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EURNZD 15M 3 LITTLE INDIAN REVERSAL STRATEGYThree Little Indians Trading Strategy Again, this strategy doesn’t require any professional trading indicators. The Three Little Indians trading strategy is a pure price action trading strategy that has the potential to reward us instantly. The rules for this setup are pretty simple (sell signals): First, you need three consecutive symmetrical peaks (swing highs). The time that passes between the development of each swing high is more or less the same. Enter a short position once the market turns below the 20% range of the second peak. Place your protective stop loss above the newly formed swing high. * It is required that at the top of the last high or low, a candlestick reversal pattern is formed. Whether it's a Hammer, a Hanged man, a Morning or Evening Star, Bullish or Bearish Engulfing, or another pattern.   Basically, we’re trying to anticipate when the third swing high will get formed. If we wait too long, our profit margins will shrink. Read more about swing trading in forex here. Note* this chart pattern works on the daily chart as much as it works on the lower time frame. We like to trade the Three Little Indians trading strategy on the 5-minute chart.
Education
by Tradingstrategyguides
TRADING 800 SMAHere is a story about the 800 SMA . When you begin your trading session look at each pair you are going to be trading on the 4 H chart. See if any pairs are stuck on the 800 sma . They probably won't move far for 25 bars. Avoid. What ever short time frame you trade from and what ever pairs you trade, make a list of pairs that have been away from the 800 sma for 24 hours or more. Also add to the list any pairs that have been stuck around the 800 sma for 25 BARS and are ready to break away. This helps find what pairs you want to focus on during the day with the rest of your trading strategy. On my chart you will see price come down to the 800 sma 3 different times. If price hesitates by the 800 for several bars then it may get stuck there for 25 bars. If price bounces away from the 800 sma when it comes down to it then price is still in motion and can set up some trading opportunities for your strategies. We have many different strategies to learn on our blog and we are constantly coming out with new strategies for traders to learn every week.
Education
by Tradingstrategyguides
Trade Planning - How to Trade PlanThis video explains how to effectively trade plan to limit your risk and to maximize your gains. When it comes to Risk Management and Trade Planning, it's important to maintain a clear mind about the possibility of the asset your assessing going in either bullish or bearish direction. Furthermore, this video explains some ideas on how and where to place stop losses based upon entry confirmations and provides insights about position managing your trades as they develop into a winner. I hope you find this video informative and hope you use this video to your best advantage with your day-to-day trading activities. Thanks for watching. Always remember to trade safe - trade well. Regards, Michael Harding RISK DISCLAIMER Information and opinions contained with this video are for educational purposes only and do not constitute trading recommendations. Trading Forex on margin carries a high level of risk and may not be suitable for all investors.
FX:XAUUSDEducation
by Michael_Harding
EURCAD 1D RANGE TRADESRanges are repeatable trading chart patterns. Ranges are consolidation chart patterns that can breakout either direction. Each chart pattern will have defining trendlines of the support/resistance levels creating the pattern. What ever time frame you are trading this chart pattern, wait for a candle close outside of the trendline in the direction of the breakout candle. (Our time frame preference is the Daily chart). Add volume indicator - Volume is the amount of $ that went into a particular candle or in Forex the # of trades that took place. Add ATR indicator - Volatility is the amount of price movement that occurred. Use the ATR to measure the price movement. When you see descending Volume bars and descending ATR line (which indicates volatility) this shows a dis-interest in traders to invest in this pair creating consolidation which creates the chart pattern. Trade Management after there is a breakout candle close. 1 - Position size (compare volume bar to volume ma line). a - Breakout candle must be 100% of average volume for a full position size. b - If 75% of average volume then ½ position size. (To find 75% of Volume look at the charts volume settings – divide smaller # into larger # = 75%+) 2 - Enter two trades. 3 - SL for both trades will be 1.5 x ATR. 4 - 1st trade TP will be 1 x ATR. 5 - No TP on 2nd trade – letting profit run and adjusting SL to follow price. 6 - When 1st TP hit – move 2nd trade SL to breakeven. 7 - Adjust the 2nd trade SL to follow price. *8 – After Breakout candle – if price closes back into chart pattern close trade *9 - When breakout candle is more than 1 ATR from breakout candle open. a - Enter 1st trade at candle close with ½ position size. b - Enter 2nd trade with a pending limit order that is 1 ATR of breakout candle open. c – Price should pullback to that pending limit order for 2nd trade. d – If Price returns back into chart pattern close trade before SL is hit.
Education
by Tradingstrategyguides
2
EURUSD 15M 9 EMA 30 WMA TRADING STRATEGY LONG TRADEThese are the rules for a long trade signal using the 9 ema 30 wma trading strategy: 9-period EMA must be above the 30-periods WMA . The two moving averages need to be apart from each other. The first bar that closes below the 9-EMA will be used as the trigger bar for the buy setup. Place a buy limit order above the high of the trigger bar. Note* the bar that closes below the 9-EMA needs to remain above the 30-WMA for this setup to be valid. (Opposite for short trade) What is the 9/30 Trading Setup Originally, the 9/30 trading setup was developed by Mike Burns and involves using a combination of two moving averages: 9-period Exponential Moving Average ( EMA ) 30-periods Weighted Moving Average ( WMA ) In this case, the 9-EMA is our short-term moving average, while the 30-EMA is out long-term moving average. The 9 and 30 EMA trading strategy seeks to take advantage of the blank space created between the two moving averages. The filter for the 9/30 trading setup can be summarized into a three-step process. Like with many trading strategies we present, you can always use different “flavors” to get into a trade. So, you can also use chart patterns to fine-tune your entry. How to Trade with the 9/30 EMA Strategy In this section, we’re going to teach you how to effectively trade with the 9/30 EMA strategy. No matter how simple this trading strategy is, you need to have a set of trading rules before you use it. So, let’s talk about the stop loss and take profit strategy.For the stop-loss strategy, you can use the trigger bar high/low for reference. For example, if you have a buy trade signal, you hide your protective stop loss below the low of the trigger bar. Alternatively, for a more conservative approach, you can hide your protective stop loss below the 30-periods WMA . Here is a little bit of trading wisdom from hedge fund billionaire Bruce Kovner: “Place your stops at a point that, if reached, will reasonably indicate that the trade is wrong, not at a point determined primarily by the maximum dollar amount you are willing to lose.” Please note that the lower the time frame used the more price whipsaws you’re going to experience. As a trading trick to avoid being caught in a whipsaw trade, make sure you add an extra buffer to your stop loss. This buffer will allow your stop loss to survive during false breakouts. Moving on… It’s easy to exit these types of trades via a trailing stop loss below the 30 WMA . This exit moving average strategy has two benefits: You don’t have to guess a possible take profit level. You got to keep riding the trend until a reversal happens. When to use the 9/30 Trading Method The 9/30 trading method is a type of trend following strategy that seeks to enter the trade on pullbacks. In this regard, the best time to use the 9/30 trading strategy is when we have established a trend. The trend can be defined via the two moving averages as follows: The bullish trend is defined when the 9 EMA is above the 30 WMA The bearish trend is defined when the 9 EMA is below the 30 WMA The strength of the trend can also be measured via the space created between the two moving averages and the angle of the moving averages. The bigger the gap between the 9 EMA and 30 WMA and the steeper the angle of the 2 moving average is, the stronger the trend is. Conversely, the flatter the two moving averages are, the weaker the trend is. In and of itself the “trigger bar” used to enter our trades doesn’t give us a trading edge. The edge comes from trading in the direction of the prevailing trend. After you have a moving average crossover and a strong trend emerges from it, that’s when you want to use this strategy. Note* Avoid using the 9/30 trading setup in flat markets. Moving forward, we’ll teach you how to implement more advanced trading concepts along with the 9 and 30 EMA trading strategy. 