How To Make 1000 Pips Per Month And Keep It

Transcription

“How to make 1000 pips per month and keep it”
How To Make 1000 Pips Per Month And Keep It
The 4x Coach
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The 4x Coach
How to make 1000 pips per month and keep it
Reclaim your trading losses! Wave goodbye to Fear!
by Joseph Fibonacci
This book is dedicated to all of my beautiful children and new grandson.
They are the inspiration for everything I do and every decision I make.
Especially my first son,
because of him I have found my path again and I have the courage to create everything I dream of.
The information in this ebook guide is for educational purposes only.
I am not a lawyer or certified investment professional. Any legal or financial advice that I give in this ebook is my own personal opinion based on my own personal
experiences and 13 years of trading success. You should always seek the advice of a professional before acting on anything that I have published or recommended in this
ebook. Any amount of earnings disclosed in this ebook should not be considered the average.
The material in this ebook may include information, products or services by third parties. Third party materials comprise of the products and opinions expressed by their
owners/developers. As such, I do not assume responsibility for or liability for any Third Party material or opinions.
The publication of such Third Party Materials does not constitute my guarantee of any information, instruction, opinion, products or services contained within the Third
Party Material. The use of recommended Third Party Material does not guarantee any success and or earnings related to you or your business. Publication of such Third
Party Material is simply a recommendation and an expression of my own opinion of that material.
** No part of this publication shall be reproduced, transmitted, or sold in whole or in part in any form, without the prior written consent of the author. All trademarks and
registered trademarks appearing in this guide are the property of their respective owners.
*** Users of this guide are advised to do their own due diligence when it comes to making trading decisions and all information, products, services that have been provided
should be independently verified by your own qualified professionals. By reading this guide, you agree that myself and my company is not responsible for the success or
failure of your business decisions relating to any information presented in this guide.
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How writing this ebook could save your trading career...
You have probably found this ebook because you are still looking for the right information that will help you develop your own style of
trading or you have tried so many trading signal services that don't work and you still have hope of becoming a full time trader.
For what ever reason, I am happy you are here and I am going to share with you all of my trading secrets and methods and help you save
your money too.
In the beginning of my trading career, I had hopes that trading would change my whole life. I dreamed that trading would provide my
children with a lifestyle that most only dream of. I also hoped that trading would reunite me with lost relationships and failed promises.
At first glance, trading doesn't seem all that hard for some. And for the most part, I think we are all used to controlling our surroundings to a
certain degree and for these reasons trading seems very achievable for most.
The reality is that trading is a very unique business to operate.
In the beginning, after a few months of trading I became desperate and fearful of losing all of the hope I had that trading would change my
life. But, I never gave up and I was lucky to be in a situation that I could continue to apply myself to learning how the markets work without
the need for additional income.
I know this is not the typical situation for most. Many traders still have to hold down full time jobs while trying to learn how to trade. This
obviously limits the amount of time new traders have to apply themselves and eventually many give up on the dreams they had.
I was fortunate to be in the right environment at the right time. I traded almost every hour of the day possible. I traded on the weekends by
reviewing charts and practicing what I could have done better. I reviewed economic data reports and read all about technical analysis
principles.
I purchased trading courses online that cost me over $2,000 and consisted of nothing more than basic trading knowledge you can find for
free on most forums and I still didn't have a method of trading that would tell me exactly when to get into a trade and where to take profits
and why to trade in the first place.
I joined many chat rooms with moderators who clearly had no business telling anyone to enter a trade and could not explain why price was
moving in the first place.
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Ultimately, I figured it out on my own but not everyone can do that. I believe that success happens because of a combination of several
factors. The first is obviously the level of commitment. Then there is the support that one has at home. Another is the actual reason for the
goal of the dream. And last but not least, the experience you have in other related experiences even though they may not seem related. I
could go on and on about the other factors but I am sure you see the primary.
I write all of this to set up how important trading as a business is and how it should be respected.
Trading is not to be taken lightly. You can lose all of your money or you could become richer than you have ever imagined.
Even thought this appears to be a simple ebook, I am sharing with you the exact methods I use for making money... lots of money.
I have made more money as a trader than I have ever thought I could make doing anything.
I remember the first time I made more than $40,000 in one morning (real money not demo money).
I literally cried out of pure joy and the realization that I had achieved what I started off to do and no one could ever take this ability away
from me!
I want you to have that same moment... I want you to realize your dreams and to make good on all of the promises you have ever made to
the people that matter to you.
This ebook is just a starting point. I will share with you methods to determine a good trade versus a bad trade. I will show you when to enter
a trade and when to exit with a profit. I will show you how to protect your trading capital and I will show you how to build your trading
business. All here in this ebook.
Trading is not a “get rich quick” opportunity. It will take work and it does take money to make money. But if you are committed to your
dream, I am very sure you will succeed.
The information in this ebook is the accumulation of my 13 years of constant trading experience.
To all of my friends, subscribers and followers, I thank you from the bottom of my heart for all of your support. I hope the information in this
ebook will help to repay you for the time and consideration you have given me. “Here is to you and your success”.
-Joseph Fibonacci
If at any point while reading this ebook, you have questions, please do not hesitate to contact me at the email address below. I will be
happy to help you with regards to your trading in any way possible.
[email protected]
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(click) Table of Contents
How to set up your charts for a day trading and swing trading strategy
Fibonacci Levels- retracements and extensions
Technical Trading Strategies
Technical Analysis Basics
A Simple Scalping Strategy- The HL30 method
Professional Trading Strategies
The Breakout Trade
Identifying Tops
Identifying Bottom Patterns
Daily Chart Trading System
How to “Trade The News” using economic data
Fading The Double Zero technique
Trading Psychology
Closing
Lets Get Started! Your Forex training schedule for 30 days
Bonuses
Resources
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How to set up your charts for a day trading and swing trading strategy.
I watch the four major time frames.
The daily, the 4 hour, the 1 hour and the 30 minute.
I also watch the weekly and the monthly but I only check those two a couple of times per week, unless of course we are in a rally that last
several days.
Most of my daytrades (intraday trading) are done with the 1 hour chart expect for the scalping trades (HL30 technique) which is done on the
30 minute chart.
For the most part, the same time frame that provides me with a trade signal is the same time frame that I use to determine my exits but I
always watch the next time frame higher so I am aware of the major moves and significant support and resistance levels.
Indicators
On each of my charts on all times frames, I use the following indicators:
• MACD Histogram set at the original settings of 26,12,9 ( I only use the histogram )
• CCI set at 14 for the 30 minute and 1 hour charts and 20 for the 4 hour and daily charts.
• Bollinger Bands set at 20, 2 (I only use the Bollinger Bands on the 4 hour and daily charts)
• 34 ema ( I use three settings for this indicator, the first is set on the high, next is the close and the third is set on the low ) you will
understand how I set them when you see a picture of my charts.
• Pivot Points on the 1 hour chart only.
On my chart program, the pivot points are calculated and set right on my charts, but the formula for calculating them is very simple and if
your chart program doesn't do this for you, you can draw them onto your charts after you figure the out the Pivot Points manually.
Technical Drawing Tools
•
•
•
•
I always use trend lines
I always use Support and Resistance
I always use Fibonacci levels
I always follow the waves ( price swings ) on my charts in an A,B,C,D, pattern
This is the basic outline for all my charts. It is also the starting point for most of my technical trades on the 1 hour chart and the 4 hour and
daily chart.
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Fibonacci Levels- retracements and extensions
Fibonacci levels are very important to my trading method. I will not enter a trade without them. I use them to determine the depth of a
retracement. I use them to determine how far the price can potentially continue to move in a given direction. Using Fibonacci's in these two
ways helps me to find a good entry and profit target.
Fibonacci's can act as potential level of support or resistance. An example of this is if price were in an uptrend. When price starts to retrace
a little, I would start thinking of entering on a bounce to continue the current trend direction. I would then be looking for a candle pattern to
develop at a Fibonacci level.
The Fibonacci's provide a stronger support or resistance level when they line up with a pivot point or a real support or resistance level in
price on the chart.
I hope that statement above didn't confuse you. What I mean by it is when for example in an uptrend, resistance can become support and
when that happens at the same place as a Fibonacci level then you have a really good chance of seeing a bounce develop. Remember to
wait for a candle pattern to develop first before deciding to take a trade. Then check for divergence in the indicators.
The most common Fibonacci levels I use are the 382 and the 618 levels. These levels tend to generate some of the best moves. That's not
to say you can't find a trade when the price bounces off the other Fibonacci levels I am just saying that I generally take trades that occur at
those two levels more often.
This is a picture of the setting I use on my charts.
You can see the settings I use are checked and it starts with the retracement levels.
If you have the ability to set your parameters in your Fibonacci tool on your charts, pay special attention to the decimal points. On the
retracement levels these are all positive settings and on the extension levels the numbers are negative numbers and again, please pay
special attention to the decimal points. By using these settings I can place retracement levels and extension levels at the same time.
Extension levels are important in my trading system because those are the levels I look for to take profits.
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Technical Trading Strategies
I use several techniques to identify technical trade setups, so before we move on, you must commit to memory the three basic candle
pattern that I use for the “actual” entry on a technical trade.
Candle Patterns
Hammers:
Two Candle Patterns:
Piercing Pattern
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Dark Cloud Cover
Three Candle Patterns:
Morning Star
Evening Star
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If you see a candle pattern develop in the middle of no where (without any of the support levels below)
LEAVE IT ALONE – and wait for the right level.
It is very important that you always keep in mind,
one of these candle patterns MUST take place at a level that you would normally expect a bounce or small reversal to occur to provide the
entry
such as
•
•
•
•
•
Support or Resistance levels
Fibonacci retracement level
Psychological Level
Pivot Points
Trend lines
Later you will see how to add indicators to the technical trade setup using the candle patterns but for now, please see the charts below so
you will have a good idea of how the candle patterns much look on a real chart.
Below is an example of a Piercing Pattern/ Bullish engulfing candle on the GBP/USD.
The candle pattern was confirmed using the divergence in the CCI indicator.
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The chart below shows a perfect example of the same type of technical trade setup, only in the exact opposite direction.
In this case there was a Dark Cloud Cover pattern that was confirmed with the divergence in the CCI indicator.
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The chart below is the Morning Star Pattern on the USD/JPY. Like the previous trades above, the candle pattern is identified first, then the
confirmation is made by using the proper indicator. In every example, it is mandatory to wait for the candle pattern to completely close.
Never assume that you know how the candle patterns will close until they actually do close.
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Technical Analysis Basics
Drawing a trend line.
In order to draw a trend line we have to find a place to start. Often times that means looking back in time and perhaps more time than you
can fit on your chart in one window.
If the trend has continued for some time, you should switch to a time frame higher.
The first example, the chart below is the EUR/USD one hour.
You will see several different trend lines as the trend continues.
One of the first things a trader will do with a trend line is to quickly identify the most obvious trend line. If the trend line isn't broken, then it is
easy to assume that the trend is still in tact and for the most part it could continue.
Another reason to draw trend lines is to determine when the trend is changing.
Below you will notice how simple the trend line looks in the first chart picture below.
There are at least two points that touch the trend line to confirm it.
Something that most traders will do, is to count the number of times the price has touched and held at the trend line. This helps to
determine the significance of the trend line. Typically, the larger time frames will produce trend lines that have been touched several times
and are quite significant.
Trader Tip:
Another useful tip when trying to locate the most
significant trend line that could cause a reaction in price is
to use the A,B,C,D price swing method. (See more about
this technique below)
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chart 1
The chart above is pretty easy to read and the trend line shows at least two locations where price touched the trend line from the beginning.
But lets take a step back and see where this up trend in price actually began. It is important to find the true trend line to see just how far
price has to move through a trend line to confirm a change in price direction.
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Chart 2
The chart above is the same time frame as chart 1 but I added much more data and found another trend line.
Why is this important?
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Because if you begin to focus on a small area of current price action, you could easy allow yourself to think that a price trend is changing. If
you think right away that a trend in direction is changing just because the trend line has been broke you can make a serious mistake and
lose money. There is much more work that needs to be done to confirm that price is definitely changing direction.
Looking at the first chart 1.
Price would not have to move too far down, (perhaps 40 or 60 pips in price) to cut through the most recent up trend line.
If this happens to the inexperienced, they begin to immediately short this pair. The trouble is that this is not true confirmation (yet) of the
trend change.
If you begin shorting immediately when price crosses a short term trend line like the one in chart 1, you will could lose as price finds some
support on the other side of the trend line.
Support such as Fibonacci retracement levels or an old resistance level could “become” support. The reason is again, that the first chart
doesn't show the true measure of the trend itself, where it began, how long it has been trending and where it is likely to stop and find some
resistance.
Chart 2 (above) shows a much better idea of where the true trend line runs, but is that one correct?
Let's step back further...
Below is a third chart using the same currency pair and the same time frame.
The candles are getting harder to see but I am trying to illustrate the necessity to take a step back and look at where price has come from
and also to identify support and resistance.
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Chart 3
In this chart you will now see the original trend line from chart one in the top right corner. Notice how sharp and steep the trend line looks in
this chart. That is not a trend line that I would use to identify a reversal in price. It's much too steep and looks like it could keep moving
higher. If price cut through the first up trend line, taking into consideration the information we now see in this third chart, I could expect price
to find some support and bounce back up, meaning that I would most likely not take any short or “Sell” positions here.
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Now the same information can be found by using a time frame higher. Lets look at the 4 hour chart below for the EUR/USD.
The chart below shows us just about the same information without having to squeeze in so much data that we can't see the candle
patterns. You will notice that the only trend line I have on this chart is the last one as in chart 3.
chart 4
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Now another way to find out where the trend has changed and shifted directions is to continue looking back in time until you see where the
trend crossed. In chart 4 which is the four hour chart above, we still don't know for sure if the bottom left where the trend line began is the
actual low or start of the trend.
Lets have a look...the next chart below is the same 4 hour chart of the EUR/USD but I squeezed more data into the chart so we could see
back further.
Chart 5
At this point we will leave it here but you can see the importance of finding the source of the trend on the chart and how to identify the
strength based on the angle of the trend.
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Now that we have ways of finding the trend lets see how to draw trend lines correctly.
In the example below we will be looking at the GBP/USD 4 hour chart.
We will start at the present time and identify the trend lines and then analyze the possibilities and the mistakes that can be made when
drawing a trend line.
Chart 6
Please notice at the top right of the chart, there is a white arrow pointing down. I put that there to show how price has found some
resistance at the bottom side of the up trend line. This is important from a technical perspective! You must draw your trend lines correctly
and do not become lazy about updating them. In the chart below I will show you the same GBP/USD 4 hour chart but I will show you how
the trend lines might have looked a few days back.
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Chart 7
In this chart please look at the bottom left and notice where the trend line started and follow it up to the next arrow. At one time, this is
where we had a our trend line and it was the proper placement but as time moves on and price made a new high, we must go back and
adjust the trend line when necessary.
The first thing to do when considering whether to adjust the trend line is to confirm a new high or low. We all know the rule... “Two to the
left and right must be lower to confirm a high” and the opposite is the rule for confirm a low.
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Chart 8
In the chart above we can see when price made new highs. This is the time to make the change to the up trend line.
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Chart 9
In the chart above, I have made the proper adjustment and again, notice how it shows up in the top right area of chart. This again would be
a technical resistance level that would help me determine whether or not I should exercise caution at these levels.
