How to Trade the Foreign Exchange Market (Forex)

[Ingot54 13]

OK - got your attention - let's deliver on the deal!

 

On this thread I plan to work with other traders, to come to a better understanding of how to approach trading in just one of many ways. Successfully. ie trading with longevity ... and perhaps if you can grasp the principles ... you might achieve a lot more than mere longevity in the markets.

 

The Retail Forex Market began growing quietly in the new millennium, but it had been possible to trade through your own bank since perhaps the 1970's. I became aware of online trading in 2004, though it had been operating quite a long time before that. I made my first online trades in March 2004 - 9 years ago now - trading equities through a bank, using no leverage.

 

Today, if you are reading this, it is likely that you are using the retail forex market to generate income for yourself through currency trading using leverage, rather than through your own bank.That's if you enjoy the hands-on approach to trading.

 

You can always use a fund ... up to you ... your money.

 

End of history lesson.

 

You will need the tools of your trade:

 

Trading platform, data feed, broker, indicators, money management plan, business plan, journal, strategy, experience ... (what's that you say ... "experience"?) ... and ...MONEY ... once you are ready to trade "live". You already have a computer terminal ... and hopefully a machine with enough grunt to process the data feed, and a couple of screens (one is really enough) to expand your desktop working real estate.

 

Of course you will also need other help - some kind of mentorship, of which the Internet is a very rich source, through forums such as Traders Laboratory. Most traders cut their trading teeth in such places. The canny traders worked out early that the best way learn, was under the mentoring of another successful trader, and were willing to pay for that.

 

Others were quick to recognise "what works" and began trading profitably after their self-taught apprenticeship - of whatever time that took.

 

That's about all the preamble we need to discuss at the outset. Happy to elaborate on any of the above at any time - I just think it is a bit redundant to be going over stuff most of have known for years, though new traders are encouraged to ask - we have all been there, and the vulnerable feelings are understood.

 

Feel free to register your interest in the thread. I have an approach that I am going to teach/discuss. I would like to keep the thread "pure" for the purposes outlined above, so while questions are welcome, side-issues will not be given much oxygen.

 

The thread will be strong on principles that work, with a sprinkling of actual examples.

 

Traders Laboratory has threads dedicated to the discussion of specific currency trading, and we can utilise those later on for live or demo trading. I have commitments in my real life, so will try to respond quickly.

 

I live in a GMT +10 time zone and occasionally sleep too!

 

Feel free to ask questions for further clarification.

[Ingot54 13]

Ok - I'd like to clarify a couple of things.

 

Please do NOT look at my record in the current Forex Trading Contest and expect to be able to emulate that just by following what we discuss here.

 

Reason? I am trading ridiculously large volumes - using little risk management, and exposing myself to large draw-down with each trade.

 

At the end of the contest I will tally up the number of pips I made - even if I crash and burn, and I will guarantee that per trade, I will not have done as well as other contestants with better Sharpe Ratios (don't be concerned if you don't understand it - it's a bell-and-whistle thing for traders).

 

So why am I doing better this time around in the contest?

 

1) Luck

2) I have been able to watch for longer, and close my trades more appropriately

3) I do have some skills

4) I do have a good strategy

 

This thread will get some momentum shortly, but for now, here are a couple of links to provide background to where I am coming from:

 

http://www.traderslaboratory.com/forums/trading-markets/9057-breakthroughs-led-trading-improvement-success.html#post109081

 

http://www.traderslaboratory.com/forums/trading-psychology/9278-your-mama-doesnt-trade-so-wise.html

 

Now - I am in the middle of trading live ... and for the contest ... so it's steady going here.

 

But shortly I will post some indicators and a template you can use, along with an explanation of how I do what I do.

 

So you will be getting about 10% of the trading requirements for success. You could substitute any indicators/charts etc, and still only have 10% of what you will need.

 

The rest of the stuff we discuss and do, will grow that percentage for you - for some it will be rapid, and for others, it will be conservative growth ... but grow you will.

[Ingot54 13]

We being to get into some meat.

 

Please complete the poll above post #1 - it will greatly assist in the way I explain what is happening if I am aware of the kind of interest the readership has in this.

