Q A M Trading Strategy

QUANTUM ASIAN METHOD

(QAM) by Masterrmind*

DUE TO POPULAR DEMAND AND SEVERAL REQUESTS BY INTERESTED TRADERS I WILL BE OUTLINING HOW I TRADE QAM

The original QUANTUM LONDON TRADING (QLT) thread by mer071898 can be found here:

http://www.forexfactory.com/showthread.php?t=551382 (original idea was based on the Frankfurt/London trading times).

Note: Trading the Q Method in the FF and London sessions is certainly possible (I know because I traded it for several months as have others) but it requires a rather big bank roll ie a larger trading account balance. Not all traders have the luxury of a larger account typically over $10 000 is required to trade during this trading window. Therefore to help traders who either have or only wish to trade the Q Method with a much smaller account balance I decided to investigate ways to make this possible. By selecting whats known as a 'turtle pair' ie a currency pair that typically has a very small ADR and frequently trades within a relatively smaller pip range I found that it was possible to start trading with a much smaller account balance and the likelihood of a large DD was less likely to occur (note however that a larger DD can and will occur even in a turtle pair so a trader must always be prepared and this is where risk management enters the equation). This thread will be a continuation of that journey and hopefully outline many of the traps that are ever present, provide additional trading knowledge and ultimately grow a smaller (eg $1000) account into a larger account by having a reasonable net weekly %gain and a respectable DD without risking the whole account in the process.

The following important points need to be made regarding the QAM Trading Strategy:

1. QAM is not my main trading strategy but simply an additional strategy that is allocated a small% of my trading account;
2. QAM should always be viewed as a trading strategy that is relatively risky because it thrives on producing a drawdown;
3. QAM can be applied to several currency pairs, commodities and indices;
4. QAM can be traded on multiple time frames;
5. QAM can be traded in a host of different trading windows; and
6. There is no limit to the number of ways that QAM can be traded, adapted or expanded upon.
7**. Importantly my approach to much of the QAM strategy is of a discretionary nature meaning that the traders decisions go well beyond opening a long trade when a blue box appears and short a trade when a red box appears!
** Sometimes this is the case but my idea with QAM is to close off mini cycles of trades at opportune times as a means of limiting large DD as much as possible.

The main points I look at when trading QAM can be briefly outlined as follows (they will be thoroughly expanded upon throughout the course of the thread):

1. Taking advantage of the typical Asian Session trading patterns that exist which implies known retracements in price;
2. Likely occurrence of pullbacks of price to the Daily Open zone;
3. Mini pullbacks of price to known areas of support and resistance for potentially closing out cycles of trades;
4. An awareness of a given pairs' ADR, ATR and other important factors;
5. The spread of the traded pair (broker spread and broker choice needs to be considered as high spread influences the efficient closing of cycles ie with respect to the ask and the bid for a short entry versus a long entry);
6. The volatility and likely trading ranges within a given trading window;
7. Setting realistic global SL for each trade or a cycle of trades such that maximum risk is never exceeded;
8. Have a realistic trading plan over weekly, monthly and yearly periods;
9. Develop a reasonable net weekly %gain at a certain DD in demo initially and then fine tune it later for a live trading account;
10. Learn to observe how price typically moves across the chart noting areas of S+R;
11. Awareness of strong trend development and how to actively manage a cycle of trades to minimize loss as much as possible
12. Awareness of news and its typical impact on a given currency pair (often this is highly variable but not always); and
13. Many other trading factors if and as required.

THE TEMPLATE

The QAM system can literally be traded using the Quantum Indicator on a 'naked' chart provided the trader has a very strong affinity to price action, zones of support and resistance, psychological levels (the round numbers 000 and the 50's), daily open price, knows the ADR, ATR, spread, average trading window pip range over several months, the trading window start and end times and a general familiarity with how the pair typically moves throughout the course of the week!



It should look similar to the chart below if you've done everything correctly:

Note: the template (tpl) is suitable for the MT4 trading platform only at this stage and is used here simply because it is the most popular platform among forum traders (other platforms can, do and will perform better and/or worse than MT4!)

