Bunnygirl's

Forex Trading Approach

Author: stockwet Email: stockwet@yahoo.com

Originator: Bunnygirl Last Modified: November 9, 2005

Bunnygirl

Bunnygirl is a Forex day trader who frequents the MoneyTec.com and StrategyBuilderFX.com trading forums. She was most active from about November 2003 to April 2005, though she still frequents to forums on occassion. Her most remarkable accomplishment was starting the "wma cross" thread in April 2004. As of November, 2005, the thread has over 1100 replies, 147 pages, and 340,000 views, three times the views of the next most popular strategy thread. Bunnygirl proposed a straight-forward, easy-to-follow framework for trading. She explained to others, in great detail, how she trades the three major market types: trending, ranging, and news breakouts. The predominant aspect of her strategy incorporates a moving average crossing. Her suggestions and recommendations should be properly termed a "framework" as she frequently interjected aspects of her own trading style into the methodology and encouraged others to deviate from the framework where it was necessary in order to fit within their own styles. Her approach was shown to be profitable as she made live calls in the chatroom and, on one post, indicated that she had a 90% trading success rate and a streak of 46 wins that had recently ended at the time of that posting. Bunnygirl's influence on the Forex trader community is significant as she has a large number of successful traders who started by using her system. Her original strategy thread has spun off numerous related threads and has helped countless other traders formulate basic rules for MA crossing strategies. This document will detail the "BunnyCross" or "BGX" methodology. Note that this document explains the most recent strategy definitions for BGX, and may not include Bunnygirl's earlier thinking. For instance, Bunnygirl originally used Bollinger Bands for exits, but moved away from them as she learned better exit techniques. There was one primary thread that Bunnygirl posted on, and another secondary one because it provides updates to some of her trading strategies. References to specific posts, from each thread, are included in this document.

Who's stockwet?

I'm stockwet. stockwet is my forum handle on the Moneytec and StrategyBuilderFX forums. I stumbled onto the Bunnygirl thread several months ago. After a tedious week of reading through the entire post, going back through the post with more answers, re-reading again and again, I decided to write down the rules of her approach. My goal is to provide myself and others with a comprehensive guide to Bunnygirl's trading style and approach. Currently, I trade the BGX system exclusively, and use this document to refresh my understanding of the rules and nuances.

Other Contributors

Others have contributed to Bunnygirl's threads. From davidwt's excellent Bunnygirl indicator to Beachie's and Shimodax's intelligent and insightful posts, many have added significant value and understanding to Bunnygirl's threads.

Bunnygirl

1

The Forex Market

The Forex market is the largest, most liquid financial markets in the world. Conducting over $1.6 trillion in transactions every day, the Forex market dwarfs the combined liquidity of both the US Equities and Treasury markets. The Forex market is completely electronic, with transactions being handled between a vast banking network. Individual investors, traders, and corporations work through brokers or Interbank dealers to gain access to the market. Following are some of the unique benefits of trading in the Forex markets.

• 24-hour market: Trading occurs primarily from 7PM EST Sundays to 4PM EST Fridays. Trades between these times can be entered or exited at any time.

• High liquidity: Over $1.3 trillion in transactions pass through the market every day.

• Low Transaction Costs: Brokers typically charge a spread, versus a commission for each

trade. Spreads vary by the currency pair being traded. Spreads can be fixed or variable. Ranges for major pairs range from 2 to 5 points.

• Easy access: Individual traders gain access to the Forex market using brokers that offer

Internet access using their proprietary trading platforms.

• Margin Trading: Forex trading is done with high degrees of leverage. This can result in rapid gains, or rapid losses.

One of the best sites to learn the fundamentals of the Forex market is at http://www.piptrader.com/forex_education/basic_forex_education/.

Currency Pairs

Forex traders trade currency pairs. The major currency pairs traded are:

• EURUSD: Euro / Dollar • GBPUSD: British Pound / Dollar • USDCHF: Dollar / Swiss Franc • USDJPY: Dollar / Japanese Yen

The first currency is the base currency. The price of the pair is understood based on the base currency. For instance, a quote of 1.1700 on the EURUSD is meant to be understood as "1 Euro buys 1.1700 US Dollars". Or "it takes 1.1700 US Dollars to buy 1 Euro." The BGX system is ideally suited to the EURUSD, GPBUSD, and USDCHF currency pairs. Other pairs might be possible to trade, but these three are preferred.

Forex Basics

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Pips and Lots

Pips are the term used for a point movement in each pair. Differences in the last decimal place at the end of the price quote are how pips are measured. For instance, if the EURUSD starts out at 1.1700 and moves to 1.1750, it has moved 50 pips. USDJPY quotes are different – they only contain two decimal places whereas the other majors contain 4 decimals. Pip measurements are the same, though, as changes in the final decimal place represent pip movements. A "lot" is similar to a "share". You buy or sell currencies in lots. The value of a lot depends upon the currency pair being traded. Each lot consists of 100,000 currency units. For most traders, buying or selling currency lots on 1:1 leverage is improbable. Forex trading is highly leveragable. Your broker will determine the degree of leverage you have available. However, as an example, if you have an account with 100:1 leverage, you're able to buy a single lot of 100,000 currency units on a margin account of only $1000 dollars. However, that's the margin amount. Each pip movement for most currency pairs is worth $10, so, it would take a move of 100 pips against you for your margin to be reached. Traders can trade multiple lots, depending on their account size. Some brokers allow you to have a mini-account. A mini-account uses fractional lots where a pip movement is worth $1, versus the normal $10 for a regular account. Some brokers allow as little as $300 be deposited in a mini-account. (Note that the value of a pip depends on the pair being traded. For simplicity, these examples use $1 for mini accounts and $10 for regular accounts.)

