75 pips plus daily using 1 min chart (not scalping)

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Thanks to all for responding to the initial post. This post will look at the actual charts that I use during live trading. Followed by a discussion. The file is in word format and I hope you can actually see it, as I have not posted images before. This chart shows what I first saw when I started my trading session today (Today is 11 July 2011). You may want to open the same charts on your computer and lets go through an analysis of the action today.

I hate posting charts that demonstrate how good a system works. It does nothing for the reader, all it is is a ego trip for the system creator. Rather the charts I will post will be charts that the system may have problems with, and what can be done to overcome these problems.

Good luck

Hi Romex,

If you are using MT4 you can make posting charts a bit easier for yourself. Just right click on a chart and find "save as picture" in the menu. Click active chart and then save it to a folder on your desktop. When you want to post it to FF, just use the manage attachment browser and find the folder with the saved pictures.

Hi All,

I know Romex doesn't intend for this to be a scalping methodology but it does lend itself to picking up short term counter trend trades. I also like the 5M chart since it's a bit slower and easier to read than the 1M charts.

You see price has made 3 attempts to go lower and sets up a resistance area. On the 3rd bounce the MACD BB indy starts to turn up (blue). I wait for the break of the last high and I'm in on the strong bullish candle (aqua line). Took a quick 10 pips and nave moved to BE so it's a free trade right now. I typically would take some profit at 10 pips and then again at 20 pips especially since this is a counter trend trade and you wouldn't expect 25-40 pip swings as you might see when trading with the trend.

First the chart layout with some explanations:

There are 4 charts on the desktop (two 1min charts for the different currency pairs, in between I have two 5min charts , one for each pair). First lets examine the 5 min. charts.

Now there are several systems on this forum that base their trading system on the RSI alone. The standard RSI on MT4 is too compacted and can cause problems if your eyesight is not that good. Instead I use the RCI-TC which is readily available on this site, and you can find it by searching for "RCI-TC" in the search box. Notice I manually set lines at levels 45 and 55. Nearly all the RSI systems only take short trades when RSI is below 45 and long trades when RSI is above. This is far safer then taking trades when RSI crosses the 50 line. One day, by chance, I discovered something that has become very useful for me. I dragged a 1EMA line to the RSI window to see what happens. Surprisingly the 1EMA is an exact overlay of the RSI. No wonder RSI is so sensitive to even very small fluctuations in price, as 1EMA literally represents what an individual candle is doing. In order to smooth out out the RCI sensitivity I now drag a 5min EMA to the RSI window which gives me a better picture of the RSI movement. Try this your self

Now when you are trading 1 time frame it is always good to get used to what the next higher time frame is doing. The RSI really becomes your trend meter. Now, regardless what support and resistance or MACD BBs are telling me, I normally refrain from trading when the 5 min RSI is within the 45-55 area and trade long or short only when RSI is above or below 55, 45 lines. Remember the emphasis is always on "safe Trading". There are more than enough safe trades on a daily basis hence I usually Reject RSI 50 crossing trades. Notice that on the two RSI charts i have shrunk the data area, I get my data information from the 1 min chart alone.

Now lets look at the 1 min charts. You will notice several horizontal and one vertical line on each chart. The vertical line is the time from when I start trading and also represents the start of the European session. you can search for "Trading session v lines" on this forum and get this indicator. I also draw a vertical line at the close of the British session. These are not really necessary, but does help when you review your trades at the end of your trading session.

The horizontal lines all represent support lines. The brown lines are the highs and lows thus far, the other lines represent the psychological levels and pivot levels and are automatically inserted , by the two indicators I posted in my first post. When I actually created the post, which was just before the US open, I was well past the 09.00 hours. Since I keep moving the hi and lo lines, as necessary, I probably misplaced the lo line for EUR/USD. I apologize for the mistake. The manual drawn lines should go just at the lo prior to 09.00, and that lo point can be seen on the actual charts I have posted. Do take note what price was doing at the various support and resistance levels just prior to my starting time.

Also on the 1min chart you should see text, that gives current information about the Average daily range, spread, and the current range thus far. The actual settings on the chart are actually wrong. The reason being, that when the chart for the post was actually created , that was the actual setting in effect, and there is no way you can see the earlier text, even though you have back tracked the chart. I will explain why ADR information can be important a little later.