Notice the low I used to draw the up trend line at the arrow pointing up.
This is the last price swing before the last spike high. It is the proper place to draw this trend line. If I was lazy about making adjustments to
the trend line and left it in the position I had it before on the chart above, then I might not have had the opportunity to see the potential
resistance when price reached the bottom of the up trend line (where price is currently)
These rules apply regardless of the time frame used.
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Now let's talk about support and resistance.
Let's take the example above in the GBP/USD chart 9.
As you can see there are many levels that could act as support or resistance.
Lets strip away some of the unnecessary lines on the chart and start fresh below.
We will still use the GBP/USD 4 hour chart.
This one is pretty easy. I placed the arrow at the proper support and the lowest level of the consolidation range.
Now it might appear obvious to me because I have been doing this a long time but there are a few basic rules that are constant throughout
technical analysis and regardless of the time frames.
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But what about the lows where I placed the arrows and ??? Should this be the support level?
Well yes and no. In this case, we need to find the area that will have the biggest influence on price when price reaches a support or
resistance level.
The first place we will use as support is the one marked support 1 and indicated in the chart below.
Remember, we need to isolate the most immediate area of consolidation (support and resistance) that will have an influence on price when
it reaches one of those levels.
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Okay, by itself it only points out the support but to really get a signal in price, we will need to draw in some support and resistance lines.
What I mean by that is if we just left the chart like it is above, when price moves to the support, how will we know what to do? Are we going
to see a break out candle or will price bounce off support?
So lets look at the chart with some support and resistance levels drawn in.
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Now using the chart above we have a much better idea of what we can expect to when price reaches support 1
and we can also see now that support 2 is quit a ways off and we can just focus on support 1. This helps us determine the proper levels of
support and resistance to focus on. (if price breaks support 1 and there is a economic reason for price to continue lower, we would most
likely use support 2 as a price target)
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Now let's look at a chart that isn't as easy to read as the GBP/USD 4 hour charts above.
What should we do with a chart like this one?
We first of all we need to identify what we are looking at, it's the EUR/USD 1 hour chart.
The first thing I would do is squeeze in the candles to see if there are any immediate trends occurring just out side the parameters of this
chart.
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Here we can see more data, but things still look a little confusing.
So now that we know that this really didn't help, let's go back to the previous setting on the 1 hour chart so we can see the candle patterns
correctly.
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Here I have drawn support and resistance which is the highest and lowest points on the chart that fits on my screen.
Remember the importance of looking at those larger time frames and taking a “step back to see the big picture”.
Now let's move in closer on this chart and find other support and resistance levels that can have an influence on price.
We need to move in closer to where price is and try to find a trade / set up.
On the next chart I have drawn more technical data.
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In this chart things make a little more sense. Now we can see why price might have found some support from a technical perspective. Its
possible that this support could be only temporary since there is another level of support on the chart and we have to take into
consideration the high and low for the week.
Now let's take this chart out a day or two to see how that support level held up.
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This support level helped traders decide to trade price back up to the resistance level that we had on our chart.
The important lesson to learn is first of all, It's going to take some time and practice to learn this skill.
You should also experiment with the cross hair tool on different levels of support and resistance.
That's how I found the support level that technically caused this bounce of almost 200 pips.
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Now let's talk about the A,B,C,D, price swing method.
Basically the A,B,C,D, price swing method helps to confirm a trend, higher highs and lower lows depending on which direction you are
trading. It also helps us determine the proper place to draw our fibonacci levels and to identify the extension targets of the fibonacci
retracements. So let's look at a chart.
What do we do with this chart and where do we start to identify our A,B,C,D, price swing?
Well the first thing to notice is that price has returned back up to the resistance area at the top of this chart.
At one time however, it looked like the chart below.
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Now in the chart above I have included the A, B, C, D, price swing. How did I find the starting point?
I start from the lows or the highs (depending on which direction I am trading) and start with the “A” and the very low or high.
Trader Tip:
If the chart is really choppy and price inside of consolidation it's hard to find
the right low or high. You can try to look at a time frame larger than the one
you are working on and it might clear up things and show you were the right
lows and highs are. You will see an example in a moment.
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So how do we use this information to find a trade entry and a profit target?
Well... there are several ways and all are probably correct but the way I would trade this chart is shown in the chart below.
Now things look a little more obvious. A safe place to enter a trade on this chart is when price hit the 382 retracement area.
I would wait for a closed “completed” M.star pattern and enter when the candle closes. I would use a stop just below the support of the
M.star pattern. But... I have to cation you that price can sometimes retrace again and move lower than the 382 area and perhaps as low as
the 618 retracement level.
This would obviously stop out a trade if placed just below the support of the M.Star so you have two choices to make.
The first is where you would take profits. If you hold for targets that are far and may take a long time to get there, then there is a higher
chance that the 618 could be tested. In that case the best stop is to use the support below the “A” in the chart.
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This is a “BIG” stop loss but remember, if you are trying to trade to a far target that will result in a bigger profit, then the risk will most likely
match the profit/reward.
On the other hand, if you are trying to trade to a closer target that can be achieved in a day or two, then the profit is obviously smaller and
closer and sooner. So the stop used could be much smaller as well and just below the “C”.
Now how do we use the A,B,C,D price swing method with the fibonacci's to find a target?
A typical rule of thumb is that if price does not retrace much more than the 618 retracement level, then we could normally expect price to try
and move up to the 618 extension level.
Trader Tip:
If you are using metatrader and need some help in finding extension targets, click the
link below to download a handy little fibonacci calculator. It can calculate the extension
targets for you. Click here to download fibonacci calculator.
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In the chart above I have indicated the price at the “A” low and the “B” high which are the two points we need to correctly draw our fibonacci
tool. Remember, we needed to find the A, B, C, D, price.
I entered this data into my fibonacci calculator which is pictured below. You will notice the 618 extension based on the 382 retracement we
saw in price.
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In the calculator we can see that the projected 618 extension is 1.4471 area.
Let's see how good this method of identifying the price target really is...
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The chart I have been using for this example is the EUR/USD daily.
At the present time price is at 1.4330 area and we have about 140 pips more to go. I have been using these figures on my charts for
several weeks and I printed this chart to remind me of the trend and the possible extension targets.
This way I will place most of my trades on an intraday basis (the time frame I prefer to trade) in the direction of the trend and if I try trading
against the primary trend on the daily chart, I will make sure to take profits within the day and not hold too long.
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Now it's very important to remember not to hold out for every last pip. These price targets are exactly that... something to aim at and they
aren't always hit on the number.
Fulcrum/ Pivot Points
Another tip I would like to share with you that can help you in identifying support or resistance is the use of fulcrum points.
I use them but I mainly use them to help me identify places where price might find support or resistance and bounce.
I always pay attention to pivot points. Many times a pivot point will line up with a Fibonacci level or a psychological level. These are price
points that many traders take profits at or will exit a bad trade. These levels and pivot points occur on all time frames all the time. Price
doesn't always react to them one hundred percent of the time but give them special attention when price gets near them.
The chances of a bounce are higher when a double zero is at a pivot point or a Fibonacci level or at support or resistance. When I see
candle patterns develop at these levels, I wait for confirmation of a closed candle pattern.
The fulcrum point (pivot point) can be calculated by taking the previous days high, low and close and add them together and then divide
that number by 3. That fulcrum point is the number you should remember or draw on your charts.
I will show you an example of how I used it recently.
***There are a few options that you can use to add pivot points and the fulcrum to your charts.
The first is to do a simple Google search for the phrase “pivot point indicator for MT4 if you are using metatrader.
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This chart above is the EUR/USD 1 hour. Notice a few things here...
We want to know if there are “hidden” support areas before we decide to short this pair.
I will show you a key support level that could have tricked traders into shorting right in to a support level.
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Here we can see support and candles closing below it. But why did it stop and not really move much lower.
Well... in the next chart I will show a potential area of support that was not visible as a swing high or low.
It was a fulcrum from two days earlier!
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Now I used a combination of the two, the fibonacci 50% retracement and the fulcrum.
Now with that kind of support running through there, I would not want to short and if I did I would either take profits quickly or put tight stops
on any short trade.
Always remember that support and resistance are not always a perfect number. Meaning that price will not stop at the exact number. Often
times its just a barrier or a range of support or resistance made up of several levels incorporating fibs, fulcrums, trend lines, psychological
levels etc.
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A Simple Scalping Strategy
(the HL30 trading system)
The trading strategy I am going to show you is one that we use every day. It has been called the HL30 from the
time I first developed it and I use it for mostly scalping, (my idea of scalping is about 15 to 20 or 25 pips)
My students and I have used if for several years with great success.
I even have some students who will only use this technique and it can provide them with hundreds of pips per
week.
Before we move on, you must be aware that it might not work the same for you on your first attempt and you should exercise caution when
trying to apply new methods to your trading strategy. It is not always possible to explain every nuance and it isn't always possible to have a
complete understanding of a strategy right away.
It has often been said that in order to truly understand the way a trader uses a specific strategy, you have to get inside his head.
This means that you have to see things the way the trader does when the trader uses a strategy.
Please be careful applying any trading method and always use a demo account when you are trying a new trading strategy.
The set up is quite simple.
The challenge is to repeat it without any mistakes. If some of the components are missing or do not line up, then there is no trade and I
suggest waiting for the next opportunity. There are other times when all the criteria has been met and the trade could still fail. Often, this
can happen inside of consolidation if it last more than a few days.
Please note that economic data can have a huge impact on your trade especially if you trade on an intraday basis. The profit targets I
suggest here are general targets and each trade should take into consideration the current market environment.
The HL30 trading system is designed to generate trade signals and to do so with the least amount of visual distraction.
This basically means that the easier it is to identify and confirm a trade, the easier it is to quickly find and execute a trade order.
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The indicators for the HL30 (how to set up your charts)
I begin with and always use this method on a 30 minute chart.
There is really one indicator that is necessary and that is the CCI. Set at 14
Candle Patterns that are necessary:
•
Bullish or Bearish Engulfing
•
Evening star
•
Morning star
Trade Structure:
The trade begins with identifying the previous day high and low on the 30 minute chart (hence the name of this strategy HL30 is High and
Low of the day on the 30 minute chart)
The only indicator used in this technique is the CCI indicator with the 14 setting.
We identify the high and the low for each day on the 30 minute chart. If you are using the metatrader charts, you can select the option in the
“tools” then select “options” then select the charts tab and check the box for “show period separators”. This will automatically draw a vertical
line on your charts when a new day starts.
Once you have identified the High or Low for the day, you need to wait for a candle pattern to complete and close at the high or low within
10 pips.
Within 10 pips means that the price cannot move more than 10 pips above the high and price must come up the the high no less than 10
pips. Just the same, if price is testing the Low, price cannot move lower than 10 pips below the low and must come down to the low no less
than 10 pips away from the low. (please see the charts below)
The final confirmation of a valid HL30 trade signal is to measure the CCI indicator. On the candle that completes the candle pattern, the
CCI reading MUST be lower than the “Spike high” CCI reading of the previous day. And just the same if we are trying to trade a HL30 trade
off of the support level, the CCI reading MUST be higher on the candle pattern that gives us our signal, than the previous day low reading
of the CCI indicator.
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Chart 1 EUR/USD 30 min
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In this example we entered short on a bearish engulfing candle.
In order for a signal to be confirmed, there must be a closed, completed candle pattern.
(the entry was on the closed candle “A”)
On the EUR/USD pair we are only looking to achieve 20 pips with the same size for a stop loss. If there happens to be a small rally in place
then we will trail the trade for perhaps another 20 pips. If the price action has been somewhat muted and there is no economic data
available then we would most likely look for a close target with in the nearest support or resistance range.
The set up requires that each day must be identified. We do this by adding a purple vertical line to each chart on the 30 minute time frame
right at 5 pm New York time. This begins the new day. From this we can determine the high and the low of the previous day.
(the olive vertical lines are drawn in to highlight the CCI measurement on the signal candle compared to the high or low of the previous day)
In the EUR/USD example, price moved back up to the high of the previous day a few hours after the start of the new day.
Price must be within a 10 pip range to qualify as a test of support or resistance. This means that the candle that attempts to test the
previous day high or low must be either within 10 pips short or beyond it. If it moves further, the trade is canceled.
The 10 pips rule is the same for all currencies when we use this strategy.
Once we have confirmed the price move or retest is within the 10 pip rule, we wait for the closed completed candle pattern.
In this case (EUR/USD chart 1) we confirmed that there was a bearish engulfing candle.
Before we enter, we need to check the CCI indicator.
As was the case on the EUR/USD chart 1 above, the closed completed bearish engulfing candle CCI reading printed a lower CCI
measurement than the CCI measurement when price made the new relative high from the previous day.
This is very important because if the CCI does not confirm then we have no trade.
In this case the confirmation was positive and we have a trade.
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The entry is on the close of the candle pattern!
No delay or hesitation. The target on the EUR/USD is 20 pips and we use a 20 pip stop. If price continues to rally we will trail the trade to
the next 20 pips if possible.
Chart 2 EUR/USD 30 min.
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Now you might recognize this chart, it was the same pair on the same day.
After we shorted the EUR/USD and took profits, we waited to see how price would react when it returned to the previous days low
(support).
As you can see it entered the 10 pips rule (zone) and then printed a bullish Morning star pattern with the CCI measuring a higher reading
than the previous day low CCI measurement.
Again we took 20 pips and use the same size stop loss.
(please note that this opportunity does not happen all the time and this technique works best inside on consolidation)
Chart 3 GBP/USD 30 min.
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This trade is similar to the EUR/USD short above. We use the same candle patterns wait for price to move to previous day high (within the
10 pips range) and look for the closed completed candle pattern. Once we see the completed candle pattern we confirm the CCI
measurement and then place the trade immediately on the closed candle pattern. On the GBP/USD however, our profit targets are 20 pips
and the same size stop loss.
Chart 4 EUR/JPY 30 min.
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The trade above was on the EUR/JPY. Again using the same criteria and confirmation.
The profit targets on this pair are 40 pips and the same size stop loss.
Using the HL30 when trading the news
There are a few key points I would like to share with you if you are considering using this strategy when economic data is set to be
released.
If you find an HL 30 trading signal 30 minutes to one hour prior to major economic data I would suggest holding off on the trade in waiting
until the data is released. It isn’t so much because the trade will not work, it is that during economic data price can spike up or down more
than the typical stop loss level we use on each HL 30 trade.
If you find that a signal has developed before major economic data and price has not hit its target at the time the data is released, it’s
possible to reenter the trade once you have confirmation of the data and it supports the signal.
Please keep in mind that not all economic data is a trading opportunity. And often times an economic report can produce a very good trade
one month but the next month not deliver anything at all but uncertainty.
Please remember regardless of whether or not the signal develops around the news, the key is to identify the candle pattern first at support
or resistance. And only confirm a closed completed candle pattern.
Exit strategy
Here I would like to review a little more on the topic of exits and strategies.
As we mentioned earlier, looking for two profit targets for every trade is a very important component of a trading system. Almost every
successful trader will exit a trade at two or three different levels.
This is applicable to any time frame. Obviously looking for two profit targets on a 30 minute chart would be a much smaller range and profit
potential then what is possible on a four hour or daily chart.
With the HL30 trading strategy we have meticulously calculated the distance price will typically travel after bouncing off of support or
resistance on the 30 minute chart. Included Into this price calculation is where the candle pattern completes and confirms an entry.
