Multi-Level Trading-Recovery Trading

FOR THOSE OF YOU WHO UNDERSTAND RECOVERY JUST GO TO PAGE SIX FOR THE 10.0
UPDATE.

The last protection of this system is that it is a multi-level trading system. If price goes
against you we have multiple EAs to use for 2 nd and 3rd level trades. Price moved enough for the
EAs to enter a sell/buy trade but soon after price moves against you. You can do 3 things:
(a) You could close and wait for another signal, do the traditional stop loss thing.
OR
(b) You multi-level another entrance by using a 2nd EA. If price goes against you,
you will then use a second EA, the Daily recovery trade EA is best, and try to
zero out the trade. When it gets half way to the previous entrance of the 1 st
level you have a zeroed out trade and you break even.
(c) When you break even you can close the trade or pull up a tight stop loss so you
dont end up with a bigger loser. For example you enter a trade and price goes
against you -200. You then enter a 2nd trade. If you use the same lot size your
trade is BE because at +100 on the second trade and the first trade is -100
that equals 0.
(d) If you use a slightly bigger lot size on the second trade then you need a smaller
recovery to BE. For example (all will assume -200 pips for easy math):
(i) First level lot is 1, second level lot is 1, retrace 100 pips = 0 trade and a BE.
(ii) First level lot is 1, second level is 2, retrace is 70, level two is twice as big so
it equals 140 pips and level 1 is at -130. You have a small profit trade.
(iii)First level is 1, second level 3, retrace to BE is 50 pips. And so on.
(e) If by some crazy happenstance you need a third level. The Math can go like
this.
(i) 1st L -400 1lot, 2nd L -200 1Lot, 3rd L 2 lot. At +150 pips L3 = +300, L2= -50
and L3 is at -250 and the trade is zeroed out. That is how it can work.

2.4.2 RECOVERY SYSTEM

THIS SECTON HAS NOT BEEN UPDATED FOR VERSION 5.0

or 10.0

BUT THE PRINCIPLES ARE STILL THE SAME

There are the commodity currenciesCAD, NZD, AUD who just love to run and run and run.
When a minor currency is matched with a major currency, the minor currency can get squashed
and not get its usual retracement. Getting out of a bad trade and taking a minimum loss is

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critical to successful trading. Whether you use my trading system or not, learning this will save
your neck no matter what trading system you use.

What I am about to show you will make a difference in your trading and trading skills no
matter what system you trade with. There is tons of material on the web, training materials,
etc. About setting up a winning trade. The problem is there is no such thing as a 100% win
system. You are going to have to battle the losing trade, there is no avoiding it. No matter
what you do the perfect storm is going to come. How you going to deal with it will determine
your success as a trader. I am going to teach you something that if you ever get it and
grasp its truth and master this trading skill. You will not fear the FOREX again. You will
always have a plan on how you are going to get out of a bad trade even before the trade
starts. The theory goes something like this. In every 1000 pip move there is a big enough
retrace somewhere to get out of any trade with a minimum loss or small profit. (I am going
to give the two exceptions I have seen this rule broke and they are easy to see and know,
major interest rate changes and trillion dollar bailouts) I am going to add a third and that is
a government going bankrupt or almost going bankrupt. So watch out for that one also.
If some currency ups it interest rate a full point you can see runs of over a thousand pips
without a retrace. I have seen runs without news stories but they didnt go over a thousand
pips once past the sixth EAs lines. So let me see if I can explain this so you can understand
the basic concept. I call it the 2.4.2 recovery plan.
VERSION A
a. This is the basic version used with the 4H trading method and is based on three
level trades and then getting out. Ok we get our trade signal and we enter the
trade. We will call this level one and our lot size is .03. In the 4H system we do
increase lot sizes by 1.6 so we always enter at .03 L1 .05 L2 and .08 L3. Price
whiplashes on us and goes -200 in the hole. We put on the 2 nd L EA. The EA will
reenter at the next 6x6 cross with a second level at .05. We now have L1 = -200
and L2=0. Price moves against us some more and 200 pips later we have level 1
-400 and L 2 -200 and L3 = 0. When we get to this point we know we are going to
be playing for a zero out trade. Even though there is a chance of making a profit
we are not going to play for a profit. We are looking for a retrace of around 133
pips or 1/3 the way back.
b. So if the levels are spaced 200 pips apart so that we want to get back to 0 it takes
about 2/3 retracement to do it. The numbers look like this L1 -400 at .03, L2-200
at .05, Level 3 +5= .08. After 133 pips retracement L1 will be at -267 x .03 or
-8.01, L2 will be at -67 x .05 or -3.35 and L3 will be +133 x .08 or 10.64.
c. +10.64 (8.01 + 3.35) = -.72 a minimal loss trade. So pip wise you are down -201
pips total but money wise you are at break even.
d. If you are not a math wizard we have a break even indicator on the MPTM page
that will give you the break even line so you know where to close your trade to
break even. It is called IBREAKEVEN.
e. GET CLOSE, NEAR A S/R LINE, TAKE THE MINIMAL LOSS. YOU SAVED THE
TRADE.

