Trading Tip #2: Advanced Method On Making More Than 40-50 pips Consistently with MA Combinations

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.

See the basic method here: http://fxtradecity.blogspot.com/2013/08/trading-tip-1-how-to-make-40-50-pips.html

--> 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.

See: How To Convert Your Trading Strategy Into Forex Signal Services

KEY POINTS OF THE ADVANCED METHOD

1. The advanced method primarily increases the profit potential of the strategy.
2. 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

1. 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.
2. 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. 

The Best Take Profit Settings - When Should I Take My Profits?

What is the best take profit settings? How do i know the best time to take my profits ? Where is the best place to set my take profits? Should i take my profits now or wait for it to increase a bit further? These are some of the boiling questions that erupts in the mind of most traders. It is one of the psychological torture that oftentimes cause many traders to be indecisive, and therefore limit their success in Forex.

There is no fantastic or precise answer to the questions above. We've seen profitable trades gone sour because of the trader's indecision to close the trade while it was still in profit. We've also seen would have been better profits reduced due to high expectations of an increase in the profit, which later reversed negatively. There is a side that says "take the profits as soon as possible", and another side which says "hold on until your profit target has been reached".

When Should I Take My Profit?

The best answer lies on the individual's personal goals, with diverse recommendations. This means if you are desirous of achieving 20% monthly returns in a certain period, then you should divide that 20% goal in relation to your account capital on every day's trading session, and stick to it.

Illustration: The capital on my account is $1,000.00 and i wish to make 20% returns from it monthly.This implies that at the end of the month my account should increase to $1,000 x 20% = $1,200.00. Therefore i need to divide the $200 (i.e. 20%) expected monthly returns over 30 days or 20 days exclusive of weekends or any other duration depending on my targets. That means i need to aim for $200/20days = $10.00 per trading session or $200/10 sessions = $20 per trading session.

Most Forex systems (EAs, Strategies, Signal Services, e.t.c) use the default 30 pips for SL and 20 or 100 pips for TP. However most traders out of fear, and anxiety take out their profits too early, while the greedy ones take it out too late hoping it would increase further. It is better to have successive runs but not reaching your profit targets than to have consistent negative runs due to expectations of reaching your targets.

Q/A - Two traders account with similar opening balance. Which of them stands a better chance of overall positive growth?

• $850.00, $9850.00, $430.00, -$3850.00, -$6850.00, $210.0,  -$6850.00,  -$1250.00,  -$5850.00,  $450.00 

• $150.00, $20.00, $70.00, $50.00, -$200.00, $280.0,  -$80.00,  -$30.00,  -$50.00,  $90.00, $110.00

Some Key Facts About Price
1. Price is never static unless the market is closed or paused due to awaiting news release.
2. They can react sharply in opposite directions in nano seconds.
3. A trend consist of undulating price movements either in an upward or downward direction. Therefore you could see your profits or pips fluctuating from positive to negative positions or increasing and reducing but gradually growing.

The key advise here is to control your emotions, maintain trading discipline, and practice very well.

How Much Profit Should I Take?

Take all of them! Apparently you cannot take fractions of

your profit unless you open multiple orders, and close them individually when they reach their profit targets (take note of FIFO rules). There are some utilities (trade managers) that allow taking of profits in fractions of the lot.

It is a good idea to take out some profits while allowing the trade to continue to break even. At least you are sure of securing some profits while expecting more of it when it reaches break even. However if price retraces you have nothing to lose because the first fractional TP becomes the SL. If price continues to move to your favour then the same process is repeated until it gets to break even. The Pivot and Fibonacci indicators are very good at setting points for fractional take profits.

Where Is The Best Place To Set Profit Targets?

This is dependent on your trading strategy. However you can use price range levels to determine how far a rally can go in a trading session, and then set your profit targets withing those levels. For instance the EURUSD can go as far as 100 pips at the beginning of the US Session. I would aim for 50 to 60 pips in my breakout system.

News traders are advised to set profit targets at least 30pips from the order placement due to extreme high volatility, and high rate of quick reversals after the initial news release. Better still wait for some few minutes after the news release before placing an order.

Try: CNT EA

Tips/Caution:
1. Use past resistance and support areas to set profit targets

2. Use pivot point indicators and Fibonacci to get accurate points for profit targets.

3. Use the right profit targets for scalping or inter day trading.

4. Do not set profit target at reversal areas.

How Can Trade Management Tools Help Me?

There are lots of Trade Management Tools, that perform more than managing profits to stop loss management, and account risk management. Most of them are automated, and hence takes off the stress of manually monitoring your trades even while your trading platform is offline. Trade Management Tools can perform virtually all the trade management action a trader would do manually. They are precise, no emotions, accurate, fast, and can handle multiple orders/accounts simultaneously.

Trade/Profit Management & Strategy Development Tools

1. Managed Take Profit: Allows fractional take profits, dynamic stop loss placement, e.t.c. (Simple & easy to use)
2. Multiple Take Profit Position Management App
3. Sentry EA:Monitors account equity, cumulative profits or loss, multiple loss/profit targets (Recommended)
4. Forex Tester: A professional training software that helps you to develop trading strategies, and affords you the opportunity to test profit targeting and trade management in your trading strategies. This tool would help you develop better profit targeting in your trading strategies. (see promotional offer)

See: Forex Tester Simulation Software Vs Demo Account

In summary the right profit target is crucial to your account growth. The tips stated here might not be sufficient enough, so we welcome everyone to leave their comments, and tips that would help traders improve their success in Forex.

Happy Trading.