Intelligent FX Trading Method

The purpose of this topic is to bring a bunch of people together who are willing to work and use there brains to make money in trading. Some will say: arn't we al looking for that... The fact is and sorry to say this, NO. Most of the people who I see on forums are looking for a system or an aproach were they have to do nothing. The only thing they wan't to do is open an account with a litlle bit of money and open an MT4.0 platform. They would like to have everything automated and hope or dream of a 500% profit on the end of the year, thinking they could retire in 5 years time.

Most of the people that I met on forums, never bought a book about trading. Why?...They think they will find the answers without paying for a book. The people who wrote those books as G.Williams A.Elder Jake Bernstein, Chick Goslin have at least 15 to 20 years experience so why would you not pay something to share some of there priceless experience. In those books (and if you bought 10 of them you will hear everytime the same) how moneymanagement works. That it is an escencial part of trading. That you need a strategy based on entry rules and rules when to take loss or profit. How big your capital needs to be. Finding out what kind of a trader you are. I see people jumping on turbo day trading and it does not work and jump then on 4hrs trading methods and that takes to long between 2 trades and jump back on 15minute chart etc. They are looking for whatever kind of system as long if it makes money and they don't have to putt to much effort in it.

Knowing who you realy are, what your strong points are but aspecially what your faults and weak points are, is the beginning of every wisdom. Knowing what your weaknesses are, will help you to deside what kind of trader you are, what kind of system suits for you. And it could be that you don't have enough money for that kind of trading.

As I stated in previous topic and posting I'm a professional trader for 9 years now and 2 years as a fund manager and I'm still very eager to learn. But I have also a feeling that what I know already, I would like to pass this true to people who are willing to realy learn what trading is all about.

So the people I would like to meet and work with on this system are not the people who never red a book, who beleve in Xpips/day strategys, who think that it is possible to make 100% profit but only a drawdown of 10%, who have very small money now and hope to become rich in no time, who are not trying to learn more then what they can learn here, who don't want to make positive contributions, who have hardly any experience (don't think if you sit for 6 months on a forum and that you know a litlle bit more then your neighbour that you are experienced).

Lets get down to bussines. The system as it is know in its purest form, is a very simple but very robust aproach. It is bassed on the crossing of price with a moving average. First of al what are the advantages and disadvantes of a Moving Average?...

The biggest advantage of a Moving Average is as the name says itself, it is the average movement of the price. So that means when we see price above the MA it is higher then average so we are on the long side of the market. If price is below the MA it is lower then average, so we are on the short side of the market. So the big advantge is, if we putt an MA on a chart, with the blinck of an eye we see on what side of the market we are. In long country or short country.

The biggest disadvantge of an MA is, when price moves sideways, one moment it is on the long side and the other moment we are on the short side. Nevertheless on the correct side (because price never lies) but if we want to trade on those moves we loos money. 2 reasons, first the trading cost and second, if we go long price is above and if we go short price is already below so we loos everytime on that litlle crossing of the MA.

If price would never range or stall and would always be in motion, going up and comming down, then we know that an MA is the only tool we need. Before it would cross with the MA we know that we would give back from the high and we would give back from the low, but I think that we could all live with that. If I could show you a pair or future who behavies like this you would all stick around in this topic. But the reality is far from this ideal dream... or isn't it?...

The problem we are faced with is the stalling of price or the trendless market. You have to realize if we can prevent ourselfs of taking in positions in this trendless market the best we will do is earning NO money. But that means also NO loss. So in the future if we are in strong sideways market conditions don't excpect to earn money or be dissapointed if you don't see any profit or maybe some small controled losses.

Back to our chart. A breakout of price true the MA has 1 rule. We need a crossing of the MA and a next bar that is lower or higher then the last bar that crossed the MA.
So we look to the last bar that CROSSED the MA. The CLOSE of that bar we call that our Reference Value.
If that bar crossed to the upside of the MA we would call the CLOSE of that bar our Reference Value Long. If that bar is the last bar that crossed the MA to the downside then we would call the CLOSE of this bar our Reference Value Short. To go long we need a bar that CLOSES HIGHER then our Reference Value Long. For a short entry we need a CLOSING of a bar that is LOWER then the Reference Value Short

Now, if price stalls we need somthing to filter out or prevent us of jumping on every price movement above and below the price. That I achieved with a 2 indicators called the stepconfirmation 1 and 2 (originally develloped by Igorad--a brilliant russian indicator develloper and changings by Ogeima and Raduga)). When the parameters of these indicator are high enough it changes only from buy to sell and from sell to buy the moment that a singificant price move starts from the MA. Sounds simple but to find an idicator who is cappable in doing this is very hard. Reason, normally if you find an indicator who is capable of preventing you to jump on every move above or below the MA it will get you to late in the market when an real move starts. You get in far to late and if price starts to fall back again to the MA that is deffenatly a big loss. Needles to say that if this happens frequently it will consume all the profit you made on your last trade and even worse then that.
To have a correct Long signal BOTH indicators have to be above zero (Lime and Green color) To have a correct Short signal, BOTH indicators need to be bellow the zero line (magenta and red color) (with the correct 2 bars crossing offcourse --exlpained a bit higher in this post).

