Forex Factory - Trading Made Simple for Day Charts

Attachment 1591669
UPDATE 1/11/2015 - I have posted some updates to the current process to reflect: http://www.forexfactory.com/showthre...64#post7983964

No major changes to the approach, Post #1 is still a must read. - p.s.sorry about the fonts - the editor was not playing nice! Indicators at the end of this post are still good - you can always check and see any latest versions in the paperclip

Add-Ons are very much down to personal risk tolerance and account / money management, so the basic rules will apply as to how many trades you have open and what percentage of your account is at risk.

To date I have yet to see a successful EA with supporting evidence of a trade explorer, so until that happens, I am staying with manual trading - most of the folks posting trade explorers accounts on FF run well for a while and then seem to blow up, so not sure if these are serious long term investors or just folks playing with high risk strategies - beware.

Start with reading this post and the referenced posts and you should be on the right track.

Following on from the outstanding success of Eelfranz

- Big E's Trading Made Simple forum, and X-Man's Super Simple System - several traders have requested a new thread be set up for TMS trading with Day Charts only.

I do update this post with general rules and tweaks as I see them for the day charts and will also bring in comments from other members. I'll check in from time to time and post training charts and trade summaries and I will nuke non-compliant posts - my privilege – I started the thread

. I will also add any new insights / clarifications / techniques in this post as well as references to applicable post #s, so Post #1 may well become seriously long winded. If you want to reference a post from a member, please include the post # and member name.

Once you have read this post, read through the trading charts that run through entries and add-ons and then you can jump to Post 1081 which us where I start trading with the revisions to the template. All of the indicators that you need are in this post as attachments or are described / referenced and are part of the standard MT4 indicators, such as MA and Bill Williams.

Please take the time and effort to read this post carefully and the referenced post - take notes, read again and run backtesting and then ask questions. We all love helping newbies, but only if you put some effort into your trading. We were all newbies once.

The overriding rule is that this forum is for Day Charts only and is based upon the time trusted and proven TMS methodologies as adapted and introduced by Big E (Rest in Peace), so let’s keep to the TMS spirit and keep Big E’s memory and his dream alive. Trade set ups are welcome as well as active trades or trade summaries / rationales for entering / exiting. We also want to see the ooopsies – and the lessons learned from the pain and suffering incurred!

Disclaimer:
Any trade or analysis related comments made in this thread by myself or any other person on this thread should not be interpreted as anything other than a point of view by the respective poster and not as advice to enter or exit a trade. Individual's trading rules may be subject to interpretation. It is your responsibility as a trader to decide what information to use and what to disregard and you do so at your own risk. Use the ideas and/or modify them to suit your trading style. It is recommend that you conduct your own testing for your trading system in a demo account before investing real money. All investments are taken at each trader's responsibility. Planned risk levels may be increased dramatically under extreme market conditions.

Trade Set-ups and Commentaries:
Here's a suggestion for posting trade set-ups / commentaries from fxjourney in Post #17:
1. Entry setups and brief explanation as to why you think the setup looks good (not only technical set up reasons but also risk/reward)
2. Trade Stop Loss management
3. Effective exit strategy

My current commitments do not allow me to trade lower timeframes and I have moved to the Day Charts. My Broker is IBFX and my new day candle starts at 4pm PST. I typically place trades between 8pm and 10pm PST (which is the 2nd H4 candle of the day). These will either be pending trades with sell stop or buy stop levels set for Fractal Breaks or potential TDI Crossovers – especially moves from below 32 or from above 68. Price Action is the Key, so watch for the momentum to support the signals. Look left and pick up on support and resistance levels / Fractals.

When using the RSI(10), I am looking at 25 as OverSold and 75 as OverBought - as the RSI(10) crosses the 50, there is usually a trade entry opportunity once you confirm with PA - Watch the value in the Data Window as this will overload the indicators on the screen. Any tine RSI is hovering around the 50 then you are looking at consolidation, so wait for Fractal Breaks / S/R level breaks.

Multiple Time Frame Analysis:
As far as MTFA– I do check the week for trend direction and always check out what the the 200ema is doing - this is the favourite institution ema and acts as a very dynamic S/R region - I may rarely look at lower timeframes - if the day looks good, I will enter.

Supply and Demand Levels:
I hve been tidying up the charts and going back to basics, so the II_SupDem.ex4 indicaor is optional to get you thinking about Supply and Demand / S/R levels.

Break outs / Reversals usually coincide with the APB changing colour for a good reversal signal. Basic Rule here is to sell as the candles leave a Supply Zone heading South and Buy as the PA leaves a Demand Zone heading North. If price blows through a Zone, this just means that the Trend has held and will usually give you a pause before bouncing and continuing.

With the Day charts this involves patience and avoiding the need to enter a trade for a few pips. If you study some of the available material - either in FF on the threads, or in the numerous ebooks that circulate with the hope of hooking you for a subscription service, then you will see there is no real fixed rule for this type of entry - it all comes down to your trading style and your trading plans.

