The Twenty Entry & Three Exit strategy
Description
The Twenty Entry & Three Exit strategy (TE-TE) was developed by Joachim Struck. It is designed to trade forex markets in a 60-minute time frame. TE-TE is a mean reversion strategy. This means the trader takes a position in the direction of the trend, but only after the market price moved significantly in the opposite direction of the trend.
The strategy is loosely based on a mean reversion strategy called “Double Seven”. This strategy is used by the well-known traders Larry Connors and Cesar Alvarez.
The following is typical for the TE-TE strategy:
- A well-established and simple concept (mean reversion).
- Based on a strategy designed by two famous traders.
- Every trader can implement this strategy.
The strategy is used for daytrading.
| Suitable for | : Forex (EUR/USD ...) |
| Instruments | : Futures and Forex |
| Trading type | : Daytrading |
| Trading tempo | : +/- 50 signals every month |
| Using NanoTrader | : Manual or (semi-)automated |
When to open a position?
The TE-TE strategy determines the trend by using an exponential moving average (EMA). To make things easy and visual, the EMA colours the chart background. A bullish trend is indicated by a green chart background. A bearish trend is indicated by a red chart background.
A buy signal occurs when the market price reaches a 20-period low in a bullish trend. A short sell signal occurs when the market price reaches a 20-period high in a bearish trend. Hence the first part of the strategy’s name “Twenty entry”. The 20-period highs and lows are indicated by a channel in the chart.
This example
the 20-period price channel and the EMA. The chart background
is green, indicating the trend is bullish.
Buy signals and short sell
signals are indicated by a coloured band in the chart. Green
for buy signals. Red for short sell signals. This example
shows a buy signal. The trend is bullish and the market price
is at 20-period low.
This example
shows a short sell signal. The trend is bearish and the market
price is at 20-period high.
When to close a position?
The open position is managed by:
- a profit target
- an stop loss, for emergency purposes only
- a time stop
The profit target is the highest (lowest) closing price of the last three candles. Hence the second half of the strategy’s name, “Three exit”.
The emergency stop loss is a simple fixed stop loss. It is quite far from the entry price. Hence it only serves to cover emergency situations. The time stop automatically closes the position after nine hours. In most cases either the profit target or the time stop will close the position.
This example
shows a buy. The profit target (green line) is reached.
This example shows a short sell. The market price never comes close to the profit target (green line) or the emergency stop (red line). The time stop automatically closes the position after nine hours.
Note: Although the TE-TE strategy was designed and optimised for forex trading, it can easily be adapted to trade other instruments and/or time frames.
Practical implementation
Using the NanoTrader follow these steps:
- Select the instrument you want to trade and open the
chart.
- Select the strategy in the WHS Strategies folder.
- If required, adapt any parameters as described above.
- For semi-automated trading, activate TradeGuard+AutoOrder
in the chart. For automated trading, activate AutoOrder in
the chart.