Cowabunga System Daily Update: Thursday, 03/11/2010

The CFTC may be changing the rules for retail traders in the US. This affects many of us in a negative way and we need your help getting our voices heard.

Read more of the details

I can not find better words to describe my position on all this than those from Andrei Pehar, Chief Currency Strategist at fxKnight.com.  

Andrei says: "I am not opposed to regulation nor regulatory agencies. But that regulation needs to be fair, transparent, and open to public input. Otherwise it becomes corrupt and self-serving. Sure high leverage can get you into trouble if used thoughtlessly. Sure hedging when not done properly turns one loss into two. But I believe the cure is EDUCATION, not restricting what people can and cannot do with their investment decisions. Guide, don’t dominate – government was invented to protect people and their property, not to limit their potential.

We at BabyPips.com disagree with the CFTC proposal.

If you disagree as well, you may submit your comments to secretary@cftc.gov.  

Include “Regulation of Retail Forex” in the subject line of the message and the identification number RIN 3038-AC61 in the body of the message. Please, help us to spread the word!

I think this is a very important matter that affects us all, and we should try our hardest to ensure that things will be done for the best of the trading community.

If this is your first time visiting this blog, read this first! 

Main Trend

Current Trend

The trend stayed down until 7am EST. From 3am – 7am EST a new trend change candle formed and changed the trend from down to UP. After 7am EST, the trend remained up the rest of the day.

Today I only looked for short trades until 7am EST. After 7am EST I only looked for long trades.

News events to watch for today :

  • 8:30am EST- US Trade Balance

Today’s Surf

1:45am EST- There was a moving average crossover for a short trade. RSI was less than 50, stochastics were trending down and MACD went from positive to negative. This was a valid entry.

The entry was at the close of the candle at 1.4960 with a stop at the most recent swing high at 1.4987. Since I was only 10 pips away from the nearest 50 or 00 level (1.4950), I decided to go for the same amount of pips I was risking on the trade, which in this case was 27. This put my initial target at 1.4933.

Entry: Short at 1.4960 Stop: 1.4987 Target: 1.4933

3:45am EST- Unfortunately I was stopped out of my trade.

10:15am EST- There was a moving average crossover for a long trade. RSI was greater than 50, stochastics were trending up and MACD was negative and gaining value. This was a valid entry.

The entry was at the close of the candle at 1.5037 with a stop at the most recent swing low at 1.4991. Since I was 13 pips away from the nearest 50 or 00 level, I decided to put my initial target at 1.5050.

Entry: Long at 1.5037 Stop: 1.4991 Target: 1.5050

11:15am EST- My target was hit. Price made a clean break so I moved my stop to 1.5050 and set my next target for 1.5100.

11:30am EST- Unfortunately I got stopped out at 1.5100.

entry2

Trade Result: -27 +13= -14 pips (NOT INCLUDING SPREAD) R-Multiple:-1.00; 0.28

News events to watch for Friday:

  • 8:30am EST- US Advance Retail Sales
  • 9:55am EST- US U. of Michigan Confidence
  • 10:00am EST- US Business Inventories

For a complete list of news events check out our Forex Economic Calendar.
Questions? Read the Cowabunga FAQ.

Want to discuss the Cowabunga System? Visit our Forex Forums.

  • Drumpip

    Thanks for the videos.. helping out alot!

  • parsush

    “11:15am EST- My target was hit. Price made a clean break so I moved my stop to 1.5050 and set my next target for 1.5100.”

    I think I’ve seen this question before, but I haven’t found the answer so sorry in advance if you’ve answered this before:

    how exactly does the “clean break” strategy work?
    if you set a TP the trade closes when price hits it. if you don’t set a TP and manually follow the price, you risk not getting paid for being too greedy.
    so my question to you is – what do you do, exacly, when price is near your TP?

    thanks,

    Parsush.

  • Drumpip

    Thanks for the videos.. helping out alot!

  • jsd1004

    That is a bit of a problem with this method..in reality very difficult if not impossible to get out (or stay in) near your target without a limit order. I would guess that no trader has ever sucessfully replicated this system using the ‘clean break’ method. Any long term traders on here using this profitably that can correct me?

  • parsush

    “11:15am EST- My target was hit. Price made a clean break so I moved my stop to 1.5050 and set my next target for 1.5100.”

    I think I’ve seen this question before, but I haven’t found the answer so sorry in advance if you’ve answered this before:

    how exactly does the “clean break” strategy work?
    if you set a TP the trade closes when price hits it. if you don’t set a TP and manually follow the price, you risk not getting paid for being too greedy.
    so my question to you is – what do you do, exacly, when price is near your TP?

    thanks,

    Parsush.

  • WrathofthePipKing

    He shows us every time he does his surf report. If it cleanly breaks his target Line (Line he’s drawn on his chart), when that candle has formed, if it ends above his target, thus creating a clean break, he moves his stop to the target line and moves the target line up another 50 pips. This target line is not a limit line, its an arbitrary price target. If it doesn’t cleanly break through the target line, then he closes the trade at the close of that candle. Most of the time, it seems that a clean break occurs, he then gets stopped out on the next candle anyway, letting the stop close the position.