VERSION B
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 You entered 3L but price still has not retraced and is going against you again. WE DO
NOT MARTINGALE AND HEAD FOR DISASTER LAND. WE LIMIT OUR LOSS AND OUR
EXPOSURE.
If we need a 4th level, we turn off the EAs on this pair by taking them off the screen, if
you use an EA with the same magic number.
Anyway depending on which EA system you use, if you enter a 4L you close the 1L trade
only. (if you are using EAs with different Magic numbers, this is not a problem. If you use
an EA which multi levels the trade, you close 1 level they all close. You dont want that.
Turn off your EA.) You only use 3L max.
Second, when you enter the 4th level you lower the lot size back to the 2L lot size. So if
L2 lots size is .05, L3 is .08, L4 is .05 again. We are not going to risk our account to save
a trade.

WE TAKE THE LOSS.

WITHOUT THIS DISCIPLINE YOU WILL BLOW UP
YOUR ACCOUNT SOME DAY.
WE ARE NOT MARTINGALE TRADERS
So level 1 is a losing trade but it had the smallest lot size. Levels 2,3,4 we look to retrace
for break even. L1 is our loss, levels 2,3,4 become a minimal loss or break even.
I have had this happen one time on a gbp/nzd trade but I has to go to a level 5. I closed
the 2nd L for a loss and used levels 3,4,5 to break even. Level 3 was .08, Level 4 was .05
(same as L2) and level 5 is .08 (same as L3)
If you will do this you will recover quickly from your losing trades and you also will relax
once you learn this. When you go to your screen you always know what you are going to
do when you trade. I primary trade A happens then I will profit here. If it backs up. I will
reenter here. If it backs up some more. I will reenter here. If it backs up some more. I will
take L1 loss here and try to zero out my trade. If it backs up some more I will exit L2 here
and try to zero out my trade.

I HAVE A COMPLETE PLAN FOR ANYTHING THAT

HAPPENS IN MY TRADING BEFORE I ENTER MY
TRADE. I KNOW WHAT I AM GOING TO DO BEFORE
I EVEN START THE TRADE. MY HEART IS NOT
BEATING FASTER WHEN I TRADE. I AM NOT
SWEATING WHILE I TRADE. I GO TO SLEEP AND
SLEEP ALL NIGHT EVEN THOUGH I HAVE LIVE
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 TRADES GOING. THIS IS HOW I HAVE TRADED FOR
OVER A YEAR NOW AND MY BLOOD PRESSURE
HAS GONE DOWN AND NOT UP AND I HAVE
MONEY IN THE BANK. I KNOW WHAT I AM GOING
TO DO AT ALL TIMES TRADING.

My new rule: 1 reentry a day, keeps the margin collectors

at bay. Cute huh.

If you are going to manually trade your levels you still must keep the 150-200+ spread on the
retraces. Cant get them too close or you are martingaling and then you cant recover because
youre in too deep or you commit too much margin and you cant maneuver. REMEMBER there
are times you just have to take a loss on a trade and go on. In fact I teach, take a loss on a
level and stay only 3, maybe only 4 levels deep. If you want to enter a 4th level, turn your EA
off (go to a screen with no EA) and close out your first level. (If you close the first level with the
EA on, the EA will close all the levels) Just accept that as your losing trade and go on. Hopefully

we can use the new level to zero out levels 2 and 3 and go on. We are not there yet though.