 

Some of you will already have worked out that I trade the 4H TF, based on the trend elicited from the higher TF - ie WEEKLY and MONTHLY. I do not trade those TF - I just use them in determining trend for using in 4H TF trades.

 

"Oh!" ... I can hear a lot of clicking as some of you prepare to switch off - after all, don't you need Biiiig stop losses to trade the higher TF?

 

Who told you that? Have you proved that yourself? Let me tell right here ... right now ... that NO it is not necessary to use huge SL (stop loss) in order to successfully trade the higher TF (time frame).

 

Look at my DD (draw-down) in the current contest :- 6.13%.

 

OK ... from another angle - if a wide SL bothers you, then why do you tolerate losing account after account, trading the noisy, scalping TF? What is preferable - using a wider SL (more margin) or losing your trade ... or worse ... your account?

 

Which is more forgiving of an error in trading - the 5M or the 4H?

In which TF does spread, slippage and requotes affect you more - the 5M or the 4H?

In which TF can you potentially make 400+ pips - the 5M or the 4H?

 

Do you like sitting in front of the computer all day, wasting your health and maybe losing touch with family relationships, while you struggle for those piddling little 5 and 20-pip trades?

 

If so, then move along please - nothing to see here. I don't intend to start a discussion about which TF is "the best."

 

On the other hand, if setting and forgetting appeals to you, with optimum entry, minimal draw-down and a sense of relaxation and success in your trading, then read on, join in, and learn something you can apply with confidence. You will never again go back to scalping ... unless you are already accomplished in that, and hopelessly addicted to it :haha:

 

Here we are going to exclusively enter trades on the 4H chart ... but as the indicators I use are also calibrated to lower TF, we will use those as tools to fine tune where our entry is most likely to make pips.

 

In that sense, the lower TF form a part of the trading strategy - they are not the trading strategy.

 

The goal for this thread is to show you principles that work, and to actually give you the tools and setups to begin with. Everything I use has a place ... and a purpose ... and deserves its place in the list.

 

In the next post, I will drop in the indicators I use, and the template that activates them in the way I trade. Then I will begin a series of posting charts, showing how each of the indicators is used, why, and what it looks like when set up correctly on the chart.

 

This stuff is not hard.

[Ingot54 13]

OK - here is a screen grab of one of my desktop work areas, and below it is a shot of the 4H chart of EURUSD, showing the indicators used.

 

In the next post I will post up the indicators and template for you, and explain why each was considered, and what its function is expected to be.

 

After that, we'll have a break - I have family and trading of my own to attend to.

[Ingot54 13]

The indicators used have been chosen after a lot of tweaking and experimentation with settings and effectiveness for the TF employed. I have proven the settings over time, but if you can do a better job with your tweaks, then please go ahead, but feel free to share the advantages you found so that we can participate in your enlightenment

ADX CROSSES: These are the red and blue arrows you see on your chart. They are NOT entry signals, because they indicate ONE 4H candle too late for that kind of purpose. They may repaint - but that does not affect us at the time because of the other indicators we will have confirming. Refreshing the .tpl ... or changing the TF to another one, and back again, will usually reset the arrows if inappropriate.

 

What they do: These alert us visually to the crossing of the 14-period ADX, signaling a change in trend ... or ... an improving/weakening trend as the DMi+ crosses the DMI-.

 

ADX Indicator Alarm: Invisible on charts, but activated ONLY on the 4H chart on the template supplied.

 

What it does: Sends an audio AND a visual alert pop-up box to your trading screen to let you know that one of your pairs has had a change of trend on the 4H.ks exactly the same as the red/blue arrows - both set to the 14-period ADX, and the alert default is set to "on." You can turn it off - just ask if you want to stop using it and I will explain how it is done. Some people find these popups very annoying - others live and die by them.

 

Parabolic PSAR: These are the green and brown dots on the charts.

 

What they do: They are not used to give a strict signal, but when used in conjunction with the 15M - 1H - 4H charts, they signal the end of a pullback and the resumption of the dominant trend. These give you the very finely tuned entry that allow you to trade the higher TF without the huge SL we spoke about in an earlier post.

 

The PSAR settings are different for every TF. Why? Because we want them to be as reactive to moves in price as possible, without incurring whipsaws unnecessarily. Whipsaws happen - but we do not tempt them. That is why we do NOT use the default PSAR settings. The settings I use are my own, worked out by trial and error.

