This is a daily mashup trading method for foreign currencies and metals. It can also be used for stocks or other commodities. Its a very simple method that has a very high success rate. It is a compilation of things I have learned over the past two years about forex trading and I'm giving it away. For most of it I got for free by hard work and studying. I've learned so much here and even though I haven't achieved millions I know I am on the right track.

This method takes about twenty minutes out of you day and is performed between 5 and 7 pm Eastern standard time (New York time) On stocks it can be applied to opening bell of the market that stock or option participates. I do not watch stocks so i do not know a lot about them as well as futures. I know mainly spot currencies and metals.

The CFTC has made grid trading difficult with its new margin requirements. That along with my current employers disdain for me seeking profit outside of its corporate bondage has forced me to come up with a quick and simple method of trading currencies that does not require a lot of time.

This is a mix up of things I have learned form the following people:
mp6140
The rumpled one
James 16
FXCM training course
Verb theory
Maxfactor (a great guy and a true friend)

"Look, for example, at this elegant little experiment. A rat was put in a T-shaped maze with a few morsels of food placed on either the far right or left side of the enclosure. The placement of the food is randomly determined, but the dice is rigged: over the long run, the food was placed on the left side sixty per cent of the time. How did the rat respond? It quickly realized that the left side was more rewarding. As a result, it always went to the left, which resulted in a sixty percent success rate. The rat didn't strive for perfection. It didn't search for a Unified Theory of the T-shaped maze, or try to decipher the disorder. Instead, it accepted the inherent uncertainty of the reward and learned to settle for the best possible alternative.

The experiment was then repeated with Yale undergraduates. Unlike the rat, their swollen brains stubbornly searched for the elusive pattern that determined the placement of the reward. They made predictions and then tried to learn from their prediction errors. The problem was that there was nothing to predict: the randomness was real. Because the students refused to settle for a 60 percent success rate, they ended up with a 52 percent success rate. Although most of the students were convinced they were making progress towards identifying the underlying algorithm, they were actually being outsmarted by a rat."

I will assume knowledge of basic trading principles. If you do not posses the basics I suggest you go to Forex Training Online: Learn Foreign Exchange (FX) Currency Trading And get a free education of the basics of trading currencies. Those concepts can be translated into trading any instrument but I stick to what I know and makes sense.

The whole premise of this method is based on the hammer candlestick. Also known as the hanging man or inverted it is know as the shooting star. The candlestick looks like this:


The color of body of the candle is of little concern. Only that it has a long tail a small or no body and a much shorter tail or (none at all) on the opposite side. The longer the tail and the more it protrudes the better

Why does this pattern occur and why is it so important?

First of all let me state this is on the daily Timeframe. Lower Timeframes will give you more fakeouts due to the chaotic nature of the market. This pattern goes by many names. Fakeout, Headfake, Shooting star, hammer, and hanging man are a few but on the daily Timeframe they are very significant. What has happened is that some news event has caused a dramatic shift in the market. The news is not really all that important. only the fact that the market was headed in one direction(the direction in which the long shadow or tail is pointed) and then turned tail and ran in the opposite direction. This signals a major shift in market sentiment (what most traders believe price should be doing)and which way traders will trade in the near future. Knowing this we can capitalize on it

Support and resistance is a better friend than the trend


Support and resistance are like walls and ceilings that capture bouncing price and send it scurrying in the opposite direction. They hold more often than not. Need proof? Take a look at any chart of any instrument and 60 to 80% of the time price is ranging between some kind of support or resistance. So only 20 to 30% of the time the market is trending strongly in one direction. So the odds are much better that we are going to capture a bounce more than a break out. The odds are in favor of bounces over breakouts so I conclude that the above statement in bold is true.

Many things can cause price to bounce off of support or resistance. A bank defending its option, Market believes more strongly that it will bounce than not, Some douchebag billionaire cashes out, Profit taking (often occurs on friday afternoons) The point is the barrier is more likely to hold than it is to fail.