Jump In

Getting started in the Forex market is easy. Here are the steps:

1. Find a broker or bank 2. Sign up for a demo account 3. Download the brokerage platform 4. Get MetaTrader 4 as a secondary/charting platform 5. Get the BGX indicator for MetaTrader 4

Find a broker or bank

Forex traders have the option of gaining access to the market via brokers, banks, or interbank exchanges. In each case, expect to pay either a spread or a commission. A commission is usually a percentage fee of the transaction value. A spread is the difference between the ask and bid price of a pair that the broker keeps. So, for example, if the EURUSD has a 3 pip spread, and you're trading a full lot, your fee for the transaction is $30 (3 pips X $10 per pip). Brokers have relationships with large Forex banks and provide individual traders with access to the interbank market via. However, brokerage firms trade their own money. Some are believed to trade against their individual trading customers as a way to pad further profits. Most brokers charge a spread on each transaction. Banks provide access to the Forex market for some high net worth traders. Commissions and spreads are not always more favorable than with brokers. While banks can provide more direct access to traders, their primary business model is to exchange their own funds. So, large banks are not necessarily the best approach for new traders who might need a little more flexibility. Interbank exchanges claim to be 3rd party exchanges providing direct access to the Interbank market. They differentiate themselves from brokers by providing rock bottom, though often variable, spreads and they do not trade for profit. Interbank exchanges are an appealing alternative to brokers. The following list provides comparison information on Forex brokers: http://www.goforex.net/forex -broker-comparison.htm. Additionally, the same site provides ratings information on Forex brokers: http://www.goforex.net/forex -broker-ratings.htm.

Get a demo account

The question of whether or not to open a demo account along with, or before, opening a live Forex account should be indisputable. Most brokers allow users to open demo accounts before opening live accounts. Demo accounts should be used to learn systems and create regular trading habits. Traders that use a demo account to jump from system to system, trying to find something that works, will, inevitably, be wasting a lot of time. The most productive use of a demo account is to establish trading habits that are successful and can be objectively applied in the same manner in a live environment.

Jump in

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Download a brokerage platform

New traders should test a broker's platform before committing to it, even though their demo system may or may not reflect the performance of the live system. The trading platform will help someone learn how to enter and exit orders, place stop losses, apply trailing stops, review account history and often include a host of useful add on features. Become familiar with your broker's platform so that orders and entered and exited correctly and effectively.

Get MetaTrader 4

Regardless of whether or not your broker offers a platform with integrated charts, new BGX traders should download and install the MetaTrader 4 platform from MetaQuotes (www.metaquotes.net). This platform is an independent Forex charting and analysis package. A large user community exists who have created numerous indicators and system experts for the product. There is even a BGX indicator for MetaTrader 4. MetaTrader 4 can be downloaded at http://www.metaquotes.net/downloads/. You can open a demo account after installing the product by right-clicking the Accounts icon in the Navigator and selecting "Open an Account."

Get the BGX indicator for MetaTrader 4

Davidwt, a trader and programmer who frequents the StrategyBuilderFX forums (www.strategybuilderfx.com) has been kind enough to create a very good indicator for the BGX system. Following are instructions for downloading and installing a modified version of the original indicator:

1. Download the indicator from the following site: 2. Extract the indicator files to your MetaTrader 4 indicators directory. (C:\Program

Files\MetaTrader 4\experts\indicators if you selected the default installation parameters.) 3. Launch (or close and re-launch) MetaTrader 4. 4. In the MetaTrader 4 Navigator window, expand the "Custom Indicators" icon and double click

the "BunnyGirl Cross …" indicator. 5. The parameters screen will allow you to modify any of the settings. Following are descriptions

of the parameters.

• PipsForBounce: Pip difference between WMA 5 and WMA 20 which would cause a "bounce" and reset the filter price.

• TimeZoneOfData: Depends on your demo provider, not your local time. If times are aligned to GMT 00:00, set this to 0.

• Ma_method: Allows you to change the Moving Average method from WMA to Exponential or simple. Keep it at 3 for WMA.

• EUR_Spread: The filter amount for EURUSD.

• Other_Spread: The filter amount for all other currency pairs.

Once you have the indicator installed and active on your screen, you'll see a chart with various solid and dashed lines. Notice, however, that you will not have the WMA 5, WMA 20, or WMA 100 lines. These will need to be added separately. Once you add these lines, along with the indicator, you can save the chart as a template. Following is what the finished screen will look like.

Following is a key to the indicator and chart. Notice that the RSI 14 has also been added to the chart.

• WMA 100: Orange line • WMA 20: Green curved line • WMA 5: Light blue curved line that hugs the candles • Daily Open: Purple dashed line • Last Cross: Gray dotted line • Sell Filter: Red lines with downward red arrows • Buy Filter: Blue lines with upward blue arrows

BGX and Analysis

The BGX methodology relies heavily upon technical and fundamental analysis. Traders need to be attuned to both types of analysis in order to succeed with the BGX. For instance, it is as important to understand how to draw Fibonacci retracements on a graph as it is to understand how economic announcements will affect price action.