There is no such thing as a never losing trading system. That is our mental SL when we have to
use L4 we accept the fact L1 is our losing trade.

Also, try to reenter only once a day, dont multiply your problem. Look at a daily chart of any
currency and you will see that candles are usually full. The body of the candle is almost always
bigger than the wicks or stems. That means once price starts heading in a direction it stays in
that direction all day. So dont fight it with multiple reentries. I enter most of my retraces at the
end of the day before the jpy session or before the euro open. Once a day on those
reentries guys/gals. So choose it wisely and let the EA handle it. Let the 2L and 3L EA
reentries handle it.

1. Here is a 5 week example of how I used the 2.4.2 recovery system to get out of a very
nasty AUD/JPY trade. I eventually made a profit on these series of trades but for a while it
really looked bad.
a. Here I am minding my own business trading off of the tops of the chart and
enjoying my profits. This is the middle of March 2010. Lots of secondary trades
after the primary trade at the purple line.

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b. Well the aud/jpy decided to go on a 500+ pip run north. You can see the dotted
pink line where there was resistance. Some nice trades there.
c. Well, like all forex trading systems we got to have a runner. At #1 I turn on my EA
and get a cross in and the trade started off profitably. I decide to let it run and see
if there is more there.

d. Unfortunately there wasnt more there so I have to reenter L2 and then L3 and on
to L4 at some point.

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e. The signals are there but price is going to run. There was one spot in the middle of
this run I came close to breakeven but I did not take it. So I got punished some
more and it went on another run. So #1 is my entrance and #2 is my deepest DD.
I entered a 4th level there and took my L1 loss. Now I must 0 out my trade.

f. As price now settles into its new range I start trading off of Secondary trades. A,B,
C, D. C was a beauty and allowed me to make a profit on these series of trades
overall. If price breaks above A,B,C,D resitance area again, well, I get to do it
again.

UPDATING USING 10.0 RECOVERY

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I have wanted to simplify and be more precise with recovery trades. If you are using the
10.0 trend system I really dont recommend recovery unless you are willing to go very
deep into DD. And by that I mean some trades could go over 1000 pips in the hole. To be
caught on the wrong side of a trade when price reverses means you could be at a peak
when prices reverses and find yourself on the wrong side of a long trend. That is why
martingale never works long term because sooner or later a martingale trade will be
taken on the wrong side of a trend and then it reverses and you are in big trouble.
Recovery is for counter trading and range trading non-volatile currencies, it was never
designed for trend trading.

However, if you are in a pickle you can put on the counter trade EA which trades out side
in. In other words you turn it on when price is outside both lines and catch a retracement
to BE. I showed 4 possible retracements to imaginary bad trades. When price is outside
both lines and then comes back in, it is common to get 100+ pips every time. It is not
guaranteed however. So the key is to get back to BE. This pic shows what you can do
with the Daily recovery.

1. I also would like to note that sometimes you cant get the whole retracement in one
trade but sometimes it takes several. You can use the 4H CTR EAs to help recovery in
several trades not just one.

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 2. Another trick I do when I recover is I will use some of my daily profit from other trades to
clean out a negative trade. I do this a lot of with big DD. I want to lessen my margin as
quickly as possible. Let us say I am down 650 pips on the eur/nzd and my recovery is
150 pips up but I use twice the lot size. I also have 300 pips in profit from the last two
days. I use that and take a total 50 pips loss. Either way I find a way to negate the loss.
3. I can also do reduction of the total loss. For example I am -400 down on a 2 lot trade and
I have 3 lots at plus +135. To do the math change everything to a 1 lot math problem so
the -400 down at 2 lots is the same as -800 at 1 lot. The +135 is +405 at 1 lot. I close all
three lots and reduce my deficit trade down to 1 lot. In other words I recovered half of
the deficit. Then I look for my next trade to clean out the rest of the deficit.
4. Any combo of the above can be used to eliminate deficit. There are alternatives to stop
losses but you have to develop trading skills to do it. Here is my live account I used to
practice some of 10.0 trades before I published it. Notice all the little dips in the curve as
I zeroed out negative trades. You may also note my curve going up as I improved my
skills trading with 10.0. In seven weeks I increased my account almost 20. That is
absolutely phenomenal. Does it mean I can keep those kinds of returns up over the long
term. Well only time will tell.

