Currency Trading Strategy Number One:
When you are just starting out, strive to carve out 20 pips per session, and that’s it. Then, turn it off, and study some more. When you get really good at it, you can then “graduate” to higher returns. So, set your goal at 20 pips and stick to it, until you are a grand master at this wonderful “business” called forex trading. I stress the word business. This is not a game, especially where your “hard-earned money” is involved.
Currency Trading Strategy Number Two:
Spend most of your time on the 15-min chart.
Currency Trading Strategy Number Three:
When you first start out in any particular session, look at the 1 hr chart to get an overall perspective on trend from one session to the next, and what it’s likely shaping up to be at the beginning of the upcoming new session.
Currency Trading Strategy Number Four:
Only look at the 5 min chart if you absolutely have to see what’s behind the current 15 min bar – especially where the bar is elongated, and may have just penetrated a pivot point; in other words, is price reversing course on the 5 min chart, which would obviously not yet be reflected on the 15 min chart?
Currency Trading Strategy Number Five:
Don’t dwell on the 5 min chart, as it contains a lot of “noise” that will whipsaw you to death.
Currency Trading Strategy Number Six:
MACD rules on the 15 min chart. Even if MACD is, say, trending up on the 1 hr chart, if it is trending down on the 15 min chart, that’s what you take your cue from. That’s not to say a shift in price direction is not in the works. It just means it’s coming, but not yet. In the meantime, you don’t want to miss what’s happening “in the now,” which is what is reflected in the 15 min chart.
Currency Trading Strategy Number Seven:
If MACD is trending down on the 15 min chart, and price is wanting to go north, price will sooner than later head south as it perhaps bounces off a pivot point, or gets turned around at a juncture caught by one of the other three “tools” you should be using (“reading bars,” MACD divergence, or trendline analysis). Same thing if MACD is trending up, and price is trying to head south.
Currency Trading Strategy Number Eight:
Only use MACD for divergence, not for buy or sell signals. It is a lagging indicator, and as such is useless as a trigger. It is too slow for that in the forex world.
Currency Trading Strategy Number Nine:
Again, MACD divergence on the 15 min chart is more significant than what you see on the 1 hr chart in the near-term. For those of you who don’t understand what divergence means, keep looking at my own personal forex trading examples on this page on a daily basis for examples of divergence. Basically, what it means is where you see MACD waves “waving” in the opposite direction to price action. That’s why I connect the top of the waves (in a downtrend) and the bottom of the waves (in an uptrend) to illustrate that the waves are “waving” higher in an uptrend and lower in a downtrend – in the opposite direction to where price is going.
Currency Trading Strategy Number 10:
Always “protect” your money by using 20-30 pip stops. Mental stops are okay, but not if you are dead serious about using a “disciplined” approach to managing your money. You will lose three out of ten trades. The three losses should be kept to 20-30 pips. Your wins will by far surpass your small losses, and that’s what stop-losses are all about. Don’t be afraid to lose. Even professional batters strike out six out of 10 times. Lions are only successful 20% of the time in their chase for the kill. Professional golfers lose 95% of the time. Professional poker players lose 50% of the time. So, your chances are better at trading the forex, using my system of course, than in any other venue. Even businesses have “bad inventory.” And, life in general is not always “100%” for sure.
Currency Trading Strategy Number 11:
That all said and done, if you entered a trade close to a pivot point, or a particular significant bar pattern (like a double top, for instance, or a trendline breakout), place your stop on the other side (but not too close to) the event that caused you to take action. This is because price has a tendency to snap back to that situation that caused it to bolt away from it in the first place. If you follow the 20-30 pip stop rule, but a 33 pip stop on the other side of that event would safeguard you against such a reaction, then so much the better. So, yes the stop rule is 20-30 pips, but within reason of course.
Currency Trading Strategy Number 12:
Stops (read “stop-loss”) are for insurance purposes only – not necessarily for taking profits. However, you can most certainly employ “trailing stops,” whereby you keep moving your stop up (or down, whichever the case may be) to protect your profits, as price advances, or declines.
