The 3 Duck's Trading System

Discussion in 'Automated Trading' started by CaptainCurrency, Sep 18, 2007.

  1. Firstly I would like to say, I did not create or invent this system, I have just added one or two ideas to make it my own and named it "The 3 duck's Trading System" for obvious reasons as you will find out later on. The system is fairly straight forward and easy to use. Like a lot of trading systems it will be more productive when prices are moving in one direction and not stuck in a tight trading range. Of course this system has losing trade and losing runs, but with proper money management and good discipline I'm sure this system will keep you out of bad trades and give you a great chance to make profits in the Fx market. One of the nice things about this system is it will quickly tell you if prices are in an up or down swing phase and stop you from guessing! It will also allow you to decide to be a bull or a bear and trade in the direction of that trend. There are 3 charts involved in this system: a 4hr chart, a 1hr chart and a 5min chart. There is 1 indicator, a 60 period simple moving average (60 sma) plotted on each chart. There you go, its that simple.

    How it works:

    (pic on blog)
    Step 1 - First Duck
    The first thing we need to do is look at our largest time-frame (4hr chart) and see if current prices are above or below the 60 sma. From this chart we can see that current price is below the 60 sma. This tells us that we maybe looking to sell.

    (pic on blog)
    Step 2 - Second Duck
    The second thing we need to do is drop down to our 1hr chart. We need to see the current price below the 60 sma on this chart also, this gives us confirmation.
    Important: If the current price was to be above the 60 sma on this chart we could not move on to step 3.

    (pic on blog)
    Step 3 - Third Duck
    From step 1 and 2, current prices need to be below their 60 sma's on each chart. We are now on the 5 min chart and we are looking to sell when price crosses below the 60 sma. For extra confirmation we should let prices break the last low on the 5 min chart. This would mean that prices will be below their 60 sma on all 3 time-frams, therefore all 3 Ducks are lined up in the same direction.

    Stop-Losses: This is where you can make this system your own. If you are a short term trader you may want to put your stop-loss above the highs on the 5 min or the 1 hr chart. If you are more of a positional trader you may wish to put your stop-loss above a high on the 4 hr chart. You could also use a fixed stop-loss, maybe 25-30 pips or more from entry. It all depends what type of a trader you are, so you decide! Another "trick" that may help you preserve capital, If you do sell and prices get back above the 5 min 60 sma by 10 pips (not a good sign) you may want to cut your losses short before your stop-loss. But if you are a longer term trader this may not be a big deal for you.

    Targets: Same again, depends what type of a trader you are but target can be support or resistance levels.

    Summary: The above example was carried out when the gbp/usd was trading lower so obviously we where selling - the system works just as well for buying opportunities, just look for prices to be above the 60 sma on all 3 time-frames, starting with step 1 again. I like this system a lot as it does not try to out-guess the markets movements and pick tops and bottoms. The system will quickly tell you to be a buyer or a seller. Its a good honest system that tries to follow prices. This system works better on currency pairs such as the Eur/Usd and Gbp/Usd, but there is nothing stopping you from plotting this system on any pair, but as we know some pairs act differently to others. The best time I found for trading this system is the European and US sessions. Take care to watch what is going on around you - economic new releases, holidays etc.

    Good Luck with the 3 Duck's Trading System.

    Captain Currency.
  2. Peter35


    Did you test this system? What are the backtesting results?
  3. Hello Peter,

    I have forward tested it and traded it with my own money. Its a steady-straight forward system that has made more than it has lost overall for me. Like all systems and traders it does have losing trades and losing runs. It works well for me, but every trader will trade it differently. My advice to you would be to forward test it on a demo and make it your own. My results from trading this system may not be of great benefit to you, as I say every trader will trade it their own way - stops, targets, enteries etc.

    Kind Regards,

    Captain Currency.
  4. Earlier today prices for the Usd/Cad where below the 60 period sma on the 4hr & 1 hr time-frames (steps 1&2 of the Duck's system). So we where looking to short this pair at some point when prices crossed below the 60 period sma on the 5min chart (step 3). We got the green light when prices dropped down to 1.0105, all our ducks where lined up in the same direction. Our target was suggested at parity - 1.0000 from our resident Economist, Eric. Well done Eric, your job is safe for another week!

    Here is how the trade looked on The Captain Currency blog.

    Important:By the way, we are not saying that The 3 Duck's Trading System is the "Holy Grail" of trading, of course it has it's losing trades & losing runs. We like to use it with our own market knowledge and view it as a common sense approach to price observation.


    Captain Currency.
  5. Typical Friday afternoon type of trading - not much happening!
    The 3 Duck's Trading System got a few chances to trade in the last few hours. The EUR/USD got a buy, the USD/CAD got a sell, the USD/AUD got a buy. I bought USD/AUD at .8648 with a stop-loss at .8624ish, the target was open but I'd say I would have looked to take profit around .8695. But the move up is sluggish and the trade has been stopped out at breakeven - it was up +22 pips at one stage.

    Have a good weekend,

    PS: Its not possible for me to post trades as they happen, but I will try and post some of the trades I do using The 3 Duck's Trading System. (the good ones and the bad ones!!)
  6. pma


    For simplicities sake,why not just utilize a 5 minute chart with longer term sma's in addition to the 60sma?Say a 120sma and a 240 sma as an example. When all are saying the same thing then your signal would be generated.
    Best of trading to you Captain~
  7. Hello Pma,

    Yes you could just apply a 60 period sma, a 720sma and a 2880 sma all on a 5 min chart, same as having the 60 sma on the 1 hr and 4 hr charts.

    Well spotted. :)

    King Regards,

    Captain Currency
  8. pma


    Captain,your system is great for those who try to pick tops and bottoms in the markets,like most newbies do. A simple working strategy with good $ management is all you need.
    Thanks for sharing your system!
  9. Hi pma,

    Thanks for the reply. I would'nt totally agree that the system tries to pick tops & bottoms. Not like some systems I've seen! I would say the system tries to trade in the direction of the last trend or swing, picking up enteries when prices keep/return (with confirmation) to moving in the main direction again. I agree with you about a simple system and 100% on the money management.:)

    Kind Regards,

    Captain Currency.
  10. pma


    Captain-I probably worded my last post incorrectly. I meant by the "picking tops and bottoms" statement is that many traders think the price cannot go higher or lower then place an order in the other direction. With a system like yours you would be more likely to be on the predominant trend.
    Again good trading to you and if you could post charts for others to learn from that would be great~
    #10     Sep 25, 2007