2# Minor Reaction/Trend Resumption Trading System

Range Breakout Trading System

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The Minor Reaction/Trend Resumption System (MR/TR) was designed by Jack Schwager and published in his book Schwager on Futures: Technical Analysis (John Wiley & Sons, 1996).

 

Schwager called this system "Reversal of Minor Reaction".

MR/TR uses a price channel to determine the trend. If the most recent breakout of the channel was to the upside, the trend is bullish; if the most recent breakout was to the downside, the trend is bearish.

Setup

a) Calculate a 40-bar price channel of highs and lows.

Long Entries

a) Determine the trend by locating the most recent breakout above or below the price channel. If the breakout was above the channel, begin monitoring for downward reaction bars. When the reaction count reaches four, begin monitoring for bullish thrust bars. 

 


When the thrust count reaches two, the buy setup is complete.

b) Buy at the high of the setup bar plus one point. The setup is cancelled if the entry is not triggered within four bars.

 

Short Entries

a) Determine the trend by locating the most recent breakout above or below the price channel. If the breakout was below the channel, begin monitoring for upward reaction bars. When the reaction count reaches four, begin monitoring for bearish thrust bars. When the thrust count reaches two, the sell setup is complete.

b) Sell short at the low of the setup bar minus one point. The setup is cancelled if the entry is not triggered within four bars.

 

Exit Orders

a) Place a protective stop 4 pips below the low of the reaction for a long position and 4 pips above the high of the reaction for a short position.

b) We'll also enable a $ risk trailing stop.

 


In the picture Minor Reaction/Trend Resumption forex system in action.

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