9 and 30 EMA Trading Strategy – Advanced Concepts The 9 and 30 moving average strategy is a versatile trading strategy that can be used in ways you never thought possible. You can use this method for short-term trading, medium-term trading and long-term trading. It all depends on your preferred time frame. Now, here is a powerful trading secret about the types of moving averages used in this strategy. The combination of the exponential moving average and the weighted moving average gives us a wider spread between the two MAs. This is a key principle that makes this MA strategy work. Now, you might wonder: “How can we improve the 9 and 30 EMA trading strategy?” If we add a better entry filter, we can gain an extra edge. What do we mean by this? Instead of using a bar that closes above/below the 9-period EMA , we can wait for the entire bar to be encompassed between the 9-EMA and 30-WMA. However, the downside to this trading approach is that you will get fewer trading setups. Often times this type of trading setup can lead to explosive trades that never look back. What are other ways to use the 9/30 trading setup? As we explained earlier the edge of this pattern relays on the resumption of the trend. So, what’s the simplest way to measure the trend direction? A series of higher high followed by a series of higher lows defines an uptrend. In reverse, a series of lower highs followed by a series of lower lows define a downtrend. So, we want to look for ways to capture these types of price structures. To do this we’re going to introduce the concept of multi-timeframe analysis. Note* the advanced 9/30 trading setup works best in conjunction with the daily chart . To better time our entries, we’re going to a combination of two-time frames as follows: The daily chart to spot the trigger candle that closes above/below the 9 EMA Downgrade the TF to 15-minutes (or 5 minutes) and look for uptrend and downtrend price structures If you haven’t realized… Here is the main reason why we use this approach: We know that the daily range can be quite high. So, instead of using the high of the daily candle to trigger our entry we downgrade our chart and seek on lower time frames early signs of upward/downward price structures. Secondly, this trading approach also reduces the stop loss needed for the daily candle. Based on the 9/30 trading strategy we need to wait for the daily candle low to be tagged to trigger an entry. However, whit this new advanced concept we can enter the market early and capture more pips. When we downgrade to the 5-minute chart, we can notice the pattern of lower highs and lower lows signalling the start of a downtrend. Keeping in mind the chart setup found on the daily time frame, we can make a trade on the 5-minute chart when price breaks and forms a new lower low. When the price makes a new lower low after at least two lower highs it develops the price structure of a downtrend. This makes an excellent entry method for the 9 and 30 EMA trading strategy. Final Words – 9/30 Trading Strategy In summary, the 9/30 trading setup is a very effective trading strategy to be used across all markets and time frames. Keep in mind that the power of the 9/30 trading strategy comes from having a prior upwards (downwards) trend. Traders should use this method as a pullback trading strategy rather than try to find reversals. The key takeaways from the 9 and 30 EMA trading strategy can be summarized below: You have the momentum power of the prevailing trend on your side You only need to focus on the gap between the two moving averages Offers you effective ways to manage your risk Built-in trailing stop Versatility to be used in conjunction with other trading methods Last but not least, make sure you use effective money management strategies and position size to protect your capital. After all, your number one priority as a trader is to protect your account balance at all cost.
Education
by Tradingstrategyguides
EURUSD 1H VOLUME TRADING STRATEGY LONG TRADEVolume Trading Strategy This volume trading strategy uses two very powerful techniques that you won’t see written anywhere else. These are trade secrets that we’ve only been taught to professional traders. The Chaikin indicator will dramatically improve your timing and teach you how to trade defensively. Having a good defense when trading is absolutely critical to keep the profits that you’ve earned. In this article, we’re going to look at the buy side. The Importance of Buying Volume and Selling Volume Volume trading requires you to pay careful attention to the forces of supply in demand. Volume traders will look for instances of increased buying or selling orders. They also pay attention to current price trends and potential price movements. Generally, increased trading volume will lean heavily towards buy orders. These positive volume trends will prompt traders to open a new position. On the other hand, if the cash flow and trading volumes decrease– we see a “bearish divergence”, meaning that it will likely be an appropriate time to sell. You also need to pay attention to the relative volume—regardless of the raw number of transactions occurring in a trading period. Ask yourself how is the prospective asset performing relative to what was expected? By learning how to use the Chaikin money flow and other relevant indicators, you will easily be able to identify whether the buyer or the seller is currently “in control.” With practice, volume trading strategies can yield wins for your portfolio 77% of the time! Step #1: Chaikin Volume Indicator must shoot up in a straight line from below zero (minimum -0.15) to above the zero line (minimum +0.15). When the Volume goes from negative to positive in a strong fashion way it has the potential to signal strong institutional buying power. That’s our base heavy lifting signal! Basically, we let the market to reveal its intentions. When big money steps into the market, they leave a mark as their orders are so big that it’s impossible to hide. When the volume indicator Forex goes straight from below zero to above the zero line and beyond, it shows accumulation by smart money. We’re a firm believer that you get the maximum bang for your buck when you trade side by side with smart money. Chances are that institutions have more money and more resources at their disposal. Odds can be stacked against you, so if you want to change that, just follow the smart money. There is one more condition that needs to be satisfied to confirm a trade entry. Step #2: Wait for the Volume Indicator Forex to slowly pullback below the zero line. The price needs to remain above the previous swing low. Once we spotted the elephant in the room, aka the institutional players, we start to look for the first sign of market weakness. Here is how to identify the right swing to boost your profit. We’re going to let the Chaikin Money Flow indicator slowly drop below the zero line. The keyword here is “slowly”. We don’t want to see the volume dropping fast because this will invalidate the accumulation noted previously. Second, as the volume decreases and drops below the zero, we want to make sure the price remains above the previous swing glow. This will confirm the smart money accumulation. The Volume strategy satisfies all the required trading conditions, which means that we can move forward and outline what is the trigger condition for our entry strategy. Step #3: Buy once the Chaikin Forex indicator breaks back above the zero line. Wait for the candle to close before pulling the trigger. Now that we have observed real institutional money coming into the market, we wait for them to step back in and drive the market back up. When the Chaikin indicator breaks back above zero, it signals an imminent rally as the smart money is trying to markup the price again. We would need to wait for the candle close to confirm the Chaikin break above the zero line. Once everything aligns, we’re free to open our long position. *Note: The trigger candle needs to have the closing price in the upper 25%. This brings us to the next important step. We need to establish the Chaikin trading strategy which is finding where to place our protective stop loss. Step #4: Hide your protective Stop Loss under the previous pullback’s low Using a stop loss is crucial if you want to have an idea of how much you’re about to lose on your trade. Never underestimate the power of placing a stop loss as it can be lifesaving. Simply hide your protective stop loss under the previous pullback’s low. Never use a mental stop loss, and always commit an SL right at the moment you open your trades. Trading with a tight stop loss can give you the opportunity to not just have a better risk to reward ratio, but also to trade a bigger lot size. Step #5: Take profit when the Chaikin Volume drops below -0.15 Once the Chaikin volume drops back below -0.15, it indicates that the sellers are stepping in and we want to take profits. We don’t want to risk giving back some of the profits gained so we liquidate our position at the first sign of the smart money stepping in on the other side of the market. We always can get back into the market later if the smart money buyers show up again. **Note: The above was an example of a BUY trade using the best volume indicator. Use the same rules for a SELL trade – but in reverse. Conclusion – Best Volume Indicator The Volume Trading Strategy will continue to work in the future because it’s based on how the markets move up and down. Any market moves from an accumulation (distribution) or base to a breakout and so forth. This is how the markets have been moving for over 100 years. Smart money always seeks to mask their trading activities, but their footprints are still visible. We can read those marks by using the proper tools. Make sure you follow this step-by-step guide to properly read the Forex volume. The Chaikin indicator will add additional value to your trading because you now have a window into the volume activity the same way you have when you trade stocks. Volume Indicator Forex In the Forex market, we don’t have a centralized exchange of total volume because we’re trading over the counter. If we look at any trading platform like TradingView, they have a volume attached to their chart. But, since we don’t have a centralized exchange that volume is coming from the feed that TradingView uses. Each retail Forex broker will have their own aggregate trading volume. We can see that the volume in the Forex market is segmented, which is the reason why we need to use our best volume indicator. The Volume indicator Forex used to read a volume in the Forex market is the Chaikin Money Flow indicator (CMF). The Chaikin Money Flow indicator was developed by trading guru Marc Chaikin, who was coached by the most successful institutional investors in the world. The reason Chaikin Money Flow is the best volume and classical volume indicator is that it measures institutional accumulation-distribution. Typically on a rally, the Chaikin volume indicator should be above the zero line. Conversely, on sell-offs, the Chaikin volume indicator should be below the zero line.
