SFT Simple Strategy

Version by Radim Frycka

www.sftmgm.com
What is it based on ?
Old School Simple Technical Analysis based on EMA E!ponential Mo"ing
A"erage# with $se of Stochastic oscilator and RS%Relati"e Strange inde!# as an
Entry and alternati"e E!it signal . And dynamic Stop &oss and 'rofit Target based
on percentage of A(R A"erage (aily Range# .
Why do i trade simple strategy ?
)omple! strategies can easily draw in traders since it is somewhat logical that the
more information we factor into a system* the more reliable it will be. +et* the market
does not always reward logic and when it does * it may not do it in the trader,s
timeframe. Remember* the market can be wrong a lot longer than the trader can
afford to be right --
What Should You know about this systm ?
As this is a short term trading system on lower Time Frames* it will e!pect trader to
be e!tremelly disciplined and foc$sed . E"ery mistake +o$ make will and co$ld be
e!pensi"e - &earn the system* test it* belie"e in it and trade it li"e after +o$ are .//0
positi"e *that this is what +o$ are looking for. 1e are indi"id$als and each ha"e taste
for different things * incl$ding trading style . %f +o$ like it * than don,t forget to
backtest ..backtest..backtest -----
Why do i share this system ?
There is no real reason i g$ess. Maybe beca$se it is christmas time . 2$t mainly i
ha"e been searching for grail before * as many others and lost patience and money by
testing different things and paying s$bscription fees and other crap . % find o$t* that
trading is mostly in +o$ as a person and e"ery syst3m works if +o$ tak3 it by the
right end of it. % want to help traders reali4e* that trading needs to be taken as
disciplined b$siness.
Who am I ?
% am a trader who has been $ns$ccesf$ll before as most begginers are. % ha"e had a
hard time to get to the profits and few wiped o$t acco$nts before it started to t$rn in
to profits few years ago. Since that* i ha"e made a long way and keeping on
profitable trading each year .
.
Basics
Trading time and 5ighest probability of profitable trades based on past statistics6
Monday thro$gh Friday
London pen !am " #$!% am EST Eastern Time#
&S pen ' am " (%$!% am EST Eastern Time#
Time Frame 7 # minutes )harts
Traded )$rrency 'airs 6 *&+,&S- " best per.ormer
&S-,/0Y
1B0,&S- " best per.ormer
&S-,)2F
A"oid Trading d$ring 2anks 5olidays
A"oid Trading d$ring )hristmas Time 7 mostly for low "ol$me * tight range and $ne!pected
spikes * which happens 8$ite often d$ring these times . As 2ank traders gets on 5olidays and
many 2lack 2o! companies and F$nds keeping prices in range .
A"oid Trading ./Min$tes pre and 9/min$tes past ma:or economical news release 7 Stay off
trading at times of $ne!pected news release if +o$ can and if s$ch occ$r * close all +o$r
opened positions and stay off $ntil market s$bside .
A"oid Trading if A(R A"erage (aily Range# of c$rrency pair is $nder .// . That means
"olatility of traded pair is too low to achie"e profitable trade in desired time . And possibly
staying in tight range .
Indicators
*34 " *5ponential 3o6ing 46erage
2asically Mo"ing a"erage shows traders sentiment .
5igher MA n$mber ; longer term trade and position
holding in that trend simply said#.
EMA is a type of mo"ing a"erage that is similar to a
simple mo"ing a"erage* e!cept that more weight is gi"en
to the latest data .
Set <p . 6 EMA period = green line in the chart#
Set <p > 6 EMA period ./ red line in the chart#
Since we are trading strategy on smaller Time Frame
with tighter S&?T' we are $sing faster Mo"ing A"erage
to a"oid false signalsprice mo"ement back# which co$ld
occ$r with slower MA on s$ch TF .
>
Stochastic scillator
The theory behind this indicator is that in an $pward@
trending market* prices tend to close near their high* and
d$ring a downward@trending market* prices tend to close
near their low. Transaction signals occ$r when the 0A
crosses thro$gh a three@period mo"ing a"erage called the
B0(B .
Stochastic is the only indicator i decide to optimi4e a
little . E"en tho it does not seems to be a ma:or iss$e* i
did change k0 period from .C to .= to adapt to sensiti"e
markets of last year. %t has been tested and pro"en .
Set <p 6 .= * 9* 9 Simple
&e"els 6 D/ o"erbo$ght
>/ $ndersold
+SI " +elati6e Strenght Inde5
A technical moment$m indicator that compares the
magnit$de of recent gains to recent losses in an attempt
to determine o"erbo$ght and o"ersold conditions of an
asset .
Set <p 6 .C
&e"els 6 E/ o"erbo$ght#
9/ $ndersold#
=/ signal le"el #
4-+ " 46erage -aily +ange
(aily mo"e in pips o"er period of time per c$rrency pair. %n o$r case it is .C days .
This indicator i $se to determine my Stop &oss and 'rofit Target le"el per each trade i make.