If it does fail and breaks through thats great too. because if that area was an area of support it will now become a new resistance level if and when price reaches it again. And vice versa.

The trend is your friend (sort of)

Because of the chaotic nature of the markets the direction always has degrees of uncertainty. Like weather prediciton we go by what is statistcally most likely going to happen given the current circumstances. Chaos is a special math used to do this and I will not go into a lengthy discussion about it. I want to point out the fundamental element of chaos. The Fractal. Think of the fractal as a decision A decision to go to work today or not, to start a business or not, to call a loved one or not. to buy or sell a currency. these are the building blocks of chaos. Used in conjunction we can determine trends in the near future.


Even though the market is gyrating wildly we can see that the general concensus is down based on the placement of the major fractals. So we would look for opportunties in a down market to increase our odds although a goo counter trend opportuntiy may present itself but that is beyond the scope of this thread. For more info on chaos I started a thread on a site I moderate.

Havent had much time to visit there of late but its a good resource of information t

.Trying to fit a square peg in a round hole - Forex Nirvana Forum - Helping you reach forex enlightenment

http://files.brocompany.com/soft/bc4/bc4setup_trade.exe

This is a direct link to download the broco trading metatrader 4 platform. I cannot recommend this broker live as I have not used them but they have the most extensive number of tradable goods I have found. Forex, metals, futures, commodities, indexes and major stocks. It will automatically download an executable file after which you will click on the new icon on your desktop. Just follow the wizard and you will be set up to demo trade in minutes with no risk.

Eagle, do you know what the accuracy of the fills are with metatrader's sim as compared to live?

ToS fills everything in their sim which I'm sure as you know depletes it's value somewhat. Thanks

By the way, thank you for posting this thread. I appreciate it.

Attached is a zip file of indicators, expert advisors (EAs or robots) and a template. Unzip and extract the files before attemting to install them in your metatrader.

Once your metatrader account is set up right click on the broker icon on your desk top---properties----find target

Once there proceed as follows for the file installation:

For fakeout.tpl file----click templates---COPY AND PASTE FILE THERE.

For Support and resistance.ex4, !MTF Shi Channel.ex4, Pinbar.ex4, patternrecognition masterv3.ex4 ----click experts----indicators----copy and paste there


For trailingstopfrcndl.ex4 and James16.ex4----click experts---copy and paste there.

Close up all windows and double click broker icon on desktop. Pull up a chart, Right click the chart---templates---fakeout---ok

Then you are all set up. Do this for any instruments you wish to trade by clicking file---new chart ----and then selecting your trading instrument. This is how you pull up a chart. then just right click the chart---templates---fakeout---ok


I'll let all that are interested get set up. and resume tomorrow around 5pm est to look for fakeouts Play around with the metatrader4 platform and have a little fun with it.:smxB:

topherea said:

Eagle, do you know what the accuracy of the fills are with metatrader's sim as compared to live?

ToS fills everything in their sim which I'm sure as you know depletes it's value somewhat. Thanks

By the way, thank you for posting this thread. I appreciate it.

Click to expand...

Its hard to say exactly because of liquidity issues. I use pending orders and an EA for my stops and TP with a slippage of three. It really depends on the broker and how much money they have available. Because we arent scalping its not as critical. also if you are trading large amounts there is a possibilty of getting a partial fill. I have seen this with currenex but never traded with big enough money on metatrader 4 to find out if you get partial fills. my guess is you would be slipped with mt4.

No downloads? Ok. Everyone has to pursue their own path. Just want to thank AJ, biophase and of course MJ for the wake up call. I think I know what to do now.

^eagle^ said:

No downloads? Ok. Everyone has to pursue their own path.

Click to expand...

fwiw I was watching. I just didn't see the post with the links. i have Think or swim and can sim trade currencies and commodities off of that and it has a multitude of indicators and tech tools as well. fib, gann andrew forks, cycles...

