The 10XROI System - A High "R" Factor Approach

I do not post very often at ForexFactory, nor have I started many threads. However, today there is a need for a new thread to discuss and test what I believe is a technically very sound and worthwhile trading system. It's more than a system really...it's a paradigm shift in and of itself where Reward/Risk and trade management are concerned. It is called the 10XROI System and it was first introduced by another ForexFactory member just a few days ago who, unfortunately, must remain nameless and is unable to post here due to commercial restrictions. He is very generous for freely sharing this system with the community.

Recently, I have been in search of some missing components to my own trading. Having long since settled the issues of proper money management parameters within the last 3 years or so, I am still in need of specific tactics that will advance my overall high R/R money management strategy. I am firmly convinced that the best R/R opportunities come when setups are identified on a higher TF and the entries occur on a lower TF. Doing this puts your trades into a naturally high R/R structure by design. Tight stops on low TF combined with higher TF targets is, IMHO, the way to go. If that approach fits your trading style and money management profile, then this system will be worth your time. If it does not appeal to you, then I invite you to consider taking a look anyway and possibly changing your paradigms about money management and high R/R systems. I think you will be quite challenged in your current thinking if you do.

Ok, let's outline the thread purpose and system rules as clearly as possible.

PURPOSE OF THREAD:
The goals I have in mind for this thread are, firstly, to provide a place for those interested in trading this method to collaborate, post trade setups/entries, and learn the method correctly as presented from the outset. In order for that to happen, we must firmly resist all attempts and temptations to "tweak" the method until we have empirically proven a need exists for some specific adjustment. "Tweakitis" is probably the most fatal disease known to trading system forum threads. If anyone starts suggesting that we add this or that new indicator or that we alter any system rules BEFORE they have bothered to do substantial testing, then you will be asked to leave. If you have a suggestion for improvement, post it WITH SUPPORTING DATA, or don't post. Adjustments to any system SHOULD NOT happen until sufficient testing has occured FIRST. If you whimsically alter the rules of a system on the fly in the absence of DATA that indicates the change is necessary, then you are trading ANOTHER system. We are NOT going to fall into that juvenile trap. We will avoid and strongly resist this time-wasting, money-draining activity and do proper testing according to the rules laid out for the system. Please respect these directives for the good of all who participate. Don't become a distraction from the goals. 'Nuff said...

Secondly, we will seek to engage in both forward and backward testing. This system should backtest nicely on ForexTester2 and/or Vhands. I personally prefer FXT2 and will be using it myself. I will also be doing forward testing with very low live leverage. Demo testing on cyber money is definitely advisable until you:
1. Learn the rules
2. Have sufficiently demonstrated you can execute the rules consistently
3. Have decided the system fits your trading style and needs

SYSTEM OVERVIEW:
We are seeking to identify a particular candle pattern on a D1 chart which must then be qualified by the presence of supporting elements that will provide positive trading context. Properly qualified entries will be taken from the H1 charts. The overall object in trade management will be to obtain a 10R trade, or a trade that yields a reward of 10 times the initial risk amount. Please be advised this system has a specific money and trading management structure which is an integral and foundational part of the system. If you alter or omit the money and trading management, you are NO LONGER TRADING THIS SYSTEM.

THE CORE CANDLE PATTERN:
This system focuses on one primary candle pattern. It is called the "Push/Pull" candle pattern. It is only valid when seen on a D1 chart ALONG WITH the presence of certain supporting elements which provide the necessary postive trading context. There are several variations of the pattern and we will identify those specifically as we develop the thread with chart examples. We are looking for the contextual elements of momentum, S/R levels, and price action patterns. These will be discussed further below with examples.

TRADING/CHARTING TOOLS USED:
Charting will be fairly clean with minimal analysis tools applied. There are no indicators, per se, only candles and a couple of simple moving averages. The presence of momentum in the market is identified using a 3 period and 10 period SMA. I will post a template file for convenience if anyone wants to use it. I will also include a fib tool that I have modified to include Entry, Stop, and Target levels from 1R through 10R. This is a money management tool only. You simply place the anchors on your entry price and stop loss price and it will project your R levels from there.

