How to achieve what 95% of traders are unable to: "profitable success" (Part 1).

In this issue I write tips that I use to trade Forex market successfully.

This is part 1 of several key that become my forex trading strategy. This topic, I explain more about my favorite strategy: Pyramiding Technique; which is the main strategy in our managed funds account or in PointBreak expert advisor.

Before I discuss more about the five steps I used to trade forex and the secret of pyramiding straategy, let me show you the proven results of this strategy:

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PointBreak EA that used Pyramiding strategy since the beginning continue to deliver very consistent profit both on our Live accountand Demo account.

Our Very Aggressive Account has profit 135% (It's 47,187.67 now - the account start at $20,000 ~ Oct 01, 2007).

Our Trial account (Very Conservative Setting) has profit more than 20% (It's 29,854.66 now, start at $25,000 ~ Dec 04 2007)

You can even login to our account & password using to checkeverything is correct, through this link below:
http://www.forexhope.com/trading_report.htm

You can also download our LIVE account reports (using REAL money) at our performance page below:
http://www.forexhope.com/performance.htm

You should have the same results on your demo account, unless you already stop PointBreak EA when EUR in bad market (choppy) on January and February 2008 before breaking 1.5000 resistance and continue making profit week by week.

I have new release for PointBreak EA (Build 803 - March 2008) available to download and valid through July 2008.

Click here to download the new release:
http://fxhope.com/2008/03/20/pointbreak-ea-new-demo-relese-build-mar-15-2008/

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Now come back to my tips how to trade Forex market:I use 5 steps to trade Forex:

1. Identify potential new trades.

2. Provide you with proprietary bullish and bearish trend outlook for the current market.

3. Provide levels for entering a trade, closing a trade and booking profits at the end of a trade.

4. Include the Pyramiding Trading technique to help you extract maximum profits from any trended move.

5. Protect your trading capital with sound money management and stop loss mechanism.

I guest you already know about those steps. I will not discuss every steps in detail; except the Pyramiding trading technique, which has been the core of my trading system.

- What is Pyramiding technique ?

Pyramiding trading is the process of using profit generated from an existing position to acquire additional positions. This results in a "doubling" of your position during each pyramid iteration to rapidly achieve exponential gains.

Pyramiding trading technique help you extract maximum profits from any trended move.

Some said "Pyramiding: A Risky Strategy"

Let me explain more about this one: Pyramiding is adding to positions as price moves in the desired trend direction. Pyramiding is a highly aggressive trading strategy suitable for professional traders who know how to control risks and have the discipline to execute a tested plan consistently.

Reward/risk trade offs quickly turn against the pyramid trader when the price trend reverses. Because adding to positions changes the total cost of the entire position on a per-unit basis toward the last price, a quick reversal to the original entry price can result in a significant loss. Pyramiding should be executed only according a predetermined and tested method which includes an effective stop loss or hedging technique.

- What is a hedging technique?

Hedging is a strategy designed to minimize exposure to an unwanted financial risk, while still allowing the assets involved to profit from their investment activity.

PointBreak trading system use strong hedging strategy. It means PointBreak will hedge using the same currency (100% correlation and every 1 long position will behedge by 1 short position). This hedge aims to minimize the risk from moves with the currency pair used, thus allowing profits to be accrued from the daily movement.

Although pyramiding increases profits if the trend continues as hoped, pyramiding also increases losses if the trend reverses, so Risk Control is key.

In PointBreak EA, risk contol is our main concern, we never overtrade our pyramiding technique. This will ensure that PointBreak trading strategy will go smooth, giving you profit month after month.

- When to Pyramid ?

There are just ways of pyramiding. One is to buy more or sell more just as soon as the market breaks into new territory or makes a new high or a new low. In a fast running market, you can continue to buy or sell every few points the market moves in your favor, all depending on the market or your method of pyramiding.

A pyramiding should always be followed up with proper and strict stop loss orders or special hedging technique above. When you do a pyramid trade, the signal to add to positions may be triggered at predetermined price points that confirm the trend direction.

Such price points might be based on volatility bands, moving averages, a variety of trendlines, logical chart points, penetration of resistance levels, and so on. No matter what method is used, because your profits must in all case be protected. The more profits are there on the table, the more room you can give the market to fluctuate or have its reverse moves or reactions, that is you can place your loss order further away from the market so that a natural reaction will not distur by our pyramid.

PointBreak EA divide its pyramid trade into multiple cycle to protect the profits and to minimize the risk.

For Example:
You have followed and added up on a EUR/USD market that is 100 points gain in your favor now. If the market has had a previousreaction of 20 points, it could again react 20 points without changing the main trend, therefore your stop loss order could be 20 points under the market, because if it was caught, you would not belosing part of your capital but only a fraction of your paper profits, while in early stages of your pyramid your stop loss order would have to be closer in order to protect you original capital.

- Pyramiding Trading Type

The Standard Pyramid, which is also known as the scaled-down pyramid or upright pyramid, starts with a large initial positionand is followed by predetermined additions that decrease systematically in size as price moves in the indicated trenddirection. For example, if the initial entry was for 10 lots, then as price moves to the next predetermined level add 5 more lots, then 3 more at the next level, then 2 more, for a total of 20 lots.

The Inverted Pyramid, which is also known as the equal amounts pyramid, adds to an initial position in equal share-size increments. For example, if the initial entry was for 10 lots, then as price moves to the next predetermined level add 10 lots more, then if the price continues 10 lots more, then 10 lots more, for atotal of 40 lots. Here, however, the average cost per share is much higher, such that a smaller price reversal eliminates all profit. The inverted pyramid offers greater potential reward at the cost of much greater risk, as compared to the standard, scaled-down pyramid.

The Reflecting Pyramid systematically adds to a position up to a predetermined price level, then it reduces the position systematically as the trend continues, so the reflecting pyramid is not a pure trend following method. If the price does have a majormove in the indicated trend direction, the reflecting pyramid would result in less profit than both the standard and inverted pyramids.

The Maximum-leverage Pyramid keeps on adding maximum size up to the limits of accumulated profits and margin requirements. This is the most aggressive strategy possible, and it offers the maximum potential reward, the maximum potential risk, and the worst reward/risk ratios. This pyramid must be combined with tight exit rules, or else it is a formula for near-certain ruin.

I use Inverted Pyramid in PointBreak EA, and PointBreak EA in the long run (i.e. over the months or years) has been able to keep onthe right side of the long term trend more often than not, you will have achieved what 95% of traders are unable to: "profitable success".

Until the next strategy.

Always hope for the best,


Yohanes R. Gagahlin
http://www.fxhope.com
A new hope in Forex Trading