How big or small should you trade. I will talk strictly from a money perspective not a lot
perspective. The reason lot size in amounts of money can change from broker to broker. To be
able to recovery trade there are times you will have some nasty draw down (DD). To make sure
you dont margin your account out you need to trade small enough so you can relax and wait
out some of the moves the market can throw at you. Here are some ratios to help you in your
trading decisions.

Recovery Ratios

There are several that work so here they are.

1. Martingale. Double each lot size. L1=1, L2=2, L3=4, ETC. or L1=3, L2=6,
L3=12. I do not recommend doing this. It is just too dangerous to trade
like this and you will get hammered at some point.
2. 1.1.3 You need a 25% retrace to clear out the debt 1 st level 33% after
you enter the 3rd level. L1=1, L2=1, L3=3,
3. 2.4.2 You need 12.5% retrace to clear out L1 but 50% from L3. L1=2,
L2=4, L3=2, L4 would go back up to 4 if needed.
4. 10.0 I am looking at 2 levels for a recovery and only use a third level if
price just peaks in the trade and begins running on you again. My
formula for that will be 1L, 2L is 1.5 x 1l, and 3L is the total of L1 and L2.
So it would look like this:
a. L1 = 2, L2=3, L3=3+2 or 5
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 b. If L1=5, L2=8, L3=13
c. If I use the 10.0 recovery EA I should get enough retrace to zero out
the trade but if not. Then I would need to use another entrance using
4H CTR or 1H CTR.
Funds to lot size:
To really trade in a relaxed matter one nickel to 1000 dollars would be a good figure. You should
be able to keep your DD to under 100 dollars most of the time and with everything going wrong
pushing you up to maybe 200 dollars. You never want your account to exceed 10% DD on any
set of trades. If you are you need to add more funds or close some losing trades. My experience
has been once an account hits a DD of 30% you might as well kiss it good bye because you no
longer have room to maneuver for recovery trades. If you add more the Margin gets eaten up
really quick and if you dont it becomes very difficult to zero out trades.

For my live account I will be trading .03 1L and .05 for 2L. You may think that is silly but look at
my first week using 10.0 range trading system.

Gross Profit: 106.58 Gross Loss: 15.64 Total Net Profit: 90.94
Profit Factor: 6.81 Expected Payoff: 1.20 Absolute Drawdown: 0.00
Maximal Drawdown: 5.01 (0.47%) Relative Drawdown: 0.47% (5.01)
Total Trades: 76 Short Positions (won %): 40 (80.00%) Long Positions (won %): 36
(91.67%)
Profit Trades (% of total): 65 (85.53%) Loss trades (% of total): 11 (14.47%)
Largest profit trade: 6.27 loss trade: -5.01
Average profit trade: 1.64 loss trade: -1.42

Nanningbob Aug. 2011

This is from Steve Hopwoods booklet on recovery trades. If you didnt understand my
explanation you can try his.

The Recovery system by Steve Hopwood.

Nanningbob's Recovery system is based on this very simple principle: no matter how far a market moves, it will retrace
eventually. As I often put it, Dem markets dey go up, den dey go down again, den dey go up again, den.......... So,
rather than insert a conventional stop loss and crying when it is hit, Recovery allows you to ride the move against you
and enter with additional trades when the moment is right. You will see these options in the Recovery inputs:
Use1.1.3.3Recovery
Use1.1.2.4Recovery