If you choose to use this strategy on a larger time frame please do some research and calculate what a typical range is for that particular
time frame after the HL30 trade system develops.
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Check List when placing a HL30 trade:
There are definitely ways to reduce the chances of a trade that fails.
Use this check list when confirming a trade
1. First identify the previous day high and low.
2. Watch for price to test the previous day high or low with in the 10 pip range. (e.g. it must not fail short of resistance by more that 10
pips or move beyond the high more than 10 pips)
3. If the price test of the previous day high or low confirms then wait for the closed completed candle pattern on the 30 minute chart.
4. Once the closed completed candle pattern is confirmed then the CCI indicator must be confirmed before placing the trade. (e.g. the
CCI measurement should be lower on the closed candle pattern than the previous day high candle on a short trade and higher on a
long trade)
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HL30 Trading System Trade Check Sheet
Before you place the trade please make sure of the following:
•
Did you set a vertical line on your 30 minute chart at the 5 pm eastern time (new york time) start of the new day?
•
Make sure you are using the 30 minute chart
•
Make sure you identify the weeks high and low
Trade criteria:
•
Has price tested the previous day high or low within the 10 pip range?
If so, move to next step, if not consider skipping the trade and looking for the next one
•
Has a closed completed candle pattern appeared?
(bullish or bearish engulfing candle pattern, evening or morning star pattern)
If so, move to next step, if not consider skipping the trade and looking for the next one
•
Do you have CCI confirmation? (CCI must be set at 14)
e.g. lower CCI measurement on a bearish set up, higher CCI measurement on a bullish set up
Entry is on the close of the completed candle pattern is all criteria is confirmed.
•
EUR/USD uses a 20 pip target with a 20 pip stop loss
•
GBP/USD uses a 20 pip target with a 20 pip stop loss
•
EUR/JPY and GBP/JPY uses a 40 pip target with a 40 pip stop loss
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This trade will give you an idea of the profit potential and the time it takes for a trade to pay. Please remember that every trade is different.
Market circumstances always have an impact on how long it takes for price to move.
Sometimes these trades will pay and hit our targets within 30 minutes, again it just depends on the market environment at the time.
Below is a HL30 trade broken down in more detail. This was a SELL signal and entry was 115.39
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Part two of the HL30 trade above
The reward to risk ratio is always one-to-one when using the HL30 technique.
In the trade above, the pair used was the EUR/JPY and the target was 40 pips with a 40 pip stop loss.
If you trade more than one lot at a time, you can close at the appropriate target and set the remaining open lots at a break even stop.
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More examples of the HL30 trade: The chart below is a HL30 trade from the previous day low on the 30 minute chart of the GBP/JPY. This
pair also uses a 40 pip target and a 40 pip stop loss placement.
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This HL30 technique can also be used during News Trading events. The chart below is the 30 minute chart of the USD/CHF during Non
Farm Payroll. The entry actually developed several candles before Non Farm Payroll was released.
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Before we move on further, I would like to share with you my thoughts on what makes one trade better than other. I think it's important to
share this with you because you might will be tempted to try some of these techniques. You will need to determine which method to use
and when to use it especially when more than one trade develops at the same time.
Why is one trade better than another?
It all comes down to the rules within your trading system.
For example if you’re looking at three or four currencies trying to find a setup you might notice that at times there are certain currencies that will
move opposite each other or mirror each other. This isn’t the first criteria for valid trade but for the most part there are some that will behave in
this manner.
So let’s take the EUR/USD and the USD/CHF for example.
At the exact moment you see a potential level of support or resistance on one pair and try to translate that information to the other pair that you
hope will move opposite, it could give you false signals.
Often new or inexperienced traders will throw all structure and discipline out the window for the opportunity to find a trade that they cannot
validate.
The key in identifying the best trading opportunity is to stay true to your trading rules. Even if you see another currency that appears to be
mirroring your currency with a valid signal, it’s best to only trade the one with solid confirmation. The one that has signaled according to all of your
trading rules.
One such example of this scenario is explained on the charts below.
To set up this scenario, we will review how these two trades set up.
The first chart you will see is the EUR/USD 30 minute.
you’ll notice that there are a total of 12 candles once the new day started which is identified by the vertical line. At the point when the 12th candle
appeared it looked like the euro/USD was running into some resistance at approximately the 382 retracement from the previous downswing.
The 382 retracement level is a very popular location for traders to enter positions anticipating the continuing trend or looking for a reversal.
Even though it is popular, it isn’t necessarily the best location to enter. There are many things to consider and most successful traders will
not recommend entering simply with price touching a certain level without confirmation.
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We also know that the 382 retracement level can sometimes act as temporary support or resistance which will then soon enough give way
to even further retracements. Often times price can go deeper than the 618 retracement level.
This possibility creates a challenge for most. Whether they should trade from the first retracement to the 382 or wait for the 618 level?
Again there are trading strategies that develop around these opportunities but require much more information to process for a valid trade
signal.
The simplest way to identify the best trading opportunity and not get stuck in the potential of a further retracement which could stop you out
using a small stop loss, is to use the one that follows all of your rules.
In this case, the USD/CHF met every trading rule when a signal was generated.
On the USD/CHF 30 minute chart you will notice 12 candles after the new day began it printed and engulfing bullish candle. This is what
we like to refer to as the HL 30 trade.
All forms of confirmation were met on this pair.
You’ll notice on the second chart for the EUR/USD which was 18 candles later, price retraced higher to the 618 level. This retracement
would have stopped out a trader using a stop loss of approximately 30 pips.
The second chart for the USD/CHF shows a retracement of the support level but nowhere near approaching the 30 pips stop loss.
Moving forward, the third chart for the USD/CHF shows price reaching its final target which was approximately 60 pips from the entry. This
trade resulted in approximately a two for one reward to risk ratio.
There was very little to worry about during this trade.
The EUR/USD however would have required either moving the stop loss to a higher level or being stopped out completely before price
ultimately moved back down towards lower levels.
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Just because something looks okay doesn’t mean it’s the right trade. It’s vitally important to confirm every aspect of the trade and make
sure that it follows your rules. Each trade is either a yes or a no. In other words like an on or off switch.
EUR/USD Chart 1
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USD/CHF chart 1
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EUR/USD chart 2
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USD/CHF chart 2
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EUR/USD chart 3
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USD/CHF chart 3
This is the HL30 on the 30 minute chart
This trade resulted in approx 60 pips with a 20 pip stop loss.
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More on trading in the right conditions:
I have often been asked what is it that I do differently from the majority of the other traders out there that helps me remain more profitable?
I have to say that the biggest advantage I have is knowing when to STOP TRADING!
I learned the hard way meaning that I lost a lot of money before I figured when the right conditions occur for a specific trading signal.
I often see one of these set ups in this ebook occur throughout the trading sessions but they don't always set up at the right place.
For example, if I see a HL30 reversal candle pattern and it develops in the middle of a consolidation range as opposed to setting up at the
most significant resistance or support levels, then I would stay away from trading the HL30 pattern.
The reason is that I feel many candle patterns that develop in the middle of trading ranges are not always that reliable.
I feel that I am going to see the most reliable reaction to a specific candle pattern that develops at a major support or resistance level
simply because most of the market is looking at the same thing.
I want to trading with the market. Even if that means waiting and sitting on my hands for the right trading opportunity that is more in my
favor than trading price action that I don't understand and can't determine the reason for price moving in the first place.
Obviously in order to know what the optimum conditions are for a particular trade set up, it requires a great deal of testing and recording the
results.
Its always important to keep in mind that regardless of the technique, if you create your own trading strategy... make sure it is build on
“solid market principle” (more on that later)
To help eliminate trading mistakes, its necessary to have a system in place that will help you determine the current state of the market...
“its it trending or is it in consolidation?” This will determine the strategy to be used.
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Make 100 pips Trading Divergences.
There are several ways to trade divergences and several indicators that can help you identify the divergence
between price and the indicator itself.
I prefer to use the CCI indicator to trade divergences and it has worked well for me over the past 13 years. This
technique most likely works on many different time frames but I have only used it with the Daily, the 4 hour, the 1 hour and the 30 minute
charts.
I prefer to use the “trading divergences” technique on larger time frames to make more money on the trade and I am not required to sit in
front of the computer screen minute by minute until price hits a target.
When I find a potential trade set up, I will not enter a trade unless I can find a target. This means a target that I have tested and a target
that makes sense by providing a reliable opportunity.
Divergences are, for the most part, easy to spot on a chart. The difficulty is in knowing if price will continue in its present trending move or
reverse and provide and sufficient move that will allow for profits in a trade. I prefer to use the 4 hour and 1 hour together to first, identify the
pattern and divergence and then the 1 hour chart to locate the point of entry.
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The first chart below is the EUR/USD 4 hour chart. I deliberately left the chart plain without technical drawings to highlight the divergence.
The setting I use on the CCI indicator for the 4 hour chart is 20.
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The next four charts are the 4 hour time frame. I begin by noticing the new “relative” high in price at the old resistance level and then immediately look to
the CCI indicator to see if it is also making a new “relative” high. If the indicator is not making a new high, this could mean divergence and will need
confirmation.
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In this chart below we will zoom in on the possible trade area and analyze the candle patterns, the price action and look for potential profit levels. Finally
identify the stop loss. It is important to think about price first. What I mean by this is that price will create the divergence, not the indicator. The indicator is
only the confirmation. Indicators are derived from the price mechanism. Notice the price swing that creates the divergence. Price moves up one more
time to re-test the old resistance on the 4 hour chart and then stops. The “re-test” will always be different so prepare yourself. Sometimes price will move
higher than the resistance and other times lower.
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Now that we see the divergence, we need an entry candle. I prefer to switch to the 1 hour chart to pin point the entry. I wait until I have a closed bearish
candle pattern. (I would look for a bullish candle pattern if I was expecting price to move up) The entry is on the close of the candle pattern. In this
example we have a bearish engulfing candle. The stop is a few pips above the spike high that occurred just before the bearish candle pattern developed.
The target in this trade is the low of the price swing that created the last spike high. (see chart below for the target)
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In this chart I placed an arrow to the profit target. This is also the beginning of the price swing that helped to create the divergence. The profit target is
always the same and if this technique is used correctly (meaning confirmation) it will work in almost every case as long as the last spike in price is at a
“MAJOR” resistance or support level. In this case we started by identifying the MAJOR or significant resistance level on the 4 hour chart. I most likely
would not have traded a “Sell” trade if the last spike high in price did not occur at a significant resistance level.
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Another example of the same technique using the Oil chart and trading a bullish divergence pattern. Below is the same divergence trading technique only
this time the instrument is Oil and the time frame once again is the 4 hour chart.
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In this 4 hour chart we can see the divergence between the price and the CCI indicator. Again, the profit target is the price swing “high” that creates the
divergence pattern.
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This 1 hour chart is the same area as the 4 hour divergence and shows the exact entry, profit and the stop loss. Sometimes it will be necessary to
combine several candles to form the bullish or bearish candle patterns that are required for confirmation to enter a trade. If the confirmation candle
patterns are difficult to find on the one hour chart, it is possible to use the 4 hour chart.
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Professional Trading Strategies
The next few trading methods are the same ones I have used for many years. There are built on solid market principals that repeat
themselves over and over again. It's been said that there aren't any real secrets to trading, its just information that you don't know yet.
Most of these methods will work on just about any time frame and on any currency pair unless otherwise noted.
I also use these same methods when I trade Index futures, Oil, Gold and Silver.
Would you like some help implementing the trading strategies
you are learning about in this ebook?
Click here for a FREE consultation with me
(http://the4xcoach.com/free-consultation-from-ebook/)
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The Breakout Trade
One of the keys to determining whether or not this trade will work is confirmation.
Many people write about confirmation but they don’t always tell you what they mean by that statement.
In a down trend for example I look for a closed candle below the “B” low on a 30 minute chart. If I see a closed candle
then I have a potential signal candle. (day trading)
Once I have the first part of my confirmation, I look to see that the two indicators are not showing any divergence (i.e., when price is
making a new low, so should the CCI and the MACD histogram indicators).
But the final confirmation comes on the entry.
Price absolutely must go three pips past the low of the signal candle. This is what I consider my entry candle. If I never see price take out
the low by 3 pips then I have no entry and chances are that price will possibly bounce in the opposite direction and price could move back
up to the highs.
So the most important thing to keep in mind is that the entry on the continuation trade is
3 pips above or below the high or low of the signal candle. This is very important.
Another important step in identifying a “Break Out Trade” is labeling your price swings in an A, B, C, D method.
“A” is where a high or low is identified. “B” is the high or low from the “A”.
“C” is usually the entry on the Pull-Back in a Trend Trade.
but with the Break Out Trade, I must see a closed candle above or below the “B” high or low.
Please remember that it's all about recognizing the pattern. This way you can quickly identify and confirm your trades.
Targets are based on the “A” to the “B” price swing. If the “C” forms a candle pattern at a Fibonacci retracement, pivot point or / and a
psycho level and no further than the 618 retracement level, then I would look for a potential target at the 1.618 extension level. The
extension targets will work best when they line up with a psycho level or support or resistance level.
The stop loss level is 15 pips above or below the “C” high or low.
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Chart 1 EUR/USD chart. This is the first step in identifying a set up. I always wait for a candle to close. I won't analyze an open candle.
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Chart 2 EUR/USD chart. In this example, price didn't retrace much further than the 382 level so I used the 1.618 extension level as my
profit target. As always... I confirm my trades with the larger time frames and I must be aware at all times the direction of the trend.
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Please note that not every trade will work exactly like this example.
This is the real world of trading and on occasion you will make some mistakes or just simply not see something that you should have the
first time.
Sometimes a trade set up is easier to see on a larger time frame such as the 1 hour or
the 4 hour chart.
This can happen when the price has been in consolidation for awhile.
You would most likely see in this case a lot of “choppiness” and many false signals on the 30 minute chart.
When I first started trading... consolidation was one of the hardest things to trade.
In the beginning you don't really know if the breakout is real or not.
Meaning if it is a whip saw, head fake or false move. Many times price will move back into consolidation.
One of the hard things to overcome as you learn to read the charts and you become familiar with the way price moves around, is the false
sense of security your new ability brings.
If you truly want to become a successful trader it will consume most of your day, your thoughts, even your dreams...I'm not joking.
After some time you begin to get a feeling of what to expect and how the price of a particular currency will react at certain times. This is
where you want to be very careful.
You will feel very proud of your new ability to read the charts and you will try to predict where you think the price is going...but this can
cause much trouble.
When you develop that frame of mind, you can sometimes be so convinced that you know where the price is going to go. If you are in a bad
trade, you might find it hard to let go and cut your losses.
This will cause you to lose more money than if you approached each trade in the right frame of mind.
The right frame of mind.
You must work on developing the ability to accept what ever outcome the market gives you. You can only look for the pattern that you know
has a higher probability of working out in your favor. Then when you think you see the pattern, confirm it and then decide if it is worth your
risk. Always be aware of where the stop loss is.
Don't enter a trade without confirmation and don't try to predict where you think the price will go.
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You can also be influenced by things you read.
Many times you will read articles about what the market is expecting price to do.
Here's a hint... they aren't always right! And the types of trades that others take might be totally different than yours and your goals.
Always read the charts with an open mind.