THE INDICATORS

The included indicators are as follows with all due acknowledgement to the original coders :

Do not post charts to this thread containing 'lagging' indicators please which include some of the following:
MACD,
RSI,
Stochastics
.............. among many others.

Note: If you are unsure about whether or not a certain indicator can be posted to this thread please ask before you post it as this shows common courtesy.

[The CCI indicator (is a possible exception to the above rule) has shown to be useful when closing cycles of trades but certainly needs to be modified and in any case is not really needed].

PAIRS TRADED

Initially only 2 currency pairs EURCHF and EURGBP will be traded due to their common 'turtle' like behavior.
EURCHF WILL BE THE ONLY PAIR traded at the start.
EURGBP will be traded at a much later stage.

Note:
In the future other currency pairs will also be traded including some commodities and indices.

TIME FRAME

M1 time frame will be used initially but other TFs will be added later.

TRADING WINDOW

Asian Session initially over a 6 hour trading period

Start Time = Tokyo Open

End Time = Frankfurt Open
Note:
The trading start time may be altered at a later time to 1 hour pre Tokyo Open however the trading end time will not be altered and it is preferred that trading cycles/trades are completed before Frankfurt Opens.

CYCLES OF TRADES

Minimum 1 cycle to a maximum of 3 cycles

Note:
Initially the cycles are limited to a maximum of 2 cycles of trades per trading day unless the 2nd cycle of trades completes well inside the assigned trading window time slot (ie several hours before FF Open). Completion of cycles of trades may take place manually before the opposite signal arrives, at the opposite signal or by EA management at closure.

NUMBER OF TRADES PER CYCLE

To be determined based on account trading size, lot size per trade, global stop loss location and overall risk parameters.

TRADE EXPLORERS

I suggest that trade explorers be used by the serious traders as a means of confirming trades entered and closed including the collection of valuable trading analytical data which will highlight important parameters such as net% gain, drawdown and a host of other factors.

Phase I:
Demo TE - Although it is voluntary for a trader to provide a TE I will be providing one and hope that others might also participate especially during the 1st phase which will be demo only! This is where you can look at any bad trades etc and discuss it in the thread so that improvements in your trading results can be made.

Phase II:
Live TE will be used on one of my trading accounts and other traders are also welcome to participate on a voluntary basis.

FURTHER INFORMATION

I prefer to guide the trader more so than doing everything for them so please do your homework and attempt in the first instance to work out an issue by yourself! If you are still really lost then please post a question or PM me.

I will upload a basic template and some informative indicators but I expect the trader to be forward thinking enough to search for other useful informative tools freely available throughout the Forexfactory forum and beyond.

Steps needed:

1. Open an M1 chart of EURCHF and attach the given template (including all the indicators)
2. Determine the ADR of EURCHF pair over the last month (initially just use 20 days but this might be modified later) which you will find at the top of your chart centred and in blue text courtesy of the ADR indicator.
3. Determine the ADR for the given currency pair of the trading window.
(An excel spreadsheet will be useful in recording these ranges on a continuous basis at the end of each trading day).
4. Go back through your chart of the EURCHF pair and become familiar with its typical daily movements from 1 session to the other and 1 hour to the next and make a mental note of any repeated patterns if any such patterns exist! This is to help you form an appreciation and an expectation of the typical movements of the pair.
5. Get ready to participate in the trading session when the market opens!

Note:
There is much to cover about many related topics that form part of trading this method but the basic concept is quite simple. The discretionary part of the traders thinking is far more important and knowing when to leave some cycles run while closing out others. At the end of the day you have done nothing wrong if you close out a cycle of trades prematurely since profit is profit but hopefully the more familiar you become with how price typically behaves on a given pair you will be able to extract more profit by closing out at better zones. Don't worry too much because no-one has the ability to close out perfect cycles of trades as it is impossible so what we wish to achieve here is taking a reasonable chunk of profit without bringing on unnecessary DD!

