Showing posts with label profitable trading strategy. Show all posts
Showing posts with label profitable trading strategy. Show all posts

Practice Exercise #3 (Money Management Test on DEMO)


If you started this Practice Exercise #1 you probably notice that this isn't working on ranging market (we had some examples of 5% losses on the last couple of days, due to Cyprus situation).

Testing this, with a SL=30p, we notice that in a range market of let's say 50p, our profit target of 90p is almost impossible to reach even if our position run in profit, for a while. And the SL will be hit, eventually, unless the PA will break any side, to have that 50% to catch the new trend (based on flipping the coin math probabilities).

The first idea that we can think of, to improve the initial exercise, is to use the Position Management (to "lock the profits"). 

NEW:
The second idea that we can think of, is to use a double number of pips as SL = 60p. And of course to double the TP = 180p, as well.
The reasons behind this are described here.
In order to keep the same MM, we can't use 20 opened positions like in the Exercise #1 (since we've doubled the SL and we need to keep the same % of loss per trade ).
Then, we will have the next steps for this new exercise:

1. Open a DEMO account = $10,000 (or continue to use the old one)
2. Take a coin (yes a coin).
3. Establish which coin sides will give you the signals. E.q head = long, tail=short
4. Open 10 pairs on your platform (NEW)
(only pairs for not ruining the margins requirement. e.q no gold/silver/oil/indices, etc)
5. Flip the coin for first pair.
6. Enter (market order) using 0.01 lots (0.1 for $100,000 account), SL = 60p, TP =180p (NEW)
7. Go to the next pair and do the same entry technique, then the next...until 10 pairs (not 20 like in the previous exercise).
8. After having 10 opened positions, stop trading (NEW)
9. If any position run in profit, move the SL = Entry ± Spread ± few pips or use Trailing Stop
10. Let all the positions to run, until the new SL/TP hit.
11. If any position is closed (TP/SL hit), on the next day, open a new trade by flipping the coin, again (and move, the SL, for the profitable positions).


* Important note: Practice TEST on DEMO purpose, only!


As I expected, the last week exercise didn't offered us enough published results, due to the people lack of time (jobs, etc). As soon as I will have it, I will update it on the Exercise #2 post.

The result for this Exercise #3 will be published here, as soon as I will have it, as well. Probably this exercise will take us 2 weeks, since we've doubled the SL and TP levels (no of pips). If we will still have a range market, it will be hard to have sooner, some closed trades to count for it.


Best Regards,
^^_Lord_Ice_^^ 

Practice Exercise #2 (Money Management Test on DEMO)


If you started this Practice Exercise #1 you probably notice that this isn't working on ranging market (we had some examples of 5% losses on the last couple of days, due to Cyprus situation).

Testing this, with a SL=30p, we notice that in a range market of let's say 50p, our profit target of 90p is almost impossible to reach even if our position run in profit, for a while. And the SL will be hit, eventually, unless the PA will break any side, to have that 50% to catch the new trend (based on flipping the coin math probabilities).

The first idea that we can think of, to improve the initial exercise, is to use the Position Management (to "lock the profits"). 

Therefore after the step no8 ("
8. After having 20 opened positions, stop trading"), we can use the next formula to move the SL for the profitable positions:

New SL = Entry
± Spread ± few pips (i.e. 5p)

Or we can use a Trailing Stop = Initial SL
± Spread ± few pips (In case you can monitor the platform)

(Ofcourse you need to calculate this for every pair, since the Spread can vary from 2p up to +25p or more, for some pairs.)

Then, we will have the next steps for this new exercise:

1. Open a DEMO account = $10,000 (or continue to use the old one)
2. Take a coin (yes a coin).
3. Establish which coin sides will give you the signals. E.q head = long, tail=short
4. Open 20 pairs on your platform
(only pairs for not ruining the margins requirement. e.q no gold/silver/oil/indices, etc)
5. Flip the coin for first pair.
6. Enter (market order) using 0.01 lots (0.1 for $100,000 account), SL = 30p, TP =90p
7. Go to the next pair and do the same entry technique, then the next...until 20 pairs
8. After having 20 opened positions, stop trading.
9. If any position run in profit, move the SL = Entry ± Spread ± few pips or use Trailing Stop (NEW)
10. Let all the positions to run, until the new SL/TP hit.
11. If any position is closed (TP/SL hit), on the next day, open a new trade by flipping the coin, again (and move, the SL, for the profitable positions - NEW).

* Important note: Practice TEST on DEMO purpose, only!
I expect the results to vary, because not everyone can monitor their trading platform, during the day trading sessions (i.e. NY, London). Also, for the Trailing Stop command, the trading station must be on (computer).

I will update here, the average results posted by all of you in my Main Facebook Group, on the end of the next week. We will look for developing new ideas (new exercises) to improve the original statistic, too.


Best Regards,
^^_Lord_Ice_^^ 


Practice Exercise #1 (Money Management Test on DEMO)


One month ago, we started this Money Management Exercise, on my Main Facebook Group.
The main ideas was the importance of the MM in trading, the risk and how this can be managed properly (read more here).