Education
by Tradingstrategyguides
2
Moving Averages - Effective Settings for Day TradersHello Traders, In today's lecture I'm explaining how to use Moving Averages effectively on smaller (1hour) time-frames. Moving Averages can be applied to all assets including Forex, Stocks, Crytpos, etc.. Please note that Moving Averages are a lagging indicator which means they print on screen after price action has moved. They by no means are a leading indicator. Your most leading indicator will either be price-action itself or correlating assets. If anyone has any questions about Moving Averages, feel free to leave your comments in the comment section below. Trade Safe - Trade Well ~Michael Harding
Education
by Michael_Harding
EURAUD 15M 9/30 TRADING STRATEGY LONG TRADEThese are the rules for a long trade signal: 9-period EMA must be above the 30-periods WMA. The two moving averages need to be apart from each other. The first bar that closes below the 9-EMA will be used as the trigger bar for the buy setup. Place a buy limit order above the high of the trigger bar. Note* the bar that closes below the 9-EMA needs to remain above the 30-WMA for this setup to be valid. (Opposite for short trade) What is the 9/30 Trading Setup Originally, the 9/30 trading setup was developed by Mike Burns and involves using a combination of two moving averages: 9-period Exponential Moving Average (EMA) 30-periods Weighted Moving Average (WMA) In this case, the 9-EMA is our short-term moving average, while the 30-EMA is out long-term moving average. The 9 and 30 EMA trading strategy seeks to take advantage of the blank space created between the two moving averages. The filter for the 9/30 trading setup can be summarized into a three-step process. Like with many trading strategies we present, you can always use different “flavors” to get into a trade. So, you can also use chart patterns to fine-tune your entry. How to Trade with the 9/30 EMA Strategy In this section, we’re going to teach you how to effectively trade with the 9/30 EMA strategy. No matter how simple this trading strategy is, you need to have a set of trading rules before you use it. So, let’s talk about the stop loss and take profit strategy.For the stop-loss strategy, you can use the trigger bar high/low for reference. For example, if you have a buy trade signal, you hide your protective stop loss below the low of the trigger bar. Alternatively, for a more conservative approach, you can hide your protective stop loss below the 30-periods WMA. Here is a little bit of trading wisdom from hedge fund billionaire Bruce Kovner: “Place your stops at a point that, if reached, will reasonably indicate that the trade is wrong, not at a point determined primarily by the maximum dollar amount you are willing to lose.” Please note that the lower the time frame used the more price whipsaws you’re going to experience. As a trading trick to avoid being caught in a whipsaw trade, make sure you add an extra buffer to your stop loss. This buffer will allow your stop loss to survive during false breakouts. Moving on… It’s easy to exit these types of trades via a trailing stop loss below the 30 WMA. This exit moving average strategy has two benefits: You don’t have to guess a possible take profit level. You got to keep riding the trend until a reversal happens. When to use the 9/30 Trading Method The 9/30 trading method is a type of trend following strategy that seeks to enter the trade on pullbacks. In this regard, the best time to use the 9/30 trading strategy is when we have established a trend. The trend can be defined via the two moving averages as follows: The bullish trend is defined when the 9 EMA is above the 30 WMA The bearish trend is defined when the 9 EMA is below the 30 WMA The strength of the trend can also be measured via the space created between the two moving averages and the angle of the moving averages. The bigger the gap between the 9 EMA and 30 WMA and the steeper the angle of the 2 moving average is, the stronger the trend is. Conversely, the flatter the two moving averages are, the weaker the trend is. In and of itself the “trigger bar” used to enter our trades doesn’t give us a trading edge. The edge comes from trading in the direction of the prevailing trend. After you have a moving average crossover and a strong trend emerges from it, that’s when you want to use this strategy. Note* Avoid using the 9/30 trading setup in flat markets. Moving forward, we’ll teach you how to implement more advanced trading concepts along with the 9 and 30 EMA trading strategy. 9 and 30 EMA Trading Strategy – Advanced Concepts The 9 and 30 moving average strategy is a versatile trading strategy that can be used in ways you never thought possible. You can use this method for short-term trading, medium-term trading and long-term trading. It all depends on your preferred time frame. Now, here is a powerful trading secret about the types of moving averages used in this strategy. The combination of the exponential moving average and the weighted moving average gives us a wider spread between the two MAs. This is a key principle that makes this MA strategy work. Now, you might wonder: “How can we improve the 9 and 30 EMA trading strategy?” If we add a better entry filter, we can gain an extra edge. What do we mean by this? Instead of using a bar that closes above/below the 9-period EMA, we can wait for the entire bar to be encompassed between the 9-EMA and 30-WMA. However, the downside to this trading approach is that you will get fewer trading setups. Often times this type of trading setup can lead to explosive trades that never look back. What are other ways to use the 9/30 trading setup? As we explained earlier the edge of this pattern relays on the resumption of the trend. So, what’s the simplest way to measure the trend direction? A series of higher high followed by a series of higher lows defines an uptrend. In reverse, a series of lower highs followed by a series of lower lows define a downtrend. So, we want to look for ways to capture these types of price structures. To do this we’re going to introduce the concept of multi-timeframe analysis. Note* the advanced 9/30 trading setup works best in conjunction with the daily chart. To better time our entries, we’re going to a combination of two-time frames as follows: The daily chart to spot the trigger candle that closes above/below the 9 EMA Downgrade the TF to 15-minutes (or 5 minutes) and look for uptrend and downtrend price structures If you haven’t realized… Here is the main reason why we use this approach: We know that the daily range can be quite high. So, instead of using the high of the daily candle to trigger our entry we downgrade our chart and seek on lower time frames early signs of upward/downward price structures. Secondly, this trading approach also reduces the stop loss needed for the daily candle. Based on the 9/30 trading strategy we need to wait for the daily candle low to be tagged to trigger an entry. However, whit this new advanced concept we can enter the market early and capture more pips. When we downgrade to the 5-minute chart, we can notice the pattern of lower highs and lower lows signalling the start of a downtrend. Keeping in mind the chart setup found on the daily time frame, we can make a trade on the 5-minute chart when price breaks and forms a new lower low. When the price makes a new lower low after at least two lower highs it develops the price structure of a downtrend. This makes an excellent entry method for the 9 and 30 EMA trading strategy. Final Words – 9/30 Trading Strategy In summary, the 9/30 trading setup is a very effective trading strategy to be used across all markets and time frames. Keep in mind that the power of the 9/30 trading strategy comes from having a prior upwards (downwards) trend. Traders should use this method as a pullback trading strategy rather than try to find reversals. The key takeaways from the 9 and 30 EMA trading strategy can be summarized below: You have the momentum power of the prevailing trend on your side You only need to focus on the gap between the two moving averages Offers you effective ways to manage your risk Built-in trailing stop Versatility to be used in conjunction with other trading methods Last but not least, make sure you use effective money management strategies and position size to protect your capital. After all, your number one priority as a trader is to protect your account balance at all cost.