I hope the thread proves to be useful as well as entertaining so I hope you all enjoy the journey!

Good Trading,

Masterrmind .........

Pair Ranges for EURCHF

Its important to create both Daily Ranges and Trading Window Ranges for the EURCHF pair since this gives us a basic idea of the likely ranges that we'll face.

Tabulate the daily range values and the trading window range values from your own chart and compare them to my values shown in the screenshot below .... they should be fairly similar but not necessarily identical.

Start with the past 4 weeks of trading so you should have 20 values (5 days by 4 weeks) for the Daily Ranges and then 20 for the trading window ranges.

Remember that not all brokers data are the same and therefore you should create your own ranges based on the broker of your choice.

Although it is unlikely that longer term averages would vary all that much.



Masterrmind...........

currently away from my desk but will load as soon I reach home, subscribed . M, can I ask what intrests you E/chf this pair makes very few pips on major moves, may your system or style suites this pair. I keep this pair out of my list but will add it now.

V

Hello Masterrmind,

Could you show in graph, how would you have traded that day (23 feb)?



Thank you for the thread and green pips for you and all members.

Welcome varun76...........

The reason for choosing these turtle pairs is related to their typical price action behavior and because they are easier pairs to deal with in the early stages of learning meaning that most traders should have no trouble keeping up with the pace.

Another reason is that the M1 Chart can generate quite a number of entries.
On the turtle pairs the likely number of pips traveled on average is far lower than the active pairs and certainly much less than the volatile pairs.
On average this means for a given number of trades at a given lot size the DD is usually much lower and it is the DD which we are trying to limit.

Masterrmind...........

Thanks for the explanation M, so to start with we are using Echf and later can use any pair right ? I'll be lloking at the system and will post the charts from next week running so busy this week and M1 needs our attention every m tick.


V

Closing out mini cycles of trades at mini S+R zones will limit the losses in this situation including the placement of a pre-defined SL.

Thankfully these types of strong trends are not that common in the trading windows that we will be using (yes the one you show is such an example but not a common example) but yes they do happen from time to time.

What I have added to this strategy is a SL placement so that DD is limited ie not infinite by waiting for a reverse signal.

Importantly, the QAM trading strategy is starting with a smaller account size say $1000 so this will imply that only a very few trades will ever be opened at the one time and certainly not all those entries you see on the chart.

This will be covered in much more detail when I outline risk management after most traders are up and running.

Masterrmind...........

Yes thats right everyone will start with the same pair so we all follow the same analysis as each other.

Getting the learning process right at the start is important and the less pairs the better initially.

Masterrmind........

Green pips MM! Followed your thread and waiting for Asian open! Good luck!

Looking Forward, May god bless us all. Will post from next week, Master.

Take Care
V

Matermind interesting strategy ,
I know well quantum , it is risky with strong trend.
To see how filtering these trends and turn away from them.
Suscribed

Welcome to the thread AntonioLegaz and yes you are right the powerful trend can be very deadly if it is not properly managed in this type of strategy!

I hope to share how I manage such situations when they arise by firstly being prepared before they occur.

Masterrmind.............

I hope you find the method interesting geol13.....

There is quite a bit of information to go through but I'll present it very slowly at first so its easier to follow.

Once you practice the method and learn to apply the discretionary part you should find it not too difficult however it is the discretionary part of trading that many traders struggle with and it also the part that takes the longest time to learn.

Masterrmind.........

Subscribed

Thank you Masterrmind, always appreciate your knowledge and experience!

Vlad

Welcome Vlad its great to see you here......

Initially the charts will be traded at a very slow pace so everyone has a chance to keep up ..... basically its crawl...then walk and then run.

I'll kick off a demo account ($1000) on March 1 and link it to a trade explorer (TE) so all trades are visible and hopefully I'll get a few others that join in.

The month of March will be used for the demo (but I'll probably keep it running) although by around April 1 I'd like to quickly shift to a live account which will also be linked to a TE.