In case you want to do this exercise, follow the next steps:

1. Open a DEMO account = $10,000
2. Take a coin (yes a coin).
3. Establish which coin sides will give you the signals. E.q head = long, tail=short
4. Open 20 pairs on your platform
(only pairs for not ruining the margins requirement. e.q no gold/silver/oil/indices, etc)
5. Flip the coin for first pair.
6. Enter (market order) using 0.01 lots (0.1 for $100,000 account), SL = 30p, TP =90p
7. Go to the next pair and do the same entry technique, then the next...until 20 pairs
8. After having 20 opened positions, stop trading.
9. Let all the positions to run, untill SL/TP hit.
10. If any position is closed (TP/SL hit), on the next day, open a new trade by flipping the coin, again.
* Important note: Practice TEST on DEMO purpose, only!
I know it might sound crazy, but what I need you to see, is what really means to trade with a good MM strategy (+ medium R:R ratio 1:3) and no strategy at all (50-50% to be right, short/long, by flipping a coin).

Also, this way of doing "automated" trades, might help you, if you are the emotional type person (bad for trading). You will understand what really means trading by the rules.

Average results:

Initial account balance = $10,000

Total trades = 50-200 trades / week
Positive/Negative = 1/3-5 trades in profit, only
Total positive pips = 150-250p / week
Total positive profit = 1.5%-2.5% / week

Negative account balance = NONE / week


* Total no of trades (and profits) are related to the time invested in testing this strategy. Some traders couldn't monitor their trading platform whole days, due to their daily schedule, jobs, etc. So their closed positions were spot in the next day, only (to open a new trade / that pair). This decrease their total no of trades, pips and profits.


Conclusions:

As I expected, nobody had a negative account balance / week, by now. Ofcourse mathematicaly, this is possible, but rare (using math probabilities). But the Draw Down wont be higher than 5% ( Signals Providers, offer a DD of max 15%, usually)

And as you can see, by using a good MM and a very bad strategy, or none - flipping a coin is just luck - you can still trade profitable, as a beginner.

The profits, can't be considered "spectacular", thinking that we are using for this exercise a $10,000 account. But if we will remember that by trading Forex, 95% of the traders wipe out their accounts in less than 3 months... (some statistic data present this no even higher, close to 99%).
Also, by using an "automatic" strategy, reduce the time involved to your trading activity. Not to mention, the stress.

We will continue this exercise, to gather more statistic data. Meanwhile, I will recommend you, new exercises, by replacing this "strategy" (flipping the coin) with some real trading strategies. And we will upgrade, later on, the MM, as well.


Best Regards,
^^_Lord_Ice_^^
   

Money Management ( or how to make money using any strategy )

Money Management ( MM ) is one of the most important thing you should know about trading, yet is not always on the front page of the courses, books, etc.

There are lots of ways of using MM in your favor. The problem for many traders, beginners or not, is how to stick to it.

Everyone knows the basics, yet, not everyone understand it: "Never risk more than 2% from your account (SL), never invest more than 30% from your account (opened positions)". For beginners, I would recommend risk = 1% / trade and max investment/trades = 10-15%. This will not make you rich fast, but will give you the change to grow constantly. ( MM for real accounts trading is completely different from MM for the contests accounts, where you must use a much higher exposure and a much higher risk to be in the top 10 traders - but still, you must stick to it, from the beginning to the end of the contest ). To find some MM examples, check Lesson #8 from my Free Course.

Trading is about chances. By opening any position, buy or sell, on any financial instrument, you have 50% to be right ( price can go up or down/swings, even if the swings might have same highs and same lows - range market ). Because of this, you need a strategy, that will increase your chances to be right. Here is the catch: many people think of it and search for the "holly grail" of trading. The problem is they never quit searching...and they become "testers" of all the possible strategies around the web, for this. ( sometimes their lack of patience for testing it on demo, makes them testing it on real account, when their initial strategy failed them ).

Finding a good strategy might take you time, but it's either you have time ( for testing on demo ), either you have money to lose, to find it, this way. Sometimes, you don't have time for testing and you don't have money...to lose either.
And after first loses, you start to "search" a new strategy that might make you rich. That's one of the most common mistakes, that will make you blow, one account after another...

After my first 2-3 years, while searching and testing all possible strategies, around the web, I found out that is useless to search for a "better strategy" ( any mistake you will mention it to me, remember, "I've been there and I've done that!" - that's why taking bad choices = experience for me, now ). The secret is related to the MM and R:R Ratio ( TP = 3x SL, for example ), besides Opened Positions Management and Personal Life MM. ( articles to come ).

Let's have an example of good MM and a very bad strategy with only 3/10 trades in profit ( yes, a very very bad strategy ), using a TP = 3 x SL :

- 7 negative trades ( 7 SLs hit)
- 3 profitable trades ( 3 TPs hit )

Lets say your MM Rules allow you a SL = 30p, that means your TP must be at least 3 x SL = 90p.

