BunnyGirl Bunny Cross (BGX) Trading Framework

Taylor Stockwell : Author

BunnyGirl : Originator

BunnyGirl is a Forex day trader who frequents the MoneyTec.com and strategyBuilderFX.com trading forums. She was active from about November 2003 to April 2005 , though she recently added a new post as this document was being written. Her most remarkable accomplishment was starting the "wma cross" thread in April 2004. As of September 16, 2005, the thread has nearly 1000 replies, 125 pages, and 310,308 views, three times the views of the next most popular strategy thread.

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.

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, which had previously been her favorite.


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. 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

BunnyGirl uses 30 minute charts to determine crosses and 5 minute charts for exiting and scalping. She used daily and 4-hour charts to plot resistance points, fibs, and to check for no-touch bars.

Chart Setup
30 minute, candlestick
WMA 5
WMA 20
WMA 100
RSI

Go Long
WMA5 Crosses above WMA20
WMA5 and WMA20 above WM
RSI signals divergence or is ab

Go Short
WMA5 Crosses below WMA20
WMA5 and WMA20 below WMA100
RSI signals divergence or is below 50

Filters
Use a filter to eliminate frequent stops and catch the trend at the right time EURUSD: 25 points plus the bid/ask spread
Other recommended pairs: 30 points plus the bid/ask spread
These filters can and do change
Cancel the trade if the filter price has not been reached before 5 minutes remaining on the 30 minute bar.
Filters on other pairs can be determined

Orders
If bull cross, place a buy stop order at the filter+spread.
If a bear cross, place a sell stop order at the filter+sprea
When the filter price is reached and the order engaged, place a stop loss at about the original crossing. (Can go as much as pips away on the other side of the crossing

Stop Loss
5 pips beyond the cross (or bounce) price

Trading Around Daily Open
Daily Open = open price at 00:00 GMT
Make sure there is room enough for profit targets between filter (entry) price and daily open
If the cross is on one side of the daily open and the filter is on the other, than this is OK to trade.

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Basic Guide to Understanding Elliott Wave

The Basics

Developed by Ralph Nelson Elliott in the 1930s, Elliott Wave Theory was originally designed to forecast stock price movement. Over time however, the theory has been applied to a variety of markets, particularly foreign exchange. It’s higher popularity in the foreign exchange market stems from the fact that 80% of the volume in the FX market is speculative. This is important since waves are based upon mass psychology. Elliott Wave Theory is now a very popular analytical strategy frequently used by the technicians of leading investment banks and intermarket players.

The Elliott Wave Theory is founded on the notion that markets are not perfectly efficient. As a result, prices from one moment to the next are not random but rather subject to changes in overall investor behavior—changes that can be predictable with an understanding of mass psychology.

Waves Within Waves

The primary reason why Elliott Wave Theory can be difficult to understand is because waves frequently occur at many different levels. In other words, there are minor waves within larger waves. That is why at many points in time, multiple correct wave interpretations usually exist. The major waves determine the direction of the trend, while the minor waves help to determine the minor trends. Used in conjunction, traders can apply Fibonacci ratios to Elliott Wave Theory to help determine when currencies will reach a top or bottom. It can also be used as a tool to identify points to trade within the trend or to participate in the shorter minor wave cycles. It is important for Elliott Wave traders to be aware of both the minor and the major waves that may exist. The following is an example of two minor waves within larger waves:


Minimize Forecasting Errors With Elliott Wave

Since many different waves can exist during the same time frame, increasing the risk of forecasting error, traders should follow certain rules to minimize risk. The most important of which is to follow the principle that the “the trend is your friend.” This means that it is more prudent to only look for opportunities sell into minor waves when the major wave is a downtrend and to buy when the major wave is an uptrend. More rules can be used though to determine levels for placing stop-loss orders or to exit the trade. Fibonacci ratios are one of the most useful ways of identifying possible peak or bottoms of wave cycles. A popular relationship that exists is that Wave 2 retraces 38% of Wave 1. 50% and 61.8% retracements are also frequently seen.

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Andrews' Pitchfork

Overview

• Andrews' Pitchfork is a method of channel identification in a trending market.
• This technique, in effect, splits a major channel into two minor equidistant channels.
• The lines in the Pitchfork tend to delineate lines of support and resistance.

Andrews' Pitchfork was developed by Dr. Alan Andrews, based on what he called his
"Action/Reaction" techniques. Originally called the "Median Line Study," this pattern
is based on a set of lines drawn from peaks and valleys on a price chart. When linked
together, the arrangement of lines closely resembles a farmer's pitchfork.
Dr. Andrews' median lines, and the pitchfork pattern, often indicate lines of support
or resistance where prices tend to stall out or reverse.

Interpretation

Andrews' Pitchfork is plotted on a price chart as follows:

1. First, identify a significant reversal point (high or low) and this becomes Pt. A.
2. Draw a line (shown in red) from this point to the next significant reversal point; at Pt. B.
3. Then plot a line from a significant point early in the trend (Pt. C) bisecting the first line (in red) half way between Pts. A and B. This is the Median Line or "handle" of the Pitchfork.
4. Now, draw two lines parallel to the Median Line, one starting from Pt. A and the other from Pt. B. These form the "tines" of the Pitchfork.
5. Presto! Andrews' Pitchfork.

This is a quick introduction to the Pitchfork technique; Dr. Andrews' price study methods were typically much more complex than what I've shown here. He also counted waves using what he called the "0-3/4 pivot count rule" and the "5 count probability rule.”

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