Not too far away I'll be applying one of your EA's (1.6.1) to the charts because it makes entries far more efficient on an M1 Chart ..... full credit to you for your coding skill and willingness to offer it freely...........

More information about QAM will be provided throughout the course of the day!

Masterrmind...........

Subscribed!!! Always learn a lot from you, Mastermind. Thank you for starting this thread. Hopefully I can also help and contribute in this thread
Congrats and Good luck to us!! More Green pips!!

To your template add the following pivot point indicator or choose one of many others available on FF




Then your chart should look like the chart below:



Masterrmind.........

Today will be used to explain the method in further details including observing price as it flows across the EURCHF chart..............

Note: Trades will commence from March 1

Masterrmind............

To answer some of the PM's I'll explain the reasoning behind the excel sheet.

1. I use it to tabulate and keep an up to date record of the Daily Ranges and

2. Trading Window Ranges

This helps to form an expectation of the 'likely' trading ranges for a given pair over the period that I'll be trading it.

I determine the average ranges over the last 20 trading days for a given pair eg EURCHF.

Then omit any obvious outliers in the data ie very large values that are unlikely to be repeated or that have a low probability of occurring!

The SL is then based on both the value from the excel sheet and then adjusted slightly on the chart to align with either S+R zones or pivot points depending on the chart being analyzed at the time.

Once you have this value then you use it for the SL of any additional trades!

Traded 0.1lots (minimum for this broker) but I'd prefer to use 0.01 to start off so a different demo account will be setup from early tomorrow (market open time).



Be patient and focus..........

Watch price action across the chart.........

Decide on the entry based on risk for the trade or cycle of trades........

Enter the trade with a SL and an appropriate TP.

Note: The TP I choose is either close to the reverse Q signal or within recent price action (ie the little swing low/highs) or at the DO line or S+R zone based on the flow of price and whether price hesitates to break lower or higher etc.

Trade was actually manually closed out just above TP after price eventually dropped down about 1.5 to 2 pips below the DO line.

Clearly you can see the pattern on the chart...price rose up then reversed and headed back to the DO line and this is what I like to see in the Asian Session.

Then price heads back up to recent highs and so we need to be looking for opportunities to short the pair down.

However, be careful entering trades that become closer to the FF Open because the chart shows us that ranges increase considerably and the chance of being caught up in a high DD is likely due in part to a small trading account!

Masterrmind............

More on the excel sheet............

1. Use the XI-AsianBO indicator.....
2. In the settings change the trading times to suit your particular case. So in the case of Tokyo Open through to FF Open which is the trading window I am currently using I choose 2 and 9 as the time frames.
Open Hour = 2
Close Hour = 9
3. Then use a TF > M1 such as H1 and simply go back as far as you like noting the ranges.

4. Repeat the process for the Daily Ranges

5. Enter both sets of ranges in a spread sheet similar to the one I have shown in an earlier post

Then look through the columns of data and delete obvious outliers (values that are well outside the normal range in particular values that are much greater than most of the other values .... (I don't really want to turn this into a detailed math lesson!)

6. Determine Max and average values (you should end up with 4 columns; 2 columns of 20 values each and 2 columns of <20 values each because you have cut out at least 1 outlier ('bad' data value) (I got 19)

7. Now you have your values that you can apply to your chart for the EURCHF pair (in the future if trading other pairs you will need to repeat this same process except on EURGBP OR EURUSD etc)

The screenshot below is what you should get close too:



The data can be plotted in excel very easily to give you a clear picture of data ranges and the obvious outliers but this is not really necessary.

Note: My data goes back more than a year so that I can plot trends over time and compare months from the current year to ones in the past.

All this is simply to give an appreciation of the 'likely' ranges moving forward and to be able to apply a realistic SL that is not too high and certainly not too low.

The value you end up with should then be updated moving forward meaning that at the end of each trading day you will enter the new values.
This keeps your excel spreadsheet current and up to date.

Provided that trading window ranges and the daily ranges don't change too much then your SL value may not change that much either but remember that as the year moves forward it is highly likely that the trading ranges will increase!

Masterrmind............