Fundamental vs Technical Analysis

Fundamental analysis observes economic and news announcements in an effort to predict price action. On the other hand, technical analysts look solely at price action of an underlying commodity, claiming that news and economic events are already factored into the price action. A healthy debate rages between the two groups regarding the appropriate approach. BGX traders take a realistic view of both types of analysis. While the BGX relies heavily on technical analysis, fundamental conditions play an important role in determining the validity and timing appropriateness of a trade. For instance, it is unlikely that there will be a significant directional run just a couple of hours before a major news of economic announcement, so price action needs to be discounted based on that knowledge. On the other hand, trading directly against news and economic announcements, with technical analysis, is perilous for intraday traders. This document will not address fundamental analysis in detail. The BGX trader will need to be aware of key economic and news reports when assessing the validity of trades. Announcements surrounding inflation, job growth, interest rate changes, and the monthly US nonfarm payrolls reports are among the most important reports to pay attention to. For more indepth information about fundamental analysis, see http://www.piptrader.com/forex_education/forex_fundamental_analysis/.

Chart Types

Most Forex charting programs provide a variety of chart types. The most common chart types available include:

• Candlesticks • HLOC (High Low Open Close) • Line • Kagi • Point and Figure • 3 Line Break

BGX traders will primarily use candlestick charts for intraday trading, though HLOC charts can also be used. A candlestick chart is made up of candlesticks which, like HLOC charts, represents the high, low, open, and close prices for a given time period. The color of the body indicates whether the bar closed higher or lower than it opened.

Analysis

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Head and Shoulders Reversal Pattern

Fibonacci Retracement Lines

The shape of candlesticks can be an important indication of whether the price will continue or reverse. http://www.incrediblecharts.com/technical/candlesticks.htm contains some common candlestick patterns. One of the most common candlestick shapes used by BGX traders is what Bunnygirl refers to as an exhaustion bar, and could indicate the end of a strong run and the start of a reversal. The exhaustion bar, after the upward run, is easy to pick out in the adjacent screen shot.

Support and Resistance

BGX traders need to understand the basics of technical analysis when trading the system. One of the key aspects of technical analysis to understand is support and resistance. Price action typically stops and reverses at key support and resistance levels. These levels may form patterns and channels, or just represent thresholds that make it difficult to pass through. Following are the key support and resistance levels used in BGX trading:

• Daily open: This represents the open price at 00:00 GMT.

• WMA 100, WMA 20, WMA 5: These are moving average lines that will be discussed further. Specifically, these are weighted moving averages with varying (100, 20, 5) periods. (http://www.incrediblecharts.com/technical/moving_average.htm).

• UK Open: Though not formally endorsed by Bunnygirl, stockwet has observed that the open price at 08:00 GMT, the UK open, acts as a support and resistance point similar to the Daily open.

• Fibonacci retracements: Fibonacci numbers are a special series of naturally occurring numbers. These numbers also contain certain percentages that, when measured against price action, often act as support and resistance points. (http://www.metaquotes.net/techanalysis/linestudies/fibonacci_retracement )

• Highs and Low: Often, price action will reach significant highs and lows that later serve as resistance and support levels.

Chart Patterns

Quite frequently, technical analysts observe and leverage chart patterns when determining future price action. Patterns can occur over short or longer time frames. Some patterns indicate reversals, others indicate price continuation, and still others represent price neutrality. Chart patterns can help determine valid breakouts.

BGX traders should be familiar with the common chart patterns that form. More information regarding these patterns can be found at http://stockcharts.com/education/ChartAnalysis/index.html. Following are some additional chart patterns that can occur:

Technical Indicators

Techinical indicators are statistical and other algorithms based on price action that are used to determine price action, momentum, trend strength, and a host of other technical aspects of the underlying Forex pair. BGX traders will primarily use Welles Wilder's Relative Strength Index (RSI). (Please see http://www.incrediblecharts.com/technical/relative_strength_index.htm for more information.) RSI compares upward price movements against downward price movements over a selected time period. It is helpful in determining the strength of price action.

RSI is used by BGX traders in two ways. First, a bull entry should not be entered unless RSI is greater than 50. Similarly, a bear entry should not be entered unless the RSI is less than 50. Additionally, traders should learn to spot RSI divergence. Divergence indicates an inverse difference in price action as compared to RSI peaks and valleys. For instance, assume that price action results in a new near term high, but the RSI peaks below the RSI peak for the previous high. This would be an indication of divergence and a sign that the move causing the new high does not have the strength needed to continue, and a reversal is pending.

Run Bunny, Run!

The Bunnygirl cross methodology is a simple approach to trading the Forex. In fact, the concept is based on some of the oldest technical trading strategies used. For instance, one of the fundamental aspects of the BGX system is a crossing of moving averages. Using moving average crosses to dictate buy and sell signals is an old technique in technical trading. Traders may vary the type of moving average (simple, weighted, exponential) or the periods use. Some traders use a two moving average cross, others use three or more. Bunnygirl has created a system based on simple, proven strategies. What makes BGX different is that the system provides more information regarding the elimination of whipsaws (quick reversals following moving average crosses), money management approaches, and risk management techniques. This and the following chapters will articulate the BGX system. Traders, at this point, should have an understanding of candlestick charts, support and resistance, chart patterns, drawing Fibonacci lines, WMA lines, finding the daily open, and the RSI indicator.

Getting Setup for Trading

Following are the conditions and variables where the BGX approach works most effectively: Suggested Currencies (a1,a53)

• EUR/USD • GBP/USD • USD/CHF • EUR/JPY (a53,a158)

Bunnygirl originally recommended trading 4 currency pairs – EURUSD, GBPUSD, USDCHF, EURJPY. These pairs were considered to be the ones most likely to respond to her methodology, based on her own back testing of BGX. However, as recently as April 2005, Bunnygirl had temporarily discontinued trading the cable (b340), which had previously been her favorite. Since then, she has picked the cable back up, indicating the flexibility of BGX to work with changing market conditions.

