SCOTT WELSH TRADING BLOG

Friendly Tips

Friendly Tips

June 16, 2021

Most ideas are bad ones.

And that’s okay.

It takes a lot of bad ideas to get a really good one.

The key is to know when to ignore the friendly tip.

Does going Long on GME at $325¬†with “diamond hands” make sense?

Does going Long on Bitcoin at $65,000 with short-term goals make sense?

Does choosing the drink in front of you make sense?

Listening to other people without filters is almost certainly a bad idea.

But other people also have other viewpoints. Viewpoints you may have missed.

In that case, listening to other people who are trustworthy is a great idea.

Recently, I got a generous comment from someone on my YouTube channel. He mentioned a Band system that has worked well for him, and he gave out many details on that system.

So, I thought I’d look into it.

And the first thing I did was change his system. (Trust is earned, after all!)

He used the USDCAD. I’m using GBPJPY. Why? Because I like instruments that trend and nothing trends better in Forex than GJPY.

Next, I changed his methodology. His was a reversion to the mean system (when price breaks above a Band, go Short). I made it a breakout system (when price breaks above a Band, go Long). Why? Breakouts are eternal.

And he used a 1-hour chart and I used the 4-hour. Why? My guess is that 4-hour signals are more powerful.

Here’s what I did:

BB Breakouts (GJPY)
Long Entry: When price closes above the Bollinger Band (Length 30/Standard Deviation 2.7), go Long at Open of next bar.
Long Entry: When price closes above the Bollinger Band (Length 30/Standard Deviation 2.7), go Short at Open of next bar.
Profit: 430 pips
Stop: 230 pips

That’s it.

The idea from my generous suggester was that Bands are a great way to get into a trade. They are a measure of volatility and volatility usually equals a good trade possibility.

That’s what I used (with practically zero optimizing. How did it do trading 1 lot from 2003-2021?

Also see it here.

The hypothetical numbers actually look pretty good. And it makes sense why it might work.

It uses volatility for breakouts, big targets (no execution problems), and good reward to risk.

This was an excellent tip, even if I didn’t do it exactly the way he generously offered.

Does the tip-based system work on anything else?

We’ll take a look in our next Newsletters.

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Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.