- 7 negative trades ( 7 SLs hit ) = 7 trades x 30p loss = 210p loss.
- 3 profitable trades ( 3 TPs hit ) = 3 trades x 90p profit = 270p profit.
____________________________________________________
TOTAL: 10 trades ( 3 positive and 7 negative ones ) = 270p - 210p = + 60p in profit.

Can you imagine now a medium strategy with at least 7/10 in profit ? Can you imagine what means using it with strict MM Rules and a R:R 1/5 or 1/8 ( using harmonics and Positions MM, your TP could reach up to 20 x SL my moving your initial SL and your initial TP ).

Lets see the math behind using the same MM Rules example  with SL = 30p and TP = 3 x SL = 90p:

- 3 negative trades ( 3 SLs hit ) = 3 trades x 30p loss = 90p loss.
- 7 profitable trades ( 7 TPs hit ) = 7 trades x 90p profit = 630p profit.
____________________________________________________
TOTAL: 10 trades ( 7 positive and 3 negative ones ) = 630p - 90p =  + 540 in profit.

Hope now is clear for everyone, that your MM Rules must be nailed on your wall, on your monitor and what's most important, in your head. And if you trust your strategy and keep the same data for your MM, while trading it, you should be in profit.

But, do you trust your strategy ? Did you made the statistic yourself ? Or you just use this strategy because someone claim is 7/10 profitable ?

Considering other people statistic is not enough. I also like to use 100 trades not just 10. So my statistic, could be: 80/100 trades in profit, for example. Why ? Because I need to see it on a long run and because math behind must show me if the "chances" are proven facts. ( do the math: how many consecutive loses can be possible , until 1 trade will make the profits )

We all know, trading is about emotions. To control emotions, we need rules. And we must stick to it, no matter what. That's why a 7/10 strategy, that will give you 5 consecutive loses, make you stop trading it and start to use another one. But what if the math was right, and you will see it as 70/100 trades ? That means you must be there for 30 loses...why to stop using it after just...5 negative results, consecutive or not ?

Ofcourse you should use MM Rules and:


n1. You must know, your SL and TP.
2. If your account reach -30% from initial balance, you should stop trading and go demo again!
3. Don't come back to real, until you'll find out, what went wrong !
4. Refill your account ( you need back up money always - Personal Life MM )
5. Keep the same rules and increase your trading lots ONLY if your account is double !

n
So, if your limit of loses is 30%, that must be the bottom line. You just need a system that allow you as many possible consecutive loses. If your MM Rules allow you ONLY 10 possible loses until this limit, not even the best strategy in the world, can't offer you profits !!! ( or if you have profits 1 month, means you are just... lucky )


Best Regards,
^^_Lord_Ice_^^


 



"ABCD" - Continuation Pattern ( Price Action Trading )

"ABCD" is not a continuation pattern ( our D entry could be or not, in the direction of the trend ). But if we see it like this ( or trade it like this ) we'll spot it earlier and we won't make confusion between this and 1-2-3-4 reversal pattern.

So on the counter trend ABCD pattern, we will have AB = CD and we buy/sell D ( trend direction ).

Ideal ABCD is like this:





Special case 1:

When AB and CD is in the direction of the trend ( and also a powerful trend's impulse ), we might find that AB CD.

So on the trend direction ABCD pattern, we can find that CD = 127.4% from AB ( so not equal in pips ) and we buy/sell D ( as a counter trend direction ).




Practicing this patterns trading while combined with 1-2-3-4 reversal pattern, you will see that these 2 strategies combined with fibs is all that you need most of the time.

* Special case 2: We will study this in "Advanced Strategies".

ABCD Trading Strategy.


Lets say we had the new trend confirmation ( using 1-2-3-4 pattern ) and get the profit between the 2-4 distance. Now we can look after ABCD ( in the direction of the trend/counter trend ).




1. Bought on BO of 2 ( using 1-2-3-4 )
2. TP @ 4 ( using 1-2-3-4 )
3. Use 3 as A, 4 as B
4. C= 61.8% from AB ( we could buy here using PO for fibonacci strategy No 2 )
5. As we going long, we found out that AB=CD (and TP for our buy limit =161.8 % from BC = D)
6. Sell D
7. TP for ABCD = 61.8% from CD.

In this chart we see that we won 2 profits from trading 1-2-3-4 and ABCD. Now we can search for another entries ( in the direction of the trend or counter trend ).
Not longer than 1 swing further we spot something that got our attention again: a powerful retracement that could form AB ( in the direction of the trend ):




* We also could of sold our B as a 50% retracement from previous traded swing ( as ABCD ), but that would have been a counter trend position and we will speak about it on our "Advanced Strategies".
** Also: C is failing to BO lower than 78.6% (yellow fibonacci, candle close above - in case we trade manually). But we would've bought with PO the 61.8%, with SL = previous LL (A).