Your job is to make money. Not predict price movement.
I know that sounds a little confusing but as you will see soon enough, if you pride yourself in predicting price movement your ego will get
the best of you and it will be difficult to recognize when you are wrong.
I learned a long time ago to stop trying to predict price movement.
I just look at my charts from a technical perspective and take into account any and all economic data.
“Once I stopped trying to predict where the price was going to go... I started making a lot of money”!
Another thing with the Break Out Trade... I wont take a trade unless I can find a target using the Fibonacci tool like in the example above.
I have notice too many times that if there isn't a clear identifiable price swing with a measurable retracement, then price seems to float off in
a direction and it is difficult to determine where to get out with a profit.
If I cant identify the price swing, then I don't know where price is going to start turning around on me. When there is a clear retracement and
a good clear extension target, those are the trades I take and those are the trades that pay well and have a higher probability of working out
in my favor.
Below is another example of a Break Out Trade. One very important thing that I always remember to do is check the larger time frames
before placing a trade.
If I see a potential Break Out Trade or Pull-Back in a Trend Trade, I want to know for sure the overall direction.
Example, if I am about to take a Break Out Trade and the market happens to be in a obvious down trend... I don't want to be taking Break
Out Trade and Pull-Back in a Trend Trades in an up direction.
The best way I can tell trend direction is by looking at the 4 hour and daily chart. If I see a trade in the opposite direction .... I sit it out... I
wont take it as hard as it might be. I tried too many times to trade in the opposite direction of the main trend and if my trades turns
profitable.... it usually only pays just a few pips and if I am not there to close the trade, it just turns around and stops me out.
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Same chart as above ... I just took out the Fibonacci drawings. And the main thing to note is that all along I was watching the 4 hour chart
for direction.
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The chart above you can see the 4 hour chart that shows a clear trend developing and clear price swings that are labeled in the A, B, C,
method. These are measured with the Fibonacci's. Notice the angle of the wave is down making lower lows and lower highs.
We still have a long way to go until the “d target” is hit, but as long as price is in a down trend, I will only take trades, (Pull-Back in a Trend
Trades and Break Out Trades) in a downward direction until price comes back up thru the wave.
Again... it is really all about pattern recognition.
Identifying Tops- Technical Analysis
In this section we will review how to identify tops on almost all time frames.
Let's start with one of my favorite quotes from John Bollinger:
“In any given environment there are a limited number of good opportunities...
places to transact where the risk and reward relationships are properly balanced in your favor”.
This to me means that there are specific times to trade and times not to trade. It really all begins with having a reliable trading system that
compliments my personality and my goals. Then its up to me, to carry out my plan and stick to it!
I am going to show you a way to identify and confirm a “Top”. Also known as a location in price where a possible change in direction could
take place.
You will learn how to confirm the signal and trade it safely by using specific patterns that repeat all the time on almost every time frame.
You will also learn which reliable indicators I use on this particular time frame. This example is focused on the 4 hour chart.
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We will be studying how to read the chart when a “top” is in place and where the best trading opportunity is.
Remember... we are looking for places to transact where the risk and reward relationships are properly balanced in our favor!
You may have heard the saying before...”three pushes to a high”.
This is referring to the number of times we might see a high printed on a chart at the top of a move or trend.
As you are probably aware, the patterns we see in the charts are the psychological reactions to the information that traders have and their
expectations of the direction price will move to.
The most common topping pattern is the “Three pushes to a high”.
This definition can be a little vague and I will admit, it does take some practice for you to correctly identify the “three pushes to the high”
pattern. Sometimes it wont be obvious and sometimes the pattern wont be there at all.
This is to be expected because the charts and price activity will not always be the same so prepare for this. If this is the case, then move on
to another chart or trading instrument and keep looking for the pattern.
One more word of caution:
this particular patter can be difficult to see compared to other price patterns. It can also be a bit challenging to find the best entry or
“places to transact where the risk and reward relationships are properly balanced in your favor”.
I will show you one way I trade a top and which indicators and technical tools I use to find not only the entry but the proper targets and
stops.
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In the chart below, we see the EUR/JPY 4 hour time frame. This is the currency we will focus on. There was a clear trend in place and now
we will focus on the “Top” and the “three pushes to the high” Chart 1
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Here I have isolated the area we will focus on. But before we move on, we need to see where price came from and the type of trade that
began the up trend. Chart 2.
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In this chart we can identify the location where price began the up trend and the resistance level it took out in order to signal the move.
From this “breakout”, as the trend develops and moves higher, we count the number of significant highs that are printed.
This is were it requires some practice because the “significant” highs wont always appear obvious or easy to read. Chart 3.
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This “three pushes to a high” was relatively easy to see but many of them aren't. My advice is that if you are struggling to clearly see a
pattern or confirm a trade...”Don't trade it!” Just watch.
After many years of full time trading I have learned to be a patient trader. After all, it's my hard earned money on the line and I don't want to
lose it.
I see too many inexperienced traders placing trades as soon as they see one candle pattern at support or resistance.
I believe this behavior will eventually frustrate traders and can cause more losses.
My experience is that if a reversal or new directional trend is going to take place, I will have an opportunity to get in the move and plenty of
time to confirm that the reversal is actually developing. I do not jump in to a trade immediately when price hits a support or resistance level.
In fairness, I understand the thinking behind jumping in right away, many traders believe that is the best way to minimize the stop.
But...there are many other ways and places to reduce your risk.
I'll show you one way.
Rather than enter a short position immediately when I see the first Bearish Engulfing pattern, Evening Star pattern of other reversal candle
patterns, I chose to wait until a pullback has occurred after I have confirmed the “three pushes to a high”.
Then I patiently wait for the “new” relative support level to be taken out by a candle on the same time frame.
This candle that “takes out the support” should occur with indicator confirmation and on a “sign of strength” (SOS).
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In the chart below, we see exactly that. A candle that closes below the significant support level on a sign of strength with indicator
confirmation. Chart 4.
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Waiting for the pull back not only allows me more time to confirm the possible reversal, I have clear support levels that can help me identify
when a “sign of strength” might occur and that's exactly when I want to enter. I want to be on the right side of momentum. In this chart I
indicated the entry which is a few pips below the low of the signal candle and the stop is placed at the last “significant” price swing high
before the signal candle occurred. Chart 5
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Now... where is my price target???
This is another advantage of waiting for the pullback or new low to be printed and in place rather than jumping in when price makes the first
reversal pattern. Because I waited for the low to print and confirm, I now have a price swing that can be measured with the fibonacci tool.
By identifying the depth of the pullback, I can project a price target with the fibonacci extensions.
In this case we can see that the pullback after the new low was confirmed, was approximately the 618 retracement area.
I also use the A, B, C, price swing method which helps to confirm the new possible trend. (lower lows and lower highs)
Entering on the sign of strength also helps to reduce the possibility that price will pull back after my entry to test my stop loss placement.
In this example, the entry was approximately 120.30 with a stop at 122.16. (this required a 200 pip stop)
The fibonacci extension was the price target based on the depth of the retracement. This is why it is a good idea to let highs and lows form
and confirm them. (they can provide targets). Without targets...what would I aim at?
The price target was 117.00 which resulted in 330 pips profit.
And all of this began with the ability to identify and confirm the “Top” by using the “Three Pushes to a High” method.
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Chart 6.
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Selecting the “right” indicator and one that you like because you know how it works is always the best choice, just do some testing when
learning a new system and adding your indicator of choice. I prefer to use the CCI indicator.
When I look for tops and bottoms I am also looking for price to make “new relative” highs or lows with divergence in the indicator.
Another important indicator I use is the 200 simple moving average for the larger time frames.
Now we all know that every trade won't look like this or be this perfect but all of the structural elements to confirm the “Top” pattern are here
and it is important to understand the very “core” basics. The next time you see this pattern, the symmetry could be off or be difficult to see.
When that happens, take each of these steps to confirm the pattern. If any thing is missing...
just leave it alone. Stay out until you see something that makes sense to you.
Remember...
we are looking for
“places to transact where the risk and reward relationships are properly balanced in your favor”
Identifying Bottom Patterns/ “W” bottom- Technical Analysis
In this section we will review how to identify tops on almost all time frames.
I am going to show you a way to identify and confirm a bottom. Also known as a location in price where a possible
change in direction could take place.
You will learn how to confirm the signal and trade it safely by using specific patterns that repeat all the time on almost every time frame.
You will also learn which reliable indicators I use on this particular time frame. This example is focused on day trading time frames but can
easily be applied to the 4 hour, daily and weekly charts.
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“W” bottoms are one of the most common bottoms to identify. In the first chart we see the USD 1 hour chart. We can see the bottom so now
we will break down how to trade it. Chart 1.
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Here I have isolated the area we will focus on. Chart 2.
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Chart 3.
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In this chart you can see the “W” bottom on the 1 hour USD. Getting to know these patterns is very important in identification and
confirmation. It is basically the first step in “Building” this trading opportunity. Chart 4.
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Selecting the “right” indicator and one that you like because you know how it works is always the best choice, just do some testing when
learning a new system and adding your indicator of choice. I prefer to use the CCI indicator.
When look for tops and bottoms I am also looking for price to make “new relative” highs or lows with divergence in the indicator which can
be clearly seen in this chart. Chart 5.
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Another important indicator I use is the 50 simple moving average for the 1 hour time frame on the USD.
As you can see it gives that additional confidence in confirming support or resistance. Where I drew the oval, there was a nice support level
held with the 50ma. You need to use the right moving average that is relevant to the time frame you are trading or analyzing. Chart 6.
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Now to identify the best place to trade the reversal or bounce off the bottom. The candle that reads “SOS” refers to the sign of strength
candle. This occurs with volume to support the move and you will notice that the candle also closes above the resistance level of
consolidation. I feel the safest entry is when price moves above the high of the signal candle or “breakout” candle. This also occurs with
“up” volume. The stop is below the last price swing. Chart 7
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Additional analysis shows that there was a great deal of confirmation for this trade. The A, B, price swing has a retracement of the 618 level
at the “C” and if we calculate correctly, the extension would be approximately 74.70 as the target. This target level is also just before price
touches the significant resistance level and that's always a good place to take profits. Chart 8.
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And lastly we can see that overall... this was an inverted head and shoulders pattern. Chart 9
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Now we all know that every trade won't look like this or this perfect but all of the structural elements to confirm the “Bottom” pattern are here
and it is important to understand the very core basics. The next time you see this pattern, the symmetry could be off or be difficult to see.
When that happens, take each of these steps to confirm the pattern. If any thing is missing...
just leave it alone. Stay out until you see something that makes sense to you.
Remember...
we are looking for
“places to transact where the risk and reward relationships are properly balanced in your favor”
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Daily Chart Trading System
The Daily Chart Trading System is designed to give you plenty of time to prepare for your trade, time to confirm the
reasons for the trade and time to execute the order.
This is perfect for traders who don't have time to sit in front of their computer screen for 10 to 16 hours at a time.
This trading system will also absorb most of the reactions from economic news on a daily basis since we are
monitoring the daily charts. You can also hold the trades open through the weekends without much concern if price isn't too close to the
stop loss level.
You also need to consider the logistics of trading on a Daily chart. This will obviously have a major influence on the amount of leverage you
use due to the size of the stop loss placements.
It is not uncommon to see stop loss levels in excess of 200 to 300 pips or more on a single trade. You absolutely must take this into
account when determining whether you can afford the trade or not.
I never recommend using more than 5 percent of your account balance on all open trades... and you must consider that if the trade moves
against you more than 100 pips or more, this will increase the percentage of capital exposed on the trade.
Please read the line above again!
Understanding the importance of leverage and controlling that leverage and maintaining a disciplined approach to money management is
one of the most important factors between success and failure.
If you have a small trading account and you still wish to trade the daily charts you need to make an adjustment to the leverage you are
using and keep in mind my recommendation of never using more than 5 percent on all open trades at a single time.
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The time frames used:
In this trading system we will be using a classic system that many successful traders use.
It involves using the daily chart and the 4 hour chart only.
The daily chart is used to determine the trend and direction and the 4 hour chart is used to time the entry.
The indicators used:
This strategy mainly revolves around the Donchian channel indicator.
The Donchian channels are added both to the daily chart and the 4 hour chart.
The setting for the Donchian channel daily chart is 20 and the Donchian channel setting for the 4 hour chart is 55 which is a typical
Fibonacci number.
(you can download a Donchian channel indicator for MT4 charts here)
We will also be using the typical 200 day moving average (set at the close) for the daily chart. This will help visually determine the trend and
the strength based on the angle of the moving average and distance of price from it.
The last indicator used in this strategy is the Stochastics on both daily and four hour charts set at 14, 3, 3.
Step one:
Always trade in the direction of the trend! (price above the 200 day moving average on the daily chart, then only trade up and vice versa)
The decision is up to you to determine the strongest trending currency pair. You will notice the angle of the moving average and the
distance of price in relation to the moving average. It is still possible to trade a pair that is not trending as strong but it is preferred to use the
strongest trending pair.
In this manual we have a perfect example of a pair (GBP/USD) that is still in an uptrend according to the position of price in relation to the
moving average. (please see chart below)
The set up:
In this example we will assume that we are looking for a trade in a up trend and a long position.
We will also need to use the A, B, C, price swing method, (not to be confused with Elliott Wave). We will be looking on the daily chart for
price to remain above the 200 day ma but touching the lower channel of the Donchian channel indicator. This should preferably occur at the
“C” in a pull back during a trend up. (please see chart 1 below)
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Chart 1
In chart 1 above, we start looking for an entry when we can confirm that price is above the 200 day ma and still in an uptrend.
When price returns to the lower Donchian channel, we switch to the 4 hour chart and look for the entry to go long again assuming that the
trend is going to remain in tact.
Once we enter the trade from the 4 hour chart, we switch back to the daily chart to manage the trade.
In the next two charts below, we will see a recent (as of this writing) trading opportunity and how we use both time frames.
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Chart 2 Recent trading opportunity/ example. GBP/USD daily chart
In the chart above, we see that price is still above the 200 day ma and price has returned to the lower Donchian channel.
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This is the first step to identifying a trading opportunity. Until price touches the upper or lower Donchian channel we don't do anything but wait or look at
another currency pair for a trade. Now we switch to the 4 hour chart and look for the entry.
Chart 3 four hour GBP/USD chart
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In the four hour chart above, we can see that the Stochastics has been in the “extreme” level and is returning back up.
Now we use a Donchian channel indicator set at 55 and wait until price touches the upper Donchian channel at the high where the arrow is,
plus one pip. This would also theoretically confirm the uptrend when price starts to break out to the upside again.
As you can see this will require a large stop placement.
The exit: (take profit)
We exit the trade when price in this example, returns back to the lower Donchian channel on the four chart.
Trailing stop:
You can move the stop up (in this example) when price takes out the last high and makes a new high, then set the stop just below the last
swing low.
Closing: Trading on a larger time frame like the daily and four hour charts can eliminate the pressure of intraday trading. This is only good
for certain personalities. Others prefer constant activity on a hour by hour basis.
No matter which trading style is right for you, you must consider the leverage required to trade any method.
Obviously we are all looking for as many trading opportunities as possible but I think we would all prefer a method that is comfortable,
profitable and provides a good rate of return.
I also use a combination of fundamental analysis while managing the trade, incorporating economic data into my decision.
