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-- Welcome to the Katana Trading System --
Named "Katana" because it's the weapon of choice of the Japanese warrior class, the Samurai followed a set of rules that later became known as the "Bushido"
In trading having a set of rules is paramount to success.
This system is based around using price bars, not time based bars. Price bars in my opinion are far superior in a few ways when compared to time based bars.
Price based bars represent price movement, they will not close until price moves a predetermined number of price increments.
Where the time based bars close as we know after a set number of minutes, but we're not trading minutes, we're trading price and price is what will pay you.
The main advantage of this is that the bars are all the same size. Traditional candlestick charting methods like, outside bars, inside bars and doji have no place on a price based chart, some may consider this a disadvantage.
To understand the logic behind this trading strategy, understanding how price moves first will help.
Determining the direction of price is the number one priority.
In the currency market, price will typically move like this.
Consolidate between set levels, then move to the next set level. That is basically how price moves. These set levels typically are bound by price levels.
These levels are formed around whole price numbers. The strongest of these levels is the xx00 and xx50 levels. That is for example 1.3600 1.3650 1.3700 etc. Mid point price levels like xx25 and xx75 also affect price, those being 1.3625 and 1.3675 for example.
This is how you must view the market. Price consolidation and price moving from one price consolidation level to the next price consilidation level.
To determine the direction of price look back on the chart and determine what price is doing. If price is going top left to bottom right it's clear that price is trending down. To make things simple, use a moving average of price to simplify this.
The period and type of moving average is of little consequence, what is important is the direction of these moving averages, and where price is in relation to these moving averages.
Once the direction of travel of price is determined, then the direction to trade in is then determined. This is the number one priority, determine the direction of price.
Now I don't want this thread to turn into an EA construction and testing thread. This thread is designed to show a simple and effective strategy to trade and make money in this market.
Next understanding how price reacts to price levels and the signs to look for to consider entering a trade.
As I outlined earlier price moves in congestion zones, moving from one congestion zone to the next, typically bound by xx00 xx25 xx50 xx75 levels.
Price also will move between these levels frequently. Once we have determined if price is trending and the direction of the trend, the next thing to do is to wait for price to retrace against the trend direction.
Once a retracement begins and is recognised as a retracement, the next thing to do is to look for a reason to enter either short or long.
To keep things simple I'm not going to talk about price patterns, bar patterns or anything like that. I'm just going to say look at the Stochastic Indicator as a guide as to whether the retracement is a retracement or not, and then look at another Stochastic indicator and use this as a guide as to whether the trend is likely to continue.
This is about as simple as it gets.
Determining where to put your exit positions, is easily determined by the price bars. Using a fixed number of pips as the exit is also an option, the reason being is that the price bars are all the same size, and as such it's easy to use a fixed number of pips once you have identified a bar to use as the entry bar.
Finding a place to exit is also quite easy as well, typically the next price level in the market is where price will react to next, hence this is the region to use as the take profit.
I will be posting some charts soon to assist in the understanding behind the logic and the reasons behind entering and exiting positions.
-- Welcome to the Katana Trading System --
Named "Katana" because it's the weapon of choice of the Japanese warrior class, the Samurai followed a set of rules that later became known as the "Bushido"
In trading having a set of rules is paramount to success.
This system is based around using price bars, not time based bars. Price bars in my opinion are far superior in a few ways when compared to time based bars.
Price based bars represent price movement, they will not close until price moves a predetermined number of price increments.
Where the time based bars close as we know after a set number of minutes, but we're not trading minutes, we're trading price and price is what will pay you.
The main advantage of this is that the bars are all the same size. Traditional candlestick charting methods like, outside bars, inside bars and doji have no place on a price based chart, some may consider this a disadvantage.
To understand the logic behind this trading strategy, understanding how price moves first will help.
Determining the direction of price is the number one priority.
In the currency market, price will typically move like this.
Consolidate between set levels, then move to the next set level. That is basically how price moves. These set levels typically are bound by price levels.
These levels are formed around whole price numbers. The strongest of these levels is the xx00 and xx50 levels. That is for example 1.3600 1.3650 1.3700 etc. Mid point price levels like xx25 and xx75 also affect price, those being 1.3625 and 1.3675 for example.
This is how you must view the market. Price consolidation and price moving from one price consolidation level to the next price consilidation level.
To determine the direction of price look back on the chart and determine what price is doing. If price is going top left to bottom right it's clear that price is trending down. To make things simple, use a moving average of price to simplify this.
The period and type of moving average is of little consequence, what is important is the direction of these moving averages, and where price is in relation to these moving averages.
Once the direction of travel of price is determined, then the direction to trade in is then determined. This is the number one priority, determine the direction of price.
Now I don't want this thread to turn into an EA construction and testing thread. This thread is designed to show a simple and effective strategy to trade and make money in this market.
Next understanding how price reacts to price levels and the signs to look for to consider entering a trade.
As I outlined earlier price moves in congestion zones, moving from one congestion zone to the next, typically bound by xx00 xx25 xx50 xx75 levels.
Price also will move between these levels frequently. Once we have determined if price is trending and the direction of the trend, the next thing to do is to wait for price to retrace against the trend direction.
Once a retracement begins and is recognised as a retracement, the next thing to do is to look for a reason to enter either short or long.
To keep things simple I'm not going to talk about price patterns, bar patterns or anything like that. I'm just going to say look at the Stochastic Indicator as a guide as to whether the retracement is a retracement or not, and then look at another Stochastic indicator and use this as a guide as to whether the trend is likely to continue.
This is about as simple as it gets.
Determining where to put your exit positions, is easily determined by the price bars. Using a fixed number of pips as the exit is also an option, the reason being is that the price bars are all the same size, and as such it's easy to use a fixed number of pips once you have identified a bar to use as the entry bar.
Finding a place to exit is also quite easy as well, typically the next price level in the market is where price will react to next, hence this is the region to use as the take profit.
I will be posting some charts soon to assist in the understanding behind the logic and the reasons behind entering and exiting positions.