The other two lines on the 1min chart are two EMAs for 100 and 20 and the arrows are alert signals when 1 EMA crosses the 20 EMA line. Why are these important you may ask: Just about every trend you see on the 1 min chart starts at 100 EMA line, and retracement followed by a continuation of the trend usually start at the 20 ema line. Just do a back test for a few days and this will become quite apparent. Therefore for safe trading make sure price is going below the 20 and 100 for short trades and above the lines for long trades.

The reason for having two charts on the same window is to look at correlation and I will go into that on my next post.

Finally The indicator section has has two instances of the MACD one I call the fast MACD and the other the slow MACD. As I mentioned the MACD is a slow and late indicator. But once the a signal is given, it is usually very reliable. I hope everyone has gone through the tutorial I posted. I generally use the fast MACD for entry (BBs crossed over fully above or below opposite Bollinger Band), with the slow MACD starting to make (but not fully completed) a move in the same direction as the fast MACD. There is a slight risk here, however if your RSI direction is correct and you are at a support or resistance plus you are in the right direction of the EMA's then the risk is actually very slight. Do notice the angle and spacing of the BBC prior to the 09.00 hours. In fact this happens because you are close to the end of the Japanese session. This end of session short trend occurs so frequently that I am considering to amend my start time to 08.00 Hours.

The slow MACD is your reliable BB. In fact I will let profits run often, if there is no change in the slow MACD trend direction. But more about when we look at "take profit and stop loss"

Lets end the post with the first problem I faced today. Shortly after 09.00 I found both Pairs hitting the low of the day, RSI and emas positioned for a downward move, as were the BBs and had to make a quick choice to which currecy pair to trade. Since I only trade 1 pair at a time, I chose the eur/USD pair. why: Well GBP/USD was approaching its ADR whereas EUR/USD still had more pips to go. I targeted to exit for a 35 pip profit at the next support and resistance and thats what happened. Often you are going to experience this choice, and you have to find something that differentiates the two. Much more about this later.Now its a pity I exited so early. During the whole european session prior to the US session the RSI and and the Slow MACDs never even moved out of the downward section. Open the charts for the day and look at what happened.

Bye, till the next post

Romex

Thank you for taking the time to share, very well explained
Q

I really appreciate the time and effort you are making to explain to us your strategy. I dont want to jump the gun but I have a quick question if you dont mind. In the last example you gave did you have to wait for the quick macd bb to move to the upperbands and then cross down over the lower bands before entering short?

On any particular day you will see there are many opportunities to also take smaller (less than 25 pips) profitable trades, which this particular system cannot deal with, however we still want to take advantage of these situations. So what can be done? Tinkering with the indicators is NOT the solution, this may solve one problem but bring forth others. You can add filters and exceptions but his creates unnecessarily complications. So lets see, but first let me digress a little.

Consider two traders using an identical system. One can be extremely successful the other not, WHY?

There are several intangibles that differentiate a good trader from the bad. One of these is the ability to understand the system, they are using, fully.

Now let me make a contradictory statement about all that I have written, but bear with me for the explanation.

In my mind trading a 1min. chart to make 25 pip plus profits is really a very silly idea. If the target is a minimum of 25 pips then you do need to trade a higher time frame, with larger stop losses. Just as you would not take your bride from the church to the wedding reception in a tractor trailer; or move house using a hired Rolls Royce. Trading the 1 min chart is excellent for scalping (say upto 15 pips max), excellent for entries into a trending market and also for Breakouts.

Now let me explain. Notice the title of the thread, the key word is "using" and not "trading". What the system is doing is actually trading the 5min and higher time frame charts, and only using the 1min chart as an entry. So what decides what time frame we are trading? Its the RSI chart. Keep everything the same but change the RSI time frame to lets say 15 min and now you are trading the 15 min chart using the 1min chart as an entry. Most often if the 5min is over 55 or under 45 and all the BBs and EMA's are as they should be, then you will also find that at least the 15min is also trending. I hope this is clear to the reader. Now that we are actually trading a higher time frame 25 pips is a very realistic figure, with the added advantage of lower stop losses.