COMMON TERMINOLOGY:
When discussing Reward/Risk, I prefer to use the terminology coined by Van Tharp which speaks of trades and/or profits as being expressed in factors of "R", where "R" represents the initial risk involved on the trade. Thus, if you have a trade with a 10 pip stop and a 20 pip profit target, the trade would be a 2R trade. This system works to secure 10R trades if possible, or gains of 10 times the risk. I think it's the simplest way of expressing "Reward/Risk", "Risk/Reward", "R/R", or whatever variant traders call it. It would be good if we would all adopt that convention in our posts. It's not mandatory, and I don't want to be a forum cop, but I think it will be helpful to our common discourse.

I will add more posts with additional information to further explain the system and give visual examples.

EDIT: I have added two templates to this post. One is for the color scheme I use for the 10XROI system with the MA's already loaded. The second template is a fib archive template that MUST be applied to a EURJPY MONTHLY chart so you can see the fib tool. I have added a fib tool with preset levels and labels to show you profit levels from 1R through 10R. The anchor points are labeled STOP and ENTRY. Once you place the anchors on your SL and Entry prices, you will know exactly where your various R levels of profit are located. To get this fib onto a chart, simply alter its color in the fib properties and it will become your temporary default fib. Then apply the fib to any chart you wish. Do not delete the archive template and you will have a convenient place to store various fibs or other similar tools with preset levels that you don't want to have to rebuild. Always be sure to open this template on EJ Monthly or else the fibs and other objects will be out of the visual price range.

EDIT: 11/24/2013: I have received feedback that I have not explained this method clearly enough. Here is my effort at a more succinct summery, hopefully, with more clarity as well.

10XROI Condensed Version

1. Setups occur in the form of a "Push/Pull" candle pattern (see examples at beginning of thread) and are found ONLY on the Daily Charts for this system. A condition of STRONG MOMENTUM is a prerequisite and must be identified to validate the candle pattern. The 3SMA and 10SMA's are the primary tools used to identify strong momentum is present for a VALID Push/Pull patter. Additional trade "context" factors are desireable and are described in the first posts.
2. Once a setup is identified, you will then seek an entry on the H1 chart into the direction of the momentum from the D1 setup. The nature of the Push/Pull candle pattern is that it prompts you to begin looking for an entry ONLY after a PULLBACK has occured against a PUSH of strong momentum. The idea is to get a tight stop H1 entry at a place where price is likely to RESUME it's momentum in the original D1 direction.
3. Use whatever technicals you prefer, such as trendilne breaks, pivot candle breaks or whatever entry method of your choice you think will give you a tight stop. Tight stop = 40 pips or less. Keep in mind that you are looking for a 10R return. So, if you have a 40 pip stop, the market will have to move 300 pips in your favor. If your stop is only 15 pips, you will only need a profit of 150 pips. The tighter the stop, the better the chance of success at 10R.
4. Once in the trade, do not move your stop to BE until after the first significant hourly pullback. This is a bit subjective, but a proper pullback should be more than just a 3 or 4 candle fractal.
5. Your TP should be set at 10 times your initial risk, or a profit factor of 10R.
6. If the pair you are trading has a low ADR, then you may want to shoot for 8R instead of 10R.
7. Rinse and repeat.

SETUPS:
Setups will be identified on the D1 charts. We do NOT trade setups. Setups are merely where we begin looking for QUALIFIED ENTRIES. Our setups will begin with the occurence of a "Push-Pull" candle pattern. This pattern is formed when price "pushes" in momentum in 1 or 2 closed D1 candles and then "pulls" back with a subsequent candle that returns to the close of the candle just before the first "push" candle. Once we see this pattern develop on D1, we will then begin to qualify an entry opportunity on the H1 charts. There are a few variants of the "Push-Pull" candle pattern that we will identify and discuss below. Each has its own contextual elements.

