I wish to appreciate the comments, and encouragements from users of the first trading tip #1. I decided to speed up the publishing of the advanced method due to high demand from interested users. However we advise traders to completely understand the basics of this system before attempting the advanced method. This is the reason we gave time for practice, and tests before the release of the advanced method.
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In the first method we were able to prove that PRICE WOULD ALWAYS REACT AT A PARTICULAR AREA, and you can convert the reaction to your favour by setting a price trap within the reaction points.
A simple reaction can earn you at least 40 to 50 pips consistently each time it occurs (all things being equal).
The advanced method reveals some tricks, and tips to increase the profits, and helps to detect the reaction areas clearly. But before we commence i strongly advise you read the first method and practice it with a simulation software (recommended) or demo account until you get a full understanding of the strategy.
KEY POINTS OF THE ADVANCED METHOD
- The advanced method primarily increases the profit potential of the strategy.
- Additional indicators (optional) would be introduced to aid easier detection of the reaction points, and show best places to set pending orders.
PRACTICE/TESTING MATERIALS
- Forex Simulation Software. Forex Tester V2.0 Professional Edition was used to practice and test the
strategy. You can download a demo version (with limited features) for this lesson before you decide to purchase the full edition.
- Offline Chart (30 Mins). We do not necessarily need a demo or live account for this lesson. Right click your chart, and select properties
from the menu. Select the common tab, and choose Offline Chart. Click
ok.
ADVANCED METHOD OF MAKING MORE THAN 40-50 PIPS
Now lets imagine we have a strategy with 85% to 90% accuracy, and another strategy with 58% to 99% accuracy. It would be better to take more risk or increase our chances with the first strategy because out of every 10 trades we are sure of 85% minimum success compared to 58% minimum success despite its ability of achieving 99% accuracy in some runs. A trading system with 85% to 90% accuracy is worthy of taking risks but with intelligent techniques.
We said before that this strategy detects areas where price MUST REACT, and we take advantage of this reaction no matter how it reacts. This means if we get 50 reactions a day (all things being equal), and we take advantage of them using this tactics, then we should expect 100% positive returns.
The first basic strategy only showed us how to detect the areas, and how to take advantage of it by placing pending orders, but the advanced system would show us some indicators that would strengthen the detection of the reaction points, and how to multiply the profits.
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Advanced Method Step 1: - Eagles Eye Detection
We are going to apply some indicators to strengthen the detection of the areas where price would always react. The basic strategy depended only on the 200 SMA line.
Pic 1
Now we are going to apply some key indicators that would give us clear signals that price is actually playing around the trap area, which is within the 200SMA line. This will help us detect fake setups.
Force Index Indicator
The force index indicator is grouped under the Oscillator Indicator. It connects the basic elements of market information such as price trend,
its drops, and volumes of transactions. This indicator when combined
with the Moving Average Indicator produces better results in opening and
closing orders (Click to see more about Force Index Indicator).
Open your offline chart and apply the indicator with its default settings. Resize your chart where necessary.
Scroll backwards or forward on your chart history, and look for areas like the picture 1 above where price is crawling along the 200 SMA line. At those areas where price is crawling along the 200 SMA line you will notice that the Force Index Indicator is somewhat on a straight line at the 0.00 level. See illustration below
This means that the volume of transactions with regards to the bulls and bears power is indecisive. This also means that price would eventually breakout either to the bull or bear area. THAT IS THE REACTION. Price would never remain indecisive forever so the Force Index Indicator gives us more confidence to set our trap, and wait for an eventual breakout.
NB: The longer the force index stays at the 0.00 level the better the certainty of the reaction.
GBPJPY 30Mins - 30th August 2013; 19:30
RVI Indicator
The Relative Vigor Index Indicator helps to verify trend, and
trend breakout. It is already part of the basic strategy but we are going to see how it will helps us filter the detection.
Take a look at the chart in the same area, and see how the RVI reacts. You'll find out that when price crawls around the reaction areas, the RVI is either fluctuating within the 0.025 level and -0.025 level or on the 0.00 level. Anything outside these levels is not guaranteed. The RVI plays lesser role when compared to the Force Index but its still useful.
In addition to these indicators you can include the Alligator Indicator. The indicator as we know it squeezes around price when it begins to move in a sideways pattern or in a channel due to inactivity.
Either of these indicators helps to further strengthen the signal that price is actually crawling around the reaction area waiting for an imminent breakout.
Advanced Method Step 2: Multiply The Profit
The primary goal of the advanced method is to multiply the profit potential of this strategy.
The steps below involves some risks that may not be suitable to some account size, type, and broker. This is why we recommend using a simulation software to practice, and test this method in order to optimize it to your account size and money management rules.
Step 1:
When all conditions are met place 2 pending orders on both sides with different lot sizes. The orders should be placed simultaneously.
For example:
Order 1 - BUY STOP - Lot Size = 10.00
Order 2 - BUY STOP - Lot Size = 20.00
Order 3 - SELL STOP - Lot Size = 10.00
Order 4 - SELL STOP - Lot Size = 20.00
Take profit should be placed in this manner:
1. The higher lot size should have a closer Take Profit setting.
2. The lower lot size can have its TP set farther than the higher lot size or at the same position.
NB: A safer way is to place the higher TP much closer like 10 pips away from the order. But If the signal shows a major reversal or cross then you could increase it. The idea is to catch as fast as possible the immediate reaction with the higher lot size, and consolidate your position with the lower lot size. Take note of FIFO and Hedging rules for brokers situated in the US.
The inherent risk is that price can suddenly counter react against your position hence you should be careful trading the advanced method prior to news release. However our confidence lies on the basis that PRICE MUST REACT and 80% of this reaction showed positive returns if applied accurately.
Warning: Please practice, and perfect this method with a simulation software before applying it to your live account. You will not be able to carryout an extensive practice, and testing of this strategy with a demo account. Also be cautious of your leverage and margin size.
Step 2:
Place 1 (one) single large order rather than placing multiple
orders with different lot sizes. The question is what happens if the order doesn't get to my Take Profit or reverses negatively? Personally i use Trade Management Systems like Managed Take Profit EA to protect my orders from situations like this. The system takes partial take profits from my account, while automatically moving the Stop level till it gets to breakeven.
We've come to the end of the advance method of making more than 40 - 50 pips consistently with MA Combinations. We hope you'll find it useful to your success in Forex.
We appreciate your feedback, and comments.
This article presents a comprehensive list of swap rates according to positive and negative rates. The essence is to let traders get a good knowledge of currency pairs that attracts extra profits or additional loss in terms of interest when a position is left open to the next day.
holding the positions overnight. The swap values (interest) has been added to the profits. For instance in the GBPCHF position with 10 lots the actual profit should have been $19,103.93 but a negative accumulated swap value of -$386.04 was added to it. If the trader knew about the swap rates for the GBPCHF pair he probably would have avoided holding on to the position overnight or taken a better decision to reduce extra loss while hoping for a price rebound. In the other illustration we can see the positive effect of leaving the EURCAD position overnight. The trader gained extra $25.54 added to the profit.