Recommended Trading Sessions (a11, a158, a520)

• European • US • Best Trading times from 06:00 GMT – 16:00 GMT (7 AM UK – 5:00 UK)

Bunnygirl maintained that the best times to trade were the European session and the open of the US session. Specifically, she indicated that the best time for crosses was at the beginning of the European session after a flat Asian session (a11, a99, a520). Additionally, she recommended observing "no touch" days. These are days where the daily or 4-hour bar does not touch the WMA5. She clarified that this was more relevant to the cable than the other pairs (b197).

Primary Charts

• 30m for crosses (a11) • 5m for scalping and exiting (a11, a52)

Run Bunny, Run!

5

Ranging market with whipsaws

• Daily and 4h for longer term trends (a334)

Bunnygirl uses 30 minute charts to determine crosses and 5 minute charts for exiting and scalping using the "Gimme Bar" method. She used daily and 4-hour charts to plot resistance points, fibs, and to check for no-touch bars (addressed later).

Chart Setup

• 30 minute candlesticks • 5, 20 and 100 Period Weighted Moving Average lines • RSI 14 indicator with 50 line

Preparation

1. Setup charts for targeted pairs. 2. On the daily and weekly charts, observe any significant patterns, support or resistance points,

and Fibonacci points. 3. Also add the WMA 5, WMA 20, and WMA 100 lines to the daily and weekly charts. Observe

the general trend and whether the price is near any of the WMA lines. 4. On the 30 minute charts, determine any near term highs and lows, chart patterns, or other

resistance points.

The Cross Signal

The BGX starts with a crossing signal. Crossing signals occur when the WMA 5 and WMA 20 lines cross each other. Following are the appropriate signals and the ideal position of the WMA 100 line for each signal: Long Signal

• WMA 5 Crosses above WMA 20 • WMA 5 and WMA 20 above WMA 100

Short Signal • WMA 5 Crosses below WMA 20 • WMA 5 and WMA 20 below WMA 100

The signal is not the entry point. Entering at this point may often result in a whipsaw – a rapid reversal immediately following a cross, frequently occurring in ranging markets. Also, while these examples show the WMA 100 either above the WMA 5 and WMA 20 lines for a bear cross, or below the WMA 5 and WMA 20 lines for a bull cross, signals can occur when the WMA 100 is not in this preferred position. There are, however, rules for trading "into" the WMA 100 line, which will be discussed later.

Bounce Signals

Bounces, like crosses, signal a potential entry. A "bounce" occurs when either the price, or one of the WMA lines bounces off another WMA line or the daily open. Following are some examples:

Treat a WMA 5 bouncing off the WMA 20 as a cross – that is, as an entry signal. The other bounces may require you to develop your own techniques for trading them. Generally, though, a bounce will either result in an entry signal itself, or an entirely new crossing.

Filters

A price filter, based on the currency pair, is measured from the point of the WMA 5 / WMA 20 cross. EURUSD's filter ranges between 20 and 25 pips. Other recommended currency pairs (GBPUSD, USDCHF, EURJPY) use a filter of about 30 pips. Check the validity of your filter by looking at crossings over the last several days. If a number of crosses occur where the price just hits the filter price and then reverses, increase the filter. Modify the filter as market conditions warrant. Example Never include your spread cost into the filter. Calculate the filter first, and then apply the spread. Here's an example. Assume the following conditions:

• EURUSD crossed up at 1.1700 • Your trading platform quotes prices based on the bid (sell) price • You've determined that 20 pips is an adequate filter • You have a 3 pip spread on the EURUSD

Given these conditions, your buy entry point would be 1.1723 (20 pip filter + 3 pip spread). Conversely, if the EURUSD had crossed down, not up, your filter price would be 1.1680 (20 pip filter, no spread as it is quoted at the bid price.) Bounce Filters In practicality, the only bounce entries that are truly valid are when the WMA 5 bounces off the WMA 20 line. When this occurs, treat the bounce as you would a cross. Apply the required filter from the WMA 20 mark at the point of the bounce, and enter as usual. If the price bounces off the WMA 20 or WMA 100 lines, then an entry can be made below the last low/high, or using the 1-2-3 method, explained in the "Entries" section.

WMA5 bounces off WMA 20 and heads up

WMA5 bounces off WMA 100 and heads down

Price bounces off of Daily open, then heads up.

Prices bounces off of WMA 100 then heads sharply down.

Finding the filter Filters for other currency pairs can be found by reviewing crosses and finding the general range where the currency pair crosses, and then retreats. Remember, the purpose of the filter is to keep you out of whipsaws and to put you into the strength of the trend.

Cross = 1.2013. Enter when bid/ask = 1.2033/1.2036

Entering the trade

Once the filter price is found, place a buy stop or a sell stop order, depending on the direction of the cross, at the filter price. Following are additional entry rules:

• Never enter in the last 5 minutes of the candle. Cancel your buy or sell stop order and wait until the close of the candle. If, at the close of the candle, the filter price has not been hit, place the buy or sell stop order again. If the filter price did end up getting hit, see the section on "Late Entries" for more information about entering.

• Never enter if the RSI did not rise above 50 for bull crosses, or fall below 50 for bear crosses. The RSI should be above or below 50 at the time of entry, not at the time of the crossing.

• Always enter in multiple lots, or mini-lots. This rule will become clear as we discuss exit strategies.

Late Entries and Re-Entries

Sometimes, you just miss an entry point. Maybe you hesitated, or you logged in late for the run, or the kids started screaming. Whatever happened, you missed the entry of what you think will be a good run. Remember that entries are critical to your trading success. A late entry, at the wrong time, could dramatically alter your risk/reward ratio for the trade. Following are some late entry scenarios and how to get back trading again at the best time possible.