Education
by Tradingstrategyguides
1
Forex Price Action AnalysisHere we have Really good Setup and price also holding Very well 1) we have very big Wick (shadow) Candle this is the alert time in any trade. 2) we have doji which is for reversal (not all the time) but Volume is good 3) we made bullish candle and bouncing from Support support is Solid. so when we find the good Support we are ready to buy the retest as always so here we are buying the retest with stop loss below Support so here we got really decent profit with very small stop loss. and good gain
Education
by akashinvestor
EURUSD 1H RENKO CHART STRATEGY #2The second simple Renko Trading Strategy system is an indicator based strategy that uses price-momentum divergence to identify trend reversals. Renko Trading Strategy #2 For this Renko trading strategy, we only need to use the RSI indicator. We can use a 14- period or a 20-period RSI indicator. So, use the same period as the ATR 14 or 20 Renko brick size. After we spot the momentum divergence an entry signal is triggered once we get a reversal. On the Renko chart, a trend reversal is set in motion once the brick changes color. In this case, when we spot a bearish divergence, enter a short position after the brick turns red. For bullish divergence, wait for the brick to turn green. We exit our profitable trade once another reversal pattern is formed in the opposite direction of our trade. As a method to protect our account balance and not lose too much, you can place your SL above and below the swing point developed after your entry. A lot of the noise inherent in regular time-based charts are eradicated. So, if you trade with Renko charts, spotting divergence and trend reversals are a lot easier. The RSI is the best indicator to use with Renko. Read the previous Renko Chart post to learn about Renko chart system.
Education
by Tradingstrategyguides
1
EURUSD 4H PIN BAR SHORT TRADE STRATEGYBasic Guidelines: Timeframe – ANY Market – ANY Indicators – NONE OTHER – Trend lines, horizontal lines, support resistance lines (anything to help you find these areas). Step 1: Find a Pin Bar On Your Chart. *Note This is a stock price action strategy, and a forex price action strategy. I will use a currency pair as an example. Price action charts are with any market and timeframe. First, identify a pin bar that has formed. In the example, this is considered a bearish pin bar because of the long wick above the body. As you can see, the pin bar “wick” is above the body, which is considered a bearish pin bar. In this case, we are looking for a downtrend bounce of the top of the range. This is a 4 hour time chart EURUSD currency pair. You can see the Bears tried their hardest to stop this uptrend from occurring. The Bears were too strong, which is why you see the pin bar form. This is a perfect example of a pin bar price action reversal setup. Step 2: Look for Past Price Action to Determine Why The Pin Bar Formed. Why did the reversal suddenly hit a price, and then continue to the downside? We can see price has been in a range pattern for quite some time. Note** you can either look at the current time frame you are on, in this case, a 4-hour time period. Or you can bump up or down one or two periods to gather information. Resistance in the past can mean support in the future. What happened is the price hit this level but failed to break through it. Since the long bullish wick formed, we decide it is time to enter this trade based on what we learned from the prior days. This is what Price Action is all about. No two trades are the same. However, we can take what we’ve learned from the past. Then make the best judgment as to where the price is going in the future. You are essentially like a detective when you trade price action. The point is to gather many pieces of evidence to back up your conclusion. You are trading with confluence. Sometimes simple is best. Study the charts and form an educated conclusion as to where the price will go. Step 3: Trade entry You just enter the trade 2-3 pips from the break of the nose of the pin bar. Step 4: Stop loss Place the stop loss 3-5 pips away from the wick. The end of the wick will be a support area. So if this is broken the trend may continue downward. Which is why you place your stop 3-5 pips away from this. Step 5: Exit Strategy Your exit strategy is when you hit the first level of support or resistance on your chart. As you can see, the price hit a point then stalled out. Once we see the price action stalling out, we exit the trade immediately. Conclusion – Price Action Pin Bar Strategy Price action is another fundamental element to learn when trading the market. There are thousands of strategies you can use with price action. It is important to find something that works for you. These pin bars are hard to miss. They are relatively accurate when you learn why a pin bar formed. Pin bar candles are shown in any time frame. The rule of thumb is, the higher the time frame, the stronger the signals. But that does not mean that this will not work on a five-minute time frame. Do not trade every pin bar you see that forms. Gather up key information from the charts. Then form the best conclusion to determine if you should enter the trade based on the rules.
Education
by Tradingstrategyguides
5
USDCHF 4H DOUBLE TOPStep #1: Identify the Phase of the Market. The Double Top reversal needs a uptrend. Just because you can spot the reversal it doesn’t mean you have to jump in willy-nilly. Remember, we need the right context and everything needs to line up for a trade-able setup. So, the first step is to identify the phase or market condition. At any given moment the market can be trading either up, or down, or it can go sideways. Establishing the phase of the market aka identifying the trend is probably the biggest ingredient that can determine the success rate of double bottom pattern technical analysis. Step #2: The historical precedent. An A++ Double Top Reversal is composed of 2 Rounded Tops The second step of the Double Top is to find what we call the historical precedent or a chart pattern. We don’t want to make a trading decision without price confirmation, and in our case, we use the reversal pattern. You need to identify two rounded tops in order for the pattern to be considered trade-able. But, what is a rounded top? In technical analysis, a rounded top is simply a price formation that typically occurs after an uptrend, prices move upwards and then quickly rallies creating a rounded top. Now, of course, that depending on the structure the rounded top will vary in size and magnitude. But the idea is that we need a quick move up followed by a quick move down to define a rounded top Note* A valid double top reversal has two rounded tops. Step #3: Allow a maximum of 10 pips variation between the two tops. Don’t seek perfection, because in trading you need to get rid of your idealistic mindset as the pattern will not look perfect all the time, so be flexible. This is the reason why we need to allow a maximum of 10 pips variation between the two tops. The probability of two tops happening at the same exact price level is almost impossible. Now, we to determine an entry technique for our chart pattern strategy. Step #4: Sell when Double Top breakout candle closes below the neckline. After we identify the phase of the market and the characteristics of a good reversal we need to wait for confirmation that momentum is shifting. The breakout candle is our signal that the momentum has shifted and it’s what it confirms and validates the double top pattern. You’ll see the double top breakdown happen over and over again, but it’s important to analyze them within the context of the market trend. The next logical thing we need to establish for the strategy is where to take profits. Step #5: Take Profit at the same price distance as measured from the highest peak to the Neckline The minimum profit target for this type of trade is approximately equal to the same price distance as measured from the double top to the neckline. If we project the same price distance to the downside we obtain our first take-profit zone for the strategy. The double top pattern can produce a major reversal so we advise you to be very flexible with your profit target not to miss any big profit opportunity. Step #6: Place the protective stop-loss slightly above the resistance created by the Double Top reversal The Double Top chart pattern strategy gives you a simple way to quantify risk because you can place your protective stop-loss slightly above the double top pattern. The double top pattern really gives you the opportunity to also trade with a tight stop loss, which is great as we always want to keep losses at a minimum. Note*** The above was an example of a SELL trade… Use the same rules – but in reverse – for a BUY trade, but this time we’re going to use the double bottom pattern. Conclusion There is no other chart pattern that illustrates the trend reversal. However, despite the high success rate you still need to use a protective stop loss and to wait for the breakout when trading with the double top chart pattern strategy. You can also trade with the breakout triangle strategy. The bottom line is that you still need a plan to successfully trade the double top breakout. Our double top chart pattern strategy should answer all your questions in regard to how to make money with this simple pattern.