Now, we have ABC formed:

1. We find that D = 127.4% from BC ( special case ) - we can use a TL and trade it as BO of TL
2. Sell D
3. TP = 61.8% from CD. (olive fibonacci)

Practicing this you will find out that B is sometimes only 50% from AB, or TP is only 50% from CD.
Never the less this pattern, like I said before, is one of the most powerful tool along the 1-2-3-4 pattern and of course Fibonacci retracement tool.


Best regards,
^^_Lord_Ice_^^


Fibonacci Tools & Strategies.

Fibonacci is one of the most powerful tool for trading. There are many fibonacci tools in trading platforms: Retracement, Expansion, Fibonacci Fan, Fibonacci Arcs and Fibonacci Times Zone.

The beauty of this toll is that work in every markets conditions and on every TF. Ofcourse like all trading strategies, works better on higher TF.

Before I'll start to tell you about strategies using these tools, I want to make sure you will use correctly Fibonacci Retracement:

1. Always draw this tool in the direction of the trend ( we want to see how much the PA will retrace, before continue the main trend - we want to know the possible end of the counter trend ).
2. If trend is short, click top, drag while keep pressing click, until bottom and release click.
3. If trend is long, click bottom , drag while keep pressing click, until top and release click.

Now the chart should look like this:



The HH level used for drawing is not actually HH, but it's a previous High ( LH ). You can use only the previous swing's High for measurements. 

For the importance of Fibonacci you might wanna look this article too: Fibonacci Retracement.

1. Fibonacci Retracement + TL BO.

This is one of the most used strategy using fibonacci retracement. But before we continue, you must look at TL BO Strategies.



Drawing a TL ( on counter trend ) offer us a great entry possibility to enter the market when:

1. PA failed to BO the 61.8% fibonacci retracement level ( golden ration ).
2. BO of the TL
3. Tight SL, previous High, before BO occur ( or 61.8% fib level + spread + 5 pips ).
4. TP is 0.0% fibonacci retracement level ( the start of the counter trend - here PA is possible to fail to break further )

2. Pending Orders on Fibonacci Retracement Levels.

 This is one of the most profitable fibonacci strategy because you always trade with this in the direction of the trend only. ( "the trend is your friend " ).
For this, we will use same example as the previous strategy chart. This strategy works better from H1 to Weekly chart.


1. Draw the fibonacci retracement from top to bottom ( since our chart has main trend short ).
2. Put pending Sell Limit Orders on 32.8%, 50% and 61.8% ( we expect PA will return to short trend at one of those levels ).
3. As SL use 61.8% or 78.6% level ( if PA BO the 61.8% from the big main swing, we might have a change of the trend, from short, to long, in our example ).
4. For our first TP, we will have 0.0% level ( or the LL - we expect this to be BO or rejection from it, when PA will fall down )
5. For the next 2 levels of TP, we can use Fibonacci Expansion. 100% and 161.8% ( drawn same as retracement tool - click top, drag bottom, then click and adjust the retracement line to the correction end - near 50% retracement level, in our example - the red dotted line ).


At this strategy you might wanna consider this:
a) If only 1 pending order hit ( first 32.8% ) and PA follow the main trend down, delete the other 2 pending orders. As TP use TP 3. ( 161.8% - expansion tool red ). If counter trend was so weak to touch only this level, that means stronger main trend down coming ).
b) If 2 pending orders were hit ( 32.8% and 50% ) delete the 61.8% pending and as TP you can use TP 1 for 50 %, TP 2 for 32.8%.
c) If all 3 pending orders were hit, you can use TP 1 for 61.8%, TP 2 for 50% and TP 3 for 32.8%.
d. Also you can use Trailing Stop or move SL manually after each BO, to the previous HL until BE.

3. Fibonacci Retracement on multi Time Frames.

Another profitable way of trading fibonacci is to draw it on a higher time frame and look for entry on lower TF. For example draw fibonacci on Daily chart and look for entries on H1.
For this you need all fibonacci levels for retracement added in the "Properties". To go there, use this way. Here you should have all those levels: 23.6%, 38.2%, 50%, 61.8%, 70.7%, 78.6%.

1. Draw Fibonacci Retracement on Daily chart ( same as previous example ).
2. Lower the TF to H1 and look trades on every level ( buy counter trend or sell correction over ) like Trend Lines Strategies or Support/Resistance Lines Strategies. Careful attention on 32.8%, 50% and 61.8%. In those area correction should end. In case correction is only 32.8% a fast down trend usually occur.
3. TP = next level / opposite TL BO / Trailing Stop.
4. SL = next level / opposite TL BO / Move SL manually on previous HH/LL.




Best Regards,
^^_Lord_Ice_^^

How to setup your Fibonacci Retracement to show price on each level on MetaTrader 4 ?

