Introduction
This system is for people who are serious about making a living from the Forex market, on a daily basis. By this I mean that you must be willing to devote the necessary time and effort required to make the venture a success.
From a personal point of view, I have completely retired from the rat race, and my sole source of income is trading the Forex market. I am not going into the history of how badly or well I have done thus far, suffice to say that my one regret is that I did not have the guts to “retire” earlier. The system I am about to detail will consist of several parts. I am going to deal with all aspects of the system so that the reader is absolutely clear about each topic that I will be discussing. All I ask all interested readers, is to be patient.
The one thing that may prevent readers from taking a close look at this thread is the term “1 min. chart”. There are two points of view on this topic. I am not here to tell which is more correct. That’s an opinion that you have to decide on yourself. One school of thought maintains that 1 min charts are nothing but noise, and if that is your belief then I would not continue going any further, you cannot be successful in something you do not believe in. A second school of thought says that all trends start from the 1min chart, if you wish to explore that second opinion then read on.
What do I mean by “daily basis” and “necessary time and effort”?
Yes, “daily basis” does mean trading every day. Daily trading means, just like any job or career, that you need to be ready and willing to trade each and every day and have a set time and routine that focuses on your new career. My day starts at the opening of the European session to a maximum of 2 hours after the close of the UK session. I use the MT4 platform and my broker by choice is Alpari. The MT4 times this corresponds to are 09.00 to 19.00 Hours. These actual hours may be different depending where you actually trade and what platform you use, and also whether daylight savings time is in effect. Note the 10 hour spread, this is the absolute maximum time I will trade. It is indeed rare for me to work the full 10 hours. On most days I reach my 75 pips just before or just after the US session opens. In these situations I will close shop and find other things to do.
The System
The system is based on safe trading using Support and Resistance on two pairs. I usually only trade one pair at a time but have charts open for other pair on the desktop, having said that there are times I Will have 2 trades open, in these situations the first trade is already in profit and a Break even has been set on that pair to ensure that no losses are incurred. On each trade I look for a a minimum of 25 pips profit and a maximum stop loss of 20 pips – more about this later when I discuss “Take profit and Stop loss”.
I trade these two pairs only because of the following factors: low spread at my Broker (GBP/USD = 2.0 pips, EUR/USD = 1.6 pips), high volatility and large Average Daily Ranges, high correlation between pairs.
Correlation often gives clues that the actual charts themselves do not show. When one pair is looking to go in one direction and the other pair is looking to go in the opposite direction. Beware!!. You do not always have to trade 2 pairs having positive correlation. You can also choose pairs that have high negative correlation. For example there is high positive correlation between EUR/USD and EUR/JPY, so these are 2 good pairs to look at or EUR/USD, EUR/JPY and USD/CAD are 2 other possibilities with high negative correlation. Correlation also points to high strength or high weakness on a particular currency.
I will point out that this strategy is NOT a scalping strategy. I am not looking for trades that give me a 5 or 10 pip profit, instead my profit targets are at a minimum of 25 pips (sometimes 20 pips). My initial stop loss is 20 pips. This rarely gets hit, and is really an Emergency stop to cater for unforeseen situations, such as losing my Internet connection, or computer dying, or some unannounced news.
Most trading systems are designed to “go with the trend” on larger time frames, and that’s fine if it suits your style. However if you are looking for daily income on a regular basis then it is the short burss that you need to recognize and take advantage of . We are well aware that most pairs range about 70 % of the time. Now safe and 20 pips plus trades are very frequent on the 1min chart. these trades nearly always start from a support or resistance area. On most days, during the time frame I mentioned, you get 4-6 opportunities on GBP/USD and also 4-6 opportunities on EUR/USD. It is not difficult to find these support and resistance areas, and if you can take advantage of these areas, then the 75+ pips will be obtained each and every day. The emphasis is on “Safe trades” and the only tool I use at the exact entry point is the MACD BB tool. More about this tool later. Remember the daily target , you need only need to take advantage of 3 trades during the day to reach your target.
