Hi all. I'm working on a system for long-term (1 year holds) directional currency speculation, and that part is so far looking pretty good. Is uses 75% fundamental, 25% technical analysis. At this point I want to add some shorter term trading to the system to reduce risk, since it holds for so long the drawdowns can get big at times. So I want to develop a short or medium term directional trading strategy to hopefully distribute the risk a bit better. Just an example: let's say the system wants to buy USD/EUR tomorrow and hold for a year, but I want to hopefully add value with some shorter term techinical trading. One idea is a simple trailing stop, say it starts at 5% lower than the entry trade and at the 1st trading day of each month it moves up 1%. Another possibility would be an indicator, such as a typical Parabolic SAR or Channel or Volatility Breakout-- but only take trades in the direction of the long-term bet and just be out of the market the rest of the time. Just wondering if anyone has ideas here for stuff like this, or any kind of indicators you think might have some potential when used just in one direction, especially since most indicators are bi-directional. I don't even mind if total returns come down a tiny bit, as long as it sort of "distributes" the monthly returns a little smoother. Thanks, -Taric
There are lots of ways to do what you want. Bi-directional indicators can be used in single directions pretty easily. You can also mix a shorter-term system with your long-term one and take only those signals which happen to be in the same direction as your long-term system. You might find that simple mixing of a shorter-term system with your long-term one works well with the short-term system taking both directions. - Curtis
Thanks for the tips, Curtis.. sounds good. I really need to find effective shorter-term strategies to diversify in any case, so maybe it will take care of itself as far as portfolio level volatility. Btw I just got back from my wedding and honeymoon, went very well -Taric