The Currency Conquistador is a forex strategy that was originally conceived by Bruce Babcock in 1991. Bruce is considered to be a pioneer of futures trading. Bruce traded with this Currency Conquistador strategy for a few years then released the Currency Conquistador II Strategy.
Nelson Freeburg also published an enhancement of Currency Conquistador Strategy in 1994 that was more simplified than the original Babcock version and worked for many futures contract as well. Let’s discuss this simplified Currency Conquistador Strategy. First, you need to check these conditions everyday:
1. Today’s Close Minus 10 Day SMA Of The Close
2. Today’s 10 SMA Minus 10 Day SMA 10 Day Ago
3. Today’s Close Minus The Close 40 Days Ago
You will go long if all the above three conditions are positive and you will go short if all the above three conditions are negative. That’s all! Let’s discuss the logic behind these three conditions.
Condition#1 means we are looking at the price action over the last 10 days. In condition#2, we are looking at the price action over the last 20 days. Condition#3 is looking at the last 40 day price. So infact, what we are doing is looking at the price action over three different time horizons.
These three conditions ensure that the trend is strong in all the three different time horizons. This way we are excluding trading a sideways market. Only when the market is going to move either up or down strongly will the above three conditions be met at the same time.
What this means is that until and unless there is a strong trend in the market, there will be no buy or sell signal generated by this system. So most of the time you will just sit out of the market when the market is moving sideways or there is a slight trend. This will save you a lot of money by avoiding the whipsaw markets.
When the three conditions are met, you either go long in case the three conditions are positive and go short in case the three conditions are negative. If you are trading a standard contract place a stop loss that would be a $2,000 loss. Figure out how many pips that would be and place a stop loss above or below the entry price accordingly. Another method to put the stop loss is to use ATR. But for our purposes this stop loss of $2,000 value will serve the purpose and will rarely get triggered. You should practice this Currency Conquistador Strategy first on your demo account and see how it works.