Support and Resistance
I have always wanted to trade support and resistance, but never quite known how to do it in a systematic manner. There are many articles available that recommend going back 2 or 3 days on a higher time frame and then drawing horizontal lines. I found myself either adding too many lines or not enough lines. Since these lines were very subjective I was never sure that I was doing the right thing. Now I draw lines which I suspect other people will also be using and use these as my support and resistance areas. Since many traders use these so called “natural” support and resistance levels, trading at these levels is quite high and in my eyes are roughly equivalent to a volume indicator in Forex.
So what are these natural support and resistance levels? These are 1. The high point and the low point of the day thus far, 2. Daily pivot and mid pivot lines 3.Psychological levels (levels ending with 50 and 00 and spread 50 pips apart). 4. Fibonacci levels.
I personally do not use Fib levels but I do use the others. Pivots, mid pivots and psychological levels are all automatically added to the chart using indicators (links to all indicators I use will be listed at the end of the post). The Highs and lows I manually draw just before I start trading. These hi’s and lo’s may need to be adjusted as the day continues
The MACD BB Indicator:
This is the only indicator that I use, and what a remarkable indicator it is. If the system perks your interest I suggest you go to the following website and go through the tutorial yourself. Run the tutorial several times , so that you fully comprehend what this indicator can do for you. I think you maybe surprisingly amazed. In Forex trading, in general it is advisable to be extremely proficient with one tool, rather than just have a working knowledge about a whole bunch of tools.
On the tutorial pay particular attention to “MACD BB trend change” section.
Out of all the tools that are on the market, the MACD is probably the slowest one. Having said that once a signal is given on this tool, it also tends to be the most reliable
I have intentionally not posted any charts. The intention of this thread is NOT to demonstrate if the system is any good for you or not. Rather the thread is intended as an introduction, and if you do the things I ask you to you can demonstrate to yourself whether the system holds possibilities for you.
Task 1: Back test about 3-5 days of data. For any day of the week open a 1 min chart for either Eur/USD or GBP/USD. Then attach the grid indicator that draws horizontal lines spaced every 50 pips (4 digit) apart at all levels that end with 00 or 50. Attach the auto pivot indicators to the chart and insert two EMAs for 100 EMA and 20 EMA. Then using the EMA crossover signal set an audible alert for when 2 EMA crosses the 20 EMA. This is a heads up signal warning that a trend change is about to take place or that a new trend has just started. Do not base your trade on this signal alone. Do not forget to also add the horizontal lines to mark the high and low for the day. Now that you have setup all your support and resistance lines, see how many 20+ pip trades show up. For now you are not interested whether you would enter the trade or not, nor how many pips you could make. The whole exercise is for the reader to recognize price action at support or resistance. This exercise should convince you of the trading possibilities that come up every day. For your initial experiment only look at the chart during the time frame I mentioned.
Task 2: Do the tutorial at the web site I listed. Use any username for yourself and for Sales. Having gone through the tutorial Open a side by side chart of the same currency and add 2 MACD BB indicators to the 2nd chart. Nothing needs to be added to the data section, because this exercise is meant to demonstrate MACD action. Zoom OUT the chart so that you can just recognize the individual candles and then shrink the data portion of this second indicator, so that he 2 MACDs take up all of the chart window, The settings for the MACDs are 38,120,20,1.1 (fast MACD) and 144,233,20,1.1 (slow MACD). Now back test for at least 3-5 days for the same time frame. When back testing notice what the BB dots are doing. AS to why I use 2 instances of MACD, is something to be explained in the next post To understand the MACD BB action, you MUST go through the tutorial.
Once you have gone through the tutorial and performed the 2 tasks either you will be very amazed at the opportunities or will be NOT impressed at all. You be the Judge and the Jury. Remember the whole point of the exercise is to open your eyes at support and resistance and at the same time see what the MACD BBs are doing at the same support and resistance. I have specifically asked you to open two charts, but I am sure many will see that both charts can be combined into one. That is absolutely correct, and when you are doing live trading that is what you will do. However the tasks are designed to give you a feel of the MACD BB and a feel of the price action at support and resistance.
My next post will go into further details about entry, exit, profit taking and stop loss and much more
I would like a response for all that read this thread. If I find there is little or no response then sadly I will not post anymore. Regardless what you actually think about the system, the 2 tasks should give a good insight to what successful day trading is all about.
http://www.nexgent3.com/Flash%20Quiz...o%20Flash.html
Happy reading
This system is for people who are serious about making a living from the Forex market, on a daily basis. By this I mean that you must be willing to devote the necessary time and effort required to make the venture a success.
