This page is a work in progress and will always be under construction. I will always add pertinent information in regards to my trading strategy to this page and upload the latest versions of the indicators, templates, set files etc. that I use to trade this strategy.
You must have at least one year trading experience to trade this system as it does require you to have a mature trading psychology as well as a good knowledge of the MT4 trading platform. I WILL NOT ANSWER ANY BASIC MT4 QUESTIONS!
You must follow proper money management principles and it is your own responsibility to ensure that your account is protected against draw down. I will not answer any MM questions nor am I taking any responsibility for your losses. You must understand that there are inherent risks associated with Forex trading and your account could be wiped out in a matter of minutes if you do not follow prudent principles of money management.
The purpose of this tread is to help traders understand the fundamental aspects of trading and the importance thereof. It is the fundamentals that move the market.
Fundamentals alone does not necessarily give you a winning edge and that is why I believe that combining fundamental analysis with technical analysis can give us a real winning edge in the market.
What is a strategy if it cannot be altered, adapted or tweaked as time goes by to increase it’s effectiveness?
This is what I have done recently. The fundamental outlook and market sentiment is the cornerstone of my trading strategy. I also use the principles of Fibonacci Pivots (information of this strategy can be found on the thread of Davit - https://www.forexfactory.com/showthread.php?t=588764).
My strategy combines these principles with fundamental analysis and price action basics (candlestick patterns) to qualify entries.
So, I do not make use of technical indicators like RSI, MACD, Stochastics etc, etc, etc. but I trade on a naked chart with just the Fibonacci pivots indicating higher probability areas for buy or sell, together with my own developed candlestick pattern indicators.
I basically try to identify strong and weak currency pairs based on fundamentals and sentiment and trade those (i.e. if USD is strong and the EUR is weak for example I will enter a short trade on EURUSD when price action confirms an entry which could be at or close to Fibonacci pivot levels).
I trade on three time frames – H1 as the main TF, M30 and H4, and I do not trade CHF or exotic pairs at all (this is personal preference).
Any currency pair can be in one of three states (depending on time frame):
- Trending. Higher highs and higher lows or lower lows and lower highs can be easily identified
- Reversal state. New higher highs and higher lows, switching from down- to up-trend and visa-versa for up- to down-trends
- Ranging state. A mixture of highs and lows, or similar highs and lows than previous can be seen with no clear market direction.
I use the H1 time frame to help me identify the state of a currency pair and if the state is not clear on H1 I use H4 time frame. I focus on pairs where the time frame agrees with the fundamental outlook for the pair. If there is currently no clear bias for the pair I steer clear and wait for a bias to develop.
Once I have a tending pair where the bias agrees with the fundamental outlook, I use candlestick patterns to identify opportunities to enter a trade.
I use four indicators for my technical analysis:
- a version of Nostromo's pivot indicator that I modified to be able to select which pivot levels I want to use
- PA indicator and
- Candle reversal indicator
- A commercial indicator that I cannot share. This indicator also identifies candles of high probability price movement, based on price action. My system can be traded without this indicator – I only use it for additional confirmation.
The PA indicator: has three candle bar patterns: bullish/bearish engulfing, bullish/bearish reversal pattern and Dojis. I ONLY use the bullish/bearish reversal pattern and switch off the engulfing and Dojis as the Candle reversal indicator has optimized engulfing & Doji patterns (I lost the machine on which I developed the PA indicator with no backups and had to re-code from memory but is now better!!).
∑ Keybar signal indicated by a green star (for long and short trades)
∑ Strong Keybar signal indicated by a red star (for long and short trades)
∑ Bullish/bearish reversal signal (thin blue or red arrow)
The Candle reversal indicator: has five candle bar patterns:
∑ Reversal (weak, moderate and strong – indicated by n)
∑ Two strong candles (indicated by a ≥)
∑ Three strong candles (indicated by u)
∑ Confirmed bullish/bearish engulfing (indicated by ť and Í)
∑ Valid Doji signal (indicated by ™).
The PA and Candle reversal indicators should be used in conjunction with the WP Nostromo indicator to identify areas of support/resistance and reversal. Areas of reversal are above R61 level for short entries and below the S61 level for long entries.
If the PA indicator shows an arrow and/or star it is an indication that a certain chart pattern has developed. These are classified as follows:
How to use the indicators:
I wait for two candlestick indicators to indicate a buy (for an uptrend) or sell (for a downtrend), mostly on the H1 time frame. Then, there has to be confluence on either M30 or H4 if I trade from H1 or confluence on H1 if I trade from M30 time frame. I normally do not trade from H4 but rather use it for confirmation. If there is confluence on all three time frames, I know the trade is a high conviction trade and I might add positions to the original trade.
To identify a trend reversal (point 2 above) I need four candlestick indicators on mainly the H1 time frame and I use the same principle of confluence. When price is above, below or inside the buy and sell zones as indicated by the WP_Nostro_mod_me indicator the probability of reversal is higher than outside these areas but is not always the case (as we know the Forex market!!), so there could be trend continuations in these zones as well.
The Strong Keybar signal is a very good indicator that a price reversal is about to occur especially above the R61 or below the S61 pivot level. The green Keybar signal on H1 time frame is normally a good indication the the prevailing trend will continue.
The fib pivot levels are normally fairly accurate areas of support and resistance and price action quite regularly bounces off them, reversing direction.
You can used any Forex calendar and/or news feed of your own choice - I use the calendar here at ForexFactory and I use the free financialjuice.com newsfeed.
Here are the MT4 indicators and template that I use for my technical analysis (the template has all the correct settings, no need to change anything):