Entries

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Last 5 Minutes (a51) Bunnygirl advised to never trade when the price reached the filter (entry) point within the last 5 minutes of a bar. Following are the steps to enter if the filter price is hit in the last 5 minutes.

1. Wait for the 30m bar to close in which the filter point was reached. This is the entry bar. 2. If price retraces, wait for the original filter (entry) point to be hit again and place the trade. 3. If the price does not retrace, place the trade on the breakout from the entry bar. Assume 1-2

pips beyond the low or high of the entry bar, depending on the direction of the cross. Missed Crossing (a159) If a cross is missed, follow these steps to reenter:

1. Wait for the price to consolidate. 2. When the price or WMA 5 bounces off of WMA 20, reenter at the new filter price. 3. Don't trade the opposite direction of the original cross, unless another cross actually occurs. In

other words, trade with the cross until a cross in the opposite direction occurs. The exception to this is if the market begins to range and you would like to scalp using the Gimme Bar method.

Stopout after profit (a233) This occurs when, after locking in an initial profit, the rest of the trade gets stopped out at breakeven (see "Exit Options". Bunnygirl always took an initial profit of 10-20 pips, and then moved the rest of the stops to breakeven.)

• Note the recent low, if short cross, or recent high, if long cross. • Reenter 2 pips below the recent low, or 2 pips above the recent high, depending on the

direction of the original cross. Stopout no profit (a806) This occurs when the price retreats immediately after hitting the filter (entry) price and before profit is locked in. Normal crossing rules apply, e.g., wait for another cross or another bounce. If it is bouncing, enter when the price breaks (on the close) the WMA 20 line. Recently missed cross (a410) This scenario can occur if a cross, not related to news, occurs quickly, or while the trader is away. Traders must make certain judgments as to whether or not to enter. Advice from Bunnygirl follows:

" If it's not too far away I wait for possible retracement back to the cross & then 2nd chance at entry. If it's already well into the move I use Mr. Sheen."

Delayed Entry WMA 100 (a800) This scenario occurs when a cross happens, but the proximity of the WMA 100 prevents an entry (see section on "Caution")

• Wait to see if price closes beyond the WMA 100. • If it closes 10 pips or more beyond WMA 100, wait for a pullback and use the WMA 100 as an

entry point as a bounce is likely. Use a 5 min chart for precise entering. • If a pullback occurs beyond the WMA 100, wait to see where the close is. If it closes on the

other side of the WMA 100, use the same rules as previously.

Early Entries

Sometimes, when the setup is right, you can enter a trade early. This entry technique is described as the 1-2-3 entry, and is based on the "Ross Hook" method (see the Joe Ross Manual at http://www.trading-naked.com/Articles_and_Reprints.htm.) Bunnygirl noted that there was one crossing situation where she would possibly enter early. This occurrence is called a Bunnygirl 1-2-3. Following is a BG quote describing the early entry:

This is the only pattern I use to pre-empt the cross & gain an early entry. Once entered, I have 2 choices depending on how the market feels. I can either exit around the proper entry level if I feel the market is stalling - or I can add to the trade & then take the normal exits as if I'd entered using the filter. This pattern is well worth looking out for, but it has to be exactly as shown in the charts. If you have the patience to wait for it, it has an added advantage apart from making more pips...because the entry will be very close to the wma20 the stop can be very tight. Don't forget one important factor...the rsi must be breaking the 50 line. What I call the 1-2-3 is simply a 3 bar sequence: 1... is when the first bar closes beyond the wma20 making a cross 2... is when the second bar reverses & closes very near the wma20 3... is when the price reverses again in the original direction bouncing off the wma20.

Best Entry Signals

There are some really excellent signals that indicate a good run is about to happen. Following is a description of each:

• Multiple Crosses: When multiple pairs cross and move toward the filter at about the same time. This is a strong indication of a trend beginning. Often, Bunnygirl will take trades on all 3 pairs (EUR, GPB, CHF)

• 3 in-a-bed: This occurs when the WMA 5, WMA 20 and WMA 100 are all within close

proximity of each other. Watch for a very big run, but beware of bank stopouts (this happens when the market movers run the price in the opposite direction of the impending trend just before the trend occurs. The filter is designed to help eliminate some of this action.)

News and Economic Reports

Never use the BGX approach to trade major news and economic reports. While the system looks reasonable, the sudden movement and reversals of such events make it difficult to establish a trend direction. Bunnygirl recommends using the "Mr. Sheen" method of trading during news events. Following is a "Mr. Sheen" example (a256, a558 a574)

A. This is the close of the "news" bar. B. This is the high point of the news bar. C. This is the target.

1. Enter is at 1 pip above point A, the close of the "news" bar. Notice in this example that we're observing a 5m chart.

2. Target is the high of the news bar.

Stop Bunny, stop!

You found the cross, applied the filter, setup your entry stop order and Wham!, the order goes through and you're in the trade. Congratulations! Now what? Bunnygirl provided comprehensive advice regarding trade management techniques. These techniques can be modified or adapted to your own trading style, preferences, or risk profile. Managing the trade, once you're in, is one of the best defined aspects of the BGX approach.