I use these strategy on the GBP/USD, EUR/USD, USD/CAD, AUD/USD, EUR/JPY and the GBP/JPY.
Below is one of my trading account that is a result of my swing trade strategies and a combination of some short term trades that are
opened for a few hours at a time.
Approximately 50 trades since the first of the year 2011
No losing trades.
Approximately 30 percent return from Jan 2011 to June 2011.
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These trades are again a combination of mostly swing trades on daily charts and 4 hour charts and some short time frame trades that are
opened and closed with in a day or two.
Real trading account, there are no trades omitted from this statement. Jan 2011 to June 2011.
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I personally trade each of the Swing Trade Alerts and I know how important protecting capital is and I never place a trade that is outside of
my trading system.
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How to “Trade The News” using economic data
My story of trading the news
My experience with trading the news begins about one year into my trading career.
During the first year of trading Forex, I was aware of economic news releases and the impact it made on price but since Forex was so new
then, it was difficult to gather enough information about the news so I spent hundreds of dollars on books in the subject of economics.
I also spent countless hours at the local library researching each economic report that was available on very basic economic calendars.
The challenge at that time was that most of the information I read was not related to the Forex market. Meaning that there was no clear
explanation of how the particular economic report related to or affected a currency.
Sure there was lots of information about exchange rates and interest rates and what governs those decisions for the most part but it wasn't
clear how I could formulate a trading plan from economic data.
So I began with the realization that there is going to be a news event just about every day. Additionally, I would get a chance to trade some
of my favorite economic reports at least once a month. Knowing that I was going to be trading for the rest of my life, I knew I had more than
enough time to study and learn how to trade these reports.
One of the most important steps I remember taking in the beginning was trying to calm my mind and except that I would not be trading a lot
of these reports in the beginning was live money. My goal was to understand each of my favorite economic reports and the effect it has on
the currencies I was able to trade through my broker.
This definitely took the pressure off. I repeat this was a very important step.
During my first year I couldn't wait to place a trade. I was always looking for an opportunity even when there wasn't one. But I really didn't
know the difference as I had nothing to compare it to. And over anxious and stressful attitude is what most beginning traders experience.
This is one of the biggest reasons that people will blow up that first trading account.
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Another advantage to taking my time and study each of these reports is that I also analyzed the reaction in price the moment the news was
released. This also taught me how brokers can manipulate the price to frustrate their clients/traders causing them to lose when they don't
have experience.
Back when I started trading the news, you could still straddle.
Brokers also guaranteed fills and stops. Obviously they learned right away that this was not a profitable approach so they cut those
opportunities off right away.
Shortly after, brokers started freezing price feeds on trading platforms and issuing re-quotes when traders would try to enter immediately on
the news.
When I developed a system that I was comfortable with in trading the news, I traded with brokers like FXCM and Refco. I cannot tell you
how frustrated those companies made it back then.
I remember one particular economic announcement I was trading with another broker called Forex.com. My story begins with trading in
8:30 a.m. New York time economic announcement. The report was a big surprise and definitely hit my trigger numbers giving me an entry. I
manually place to trade with a market order but the platform did not give me any confirmation nor did the trade show up in my filled orders
box.
I gave it a few minutes and continue to watch to make sure that it would pop up later on at a fill price far from where I clicked to enter.
After about 40 minutes I still noticed that there was no opened trade and I had learned early on that if your broker does until my order on
the first click not to chase it.
One of the things brokers used to do is fill the number of orders people clicked long after a trader place their order. This would not only give
the trader a horrible fill Price, it also executed multiple orders which would have a severe impact on the capital available in their account.
Many times this led to margin calls in just one single trade.
I decided to call Forex.com directly which took about 15 minutes to get through to a live support person. I had also opened and closed my
trading platform a couple of times prior to calling just to make sure the trade did not fill. I told my customer support Representative of my
situation and asked them to confirm that they did not see the order filled. They told me twice that I was safe and that the order would not be
filled in that since almost an hour had passed, there is no way that it would show up after that.
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So I left my office after closing down my charts and told myself, oh well it was just a missed opportunity and there will be another one
tomorrow.
Later in the day after spending time with my family, I went back into my office and open up my computer and charts. This was several
minutes before the New York close. When I opened my trading platform, low and behold, there was my order executed more than four
hours after I clicked the entry price at 8:30 a.m.. Additionally, the price they filled my order which was four hours after I clicked to enter, was
nowhere near where price was at the time they filled the order. Seriously, Price was more than 80 pips away and they still filled the order at
that price, at that time.
Nothing about the transaction made any sense at all and I had live money placed on the trade. I was trading standard lots and had over 25
lots on the trade. This was a lot of money and it concern me a great deal.
I immediately got on the phone with the Forex.com, and of course the customer service assistant who was helping me earlier in the day
was no longer in so I had to start the process and explain it all over again.
This gave them the opportunity to play dumb and act like there was nothing they could do for me.
But as nothing about the trade made any sense, it didn't take much for the individual helping me to realize they were completely screwing
me. It was just that obvious. So after 45 minutes of talking to several different people
they finally told me they would review it and get back to me later in the day.
Fortunately they canceled the trade and put everything back to zero. I was lucky but I was not lucky other times trading with other brokers
because when they get a chance to screw you they certainly will.
I think that most retail Forex traders don't spend a lot of time understanding what happens to their money at a brokerage firm or where the
money comes from that they earn on a trade.
Looking online to research the Forex industry, you read many stories about the interbank and how huge the Forex market is. Yes it is true,
the foreign exchange market is huge and it has been around for a long time.
But the money you trade with your brokerage firm stays within the most part, you're brokers company. You are trading within a small pool
of capital. Your money does not automatically flow into this massive trillion dollar market. And your trades will not make the slightest
difference in price when you place an order.
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New traders also misunderstand price feeds received on their trading platform from their broker. Your broker can and will set the price you
see. It is not like stocks or futures where there is one central exchange for a price is set by market makers. In other regulated markets, the
price you see on your charts is the price in fact.
This is not the case with the Forex retail market.
So in order to consistently earn a profit and build your trading account you need to find consistencies and opportunities to trade when the
playing field is leveled. This time is during the news.
When trading during the news, if the news is a surprise, then it will surprise everyone from banks to your broker and even they cannot
change the fact that price must be reevaluated based on the economic data.
This is how we can compete with the big boys and broker and manipulation and why I believe that it is probably the best way to trade the
retail Forex market.
2. Why should you trade the news?
Trading the news provides just about all traders and in particular, retail Forex traders, the opportunity to level the playing field. The reason
is that everyone, bankers, corporations and traders alike must all take into consideration economic data. This is what will set the price of
any particular currency.
When economic data is released, everyone is looking at the news. I mean everyone from the top of the trading food chain all away down to
the bottom.
As I mentioned, it is the only time the playing field can be leveled. This includes brokers who still have to respect the outcome of that news
and even if they don't have prior knowledge of the numbers before the data is released. This means they're less likely to manipulate the
price as they can at other times.
One important note is to make sure you are trading with an ethical Forex broker that allows both scalping and news trading. I would
suggest contacting the broker you're interested in placing your money with and finding out if they support this type of trading before hand.
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3. Other advantages to trading the news
Using the methods and strategies outlined in this e-book, you will find that you only need to place a few trades each week. This is because
there are only certain economic announcements worth trading that will actually produce a decent profit. Additionally, not every news event
will surprise the market with the release of economic data that is sufficient enough to move price.
Another advantage to trading the news is that you do not need to understand technical analysis. As a matter of fact the primary technique
or strategy used for trading the news does not involve technical analysis at all.
It relies purely on the understanding of what a surprise number of economic data will do to price and how traders will react to it.
That's it! It is the only time the playing field is leveled between Forex retail traders and brokers. Any other time, price data can be skewed in
the favor of the brokers.
There is constant manipulation between spreads from one broker to the next.
How many times have you identified the highs or lows on a chart and later opened up that same chart only to find the high or low has
changed?
That's one of the disadvantages a Forex retail trader experiences. There's constant price manipulation as it is unregulated.
This is one of the consistent flaws with technical analysis in the retail Forex market. It simply isn't always possible to rely on technical
analysis skills when the data feed is always changing.
4. Selecting the news that is worth trading
In this e-book I will only focus on specific economic announcements that are worth trading. There are many types of economic
announcements that are released throughout the month. Some from private corporations, others from major universities and then others
directly from the government.
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Additionally, some economic announcements have a preferred list and individuals or companies on these preferred lists actually received
economic data before the general public.
I choose to stay away from economic news releases that have any potential of favoring one individual over another. I stick strictly with
economic announcement that is under strict policy not to be released until a specific date and time to everyone.
The economic data news releases I choose to trade are from the US, the UK, some from Europe and Canada.
5. Some notes before we get started
You can use any MetaTrader platform you are currently using to apply the strategies outlined in this e-book.
These strategies are fundamental trading methods based on solid principles of economics. These are the same principles used by all banks
and economists every day.
There is really nothing else to purchase as some news providers are free.
Please keep in mind that you get what you pay for when it comes to free news providers. There are many news traders that visit the
specific sites which release the economic data to be traded. Many of them will simply continue to click the refresh button until the economic
data is posted on their website. Once the trader finds the data they simply scan through the report looking for key data to make their trade.
There are other options including subscribing to a chat room that provides live trade signals based on the economic data. There are are a
few good news trading chat rooms out there you just have to make sure that they have a few years experience trading the news
exclusively.
and lastly... trading the news is fun, especially if you do it right. There is normally very little stress and you can control the risks involved.
So let's have some fun!
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Preparing to trade the news
1. Some advice before you start
The first advice I always give any news trader is that you must be prepared to walk away from a trade if things just don't line up according
to your strategy.
My strategy for trading the news mostly revolves around the outcome of economic data and if there is a surprise in the numbers that are
actually released to what the market is expecting.
If there is no big surprise or if it seems to be confusing analyzing the data, I walk away and place no trade.
More words of wisdom
The most difficult challenge you may experience when trading the news is self control.
Most often, economic data will come out pretty close to expectations. The only time we are looking to trade is when the announced
numbers surprise the markets with a great number.
If the numbers reported come in close to consensus there is no trade however inexperienced traders will rationalize the data and take the
trade even though the parameters are not achieved. What ultimately ends up happening is more losses than winning trades.
You absolutely have to learn how and when to walk away from a trade. The typical scenario ends with a trader battling against his own
emotions and better sense of judgment until they either lose all of their money or have experienced enough pain to learn when to stop
trading.
Trigger numbers are possible because it is often very difficult to determine the trend direction without economic data deviating from what is
expected from it.
Determining the prior direction of the trend just before the economic announcement is also a very important consideration.
Brokers can also move price within certain ranges when there isn't sufficient data to set a trend in place.
You must be very careful not to confuse price activity with the actual reaction of traders to economic data
that is a big surprise and deviates far from the expected number.
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2. Selecting the right economic calendars
There are various sources that post economic data news releases which include the expected numbers and the prior numbers. When the
economic data has been released these websites will typically up date the site with the most recent numbers.
It is important to realize that there are on occasion mistakes made to the information on the calendars and the numbers expected so it is a
very good idea to find two or three different economic calendar sources and check them before each event that you are about to trade.
After some time, you will get a feel for what is expected based on your experience trading that particular news event.
3. Trade technique outlining
Once you have determined which economic reports you're going to trade it is time to figure out exactly how to trade it.
You can use the section titled, which news to trade--Chapter 5.
Remember, we're specifically trading news which is sanctioned only to be released at specific times on a specific date. This is the only way
to make sure the playing field is leveled.
We begin by using our specially designed news trading worksheet.
This worksheet as you will see, calls for specific data to be entered on the worksheet before the news is released.
Start with knowing what the market is expecting and what the prior number was. Once we have these two numbers we can determine what
can cause a serious move in the market which will surprise everyone including banks, economists, corporations and traders.
The numbers could signal a trade are called trigger numbers and when they are hit, they typically cause a significant move in price on a
currency that is highly correlated to that economic announcement.
A trigger number is the difference between the announced numbers to economic data versus consensus.
Trigger numbers are a very tricky and somewhat subjective topic if done incorrectly by inexperienced news trader's.
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However I have been trading in news for over ten years in a row and I have kept impeccable analysis of each and every trade I make using
this particular strategy outlined in this e-book.
The only time I lose is when I deviate from the plan or make a small mistake misreading a number. Otherwise, the system is accurate over
90% of the time and on certain cycles does even better than 90%.
Trigger numbers can be thought of like this... the most profitable trades will occur when the numbers that are released vary a great deal
from the expected numbers. So much so, that it completely changes the economic picture.
4. Entry, stop loss and length of trade
As far as the exact entry, I will review in the next chapter however I would like to make a few comments about stop loss and time or length
that he trade should be remained opened.
Some news traders always use about a 100 and stop loss. The reason they do this is that brokers can see physical stops that are placed in
a trading platform and will often widen the spread to tag those levels.
In most cases, news traders will only use a 100 pip stop to make sure that their not taken out of a trade prematurely.
Most news traders will only use a mental stop but they will never ever leave their computer and turn their backs on their trade.
Trading the news requires taking only what is available in order to profit from it consistently. This also means that the trade may only remain
open for a few minutes and possibly no more than 30 or 40 minutes at a time.
Most often however the trade is only open for a few minutes.
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5. Moments before the news is released
I have stated in several places throughout this e-book how important it is to double or triple check economic calendars to avoid any
mistakes in determining the expected numbers to a specific news release.
Another very important but overlooked component is timing. It is very important you are aware of the exact time the news is released even
down to the exact second.
There are some free atomic clocks that can be downloaded and installed onto your computer to make sure that your computer's time is
exactly correct. Believe me you do not want to be even 15 seconds behind an economic announcement, especially if it's a class "A" report.
The next step is to make sure that your news trading worksheet is filled out correctly.
I review this information and sort of role-play what I will do based on the two or three scenarios that are possible.
Scenario one is that the actual number released is exactly as expected or very close to it which would be a "hold" or no trade opportunity.
Scenario two is that the numbers released will surprise and exceed the expected numbers in a positive direction and of course scenario
three is that the number released will surprise and exceed the expected numbers in a negative direction.
Prior to any news announcement it is always important to determine the current market cycle.
For example, at the time of this writing, often times positive economic data for the US can have a negative impact on the US dollar meaning
that good economic data for the US would actually cause or see a price fall in the USD.
In this case, depending on the news and the time in cycle it takes place, we could potentially buy EUR/USD on good economic data for the
US. But, in the past and in prior cycles, positive economic data for the US would see a move up in USD and we would sell EUR/USD.
As I mentioned before I have been trading the news for many years and I have seen the cycles change in all currency pairs. It is always
important to understand which direction a currency moves based on economic data whether it is positive, negative or as expected.
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News Trading Strategies
1. Brief history of trading news events
If you've spent any amount of time researching how to trade the news as a retail Forex trader, you will learn that
there are many different ways or strategies for trading the news the moment it is released.
Rather than spend this time rewriting most of that which is already available on the Internet, I will simply say that trading the news can be a
very simple and safe endeavor if certain principles are followed correctly. One thing is true regardless of which market you are trading, in
order to profit successfully, there must be some consistency's throughout the trading environment including the strategy used to trade it.
Trading the news the moment it is released is nothing new and the same consistent profitable strategies must be duplicated every single
time.
If the components to your trading system do not line up, you must walk away from the trade. This is very important as it will keep you from
losing money and perhaps your entire trading account. Without money you've got no ability to continue.
