The thread discussing this is here: Automatic Loss Recovery System (ALR)
I am sure many of you have also been getting some e-mails from Dustin Pass' latest and greatest, the ALR (automatic loss recovery) program that supposedly means you will never lose a trade again. You can check it out here: http://forextradersdaily.com/alr/?p=1 BTW—it sells for $1997.
This looks very similar to something Joseph Nemeth is selling as part of his program. His lecture on recovery where he says this method will mean you never lose a trade again is explained in Lesson 4 here: http://www.4x-dat.com/nemeth.asp His program is around $3,000
The basic strategy is this: Let’s say you take a buy order for 1 lot and would normally place a 150 pip TP and a 50 pip stop loss. Instead of using a stop loss, if price moves against you by 50 pips you take a sell order for 1.4 lots. If price keeps going down another 150 pips you will make a small profit (150 * 1.4) – 200 *1) = a net profit of 10 pips). If it goes back up to where you first took your order (this area is called the recovery zone), you open another buy order for 1 lot. If it goes up another 150 lots, once again you get out with a small profit where you would have taken a loss otherwise. Each time price reverses instead to the other side of the recovery zone then you open another trade. Eventually price will go up or down enough to be able to close all the trades. This means when you are right, you will hit your TP as you planned. When you are wrong, your trades will close at a modest profit. Once in a blue moon you will hit SL but it won’t devastate your account. You can predefine what your total SL would be.
After lots of debate and input from several others, I think we are ready to move forward. I think the simplest way is for the user to input lot settings for each turn and the maximum number of turns. They can use the ALR calculator to determine what the settings should be based on their account size, risk tolerance etc.
Ideally we would need 3 versions. One would be the trade manager for everyone to use with their own strategies. Secondly, I would like to see this already coupled with a good strategy so people can see this in action (and do all sorts of back tests for data collection to compare how well it works on higher volatility pairs versus lower ones etc.). Eventually there should also be a “shell version” so people could append this to their own strategies.
As a suggestion here is a simple strategy that works well on higher volatility pairs:
I used EURNZD for my example on a H4 chart. Use a 240 LWMA for trend direction. Only trade with the trend--only buys if the price is above the LWMA 240 and sells if below. Even better if you know how to state a minimum angle for the LWMA MA. I have heard there are indicators that tell you the slope of an EA that can be used to filter out when the MA is pretty flat. . If you are in an uptrend wait for MACD to cross below the 0 line, and then open a buy when price crosses and closes above the 5 EMA shift 5. Use 150 TP. Close when price hits TP or when it closes below the 5 EMA shift 5 as long as the trade is in profit. Do not close if it isn't. If price moves 50 pips against you then start your ALR sequence--turn on 50 pip moves and take TP at 150. Every trade either hits profit or just above break-even. The most ALR turns I could see was 3.
If you use the template all the trade lines are drawn in so you can follow along.
I think ALR would also do very well with Bob’s 10.7, BASA and others. Another one would be the old Nanningbob 5.0 system. I am sure you can think of several others.
To help picture why the ALR strategy works, have a look at this H4 chart from the GBPJPY. All we need to ensure a profit is for the trade to move at least 150-200 pips if our initial TP is 150. As long as the market moves we will not lose. If we do hit a SL, it will be small in size (as determined by YOU). Using this on a higher volatility pair and I think it is going to be very successful!
Please let me know if there are any questions. After spending hours on this some things might seem simple to me by now that are as clear as mud to a third party.