Here is a simple trick that will show price near every level from your Fibonacci Retracement tool:

1. Draw your fib to the chart ( for example from the top to the bottom )
2. Double click on the "Common Line" ( connect levels from top to bottom, for example )
3. Right click on the selected Fibonacci Retracement + Properties.
4. Select "Fibo levels" from menu.
5. At "Description" add near the levels "= %$" (you can put 2 x space before that = to see it more clear)



Now your drawn Fibonacci Retracement tool will show the price on each level like this:



Now you don't have to check the price everytime, using your "Crosshair" tool, cause price apear next to the fibs levels.


Best Regards,
^^_Lord_Ice_^^

"1-2-3-4" - Reversal Pattern ( Price Action Trading )

This reversal pattern can be found at the end of the trend if:

1. TL is broken.
2. PA failed to make HH ( for Sell ) or LL ( for Buy ).
3. BO of 2 ( confirmation that the trend is changed ).





This is a Price Action Strategy and for better understanding this you should check this strategy, too: Swings Trading ( Price Action Trading )


Lets see an example on the chart:



In our example, we have a retest of the BO of 2 level, but it doesn't happend all the time. That's why for proper trading this strategy, you can use only 1 pending order, Buy Stop/Sell Stop at the Break Out of 2.

SL can be @ 3, but also you can use a more relaxed SL, below 1 level.
For TP we project the same distance in pips, as between 1 and 2 level.


Best Regards,
^^_Lord_Ice_^^


Swings Trading ( Price Action Trading )



Swings ( waves ) are PA formations, described as an impulse, followed by a correction, during trends and counter trends. Every trend have ups and downs (swings ).

Best way to see the swings, is to draw them manually, connecting with lines the Higher Highs and the Lower Lows.



Now all we have to do is to mark the swings:

HH = Higher High
LL = Lower Low
LH = Lower High
HL = Higher Low



So for an UP Trend ( bullish ) we will have swings:

LL-HH-HL-HH-HL...

And for a DOWN Trend ( bearish ) we will have swings:

HH-LL-LH-LL-LH...

So based on the swings and PA, we might use the next strategies:

1. Trend Lines BO 

2. Support & Resistance Lines ( S/R Lines )
3. Channels

For trading the swings, SL should always be a large one ( previous HH or LL ).


Best Regards,
^^_Lord_Ice_^^





Moving Averages ( MA, SMA, EMA )


A Simple Moving Average is the average of a series of prices, over a period of time which is constantly updated by dropping the oldest value and then adding the newest value and recalculating the average.

For Exponential Moving Average, the formula is changed and the last prices count more than the oldest ones.

MA is used for trading, as a "mobile" Trend Line or S/R Line ( range market ), because every time a new candle is closed the "line" is drawing that change in PA.

Also, MAs, even if there aren't used as crossing strategy, can be used as trend indicator ( like a TL, adjusted every time a new candle is formed ).

There are many ways we can use it as trading strategies, too.

1. One Moving Average BO

For example we can use 50 SMA, like this.



1. Always use the direction of the MA to establish trend for swing
2. When 50 SMA point UP, look to BUY only, when 50 SMA point DOWN look to SELL only.
3. After trend is confirmed ( SMA pointing UP or DOWN ), you can open a buy ( in our example ), after PA closed above 50 SMA. SL would be the LL of the candle that made the BO or the previous LH ( we are in a uptrend now ).
4. After that, you can add more positions ( BUY ) on every retest that failed to break below 50 SMA or other crossing ( from below-above ) between PA and 50 SMA. SL would be previous LH or the LL of the candle that made the BO (crossed the 50 SMA ).

2. Two or more Moving Averages Crossing

This is the common use of MAs for trading. For example we can use 20 SMA, 100 SMA, like this.



1. Previous down trend is over, 20 SMA crossed above 100 SMA, we look to BUY opportunity.
2. PA retested the SMA 100 = BUY, SL would be @ previous LL.
3. Candle closed above 20 SMA, you can also BUY , the next candle opening. SL would be @ previous LL.
4. After the BO of the new formed HH, move the SL to next HL ( our entry ) until BE, or use trailing stop.
5. You can also add more BUY positions on every crossing UP ( 20SMA over 100 SMA ), or new closed candle above 20 SMA ( when changing directions again from pointing DOWN to pointing UP - rejection from 100 SMA)

In this way you can also add the 3rd SMA and add positions to the crossing of first 2 ( 20 and 50 ) and use SMA 100 for trend direction confirmation.



If in this example, 20 and 50 SMA, cross below 100 SMA, the long trend is over and we look for sell opportunities only.

3. Moving Averages and TL or S/R Lines

As I said, MAs are also good for indicating ( pointing ) the main trend.



But another way you can use 50 SMA is to confirm BO. One of the best ways to do it is to trade TL's BO on the main swing trend like this.



To read more how to setup the trades using TL's BO systems, SL and TP, go here.


4. 200 EMA using multi TF


This is one of the best trading strategies. Very simple and yet so effective ( you will never be against the trend ).



1. Daily chart, PA is below 200 EMA
2. H4 chart, PA is below EMA
3. M15 chart "bucking" the trend and must also go below 200 EMA.
4. For filtering the entry, on M15, you can use Stochastic oscillator crossing from top to bottom ( crossing 80% - oversold level )
5. SL would be previous @ LH ( down trend ).


