips, and the average profit on the trade is 75 pips.
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