 

MACD 4,21,1,5: Momentum Indicator with finely tuned settings, and coloured to give advance warning of change in momentum.

 

What it does: The settings have been changed from the default indicator, to give us a faster crossover of the MA's, and confirm trend. The crossover of the 2 small MA's on the indicator, tell us that the change is happening, and should be confirmed by other indicators.

 

STOCHASTIC: Overlaid in the MACD window.

 

What it does: The settings are 14.3.3 for a good reason. Won't go into it here, but the levels set are 23.6 and 76.4 ... supposedly Fibonacci levels. Signals are strong when Stochastic crosses these levels in the appropriate direction - more later. Very powerful combo with MACD and TDI, as explained later. I have removed the "D%" period line from visibility, because we are not working from the K%/D% crosses, but the 23.6/76.4 level crosses.

 

Other stuff ...: I have attached a clock to the charts to tell how many minutes/seconds remain until the next new candle. Also you will see the ADR on the Daily chart only, indicating the ADR over the past 5 days, and also telling how far the range has moved for the current day.

 

That's all there is to this.

 

Set up your charts, and the rest is in your head!

 

I am certain this will trigger a few questions about how I find and trade the setups, and when I opt out of a setup altogether.

 

Note that the files are inside the .rar file attached. If you can not open the file, you can download a free RAR file from the Internet that will allow you to access the files within.

Ingot54 Template.rar

[Mysticforex 13]

Hi Ingot, looking forward to a GREAT thread!

 

 

I voted in post #1 and just wanted to qualify my vote.

 

Successful - I am a self supporting trader:

 

The qualification ?

 

I am 62 years old, no kids at home. No mortgage on home, no mortgage on small investment property, moderate passive stream of income, wife still works and has a great job.. Unless I am offered 0% interest, we pay cash. I HATE paying interest.

Don't drink, don't smoke, don't use drugs. We like to travel, and I have a few motorcycles.

In other words we don't have a big nut.

[optiontimer 10]

Congratulations on having found an approach that works so well for you, Ingot. I'm proud of you - not only for the success you are now enjoying but also because you have put yourself forward to share your work with others. Good for you!

 

Now, I'm too old a dog to learn these new tricks, but I am looking forward to following along, nonetheless. I take it that the "template" you are using is for MT4 software. From what I understand, every individual bucket shop feeds its own quotes through the platform; so would you mind sharing which broker you will be using for the screen shots you will be posting to demonstrate your method? Is it Oanda, by any chance?

 

Thank you, and good luck with both your trading and your thread!

 

-OT

[Ingot54 13]

Hi Ingot, looking forward to a GREAT thread!

 

I voted in post #1 and just wanted to qualify my vote.

 

Successful - I am a self supporting trader:

Thanks Mystic and welcome to the thread.

 

I appreciate your presence, and look forward to some dialogue

where I hope we can uncover ways to improve this strategy.

[Ingot54 13]

Congratulations on having found an approach that works so well

for you, Ingot. I'm proud of you - not only for the success you are now

enjoying but also because you have put yourself forward to share your

work with others. Good for you!

 

Now, I'm too old a dog to learn these new tricks, but I am looking

forward to following along, nonetheless. I take it that the "template"

you are using is for MT4 software. From what I understand, every

individual bucket shop feeds its own quotes through the platform;

so would you mind sharing which broker you will be using for the

screen shots you will be posting to demonstrate your method?

Is it Oanda, by any chance?

 

Thank you, and good luck with both your trading and your thread!

 

-OT

 

Welcome to the thread, OptionTimer - I am honored that you have stopped by.

There are similarities here between what I am doing, and the strategy you have

proposed in your great thread:

 

http://www.traderslaboratory.com/forums/trading-psychology/10158-optiontimers-project-14.html#post175004

 

I use an Australian broker - AxiTrader (demo for 2 years) because I believe while

Australian regulators and regulations are amongst the best in the world, our regulators

are powerless to assist if there is a dispute with an off-shore broker.

 

If you don't deal at home ... you're alone.

 

I occasionally use IG Australia (subsidiary of IG UK). Because of some serious issues

with IG which I have not been able to resolve through cordial dialogue, I have decided

to withdraw my patronage of 8 years duration.