My preference is to let the candle close and then follow the momentum of the PA. From the charts that I am now posting, you will see that the 100ema and 200ema will often act as a floating S/R - be aware of this when trading with set-ups heading towards these emas, especially when your entry point is within 100 pips and especially when 100 and 200 are running horizontal together - check out this post - http://www.forexfactory.com/showthre...97#post5779197

One very well written article that I have seen, talked to how momentum was perceived / interpreted. The focus was on the second half of the candle's life as this demonstrates the support and demand for the current PA. You can have a great bull push in the first half of the candle with new highs being set, only for the bears to take over which will leave you with a pull back candle with a large wick - this negates any momentum that was achieved earlier in the day. This often occurs around S/R levels and folks get faked out by the initial strength of the candle, only to watch it fall away at the end of the day.

If, however, the bear push continues into the latter part of the day, then you have a strong momentum candle and if this succeeds in breaking the S/R, then look for continued momentum to drive the PA.

This supports the Big E message that not all TDI crosses are not created equal and you still have to be on your game with the forex basics.

Trade Entries:
Is there such a thing as a perfect set up? My ideal scenario would be the following for long entries for reversals (and they do happen):

APB/HA closes and changes colour
PA moves with some strength - this means its day ATR(1) is at 75% or higher of the ATR(7) - this should also be stressed that the candle body needs to be strong - larger body than wicks.
RSI moving above 51 / breaking through the 50 with strong momentum
TDI cross within the last 1 or 2 candles and moving up from the 32 region
Day chart showing recent trading range of swings (next Supply / Demand Zones 150 + pips away)

For short entries:
APB colour change to red
PA moves with ATR(1) at 75% or higher of ATR(7)
RSI moving below 49
TDI cross within the last 1 or 2 candles and moving down from the 68 region

Generally, trading into the 200ema is bad news -a strong enough PA will push through the 200ema and continue on its way. If the 200ema is dead flat, PA will very likely follow it and consolidate - wait for the breakout.

Using the Trade Signal Line for Entries
Check out Post #1419 http://www.forexfactory.com/showthre...53#post6623553 and see how this works.

Thoughts on APB Colour Changes Check out Post #1267 http://www.forexfactory.com/showthre...67#post6434367

Trade Exits:
For those of you that followed Big E - his trading style was structured to preserve pips, so he would exit on TDI flattening / hooks / pull backs and then look for re-entry positions. Also, Big E was not trading day charts - he did trade H4 and lower timeframes for London / NY openings. I have a flexible approach to exits and may change in accordance with S/R or general momentum. If you exit early, then look for re-entry possibilities on the H4.

With regards to any indicator that has an Overbought / Oversold region - once these indicators are in the OB / OS regions, they cease to be reliable as trends can continue to add hundreds of pips after these regions have been entered - watch for candle sizes / S/R levels and further breakouts - very few indicators will help you here - Price Action will always be king!

SL and TP levels:
From the TMS thread - dcginc posted several posts on setting up SL and TP levels using the ATR(7) and I have tweaked this to match my approach.

I now run with 3 entries per set-up and base my SL on the current ATR(7) - usually 1.5XATR(7) or the previous swing H/L / Fractal.

TP1 for reversals is 1.5XATR(7) - this will mean SL levels are sometimes 200 + pips on the more volatile pairs.

TP2 - options here are to set TP2 at 3XATR(7), OR, for TP2, you can always leave this open and manually manage the trade. My suggestion is to start out wit the fixed

TP3 - no fixed level - run with manually adjusting SL levels

Experiment with TP1 and TP2, see how it works, modify as necessary, but don't allow the greed glands to take over your trading plan

Once TP1 is hit, move TP2 and TP3 to B/E and then manage to your trading plan.

Trade Management:
There are several posts on manual trade management such as: 164 / 204 / 246. I will always let TP1 close out, so for my trade management, this is for TP2 and add-ons. For trend runs, I manually move my SL up to the previous but one (2 candles previous) candle L for longs (wick not body), H for shorts.

As trend runs approach major S/L levels, the 200EMA / Big Round Numbers / 32/68 on TDI, 25/75 on RSi(10), be aware the trade can stall or bounce against you, so consider a manual exit and then re-enter if the S/R is broken and the move continues.
Typically, the TDI will flatten out in the Overbought (>68) and Oversold (<32) regions and that the TDI will start to give exit signals on trade slow downs and stalls.

As the candles start to shorten, this is the signal that momentum is fading. The end results are one of three options - congestion / ranging market, trend stall followed by reversal, trend stall followed by continuation (look for add-on possibilities on a new fractal break).

Other possibilities include running with TS set to account for your ATR(7) - currently suggesting that the TS is not less than ATR(7) but then this depends what you are willing to sacrifice from your hard earned pips. Remember, it's not how much you make, but how much you keep!

Money Management:
Leonaforex made a great comment in Post # 295
For my trades, I trade 3% of my account at any time, until 3 trades in a row are winners.
I then increase to 4.5% of my account.

One loss reverts to 3%.
Two losses reverts to 1.5%.
Three or more go to 1% of account and stay there until you figure out what you were missing.