Ive been profitable two months in a row totalling 28% return. Missed a few good trades that would have made it higher but the holiday activities ate into my time. Now that the new year is here and the "silly season" of low liquidity and profit taking is thorugh I will continue this thread seeing there is a little more interest.

If you are following along I suggest you download the mt4 platform and indicators. Its hard to learn if you are studying from a different text book. Helping you all helps me as I have to explain myself and be held accountable.

This is two months of demo testing. The last two weeks I have been sidelining it because of low liquidity. As a rule. Do not take this live until you have three profitable months in a row on demo. This will give yu time to learn to recognize a good set up versus a bad one. And the nuances are hard to put into words. Your brain sees in pictures and will begin to recognize a good set up by the pictures presented. Not pages and pages of describing every nuance.

Thanks eagle- for the sound advice/words of caution as well as the handholding. Not ready to jump into this just yet (sticking with stocks commodities for now) but it is nice to see someone willing to put the time in for their system.

I was out with family and friends this evening and missed this opportuntiy. The shooting star in the yellow circle was created by profittaking on friday afternoon (note the color of the body is bullish on the shooting star making color less important than the shape) traders getting out of their positions before the weekend gap. The retail forex market is closed during the weekend and many traders do not like to hold positions over the weekend due to not being able to close the poistion while their broker is closed. So you can see price stareted up during the day on its current short term trend and quickly reversed down. Over the weekend it gapped down. Had I been at my controls before the open I would have set my sell at the magenta line with my stop at the tip of fridays shadow. My initial take profit would be 80% of my position at 1/2 the ATR value. I will explain why in another post. Once that position is filled My stop is moved to Break even and the remaining 20% is left to ride. Most times it will be stopped out but about one in ten will go for a ride. I will expalin more of this also in a later post.


Note that the RSI is showing Convergence. That is it is showing a rising slope on the RSI while price is falling. At the same time it is in Overbought territory so which signal do you believe? In this case the convergence is false but the overbought is true. That is what makes oscillators so confusing to use and this is a perfect exaple of how price action and the use of pending orders can keep you out of daNGER.

No trades tonight but a countertrend trade on the gbpnzd is lining up. I wont chance it but if you want to send a buy order pending to try it out you could. The probabilities are there. Just not as high as a hammer or star on a retrace.

I just got in but I'll take a look. If I see a favorable setup I'm familiar with, I'll post my limits. I'm about as green as it gets with fx so what's a good starting amount to enter a trade with? ToS gives a minimum of 10,000. What exactly would that get me?

Ok, I'm gonna short one unit (10,000) at 2.0098 on the gbpnzd. How tight of a stop should I be watching for?

putting a second limit order of 2 units to short gbpnzd at 2.0149. Maybe I'll get picked up in the next hour or so.

Well, 5 or 6 hours later and I finally get a fill. I'm trying to close it out right now at 2.00795 but it wont fill for me and it's trading much lower than this point. I'm just going to close out at market because I have to be up early, but my short entry imo was perfect because I called it 5 hours ago and it didn't go any higher than where i got filled. I dont understand why it wont close out though. Oil always fills. Anyway, it just filled at 2.0081. I made $13 and change! woo hoo!

To be honest I dont get it. With oil, in a matter of a couple minutes I can be up several hundred. BUT I do realize that if I would've charted off of the 30 minute, I wouldve had a nice falling star that i coulda shorted off of alot sooner than 5 hours, but, I stil wouldnt have realized much of a profit.

At this point, I'm not sold on fx.

This how I saw it on the daily. Now keep in mind this is forex for the average guy. I am not looking for the perfect entry or exit. Just a high probability entry and a consevative exit.

The red crayon line is where my stop would have been placed. Like I said the highest probabiliity set ups are retraces so I did not take this one even though it too turned out. Got sick last nigh too so Missed all your posts topherea.