 

This is not the place to air those issues.

 

The prices sourced by most MT4 brokers, come from a smorgasbord of major banks

and the Interbank constituents generally. Today, most brokers have their own favorite

mix, designed to give them competitive spread offering.

 

One MT4 broker I am aware of, uses all of these Barclays, Credit Suisse, Deutsche

Bank, Morgan Stanley, Westpac, Sucden, BNP Paribas & RBS, to offer spreads as low

as the ones I have just screen-grabbed in the pic below.

 

I also have demo accounts with FXCM, IBFX and Oanda, but after having issues with

requotes, platform freezing at the instant of placing orders, wide slippage and so on, I

have opted for a small account with AxiTrader as my first MT4 live broker.

 

I looked hard at GlobalPrime - another Australian broker. There is no FIFO with Aussie

brokers, and you can be long and short (hedged) at the same time.

 

Global Prime Forex - Metatrader 4 FX Trading & Managed Investments

 

Retail Forex is quite different from the commercial brokerage houses, where a

commission as well as spread is charged, and a ridiculous leverage is allowed!

Insane to be using 400:1, and I have seen 800:1! (Google "800:1 leverage" and

you will be gobsmacked!)

 

That sums it up - happy to elaborate further ... but you will never get the short answer

while the long one is available!

[onemove 10]

Thank you for sharing in this new thread. Looking forward to it.

 

Regarding the poll - since we are qualifying - not improving at the moment, but hope to do again soon

[Ingot54 13]

Ok - let's move along a little.

 

One of the first things to do, is to bust everyone's favourite myth: "The trend is your friend."

 

I'm here to tell you:

 

THE TREND IS NOT YOUR FRIEND

 

Look - as traders, we want nothing more than to get aboard a nice trend, The problem is, by the time you spot the trend, it is far too late - your ideal entry point has vanished, and you are chasing the trade.

 

This is where the indicators come in. The ones I have chosen are there for good reason:

 

They help identify:

* the trend

* the strength of the trend and

* the slowing and turning of the trend.

 

More importantly, they can help pinpoint the beginning of the trend, which most traders would consider to be some sort of prized mythical cup

 

In post #5 above, I have given you the indicators listed there. I will quickly explain why they have been chosen, and their strengths and limitations. If we are to be mechanical traders, we need to understand the tools and how to use them.

 

Nothing is perfect, and so we need to also be able to use what I call "informed discretion" and this can only come through experience - sorry if anyone thought trading stuff was easy. Simple? Yes. Easy? Depends ...

 

Let's begin.

 

Our indicators will tell us the trend's beginning and turning points most of the time, but not always, so we are needing a filter or two to give us the highest probability of finding and riding a good trend.

 

* ADX Crosses: These are the red and blue arrows you see on the 4H charts. Note that they are NOT signals to enter trades, because not only do they appear after the candle closes and the new one begins, they can repaint.

 

We need to dispel the myth of repainting indicators, lagging indicators and so on, because they all have their place in trading, and certainly I am making good use of them in this strategy. If there has been a change of trend in a new candle, the arrow will NOT appear until the DMI+ has crossed the DMI- in either direction.

 

All the arrow does is tell us that. ADX itself is an indication of the strength of the trend, but this is not what we are using here. How we use the indicator will be come clear once we get into the actual setup side of this ... (coming ... it's coming) ...

 

More info:

http://www.traderslaboratory.com/forums/trading-dictionary/12204-adx-definition.html

 

* MACD: The particular MACD we are using for this strategy has been chosen because of its early warning features. MACD is one of the best indicators of momentum we have. It can also act as an oscillator, but its main purpose is to tell us when a trend is insitu, or not, and visually we can see how much momentum that trend has.

 

The particular MACD I use, can be customised to show us the very early hints of any alteration in the trend. It has multi-coloured bars to further illustrate what is happening.

 

More info:

http://www.traderslaboratory.com/forums/trading-dictionary/12219-macd-definition.html

 

* Stochastic: Perhaps the most popular and reliable oscillator available. It generally consists of two lines, and traders get warning of the slowing of an old trend, or the beginning of a new trend after consolidation conditions in the chart.