The only reason we are unable to take small profitable trades is because of our insistence of the 5min RSI being outside the 45-55 area for our entries.

Notice all these small trades that the system rejects, are retracements to the main trend on the 5 min chart. If you want to shoot for the smaller (10-15 pips), but more often targets, then either remove the 5 min RSI charts from the desktop completely, or better still keep the RSI 5 but make sure that the rsi is NOT outside the 45-55 range in the opposite direction to the direction of your trade. Scalping with RSI inside the 45-55 range is now fully acceptable. Of course BBs and EMARs must always be lined up correctly.

Often these scalping entries actually are the prelude to a long term entry. Another important point, with 10-15 pip scalping is to note that actual support and resistance levels need NOT be a consideration. So know the system. This will realistically point to your profit target. With scalping entries make sure that your entry is very close to the 100 EMA or 20 EMA line and avoid making entries after large candles.

I hope I have conveyed to all about a very important point that needs the attention of the reader

I also hope this post answers the question about taking other small but profitable entries

Romex

Many set ups!
Thanks again!
Q

Thanks for the on-going comments on your strategy. Are you going to discuss S/R at some stage?

Also - I have built my charts to exactly match yours, although I am not using Alpari. My brokers time differs from Alpari and so I wonder , if you have the time , can you post a chart (any timeframe) showing your current S/R lines. Thanks.

Waiting for more to read and learn


best regards

Here is a quick 31 pip trade on the EU. Short term BB moving up, longer term BB blue and RSI above 53.

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In order for you take a trend change signal from the 2 MACD BBs. The following rules are what I follow.

1. BBs must move sharply from above the upper Bollinger band to below the lower Bollinger band (Fast MACD); as well as the slow MACD, at the very least, must be moving downwards from the upper Bollinger band, and not necessarily as yet crossed the lower Bollinger Band. The important point to note is the question about the slope of the slow MACD. Even if you see red BBs on the slow MACD and FAST MACD has crossed to below the lower Bollinger Band, if SLOW MACD is flat DO NOT TAKE the TRADE. This situation usually happens when the trend is exhausting.

2. If the BBS are moving downwards below the lower Bollinger band on the SLOW MACD you CAN take take an entry signal as soon as fast macd DIPS BELOW THE Upper bollinger Band. Here you do not have to wait for the FAST MACD to cross the lower Bollinger Band. This situation happens when you are entering on a retrace to an already established Trend

The important point to note, in all cases, is to realize what SLOW MACD is doing.

Here is a link in the FF Forum, that will give you some added info. In the section titled "How to recognize a weak MACD" Assume that the MACD diagram shown is for the SLOW MACD. Post # 387

Thread NAME - PART 2 EURUSD Trend Magic System.

I hope I have answered your question to your satisfaction

Regards Romex

Guys - please post some screens of bad deals. and let's discuss them - what was wrong. i really want to study this system but think i'm a loooser)

Thanks Romex for your reply. It clears things up for me. With regards to take profit do you find that you take a few small losses before reaching your 20+ pip target

I have been studying price action for a while now and the one thats a constant is that you ll always get a nice impulsive move on the e/d or g/d between 7 and 10 GMT (include daylight saving) every morning. Its catching this move on a lower time frame is the trick!

I hope you stay with us for a while longer and explain how you would manage a typical london open trade using this strategy.

Best Regards

Paul

Wow...didn't take long for this thread to go dead.

remember patience was the word he first spoke. we just wait and see.


best regards

what happened here?
every thing looked very exciting and great and suddenly went dead?

Hi,

this looks like a promising system, looking forward to hear more about your entry/close/takeprofit signals.

Some (newb) questions:
-How do you determine where to place the days low/high horizontal line; does this depend on the opening time of a particular trading session or the actual time that you start to trade?
-Why are those arrows (and signal sounds) used? Does it need to be the 2EMA or the 1EMA that crosses over the 20 EMA? There was an inconsistency about this in 2 different posts.

Thanks!

Thread was under evaluation now listed under Trading Journals so nobody really sees. This is a very good system if you are experienced in PA.
Q

Hi romex,

What period settings do you use for rsi?

Thanks