Hello Fellow Traders,
I know many of you have been trying to make sense out of this trading lark for quite a long time but can never seem to make the breakthrough. There may be many reasons for this and I am not going to attempt to explain them all in this post, but what I am going to do is give you all a system that I use quite successfully to extract profits from the markets.
Now this system is not going to be a silver bullet or your magic beans, it is simply an approach to making money from the markets, and still requires a little effort and discipline from yourside. What it is however is relatively simple and easy to follow, and it is also a system that goes someway to eliminating much of the noise typically found on intraday charts.
OK so to the system.
The Charts
I use range charts which are price based charts as oppose to our normal time based or volume based. I am not going to give an in depth overview of range charts here but if you are interested and want to know more please do a google search where you will find many articles about range charts.
Now with regards to charting platforms, I use Ninja Trader which provide range charts as standard, but if you are a metatrader user I believe you can get indicators that do the same job or similar.
I use two different ranges, the 4 and the 8 with 3 moving averages as can be seen below.
4 Range --> 20 EMA, 60 EMA, 100 EMA
8 Range --> 20 EMA, 60 EMA, 100 EMA
I use the 4 for fast moving markets where I can see a clear direction, however if this starts to get a little noisy I then move up to the 8.
I hope you are all following so far.
The Pair
I solely trade the EURUSD as far as currency pairs go (I also trade the eminis). The reason for this is the cost of doing business is so much cheaper on this pair as well as the fact that when you are intraday trading you need to remain focused, and I don't believe you can do that by trading hundreds of different pairs. You end up always missing the move. Plus you get more than enough opportunities trading the EURUSD without having to watch other pairs.
The System
Ultimately this is a swing trading system. We are simply trading the pull backs during a trend. So the first thing we need to do is define a trend. Now I know we can do that looking for higher highs and higher lows in and uptrend and the opposite in a downtrend but as we are so close to the price I like to have a little more confirmation. This is where the MA's come into play.
If the 20 is above the 60 and the 60 above the 100 then we are only looking for longs. If the 20 is below the 60 and the 60 below the 100 then we are only looking for shorts. Clear enough so far?
Now for the pullback (or congestion), we need to see momentum in the price so as well as the MA's we also need to see the price clearly moving and not just chugging along slowly in anyone direction. Once we have this momentum we then look for the candles to start to pull back, we need a minimum of 4 candles pullback, this means we cannot enter before the 5th candle opens at a bare minimum.
Now once we have the pullback (you can use trendlines to contain the price if you like) you wait for the candle to tick through the trend line, this is usually the open of the next bar unless it is a little more noisy in which case you may need price to move further. On the break you enter your position and you place your stop behind the most recent swing. You target is roughly where the previous upswing was in an uptrend and down swing in a downtrend. When I say roughly, of course you want to make a good risk reward, so you need to try and run your trades for as long as you can, although this is a feeling thing more than anything. You watch to see how price reacts when it gets to its first road block.
Risk
You can have many trades in a day so to protect yourself, you need to think about an overall daily stop loss. That is the max you are willing to lose in a day and then divide it into 6 at least. This will allow you to make a few losing trades in a row and still be in the game to profit when the markests move.
Ok that is enough from me for now. I will update with some screen shots and other thoughts and insights later. I have just given you the bones, which once you have read through it a few times should seem quite logical.
As we progress I will give you more about actually trading it as well as results as I trade etc.
Until next time
Nexas
I know many of you have been trying to make sense out of this trading lark for quite a long time but can never seem to make the breakthrough. There may be many reasons for this and I am not going to attempt to explain them all in this post, but what I am going to do is give you all a system that I use quite successfully to extract profits from the markets.
Now this system is not going to be a silver bullet or your magic beans, it is simply an approach to making money from the markets, and still requires a little effort and discipline from yourside. What it is however is relatively simple and easy to follow, and it is also a system that goes someway to eliminating much of the noise typically found on intraday charts.
OK so to the system.
The Charts
I use range charts which are price based charts as oppose to our normal time based or volume based. I am not going to give an in depth overview of range charts here but if you are interested and want to know more please do a google search where you will find many articles about range charts.
Now with regards to charting platforms, I use Ninja Trader which provide range charts as standard, but if you are a metatrader user I believe you can get indicators that do the same job or similar.
I use two different ranges, the 4 and the 8 with 3 moving averages as can be seen below.
4 Range --> 20 EMA, 60 EMA, 100 EMA
8 Range --> 20 EMA, 60 EMA, 100 EMA
I use the 4 for fast moving markets where I can see a clear direction, however if this starts to get a little noisy I then move up to the 8.
I hope you are all following so far.
The Pair
I solely trade the EURUSD as far as currency pairs go (I also trade the eminis). The reason for this is the cost of doing business is so much cheaper on this pair as well as the fact that when you are intraday trading you need to remain focused, and I don't believe you can do that by trading hundreds of different pairs. You end up always missing the move. Plus you get more than enough opportunities trading the EURUSD without having to watch other pairs.
The System
Ultimately this is a swing trading system. We are simply trading the pull backs during a trend. So the first thing we need to do is define a trend. Now I know we can do that looking for higher highs and higher lows in and uptrend and the opposite in a downtrend but as we are so close to the price I like to have a little more confirmation. This is where the MA's come into play.
If the 20 is above the 60 and the 60 above the 100 then we are only looking for longs. If the 20 is below the 60 and the 60 below the 100 then we are only looking for shorts. Clear enough so far?
Now for the pullback (or congestion), we need to see momentum in the price so as well as the MA's we also need to see the price clearly moving and not just chugging along slowly in anyone direction. Once we have this momentum we then look for the candles to start to pull back, we need a minimum of 4 candles pullback, this means we cannot enter before the 5th candle opens at a bare minimum.
Now once we have the pullback (you can use trendlines to contain the price if you like) you wait for the candle to tick through the trend line, this is usually the open of the next bar unless it is a little more noisy in which case you may need price to move further. On the break you enter your position and you place your stop behind the most recent swing. You target is roughly where the previous upswing was in an uptrend and down swing in a downtrend. When I say roughly, of course you want to make a good risk reward, so you need to try and run your trades for as long as you can, although this is a feeling thing more than anything. You watch to see how price reacts when it gets to its first road block.
Risk
You can have many trades in a day so to protect yourself, you need to think about an overall daily stop loss. That is the max you are willing to lose in a day and then divide it into 6 at least. This will allow you to make a few losing trades in a row and still be in the game to profit when the markests move.
Ok that is enough from me for now. I will update with some screen shots and other thoughts and insights later. I have just given you the bones, which once you have read through it a few times should seem quite logical.
As we progress I will give you more about actually trading it as well as results as I trade etc.
Until next time
Nexas