 

In my strategy, I have made one of the lines invisible because we are not acting on the crossing of the lines of the stochastic itself, but we pay very close attention to the crossing of the LEVELS in the indicator window. I have chosen the 23.6 and 76.4 levels, as they are reportedly Fibonacci levels. In any case, they are a little more confirmatory than the standard 20-80 settings most traders use. I make quite a lot of use of this oscillator in the setup.

 

The other point worth mentioning here, is the setting I use. The stochastic is set at 14.3.3 which might seem a bit slow to some traders. Remember we are trading 4H, and when the market is serious about its move, we want to know it can be trusted. The shorter settings (5.3.3 and 8.3.3) are more volatile, and likely to five false signals - we don't need that.

 

More info:

 

Stochastic Oscillator - ChartSchool - StockCharts.com

 

Continued next post ...

[Ingot54 13]

Those are the main indicators.

 

I have carried over a couple of other indicators I use - the PSAR and the Traders Dynamic Index (TDI).

 

I still use them for confirmation of signals, but it is likely we can clean up the charts a little - remove them - and still not lose much by their absence.

 

* PSAR : This is an old favourite of mine, but many traders miss the brilliance of it. I do not use it to enter/exit trades the way it was originally designed to do. I use it to tell me where on the lower TF the trend is moving.

 

For example - if we have an uptrend in the 4H chart, but a downtrend in the 1H chart, we are looking at the pullback we need to get into the trend. So we drop down to a lower TF - the 15M chart, to see what thje PSAR is doing there. If we have a resumption appearing on the 15M chart, we wait until we also see 2 dots of the PSAR appearing also on the 1H chart (= 2 candles). That is our signal for entry.

 

More info:

 

Introduction To The Parabolic SAR

* TRADERS DYNAMIC INDEX : This is a collection of indicators so arranged as to give reliable signals It is a system in itself, but we are only concerned with the crossover of two of the lines. It is particularly reliable on the 4H chart, and the actual speed and angle of the crossover can be extremely indicative of the strength of the move we want to trade.

For more info, see the attached .pdf below.

 

I also have a clock to countdown to the end of the bar - you can choose to remove it from appearing if you find it too much clutter to bother with.

 

Further, I have included the ADR indicator, and an audio and pop-up alert for the ADX crosses, so that you have a faster heads-up if a signal arrives.

 

Later I'll begin looking at some trades, and as we go, explain how each piece of the strategy exists symbiotically.

 

Don't forget to use the poll at the top of the thread -

We do not really need to qualify ourselves if we don't

feel comfortable doing so.

And no one can see - even me - who checked which

part of the poll - it is totally discreet.

Dean Malone E.A.S.Y. Trading Method.pdf

[Jivanjiao 10]

Hi Ingot! Many thanks for sharing experience with unknown traders. I'm a beginner and ready to study anything interesting. Interactive Broker does not provide many indicators but they are very honest, so I don't want to change (I have tried TradeStation, but they are not correct with Forex although the platform provides much more indicators). For MACD which could be the settings as I can only modify the 1st Base average (EMA or SMA), the 2nd Base average, the periods of 1st avg. and 2nd avg. and the period of signal avg. Thank you for your advice. Jivanjiao (China)

[Ingot54 13]

In any trading strategy, there are rules. Some are very rigid, and some are to be treated more like principles, that you do not break.

 

Treating rules like principles does, however, give us scope to use discretion, as long as we do not overstretch our experience quotient! Remember that.

 

Some people here are very close to giving up on trading. I understand, having been through that about 2 years ago. It was a time of anxiety for me, as I had spent a lot of money and time trying to get this trading working.

 

All I can say is to hang around here, and see if this strategy can help you. Stop whatever trading you are trying until you can see if this is something workable for you. The space in your head has to be right, and getting into something different may just work.

 

Now - I have posted a few charts below. I have a 23-inch monitor, so I have a good view of the charts.

 

In the first pic, there are six charts. This is the basic setup. You will have the following charts:

 

Monthly

weekly

Daily

4H

1H

15M

 

If you place the template on the chart exactly as I have supplied it, you will see that I have set some windows differently form others. This is adjusted in the

"Indicators/Edit/Visualisation" section of the template, and is located by right clicking the chart, and selecting "Indicators List" 3rd down from the top of that drop-down menu.