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by Tradingstrategyguides
2
QUESTION - WHAT ARE THE BEST FOREX TRADING STRATEGIES?2ND ICHIMOKU TREND FOLLOWING TRADING STRATEGY ICHIMOKU SETTING CHANGES Kijun Sen Blue line to Red Line Tenkan Sen Red line to Blue Line This will match Ichimoku settings for MT4 & 5 Step One: Using Ichimoku Indicator to Find the Uptrend or Downtrend Since this is a trend following strategy the first thing that needs to be identified is a trend. Do this on the one day, or four-hour time frame. These time frames will give you the best opportunity to identify a trend. In our example trade, we see a downward trend with an upper trendline of resistance. Drawing trend lines is one of the simplest ways to find a trend. Draw the trend line where there is support or resistance. Our example trade has three different levels of resistance to confirm this downtrend. This trading strategy will always go in the direction of the trend. So an uptrend will ALWAYS be a BUY. A downtrend will ALWAYS be a SELL. This strategy uses all of these tools to identify if a trend will keep going and gets you into the uptrend or downtrend. Step Two: Ichimoku Trading System The Tenkan Sen/ Kijun Sen Lines Cross This next step using the Trend Following Trading Strategy, I will explain what criteria are needed for a trade entry. Just to keep you on track, on the Tenkan Sen lines are Blue, Kijun Sen lines are Red. This crossing signal is going to tell you whether there is a strong bullish trend or a bearish trend. When the Tenkan Sen line will cross below the Kijun Sen line, then this will give you an indication that there is a bearish trend. You can see in our example trade the lines clearly cross which is our indication that this bearish downtrend is strong. These lines are designed to do that very thing when they cross each other. After the cross happened the Red line (Kijun) is now above the Blue line (Tenkan). That means that the trend is going to keep heading downwards. This is not an indication that the trend is breaking. This was used on a four-hour chart. This chart is the best time frame to use because it gives you a good overall picture of how the last few days have gone as far as it trending. In this timeframe, The lines need to cross either in the Kumo, which in the picture above is the orange area, or right below the cloud in this example. This was a sell signal because the trend was bearish while the Tenkan Sen line crossed below the Kijun Sen line in the senkou span area (Kumo). Note* If the lines cross above the Kumo area in a downtrend, do not buy/sell. The opposite can also be applied to a downtrend. If the lines cross above the Kumo area in a downtrend, do not sell/buy. The reason for this is because this would be a weak signal that the trend will keep going up or down. The trade must always be made to go in the direction of the trend. Recapping our rules using the Trend Following Trading Strategy, these three things must happen in order to enter a trade using the Ichimoku Indicator. Identify the trend. This needs to be an upward or downward trend. The trade must go the direction of the trend. Tenkan Sen line needs to cross Kijun Sen line. When the two lines cross, they need to cross in one of these two specific areas. The first place would be in the Kumo area. The second will depend if its an upward or downward trend. In an upward trend, they need to cross above the Kumo area. During a downward trend, they need to cross below the Kumo area. Note* This strategy is a trend following strategy. It is to help you identify a trend and identify that the trend will keep going either upward or downward. Step 3: Determining an entry point Trend Following Trading Strategy Determining an entry point should be very easy to do now. This is because once the Tenkan sen line crossed with the Kijun sen line either in the Kumo or just above or below on the four-hour time frame. You can use the four-hour chart to enter and exit. Or you can drop down to a 1-hour chart for entry and exit. I used the 4H to enter and exit on this example trade. But here is how to use a 1-hour chart for both. Now, simply drop down to a one-hour time frame chart and enter the trade. You may check other time frames, but there really is no need since you have already followed the rules to enter the trade on the four-hour time frame. This is just to give you a better perspective on where you are entering. Step 4: Stop Loss point Stop loss is always important to have in case the trade goes in the wrong direction and you are now stuck in a pickle whether to end the trade early or end it too late and lose it all! So we need a stop loss to help us out. Do this on the four hour time chart to see when the last areas of support or resistance were. There need to be two or more points of resistance or support. In the example below, you see that there were support levels. So in this example, it will go just below them. Step five: Exit Strategy The exit strategy using the Trend Following Trading Strategy will wait until and trend starts moving the wrong direction and the lines cross again. I used the 4-hour chart to exit my trade. It is recommended to monitor this on the one-hour time frame to get the most accurate reading for this particular strategy. The reason for this is that the trend is most likely coming to an end. The trend can come back up, but once the lines cross over again it is time to exit the trade. As you can see in the example the trend was slowly going back down. In the rules of this strategy, you will exit the trade if the lines cross over again. So a trade may be 2 hours, 10 hours, 3 days or even a week! It depends on what the chart tells you and if it continues to follow the rules of the strategy. Conclusion The Trend Following Trading Strategy only uses this one indicator. That makes you focus on this indicator and does not make you have to keep checking others to see what they are telling you. It may seem complicated at first with all of the different colored lines, clouds, and so on, however, when you break it down with this simple strategy, it makes it so much easier to understand. Make sure you remember to only be risking no more than 2% of your account! No matter how confident you are, you should always follow this to maximize your account. Thank you for reading the Trend Following Trading Strategy that uses the Ichimoku Indicator to help you gain a massive amount of pips at a time!