    I think the confusion comes in when thinking that his price target needs to be the actual exit point of the trade. And as you are applying this system, you want to “tweak” it to maximize profit, like limiting out when it hits that price target or setting your stop a little lower to withstand the next downswing. Which is fine if you want to customize the system to suit your goals.

    I think its a changing of your mind set that this system is not a grab every single pip you can grab system. More of a ride the wave as they come in, some knock you off, some give a sweet ride. Hope this helps…

  • jsd1004

    Incorrect. He does not end trade at the close of the candle he ends the trade when he thinks there is not enough momentum to sustain it. Which is not quantifiable. Therefore impossible to reproduce.

  • WrathofthePipKing

    Thanks jsd1004.

    ::I have been watching his system for a couple weeks now and I am trying to find an example of the scenario you describe. On 1/19/10, he lets the only trade stop out because the candles never hit his target price, they certainly come really close, within 10 pips, and he doesn’t close the trade even as moment slows. Also, 01/20/2010, he comes really close to his Target but then lets it close out with almost no pips gained because of news. Do you have an example of what you are describing?

    ::The majority of the trades I have seen, he lets the trade stop out after moving the stop to cleanly broken target price line. He addresses whether there is enough momentum to stay in the trade through this “clean break” system. If the candle that forms, cleanly breaks your price target line, then you stay in the trade and move your stops, that’s part of the system.

    ::I have thought about this problem, as 50 pips seems hard to grab on the Cable recently. I wonder if changing your Price target increments to something like 30 pips or even 10 pips would work better for your style. 30 pips a day seems to be a lot of peoples goal.

  • jsd1004

    Run the system on a demo account and try and reproduce the results and you will see the problem. I trade semi pro and sometimes make money and do enjoy babypips blogs but i would not like someone to think that they can reproduce it and make money. Because they more than likely wont. Especially with spread and this anomaly regarding a clean break. I would like to see someone independent compare their results with babypips every day and also post when babypips cant so w get an objective analysis. Any volunteers?

  • WrathofthePipKing

    Is it not profitable?

    ::I have been trading some of it on a demo account, but can’t stay up night after night with fake money. I guess I don’t understand the anomaly with the clean break.

    ::I ask as I was going to try this on my real account, once I get it opened. So I appreciate your thoughts.

  • jsd1004

    That is a bit of a problem with this method..in reality very difficult if not impossible to get out (or stay in) near your target without a limit order. I would guess that no trader has ever sucessfully replicated this system using the ‘clean break’ method. Any long term traders on here using this profitably that can correct me?

  • WrathofthePipKing

    He shows us every time he does his surf report. If it cleanly breaks his target Line (Line he’s drawn on his chart), when that candle has formed, if it ends above his target, thus creating a clean break, he moves his stop to the target line and moves the target line up another 50 pips. This target line is not a limit line, its an arbitrary price target. If it doesn’t cleanly break through the target line, then he closes the trade at the close of that candle. Most of the time, it seems that a clean break occurs, he then gets stopped out on the next candle anyway, letting the stop close the position.

    I think the confusion comes in when thinking that his price target needs to be the actual exit point of the trade. And as you are applying this system, you want to “tweak” it to maximize profit, like limiting out when it hits that price target or setting your stop a little lower to withstand the next downswing. Which is fine if you want to customize the system to suit your goals.

    I think its a changing of your mind set that this system is not a grab every single pip you can grab system. More of a ride the wave as they come in, some knock you off, some give a sweet ride. Hope this helps…

  • jsd1004

    Incorrect. He does not end trade at the close of the candle he ends the trade when he thinks there is not enough momentum to sustain it. Which is not quantifiable. Therefore impossible to reproduce.

  • WrathofthePipKing

    Thanks jsd1004.

    ::I have been watching his system for a couple weeks now and I am trying to find an example of the scenario you describe. On 1/19/10, he lets the only trade stop out because the candles never hit his target price, they certainly come really close, within 10 pips, and he doesn’t close the trade even as moment slows. Also, 01/20/2010, he comes really close to his Target but then lets it close out with almost no pips gained because of news. Do you have an example of what you are describing?

    ::The majority of the trades I have seen, he lets the trade stop out after moving the stop to cleanly broken target price line. He addresses whether there is enough momentum to stay in the trade through this “clean break” system. If the candle that forms, cleanly breaks your price target line, then you stay in the trade and move your stops, that’s part of the system.

    ::I have thought about this problem, as 50 pips seems hard to grab on the Cable recently. I wonder if changing your Price target increments to something like 30 pips or even 10 pips would work better for your style. 30 pips a day seems to be a lot of peoples goal.

