“The Puppeteer’s Shadow” – almost grail for intraday scalping

Hello friends, Forex traders! As we know, the market’s goal is to pick up your stops. Reversals will certainly follow the trend. It was and always will be like that, otherwise, this game would be too easy.

Today we talk about a strategy called “The Puppeteer’s Shadow“. The strategy aims to make the profit from the natural movements of the market, which occur after the breakthrough of round levels. The system is simple and undemanding, so it is possible to trade it well on almost any trading platform (there is the auxiliary advisor, but you can do everything manually).

We will enter the market at the harvest time – the time to collect losers’ stops. When the “The Puppeteer’s Shadow” hangs over the market …

Strategy Features

Platform: Any;
Currency pairs: EURUSD, USDJPY, GBPUSD, AUDUSD, NZDUSD, USDCAD;
Timeframe: Any;
Trading Hours: Round the clock;
Recommended brokers: Roboforex, XM, Alpari

The strategy principles

For the beginning let’s try to understand what are round levels. In fact, round (or psychological) levels are horizontal price marks having two zeros at the end, for example, 1.3300, 1.3400, 1.3500, and so forth. The same goes for yen pairs: 110.00, 111.00, 112.00.

The strategy is based on the idea that after and at the breakdown of the round level, the activation of a large number of orders, rollback is necessarily formed. Usually, a rollback occurs at a distance of 30 points from the breakdown of the round level.

Strategy rules

SELL Rules:

If the price breaks the level bottom-up, at the level of 30 points, we have to put a Sell Limit pending order.

Empirically, it was found that the most appropriate (in terms of profits) level of take-profit is 10 points, but for a greater percentage of profitable trades – 7 points. The optimum size of the stop-loss – 21 points.

Despite the fact that stop-loss is bigger than profit, in this case, the loss is compensated by far more profitable trades. The reason for the large stop-loss is simple. The fact is that there is too much trading noise during the day, so, as in the case of many other intraday strategies, this is simply necessary stop.

BUY rules:

Similarly for the downward level breakdown. At a distance of 30 points from the level set a pending Buy Limit order. Also, setting take-profit in 7 (or 10) points and 21 points stop loss. Since in the beginning, we set two orders – one above the level, the other below, when one of them triggers, we remove the second one.

There is an exception for USDCAD – this pair has turbulent nature, so the rules are slightly different for it. Rules of orders setting are similar, the only thing is that pending orders are placed at a distance of 50 points instead of 30. The size of stops and takes is the same.

Trading Hours

It is important to take into account the time factor. We begin to follow the breakdowns at 8:00 GMT. Once there was a breakdown (or before the breakdown) we set pending orders on both sides of the level. We finish trading at 20:00 GMT. At this time we delete all pending orders that left. If at this time there are open positions, we’re waiting for their closure by stop-loss or take-profit. That is, delete pending orders, but don’t touch opened positions.

We have a break for 3 hours, and at 23:00 GMT the Asian session as part of this strategy begins. So, the first trading section is the period from 8 am to 8 pm GMT. The second section begins at 11 pm GMT and ends at 8 am GMT.

At the junction between the two periods, we delete all night orders that didn’t trigger and start trading from a clear chart. If at this time there are opened positions, we let them close at stop-loss or take-profit. From 20:00 ‘till 23:00 GMT, we do not trade.

Greenwich Mean Time (GMT) can be checked here.

Supporting Advisor

Since trade is conducted around the clock (except the 3-hour break), it is convenient to use an advisor for setting orders. You simply specify the levels at which to place orders and specify the size of take-profit and stop-loss. Also, at a specified time advisor may delete all pending orders that didn’t work out.

An adviser should be installed by standard instructions, no nuances.

First, open the chart with the timeframe in which you will be comfortable watching the breakthrough level. As for me, it’s best to do it on M5 chart. To run Advisor, simply drag it to the chart.

To begin we specify the Lot Size value – order size. You can set 2 levels at the advisor (Price 1 and Price 2). Since we do not know exactly where the price will go, we ask one level above and the other below the current price.

Next, set the distance (Distance to entry). As we remember, the distance for the CAD should be 50 points, for the remaining pairs – 30. Stop-loss and take-profit are 21 and 7 (or 10) points, respectively.

You can also program the deletion of orders at a specific time. To do this we set Cancel Pendings at? GMT parameter to true, and in the Time to Cancel field we specify the orders removal time (eg, 8 am GMT).

There will be 2 lines on the chart. Once the price crosses one of them, the advisor will put limit orders with preset parameters of distance, stop and profit.

Examples

The strategy works out great at the flat. It rarely happens that a deal is knocked out at the stop-loss that you can watch on a five-minute GBPUSD chart below.

During a trend, there will be fewer transactions. At such times it is better not to use a large profit, as it can greatly reduce the percentage of profitable trades.

Tip: if the price almost reached take-profit and then reversed, then it’s better to quit the deal.

Conclusion

Keep track of the profit and loss levels fixation. Short take-profit gives more profitable trades, but a 10-point take-profit increases the total yield. Stop-loss, in any case, should stand higher than the level of profit so that intraday trading noise does not beat out short stops. Nevertheless, even such a Stop-Loss to Take-Profit ratio gives substantial profits. The strategy itself is fairly simple, but using an auxiliary advisor won’t require any actions from you. The percentage of profitable trades can reach 85%.