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by Tradingstrategyguides
5
1ST - MACD TREND FOLLOWING STRATEGYQUESTION - WHAT ARE THE BEST FOREX TRADING STRATEGIES? 1ST - MACD TREND FOLLOWING STRATEGY Step #1: Wait for the MACD lines to develop a higher high followed by a lower high swing point. This is an unorthodox approach to technical analysis. But, we at Trading Strategy Guides.com are different. We don’t mind doing uncomfortable things if that’s what it takes to succeed in this business. First, let’s visualize how an authentic swing point really looks on the MACD indicator: The first rule of thumb to recognize a swing high on the MACD indicator is to look at the price chart if the respective currency pair is doing a swing high the same as the MACD indicator does. A higher high is the highest swing price point on a chart and must be higher than all previous swing high points. While a lower high happens when the swing point is lower than the previous swing high point. Step #2: Connect the MACD line swing points that you have identified in Step #1 with a trendline. At this point, we really ignored the MACD histogram because much of the information contained by the histogram is already showing up by the moving averages. Look at the price action now and compare it to our MACD trendline we drew early. We can clearly notice that the MACD contains the price action much better and reflects the trend much clear. But, at this point, we’re still not done with the MACD indicator, which brings us to the critical part of our MACD Trend Following Strategy. Step #3: Wait for the MACD line to break above the trendline. (Entry at the market price as soon as the MACD line breaks above). When the MACD line (the blue line) crosses the signal line (the orange line) it’s an early signal that a bullish trend might start. However, if trading would be that easy we would all be millionaires, right? And that’s the reason why our MACD Trend Following Strategy is so unique. We’re not only waiting for the MACD moving averages to cross over but we also have our other criteria for the price action to break aka the trend line we drew early. This is a clever way to filter out the false MACD signals, but you have to be equipped with the right mindset and have patience until all the piece of the puzzle come together. If you were to trade just based on the MACD crossover over time you’ll lose money because that’s not a reliable strategy. But if you use the MACD indicator along with other criteria such what this strategy tells you to do, you will find great trade entries on a consistent basis. Step #4: Use Protective Stop Loss Order. (Place the SL below the most recent swing low). Now, that you already know how to enter a trade at this point you have to learn how to manage risk and where to place the SL. After all, a trader is basically a risk manager. You want to place your stop loss below the most recent low, like in the figure below. But make sure you add a buffer of 5-10 pips away from the low, to protect yourself from possible false breakouts. Did you notice? The MACD Trend Following Strategy triggered the buy signal right at the start of a new trend and what is most important the timing is more than perfection. We bought EUR/USD the same day the bullish divergence trend started. Now, what this has to do with the SL? Basically, a good entry price means a smaller stop loss and ultimately it means you’ll lose a lot less comparing it with the profit potential, so a positive risk to reward ratio. Step #5: Take Profit when the MACD crossover happens in the opposite direction of our entry. Knowing when to take profit is as important as knowing when to enter a trade. However, we want to make sure we don’t use the same trading technique as for our entry order. When the MACD line (the blue line) produces signal line crossovers (the orange line) we want to close the position and take full profits. Before taking profits, it’s important to wait for the candle close – either the 4h or the daily candle – depending on the time frame you trade so you make sure the MACD crossover actually happens. Note** The above was an example of a buy trade using the MACD Trend Following Strategy. Use the exact same rules – but in reverse – for a sell trade. Conclusion: The MACD Trend Following Strategy is a very simple trend following strategy and yet a very profitable strategy at the same time. As the saying goes, “The trend is your friend” and no matter if you’re just starting as a Forex trader or you’re already an established trader life is much easier when trading in the direction of the line of least resistance rather than fighting the trend which is a loser’s game. The success behind the MACD Trend Following Strategy is derived from one simple principle: momentum precedes price.
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by Tradingstrategyguides
3
EURJPY 1H SCHIFF PITCHFORK LONG TRADING STRATEGYThe Andrews Pitchfork Trading Strategy Our team at Trading Strategy Guides likes to use the Pitchfork trading system to identify a change in market behavior and make a profit from it. It’s important to understand what Andrews Pitchfork is and what pivots to use. This will give us more confidence later when taking the trades based on the Pitchfork trading system. Moving forward, we present the buy-side rules of the Andrews Pitchfork trading Indicator. Step #1: Identify the Three Pivot Points necessary to Draw the Pitchfork lines. The first thing you need to establish for the Pitchfork trading system is to identify three pivot points necessary to draw the Pitchfork lines. For more insights into this topic, check out the what is Andrews Pitchfork section. Since we’re looking for buying opportunities, we need to identify a series of rising pivot points. Step #2: Apply the Pitchfork indicator starting from Pivot 1 and move through Pivot 2 and Pivot 3. Now, use the three pivots identified and draw the Pitchfork trading system lines by connecting the pivots together. Start from Pivot 1 and move forward through Pivot 2 and Pivot 3. During this stage, you’ll be plotting the Pitchfork trading system lines. This will map the most important dynamic support and resistance levels. Once you’ve done this correctly you will see a rectangle or pitchfork formed. Step #3: Buy at the market at the first retest of the lower Pitchfork support trendline. With the Andrews Pitchfork trading strategy, the price should be contained inside the Pitchfork parallel channel. In this regard, if we’re looking for buying opportunities, assume the lower Pitchfork support trendline to hold the price for a bounce. We recommend buying when the lower Pitchfork support trendline is tested. The next logical thing we need to establish for the Andrews Pitchfork trading strategy is where to take profits. Step #4: Take Partial Profit at the Median Line, and Take Profit 2 at the upper Pitchfork Resistance trendline. The Pitchfork trading system gives you the flexibility to manage your trades in many different ways. Our mantra is, “Keep it Simple, Stupid.” In this regard, since the core principle of the Andrews Pitchfork trendline is that price tends to gravitate towards the median line, it’s the logical place to take some profits off the table. We only take partial profits on the median line because we also want to maximize our profits. This will give the market a chance to retest the upper Pitchfork resistance trendline. With the Andrews Pitchfork trading system, we’re trading in the direction of the trend. So, the expectation is to see the price moving higher and eventually retest the upper Pitchfork limits. Note: After TP1 was reached, move your SL at BE. We accomplish two things by doing this. First, we make sure that we accumulate profits. And secondly, if the markets reverse, make sure you stopped at BE and don’t lose any money. The next important thing we need to establish is where to place your protective stop loss. Step #5: Place the Stop Loss below the lower Pitchfork trendline and add a buffer of 20-30 pips. The recommended place to hide our protective stop loss is by adding a buffer of 20 – 30 pips below the lower Pitchfork trendline. Normally, in an uptrend, the support Pitchfork trendline should hold the price above. However, in order to protect ourselves from possible false breakouts, we’ve added a buffer of around 20-30 pips to our protective stop loss. Note* In a strong uptrend, it’s quite normal for the price to break and trade above the resistance Pitchfork trendline. Inversely, in a strong downtrend, it’s quite normal for the price to break and trade below the support Pitchfork trendline. Andrews Pitchfork Trading Strategy Conclusion There are many Andrews Pitchfork trading strategies that can be built around the Pitchfork trading system lines. They can all be simply derived from the Pitchfork’s trading rules. In order to use this system, you need to understand what Andrews Pitchfork is. You can also read our best short-term trading strategy. Andrews Pitchfork is simple to understand because, according to the Pitchfork trading system principles, you only need to know these three rules: Price tends to gravitate towards the median line. When price breaks the median line there is a high chance it will pull back to retest again the median line. When price breaks the Pitchfork channel on the opposite side of the channel direction, there is a shift in market sentiment and the trend can reverse.