From a personal point of view, I have completely retired from the rat race, and my sole source of income is trading the Forex market. I am not going into the history of how badly or well I have done thus far, suffice to say that my one regret is that I did not have the guts to “retire” earlier. The system I am about to detail will consist of several parts. I am going to deal with all aspects of the system so that the reader is absolutely clear about each topic that I will be discussing. All I ask all interested readers, is to be patient.
The one thing that may prevent readers from taking a close look at this thread is the term “1 min. chart”. There are two points of view on this topic. I am not here to tell which is more correct. That’s an opinion that you have to decide on yourself. One school of thought maintains that 1 min charts are nothing but noise, and if that is your belief then I would not continue going any further, you cannot be successful in something you do not believe in. A second school of thought says that all trends start from the 1min chart, if you wish to explore that second opinion then read on.
What do I mean by “daily basis” and “necessary time and effort”?
Yes, “daily basis” does mean trading every day. Daily trading means, just like any job or career, that you need to be ready and willing to trade each and every day and have a set time and routine that focuses on your new career. My day starts at the opening of the European session to a maximum of 2 hours after the close of the UK session. I use the MT4 platform and my broker by choice is Alpari. The MT4 times this corresponds to are 09.00 to 19.00 Hours. These actual hours may be different depending where you actually trade and what platform you use, and also whether daylight savings time is in effect. Note the 10 hour spread, this is the absolute maximum time I will trade. It is indeed rare for me to work the full 10 hours. On most days I reach my 75 pips just before or just after the US session opens. In these situations I will close shop and find other things to do.
The System
The system is based on safe trading using Support and Resistance on two pairs. I usually only trade one pair at a time but have charts open for other pair on the desktop, having said that there are times I Will have 2 trades open, in these situations the first trade is already in profit and a Break even has been set on that pair to ensure that no losses are incurred. On each trade I look for a a minimum of 25 pips profit and a maximum stop loss of 20 pips – more about this later when I discuss “Take profit and Stop loss”.
I trade these two pairs only because of the following factors: low spread at my Broker (GBP/USD = 2.0 pips, EUR/USD = 1.6 pips), high volatility and large Average Daily Ranges, high correlation between pairs.
Correlation often gives clues that the actual charts themselves do not show. When one pair is looking to go in one direction and the other pair is looking to go in the opposite direction. Beware!!. You do not always have to trade 2 pairs having positive correlation. You can also choose pairs that have high negative correlation. For example there is high positive correlation between EUR/USD and EUR/JPY, so these are 2 good pairs to look at or EUR/USD, EUR/JPY and USD/CAD are 2 other possibilities with high negative correlation. Correlation also points to high strength or high weakness on a particular currency.
I will point out that this strategy is NOT a scalping strategy. I am not looking for trades that give me a 5 or 10 pip profit, instead my profit targets are at a minimum of 25 pips (sometimes 20 pips). My initial stop loss is 20 pips. This rarely gets hit, and is really an Emergency stop to cater for unforeseen situations, such as losing my Internet connection, or computer dying, or some unannounced news.
Most trading systems are designed to “go with the trend” on larger time frames, and that’s fine if it suits your style. However if you are looking for daily income on a regular basis then it is the short burss that you need to recognize and take advantage of . We are well aware that most pairs range about 70 % of the time. Now safe and 20 pips plus trades are very frequent on the 1min chart. these trades nearly always start from a support or resistance area. On most days, during the time frame I mentioned, you get 4-6 opportunities on GBP/USD and also 4-6 opportunities on EUR/USD. It is not difficult to find these support and resistance areas, and if you can take advantage of these areas, then the 75+ pips will be obtained each and every day. The emphasis is on “Safe trades” and the only tool I use at the exact entry point is the MACD BB tool. More about this tool later. Remember the daily target , you need only need to take advantage of 3 trades during the day to reach your target.
