OPPORTUNITY 10 – COMPOUNDED GAINS
Ok, now this is fun, and it’s guaranteed to get your heart pounding
(a mix of excitement from the profits and some “yikes!”).
This technique is great to use after a significant Fundamental
Announcement. Basically, this is what you learned from the
“Opportunity” above on “FA After Surf”, but on steroids. This
technique will also work for situations where you have a strong
trend during that particular trading session, and prices are really
moving well. Most often such strong trending days happen after
some kind of FA news (but not all the time).
Usually you can anticipate that you’ll probably have a good
opportunity to do this if there was a Fundamental Announcement
early in the day’s trading session that had a nice jump up of 20 to 50
pips, then when you attempted to “After Surf” (using the FA
Explosions After Surf technique) you score a successful first entry.
By now you should already be entered in a trade. Then you wait a
bit. Prices should soon form another wave that you could enter in
on. Now, you could simply enter on the trade now (a second trade,
so you would have two trades active), but before we continue I need
to explain an important point.
Your ability to do a “Compound Gain” will depend on how much
money you have in your margin account. Remember that brokers
will allow you to have open lots as long as you have sufficient funds
in your account. Many brokers offer a 200:1 ratio, but we’ll look at
a 100:1 ratio. This is well explained in the “FOREX Freedom”
eBook. So, assuming a 100:1 ratio, to trade one lot you need over
$1,000 in your margin account minimum. Realistically you should
have more because let’s say you have $1,100 then if the market
moves down 11 pips the broker will automatically stop you out
regardless of what you set your stop at. So you should have
significantly more than just $1,000 to trade one lot ($500 if your
broker gives you 200:1 ratio). Same thing with a mini account,
except that everything in a mini account is just one-tenth the size.
So if you were to trade two lots (one deal, or two separate trades)
then you would need $2,000 set aside in your margin account ($200
FOREX Surfing Draft .forex sato
for a mini), but of course more to cover your stops. Basically you
need to have sufficient funds in your margin account to cover
however many open lots you are trading.
Now, back to the strategy. What you do is you keep adding a lot (on
nice waves) as the market keeps waving up (or down in a down
market). Sounds simple, but wait there is more.
It is important to do all this properly to secure your profits (so you
can score big), otherwise if you do this wrong then you stand to lose
big. So continue reading paying attention to the details.
You could simply enter a lot each time a nice wave is created.
Remember, it only counts as a new wave if it has made a higher
high and a higher low (in an up trend, conversely for a down trend).
But now here are the specifics of the strategy to do this safely.
I know I’m repeating myself, but I want to make sure you catch this
point. Do this wrong and you could potentially lose a bunch
(though you’d likely make good profits anyways, but it’s better to be
safe than sorry). Do this right and you shouldn’t lose at all.
One more thing… this isn’t a quick trade. When find such an
opportunity (they happen several times a month) then you’ll want to
be near your computer through the trading session (remember the
Asian/European and European/N.American sessions we discussed
earlier in this eBook?).forex sato
This is how you could lose with this (if not done properly). Let’s
say you have a series of open lots that you entered at incorrect times
(as taught shortly), and you don’t have your stops at the correct
places. You could end up with one winning trade (your first one)
and the rest losers, making you an overall loser (don’t read any puns
into this).forex sato
This is how to do it right. Read the following paragraphs several
times to be sure you fully understand this.
Ideally you want to enter on successive waves such that when you
replace all the stops of your existing trades at where you would
normally place your stop for the newest trade all the older trades
would result in a profit, or at least a break even (for the second
FOREX Surfing Draft.forex sato
newest trade). Of course the newest trade you entered would be
stopped out for a loss should you get stopped out.
If you were to continue compounding your gains, and let’s say you
succeeded in adding 7 lots (seven trades, for example), then unless
you manually exit your trades at a strategic time (explained below)
you’ll eventually get stopped out. If this were to happen then you
should have 5 trades that are definite winners, the 6th one could have
gains or break even (or at worst just a minor loss of say 5 to 10
pips), and your 7th trade would be a loss for sure. The net result
would be that you have several trades that resulted in a nice overall
profit.
Take a look at the following diagram.forex sato
without any numbers (as the numbers might confuse you at this
point). We’re going to break out into to variations now. Compound
Gains Variation 1 uses standard “Surfing” techniques and is
FOREX Surfing Draft
somewhat more likely to let you ride the series of waves to the top.
Compound Gains Variation 2 uses modified “Surfing” techniques,
and if all goes your way you stand to catch even bigger gains.forex sato
forex sato
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