 

I advise not to change anything there, though you can't do any harm ... you can always refresh the template to restore my defaults. Feel free to customise the appearance though - I realise my charts are not everyone's visual dream!

 

Once you have examined the Monthly and the Weekly charts, you will know the trend, and no longer need these charts. We will never trade against the trend. We will always only trade in the trend direction. Counter trend traders are skilled tacticians - not for us at this basic level - even if you see a "nice setup."

 

Why? Because when price is falling, for example, it will have MORE falls than rises, and those falls will be swifter and yield more pips-per-move than the counter-trend pullbacks.

 

But the counter-trend rallies have an extremely important place in our strategy. It is these little pullbacks that provide us with our entries.

 

Master the counter-trend entry points, and you will succeed as a trader.

Simple as that.

 

Now - here are the charts - basic setup, then determining the trend, then the working screen. From this point onwards, I will continue using the EURUSD as an example of the trades we can accomplish using this strategy. In the next post, I will go back and select a setup that has already occurred, and step through it.

 

This may stimulate a few questions, so feel free to interject at any time - we are not in a hurry. We need to get this right for you, the trader ... and we will.

[Jivanjiao 10]

if you place the template on the chart exactly as I have supplied it, you will see that I have set some windows differently form others. This is adjusted in the

"Indicators/Edit/Visualisation" section of the template, and is located by right clicking the chart, and selecting "Indicators List" 3rd down from the top of that drop-down menu.

 

Many thanks Ingot54. About the template you described, where could I find it?

 

Wish you a good weekend. Jivanjiao.

[Jivanjiao 10]

Hi Ingot54! Sorry...I've found your Template. Good. But how could I open the extensions .EX4 and .MQ4 ? Any idea? Thanks in advance, Jivanjiao

[henry1000 10]

Hello Ingot54:

 

Looks like you have started a great thread. Looking forward to more of your thoughts on trading Forex.

 

I'm glad your Forex trader poll is totally discreet. I sure wouldn't want any one to know how much I suck at trading - lol.

 

The 4 hour tf may seem easier to some people but the market can move a lot in 4 hours.

 

What is the maximum draw down you would you consider normal for your trading approach ?

 

And how long a period have you tested it over ?

 

Thank You

[Ingot54 13]

Hi Ingot54! Sorry...I've found your Template. Good. But how could I open the extensions .EX4 and .MQ4 ? Any idea? Thanks in advance, Jivanjiao

Hi Jivanjiao

 

Sorry I did not get back to you earlier about this.

 

It is outside the scope and intent of this thread to discuss installing indicators, as most people using MT4 are already familiar with the process.

 

However, I Googled the question "How to load indicators in MT4" and here is one useful response:

 

How to install MT4 Indicators? - Forex Trading | MetaTrader Indicators and Expert Advisors

 

There are also Youtube examples.

 

The easiest way is to place all indicators and templates you want to load on to your desktop, and then open "Computer/hard Disc Drive (where the MT4 file is stored)/

 

Then open the MT4 file, where you will see a list including "experts" ... and further down the list ... "Templates." This is where the .tpl file goes - just drag it into the window.

 

The rest of the files go into "Experts/Indicators"

 

Note: When you double click on "experts" there is another "templates" folder in there - DO NOT PLACE the .tpl files in there, or you will not be able to see it in the list, when you open MT platform.

 

I can not help you further than this - I suggest you have a look at :

 

School of Pipsology How to Use MetaTrader*4

 

http://www.traderslaboratory.com/forums/beginners-forum/2427-how-import-indicators-templates-into-mt4.html

 

EDIT: Once installed, open the platform and look for the folder icon with a star, on the top toolbar - this is the "navigator" folder, where your indicators are stored - just use your mouse to drag and drop them onto the open chart, and a box will open allowing any customising.

 

The template will be found on the top folder under the "templates" icon (appears like a chart symbol). On the drop-down menu under "templates" you click on the "Ingot54_4H" template, and your chart will be instantly changed to the correct formation.

 

Note: Once you have the indicators installed into "Experts/Indicators" folder, you do not have to actually place them onto any charts - this happens automatically if you use the template function, because the template is going to use only those indicators that were "saved" into it, when it was constructed by me.

 

Hope this helps.

