fxcm-traits-of-successful-traders-guide

TRAITS OF SUCCESSFUL TRADERS: PART THREEHow to Trade the Majors During Active HoursWe sell the currency pair if the price breaksbelow the channel bottom. If price quicklyreverses, we will be taken out of the trade ata loss. Yet if price continues lower, we standto see profits on the continued moves.Thus we can conceptualize this trade systemmight work especially well during times ofhigh volatility, when channels tend to bebroken. Let’s test by looking at how well it hasdone on the Euro/US Dollar in the pastseveral years.The channel breakout system did reasonablywell overall, and especially well during timesof strong market volatility in late 2009. Yet ithas also had long stretches ofunderperformance and noteworthy losingstreaks. Since we know that breakoutstrategies tend to work better during times ofhigher volatility, how can we instruct oursystem to trade only during those times?EUR/USD Channel Breakout Strategy (2005 - 2011)15K14K13K12K11K10K9K09/07/06 04/27/08 12/23/09CHART 3.6Hypothetical returns* from the model channel breakout strategy (2005-2011)Source: Appendix 3.526