In this article, we’ll take a closer look at the “Travel Trading Profit Formula”. Despite having the word “Travel” in the name, the strategy doesn’t imply trading while traveling. On the contrary, a person barely has time to look in the trading terminal while on the trip.
The strategy author offers to trade such currency pairs as EUR/USD, GBP/USD, AUD/USD, NZD/USD, USD/JPY, USD/CHF, and USD/CAD on any timeframe from М1 to MN, although I personally see no obstacles to use it with any other instrument not only on Forex, but also stock and futures markets. Apparently, the author only trades major currency pairs, so he decided not to recommend any other financial instruments.
The strategy desktop:
- The Parabolic SAR indicator with: acceleration factor (AF) = 0.02, maximum acceleration (MA) 0.2
- The Moving Average indicator with: period = 20, shift = 0, МА method = Simple, apply to = Close
- The MACD indicator with: fast ЕМА = 12, slow ЕМА = 26, MACD SMA = 9, apply to = Close
- The Force Index indicator with: period = 13, МА method = Simple, apply to = Close
A signal to buy under the “Travel Trading Profit Formula” strategy
The following conditions must be met in order for a signal to buy to appear on the chart:
- According to the strategy, the Parabolic SAR indicator must be below the price chart
- The Moving Average indicator must also be below the price chart, directed upwards
- The MACD indicator signal line must be below 0, outside the histogram area
- The Force Index indicator must be moving upwards
- The candlestick, where all these conditions are met, must be completely formed. Only after that, one might open a long position
An example of a signal to buy under the “Travel Trading Profit Formula” strategy
The strategy author places special emphasis on the fact that all five conditions must be met before a trader opens a long position.
The following conditions must be met in order for a signal to sell to appear on the chart:
- The Parabolic SAR indicator must be above the price chart
- The Moving Average indicator must also be above the price chart, directed downwards
- According to the strategy, the MACD indicator signal line must be above 0, outside the histogram area
- The Force Index indicator must be moving downwards
- The candlestick, where all these conditions are met, must be completely formed. Only after that, one might open a short position
A signal appeared during the first hour of trading week. Although it appeared on a bullish candlestick instead of a bearish one, one might earn good money.
Stop Loss and Take Profit in the “Travel Trading Profit Formula” strategy
The strategy author recommends placing the Stop Loss order 15-20 points (150-200 pips with 5 digits or 3 digits for USDJPY) away from the entry point, but I strongly disagree with him, because this advice is a bit disconnected from reality.
Of course, this method might work for minute timeframes, but when it comes to longer periods, the recommendation might ruin the whole trading process. I believe the Stop Loss order should be placed according to the safe, proven, and, most importantly, reasonable method: below the previous local low when selling and above the previous local high when buying. And don’t forget about spread when opening short positions.
The trading strategy doesn’t require a trader to maintain a position. However, I think it won’t get much worse if you use new local extremums to mitigate risks and protect profits. However, every trader should test for themselves whether it is effective for them.
At the same time, the strategy doesn’t imply Take Profit orders. However, if you backtest it and find out that trading might be more effective with Take Profit orders, I see no reasons why you shouldn’t add them to the strategy.
A trader can close a position opened under this trading system if the moving average rose after selling or fell after buying. However, only if the “Parabolic SAR” indicator and the “MACD” indicator signal line are above the chart and 0 respectively in the case of selling, and below the chart and 0 in the case of buying.
However, a signal to close a position has the following peculiarity: if you close a position according to these conditions, when trading under this strategy, you won’t be able to profit from any major trend movement. So, if a position is already “in the black” and there is a signal to close, I would recommend to move the Stop Loss order below the previous local low and above the previous local high in the case of buying and selling respectively.
If the latest extremum is in the group of extremums, use the lowest extremum of all local lows and the highest extremum of all local highs to place a protective stop order. And if a position is “in the red” after a possible activation of a relocated Stop Loss order, it would be wise just to close it. It would be better to have a missed opportunity instead of losing money.
If you trade with a specific lot size, the difference in the risks in each position might have a significant influence on trading results, no matter what percentage of orders were successful or with what ratio a trader managed to enter profitable positions.
That’s why, I would recommend a specific lot size for each order, which would imply the risk as the same percentage of the current deposit for each order. At first, you shouldn’t definitely exceed 1% of the deposit. Later, you can increase it, but not more than 2%. However, if you plan to risk more, spend some extra time learning and testing the strategy so that you can increase the risk percentage for each position, but not more often than once a month.
By the way, although the total number of conditions for entering the market is rather small, I would advise to write them down and keep it close at hand. Since the strategy requires you to act fast when a signal appears, you may miss one of the conditions in a rush and it may lead to unsystematic entries that will have a negative influence on trading results.
It often happens that you forget some requirement for a trading signal. To avoid this, use stickers with all entry conditions and requirements for each pattern somewhere on your table or desktop where you can see them regularly.
It should be immediately noted that such successful and “smooth” orders do not often happen in this strategy. The longer the timeframe, the less often they occur. However, it doesn’t mean that a trader should switch from the timeframes they got used to a shorter one. It’s better to stick with a comfortable period and increase the risks a little bit than vice versa. I personally arrived at this conclusion, but you don’t have to hold by what it says.
By RoboForex Analytical Department