Best Regards,
^^_Lord_Ice_^^


Channels



Channels are basically 2 parallel TL drawn on the chart, that contain LL and HH of PA's last swings. There are many ways to trade channels.

1. The common use of channels is to trade it as Trend Lines BO or Pullback ( rejection ).


2. Also, when the formed channel is horizontal we can trade it as S/R Lines BO or Pullback ( Rejections ).



3. BO Boxes Channel Trading Strategy

After we found a channel on higher TF we can lower the TF to M30 to find our first BOX. Then we can use it to keep add positions or to move SL until BE.



Also using same technique with boxes, you could of predict the drawn channel forming since beginning. All you have to do is to find first pullback and make a box of it.



Sl would be opposite BOX direction. You can add positions, move SL ( BE ) when it's BO of the BOX, or use Trailing Stop = BOX pips. ( HH-LL ).

From my experience this work better on London's opening and no important news in that day for the pair you trade.



Best Regards,
^^_Lord_Ice_^^

Support & Resistance Lines ( S/R Lines )

Support & Resistance Lines ( S/R Lines ) are horizontal lines connecting at least 2 previous HH or LL of PA on the chart.



To draw S/R Lines we can use HH/LL or close price, as our R Line from the chart above.

The common mistake of trading these S/R Lines, is to consider them ...lines. S/R Lines are actually Zones.

Normally second R Line is a LH on the chart ( is a resistance when we connect at least 2 previous HH/LL ).




In this example using zones, we could connect our second R Line with previous LL/HH. ( since there are sometimes 10p-20p difference, between those levels ). Using only a line we can't connect them properly.
 
Every broken Support, becomes Resistance and every Resistance broken, becomes Support.

There are many ways to trade S/R Lines.

1. S/R Lines BO Strategy.

After a candle broke a S/R Line and close below you can entry on the next candle opening, with a SL above the candle's high ( our example is a short one ).



For TP you may use Trailing Stop, BE ( moving SL after each further BO ) or find the next Support Zone pullback. ( rejection ).

2. S/R Lines Pullback Strategy ( rejections )

If you look carefully at our previous chart, you will see that was a false BO of the S Line on the bottom of the chart. If we would of drawn a Line, we might of trade it as a BO of S Line.

But since we've considered a S Zone ( connecting the last previous low and the last one ), we look for a candle to close above to entry. ( rejection )



3. S/R + TL BO Strategy


An interesting idea of trading S/R Lines is to combine it with TL.





For trading it like this all we have to do is to lower the TF ( we used H4 and now we entry on H1 - for proper entry and a tight SL ).


4. Pending Order @ Retest previous BO of S/R Strategy

This is one of the best and yet simpliest trading strategy I've ever found.




Ypu can use pending order for this ( after previous BO ), or use rejection from R Zone.
Your SL would be @ new formed HL. For TP you can use previous LL, BE or Trailing Stop.


Best Regards,
^^_Lord_Ice_^^

Trend Lines I ( TL )

A Trend Line is formed by a diagonal line, connecting at least 2 pivot points ( HH or LL ).





I know there are many traders that draw these TL between closing/opening price, but I prefer to draw them by connecting HH/LL. ( with some exceptions when starting with 2 HH/LL and the next taps are fake BO's of the TL ).

So there are many ways of considering an entry using TL.
1. TL's 3rd tap strategy 

Considering an entry by waiting another touch of this TL ( also known as "3rd tap").

If the candle touched the TL and didn't closed below, in our example ( fail to break ), we can open a long position on the next candle open area. SL would be @ previous HL and TP @ previous HH, or Trailing Stop.





For exit you may also use opposite TL broken like in the next example.

2. TL's BO Strategy.

Another common use of trading the TL is to trade the BO.





As you can see in our example, we have 3 opportunities to enter the trade:

Entry 1 - @ retest ( pullback ) of the broken TL.
Entry 2 - @ new formed "HL" of the PA.
Entry 3 - @ the real "HL" of the PA ( since the PA failed to break the HH and formed a LH in top of the chart )

For exit the trade we may consider Trailing Stop or the opposite TL BO.




PA also failed to BO the LL of the chart ( forming a double bottom ) that offer a great exit opportunity. But normally we can use the BO of bearish TL.

3. TL's BO Strategy, following the main trend

Drawing a TL on a higher TF like H1, then lowering the TF to M30, offer us many entry opportunities in the same direction of the main trend.




SL for all those entries might be the BO candle lowest or the last swing HL ( since we have a bullish trend in our example ).