Edited March 3, 2013 by Ingot54

[Ingot54 13]

The 4 hour tf may seem easier to some people but the market can move a lot in 4 hours.

 

What is the maximum draw down you would you consider normal for your trading approach ?

 

And how long a period have you tested it over ?

 

Thank You

Thank you for the Q Henry.

 

I use a variable SL - between 50 and 100 pips away from entry. This varies depending on the strength of the trend prior to the pullback, and the proximity to news events and so on. I regard trading as an "art" in that it is difficult for a trader to simply follow the instructions in black and white, and expect to come out winning.

 

That is the intent. The reality is different because of the infinite variability of market activity.

 

I am not a guru - I am a trader who has struggled to get something together over the years that actually works for me. I wouldn't be surprised if it can be shown that there are lots of weaknesses in my strategy - I don't think that is the case though.

 

Some trades get going straight into positive territory from entry - zero draw down. Others move 30 pips or more further, before resuming the direction indicated by the higher TF.

 

How long have I tested this?

 

I began getting this stuff together 18 months ago, and have spent most of that time working towards getting to break-even. Now I find that with using the lower TF to nail the pullback/resumption points a little better, that I am making pips.

 

For example, in the trading contest I do not think I have gone more than 10% draw-down, and have not had a losing trade.

 

Mystic hasn't put the latest figures up for awhile, but my a/c is sitting at +146% after about 14 trades, with no losses. The figures will show 28 trades or something, but it counts an open and a close as 2 trades.

 

I should mention here also that I closed MANY of those trades before they really got going properly - ie they didn't get the chance to really run before I closed them for weekends, news etc. With more experience I could take a hands-off approach and do better.

 

To answer the Q in a short way - no back-testing ... all forward and mostly small live trades.

 

I do not personally believe in back-testing - but agree some people swear by it.

 

EDIT:

The 4 hour tf may seem easier to some people but the market can move a lot in 4 hours.

And it is us that is going to be nailing these moves Edited March 3, 2013 by Ingot54

[henry1000 10]

Hello Ingot

 

Good answers above. Forward testing is the best kind.

 

Catching large moves on the 4 hour tf is great. But how do you move your stops as price moves in your favor ?

 

Do you limit your Forex trading to only certain days of the week or hours of the day ?

 

Will you have trades going over the weekend ?

 

What are your favorite pairs for trading ?

 

How do you select the pair you will actually trade ?

 

What do you consider to be important news events to track and what do you use for a source of news ?

 

Thank You.

[Ingot54 13]

Catching large moves on the 4 hour tf is great. But how do you move your stops as price moves in your favor ?

Probably one of the weaknesses of the strategy as it stands. Taking exits has been difficult for me, since

everywhere people are saying: "let your profits run." I wonder how many of these

people actually trade ... or are actually profitable themselves?

 

I can tell you this honestly worries me in every trade - perhaps sharing the strategy

here will help uncover the solution to this. What I usually do is take a look for weakness

in the trend, and if there is "enough" taken out of the trend, I close. I can tell you I leave

plenty behind, and want to learn how to take better exits.

 

Do you limit your Forex trading to only certain days of the week or hours of the day ?

I usually let the markets do what they like on Sunday night/Monday ... around the first 8 to 12 hours usually,

because Forex has taken to gapping-and-reversing every week on the open, and I want

that to settle down first - it is false activity generally.

 

Forex never used to have gaps - it was very rare - now it is common and expected.

 

Will you have trades going over the weekend ?

Not usually - I want to have a life. Because I worry about cataclysmic events these days - eg Mario Draghi and

his big mouth, Greece, Cyprus etc - I find I am more relaxed being out of the market.

 

And of course most market-moving news comes out of the USA on weekends, and this

can have an adverse effect on my positions - why risk damage?

 

What are your favorite pairs for trading ?

Easy one:

EURUSD - EURJPY

GBPUSD - GBPJPY

AUDUSD - AUDJPY

 

I will usually only trade one of these at a time - the best one in my judgement.

 

How do you select the pair you will actually trade ?

Another easy one: I eyeball the 6 pairs, and choose the one that is showing things like ...

strongest trend, most to move to complete ADR and so on - factors that work FOR me

... not against me.

 

What do you consider to be important news events to track and what do you use for a source of news ?

