22. Why Cash Trap Blue Gator?
Mar.22 Today I am experimenting with a brand new strategy that I call Cash Trap Blue Gator. I don’t know if anyone in the world uses this precise strategy. It is simply an experiment to see if my educated guess will work.
What is Cash Trap Blue Gator?
This strategy will combine some of the tools within both Cash Trap and Blue Gator to make trades. Because this is experimental, the first 5 trades will be $1 trades. If they are all successful, I will start investing 1% of my account in each trade.
You can find Blue Gator by opening up your Hourglass indicator. Click on Strategies > Blue Gator at the top left of the page.
For any currency pair you can see an image similar to the one here on the right. Note these 3 bullet points:
- Where candles are within the light blue channel, prices are consolidating.
- Where they are below the light blue channel, they are trending downwards and you should put more often than you call.
- Where they are above, they are trending upwards and you should have more calls than puts.
Market phases and strategies
An investment strategy that works in one market phase often will not work in other market phases. The market in the picture here is in a consolidation phase between those 2 arrows I drew there. Cash Trap will work very well there. Do not expect it to work so well in an up trending or a down trending market.
So, in this experiment I will use Blue Gator to find consolidations and then use Cash Trap to trade within that consolidation.
I like to have 2 screens open in such a way that the one with my broker is large and overlaps the other one. It is easy to switch back and forth between screens. One screen has only my account so that I can trade. The other screen has the following open:
- Forex Factory news
- This webpage opened to that list of 10 currency pairs.
As of this writing, the 10 currency pairs above are the only ones available in Cash Trap. So, there is not point in looking at any pairs other than these.
Point system for choosing the correct trade
My strategy for the foreseeable future is to trade 1% of the amount in my brokerage account every single time I trade. I will trade if the points add up to 5 or more.
If you are trading up to 3% at a time, you can use 6 points for 2% and 7 or more for 3%. (Note that a rollover would increase the amount of your trade.)
- The first thing you do at the beginning of your trading session is check the news. Go to forexfactory.com for latest financial news. If any of the currencies in that list have a red folder beside them, I will NOT trade that currency within 2 hours on either direction. The image above is from today’s Forex Factory. That image means that today between 7 am and 11 am you should not trade any currency pair with USD in it
- 1 point. In the Alert Panel here you see USD 64 & CHF 56. If the stronger is the first one, call (buy). If the stronger is the second one, put (sell). You get one point of the 2 numbers line up with the word after Type.
- 1 point. An up arrow will get point if it corresponds to the Call in the Alert Panel. If the numbers are really close, you are in a consolidation and there could be either a call or a put.
- 1 point. In your Hourglass, just above the Stochastic & RSI trend graphs, you will see an S or a B.If the S (sell/put) or the B (buy/call) line up with your other Put or Call indicators, that’s worth a point. In this example, the B lines up with the Call arrow.
- 1 point. Read the Bollinger Band section. You get a point when price of a currency pair is within bottom Bollinger band for a call (buy). You get a point when price of currency pair is within top band for a put (sell). In the image to the right, we would have got a point because the put arrow is within the upper Bollinger band.
- +1 or -1 points. Read the Trend Line section. If trend line (also called the 200 EMA or exponential moving average) and direction of the call or put arrow are favourable (as in this example), you get +1 point. If unfavourable, you get -1 point. There is another way you can get a point for an EMA. When the EMA is between the Bollinger bands, look for one of the 2 scenarios: 1. A put arrow is below the EMA. 2. A call arrow is above the EMA. Either of those situations would give you one point.
- 1 point. Read about the Stochastic chart.
- 1 point. Read about the Relative Strength Index. Never compromise on the Stochastic & RSI. Above the red dotted line, look for a put. If is below the green dotted line, look for a call . To be through the dotted line and starting back through again is even better. In the example to the right, the Stochastic (top) will not get a point because it has gone down too far. The RSI (bottom) will get a point because it is barely through the red dotted line on its way down.
- 1 point. Wait for the 3 Bollinger bands to be together before making the trade. That would give you one point. Note that if the arrow is in a place where the 3 Bollinger bands are together, it is okay for the other set of 3 Bollinger bands to be apart.
- 1 point. Resistance & support lines. If a put arrow is just beneath a resistance line or a call arrow is just above a support line, give yourself a point. These resistance & support lines are often drawn into Hourglass like the one in this screenshot.
Testing out Cash Trap Blue Gator
When trading forex, it best to not do it in the first few hours after the market opens. That when the big banks and the hedge funds are trading heavily. The market is too volatile.
The three mains markets in the world are in London, New York & Tokyo. You do not want to trade when there is an overlap of two markets.
The best times to trade using Pacific time are 9 am – noon and 6 pm – 9 pm. Right now where I live it is 3 pm. So, now would be a bad time to test out my system. Tonight after supper I will test it out using 5 one dollar trades. If they are all successful, I will know that the system on this page works.
After 7 pm. I tested out my strategy with 5 one-dollar trades. I won all 5 of them.
So, I guess I will be using the Cash Trap Blue Gator strategy with 1% of my account each time. I will be doing this in the foreseeable future.
Learn about the origin of Blue Gator.