PUSH-PULL PATTERN VARIATIONS:

1. The 2 Candle Push/Pull
It is formed when two momentum candles push away strongly. A 3rd candle then pulls back to the close of the 1st one. Appropriate entries will then found on the H1 chart near the close of the 1st candle in the pattern. Here is a chart example:

2. Multi-Candle Push/Pull
This is similar to the 2 Candle version, but candle 3 actually closes (and even exceeds, which is good!) at or near the close of candle 1 without offering an entry. An entry would then be sought on candle 4. Here is a chart example:

3. The 2 Candle Push/Pull in Reversal
This is just the 2 Candle Push/Pull shown as a reversal pattern. Here is a chart example:

4. The 1 Candle Push/ Pull
In this example, candle 1 is not a push candle. It can be either a doji or go in the opposite direction. Candle 2 is the momentum push candle. Candle 3 then pulls back to the close of candle 1, we'll look for an entry on candle 4 on the H1 charts. In the example photo, please ignore the small Sunday candle between the #1 and #2 candles. Here is a chart example:

5. The 1 Cande Push/Pull w/Doji
Candles 1 and 2 are dojis. Candle 3 is the push momentum candle. Candle 4 pulls back to the high of the dojis which represents a multi day resistance area for the prior week. Here is the chart example:

Next, we'll discuss the pattern logic and the idea of trade context.

The logic behind the Push/Pull candle pattern is not rocket science. We're basically looking to identify a level where we can enter the market at an extreme pull-back point following a momentum push. We'll identify these extreme pull-backs on the H1 chart which gives us a better chance to avoid getting stopped on a retracement AND which also gives us an excellent potential R Factor for our trades. These are basically momentum retracement trades.

If there's one thing I've learned about technical analysis, it's that you should rarely, if EVER, take a trade from a single candle pattern in a vacuum. You should always qualify the pattern by requiring some additional supporting elements to be present. I've called this "confluence" in the past, but the author uses the term "context" and I feel both terms are synonymous here. The most important element of context for this system is by far "Strong Momentum" on the daily chart. We want to have daily momentum on our side to make sure that when we get into our trade from H1 we have the best possible chance to get to our TP.

There are several technical charting conditions where strong momentum can be found. Let's name a few examples.
1. Parabolic moves
2. Breakouts - We're looking mainly at three types of these:

1. Horizontal Reversals
2. Horizontal Continuations
3. Flag/Wedge breakouts w/trendline breaks.

There are also other elements of context that are not specifically breakouts themselves, but which signal the impending approach of strong momentum.
1. Trend line bounces in a wide channel
2. Support and Resistance levels
3. Sideways/Horizontal PA on the daily chart with dojis and spinning tops

The 10XROI system uses a 3 period and 10 period SMA to see the strength of a move. When both the daily 3 period SMA and the candles gap themselves away from the 10 period SMA, we can "see" momentum in the price action. Here is a chart example:

I didn't cover every one of the following elements in detail, but here is a summary of the conditions we want to see in the 10XROI setups:

1. Conditions that indicate high momentum on the daily chart.
2. Parabolic moves, either reversals or continuation moves.
3. Breakouts from horizontal/sideways PA in the direction of the setup.
4. Trend line breaks in the direction of the setup.
5. Trend line bounces in a confirmed wide channel pattern (channel confirmed after 2nd bounce off trend line).
6. Price continuation after pull-back to a trend line after a previous trend line break.
7. Sideways candle patterns including dojis and spinning tops forming a breakout zone.
8. Pull-backs to areas of horizontal S/R.
9. Hugging of the fast moving average when the move is underway.