Do not hesitate to walk away from a trade if you are uncomfortable or do not understand the outcome! There will always be another trade.
That is one of the best things we can count on. You should be in no hurry to lose money because you misunderstood economic data or the
technical information you're looking at on a chart.
The final word here is that you should never feel as though you absolutely must trade. If you are new in this business, you may be feeling
like that now but you've got to work on your emotions and understanding.
In order for you to survive in this business and trade for the next 5,10 or 20 years, you must realize that there will always be another trading
opportunity and if things don't seem right at the moment, do nothing!
2. The most common ways to trade the news
This typically requires that you have access to a news reporting feed or agency that will give you the results of the economic data instantly.
Speed is crucial and of the utmost importance. The disadvantage in this case for most new traders is the cost. A decent news reporting
service could cost about $200 per month. Most new retail Forex traders only have about $1000 or so in a trading account.
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This is one of the differences between retail Forex traders and other traders. In order to trade other markets, a larger capital requirement is
mandatory. Traders in other markets are accustomed to paying more for services and education than most retail Forex traders.
The bottom line is that in order to succeed in any business you must have the right tools and education. The reality is that you get what you
pay for. If you use a free new service, it may work most of the time but please be careful if things start to go a little hay wire at the moment
the news is being released with a free service.
Remember, if things are not working correctly during a news event, do nothing. Walk away and wait for the next trade. Better to watch and
not be in a trade wishing you were in, then to be in the trade losing money panicking the entire time.
3. The setup
When the news is released, you should be prepared prior to the event with a clear understanding of what the market expects the numbers
to be. This is called the forecast or expectation of the numbers based on economists and analysts throughout the market.
It is a very good idea to check more than one economic news calendar to make sure that there are no mistakes made to the expected
numbers. Occasionally mistakes can happen.
Once you clearly understand what the expected numbers are, you can then formulate or determine a trigger number.
A trigger number is simply the result that is sufficient enough to surprise the market from what is expected in the news release.
Trigger numbers are sometimes difficult to determine and they should be updated based on market cycles. The main reason is that what is
important today in the current market environment may not be important next month or six months to a year down the road.
If the news is released with a surprise number and deviates enough to trigger a reaction that is sustainable, causing a re-evaluation of the
currency, then you potentially have a trade.
Another component of trading the news is your entry and timing.
The itchy trigger-finger new trader will often jump into the trade immediately upon watching a spike in the price however if you have traded
the news for any length of time you will soon learn that revisions or subcategories of a report can and do on occasion, reverse price from
the initial spike when the news was released.
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Because understanding and confirmation is crucial to determine a trade,
minutes after the initial spike.
it is required that you wait a few seconds or perhaps even
You are basically doing two things during this time.
1. You are waiting for price to retrace after the initial spike, which will give you a potentially better fill, and
2. You are also taking this time to confirm the economic data and make sure that the direction of price lines up with the outcome of the
economic report.
Remember, you're only entering the trade if the numbers that are released hit your trigger numbers and greatly surprise the market based
on the numbers that were expected to be released.
Be forewarned, if the numbers that are released are not a big surprise compared to the numbers that were expected, do not trade!
If there is no big surprise in the numbers, then price will most likely not move. The big trade orders will not come through and price will only
move sideways within the range that brokers can control.
4. Where to enter the trade?
The most typical strategy used to find the entry after the initial spike is to watch a one minute or five minute chart on the currency pair you
prefer to trade that is most likely to react to the news event associated to it.
Once you witness the pullback after the initial spike, use a Fibonacci tool to determine the retracement depth. Using typical Fibonacci
retracements levels such as the 382 or the 618 are preferred. You could wait for a candle pattern to signal your entry or simply enter when
price has reached one of those two levels.
Obviously if price only retraces to the 382 level, it could indicate that the outcome of the news event was an extreme surprise and price
could continue much higher.
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5. Where to take profits?
There are many different places to take profits.
The first comment I would like to make on this subject is that if you take profits and price continues much further than your exit, do not beat
yourself up over it. Yes it is true that you are leaving money on the table but until you can develop a trading plan based on experience
trading the news, you should be happy that the trade resulted in profits rather than a loss.
Always consider any opportunity as a learning experience, positive or negative.
Typical strategies to take profits include using support and resistance on a five minute chart. Basically you are trying to determine how
many times price touches a specific high or low. These could be a good place to take some profits.
Another exit strategy is determined from the Fibonacci extension level according to the depth of the pull back you measured using your
Fibonacci tool.
For example, if price retraces after the initial spike to the 618 retracement level, you could look for the 100% or the 1.618 extension of the
Fibonacci retracement as your profit taking level.
And last but not least, you can determine your exit based on how many pips price has already moved for the day within a specific range.
This means that you must be completely aware of the daily average range of a particular currency pair you are trading.
6. Where to place your stop loss level?
The most common mistake is to watch the profit and loss on your trading platform to determine your stop loss. What I mean by this is do
not sit and stare at how much money you are positive or negative during a trade.
It is important that you be fully aware of support and resistance to take both profits and place your stop loss.
If for example you are using the Fibonacci retracement/extension method to enter and exit your trade, I would use the low of the price
swing you are measuring with the Fibonacci tool, as the place for a stop loss level. Perhaps a few pips below.
Another method includes using The A, B,C price swing method.
If the "A" represents the low of the price swing, put your stop just below the "A".
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If the entry is at a "C" retracement level, put your stop just below the "C" entry. This "C" entry is usually a Fibonacci retracement level such
as the 382 or the 618.
More on stop loss placement
It is always necessary to have a stop loss whether it is a physical stop and an order already placed in your platform or a mental stop that
you are watching on your charts.
The important factor in determining the right stop loss is paring it to the trading technique you are using. Since we are trading economic
data news releases we are already entering during an extremely volatile time.
But it is one of the most even trading opportunities between the Forex retail trader and broker.
Regardless, there are certain characteristics that cannot be avoided such as price spikes and broker manipulation. Setting your stop loss
to close immediately after entering your trade will allow brokers to aim and hit your stop easily during this volatile trading event.
It will only take a matter of seconds in most cases for this to occur.
This is the reason that most news traders always use at least a 100 pip stop loss. As painful as this may sound compared to other trading
strategies you currently use, it is an effective way of trading the news.
The key to success in trading news events is your ability to control your behavior and determine the outcome of economic data in relation to
your trigger numbers you have prepared.
I included a couple of different strategies for reducing the size of a stop loss necessary such as using the low of a price point after the initial
spike up.
(Of course the same can be true when trading in the downward direction)
But keep in mind if using a stop loss of less than 100 pips during the news you could be stopped out prematurely.
Only with some experience and testing will you realize that it may be necessary to use a larger stop.
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7. Should you add more to your position when price pulls back?
This question should be considered very carefully.
I would only suggest adding to your position if you have had sufficient time to analyze the data, check for revisions and to make sure that
no subcategories of the report have printed numbers that could off set the initial spike from the headline numbers of the report.
The typical strategy involves adding more on a pullback after the initial spike or your entry but this takes into consideration that very little
was added to the position in the beginning, meaning that money management is paramount in this example.
Most retail Forex traders will use margin that requires increments rather than trading in standard or mini lot sizes.
Fading The Double Zero technique
1. Fading the double zero
This is a very popular trading strategy that I thought I should include.
The reason is that we are always looking for trading opportunities and the more tools or strategies you have to find valid trading
opportunities, the less likely you are to jump in and out from pure boredom and find yourself in a losing trade.
This trading strategy involves the news, or specifically the lack of it.
It is very important to be aware of all previous economic data announcements released for the day that you are trying to trade. There must
not be any additional economic announcements released after you have entered your trade using this technique.
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2. The setup
As the title implies, we are watching for the times when price is approaching the double zero levels. Examples are 1.3300, 1.5500, 100.00
and so on.
*** Personal note- I personally put a different colored horizontal line at all double zero levels. This way I can distinction them from other
support or resistance levels on my charts. Since I'm also using different indicators for this particular trade technique, I have set up specific
charts for this strategy.
The time frame used for this trade is the 30 minute chart.
For example, let's say we are watching GBP/USD.
Price is at 1.8800 and begins to drop during the Asian and early London sessions. At the time you turn on your charts and you are prepared
for work, price and begins to move through and below the 1.8700 level.
My entry would be approximately 5 or 10 pips below 1.8700.
My entry would be to go long this pair.
Essentially I would be fading the double zero when price falls
below the 1.8700 level.
The most important component of this technique is to make sure that at the time I enter the trade there is no more economic data that will
be released which could reverse price and send it falling in the same direction it was moving prior to my entry.
Preferably, all of the economic data should be released prior to my entry.
This is very important for the strategy to work.
If you see a situation like this occur and there is going to be economic data released for example, 30 minutes or one hour later, I would
recommend staying away from the trade as part of the confirmation for a valid trade like this is the fact that there is no additional economic
data to be released after the entry.
Additional sources of confirmation are the indicator I use for this technique.
As I mentioned above, I have a separate chart specifically for this technique. The indicator I prefer to use is the stochastics and I'm
specifically looking for indicator divergence versus price action.
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What this means is that as price is falling below 1.8700, I would prefer to see the stochastics indicator moving back up and possibly
through the mid range of the oversold and overbought levels I have highlighted on my indicator.
Additionally, as price falls through and below the 1.8700 level, I could expect to see price bounce off of perhaps an old support level or
even a psychological level of 80.
However price does not always have to touch these support levels to qualify as a bounce.
3. My Entry
For this example my entry could be 1.8695 long this pair.
The stop should be placed 25 pips below my entry.
Obviously the lower my entry below 1.8700, the better if I'm going to be using a 25 pips stop. The entry however is five or 10 pips below the
double zero level.
4. My take profit levels
The target for this particular technique is always 40.
This means if I enter at 1.8695, my target is 1.8740.
On occasion price will continue and sometimes it will even fall just short of 40 but with experience, comes the understanding that trading is
not always perfect and on occasion I will need to close my trade a few pips ahead of my target.
At the time of this writing this technique works about 85% of the time meaning that price can and will achieve the 40 level.
An example of the most recent trade I took using this technique, I closed at 38.
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5. Fading the double zero.
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Which news to trade?
1. The News Events Worth Trading
News events that we trade live in the chat room.
We give you a clear BUY, SELL or HOLD trade alert during these news trading events in the chat room.
2. U.S. Grade "A" reports
Non farm payroll
Trade figures
TIC treasury international capital
Conference Board consumer confidence
Current account
Advance GDP
Weekly initial claim
3. U.S. Grade "B" reports
Personal income and outlays
FOMC announcement
Michigan final consumer sentiment
NAPM Chicago
Retail sales
CPI
Durable goods
Philly Fed survey
Michigan preliminary consumer sentiment
FOMC minutes
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4. U.K. Grade "A" reports
CIPS Manufacturing PMI
Industrial production
Trade balance
CPI
BOE quarterly inflation report
Retail sales
Current account
GDP
5. U.K. Grade "B" reports
Nationwide House Price Index
CIPS services PMI
Halifax House Price Index
MPC interest-rate decision
PPI
RICS housing price index
MPC minutes
GFK consumer confidence
6. Canada Grade "A" reports
Monthly GBP
Labour force survey
Trade figures
Retail Sales
BOC interest rate decision
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7. Canada Grade "B" reports
CPI
Monthly survey of manufacturing
Industrial capacity utilization rate
Monetary policy report and update
News Trigger Numbers
Trigger numbers are just one method to use when trading the news as it is being released.
Many people on the Internet are making a name for themselves simply by repeating what someone else is using as a
trigger number. They post it or email it to everyone on their email list and that's it. The person receiving the email is on their own to try and
figure out how to use the trigger number as the numbers are being released, quick enough to get in and make a profit.
Please keep in mind that the trigger numbers used today, might be different tomorrow. The reason is that they can and should change to
keep up with market cycles.
For example, at the present time, the “Trigger Number” that is being used to trade the Employment Situation Report is 50,000. This means
that the number of new jobs created for the previous month must be at least 50,000 difference from the expected number. But at one time
this number was bigger. When the economy changes we must change our expectation of what the economic data numbers might be.
Remember, even though the numbers released during the announcement don't always hit the “Trigger Numbers”, there could still be a
possible trade developing. Just wait and give it time. In this case I would trade using a technical method but use the economic data as
confirmation meaning that if there was no surprise, then I would normally expect the prior trend to continue if support or resistance are a
distance off.
Many times the reaction to the numbers, good, bad or as expected will allow for a technical trade set up. Just give it time and be patient.
Most “News Traders” walk away and wait for another day if the numbers don't hit their “Trigger Numbers”, while perfectly good trades are
just around the corner, meaning minutes or hours away. Many “News Traders” don't like waiting around for a trade to develop or pay off and
many don't like technical analysis. If they would learn to apply it they could find many opportunities to trade almost every day.
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I have trigger numbers for many economic reports. I don't trade the report using the trigger number right at that exact moment the numbers
are released. Unless of course I see a technical trade set up at the moment the news is released as confirmation. I use the trigger numbers
to determine if the announcement is a surprise or not and I use that information to confirm my trade.
Please keep in mind that using trigger numbers is not an exact science, it is a guess at best. The trigger numbers can and should change to
reflect the significance that each report holds at the time it is being released. Another EXTREMELY important consideration is the
revisions. Get the know the report before it is released and identify if there are expected revisions to the report. (Some reports do not have
revisions)
The trigger numbers below are for US economic data
Non Farm Payroll
50000
Trade Balance
3.00%
Retail Sales (x-autos)
0.10%
CPI (x- food and energy)
0.20%
Current Account
9 billion
Consumer Confidence
3
Existing Home Sales
200000
New Home Sales
50000
Housing Starts
300000
Durable Goods (x-transportation)
1.70%
GDP
0.50%
PPI (core)
0.20%
ISM manufacturing index
2
Capacity Utilization
3.00%
Industrial Production
0.40%
Personal Spending
0.20%
PCE (core)
0.20%
TIC
10 billion
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As I have mentioned before, if I enter a trade at the moment an economic announcement is released it is because of a technical trade that
I can identify and I use the economic announcement as confirmation.
Every time my trade will be different. There are times when I enter a trade several hours before the announcement due to a technical trade
and when the economic announcement is the fuel for the move in price to my projected profit target.
A perfect example is a chart on the HL30 method I showed you earlier. In the chart below (USD/CHF) I shorted the pair a few hours before
Non Farm Payroll was released. If I have correctly identified my trade, the news will typically be the “fuel” to move price to my targets.
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Date______________ Time___________ Economic Report______________________________________ Country________________
Report
Pair
Date
Time
Expect
Prior
Actual
Trigger
Diff
Trade
Spike
UPPER TRIGGER_____________________________
(Signal to__________________
EXPECTED NUMBER __________________
(Prior) ______________
LOWER TRIGGER________________________
Actual _______________________
(Signal to__________________
Notes:
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
____________________________________________________________
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The news trading trigger worksheet above is what I use when I trade the news.
You will see that there is space to enter the forecast data and your trigger number. I must stress the importance of record keeping!
Just like operating a business, you must keep accurate records of all the news events you trade.
You should make note of the price action before the news and after it is released.
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Trading Psychology
Starting off in the right direction
The first thing you must learn to accept is,
"There will be losses no matter what method you use!"
"Think and grow rich". If the title to this very famous book is true, then in this business it could be no further from the truth!