What happens next?.......For the the 3 majors (eur/usd, gbp/usd and chf/usd) we allways take the same position on all 3 pairs (offcourse the opposite for chf/usd).
we only go long if all 3 pairs have a long signal and we stay with this signal till we have a short signal on all 3 pairs and we stay with this position till we get an other long signal on all 3 pairs. So lets say that we have long position on all our positions...the euro gives a short signal at 10.00cet....we stay long with our 3 positions (again this is short for the chf) ..the gbp/usd gives a short position at 14.00cet ..we stay with our positions....the chf/usd turns at 17.00cet only then we turn all 3 of our positions. We stay with the same positions till the same situation happens for a new long position. No exits for a single pairs or turning on 1 single pair nore for 2.
We take the last trade at the close of the 20.00cet bar. The first trade we take at the close of the 08.00cet bar...so in between NO TRADING.
The same principle can be used on the eur/jpy and chf/jpy. So here it would be 2x signal or the 2 pairs need to give the same signal.
If we would get a compleet set up during night hours and in the morning at the close of 08.00cet bar the compleet set up to turn postions is no longer there then we do not turn positions and we stay with the postions of the previous day.
The purpose of this new rules are not to look for more profit but to reduce the amount of losing trades (and offcourse the overall profit increases this way). This will help in consolidation periods were the price keeps moving around the MA. When this happens it is more difficult for all 3 pairs to lign up in the same way. Once a big moves starts we know that we will catch it.
In the previous trade rapports we only had the results since 1st march 2006. To compare the method of 3 x signal with the individual method we took the results since the 1st januari 2006 to have a more reliable research. And indeed the results gave what I hoped for.
By adding the results between the 1st jan and 28 th febr. to the individual aproach the hitrate dropped to 40% (as I predicted) the profit factor dropped also to 1.95 and the average profit/trade dropped to 102.
With the new method (turning with all 3 pairs if they show the same signal) the hitrate is 44.5%. the profit factor goes up to 2.29 and the average profit/trade shot up to 119pips /trade. The total result whent up from 3.838pips to 4.535pips (16% more !!) and that with 44 less trades.

Trade rapport for 3 x signal (new rules) since 1 januari:
144 trades
66 winners
80 losers
Net Profit = 4450pips
Gross profit = 7886pips
Gross loss = 3436pips
avg profit/trade= 54.7pips
avg. Loss/trade= 23.8 pips
avg. Winning trade= 119.4 pips
avg losing trade= 43pips
Avg win/avg loss= 2.77
Profit Factor= 2.29
hitratio 45.5%
Kelly value = 0.258
Sterling ratio (Total result/MaxDD) = 4.1

In this results the eur/jpy is included. The results of the eur/jpy are calculated on a individuall aproach. So we took the signals from the system only on eur/jpy. I will calculate what would happen if we only would take the signals if chf/jpy and eur/jpy give the same signal.

The results of the new method are on the last page of the spread sheet. It is not possible to make a chart of the results of the old method because the dates and hours don't match. The same reason why it is also impossible to calculate the sterling ratio.
The total result of the new aproach is 4.450pips and this over 84 trading days. That means that we earn an AVERAGE! of 52.9pips per day...
Who told you it is very difficult to earn 10pips per day ?!...

The calculations were made possible with the important help of JP and ogeima.

If you want help on this method we can be contacted at ensignsoftware. com
You can download a free litlle programm to chat. We are in room 55 (I_FX_T)

updated 27/04/2006

IMPORTANT ABOUT THE STOPLOSSES AND PROFIT TARGETS:

As said before we do not take any profit targets. We go for the complete moves.

For the stoplosses: we need all 3 pairs to CLOSE! above or bellow the Fib55 level to exit on all 3 pairs.
No stoplosses on a single pair, will be taken.

We have also an emergency stoploss and that is when price hits 200pips from your entry price. That can be taken on single pairs.
And 150pips during the nightly hours (between the CLOSE of the 20:00cet bar and 08:00cet bar). Same goes for day session, the stoploss can be taken on single pairs.

What is one with a strategy but without a goal ?...whe are fully armed but see no combat. We will trade on the 3 majors eur/usd, usd/chf and gbp/usd on a 30min chart. Our goal is to make 4500pips on those 3 pairs in 1 year time. And a maximum drawdown less then 1500pips. If some of you think that the drawdown is to big then I can tell you that it is not. If you are a fund manager and on the end of the year you had a drawdown that was half of you profit you did very well (ex. 15% profit on the end of the year and during that year your drawdown was 7.5% your customers will want you back the year after)
If some of you think that this is to big because the smallest value you broker offers is 10$/pip, then I sujest a broker like o a n d a . c o m were you can trade as small as a penny per pip. (and only 1.5pips spread on the eur/usd). If you don’t want to change broker and still want to trade but don’t have enough money then trade only 1 pair. Your goal will be 1500pips profit and 500pips drawdown

On other topics is see sometimes good systems or aproaches but I never or hardly see the founder posting his entry or exits or the losses he had to take. They give the empression that all what chatters is gold. But as intelligent traders we know that this is not the case. So to show the nescasseray crediblity all entry and exit will be posted with chart on that the moment it happens (not after the facts or at the end of the day).

As easy the set up and rules may look, for some of you it will be a test for the nerves. Because often you will see a 100pip profit vaporize. Those who think that every pip profit in your account should stay yours will abandon this method very quickly. I can not recommend to look al day long to this method because it will drive you crazy the jumping of every pip. This is a swing trading strategy. So we go for the bigger waves. If some of you think that they can use this method on a shorter time frame and beet our goal of 4500pips, let us know.

Remember that trading is all about averages. Average loss, average profit, average winners average loosers, biggest loss biggest win. Most consecutive losses in a row most consecutive winners in a row. If you take all those elements on average, trading looks like a walk over a bed of roses but the statistician said, this river is on average 3 feet deep, while he drawned

The indicators in this zip file are the ones to use for the 2 stepconfirmation + 3x signal set up.IT CONTAINS 2 TEMPLATES. 1 for the 3x signal on eur/usd, gbp/usd and usd/chf. THE OTHER IS FOR THE 2x SIGNAL ON EUR/JPY and CHF/JPY

Chart pictures:

Sample signal

Required Indicators :

Indicators + templates

Note : If you have any question regarding this system just visit this link

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