The more of these factors present when we locate a Push/Pull Candle pattern, the better. Once a setup is CONFIRMED worthy of pursuing, then you set a price alert for the correct pull-back level. When the level has been reached by price, we can then begin to fine tune our entry on the H1 chart. It is here that you will begin consideration of the time of day and try to locate an hourly entry that will line up with times in the market when a change of direction is more likely, such as the London or New York sessions.

HOURLY ENTRIES:
The entry levels you are targeting should be fairly well-defined on the daily Push/Pull pattern. You are basically looking for any H1 price action that indicates price weakness or reversal back in the direction of daily momentum AT or NEAR your D1 target entry level. Confluence with previous important S/R levels is also a plus. Be sure to keep your Push/Pull Candle pattern retracement level marked on the H1 chart and then look for S/R to form at that level during the daily candle's pullback.

The following is an example of a Push/Pull Candle setup on UCHF on Nov 13, 2013. The immediate context is a Parabolic Reversal. The D1 entry level is marked in red. There were at least three possible entries for this trade on the hourly chart as price breaks H1 support from Nov 11th and then retraces to this level to become resistance for the parabolic move down. The first chart is the D1 setup. The second chart shows the H1 entry examples. You could have taken entries either at the trend line breaks or the pin bar breaks.

SAFE STOP LOSS PLACEMENT:
Using the Push/Pull setup shown above and the taking any one of the three entries offered would have allowed a stop placement of between 15 to 40 pips, depending on how aggressively you took entry. If you entered at the break of the pin bars, this would have given you the tightest stop placement. A trend line break entry would require a somewhat larger stop placement. Tight stop placement is crucial to achieving the best possibility of attaining your 10R result. With a 40 pip stop, the market will have to move 400 pips in your favor to achieve 10R. With a 15 pip stop, you place less burden on price action to meet your trade/money management goals.

MOVING STOPS TO BREAKEVEN:
This part is fairly simple. We do not move the stop loss to break even until price makes it's first hourly pullback (i.e. formed new support/resistance level) after your entry. If you move the stop too early, you will likely find yourself getting stopped out only to see price resume with momentum back in the direction of your trade. The large ROI potential and low 1% risk per trade allows you to do this comfortably. If you wait to move your stop until after an hourly pullback and you still get stopped out, it is likely the trade would have not worked out anyway.

TAKE PROFITS:
This system has a 10R Factor money management component built right in as an integrated foundational element of the system. Most traders simply tack on what they call "money management" to an otherwise mathematically flawed trading plan as if it were a band-aid. The 10XROI system does it RIGHT! Some or most will say it is quite an ambitious thing to set a fixed 10R profit target (including spread) for every trade you take. This is where the paradigm shift in your thinking comes into play. You must come to realize the following points:

1. You will not achieve what you do not plan and aim to achieve.
2. 10R trades MUST be STRUCTURED as 10R trades from the beginning.

Having said all that, there are exceptions to setting a 10R profit target. If you are trading a low daily range currency like the EURUSD and you have a stop loss 40 pips away from entry, then you should adjust your target to something like 8R. A 40 pip stop would require price to move 320 pips to reach the TP which is a more reasonable distance for that pair than 400 pips. Some setups will allow us to measure the potential travel of the move, such as a parabolic, megaphone channel, or flag breakout continuation. These setups will allow us to better calculate our profit potential from the momentum setup.

CONTEXT:
There were several key technicals in play which had great positive bearing on the probability of this entry being successful. Besides being an immediate parabolic pattern, there was a substantial fib range 1st extension (138.2) target hit by the big push to the top of the parabolic move. Second, this was also an area of a prior break of support that had not yet seen a retest for almost two months. These levels also coincided with a 68% retracement from the larger price range from the high in early September to the low in late October. All of this is much better shown graphically...

I think that about does it for now. I'll wait to see what sort of questions you come up with. I don't want to include all the finer elements of the author's book in great detail. I'll let HappyBunny to chime in if/when possible to add to or modify anything I've posted. My thanks to the author for freely sharing the system and for particpating in this thread. I look forward to putting this system through its paces. Please feel free to post your setup charts and ask questions. I'm not a guru or expert on this, as I've only seen the book a couple days ago myself. Hopefully, I've reproduced enough details about the system to give us a good start on it.