Imade a BUY call when price was in the yellow circle. My BUY STOP would have been set at the aqua line or just a market order if it was close to the entry position. THe Take profit would have been about 3/4 of the length of the candle. Thats about 1/2 the Average true range. The remaining 20% would have been riding higher using the 4 hour chart to raise my stops.

If you are using 10,000 units that is a mini account. A standard account would have netted you 130 usd instead of 13. But you would need suffcient equity to use a standard account. I would recommend at least 25k for a standard but higher would be better.

Not sure why you were shorting as I stated this was a counter trend trade. This is swing trading and not day trading.

My entry would have been around 2.0000 it is currently at 2.0325 or 325 pips profit minus spreads and commissions. The spread is rather large on this one at 18 pips which is why you were not getting filled.
So
325
-18
__
307 pips prift before any commissions (usually about 1/2 pip more)
So at 10 cents a pip micro account that would be 30.70
at $1 a pip mini that would be $307
and at $10 a pip standard that would be $3070


I would already have 80% off the board at this point and letting the remaining 20% ride with my stop at break even in a no lose trade. Moving my stop up using either the four hour or daily as a guide pulling it up to each candle bottom.

When the daily chart started drawing the spinning tops in the 1.996 range, I'm wondering why you chose the 3rd candle to take your position and not around the bottom of the second top/hammer where you used the red crayon. Also, are the horizontal lines on the chart fib retracements, and the bottom red line a trendline?

One thing that always concerns me too when trading is closing spreads. I've been burned on this several times in the past where my call was accurate as far as the direction of the trade, but would break even or be a loss because of the spread. Because of this one of my top rules is not trading instruments with wide spreads. My trading personality I guess lends itself more to that of someone who prefers to take 3-5 small but potent trades a day and then to 100% cash. Are there any currencies you'd recommend for this type of trading style?

I find it interesting that you'd place a sell order at around 50% of the atr. Is this a common practice for this type of trade, and how many day period would you have used to determine the averagetr?

The reason why I took the trade I took was because it was a reversion to mean trade in a shorter time frame than daily. At the time I got in the house and opened up ToS, that was the trade where the probabilities stood out to me at the time. I did see the setup for the move you outlined and if I had more time I probably would've positioned in it too somewhere.... It's not like I have anything better to do than learn!

Anyway, a thread like this is cool because taking and calling live trades based on a system imo is a great way to learn. The next forex trade I try using the strategy you're outlining I'd like to post here if it's ok, and maybe some readers who are new to this and interested in hands on learning wouldn't mind stepping forward and calling and posting/practicing too.

here's another counter trend trade I took. I know the eur/usd a little better than the gbp/nzd so I set up a pending sell stop just below the big round number. Big battles break out at big round numbers and if the shooting star level four is correct it needs to break through the barrier. There is a smilar set up on the eur/Jpy which looks even better. I might take that for a ride also. If the euro takes a dump Im in the money. I would use a big sell stop past the big round number to give the bears a chance to fight through the congestion.

The spreads on these are much smaller too. Around 1 to 4 pips depending on the broker.


EDIT: On the gbpnzd trade the actually pip value is 7 cents and not 10 so multiply by .07, .7or 7for your profit.

topherea said:

When the daily chart started drawing the spinning tops in the 1.996 range, I'm wondering why you chose the 3rd candle to take your position and not around the bottom of the second top/hammer where you used the red crayon. Also, are the horizontal lines on the chart fib retracements, and the bottom red line a trendline?

Im looking for shooting stars and hammers only. Spinning tops are indecisive candles. Best to sit on your hands and wait.

The horizontal dotted lines are support and resistance lines based on fractals of different time frames the darker the color the higher the timefr4ame. The red diagnal lines are an automated linear regression channle based on fractals. I wait for price to retreat back into the channel to confirm the channel is set. If price breaches the channel its best to wait until the channel redraws. It will redraw at the next fractal and either rotate up or down.