Education
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AUDUSD ALEXANDER ELDER 3 SCREEN TRADING STRATEGY As the name of the Elder trading system suggests there are three “screens” that we apply to every trade. The three screens used by Alex Elder can be summarized as follows: First Screen used for establishing a trading bias. The second Screen applies technical indicators to identify retracements against the trading bias established earlier. The third Screen is used for timing your entries using short-term breakouts in the direction of your trading bias. As you can probably tell, the Alex Elder trading rules involve the use of multi-timeframe analysis. The first screen starts with higher degree time frames and subsequently we downgrade our time frames lower as we progress with the 3 screens. In total, trading Alexander Elder system involves using three different time frames: The long-term trend – Alex Elder calls this as being the tide The medium-term trend – this trend is also known as the wave The short-term trend – it’s also referred to as the ripple Elder Trading System – First Screen According to Dr. Alexander Elder’s rules, the first screen starts with a time frame bigger than the time frame you’re looking to trade. For example, if your preferred time frame is the daily chart, you first start by looking at higher time frames like the weekly chart. This is the chart where you’re going to apply the trend-following indicators to establish your bias. If the trend is up, we only look for buy signals. Inversely, if the trend is down, we only look for sell signals. By going through this process, we can filter out trades against the primary trend. Elder Trading System – Second Screen Dr. Elder trading rules recommend downgrading our time frame lower. If during the First Screen we used the weekly chart, the next lower time frame we can use is the daily chart. Now, we look for price movements against the tide. In other words, we’re waiting for pullbacks or what Elder system calls the “wave”. Learn the most profitable approach to profit from pullbacks HERE. This in return will help us spot good times to execute your trades. The Elder trading system uses oscillators to identify these price movements against the tide. For example, if the weekly tide is up, then we’re looking for the oscillator to identify when the wave is down and that’s when we buy. On the other hand, if the weekly tide is down, then we’re looking for the oscillator to identify when the wave is up and that’s when we sell. Elder Trading System – Third Screen The Elder trading system refers to the third screen as the execution screen. Or, in other words, this time frame is used for better timing our entries. We have to downgrade our time frame lower. The next in order time frame is the 4h chart. When the trend on the third screen aligns with the trend of the first screen that’s the optimal trade entry. To time your trades, Alexander Elder uses a trailing stop in order to seize small breakout in the direction of the main trend. Basically, that’s what the Elder system is all about. Dr. Alexander Elder Rules on how to Use Multiple Time Frame Analysis The Alexander Elder trading strategy uses a technique to balance out the different information that comes from looking at different time frames. The Elder’s technique involves using a factor of four to six to classify his time frames. Let me explain… Alexander Elder factor of 4 to 6 can help us divide our charts into smaller units of 4, 5, or 6. The way to go about it is to first select your larger time frame (first screen) and then downgrade the charts lower by a factor of 4, 5, or 6. For example, if your first screen is the daily chart and we downgrade our time frame by a factor of 6, the next time frame would be the 4-hour chart. Four multiplied by 6, it gives us 24-hours, which is a day. Using a factor of 4 will require us to downgrade our charts to the 8-hours time frame. Now, to find your execution screen aka the third screen, we have to downgrade our time frames lower one more time. If we used a factor of 4, the next down in line time frame is the 1-hour chart. So, the 1-hour time frame is our third screen. Note* if after downgrading the charts, the exact time frame doesn’t exist, then as a general rule the closest one is used. This is the method used by Dr. Alexander Elder to select his time frames. Long Range - 1st screen Weekly - 2nd screen Daily - 3rd screen 4H Mid Range - 1st screen Daily - 2nd screen 4H - 3rd screen 1H Short Range - 1st screen 4H - 2nd screen 1H - 3rd screen 15m When to buy using the Alexander Elder Trading Strategy According to Alex Elder trading rules, the best moment to buy is when an uptrend has undergone a pullback and has started to resume the bullish trend. For this example, we’re going to use as the first screen the 4H chart. So, the 4H chart is used to determine the long-term trend. And, for this purpose, the 200-day moving average, which is the standard measurement of bullish and bearish trends, will be our trend filter. Check if the price is trading above the 200-day moving average to confirm the uptrend. The next step is to downgrade our time frame to the second screen. If the first screen used the daily chart, the next in line time frame is the 4-hour chart. The middle time frame is going to be used to spot corrections against the bullish trend. For this purpose, we’re going to use the MACD indicator applied to the 4-hour time frame. We wait for the MACD lines to rise from the oversold condition and the moving average slops have turned upwards again. Note* Dr. Alexander Elder recommends to use the Force index or another momentum oscillator to add more confluence. The next step is to downgrade our time frame to the third screen. If on the second screen we used the 4-hour time frame, the next in line time frame is the 1-hour chart. The short-term time frame is going to be used to time the market. However, since Alexander Elder doesn’t provide rigid rules for entry and exit, it’s time to reveal the Ace from our sleeve. For timing the market with great result, we’re going to use the Know Sure Thing indicator. On the 15m time frame, we wait for the Know Sure Thing oscillator to cross above the zero lines to trigger a buy signal. The KST indicator is great because it also signals burst in momentum. What does it mean for your trade? Simply, you get the chance for your trade to show a profit right from the start. Note* for sell signals the same trading rules can be applied but in reverse. Final words – Alexander Elder Trading System The Alexander Elder trading strategy can be used as a building block for your own trading strategy. The Elder trading system has the advantage of using multi time frame analysis to verify the market trend in several degrees. According to Dr. Alexander Elder, the single most important factor that will dictate your profitability is the quality of the records that you keep. We succeed in some trades and make mistakes in others. However, we can only improve our trading strategy only if we learn from both winning and losing trades. And, that’s why Dr. Elder believes that journaling is an absolute must as it makes you into your own teacher.
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by Tradingstrategyguides
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EURAUD 15M BIG BEN BREAKOUT TRADING STRATEGYRule #1 Define the London Trading Range We’re going to use the range definition that takes into consideration only the body of the candles, excluding the wicks. Note* this trading rule can be adapted as you get more experienced at reading the price action. This strategy works because the Asia trading range tends to attract buy and sell stops above and below the trading range. The bulk of buying and selling stops becomes an easy target for the smart money. Remember that traders need liquidity to execute their orders. And, the smart money is always in search of liquidity to fill their large orders. That’s the reason why the smart money needs to trigger those stops. Rule #2: The One-Hour before the London Open Needs to Generate the Breakout Our backtesting results revealed that momentum really starts to pick up 1-hour earlier than the actual London opening session. There are some smart ways to trade this burst of momentum. Let’s see some technical ways to trade the pre-London open. We don’t need to guess in which way the market will break, we let the market tip his hand and show us the way. This is where things get interesting. Let me explain… During the London session we’re going to see the most traded volume thus the foreign exchange market should really take off in one direction or another. Rule #3 Price needs to fade Immediately after the London session opens, we want to see the price fading the pre-open move. If the move starts fading, we know it was a false breakout. Smart money has used the pre-open move to trigger the stops above the range and now they reverse the tie and start selling. We want to see price pulling back into the range at the same speed as it went up. Let me explain… In simple words, the bearish momentum used to produce the false breakout needs to be equal to the bullish momentum used to fade the pre-open move. We enter our trade after the first 5-minutes have confirmed that the price is reversing. Once this trade setup is completed, you should see a price formation that takes the V-shaped form (or inverse V-shape). Rule #4 Take Profit or Ride the Trend We can measure the size of the Asia trading range and project from the top or bottom of our range to get our profit target. But, oftentimes this type of setup can lead to a trading day that can extend in the days to come. Now, in this case, it’s wise if you employ other trading tactics so you can actually profit from this trend. In this example, the better take profit strategy would be to use a trailing stop. You need to be ready to explore other trading methods to manage your trades. Rule #5 Use a Time Stop Instead of a Price Stop In order to fade the London breakout, you need to use unconventional trading methods. In this regard, for our stop loss trading strategy we’re going to use a time stop instead of a price stop. The first time I’ve ever heard about the time stop concept was while reading the Market Wizards book. Billionaire Hedge Fund manager Paul Tudor Jones one of the greatest traders of our times said: “When I trade, I don’t just use a price stop, I also use a time stop.” So, how to apply the time stop to the London strategy? It’s very simple… If, in the first hour after the London open the price didn’t COMPLETELY reversed the pre-opening breakout, we exit the trade. It’s simple as that, no further explanation is needed.
