Staggered Entry and Exit Strategy

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Video Transcription:

Hey, traders. Welcome to Video 5 of the Advanced Forex Strategies Course. Continuing our look at strategies, this one is the Staggered Entry and Exit. It’s a Fibonacci Intro. We can use it on all time frames. I do recommend that it’s used for swing trading, just because there’s a little bit of math involved, and it may take a bit of time to be able to calculate yours. But, this video is brought to you by

So, trend trading is where the money is. There are multiple ways to trade trends. This strategy is useful because you can set orders and forget about it. In the last videos, we looked at a couple of entry techniques that required you to be there. You had to watch for the breakout or the price crossing a certain level. This one’s not like that. I like these strategies. You can put them up before you go to bed. When you wake up, you might have some trades.

It manages risk, and it keeps the loss small relative to your profit. It can be used on all time frames, but as mentioned, ideally used for swing trading, since we are going to take a bit of time to calculate our orders.

So, an uptrend occurs when the price is making higher swing highs, and higher swing lows. During that time, we want to be trading with the uptrend, so we’re looking for long trades. In a down trend, we are looking for short trades or sell singles when the price is making lower lows and lower highs.

This strategy can be used on most trending waves. The strategies in prior videos required active entries, and we had to sit and wait for a break. This is a set-and-forget strategy.

So, how that basically works is, for an uptrend, we need a strong advance, so we need to have just seen a higher high. And when the pullback begins, we apply a Fibonacci retracement tool to the last wave higher, and we place orders at the 50%, 61.8%, and 78.6% retracement levels.

All these positions, we’re putting out three orders. The whole risk of all those three positions must be less than 1% of our account, as we covered in the first video. If taking three positions is too much risk for your account, you can just take the 61.8% level and the 78.6%, or if you’re just taking one position, take it at the 78.6% level. That entry point has the lowest risk and the highest reward. The problem with taking just the 78.6% is that on quite a few trading moves, you won’t get a trade. But it is, for a small account, probably the best entry point you can get.

So, stop goes 5 pips below the last swing low. Since we are mostly considering this for swing trading, if you’re day trading you’d probably reduce that to about 1 or 2 pips. But for swing trading, we want to have it 5 to 7 pips.

So, our targets are a little bit different than what we’ve seen, but you’ll notice some similar numbers. The 50% entry point, so whatever our risk is, let’s say it’s 10 pips for 50%, we’re going to look to get 16 pips out of it. So, we’re going to put our stop 10 pips away, and our target 16 pips away. Same goes for this, 2.6 times the risk, and our final entry point has 3.6 times the risk. So, that’s why I mentioned up here, if you’re going to take one entry point, 78.6 is the best one for a small account, simply because you’re going to be able to maximize your gain, and it also has the smallest risk, as we’ll see when we look at a few examples.

So, for down trend trades, we need a strong decline, so we need a lower low, and when that pullback begins, so once we’ve seen the price start to pull back a little bit off that low, we’re going to use our Fibonacci retracement tool, apply it to that down wave, and put out orders at the 50%, 61.8%, and 78.6% retracement levels. Once again, all these positions, the whole risk must be kept under 1%. Take the last two, if you can just take two positions or take the 78.6% entry if you’re only taking one.

Stop goes 5 pips above the swing high. As mentioned, day trading can be a little bit more. With swing trading we want it about 5-7 pips. Targets are the same. For the 50%, we’re looking 1.6 times the risk, 61.8%, 2.6 times the risk, and 3.6 times the risk for the 78.6% entry.

So, I have a few of these set up to show you. So, we have an overall uptrend here. If we pan out a little bit, we’d see the price moving in an overall uptrend. Moving within a channel as well, so this is something we want to be aware of. We are not blindly applying strategies. We’re also doing a little bit of analysis, looking for probabilities.

So, going long, right at the top of this channel, probably not a great idea. So, instead, we would rather wait for a strong move off the bottom of the channel, which we got back here a couple weeks ago. So, we had strong balance off the top of the channel, plus it made a higher swing high. So, we’re moving down. We have this strong move up. It’s a higher high. You can see it clear these bars here, so we are potentially moving within an uptrend, plus we have to look at this longer-term structure here, which says that we are moving within an overall uptrend. So, once we see that nice, strong bounce, we would put our orders out.

So, how this basically works is, we have this upmove, and we are looking for pullbacks to the 50%, 61.8%, and 78.6% levels. When we’re talking about an uptrend, we’re going to have the zero at the top of the trend. That way we can measure how far the pullback is, and you’ll get the right levels. So, 50% is always at the middle, but once we get down here, we’re looking at a 78.6% retracement. That means the price has come almost all the way back, so you can think of it that way. If it comes all the way back here, it is retraced 100% of the move.