Best Regards,
^^_Lord_Ice_^^

Elliot Wave Principle

The Elliott Wave Principle is a form of technical analysis that some traders use to analyze financial market cycles and forecast market trends by identifying extremes in investor psychology, highs and lows in prices, and other collective factors. Ralph Nelson Elliott (1871–1948), a professional accountant, discovered the underlying social principles and developed the analytical tools in the 1930s. He proposed that market prices unfold in specific patterns, which practitioners today call Elliott waves, or simply waves. Elliott published his theory of market behavior in the book The Wave Principle in 1938, summarized it in a series of articles in Financial World magazine in 1939, and covered it most comprehensively in his final major work, Nature’s Laws: The Secret of the Universe in 1946. Elliott stated that "because man is subject to rhythmical procedure, calculations having to do with his activities can be projected far into the future with a justification and certainty heretofore unattainable." The empirical validity of the Elliott Wave Principle remains the subject of debate.



Overall design

From R.N. Elliott's essay, "The Basis of the Wave Principle," October 1940.


The Elliott Wave Principle posits that collective investor psychology, or crowd psychology, moves between optimism and pessimism in natural sequences. These mood swings create patterns evidenced in the price movements of markets at every degree of trend or time scale.

In Elliott's model, market prices alternate between an impulsive, or motive phase, and a corrective phase on all time scales of trend, as the illustration shows. Impulses are always subdivided into a set of 5 lower-degree waves, alternating again between motive and corrective character, so that waves 1, 3, and 5 are impulses, and waves 2 and 4 are smaller retraces of waves 1 and 3. Corrective waves subdivide into 3 smaller-degree waves starting with a five-wave counter-trend impulse, a retrace, and another impulse. In a bear market the dominant trend is downward, so the pattern is reversed—five waves down and three up. Motive waves always move with the trend, while corrective waves move against it.

Degree

The patterns link to form five and three-wave structures which themselves underlie self-similar wave structures of increasing size or higher degree. Note the lower most of the three idealized cycles. In the first small five-wave sequence, waves 1, 3 and 5 are motive, while waves 2 and 4 are corrective. This signals that the movement of the wave one degree higher is upward. It also signals the start of the first small three-wave corrective sequence. After the initial five waves up and three waves down, the sequence begins again and the self-similar fractal geometry begins to unfold according to the five and three-wave structure which it underlies one degree higher. The completed motive pattern includes 89 waves, followed by a completed corrective pattern of 55 waves.

Each degree of a pattern in a financial market has a name. Practitioners use symbols for each wave to indicate both function and degree—numbers for motive waves, letters for corrective waves (shown in the highest of the three idealized series of wave structures or degrees). Degrees are relative; they are defined by form, not by absolute size or duration. Waves of the same degree may be of very different size and/or duration.

The classification of a wave at any particular degree can vary, though practitioners generally agree on the standard order of degrees (approximate durations given):

    Grand supercycle: multi-century
    Supercycle: multi-decade (about 40-70 years)
    Cycle: one year to several years (or even several decades under an Elliott Extension)
    Primary: a few months to a couple of years
    Intermediate: weeks to months
    Minor: weeks
    Minute: days
    Minuette: hours
    Subminuette: minutes

Elliott Wave personality and characteristics

Elliott wave analysts (or Elliotticians) hold that each individual wave has its own signature or characteristic, which typically reflects the psychology of the moment. Understanding those personalities is key to the application of the Wave Principle; they are defined below. (Definitions assume a bull market in equities; the characteristics apply in reverse in bear markets.)

Five wave pattern (dominant trend)

Wave 1: Wave one is rarely obvious at its inception. When the first wave of a new bull market begins, the fundamental news is almost universally negative. The previous trend is considered still strongly in force. Fundamental analysts continue to revise their earnings estimates lower; the economy probably does not look strong. Sentiment surveys are decidedly bearish, put options are in vogue, and implied volatility in the options market is high. Volume might increase a bit as prices rise, but not by enough to alert many technical analysts.

Wave 2: Wave two corrects wave one, but can never extend beyond the starting point of wave one. Typically, the news is still bad. As prices retest the prior low, bearish sentiment quickly builds, and "the crowd" haughtily reminds all that the bear market is still deeply ensconced. Still, some positive signs appear for those who are looking: volume should be lower during wave two than during wave one, prices usually do not retrace more than 61.8% (see Fibonacci section below) of the wave one gains, and prices should fall in a three wave pattern.

Wave 3: Wave three is usually the largest and most powerful wave in a trend (although some research suggests that in commodity markets, wave five is the largest). The news is now positive and fundamental analysts start to raise earnings estimates. Prices rise quickly, corrections are short-lived and shallow. Anyone looking to "get in on a pullback" will likely miss the boat. As wave three starts, the news is probably still bearish, and most market players remain negative; but by wave three's midpoint, "the crowd" will often join the new bullish trend. Wave three often extends wave one by a ratio of 1.618:1.

Wave 4: Wave four is typically clearly corrective. Prices may meander sideways for an extended period, and wave four typically retraces less than 38.2% of wave three (see Fibonacci relationships below). Volume is well below than that of wave three. This is a good place to buy a pull back if you understand the potential ahead for wave 5. Still, fourth waves are often frustrating because of their lack of progress in the larger trend.