Education
by Tradingstrategyguides
Trade Forex Like an Investment BankWhat I will explain to you today is exactly how you should trade the Forex market and that few traders do. What I am going to tell you has great value. You will hardly find that information in other videos or courses, and surely not for free. It comes from over 25 years of experience in financial markets, even as a fund manager. I tell you immediately that if you are not willing to toil, it’s useless for you continuing to read. I won't give you the magic formula to get rich just by pressing a button. Do you think I have become a professional trader, that is a person who trades for a living, in a day or month? I spent several years to study; I had a hard time (most of all at the beginning). I had to overcome several difficulties before I became the trader I am today. Hard work, in trading like in every field of life, is the basis of success. So, how should you trade the Forex market? First, a mistake most Forex traders make is to consider a currency pair as a single market, a price. But a currency pair is not a stock or commodity. Instead, you have to see a currency pair as two opposing economies. For example, you don’t have to see Eur-Usd as a single market, but as the Eurozone economy versus the American economy. Why should you trade Eur-Usd like Apple or Facebook? On the one hand, you have an individual company, on the other side, two economies. So, get used to considering a currency pair, not as a single market, a price, but as two opposing economies. Now you also understand why most traders who use technical analysis are losers. It’s certainly not an indicator in the overbought or oversold zone that makes a currency pair rise or fall. After having understood this fundamental aspect of the Forex market, the next step is to buy the strength and sell the weakness. But to do that, you have to compare the two economies. First equation : strong economy means strong currency and weak economy means weak currency So, let's see how you should proceed First, for each economy, you need to research the macroeconomic data that make the currency market movements. And this is the simplest thing to do. Several sites show this data in real-time. We can divide the main macroeconomic data into 4 areas: 1) Interest rates. 2) Growth (Gross Domestic Product). 3) Employment. 4) Inflation Then, you have to compare and interpret the data to understand, for both the economies, what the situation is. And this, at least initially, is a little less simple. You have to create two tables, one for each of the economies, and insert the main macroeconomic data. Once you have completed this step, by using the data, you need to compare the two economies to figure out which one is stronger. You can also create a graph with Excel or other software for each data, so as to get a more immediate visual image. For example, if the graph of the unemployment rate in the United Kingdom is falling while that of the United States is moving sideways, even though the American economy remains stronger than the British one, right now it’s the British economy that is strengthening over the American one. Second, you have to read the reports of the central banks, and listening to the speeches (or reading the transcripts) of their Presidents. These are fundamental to understand the monetary policy implemented by each central bank. Also, you find the situation in the country and often a vision of the world economy. Statements and Minutes are therefore essential for understanding the next moves of a central bank concerning interest rates. Second equation : raising interest rates leads to a stronger currency and reducing interest rates leads to a weaker currency The reports, and speeches of central bank Presidents, are essential also because the decisions on interest rates are sometimes known before their release. Which means that a decision has already been priced into the market. It’s probably a process that may be difficult to implement initially, but believe me that, over time, you will be able to analyse a currency pair simply and clearly. Certainly, better than with technical analysis. That was the first pillar of your Forex trading. You have seen how you have to analyse a currency pair. First, you have to see a currency pair not as a market, a price, but as two opposing economies. And then, you have not to use the technical analysis and indicators, but studying and understanding the fundamentals that drive a currency. Now, let's see the second pillar. After analysing a currency pair, you need to select your trade entry. But before… Never forget : in the medium to long-term, it’s the fundamentals that drive a currency pair, but in the short-term, it’s speculation to do it. For this reason, to buy for example Eur-Usd just because your analysis has told you that the currency pair will rise, it’s a bad idea. So, how should you decide when to enter? By using subjective probability. I tell you that no strategy can give you the perfect trade entry. It’s all about probability. Subjective probability is the numeric measure of chance (probability) that reflects the degree of a personal belief in the likelihood of an occurrence. Subjective probability judgments are people's evaluations of the probability of uncertain events or outcomes. It contains no formal calculations and only reflects the subject's opinions and past experience. Now, let's see how to use subjective probability, in trading. Before, an Advice : avoid trading with many markets. Focus only on those you know well. Because it’s essential to know well the currency pair that is being traded, how it behaves and moves, so you can understand what the key levels are. In this way, you will know which are the price levels with the highest odds of success for your trade entry. Let me give you an example with the currency pair EUR-USD. Look at the chart above. You will certainly have noticed how the X.XX20 levels (i.e. 1.0920, 1.1020, 1.1120, 1.1220, etc.) for EUR-USD are often, not always, sensitive price levels. That's just one aspect, a characteristic of EUR-USD. Once you understand how the currency pair moves, when you know it perfectly, you will no longer even need to open the chart to decide your trade. And what about the take profit? First, you need to know when to take your profit before opening the trade (you have to decide it in your trading plan). Then, it has to be a take profit statistically achievable and have a Risk/Reward at least 1:1. To select your take profit, you have to put into the field all your knowledge of that currency pair, and how you did with the trade entry, use subjective probability. This was the second pillar of your Forex trading. You have seen how to select your entry and exit points in trade. You have to use subjective probability, and thanks to your experience and knowledge of a currency pair, choose the trade entry with the higher odds of success. Now let's see the third and final pillar. How to select the stop-loss and cancel the emotions. It is well known that success in trading is determined by our emotionality. You have to put yourself in the best conditions to trade. The problem with the management of emotions is that we are all different. So, it’s impossible to have a system that works for everyone, without distinction. To erase your fears, anxieties, before opening the trade, you have to decide how much you are willing to lose with that trade. Then, you have to set the stop-loss on equity, that is the current value of your trading account, not the price. But where to set the stop-loss? You have to use the Value-at-Risk (VaR). Value-at-Risk measures the potential loss in value of a risky asset or portfolio over a defined period for a given confidence interval. The key elements of Value-at-Risk are: 1. a specified level of loss in value; 2. a fixed time period over which risk is assessed (1 day, 1 week, etc.); 3. a confidence interval (usually 95% or 99%) Let’s see an example. If the Value-at-Risk on Eur-Usd is 1.81% at one-week, 95% confidence level, there is an only a 5% chance that the value of Eur-Usd will drop more than 1.81% over any given week. Unfortunately, here I can't explain the calculation, but you can find it on my Forex e-Book and for free on the internet, in particular on YouTube. At this point, all you have to do is calculate the correct position size to open, based on the maximum loss that you are willing to suffer, and that you must have already decided in your trading plan. That's the way to dispel your doubts about how to set the stop-loss, how to cancel your emotions because using the Value-at-Risk, you are working like an investment bank, a fund manager. This was the third and final pillar of your Forex trading. You have seen how to cancel your emotions thanks to Value-at-Risk. Now you have all the information to become a profitable trader in Forex trading, to trade like an investment bank. You can get significant results in Forex trading, maybe even better than mine, but only if you apply what I explained to you, and you will work hard. Happy trading to you all!
Education
by TradingwDavid
7
Which is better: Arithmetic or Logarithmic scale charts?A market chart has two axes, the x-axis and they-axis. Where the x-axis registers the date, the y-axis registers the price. The y-axis has two methods for plotting it: an arithmetic scale or logarithmic scale. Whichever you chose will have implications for your trading. Arithmetic scale: On an arithmetic scaled chart, the spacing between price levels is equal. If price rises, like from 1000.20 to 1500.20 and 1780.20 to 1980.20 for gold, the grid spacing on the chart does not change. This is a gold chart illustrating arithmetic scaled chart. Logarithmic scale: The log chart is scaled based on percent moves. A hundred percent move or change in prices will have a larger space than a fifty percent move or change in prices because the spacing reflects differences in percentages. The same gold chart illustrating a logarithmic scale. The differences in both scales are not readily noticeable when charts are plotted on short periods of time because price fluctuations are relatively subdued. However, you begin to notice considerable differences with large price fluctuations. Because my trading is in the short term, I use the arithmetic scale. But position traders who deal on the longer term would consider using both arithmetic and logarithmic charts for their trading. That way they see both the price level moves as well as how that scales in percentage terms.
FOREXCOM:XAUUSDEducation
by Emekadavid