EDIT: The author does not specifically incorporate fibonacci levels into his system. However, I arbitrarily introduced them on the chart examples because I have always used fibs to identify S/R levels on both fib extensions and retracements. Fibs, like any other charting tool, should not be used in a vacuum. My testing has shown the best use of fibs is in CONFLUENCE and CONTEXT with other technicals. Just be aware they are NOT specifically part of the 10XROI system as published by the author.

in

I am very happy to see this thread open.

Thanks.

What a thread! I m in -expecting ur entry and exit levels.

very nice thx, i read the book, and this is easy explained nice

Good morning all, thanks to those who have joined the thread and posted, as well as those maybe just watching for now. The more eyes we have on the charts, the better this will be for all.

I have updated post #1 with two template files. One of them is for my chart colors and SMA's in case someone wants it, the other is a fib archive template with a special fib I created to show all the TP levels from R1 through R10. Simply place the anchors on your STOP and ENTRY prices and the fib will show all the TP's. I use the archive template ONLY on EJ Monthly. That way I can always see the objects I want to save in the correct price range. Hope you find it useful.

Haha! And I am expecting YOURS!

Great, thank you Frani60! I can get a bit verbose at times, so I'm glad to hear the explanation was clear for you.

Any trades on horizon?

I will certainly post any new setups I see when I see them. But it's important that we all learn to spot setups rather than waiting for someone else. I would like to see some of you folks post your setups...current PA or historic...so we can begin to get a feel for putting the rules into practice. Daily chart Push/Pull candle patterns are not going to show up every day, so this isn't going to appeal to a lot of traders who have to always be in a trade just for the thrill.

i'll try, now give me an honest opinion please. if i'm wrong tell me why

scratch all of that

This is more plausible. I should've stayed away from the markets all together earlier today. but the nuttiness has calm a bit and i think that the dust settled

Setups are identified on the D1 chart. Entries are on H1. These are invalid for that reason alone.

When you find a proper setup to post, please label it with the specific push/pull candle pattern you believe you have identified and mark the level of interest that we should be looking for an H1 entry to the setup.

i don't mean to spam i just still don't realize(haven't gotten a grasp) how it should be done. i'd like to have some live examples

No harm, I want people to post so we can discuss the criteria and we can work together to correct gaps in our understanding. To be clear, the setups are always found on D1 and the entries are located on H1. You must identify a candle pattern on D1 before you begin to look for entries and other contextual elements. If you post H4 setup charts for review, then it's a good bet that you have already missed the most basic and crucial elements about the system. Live examples aren't going to help much if you haven't sufficiently gained understanding of the system's foundation. I'm certainly not trying to be harsh here, it just sounds like you need to re-read the information at the beginning so you will begin to get a grasp on what's necessary to find these patterns and to judge for yourself whether they are supported by proper context. Also, live examples are not likely to show up on a daily basis, so it might be a bit of a wait.

The concept of this system is to look for a strong momentum push out of conditions such as horizontal reversals/continuations, flag/wedge breakouts, parabolic moves, etc. We have a fairly simple candle pattern to look for with fairly minimal variants. The essential elements of the system must be present in supporting context, which I discuss at good length in the first posts. The purpose of this thread is not for me or anyone else to provide free "trade signals" to the community. Anyone who attempts to trade this system has to do the homework necessary to "get it" so they can trade it themselves. I'll help any way I can to help further someone's understanding of the components of the system, providing they are willing to do their part in the process.

This looks like trading just railroad tracks and really nothing more

Here is an example of a classic, text book trade, sent to me by the author. See if this helps you get a better idea of what to look for.

First, there is a monthly trendline break...then a One Candle Push/Pull pattern. The H1 chart shows the entry near the TL break.