  • jsd1004

    Run the system on a demo account and try and reproduce the results and you will see the problem. I trade semi pro and sometimes make money and do enjoy babypips blogs but i would not like someone to think that they can reproduce it and make money. Because they more than likely wont. Especially with spread and this anomaly regarding a clean break. I would like to see someone independent compare their results with babypips every day and also post when babypips cant so w get an objective analysis. Any volunteers?

  • WrathofthePipKing

    Is it not profitable?

    ::I have been trading some of it on a demo account, but can’t stay up night after night with fake money. I guess I don’t understand the anomaly with the clean break.

    ::I ask as I was going to try this on my real account, once I get it opened. So I appreciate your thoughts.

  • mabidashraf

    Folks, this system is created to give you an example of how the simple forex system can work in live trading. You can tweak this system as you consider appropriate. All the above comments made me to share the backtesting I performed on Cowabunga system, however, given the limitation of my expertise in programming I decided to use 30 pips stop loss and 50 pips profit target. The backtest is set to trade 24 hours a day when the signal is triggered and does not take into account the news candle as well. However, this can help you in assessing whether you can reproduce the results of the system or not. Let me know if you have any questions on this. Backtest results can be accessed here: link to short.ie and I also tested this for GBP/JPY with 50 pips stop loss and 100 pips profit target link to short.ie

  • mabidashraf

    Folks, this system is created to give you an example of how the simple forex system can work in live trading. You can tweak this system as you consider appropriate. All the above comments made me to share the backtesting I performed on Cowabunga system, however, given the limitation of my expertise in programming I decided to use 30 pips stop loss and 50 pips profit target. The backtest is set to trade 24 hours a day when the signal is triggered and does not take into account the news candle as well. However, this can help you in assessing whether you can reproduce the results of the system or not. Let me know if you have any questions on this. Backtest results can be accessed here: link to short.ie and I also tested this for GBP/JPY with 50 pips stop loss and 100 pips profit target link to short.ie

  • parsush

    thanks for all your comments everyone!
    from the things I’ve read, it seems like jsd1004 is the only one who has experienced what I was talking about.
    Wrath – the problem in executing his “clean break” strategy is that sometimes price only touches TP for a glimpse and drops, sometimes it goes 5 pips above it, and then drops, and sometimes it keeps rallying to TP2… in the first and common two cases, you will end up losing TP1 if you don’t auto-TP. (some would say too greedy)
    if you do auto-TP, on the other hand, you will never enjoy TP2. (too tight?)
    the way I see it, you have to know in advance weather it’s gonna be a clean break or not. but I hope I’m wrong. waiting for one of babypips.com staff to reply…

  • parsush

    thanks for all your comments everyone!
    from the things I’ve read, it seems like jsd1004 is the only one who has experienced what I was talking about.
    Wrath – the problem in executing his “clean break” strategy is that sometimes price only touches TP for a glimpse and drops, sometimes it goes 5 pips above it, and then drops, and sometimes it keeps rallying to TP2… in the first and common two cases, you will end up losing TP1 if you don’t auto-TP. (some would say too greedy)
    if you do auto-TP, on the other hand, you will never enjoy TP2. (too tight?)
    the way I see it, you have to know in advance weather it’s gonna be a clean break or not. but I hope I’m wrong. waiting for one of babypips.com staff to reply…

  • WrathofthePipKing

    If it touches your Target Price Line and then retraces, you exit at the close of that candle, cause it wasn’t a clean break. If it breaks through it completely, then you adjust your stop and let it ride. That seems to be the way the he exits his trades.

  • parsush

    “if it touches your Target Price Line and then retraces, you exit at the close of that candle” .
    on 15 minutes scale? it basicly means that I will find myself waiting up to 15 (!!) minutes since it first touched TP1.
    by that time it economies may rise and fall. price could be anywhere. if it’s a glimpse-n-drop you WILL lose the trade.

    nevertheless, Pip Surfer DID repeat this point on several occasions . I don’t think he would have done so if it was rubbish. waiting for you to light the way Pip Surfer…

  • WrathofthePipKing

    If it touches your Target Price Line and then retraces, you exit at the close of that candle, cause it wasn’t a clean break. If it breaks through it completely, then you adjust your stop and let it ride. That seems to be the way the he exits his trades.

  • Lordpipi

    hello… I have a problem with entering trades on meet pips. Any trade I enter , it shows thats its pending, so I cannot enter my closing price….please how can I go about it…

  • Lordpipi

    hello… I have a problem with entering trades on meet pips. Any trade I enter , it shows thats its pending, so I cannot enter my closing price….please how can I go about it…

  • PipsyGirl

    Hello Lordpipi,

    After you created a trade, you will edit the status to ‘open’ from the drop-down menu somewhere at the bottom. Save changes. Editing is manual; so you will use the drop-down menu again to ‘close’ a trade. Don’t forget to save updates.

  • PipsyGirl

    Hello Lordpipi,

    After you created a trade, you will edit the status to ‘open’ from the drop-down menu somewhere at the bottom. Save changes. Editing is manual; so you will use the drop-down menu again to ‘close’ a trade. Don’t forget to save updates.