Isolate the numbers from these inputs and we are left with:
1.1.3.3
1.1.2.4

In Nanningbob-style trading, we talk about trades at Level 1, Level 2, Level 3 and Level 4. Level 1 is the initial trade.
Levels 2, 3 and 4 are Recovery trades. The digits in the 1.1.3.3 and 1.1.2.4 refer to multipliers of the initial lot size So:
in 1.1.3.3:
1 is the L1 trade (Level 1 or initial trade) at your chosen lot size
1 is the L2 trade at your chosen lot size
3 is the L3 trade at your chosen lot size x 3
3 is the L4 trade at your chosen lot size x 3
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in 1.1.2.4:
1 is the L1 trade (Level 1 or initial trade) at your chosen lot size
1 is the L2 trade at your chosen lot size
2 is the L3 trade at your chosen lot size x 2
4 is the L4 trade at your chosen lot size x 4

TOB will only send Recovery trades when:

The trade has moved ReEntryLinePips against you and
The conditions are correct to enter a trade, i.e. the market has touched the relevant outer magenta line and has triggered
a pending trade. It will not merely send a trade because the market has moved x pips against you. In other words, it
trades Recovery as it trades normally.

Here is how it works. Imagine you are using 1.1.2.4 and RecoveryLinePips = 100 (proper pips, not 5 digit wally-
plonker-dipstick-crim points):. For the purpose of this example, imagine that 1 pip = $1:
An L1 sell trade fills. The market continues to rise and goes 100 pips against your trade.
TOB looks for an opportunity to enter an L2 sell trade at your normal lot size. This arises, so you have two trades
open:
L1 is -$100
L2 has just opened at your normal lot size.
The market co-operates and begins to fall. If falls 50 pips. At this point:
L1 is -$50
L2 is +$50
Users Manual
so the position is at breakeven and can close
Suppose the market refuses to cooperate and rises another 100 pips, so now:
L1 is -$200
L2 is -$100
TOB looks for an opportunity to enter an L3 sell trade at double your normal lot size. This arises, so you have three
trades open::
L1 is -$200
L2 is -$100
L3 has just opened
The market co-operates and begins to fall. Because your L3 trade is at double your lot size, we double the effect of the
L3 on the open basket of trades. The market falls 75 pips
L1 is -$125
L2 is -$ 25
L3 is +$150
so the position is at breakeven and can close
Suppose the market refuses to cooperate and rises another 100 pips, so now:
L1 is -$300
L2 is -$200
L3 is -$200
TOB looks for an opportunity to enter an L4 sell trade at four times your normal lot size. This arises, so you have four
trades open::
L1 is -$300
L2 is -$200
L3 is -$200
L4 has just opened

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The market co-operates and begins to fall. Because your L4 trade is at double your lot size, we quadruple the effect of
the L4 on the open basket of trades. The market falls 90 pips
L1 is -$210
L2 is -$110
L3 is -$20
L4 is +$360
so the position plus a few, is at breakeven and can close

The reality is that L3 is rarely reached, although it does happen occasionally. I have yet to reach L4 in my live or demo
trading. It will happen one day, but you can see that this involved a huge movement against my original trade. This
process is self-limiting and holds within it the means to get out of an increasingly nasty situation. Once a L4 trade is
sent, TOB can do no more and it is up to traders to manage their way out of the situation. Turn off the bot. Suppose the
market continues to move against the trade and moves a further 100 pips against us?
Now we have:
L1 is -400 (original lotsize)
L2 is -300 (original lotsize)
L3 is -200 (original lotsize x 2)
L4 is -100 (original lotsize x 4)
From here, we start closing trades in the order of oldest first. A re-entry opportunity arises so we::
Close the L1 trade and cry
Users Manual
Mentally move all the trades down a level, so the old L2 is now L1, old L3 is now L2 and old L4 is now L3
We start the lot size process afresh, so the new L4 trade is the original lot size.

Reaching the point described in the last paragraph would not be a happy experience, but it is
important to remember that there will never be more than 4 trades open, so we cannot
blow our accounts unless we start with an oversized lot size to kick off with. The worst losing
trades always get kicked off the end. It will make a dent in the account, but will take a long
time; in the meantime, other successful trades are continually adding to the balance to offset
the problem. Mind, if this does not convince you to trade tiny lot sizes, then you are an idiot
and should be shot. Also, if it makes you want to use stop losses instead then go ahead and try
them.

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