LETS GO Trading

Its been over 2 yrs since I posted the "Genuine 5m 4rr " system on FF, it is still used by many traders and gets steady and consistent profits from the market without having to rely on indicators, which as many who know me is a pet hate of mine and one of the main reasons why many traders are unsuccessful in the markets.

This time we are going to do something which to my knowledge hasn't been done on FF before. Instead of just giving you another system for you to try and get frustrated with, we are going to give you the tools and Knowledge to develop your own system, we are going to do this by lifting the cloud on how the market works, and see it in a way that you probably hadn't seen it before, perhaps because your charts have always been covered in indicators and your not actually seeing what is really going on under them or maybe that nobody has actually shown you how market structure works.

Over the next few days we will gradually work our way through some basic market structure and end with a fully functioning and profitable trading method.
You will learn step by step how we get to the finished trading method, which you can choose to trade yourself or with the knowledge you have learnt along the way you will be now well equipped to change it to suit yourself or develop your own trading system all without having to rely lagging loosing indicators ever again.

Please be patient as there will be a lot of posts that will take some time to put together.

intersting.subscribed

OK lets get started.
Until we can start any trading, we need to know what direction the market is going in , in other words its trend, we need to know if its up or down, sounds simple but its confusing to a lot of people and is up to a lot of interpretation, as it changes depending on what time frame you are looking at.
For example you may be looking at a 1m chart and assume it is trending down yet you change to a 5 or15m TF and it is trending up. Which one do you take notice of?, well both really, you'll see why soon.



But first lets get to basics and find out which direction price is trending in any Time Frame. Apologies to any traders who all ready know this, bear with me.



The market either does one of three things on each TF , it Either trends up, trends down or consolidates { goes sideways}, for this exercise we are only interested in the up and downs.

As you can see from the above attachment you can probably see that the line is going up, and it goes up in WAVES with retracements on the way up, the whole market is just made up of waves, waves up form an UPTREND, waves down form a DOWNTREND. On an Uptrend we have Higher highs on the up wave and higher lows on the retracements, this is a very simplistic drawing, it rarely looks as good as this on the charts, but the chart below will give you an idea of what to look for

welcome back rifid!

hello rfid, I am very interested in your lesson. Thank you

Rifid, hello! It is very useful and necessary thing, very interesting, thank you.

Although it is most important to know what direction the market is currently in , in a given T/F, it is equally important to know when it is about to change direction.
Popular opinion is that the markets, especially the forex market is very random, and at times it makes no sense at all in the direction that it takes, and other times it is very predictable, you just need to know what are the most likely times when it is going to be random and make no sense and when it is most likely to be predictable and only trade in those times. This is not as hard as you may think, and we will get to this.

So what are the indications that a market MAY be turning? We have already established as shown in the above diagram and chart that an up trend in a clean looking chart consists of HH's and HL's. { waves up}. Lets look at the diagram and chart example below.

The first hint that a change in sentiment maybe happening is when price fails to form a HH and follows with a LL breaking the the point of the previous LH as shown by the red line. Now just because you see this ,it is no guarantee that the direction is changing, it maybe just having a larger than normal retrace, but just being aware of what is going on in front of you is being one step ahead of the market.

Just on a side note while I think of it, you will see that the charts above are nice clean "cherrypicked" examples of what we are talking about, and that's true, the fact is that if you cant clearly follow the Highs and Lows of the waves then you should not be trading this particular market at that time, change pairs till you can see everything clearly, this is what will give you the advantage and when the market becomes Not totally RANDOM.
When you see a chart like the one Below on any T/F , please stay out of the market as this is only gambling and not professional trading.
Learn to tell the difference between this chart and the above ones. Trying to pick out a trend on this chart is near on impossible, so it is not tradable.

Ok Lets talk about retracements for a while, as this forms a very important part of where this thread is leading.

There are 3 types of retracements that you need to learn to recognize and look for.

They are:

Simple retracements
Retracement with-in Retracements {we'll call these RnR for short}
and
Compound or Complex Retracements

Lets go over each individually

SIMPLE RETRACEMENTS





As you can see a Simple retracement ideally consists of a smooth up and down motion usually made up of same colour bars down and same colours up. You will find these in all T/Fs . You should never trade the break of these retracements except when found in a Compound retracement or by a very experienced trader who is confident price will continue on a reasonable distance from the break, as they commonly reverse just after the break of the previous high. Have a look at your charts and see how many examples you can find.

RnR s

This is an interesting pattern as it can be traded profitably on its
own if you have the patience to wait for them. Again these appear on all T/Fs.





An RnR appears to be forming a simple retracement but as price seems to be returning to it original trend direction it pauses at around half ve way to its previous high or low and reverses, when you see this situation forming, take close note and follow the price action. If price starts to reverse again put a Stop Order at the middle reversal point. There is a very high chance that price will not only hit your entry but shoot past your original High or Low and carry on to make a profit for you. From hear you have to decide where you would place your T/P depending on market conditions. Normally you would put a S/L below the previous H/L.
Have a look through your charts and see how many examples you can find




But as mentioned before you must only trade when the pattern is very clear and in a discernable trend.

COMPOUND RETRACEMENT

Probably the least known but most important for this thread





You will find a compound retracement in an established trend when price has been going in one direction for a while and reaches a point where it needs to take a bit of a breather before resuming its original direction. Quite often they can be interpreted as a change of trend, as they can exhibit the same indicators, except the waves down are usually much smaller. Have a look at your charts and see if you can find nice clean examples similar to the ones above.

Now have a closer look on the well formed compound retracements you have found and you will see that they are actually formed by its own mini trends with its own waves down and then up again, the same as a normal size trend. At the bottom of the retracement you will find indicators that it is about to resume its longer term trend by changing from LL and LH to HH and LH.



As you can see from the drawing, the small waves down and the moment that possibly indicates a change to the upside to longer term trend by the break at the green line.

Hi rifid, I like your trading method and glad to see you back.

Just a small correction to a typo in your last post, the trend changing to HH and HL

Have a great day.

Please forgive any Typos, as long as the general message is understood

IN A RETRACEMENT, PRICE WILL NEARLY ALWAYS RETURN TO ITS PREVIOUS HIGH OR LOW, EXCEPT WHEN CHANGING DIRECTION !!!!!!!!!!!!!!!!!!!!

That's a pretty big statement, go to a chart and have a look for yourself.

So knowing this fact, how can we use this to make money? Very simply, and its easier than you think, and its been staring you in the face every time you look at your chart .


All we have to do now is put all the elements we have learnt above together and the method will reveal itself. Thanks for your patience.
Feel free to comment

That's all for today guys, tomorrow I"ll be back and we'll put it all together.
Happy trading
RIFID

Hello rifid,

Thanks for sharing your knowledge, we can compare what you call "SIMPLE RETRACE" with "1-2-3 movement"?
If yes, this make a little confuse becouse im using 123 on lower TF and strategy working pretty well... by now hehe.

At this stage we are only looking at a Simple Retrace as a stand alone pattern, but it will evolve into something a whole lot more significant tomorrow.

Ok, thanks.

it is very informative ..
looking to learn more.

thanks a lot, rfid