What you think and how you feel has everything to do with your trading success. I know that there are many books and articles that discuss
how mechanical you should be when you trade. The truth is, you will be emotional when you trade. It is your responsibility to learn to control
your thoughts and actions. Like most things in life, in time... most of the things you fear in the beginning will seem easier to deal with and
control after time has pasted.
It is very important that you learn to create a productive environment. This will include the very space you work in while you are trading and
the environment outside your trading space. Some traders I know even go as far as changing the color of paint they use in their office.
There have been many studies done on the human emotional reaction to color.
Preparing yourself emotionally to trade
Before you begin each trading day, you must remember this..."The past does not equal the future."
I am very sure you have all heard this and you know who has made this phrase so popular, but it is very true. If you failed on your last
trade, it does not necessarily mean that you will fail on the next trade. It is very difficult for many traders to take the next trade after a loss.
You must remember that this is a business and you must operate like one.
I know that many new and novice traders panic when they find themselves in a bad trade. They also panic when things happen that they do
not understand. This is a very normal feeling. In my experience, I can tell you that how I feel now when I am in a bad trade is much different
than the way I felt when I first started my trading career.
Now, when I am in a bad trade I do not experience fear or pain. It is perhaps a minor annoyance more than anything else. I do not say
negative things to myself and I know why I have made a mistake. I must apply the discipline to prevent myself from making the same
mistake. I know that one or two bad trades will not take me out of this business. I have created a business plan and I
stick to that business plan.
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This of course is very different from some of the things I might have said in the beginning or some of the things you may say to yourself
now. I have heard many new traders say things such as, "As soon as I get in this trade, price will move in the opposite direction." They feel
that every time they take a trade it will lose. You have to prevent yourself from feeling or thinking this way. Below I will share with you some
of the ideas and exercises I used to change the negative behavior and thoughts I had.
Having a trading goal
It is always a good idea to have a very clear understanding of why you are trading to begin with.
This can be a vague topic but it is a very important one to consider as it has major consequences on your trading style.
I would always ask myself what are my goals for the day? and I would remind myself what it would cost me if I broke my rules. Something I
should mention at this point, is the unnecessary pressure many traders put on themselves. I have seen some traders create a plan that
involves them finding trades that will net at least 40 or 50 pips per day. To have goals is a good idea but to have a goal that can be
influenced by outside factors that you don’t have any control over can be disastrous.
We all know that there are days when the markets are in consolidation. This happens for many different reasons. Things such as the
anticipation of a big economic announcement, holidays and the markets digesting economic data that has already been released can also
affect the value of currency pairs. To force yourself to find a trade that will net 40 or 50 pips may not always be a good idea. It isn't everyday
that we will see a perfect trade develop.
Perhaps a better idea is having daily goals like following your plan perfectly. This can include showing up for work at specific times,
following a routine that would include hourly responsibilities throughout your trading session. Leaving alone certain trades or situations you
know don’t always work.
All of these ideas can be part of a trading plan and you should be proud that you follow your plan even if it means not taking a trade for the
day. You should not force a trade where it does not belong.
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Stop trading!
These two words have helped me save lots of money.
Most new and novice traders feel that if they come to work looking for a trade there must be one and if they cannot find one soon they end
up forcing one that fails. It is very important to follow your trading plan. You must not deviate from your trading plan.
There are also times that you should simply stay out of the markets and not trade at all. The reasons can range anywhere from outside
psychological issues that have nothing to do with your trading but can certainly impact your trading, to the markets being in a transitional
state or consolidation.
It really is okay if you don’t trade for the day! The market isn’t going anywhere and it will be there when you return.
When I first started my trading career in the Forex market, I was very excited that it was a 24 hour market. I made the same mistake that
most people do and that is to try and stay awake for as long as I could in a 24-hour period. I thought that by doing this I could make a
unlimited numbers of pips. Little did I know in the beginning, that there are too many problems with thinking this way.
The first is simply the market will only move so much in a given period of time based on technical and fundamental factors. The other
obvious problem is that we all need sleep.
For a couple of years, I would sleep no more than three or four hours at a time during the trading week. While it definitely gave me many
hours of experience, it affected my mood and my ability to focus after a while. I cannot stress the importance of taking care of yourself in
order to become a consistent and successful trader.
My trading schedule now and has been for quite some time, requires me to sleep at least seven or eight hours at a time. Of course we all
live in different parts of the world so we will have to make some adjustments if we prefer to trade during certain market hours.
If you happen to live in a part of the world where it is daylight when you have to sleep, you will obviously need to make some adjustments
to your sleeping environment and your family and friends will have to be supportive as well.
The point I am trying to make here is the importance of creating business hours for yourself. This is exactly what you will have to do when
creating your business plan. Every business has operating hours. It is important for the customers as well as for your employees and
yourself to know these hours and to follow them. It is another way to add structure and consistency to your business.
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Once you have created your business and operating hours, you must accept that there will be times while you’re closed/sleeping or taking
time off, that trades will develop and you will not be able to participate. This is okay. You must stick to your operating and business plan.
Another time to stop trading is during your trading day.
You must take breaks just like any other job or business you operate. Don’t forget to stop and take a few 10 minute breaks during your
trading session and if you trade for more than six or seven hours, don’t forget to take a lunch break.
During a live trade
What to think when you are in a live trade is very important and requires experience... time and a great deal of self control.
As I mentioned above when I find myself in a bad trade it is more of an annoyance than anything else. The reason it is annoying to me is
that it was probably a simple mistake that could have been prevented. In the beginning of my trading career, if I made a mistake or found
myself in a bad trade and I did not know why, there was a great deal of fear and frustration.
I have a solid trading plan now and that helps me to eliminate the fear and frustration I experienced before. As I developed my experience
and my trading method, I tried many different things to help me keep my mind focused and off of my fears. One of the first things I changed
about my trading style was not to watch every pip go by during an open trade. Doing this in the beginning of your trading career can only
add to your frustration.
What I realized would make it easier during an open trade was to only analyze a closed candle. This is very important and can be used no
matter what time frame you trade from.
If you trade off of a 15 minute chart, only look at closed completed 15 minute candles. Do not try to analyze an open candle. And after you
have placed a trade you can set alarms on your charts and if those alarms are not touched then only look at your charts when the candles
close. These alarms would obviously be set at profit targets and stop loss levels.
We all use different chart programs but the one I currently use allows me to set alarms on my charts which will notify me on my cell phone
when an alarm goes off. I usually receive these messages on my cell phone within seconds after the alarm has been triggered.
Another option to be alerted when a alarm is triggered is to use a baby monitor. This is basically a one-way radio and you set the monitor/
microphone in front of your computer speaker. You can carry around the receiver in your home. What you are trying to do here is remove
yourself from the stressful situation by allowing yourself the freedom to step away from the charts and your computer.
The 4x Coach
You must give your trade time to work. Staring at the charts and watching every pip go by will in
many cases cause you to change your mind and your trading plan. This will not produce
consistent results and will make developing confidence in your trading system even more difficult.
Closing a trade
Nothing in trading is perfect or exact. Many times you will find or identify potential profit targets but price does not always have to hit the
target on the number. You must learn to be flexible. By being flexible you will also allow yourself the opportunity to analyze your trading
method and make changes if they are needed.
A very important tip I would like to share with you is looking for the correct profit targets. I refer to this as looking for realistic profit targets.
What I mean by this is that the market will only move a certain amount at any given time. This is something we can determine on our own
by getting to know the pair we trade. We can analyze previous data by watching the high and the low for the day. You can then determine
an average with the information you have and you will have a rough idea of the normal range for that pair.
By being realistic as far as your profit and target expectations, you will find that your trades will become much more profitable rather than
holding for an indefinite period of time hoping for the market to move in one direction or another. Many times new traders will find
themselves in a profitable trade but do not know where to close the trade and take the money. After some time has passed because of
unrealistic expectations, the trade reverses and then becomes negative.
Writing specific details of your trades in a journal will help you determine whether you are taking profits too soon or if you are waiting too
long to close your trades. You can start looking for profit targets by using a few different methods, the first is by looking for Fibonacci
extension targets.
These are a result of the pullback in price to a specific Fibonacci retracement level. Another target strategy is to look for psychological
levels. Areas such as the 20 , 50 or 80 levels are often repeated in the price swings that occur in the currency market.
If you notice after some time that you are taking profits too soon you can do a little more back testing on your trading method and identify
how much longer you can stay in the trade. You may also wish to look into different types of stops. There are many different types such as
chandelier stops and parabolic SARS are a simple trailing method.
One of your major responsibilities as a trader is to develop a trading method or system that allows you to identify specific entry points and
where to take profits. This will obviously take many hours of back testing. You must also apply the discipline to stick to this trading plan but
at the same time be flexible if you see things might be changing in the markets.
The 4x Coach
However in regards to targets and stop loss levels, I have a saying that I use once I have entered a trade... "its stop or target!"
"Stop or target" means that once I have entered a trade there is nothing else I can do but manage the trade. One of two things will happen
after I have entered my order. Price will either hit my profit target or I will be stopped out. Either way it does not make me a bad trader or a
loser. I do not think in those terms.
You are never a bad trader because you have lost money on a trade. The results of your trades should serve as an indicator to you of either
your experience and discipline or it will simply point out your weaknesses and where you must apply more effort. The results of your trades
will point out what you must work on at any level.
I can share with you from my own personal experience that whether I have a winning or losing trade, overall it does not have an emotional
effect on me like it did in the beginning of my trading career. Of course it is always good to win and make money as opposed to failing and
losing money but I don’t spend any more time thinking about a winner or a losing trade other than the time I spend analyzing the trade.
Whether I have a winning trade or a losing trade, I spend a few moments perhaps 10 minutes looking at the trade to make sure that I either
did everything correctly or find out why the trade failed. You will find that when you fail it is usually because you have deviated from your
trading plan in one way or another.
How to get back on track
When you start to make big mistakes and you find yourself breaking your trading rules and feeling out of control, it is very important that
you stop trading immediately. You must determine why you feel the way you do and why you are trading in a reckless manner.
If some of the behavior comes from outside forces which do not include your trading business, you should address those issues before you
continue to trade. Trading is a serious business. You are in the business of making money. Your inventory is money. You must do everything
you can to protect yourself, your business and your inventory.
If you feel after a while that you are ready to begin trading, start slow. Set a small goal or focus for the day. Remember, do not get focused
on the number of pips or money you feel you must make for the day. What is important is that you follow your trading plan and your goals.
Your goal should be not to break the rules. If you have created or found a trading plan that you have tested and you know can produce real
results then you must do everything you can to follow that plan. By following this plan you should obviously make money if the trading
system works.
The 4x Coach
Please remember... it is okay if you do not trade for the day!
On occasion, there are days when I do not trade. If I do not find a trade I am not angry or upset. I do not feel that I have wasted any time
and I do not feel the pressure from not making any money for the day. If there is no trade available for me I should not be trading. If I force a
trade where it does not belong I will only lose money as it will most likely fail and I would have saved money by staying out of the market if
there was no trade available to me according to my trading plan.
There are many resources available on the Internet to seek psychological help for traders. I have even tried some. While most of what they
have to share is common sense, the key to making help like this work for you is being committed to the program and be honest with
yourself. Some things just take time for you to understand. And there is also the harsh reality that you simply may not be ready for the next
stage of your career yet.
More tips for becoming successful
Many books on the subject of self help are good. But when I read those books I often found myself wondering, how does this information
apply to me?
The first time I read through some of these books it was difficult for me to place myself in those situations I was reading about. The obvious
reasons for feeling this way was because I did not have any prior experience with the situations I was reading about. As time passed on
and I gained more experience as a trader I would re-read the same books and many of those situations became very clear the second or
third time around.
I have been asked quite often, "Was there a key moment or a specific day that I realized my trading had changed and I had become a
successful trader?"
I have always kept a journal during my trading career. At different times of the year I would take the time to re-read my notes in my journal. I
could see patterns developing in both good and negative ways. As I became more and more successful, I would notice how truly happy I
was to be doing what I am doing as a trader. There was no longer any fear but it did not happen overnight. It was an accumulation of many
days and nights weeks and months of hard work, study and preparation. As far as the fear factor, it just takes time to get used to it so
please prepare yourself now for the length of time it may take for you to achieve true success and comfort with your trading.
The 4x Coach
It is very true that we all learn and process information in different ways. We also have different time frames available due to other
responsibilities. Not every one of us will have the good fortune of quitting a full-time job to become a full-time trader. All of these factors will
determine how long it will take for you to find your true path and success as a trader.
So in answer to the question above about if I noticed a specific day when my trading changed for the better, it was a gradual process and
during most of it I was actually aware that I was succeeding but what I noticed was that my successes where built one on top of the other.
My strength came from repeating all of the right things according to my plan. If there was something that happened during a particular trade
that I did not understand but I followed my plan completely, there was a great deal of confidence created from following the plan. Following
my plan and the confidence it helped me create, allowed me the strength to take the next trade and so on.
There are always going to be good days and bad days. My goal is to minimize the bad days by following my trading plan with strict
discipline and determination.
There are many ways I created the energy levels required from both a physical and mental point of view. I realized right away that for me to
have enough mental focus for ten hours a day or more, I would definitely need to pay attention to what I eat. I read many different books on
nutrition and brain function. I also realize the importance of being physically fit which helps to elevate my energy levels for the endless
hours I spend watching the charts, reading the news and analyzing all of this information to determine a valid trade.
It has been said that until you pay your dues you will most likely continue to struggle. Obviously this means the more time you have
available to study the market, the sooner your success can come to you. I realized this at the very beginning and I knew I was in it for the
long haul.
Anything you can do to improve yourself stands to boost your confidence. As confidence is one of the biggest factors that will make or
break your trading success, realize that you should always protect yourself in every way both emotionally and financially.
The 4x Coach
Taking personal responsibility.
I have said to many of my student traders that it is important for them to understand that they must apply personal responsibility in their
trading. As nothing is ever exact in the world of trading, we can only hope to provide as much structure to allow us consistent profits but we
must be flexible and realize when things either do not work or there may be changes in the market.
This is a very unique business and it is difficult to really find any correlation between trading and something you may have done in the past.
But it does help to apply techniques of discipline and confidence.
During the first two years of my trading career I did many different things to keep myself on track. I wanted to remain accountable for all of
my actions good or bad. An example of some of the things I did are like rating my trades. Each trade that I took I would rate them with a
number 1, 2, or 3. You can do the same with an A, B, or C.
"1" is a perfect trade. This means that I entered correctly and I took the proper exit according to my plan.
It also means that I allowed the trade to take as long as it needed to without worrying about it! Remember..."Stop or target"
“2”, means that either my entry was wrong but my exit was according to plan or vice versa
“3” means that I was completely out of control and my entry and my exit was wrong.
I hung a large white dry erase board on my office wall. Each day my family members would come into my office to see the results of some
of my trades as I would post my ratings for each of my trades. Obviously the goal here is to have as many “1’s as possible. I also created
worksheets for these ratings.
I also developed many rules during my 11 years of trading. I created separate notebooks that consisted of my top 10 rules and before I
started each trading day I would review all of the rules and read them out loud.