The Initial Stop Loss

When you initially enter the trade, it is important to also add an initial stop loss to the order. Originally, Bunnygirl suggested that the initial stop loss be 5 pips beyond the crossing. So, if a bull cross occurred at 1.1700, and you entered at 1.1723, the initial stop loss would be 1.1695, 28 pips away. If you traded 4 lots and the price reversed right after hitting the filter, you would take a loss of $1120 (or $112 on a mini-account.) Price fails to cover the spread In order to improve money management, Bunnygirl recently modified this rule. Now, if the price fails to move beyond the spread of the currency pair, the stop loss should be placed 15 pips from the filter, or entry, price. In the previous scenario, this would mean that the initial stop loss would be 1.1708 (1.1723 – 15 pips), for a maximum loss on 4 lots of $600, a little more than half what was required in the original rule. Naturally, like most everything else with the BGX system, this can be modified based on your own preferences. For instance, you might want to have multiple levels of stops, where you place a 2 lot stop loss 10 pips below the entry price and a 2 lot stop loss 20 pips below the entry price (still averaging a 15 pip stop loss.) Stops near support and resistance Stop losses can also be placed near support and resistance lines – particularly the daily open and WMA 100 lines. Always place stops 3-5 pips beyond these lines to account for momentum pushes through the line.

Exiting

First, entries should always be entered into with multiple lots. These can be standard lots, or mini lots. As long as you have a way to "peel" out of your trade, one or two lots at a time, then that's all you need out of your trading platform.

Stop Bunny, stop

7

Bunnygirl suggests entering a trade with 4 lots, or multiples of 4. Following is the recommended process for exiting trades:

1. Close the 1st lot (1st 25% of the position) at 10-30 pips profit, depending on the speed of the move.

2. Move a stop loss for the remaining lots to the breakeven point. 3. Close the 2nd lot (2nd 25% of the position) at 30-50 pips. 4. Move a stop loss for the remaining lots to breakeven +10. 5. Close the 3rd lot (3rd 25% of the position) at 50-100+ pips. 6. On the 4th lot (4th 25% of the position), trail using the extreme of the previous bar, or the

halfway point of the previous bar if it's longer than the average bar. Price fails to reach 10 pips One thing to notice is that there is nothing to indicate how to handle a trade that moves greater than the spread, but less than the first 10 pips of profit taking. Following are several suggested approaches, none of which are yet endorsed by Bunnygirl:

• Leave the stop loss at the original 15 pip configuration • Manually "trail" the stop loss (or a portion of the stop loss) from the original 15 points as the

pair moves toward the 10 pip profit target. • Take profit earlier and move to breakeven if the trade momentum feels like it is stalling. The

downside to this is that it is easy for the price to have a small retracement and stop you out at breakeven.

Unfortunately, this issue has not yet been addressed and an optimal solution has not yet been presented. Alternate Bunnygirl Exit Method "Quite often I'll take half out at 10 - 30 pips and then trail with 3rd & 4th lot." Alternate stockwet Exit Method Trade 6 lots, or multiples of 6. Follow the original exit rules except take profit on 3 lots (50% of the position) at the initial 10 pips, rather than 1 lot (25% of the position). This method would allow you to lock in more profit up front and provide the flexibility of having looser stop loss movements. For instance, instead of taking profit at 10 pips and moving the remaining stops to breakeven, you now have the option of moving the remaining stops to less than breakeven, in case a retracement occurs resulting in a bounce off the filter price (which does happen.) What to do in a slow moving market "The first time I move stop is usually to b/e. The exception to this is if the trade is taking a long time to move and the market is flat. If I have entered and the market has not moved for some hours I will move down to a 5 mins bar to take a quicker exit rather than let it hit the initial stop." Exiting is one of the areas in which Bunnygirl struggled. BGX traders should find the best way to exit positions which suits their trading style, preferences, and risk profile. Start out by using the recommended exit approach until you develop your own. Just having a disciplined approach that requires you to be patient enough to wait for a 100 point move makes it worth trying out the original exit strategy.

Slow Bunny, slow

The Forex market can be unpredictable and, in fact, quite brutal at times. However, while it may seem like chaos, the market can, quite often, act in an organized, somewhat predictable manner. Support and resistance concepts are pervasive in the Forex market. At times, it is uncanny how prices will move right up to a resistance line, hit it, then bounce right back down. The same is true for Fibonacci lines, the WMA 100, daily open lines, and, according to stockwet, the UK session open. Trading near these support and resistance lines may warrant caution or even complete abandonment of a trade. Following are some scenarios to discuss.

Crossing near WMA 100 and Daily Open (a806)

Definition Sometimes a crossing may occur in which the price is heading into either the WMA 100 or the Daily open. Extreme caution should be exercised in these circumstances. Following are the two scenarios that may occur. These scenarios should be considered when the filter price is within 10 pips of the WMA 100 or Daily Open lines. Crossing with filter before WMA 100 or Daily Open In this scenario, the WMA 100 or Daily Open line is 10 pips or less away from the price filter and lies beyond both the cross and the filter. Do not place a trade at the filter. Wait until the price action moves through the line and reconsider the position. Look at the late entry techniques for possible reentry.

Crossing with WMA 100 or Daily Open between cross and filter This scenario is OK to trade. In this example, the WMA 100 or Daily open line lies between the cross and the filter. A trade can be placed, but exercise caution in this instance and be prepared for a late bounce back towards the crossing. Use the resistance line to set your initial stops.

These same rules apply when either the WMA 5 or WMA 20 are near the WMA 100 or Daily Open lines. (a233, a374)

Slow Bunny, slow

8

Best entry is two pips below the low of the bar that penetrated the WMA 100. The new entry should be below the WMA 100.

Last 5 Minutes

• Do not place a trade when the filter price was reached within the last 5 minutes of the 30

minute bar. • Wait and look for reentry on the next bar or at a bounce. See "Late Entry" section.