Currency Trading Strategy Number 13:
Only use “reading bars,” MACD divergence, pivot points, and trendline analysis in your forex trading toolkit. That’s all you need for this market. Be a technical bigot. Focus on pure technical analysis, and avoid funnymentals. Even news is factored into price action, so you don’t need to be up on it each and every nanosecond. If you don't have my .pdf file on reading bars, please send me an e-mail, and I'll forward it to you: firstname.lastname@example.org As was pointed out to me by a client, "reading bars" includes spotting double, or even triple, tops and bottoms.
Currency Trading Strategy Number 14:
And now for the tough part. I know my documentation says that the forecast low and high for the next trading session can be M1/M3 or M2/M4. However, trading is shades of gray. It is not a black and white business. If it were, the world would be paved in gold, and everybody would be rich. Now, we wouldn’t want that would we? The forex would be nothing more than a Church at the end of a road connected to a river bank at the other end with nothing in between. The point I am trying to make is that the “actual” low and high for the next session could very well be any combination of M1, M2, M3, and M4. It could be M1/M4, M2/M3, or combinations of the other five pivot points. The M1/M3 and M2/M4 calculations are just guideposts, but are not poured in concrete. Price is the number one indicator. It will determine what the low and high are going to be. And one other thing, you should use these forecasts in conjunction with the other three “tools” in your forex trading toolkit – “reading bars,” MACD divergence, and trendline analysis. In other words, if price has been trending down from the past session into the current one, price is trading at, say, M3, and price is still going down, then M3 may very well be the high for the new session, regardless of the fact that my system may have called for M4 to be the high. So, use the pivot points in conjunction with other three possible signals – “reading bars,” MACD divergence, and trendline analysis. I have seen it happen, as in the example just given, where price was trending down from one session to the next right through M3 at the open of the next session – simultaneous with the formation of a “double top” bar pattern. Well, there you have three indications that price was headed south for sure. And, I believe MACD was also trending down in that particular case. So, that was another clue that the high for the session had probably already been put in.
Currency Trading Strategy Number 15:
When you are first starting out, pick one currency of the four major pairs (EUR/USD, USD/JPY, GBP/USD, and USD/CHF) to trade, and become a specialist in it. I would personally recommend the Euro, especially if you are going to be asking me questions, as that's what I focus on with my clients around the world. Get to know its rhythm. When you are doing well with it, then move on, and trade the other three major pairs, as you see fit. When you are in learning mode, you will have your hands full trying to figure out what to look for, and how to manage your trades – enough so that you don't want to be skipping back and forth between currencies.
Currency Trading Strategy Number 16:
Keep a log of all your trades – both good and bad. Analyze where you went right and wrong, and vow not to repeat those situations that could have been done better. This is all part of being organized as a "professional" trader - with good habits. This is not about gun-slinging and winging it with "Hail Mary" passes.
Currency Trading Strategy Number 17:
Important point here: If price action opens in the upper end of the projected range for the session (all the way up to R2, and beyond) – in other words, in the sell area (that area above the central pivot point) – and there are other suggestions that price is too high (such as a particular bar reading, MACD divergence, or trendline breakout), then price has probably achieved the upper end of its price range for the session. The same holds true where price action opens in the lower end of the projected range for the session (all the way down to S2, and beyond) – in other words, in the buy area (that area below the central pivot point) – and there are other suggestions that price is too low (such as a particular bar reading, MACD divergence, or trendline breakout), then price has probably achieved the lower end of its price range for the session.
Currency Trading Strategy Number 18:
If there is nothing to do, then don't do it. Don't just do something because your "gut" tells you to. That can get you in a lot of trouble in this business. Only react to bona fide signals provided by the four indicators talked about above – "reading bars," MACD divergence, pivot points, and trendline analysis.
Currency Trading Strategy Number 19:
Only use an "industrial strength" market maker with the lowest pip spread in the industry.
Currency Trading Strategy Number 20:
Occasionally, you will see a huge spike up in price, as we did 11 May 03. This just happened to be on a Sunday, shortly after re-commencement of trading, after the weekend respite. Ordinarily, I would take the OHLC numbers from Friday, but given the nature of the wild swing up that evening on one of the 15 min bars, I would then use the OHLC numbers from Sunday night's session close to get a better reading on support and resistance levels for the next session. This is, of course, if you are using a market maker that delineates its break between trading sessions in the late evening - anywhere between 20:59:50 and 24:00 (midnight).
Monday, March 3, 2008 At： 3/03/2008 07:38:00 PM by Joyce.gardner
Currency Trading Strategy Number One:
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