My basic set $p of S& is ./0 of A(R . 'T .=0 of A(R . 2ased on past trading acti"ity i
recommend to keep this setting $nchanged as we are keeping off ma:or economic news and
most e!pected "olatility of the market .
%f A(R is $nder .// per gi"en c$rrency pair* i do not trade it ---
9
*nter the position
Enter the position with MARAET order on opening of new bar -
Enter the position only if all signals are tr$e -
L71
EMA = crossing EMA ./ $pwards at the open of new bar
RS% heading $pwards and is o"er le"el =/ or crossing at the open of new bar
and is $nder le"el E/
STO)5AST%) heading $pwards and is o"er le"el >/ and $nder le"el D/
C
S2+T
EMA = crossing EMA ./ downwards at the open of new bar
RS% heading downwards and is $nder le"el =/ or crossing at the open of new bar
and is o"er le"el >/
STO)5AST%) heading $pwards and is o"er le"el >/ and $nder le"el D/
=
*5it the position
Stop &oss
2ased on percentage of A(R . %n my case ./0 of A"erage (aily Range
'rofit Target
2ased on percentage of A(R . %n my case .=0 of A"erage (aily Range
Trailing Stop
Set Trailing based on +o$r 2rokers a"ailability to .> points .%f +o$r 2roker will not allow it*
than stick with the lowest setting possible o"er .>points
2reak E"en
After ./pips mo"e in +o$r profit direction mo"e S& to 2E
Alternati"e 'rofit Target
%f +o$ decide to ma!imi4e +o$r profit by taking +o$r 'rofit Target off the charts* mo"e Stop
&oss after e"ery ./ pips price mo"e in +o$r profit direction . (o not $se Trailing Stop as it
mo"es e"ery highest high of the c$rrent price .
2y mo"ing S& +o$ co$ld *b$t it is not g$aranteed* to ma!imi4e +o$r profit .
Simply said* +o$ ne"er know when the big mo"e is comming . %f the mo"e goes in +o$r
fa"or fast * $se it.
Alternati"e E!it
1hen EMA crosses back to the opposite of +o$r signal after closing of the bar and stays
after opening of new bar .
F
3oney,+isk 3anagement
>0 r$le 7 (o not risk more than >0 e8$ity on position with this strategy
This strategy can ha"e periods of loosing as any other. %f +o$ risk no more than >0 * than
+o$ will hardly e"er gets to the $gly (rawdown . Stay with this r$le as this strategy is 8$ite
agressi"e trading wise . E!pect $p to 9 trades per traded c$rrency pair per session . Trade
with low position si4e based on risk management r$le and keep trading for e"er with
constant long term profit -
5ere is e!ample getting back to the base le"el of e8$ity after serio$s loosing
Loss in
percentage
)apital in
percentage
needed to get
back to the
2W3 8base o.
the e9uity:
>=*//0 99*//0
=/*//0 .//*//0
E=*//0 C//*//0
G/*//0 .///*//0
R$le of the C consec$ti"e loosers
%f we e!perience C consec$ti"e losses in one session * we are ending the session and getting
of the charts $ntil the ne!t session 7 HO EI)E'T%OH.
Jet thro$gh the each trade to find o$t possible mistakes * if any 6o#
0osition si;ing
For this strategy and few others i $se Fi!ed Fractional Risk or +o$ can $se >0 r$le >0 of
e8$ity as position si4e# . 2oth are straight and simple.
For e!ample $se this simple calc$lation form .
0osition Si;e < 84 5 += , SL:
4 ; Acco$nt Si4e
+ ; risk per position in 0
SL ; amo$nt of K or e8$i"alent#
risking per position
E
Systm pro.itability
% do ha"e statistics of trading with this syst3m on &i"e acco$nt from May >//D to Ho"ember
>/./ with a"erage monthly profits of F.9 0 while trading both sessions and C ma:or pairs
with holidays * days off* sick days and similar taking into acco$nt. % am not going to share
any &i"e n$mbers as +o$ can 2acktest them man$ally +o$r self and by this $nderstand and
learn the syst3m better .
+ear >//D FG0
+ear >//G E.0
+ear >/./ CF0
1in to &oss ratio o"er the period =C6CF =C0 winners * CF0 loosers#
+isk to +eward ratio
Since i ha"e been $sing dynamic S&?T' based on 0 of A(R and my setting is ./ and .=0*
than ob"io$s RRR wo$ld be .6..= . 2$t since there has been larger profits from time to time
by $sing mo"ing S& witho$t T' * my RRR gets to .6..E . %deal RRR wo$ld be aro$nd .6> *
b$t +o$ ha"e to $nderstand* that we do trade fast on small TF --
*5pectancy
)alc$lations of e!pectancy in c$rrency per strategy . E!pectancy calc$lates profit or loss
from each position taken o"er period of time . My e!pectancy based on my trading history is
>'?@ A per position both lost and profitable# while i am trading f$ll lots now. E!pectancy at
first sho$ld be taken from 2acktest and (emo trading for at least 9 months each to come $p
with reliable n$mbers -
Simply said* if +o$ ha"e positi"e e!pectancy o"er longer period of the time* +o$r syst3m is
reliable a +o$ can tr$st it . +o$ need to belie"e in +o$r syst3m to $se it &%VE --
5ow to calc$late E!pectancy L 5ere is a simple form . % ad"ise to read some of Van A.