Once you have achieved 2 wins in row again, go to 3% of your account.

Again - before going live with this, run the backtests for the trade methodology and then plug in different money management approaches and see how the drawdowns affect your account and how quickly you recover. Many folks use a fixed 2% max and this is pretty safe.

Here is something that I read on another thread:

You should classify any contemplated trade into one of the following five categories before putting on a position:
a. Entrance into congestion
b. A trade within a congestion
c. A breakout from a congestion area
d. A trend run
e. Trend reversal

The trader will have difficulty in formulating a successful and intelligent risk/reward (entry/exit) plan unless the trade is properly categorized before the trade is taken. The risk/reward parameters are different for each of the five types of trades.

Candle Patterns:
Watch for candle reversal patterns - in the attachments.

Candlesticks vs APB vs HA - see Post #305
With regards to candles - my preference is for traditional good old fashioned style candlestick charts- however, Heikin Ashi or Synergy APB (Average Price Bars) have also worked well and continue to do so on the original TMS and X-Man's threads. The APB /HA appproach centers around a colour change on the day chart - When a colour change occurs, go look at it - review the PA and if it has momentum then it has a reasonable probability of succeeding - PA always takes priority in the decision making process.

With day charts, it's not like you are rushed into a trading decision, so you have time to verify PA with either the APB and Candlesticks/price bars. Using candlesticks will of course require some understanding of candles and especially reversal patterns. Again, as with so many other aspects of forex - pick what works for you and run with it - you must be comfortable with your chart settings and not become one of the sheeple trying to make something alien work just because other are doing it.

For general reading on TMS and trading strategies – look to the following members (most are from the original TMS Thread and although these are not necessarily day chart traders, their approaches and methodologies are sound and will translate to any timeframe):
Eelfranz / dcginc / X-Man / Phx62 / Emmanuel7788 / Vantage / Dean / Lawgirl – apologies to those whom I have missed – nothing intentional, just attribute it to lost brain cells over the years.

As far as trading opportunities, you will probably see each pair have one good set up per week and there are usually several high probability trade set ups each week across all the pairs – if the market is ranging – leave it alone and come back another day. The day charts will easily bring you pips and with less stress and less false signals. My experience has been between 800 to 1200 pips per month since July which is when I picked up on TMS. This can be achieved on a single currency pair, or over multiple pairs.

Abbreviations used in posts

TP1 - Take Profit for Entry #1
TP2 - Take Profit for Entry #2
TP3 - Take Profit for Entry # 3
AOC - Add-On Candle
BE - Break Even
S/R - Support / Resistance
S/D - Supply / Demand
DD - Drawdown

Install the indicators into your MT4 platform - folder name "experts" and then sub folder name "indicators"

Indicators for Chart (Day)
Synergy_APB_[C]
ATR Pips UL Corner – color to none - periods 1 – multiplier 1 - this will give you the ATR for a single candle
ATR Pips UL Corner – color to none - periods 7 – multiplier 1 (read dcginc posts for using this and setting SL and TP)
EMA 200 – blue dotted – Price Typical
EMA 100 – aqua dotted – Price Typical
Fractals (Bill Williams)
Supply and Demand indicator II_SupDem - optional

Indicator Window 1
TMSTDI Watchdog – all settings at defaults – Set the alarms that you do not want to false and adjust the font sizes accordingly for your set-up. Colors are personal preference for the TDI lines - I do not use the "Bollinger" lines, so I stick with TSL / RSI and MBL
Overlay the RSI set to 10 with no color – just a personal preference – higher probability trades when RSI(10) is above 51 for longs and below 49 for shorts. Again – another one for the Data Window.

TMS Links to Other Threads:
Further reading for your education in all things related to Trading Made Simple:

Harlem posted this on the TMS thread - it is a compilation of some of the top TMS traders post and includes posts from BigE, Phx62, dcginc
http://www.forexfactory.com/showthre...35#post6634735

Xaphod did update all of the TMS related indicators and pulled these from a variety of sources- make sure you download the latest versions - here is page 1 of his thread
http://www.forexfactory.com/showthre...40#post4619540
and here is the link to the attachments which will have all of the other discussed indicators http://www.forexfactory.com/misc.php...ments&t=294327

X-Man is having fun with the Sonic indicator - here is the link to page 1 of his thread
http://www.forexfactory.com/showthre...32#post5167732

For those of you wanting to learn TMS from scratch, then here is page 1 of the Trading Made Simple thread started by Eelfranz
http://www.forexfactory.com/showthre...74#post4569574

Posts to check out
http://www.forexfactory.com/showthre...22#post5767722 - Changes to templates and a couple of neat indicators

http://www.forexfactory.com/showthre...53#post5814153 - Detailed look at entries and add-on candles

http://www.forexfactory.com/showthre...38#post5786338 - Overview on Currency Index Training
Candle Reversal Patterns.pdf
MT4 navigational tips and techniques.doc
@TMSTDI_WatchDog.ex4
ATR Pips UL corner.ex4
II_SupDem.ex4