The other important feeling that I can share with you is that I always knew I would stay in this business and I would succeed. I was going to
stick it out for as long as it took. There was never a time in my mind where I felt or thought that I should quit. There were obviously times in
the beginning where things appeared to be out of control and somewhat hopeless in the sense that I was not sure how long it would take
for me to create a system of trading that would work consistently. But I can honestly say that it never entered my mind to stop trading and
either look for a new profession or go back to an old one. I think that this is another important factor that may separate extremely successful
traders from new or novice traders. The key here is commitment.
You must feel it in every way.
You can only fail if you quit.
The 4x Coach
Getting paid
Of course we all trade because of the money we can potentially make. Based on the reasons why you trade, this can directly determine
how often you pay yourself.
I have read many different articles or ideas about taking money out of your account on a monthly basis. Of course there is a great deal of
satisfaction that comes from sending money home from all the hard work you put into this business.
One trader I know sends home any profit he has at the end of each month. He does this regardless of how much he has made. He does
not roll over profits.
Another trader will only send home money every three months but he has a part-time job that pays all of his bills so this allows him to roll
over any profits. This of course would allow him to grow his account but he also expands the range of trading by including other markets.
What ever you decide based on what ever your circumstances are, please remember that if you begin as a new trader expecting to make
quick money you must be extremely careful and forewarned that most people fail when they start with the pressure of making money to pay
their bills right away without really knowing how to trade.
It is not a bad idea to continue trading a demo account for quite some time until you feel the psychological strength and the confidence in
your trading method. It is possible to trade a demo account just as if you were trading with live money. It really depends on how you think.
In the beginning of my trading career I was determined to succeed at all costs. I had a very aggressive trading strategy, not in the sense
that I was reckless but that I was willing to put in unlimited amounts of time, discipline and determination to succeed.
I created a special goal worksheet that required me to leave my money in my account for an entire month. My goal sheet helped keep me
on track and helped me determined the different strategies I would need to have in place to create the results I was seeking.
But please know... you really can make an unlimited income in this business and it is all based on the amount of capital you have available
to trade.
Below is the statement of my trading account on the morning I made over $40,000 in one morning. It was “real” money not demo money
and it was from my trading account not linked to any others.
I share with you this statement because on that day, I realized that I was doing certain things while I was trading that I wasn't aware of
before that day. Trading is always providing me a new learning experience and for that I am most grateful.
The 4x Coach
Closing
I have shared with you many different strategies I use and the structure that has helped me create consistency in my trading. I realize that
to those who are just starting their career and don’t have a lot of experience, some of the ideas in this e-book may seem unnecessary.
I can assure you that if you provide structure and discipline it will only serve to strengthen your trading method and help you operate like a
business. The structure I use and how I live may seem a bit over the top to those who only wish to trade part-time. It really comes down to
what your goals are and why you want to trade. Knowing why you trade and what your goals are will directly influence what you will need to
do to become successful and how you should adjust your lifestyle.
The information in this e-book is only one way to become successful. I hope that you are able to use some of the ideas here and if not it, I
hope that it has sparked your creative imagination to find structure that will suit your trading style and goals.
I realize that we do not know each other personally, but with trading we do have a common bond. I truly hope you succeed to your fullest
desires and expectations. I know what it means to be successful in this business and I know how much pain and time it can take to do so.
For each one of us the amount of pain or time is different for obvious reasons. I urge you to look for methods and techniques that will help
you conquer your fears and speed up the process necessary to achieve what you feel is ultimate success as a trader.
Good luck trading and remember you will not fail unless you quit. You have to learn the rules of the game, and then you have to play better
than anyone else.
-Joseph Fibonacci
The 4x Coach
Let's Get Started! Your Forex training schedule for 30 days
In this section you will find a complete step by step outline that I have developed to help you learn Forex trading in 30 days.
•
•
•
•
•
This section includes goal setting worksheets
Study charts
Check list of rules for each trade that you can print out and keep on your desk
News Trading Trigger work sheets
Practice Tic by Tic software for the MT4 platform
First Week:
I recommend reading this ebook completely. Even if things don't make sense at first, they will with repetition.
You may also be tempted to skip sections that you already have experience with but I believe that in order to evaluate my trading system
fairly, you should understand all of the nuances in my methods.
If you still aren't convinced to read the entire ebook before applying some of the strategies and you want to go straight to the trading
methods, then please begin with the list below.
•
•
If you are going to start with the HL30 Scalping method. Please click here to go to that section.
The HL30 Scalping method is a simple strategy that can be applied to almost any currency pair and works almost every day.
If you are going to start with the Daily Chart Trading System. Please click here to go to that section.
The 4x Coach
If you are going to start from the beginning, please begin by setting up your charts and time frames. Please click here to go to that section.
Your first day you should review the time frame and the indicators for the basic trading system I use.
Watch how price moves around certain levels for the day and notice how the indicators confirm certain price patterns.
Day Two:
Print and review the Candle Patterns that apply to the corresponding trading method.
You must commit these candle patterns to memory and until you do, it could be a good idea to print them and post them on a wall above
your computer space.
You should also print the list of rules that is the basic structure for each trading strategy.
Once you have them printed out, look at a chart on any time frame and see if you can spot the locations that the trade set up within the
chart.
Day Three, Four and Five:
I recommend starting with the Simple Scalping method (HL30)
This system uses only one indicator and the basic candle patterns that must be present in almost every method I use.
You can also add other indicators like the pivot points to the 30 minute chart to see how price reacts around pivot points.
***As always, I strongly recommend using all of the techniques in this ebook with a demo account. Never use real money to test
out trading strategies that you are not familiar with.
If you have your charts set up correctly to use the HL30 method, give it a try on your favorite currency pair.
Remember, before placing a HL30 trade to use the HL30 check list to verify a valid trade. Please click here to go to the HL30 check sheet.
The 4x Coach
Recent HL30 trading examples.
This chart above is the GBP/USD 30 minute on February 27th 2012. You will notice the “new day” low was 1.5813 and the prior day low was
1.5809. This is the first rule for the HL30. The next step is to confirm the candle pattern which occurred at the 2nd up arrow on the strong
engulfing candle. The next step is to confirm the CCI indicator. In this case we are trading a move back up so the CCI reading must be
higher than the previous days spike low and we only need to confirm the current day CCI reading on the closed candle that completes the
entry signal candle pattern.
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The first up arrow is the previous days spike low and the second arrow it the CCI reading on the closed completed candle pattern that gives
us our entry.
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Since we are trading the GBP/USD we know that we can use a initial profit target of 25 and a stop loss placement of 25 pips.
If we are using more than one lot on the trade, we take profits at the target and then set the remaining lots at a break even stop.
1.5831 was the entry which is the close of the candle that completes the engulfing pattern. The target is 1.5856 and stop is 1.5806.
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Completed HL30 trade to profit target. Now at first glance price in this chart appears to be in a down trend but in the chart below, you can
see when price started.
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This is the same chart, I just reduced the size so you could see where price started from and the pullback Fib support level at the HL30
entry.
The 4x Coach
Your first weekend:
I have used and recommend a program that works on the meta trader platform to practice your trading regardless of which trading methods
you use.
Since the markets are closed on the weekends, you can plug in this MT4 program and replay any week or day just like the market was
open. This program replays tick for tick every move on any currency pair.
You can use it to practice not only the HL30 method but all trading methods including how to trade the news.
You can download this program by clicking the link below. I also included a link to the thread which includes other trades' experiences with
this program and any technical questions you might have with it. This program is not one that I developed so my support is limited but if you
have basic questions about the practice program, I would be happy to help you.
Bonus
Click here to download the VHands Trading Simulator
This link above will take you to the forum thread were the Vhands Trading Simulator is posted. Please follow the installation and
instructions for using the program. It is a very simple program to use once it is installed.
The 4x Coach
The Second Week:
In the second week I recommend becoming familiar with the Breakout trading method, the Identifying Tops and “W” Bottom patterns.
I recommending following this order before trading to study Daily Chart trading systems because trading on a very large time frame can be
very expensive.
What I mean by this is that trading on a Daily chart (sometimes called swing trading) requires the use of large stop loss placements.
Usually support and resistance are the proper locations to use for identifying a stop. Often, on a Daily chart that will mean 200 pips or more
and that is a lot of money so please be sure you understand the methods and use a proper money management structure.
The Breakout Trading method develops on all time frames and works well with four and daily charts but it is extremely effective on the one
hour time frame and can be used for day trading. Please click here to go to the Breakout Trading method.
Please click here to go to the Identifying Tops pattern.
Please click here to go to the Identifying “W” Bottom pattern.
I recommend working on these trading methods before learning the daily strategies since they apply to the daily chart and and technical
trades.
The 4x Coach
The Third Week:
On the third week, I recommend applying the Breakout, Identifying Tops and Identifying “W” bottom pattern with the “Daily Trading method
that requires the use of the Donchian channel indicator. If you can identify the Daily Trade method using the Donchian channel indicator,
the Breakout, Tops and “W” Bottom patterns can and should be used not only as confirmation but as additional methods to identify stop and
profit targets on the Daily chart since changes in the economic value of a currency pair will occur and you might need to re-evaluate the
trade.
The Fourth Week:
Now its time to get really serious. By now, you should have tested each of the trading methods in this ebook and you have probably found
one that you really like.
Now.... its time to grade your trades.
You must spend one whole week doing your best to trade by your trading rules.
Use the “grade your trade” worksheet below.
The goal is to have at least 20 trades and then look back at how you scored.
Try to keep written notes of how you felt, the market conditions before entering the trade and so on.
(don't worry about the number of 20 trades on the worksheet, you don't have to find 20 trades in one week and please don't force trades
just to fill up the work sheet. It is okay if it takes a week or two or three to complete 20 trades)
The 4x Coach
20 Perfect Trades All By The Rules Rate Your Trade. 1 - 3
Currency Pair
Trade Type
Net Gain/Loss
Trade Rating
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Rating System:
You can rate your trade a #1 if you have correctly entered your trade at the appropriate entry level and have exited your trade at the proper profit targets.
And You must follow the rules to the stop loss and scaling technique.
You can rate your trade a #2 if only one side of your trade is correct. Example, your entry is correct and by the rules but your exit is not and you have
changed it for no other reason other than fear. This can also be a #2 if the exit is correct and by the rules but the entry is just a trade where you jumped in
even after the entry point has taken place. You can rate your trade a #3 if both your entry and your exit are breaking the rules. A
completely out of control trade. Even if you profit from a bad trade, you must still give it the correct rating.
The 4x Coach
Bonuses
Currency Strength Meter.
This is a great tool to use when trading the news which is measuring a currency strength against other
currencies. It is also an EA, so it needs to installed in the experts folder of your MT4.
Click the link below to download the Currency Strength Meter and if you have any questions, you can post them on the thread.
Since I did not develop this EA I can only offer limited support but if you have questions about the meter, I will do my best to help you with it.
Click here to download the Currency Strength Meter.
Click here to download the Fibonacci Calculator
Click here to download the Vhand Trading Simulator
Click here to download the Donchian indicator
Click here to download the Pivot Point indicator
Click here to download the News Report indicator
The 4x Coach
Resources
1. Building your trading resource section
The news is one of the most important market moving activities.
There is so much news available is often difficult to determine which news events are most likely to move price.
It's important to understand the concept that markets are always changing.
What is important today and not be important tomorrow. This is because markets move in cycles. In order to consistently profit as a Forex
trader you must stay informed and in tune with the market news, specifically economic data.
You must build your trading business right away by including a select group of tools. This tool should also consist of professionals who
specialize in analyzing economic data in different parts of the overall market.
A few tools or resources that will help you are to find key economic reporting agencies on the Internet and have this news feed delivered
directly into some kind of organizer so that you can scan through the headlines. One tool I use is Google reader. If you are unfamiliar with
this please visit Google and do a simple search on the Google reader program.
2. Google Alerts
Google alerts is also another important tool I use.
For example I will enter in Mario Draghi, or US CPI, or US non farm payroll.
You get the picture here, I'm setting up the Google alerts to scan the Internet
and send to my e-mail, the most recent stories or articles using these specific keywords.
A couple of days before an important economic announcement, I will make sure that I have the title of the economic announcement I'm
going to trade in my Google alerts. This way I can follow along with any updated analysis, commentary or expected numbers for the record
prior to the moment it is released. Of course after doing this one-month you should be set for the following month on most of the economic
reports that will likely move price if there is a surprise event.
Link to Google Alerts
click here
The 4x Coach
3. Organizing the data
I have always kept accurate data as a result of trading economic reports.
I can go back many many years and track trends and events and also changes in market cycles simply by reviewing my historical data.
A simple method in the beginning of your trading career, you could use a three ring binder for each currency pair you trade. In the three
ring binder you would add each news trading worksheet after the event in the appropriate section for that particular news event.
Please see the resources chapter for the news trading worksheet.
4. Watching other markets
It is true that all markets are connected in one way or another. Currencies can have a direct impact on just about every market. For this
reason it is important to be aware of what other markets are doing and how they are trending. Obviously watching the USD is just about the
all important leader when it comes to trading currencies. Other signals or glimpses into a trending market can also come from watching
commodities such as gold and oil.
Keep in mind that with all the market cycles what is important today may not be important tomorrow and this is the same with commodities.
For example, several years ago trading the news it was important that the currencies I was trading, I had to keep a close eye on the JGB
market. This is the Japanese government bond market and at the time it had a major impact on the overnight trading sessions.
At the time of this writing it is important to keep an eye on the interest-rate markets on a daily basis as a directly indicates risk on or risk off
environments. Often times the interest-rate markets will lead the trend direction based on speculation of a economic data or the
expectations of solutions to the global financial meltdown. Just as the Fed in the US purchases government securities to directly affect the
money supply, the Bank of Japan can do the same by purchasing Japanese government securities. Obviously this information is the most
pertinent to the USD/JPY pair.
In regards to the US market, the FOMC is one of the most important divisions of the federal reserve. Open market operations can increase
or decrease the supply/demand.
The Federal open market committee increases or decreases the supply of money by buying or selling US government securities.
When the federal reserve is going to lower interest rates it will increase supply by buying government issued securities.
The reverse is also true, as the Fed tries to raise interest rates, they sell government securities which tighten the supplies thereby directly
raising interest rates. This of course is a very general outline of how it works but it is important to keep an eye on the overnight fed funds
rate.
The 4x Coach
5. Economic Calendars
Forex Factory Economic Calendar
ForexPros Economic Calendar
FXStreet.com Economic Calendar
Baby Pips Economic Calendar
6. Free Economic News Articles and Commentary
Bloomberg.com
Market Watch
The Street.com
NASDAQ.com
Standard & Poors
RTT News
CNBC
(this list is obviously endless but this will get you started)
The 4x Coach
7. Broker list that allows scalping and trading the news
100 brokers that allow trading the news and scalping
***Here is a tip I learned from a Forex trader in his chat room years ago.
Want to get through reading all these reports and commentary faster each day?
Get a speed reading course and really use it!
I promise it will make a huge difference in the amount of information you can get through.
8. Atomic Clock
Free atomic clock download
9. Central Banks
European Central Bank
Bank of England
Federal Reserve (US)
Bank of Canada
Bank of China
The 4x Coach
10. News Reporting Services
Trade The News (paid service)
NewsStrike (free audio news service)
Talking Forex (free audio news service)
The 4x Coach
The 4x Coach
How to make 1000 pips per month and keep it
Reclaim your trading losses! Wave goodbye to Fear!
by Joseph Fibonacci
The 4x Coach

How To Make 1000 Pips Per Month And Keep It

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