Other Scenarios

• Be careful when the price spikes past the WMA 20, but does not cause a WMA 5 crossing

(Baruch bar). • Observe other strong support/resistance. • Avoid trading when the chart looks like a squashed centipede (e.g. lots of ranging). • Avoid trading when multiple crosses for the day have already occurred. • Avoid trading away from the WMA 5 on days following a "no-touch" day.

No-Touch Day

A "No Touch Day" occurs when, on a daily chart (or others as well), a candle does not touch the WMA 5. This seems to be either a significant trend reversal indicator or one that indicates a fast moving trend in the same direction. The best explanation of this is given by Ilia (b191). If a "No Touch Day" occurs, observe whether or not the touch was caused by a large, fast moving bar preceding it. If so, the trend will likely continue, but weaken. If not, the trend is likely primed to reverse (b191). On the day following a "no-touch day", be wary of crosses that occur heading away from the WMA 5 (a334), but take all crosses heading toward the daily WMA 5 (a1087).

Money Management

Money management is one of the most important, yet, overlooked aspect by new traders. The most successful traders are often more interested in managing risk, then perfecting the entries and exits of a system, though those goals are often intertwined. Generally speaking, money management deals with 2 dominant issues – risk/reward management and position sizing. Risk/Reward Management The ratio between the potential gain and loss in a single trade represents the risk/reward for the trade. For instance, assume you enter a buy trade at 1.1700. You expect that the price will rise to 1.1800, based on sound analysis. You place a stop loss at 1.1650. Assuming 1 lot, you are looking at a 1:2 risk reward ration. In other words, you expect twice as much reward against the amount of capital you are risking. Risk/Reward management becomes more complex in "peel out" tactics. These tactics employ trading multiple lots and taking profit along the way. Assume the previous example, except that you are trading 4 lots. You will take profit at 25, 50, 75, and 100 pips, with the stop loss still at 1.1650. You still expect the price to rise to 1.1800, but your risk/reward ratio is now 1.25:1. You've increase the risk of the trade. Here's how you figure it out: Max Loss = [1.1700 – 1.1650 (or 50 pips)] * 4 lots = $2000 Max Gain = [(1.1725 – 1.1700) * 1 lot] + [(1.1750 – 1.1700) * 1 lot] + [(1.1775 – 1.1700) * 1 lot] + [(1.1800 – 1.1700) * 1 lot] = $2500 The typical risk/reward ratio of a BGX trade, using 15 pips as the stop loss and 4 lots, peeling out at 10, 30, 50, and 100 point would be 190:60 or 19:6. This is approximately a 3:1 risk/reward ratio. Position Sizing The amount of capital you put it at risk is highly variable in the Forex market due to the leverage and margin options available. Many traders subjectively determine their position size. However, discipline in this area is what distinguishes the best traders. Bunnygirl's approach to position sizing provides a conservative framework for building your account balance. First, it is generally advisable to start out by risking no more than 2% of your account balance on a single trade. This isn't necessary, just advisable. Let's assume you start with 4 mini lots on each trade. Next, ensure you have enough capital to support two failed trades of 30 pips each. If you're trading with 4 mini lots, then you need enough initial capital to cover at least $240 (60 pips * 4 mini lots). Finally, trade until you have gained enough to cover moving to your next trading level of 8 mini lots (60 pips * 8 mini lots) or $480. Continue this cycle, moving to your next defined level as you are comfortable. Here's a summary from Bunnygirl:

I allowed myself a maximum drawdown of 60 pips - (2 bad trades @30 pips each). I started at £4 per pip & took profit at £1 for 10 pips, £1 for 30 pips, £1 for

Money Management

9

50 pips & £1 for 100 pips. If the first trade made 100 pips I would therefore have won £190. If it only reached say 70 odd pips I would make 10, + 30, + 50, + 50 = £140. I stayed at this level until I had made enough money to be able to cover the possible drawdown at £8 per per pip (£8 x 60 = £480). After I had made £480 at £4 (splitting into 4 x £1) I could then move onto £8 per pip (splitting into 4 x £2). I now needed to make £720 at £8 per pip (£12 x 60 = £720) before I allowed myself to move up to £12 per pip. At each new level I would 'bank' the previous level. So each time I move up £4. Never move up a level until you're totally comfortable at the previous level. It's better to trade for longer at that level than to get into a panic. And after a losing trade there's always the option of going back a level. I never jump a level.

Hopefully, you've found this guide helpful. The BGX approach is a great method to help you get started in Forex. If you have any questions about or suggestions for this guide, don't hesitate to contact me (stockwet@yahoo.com) or visit the forum (www.strategybuilderfx.com).

Bunnygirl Examples

Bunnygirl Example 1 (a808)

Bunnygirl Example 2 (a809)

Appendix

A

Bunnygirl Example 3 (a734)

From Bunnygirl's post: A - Low of the day 1.8624 B - Resistance seen at 1.8724 (100 pips exactly from the bottom), but enough to give us 1st target at 1.8719 C - 2nd target hit 1.8739 D - 3rd target hit 1.8789 for 100 pips E - high of the day 1.8825 (201 pips up from the bottom - neat! ) Now we have the downside: G - Cross down at 1.8752, entry short 1.8727, stop loss 1.8756 + spread. 1st target 1.8697 for 30 pips 2nd target 1.8677 for 50 pips 3rd target 1.8627 for 100 pips

H - Entry level hit I - Bounce down off the 50% line gives extra confirmation J - 1st target hit (on the ema100 line) 1.8697 K - 2nd target hit 1.8677 L - We have a bounce off this morning's cross up level.