I follow the calendar at Forex Factory, and have tweaked that display to display only moderate (orange) and high

impact (red) news events. Having said that, I take little notice of the actual news, as far

as making a trading decision. markets have been perverse since the GFC - traders

want to do the risk-on/risk-off thing ... but we no longer know what that will be, like we

did in 2005 - 2007.

 

News used to be 'good or bad' for an economy, and markets moved accordingly.

Now it is this "buy the USD ... sell the USD" safe-haven rubbish. There are no real

traders any more - just gamblers, or people using inside information ... just my view.

 

You will notice with news, that after all the froth and bubble settles after the event, that

price continues the SAME trend it did before. It might be 20 pips higher or lower ... or

more ... but the same trend is still in place.

 

If you have a large enough stop, you can tolerate the volatility, but I can't do that - I

prefer to be out of the market when strong news announcements are due. A lot of times

the market jumps around when there is no news to back that up, and you will read on

Bloomberg - hours too late - that the president of this/that bank said something controversial.

 

Recently it was some silly understudy of the BOJ said something that sent the JPY

pairs crazy ... then a more senior person refuted the statement, and things calmed

down.

 

Was that intentional? Can you predict or foresee these things?

 

No - then that is why I like the 4H TF - you are mostly immune from the smaller rubbish,

but can stay in a decent, strong trend.

[Jivanjiao 10]

Hi Ingot54,

 

Many thanks for your comments on Indicators with MT4. Very useful.

 

You wrote: I can tell you I leave plenty behind, and want to learn how to take better exits.

 

I consider trading a probability game and modestly I use Fibonacci for exit or eventually old Support/Resistance which most of the time coincide with Fibonacci 1.618.

 

Thank you again for not being a "guru".

Jivanjiao

[BlueHorseshoe 10]

Hi Ingot,

 

Thanks for taking the time to put together such a great thread - I'm finding it very useful and it seems that plenty of others are as well. Looking forward to seeing a walk-through example of a trade (and then I might bombard you with questions!) . . .

 

Kind regards,

 

BlueHorseshoe

[Ingot54 13]

Hi Ingot,

 

Thanks for taking the time to put together such a great thread - I'm finding it very useful and it

seems that plenty of others are as well. Looking forward to seeing a walk-through

example of a trade (and then I might bombard you with questions!) . . .

 

Kind regards,

 

BlueHorseshoe

Thank you BlueHorseshoe.

 

I look forward to all Q's but do appreciate the space to develop the first set-up and

walk-through, before the onslaught

 

I don't want to get sidetracked before we really have something to look at and discuss.

 

If people have questions already (I'd be surprised if the afore-going hasn't stimulated

some), then please write them down. If they get answered as we go - good, but doing

that will also teach you something about the way you think and see things, before they

are explained. Looking back at past attitudes is a great mind-opener for the future.

 

In about 10 to 12 hrs from the time of this post, I will have slept off my night shift, and

be looking at a chart or two - maybe several, in order to step through a set-up and if we

are fortunate, we might even see a trade we can enter.

 

I have to be honest here - I do appreciate all feedback, because there are still sections

of my strategy with which I struggle - particularly exits, as mentioned earlier. I hope

some traders who have been in this predicament are able to step in and guide the way

we handle them.

 

While it is "my" strategy at present, I am hoping it can also become "our" strategy when

a bit of wise experience from old hands looking on, can be brought to bear, to

significantly improve it.

 

I am hoping not to let anyone down with this, but I assure you we will get some good

trades out of this, and a pattern to follow that will change the way you see the markets,

and take advantage of what you see setting up.

 

By the way - I answered Henry by saying I trade only 6 pairs - this is true.

 

But that does not mean you can not have 20 on your watch list, and pick the eyes out

of them to find the best trade. I only keep 6 going, because I find that is enough

for me to concentrate on, and a trade well-done is worth a dozen half-done.

[henry1000 10]

Hello Ingot:

 

Thanks for the previous answers.

 

Looking forward to your up coming charts and setups.

 

Can you tell me what time zone your charts are set for ?

 

How many trades would your methodology take per week ?

 

How long does a typical profitable trade last ?

 

How many pips would a typical profitable trade have ?

 

How many pips would a typical losing trade have ?

 

Thank You.