So, orders would have been out at 50%, 61.8%, 78.6%. We only would have gotten filled on the 50% level in this case, because the price only came back about halfway of this wave. And our stop goes below the recent low. So, a quick way to see what our potential risk is, and just click down and see our risk is about 110 pips on that, plus we’re adding a bit of a buffer at the bottom, so 115 pips. We would multiply that by 1.6. And you can see that I have set that out already.

So, here is the entry. Our stop’s down here, and our target for that order would have been up here, 61.8% if it had been filled. Unfortunately, in this case it wasn’t, when you from there to our stop, we’re looking at about 92 pips of risk. We multiply that by 2.6. And for that one, our target would have been this target right here. And 78.6%, the price didn’t get anywhere close to it. That would have been about 53 pips of risk. You would multiply that by 3.6. And that order number’s 93. So, our target would have been right at this level here.

So, that’s how that works. You can see this is very profitable if we have a deep retracement and then a surge higher. We can apply these to any of these ways. We have this upmove here, so basically we would have been out of all these trades. And we would simply move our tool up to the next wave. Now we have put our orders out again. So, if we had placed orders at the 50% and 61.8% levels in this case… just drag these up here. You can see if we had isolated that trend right away, we could have put out our orders. We would have gotten the 50% and the 61.8% level. Our stops would have been a bit bigger on this trade, since it was a larger move. And then we would have had to calculate our targets out. Once again, 1.6 for the 50% and 2.6 for the 61.8%. So, our targets would have likely been a bit higher, based on our risk, so potentially somewhere in there.

Let’s look at an example of a downtrend here. So, we have price making the lower lows, lower highs. We definitely have a lower low here. Something to keep in mind, we can use this on any sort of wave that we want. I’m looking at major price waves, but you could have used the same strategy here as well. This pullback didn’t quite make it to the 50% level, so no trades there. But in this case, we have a nice run to the downside. We would have put orders out at the 50% level to sell, 61.8%, and 78.6%. And our stop would have been placed just above this high here. It’s right at about that area there.

Our targets, same thing. For this, our risk would have been 35 pips for the 50%. So, remember we’re entering at the 50% level. That would have happened back here. So, our target on that one would have been about 56 pips, so right about there. 61.8% retracement, we’re looking at about 26 pips to the stops. We had multiplied that one by 2.6. Twenty-six times 2.6 gives us 67.6. That would have gotten filled right there, going down 76, 67 pips. So, the second target would have been right about there as well. So, as you can see, when the downtrend unfolds, this is a very powerful strategy.

As mentioned, the 78.6% won’t get filled as often as the 50% and 61.8%, but when it does, that one’s going to offer the most potential, because you’re getting 3.6 times your risk. So, if you have a small account, those are the types of retracements you want to look for. They do happen, and when they do, it can be quite profitable, if you get that trade.

So, a little review, every trade has a stop and target. Put those orders out when you place the trade. It does take a little bit more math than the typical strategy, because you have multiple entries, different targets. Only risk 1% of your account in any one pair, even though we’re taking multiple positions. We’re staggering our entries and exits. It’s still all part of one trade. That way, even a string of losses won’t significantly draw down your account.

Only trade in the trending direction. We are expecting a pullback, but we’re relying on that trend to continue. So, during an uptrend, we’re putting out buy orders, even though the price is pulling back at that point. Typically a trend will retrace the entire last wave, which is why we are putting out those orders.

Place a stop 5 pips above the recent high for a downtrend, 5 pips below the recent low for an uptrend. Targets are 1.6 times risk for the 50%, 2.6 times risk for the 61.8%, and 3.6 times risk for the 78.6% entry.

Optional, we can reduce the risk to break even on remaining positions once the first target is hit. So, it’s that first 50% entry order has been hit at its target, and then we can move the stops up on the other positions to break even. That way, we’re going to be well inside on that trade. That way if it does come all the way back, we’re not going to lose money. And we’ve still made money on the first position.

Trading involves substantial risk of loss. Only trade with capital that you can afford to lose. Test out strategies before using them to make sure you’re actually able to implement them, and that they work for you.

Looking at a few examples isn’t going to make you proficient in this method. You’re going to have to go through a practice. Practice in a demo account, putting out the orders using that Fibonacci tool. So, really test it out. It’s a little bit different. We’re putting out orders as the market’s coming into us, as opposed to the other strategies to where we were jumping into the market. So, it’s a little bit of a different approach, different psychology involved, but when it works out and we’re trading strong trends, it can be a very profitable strategy.

So, until next time, happy trading.


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