Support and Resistance
I have always wanted to trade support and resistance, but never quite known how to do it in a systematic manner. There are many articles available that recommend going back 2 or 3 days on a higher time frame and then drawing horizontal lines. I found myself either adding too many lines or not enough lines. Since these lines were very subjective I was never sure that I was doing the right thing. Now I draw lines which I suspect other people will also be using and use these as my support and resistance areas. Since many traders use these so called “natural” support and resistance levels, trading at these levels is quite high and in my eyes are roughly equivalent to a volume indicator in Forex.
So what are these natural support and resistance levels? These are 1. The high point and the low point of the day thus far, 2. Daily pivot and mid pivot lines 3.Psychological levels (levels ending with 50 and 00 and spread 50 pips apart). 4. Fibonacci levels.
I personally do not use Fib levels but I do use the others. Pivots, mid pivots and psychological levels are all automatically added to the chart using indicators (links to all indicators I use will be listed at the end of the post). The Highs and lows I manually draw just before I start trading. These hi’s and lo’s may need to be adjusted as the day continues
The MACD BB Indicator:
This is the only indicator that I use, and what a remarkable indicator it is. If the system perks your interest I suggest you go to the following website and go through the tutorial yourself. Run the tutorial several times , so that you fully comprehend what this indicator can do for you. I think you maybe surprisingly amazed. In Forex trading, in general it is advisable to be extremely proficient with one tool, rather than just have a working knowledge about a whole bunch of tools.
On the tutorial pay particular attention to “MACD BB trend change” section.
Out of all the tools that are on the market, the MACD is probably the slowest one. Having said that once a signal is given on this tool, it also tends to be the most reliable
I have intentionally not posted any charts. The intention of this thread is NOT to demonstrate if the system is any good for you or not. Rather the thread is intended as an introduction, and if you do the things I ask you to you can demonstrate to yourself whether the system holds possibilities for you.
Task 1: Back test about 3-5 days of data. For any day of the week open a 1 min chart for either Eur/USD or GBP/USD. Then attach the grid indicator that draws horizontal lines spaced every 50 pips (4 digit) apart at all levels that end with 00 or 50. Attach the auto pivot indicators to the chart and insert two EMAs for 100 EMA and 20 EMA. Then using the EMA crossover signal set an audible alert for when 2 EMA crosses the 20 EMA. This is a heads up signal warning that a trend change is about to take place or that a new trend has just started. Do not base your trade on this signal alone. Do not forget to also add the horizontal lines to mark the high and low for the day. Now that you have setup all your support and resistance lines, see how many 20+ pip trades show up. For now you are not interested whether you would enter the trade or not, nor how many pips you could make. The whole exercise is for the reader to recognize price action at support or resistance. This exercise should convince you of the trading possibilities that come up every day. For your initial experiment only look at the chart during the time frame I mentioned.
Task 2: Do the tutorial at the web site I listed. Use any username for yourself and for Sales. Having gone through the tutorial Open a side by side chart of the same currency and add 2 MACD BB indicators to the 2nd chart. Nothing needs to be added to the data section, because this exercise is meant to demonstrate MACD action. Zoom OUT the chart so that you can just recognize the individual candles and then shrink the data portion of this second indicator, so that he 2 MACDs take up all of the chart window, The settings for the MACDs are 38,120,20,1.1 (fast MACD) and 144,233,20,1.1 (slow MACD). Now back test for at least 3-5 days for the same time frame. When back testing notice what the BB dots are doing. AS to why I use 2 instances of MACD, is something to be explained in the next post To understand the MACD BB action, you MUST go through the tutorial.
Once you have gone through the tutorial and performed the 2 tasks either you will be very amazed at the opportunities or will be NOT impressed at all. You be the Judge and the Jury. Remember the whole point of the exercise is to open your eyes at support and resistance and at the same time see what the MACD BBs are doing at the same support and resistance. I have specifically asked you to open two charts, but I am sure many will see that both charts can be combined into one. That is absolutely correct, and when you are doing live trading that is what you will do. However the tasks are designed to give you a feel of the MACD BB and a feel of the price action at support and resistance.
My next post will go into further details about entry, exit, profit taking and stop loss and much more
I would like a response for all that read this thread. If I find there is little or no response then sadly I will not post anymore. Regardless what you actually think about the system, the 2 tasks should give a good insight to what successful day trading is all about.
http://www.nexgent3.com/Flash%20Quiz...o%20Flash.html
Happy reading
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