Tharp st$ff to better $nderstand importance of E!pectancy in trading
*5pectancy < 84 5 B: " 8) 5 -: $ (%%
A ; H$mber of profitable trades in 0
2 ; A"erage winner in K
) ; H$mber of loosing trades in 0
( ; A"erage looser in K
D
-rawdown
Ma!imal (rawdown man$al trading# 7 (!?>=
Means* that if +o$ started trading +o$r acco$nt with this strategy in last 9 years* +o$ co$ld
loose .9.E 0 in ma! before it begin to getting back . Since there is no ass$rance of s$ch a
loosing period *+o$ ha"e to always e!pect bigger (( after the ma!im$m (( .
+o$ can get to trading while strategy is loosing or "ice "ersa. For that reason each of +o$
co$ld ha"e different 2alance and E8$ity at the end of the +ear . 1hich is ob"io$s .
Ma!im$m n$mber of consec$ti"e loosing trades 6 G
%n more than one session * since we keep on C consec$ti"e loosers r$le --
-aily +outine
Altho$gh it might not be s$ited for e"eryone* i do keep on daily ro$tine -
2efore the market opens 6
)heck o"ernight charts and acti"ity
)heck the trend of last >C5
)alc$late Stop &oss and 'rofit Target for day per each pair
)alc$late position si4e based on the position si4ing r$les
Make Trading &og ready
)heck 5ardware *Software and $pdates
Jo thro$gh +o$r trading plan each and e"ery day#

($ring the session 6

Stay foc$sed on trading and platform only -
1rite down e"ery trade man$ally to the trading log#
Stay disciplined and follow the r$les
After the session
Jo thro$gh the trades and e"al$ate +o$r s$ccess
%np$t +o$r trades to the statistical software or e!cel at the end of e"ery trading day
'repare for ne!t session
(o some sports * physical acti"ity
&earn to rela!
%f +o$ ha"e traded e!actly as +o$r plan tells +o$ loss or profit doesnt matter# * Reward
+o$r self
G
Backtest with *5pert 4d6isor based on this strategy
'air E<R<S(
+ear >/./
As +o$ can see from the test *E<R<S( had more loosers *than winners in >/./ and still
profit . Thats where +o$ need to $nderstand the importancy of $sing right money and risk
management -
Since i trade man$ally only * i $se EA for tests on different Tfs * pairs and with different
settings. EA 2T cannot d$plicate man$all 2T in this e!act strategy . 'lease consider
n$mbers :$st as an e!ample -
As well consider difference between (EMO and &%VE tests and trading -
./
Few words at the end
Trading and all its aspects are dependent on the indi"id$al preparation and mental readiness
of each trader -
+o$ need to ha"e indi"id$al trading plan - Ho plan ; Ho profits
Stick to the r$les +o$ belie"e in and are pro"en in long term -
Stop looking for holly grail . 'ick strategy *that s$its +o$ the most for e!ample by Time
Frame * $sed %ndicators * )alc$lations* that makes sense to +o$ and so on# * test it and paper
trade it. Make +o$r own r$les based on +o$r own backtests and when +o$ .//0 s$re and
belie" in it* than trade it &%VE -
Traders are loosing beca$se .. They ha"e no plan
>. They ha"e no e!perience with their syst3m
9. They ha"e no patience
C. They change strategies way too often
E!pect to be loosing from time to time. There is no .//0 winning syst3m in this world . %f
+o$ belie"e in +o$r syst3m and $se proper money and risk management * stick to +o$r r$les
e"en thro$gh loosing period. Thats the point of systematic trading .
% do ha"e .M%' file with few handy materials to $se with this strategy incl$ding 2<+?SE&&
script with Money management and a$tomatic S&?T' based on A(R per each pair . Script to
mo"e S& on 2reak E"en . )hart indicators 6 A(R * 2ar )lock co$ntdown to the ne!t bar
opening# * )hart Template * simple Trading &og * which i am willing to share -
1ork on Statistics of +o$r past trading acti"ity to impro"e +o$rself. % $se statistical software
for Fore! based on e!cel *and Market Syst3m Analy4er .
% J$ess *thats abo$t it for now . +o$ ha"e a winning syst3m in front of
+o$* b$t +o$ might be :$st at the absol$te beggining . How +o$ ha"e to
work hard to get the res$lts.
(on,t look for shortc$ts* dont lie to +o$r self.
%t is not going to be easy* b$t definitelly possible -
% wish e"eryone s$ccessf$l trading and
consistent profits --
by Radim Frycka
www.sftmgm.com
..