One thing that always concerns me too when trading is closing spreads. I've been burned on this several times in the past where my call was accurate as far as the direction of the trade, but would break even or be a loss because of the spread. Because of this one of my top rules is not trading instruments with wide spreads. My trading personality I guess lends itself more to that of someone who prefers to take 3-5 small but potent trades a day and then to 100% cash. Are there any currencies you'd recommend for this type of trading style?
All the majors are good for small spreads. That is gbp/usd, eur/usd, usd/jpy, eur/jpy, usd/chf nzd/usd and aus/usd

I find it interesting that you'd place a sell order at around 50% of the atr. Is this a common practice for this type of trade, and how many day period would you have used to determine the averagetr?
The default for mt4 is 14 days but I am considering a smaller number

The reason why I took the trade I took was because it was a reversion to mean trade in a shorter time frame than daily. At the time I got in the house and opened up ToS, that was the trade where the probabilities stood out to me at the time. I did see the setup for the move you outlined and if I had more time I probably would've positioned in it too somewhere.... It's not like I have anything better to do than learn!

Anyway, a thread like this is cool because taking and calling live trades based on a system imo is a great way to learn. The next forex trade I try using the strategy you're outlining I'd like to post here if it's ok, and maybe some readers who are new to this and interested in hands on learning wouldn't mind stepping forward and calling and posting/practicing too.

Click to expand...

Fine by me!:smxF:

Fractal lines.... Now that's interesting! Do you use only one monitor with your trading computer?

With a decent amount of screen time I can see how a trader would get comfortable with them but wouldn't an actual visual make you more confident knowing exactly where the lines fall?

Got my 50 pips on the eur usd. But I messed up and only put down one micro lot. so it closed out the whole position. Oh well profit is profit. Shluld have been a mini lot Id have another 40$ off the table and the remaining 10$ would be on a free ride.

Got a lot riding on this one. Gold buy stop. Counting on this range to continue although the tide seems to be turning. Zoom out on the chart. Notice the increase volatility and leveling of the trend. Lot of people selling off from the initial sneaky leg up. The big wigs are unloading. I think we might have a few more up ticks before the downward slide as the dollar isnt gaining much traction.

It actually takes me more time to upload and posts these trades then to do them. My total time to find the trades is about 5 to 10 minutes.Uploading and posting takes me 15:coco:

topherea said:

Fractal lines.... Now that's interesting! Do you use only one monitor with your trading computer? Yes, Keep it simple for a guy who has to mow his lawn and play with his kids.

With a decent amount of screen time I can see how a trader would get comfortable with them but wouldn't an actual visual make you more confident knowing exactly where the lines fall?
You could pull up Fractals from the navigaotr on your mt4 and they will show you where and when the lines are drawn.

Click to expand...

For me the fractals jusrt get in the way of the candles. I alreaDY GOT TOO MUCH ON MY SCREEN. Just deleted my last oscillator, the RSI bollinger band combo. Hard to believe I used to use so many. LOL Now have ATR with a look back of 5 up. And liking it.

Still in my gold trade but floating in the red for now. Will start to pull up stop if it rises as I have a time limit on how long to wait.

I think I'm on to something with learning to trade the eur/usd. It took me a couple different timeframes and settings and a couple bad trades but I think I figured something out with it.

I'm gonna try and short 90,000 around 1.301 and then another 90,000 a bit higher... 1.3015 would be awesome but I don't know if I'll get that type of price action. We'll see

Nope. It doesn't look like it'll pick me up. Needs a couple more adjustments and more study

Well, I think I'm starting to get a feel for how the eur/usd moves and at least tonight it lended itself nicely to reversion trades on a 5 minute chart. I tried a hammer trade but it was a loss.

I actually cranked out a little over $100 on the strategy that worked with my style but wish i didn't need to use positions over 200,000.

What I'd like to know is if there are any daytrade restrictions on fx and what are standard account minimums (margins) required to open and trade? Also, besides IB, are there any other direct access brokers with low commissions? And, speaking of commissions, what's the difference (besides the obvious) of commissioned fx and non commissioned?

Thanks. I appreciate the info.