STEVE Ward once told me that there is no point in having a mechanical trading system if you are not going to follow it. He certainly has a valid point.

I fondly remember the trading exercise that I put myself through in order to build trading discipline: pick a strategy and execute it religiously for 30 trades. You should find that by trade 15 or so you will have taken an enormous step towards trading discipline and consistency.

I have a good suggestion for a mechanical entry. I like to trade it in euro-yen, which is quite a volatile currency pair. The ingredients for this straightforward technique contain the following well-known principles: Fibonacci, overnight high and overnight low.

In the morning, around 8am, I look at what the high over the overnight range is. I then look at what the low of the overnight range is. I then wait for the market to take out either the high or the low of the range. If, and only if, the market then trades back into the range, after having taking out the high or the low of the range, I prepare an order to enter the market at the 62 per cent retracement over the range. This order comes complete with a stop and a target too. It doesn’t trigger every day though.

The overnight high was ¥117.40 and the low was ¥116.80. Around 8.30am, the market traded below ¥116.80, down to ¥116.60. It then began to rally. The entry price is ¥116.60 + 62 per cent of ¥117.40 minus ¥116.60 = ¥117.10.

The stop is below the old low and the target is double of what the stop is, in this case 100 points. If the target has not been reached by 4pm, I will close the position, unless I am in profit, in which case I will move the stop loss to breakeven, and potentially close some of the position, depending on how much I am up. I use a bit of discretion when it comes to the end of the day.

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