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Main » Articles » Trading Strategy

Round Numbers

This is another very simple, but extremely efficient strategy. The round numbers (example EUR/USD 1.2800, USD/JPY 99.00) are natural levels of support and resistance. A lot of orders are placed around these levels. During the last few years the importance of the round numbers increased because they are used for options barriers levels and are protected. That is why when the market approaches such levels the price movement is countered by these order flows and small retracement usually happens. You should study carefully the price action around the round numbers and improve the strategy.

Rules for long position

  1. The prices approach round number support.
  2. Long position is initiated when:
    - the price hits the round number, or
    - the price breaks a few pips below the round number.
  3. After the position is open an initial stop loss order is placed 2-3 pips below the low reached during the test of the round number or at fixed distance from the entry point.
  4. A limit order is placed according to our Money management rules.

Rules for short position

  1. The prices approach round number resistance.
  2. Short position is initiated when:
    - the price hits the round number, or
    - the price breaks a few pips above the round number.
  3. After the position is open an initial stop loss order is placed 2-3 pips above the high reached during the test of the round number or at fixed distance from the entry point.
  4. A limit order is placed according to our Money management rules.

How to Test

The power of this strategy is the entry logic. I'll show you how Forex Strategy Builder can help you improving it by adding additional entry filters and proper exit logic.

The integrated strategy “Generator” can do this in several steps:

  1. Set the shown entry logic in the “Opening Point of the Position” slot;
    Opening Point of the Position
    Previous High Low
    Enter long at the previous High
    Base price - High and Low
    Vertical shift - 3
  2. Start the “Generator”;
  3. Click on the “Opening Point of the Position” slot. This will lock it.
  4. Start the Generator. Since the first slot is locked the Generator will not change it. The generated strategy will be a combination of our “Round Number” entry logic and other indicators.

Balance Chart after Generating

Round Numbers balance

http://forexsb.com/strategies/round-numbers.html

Category: Trading Strategy | Added by: forex-market (2009-10-15)
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