Bunnygirl Example 4 (a718)

Bunnygirl Example 5 (a719)

Bunnygirl's Forex Trading Approach

Bunnygirl Example 6 (a1001) Bunnygirl Example 7 (a1073)

Bunnygirl's Forex Trading Approach

Bunnygirl Example 8 (a1074)

Bunnygirl Example 9 (a1075)

Bunnygirl's Forex Trading Approach

Bunnygirl Example 10 (a1076) Bunnygirl Example 11 (a1087)

Bunnygirl's Forex Trading Approach

Bunnygirl Posts

The following pages constitute Bunnygirl's posts at the StrategyBuilderFX forum site, up until 12/2005. From WMA Cross thread (http://www.strategybuilderfx.com/forums/showthread.php?t=7916) 1 – Main strategy definition, filter, MA's, stoploss, trailing stop, pairs, targets 7 – 30m chart, filter 11- 30m chart for entry, exits (5m close above wma20), targets, caution around crossing, best time, lots 12 – time trading system, 23 – performance 48 – bounces 50 – exit issues 51 – cross entry, last 5 minutes, late entry, 52 – exits 53 – USDJPY unreliable. Look at eurjpy, gbpjpy 54 – no news 56 – staying in a trade 62 – Beachie's chandelier exit 75 – Beachie's links to GimmeBar docs 81 – GimmeBar, filter importance 83 – no news 84 – filter importance 86 – filters 92 – does not like to autotrade, backtest period 93 – lockins, exits, ignoring multiple crosses, ranging market signs 99 – trade times, explanation of specific setup (See 94 – 5-10-04, EUR, near cross) 104 – filter enhancing (steep wma5, flat wma20) 107 – cross importance 122 – Beachie's suggestion bgx is a "methodology", bounces, ignoring crosses 158 – latest filters, latest pairs and why, time, Asia flat but seeing nice entries, options during news 159 – re-entering a missed cross 160 – trailing stop, backtesting 169 – exits, bounce definition with example, trailing using extreme 30m, bid offer definition, engulfing candle 170 – her chart platform 171 – multiple lots, exit, 187 – no single exit strategy, multiple lots 189 – performance 206 – bounce, multiple bounces 233 – not entering a trade, price going into wma100, etc., all pairs signal, reentry, 1st move stop, slow moving market, recommended book 234 – how to find the filter 235 – wma vs ema, wma performance, favorite pair 236 – adding spread to buy stop 238 – examples 256 – gimme bar, mr. sheen news, mr. sheen reentry 264 – multiple lots 269 – tighter stops with gbp and chf

Appendix

B

Bunnygirl's Forex Trading Approach

280 – latest exit strategy 291 – gimmebar scalping 294 – sto's 295 – results of last exit strategy – not so good 300 – alerts, oco's 301 – filter clarification 334 – using a daily chart, daily open 374 – no crosses near wma100, retrace after big move, trail cross 376 – filter change on chf, gbp, mixed exits 378 – terminology, bounce off open, 3 in a bed, Daily open definition, 395 – Beachies filter suggestion (be flexible) 411 – late entry possibilities 418 – chart example, baruch bar 422 – chart example 438 – exhaustion bars 520 – Times to trade 524 – exits 558 – Mr sheen example 559 – Mr sheen result 560 – Mr sheen result 574 – Mr sheen explanation 585 – how to confirm the method 600 – 3 in a bed explanation. Open day 623 – Signals – she doesn't give them. 640 – Last post 715 – Example EMA Cross 716 – Example EMA Cross 718 – Example EMA Cross 719 – Example EMA Cross – squashed centipede 733 – Mechanical systems OK if they work 734 – Example 736 – Cable 100+ pip moves, gimme bar time period long term, 5 m intraday 758 – Bunnygirl Presentation 766 – Daily Open rules, why using EMA, WMA 100 rules 768 – Example 773 – Example 800 – WMA v EMA 803 – sticking to the rules 804 – MA's set to close 806 – When not to take trade, open, stop loss, no bb's for exits, wait for pullback if miss entry, what to do if stopout 807 – example 808 – example 809 – example 810 – removing indicators. 812 – S/R lines and trendlines for confirmation 813 – fibs on all time frames 818 – Keeps fib levels for 4h, daily, weekly, looking for any near each other. Keeps 30m and 5m fibs on screen 819 – Eliminating indicators 875 – BG Cross and Ross hook, options for entering the BG Cross ("BG 1-2-3") 998 – Example - especially highlighting 1-2-3, her "favorite" setup. 1001 – Example 1006 – Trading methods, trading at 00:00gmt, Bollingers, 1-2-3 explanation. 1008 – Shimodax's graphical representation of the 1-2-3 setup. 1034 – Which pair to trade, doesn't use stochastics anymore, which direction following daily open

Bunnygirl's Forex Trading Approach

1036 – Asian session might be OK. It's up to us. 1053 – Best trades to take – move straight from open or flat Asian session 1055 – Consolidations following big moves 1056 – 4-hour price times, 1-2-3 setup references 1073 – 1076 – Examples 1080 – Best way to learn the system 1085 – Response to and analysis of post 1083 1087 – Using average range to estimate targets, fibs, Mr. Sheen, clarification on no-touch days. 1093 – Link to free training videos 1094 – Charting package and screen capture utility 1097 – Using Fibs From Bunnygirl System Followers thread (http://www.strategybuilderfx.com/forums/showthread.php?p=107464#post107464) 197 – No touch day 340 – Holding off on cable 342 – wait for close after cross, sometimes, no stochastics, rsi14 for divergence and over 50 376 – daily open and filter