Strategy 3: CounterTrend 1 (“Gann OFR”)

Trading against the trend is difficult and risky, and yet, when properly controlled, can be profitable. That is why the setup for a Gann OFR trade requires several conditions. First, price must be testing key support or resistance. A pattern used in the “OFR 30” system needs to develop, then price must break the Gann HiLo line. When a position is taken, Gann OFR employs two profit targets as well as a trailing take-profit stop.

Gann OFR uses these Indicators on the 30-Minute Chart:

Pivot Calculator - Daily
FXS Adaptive Mvg Avg (5,2.0,0)
Gann Hi/Lo Activator - Gann HiLoA(7)

Chart 1: This CounterTrend Strategy uses three indicators.

Trend

An UP Trend is shown when price stays above a rising black Gann HiLo line, testing the Hi Band and sometimes exceeding it.

A DOWN Trend is shown when price stays below a falling black Gann HiLo line, testing the Lo Band and sometimes dropping below it.

Trade Entry

The steps for a Gann OFR buy or sell trade are listed below. Trade entry occurs when the currency retests the Gann HiLo line. After buy entry conditions occur, Gann OFR will buy if the market drops to the Gann HiLo line. When sell entry conditions occur, then GannOFR will sell if the market rises to retest the Gann HiLo line.

CT1 Gann OFR Buy Entry Rules:

1. Price tests key pivot support level and
2. Closes outside of the Lo Band and
3. Followed by a Close back inside the Lo Band.
4. Price must then close above the Gann HiLo line.
5. Buy on a retest of the Gann Hi Lo line.

In Chart 2, on October 10th a Sell Entry occurs at #5 in the EURJPY at 166.13.

CT1 Gann OFR Sell Entry Rules:

1. Price is trading near key pivot resistance and
2. Closes outside of the Hi Band and
3. Followed by a Close inside the Hi Band.
4. Price must then close below the Gann HiLo line
5. Sell on a retest of the Gann HiLo line

Trade Exit

It is not possible, in advance, whether a small or larger profit will develop. So two profit targets are used. Half profit can be taken at or beyond the FAMA Band (Hi Band for Buy Trades; Lo Band for Sell Trades). The second profit target is the next key support or resistance beyond the FAMA Band. The Gann HiLo line is used a trailing stop to keep losses small and also to let profits run, per below exit rules.

Profit Targets

1st Profit Target: Opposite FAMA Band
In a buy trade, exit half the position at the FAMA Hi Band or above.
In a sell trade, exit half of the position at the FAMA Lo Band or below.

2nd Profit Target: The Next Key Pivot Line
A buy trade can target the next key Pivot Resistance above the Hi Band.
A sell trade can target the next key Pivot Support below the Lo Band

Price Closes beyond Trailing Stop

The Gann Hi/Lo Activator (‘Gann HiLo’) is used as a Trailing Stop. If the strategy position is long, then the strategy exits if price closes below the Gann HiLo line. If the strategy is short, then it exit the position if price closes above the Gann HiLo line.

Chart 3. A Sell Trade takes half profit at the Lo Band, then exits the other half on a strategy Buy signal.

The example in Chart 3 shows a sell trade at 166.13, near R2(Daily) Resistance. Half profit was taken at 165.63, at the Lo Band. The second half of the position was closed at 165.61, when a Gann OFR buy trade occurred. Profit on the trade was 51 pips (166.13-165.62 [average exit price]).

Gann OFR Buy Exit Rules:
Exit a BUY Position if

1. A Profit Target is reached OR
2. Price closes below the Gann HiLo line

Gann OFR Sell Exit Rules:
Exit a Sell Position if

1. A Profit Target is reached OR
2. Price closes above the Gann HiLo line

Initial Stop Loss Order:
Controls trade risk. Establish before the trade. (See "Risk Controller".)

Risk Control

Go to Risk Controller. Input risk preferences to determine:

1. Stop Loss Order
2. Maximum Position Size

Use the Trade Strategy Worksheet to control, monitor and record the trade.

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Strategy One: Momentum 1

Momentum 1 is a short-term trend momentum strategy. Short-term means that this strategy can enter and exit several trades a day. It is a trend momentum strategy because it buys only when the Schaff Trend Cycle (‘STC’) is rising and sells only when the STC is falling. The strategy exits a trade when trend or price momentum slows down.

For example, MOM 1 will buy into an uptrending market as it accelerates. And it will exit that trade when the speed of the uptrend slows down. The reverse holds true for a sell trade. MOM 1 will sell into a downtrend as it accelerates. It will exit a sell trade when the speed at which prices are falling slows down.

Indicators used in this strategy & their inputs:

Schaff Trend Cycle - STC(5,7,13)
Simple Moving Averages – Two Lines, SMA(3) and SMA(5)
FXS Trend Oscillator - TrendOscl(2)

Trend

This strategy uses a fast moving Schaff Trend Cycle (‘STC’) on a 1-Hour Chart to indicate Trend. The STC moves between 0 and 100. Trend is the direction of the “fast” STC.

UP: Trend is considered to be UP when the STC is rising or at 100.

Chart 1. Momentum 1 uses three strategy indicators.

DOWN: Trend is DOWN if the STC is falling or is equal to zero.

Trade Entry

The strategy uses two fast moving Trade Entry indicators to fine-tune when to buy or sell: Simple Moving Averages – Two Lines and the FXS Trend Oscillator (‘TrendOscl’).

The moving averages are considered bullish when the faster black SMA(3) is rising and above the green SMA(5), and bearish when the SMA(3) is falling and below the green SMA(5).

FXS Trend Oscillator crosses above and below zero. The green ‘TrendOscl(2)’ line is bullish when it is above zero and rising. It is considered bearish when it is below zero and falling.

Chart 2. A Buy Entry occurs at 1.4186, at 8:00, when all three strategy indicators became bullish.

Here are the Buy Entry and Sell Entry rules:
BUY when Trend is UP and:

1. The black SMA(3) above the green SMA(5) and
2. The green Trend Oscillator line is above zero and rising

SELL when Trend is DOWN and

1. The black SMA(3) is below the green SMA(5) and
2. The green Trend Oscillator line is below zero and falling

Trade Exit

Various exit tactics are used, depending on how price could develop.

Profit Target:

1. Exit Buy Position if price trades at Key Resistance target and TrendOscl crosses below zero.
2. Exit Sell Position if price trades at Key Support target and TrendOscl crosses above zero.

Strategy Indicators Changes Direction:

If the Trend Indicator changes direction then exit the trade. If both of the Trade Entry indicators change direction then exit the trade.

Chart 3. Buy Trade exits after Trend changes to DOWN.

Exit a BUY Position if

1. Trend changes to DOWN
OR
2. Both Trade Entry indicators change to Bearish

Exit a SELL Position if

1. Trend changes to UP
OR
2. Both Trade Entry indicators change to Bullish.

Initial Stop Loss Order: Controls trade risk. Establish before the trade. (See "Risk Controller".)

Risk Control

Go to Risk Controller. Input risk preferences to determine:

1. Stop Loss Order
2. Maximum Position Size

Use the Trade Strategy Worksheet to control, monitor and record the trade.

Continue Reading »