Wave 5: Wave five is the final leg in the direction of the dominant trend. The news is almost universally positive and everyone is bullish. Unfortunately, this is when many average investors finally buy in, right before the top. Volume is often lower in wave five than in wave three, and many momentum indicators start to show divergences (prices reach a new high but the indicators do not reach a new peak). At the end of a major bull market, bears may very well be ridiculed (recall how forecasts for a top in the stock market during 2000 were received).

Three wave pattern (corrective trend)

Wave A:
Corrections are typically harder to identify than impulse moves. In wave A of a bear market, the fundamental news is usually still positive. Most analysts see the drop as a correction in a still-active bull market. Some technical indicators that accompany wave A include increased volume, rising implied volatility in the options markets and possibly a turn higher in open interest in related futures markets.

  
Wave B: Prices reverse higher, which many see as a resumption of the now long-gone bull market. Those familiar with classical technical analysis may see the peak as the right shoulder of a head and shoulders reversal pattern. The volume during wave B should be lower than in wave A. By this point, fundamentals are probably no longer improving, but they most likely have not yet turned negative.

Wave C: Prices move impulsively lower in five waves. Volume picks up, and by the third leg of wave C, almost everyone realizes that a bear market is firmly entrenched. Wave C is typically at least as large as wave A and often extends to 1.618 times wave A or beyond.

Pattern recognition and fractals

Elliott's market model relies heavily on looking at price charts. Practitioners study developing trends to distinguish the waves and wave structures, and discern what prices may do next; thus the application of the wave principle is a form of pattern recognition.

The structures Elliott described also meet the common definition of a fractal (self-similar patterns appearing at every degree of trend). Elliott wave practitioners say that just as naturally-occurring fractals often expand and grow more complex over time, the model shows that collective human psychology develops in natural patterns, via buying and selling decisions reflected in market prices: "It's as though we are somehow programmed by mathematics. Seashell, galaxy, snowflake or human: we're all bound by the same order."



Elliott wave rules and guidelines

A correct Elliott wave "count" must observe three rules:

    Wave 2 always retraces less than 100% of wave 1.
    Wave 3 cannot be the shortest of the three impulse waves, namely waves 1, 3 and 5.
    Wave 4 does not overlap with the price territory of wave 1, except in the rare case of a diagonal triangle.

A common guideline observes that in a five-wave pattern, waves 2 and 4 will often take alternate forms; a sharp move in wave 2, for example, will suggest a mild move in wave 4. Corrective wave patterns unfold in forms known as zigzags, flats, or triangles. In turn these corrective patterns can come together to form more complex corrections.

Fibonacci relationships

R. N. Elliott's analysis of the mathematical properties of waves and patterns eventually led him to conclude that "The Fibonacci Summation Series is the basis of The Wave Principle". Numbers from the Fibonacci sequence surface repeatedly in Elliott wave structures, including motive waves (1, 3, 5), a single full cycle (8 waves), and the completed motive (89 waves) and corrective (55 waves) patterns. Elliott developed his market model before he realized that it reflects the Fibonacci sequence. "When I discovered The Wave Principle action of market trends, I had never heard of either the Fibonacci Series or the Pythagorean Diagram".

The Fibonacci sequence is also closely connected to the Golden ratio (1.618). Practitioners commonly use this ratio and related ratios to establish support and resistance levels for market waves, namely the price points which help define the parameters of a trend.  See Fibonacci retracement.

Finance professor Roy Batchelor and researcher Richard Ramyar, a former Director of the United Kingdom Society of Technical Analysts and Head of UK Asset Management Research at Reuters Lipper, studied whether Fibonacci ratios appear non-randomly in the stock market, as Elliott's model predicts. The researchers said the "idea that prices retrace to a Fibonacci ratio or round fraction of the previous trend clearly lacks any scientific rationale". They also said "there is no significant difference between the frequencies with which price and time ratios occur in cycles in the Dow Jones Industrial Average, and frequencies which we would expect to occur at random in such a time series".

Robert Prechter replied to the Batchelor–Ramyar study, saying that it "does not challenge the validity of any aspect of the Wave Principle...it supports wave theorists' observations," and that because the authors had examined ratios between prices achieved in filtered trends rather than Elliott waves, "their method does not address actual claims by wave theorists". The Socionomics Institute also reviewed data in the Batchelor–Ramyar study, and said these data show "Fibonacci ratios do occur more often in the stock market than would be expected in a random environment".

It has been suggested that Fibonacci relationships are not the only irrational number based relationships evident in waves.

After Elliott

Following Elliott's death in 1948, other market technicians and financial professionals continued to use the wave principle and provide forecasts to investors. Charles Collins, who had published Elliott's "Wave Principle" and helped introduce Elliott's theory to Wall Street, ranked Elliott's contributions to technical analysis on a level with Charles Dow. Hamilton Bolton, founder of The Bank Credit Analyst, provided wave analysis to a wide readership in the 1950s and 1960s. Bolton introduced Elliott's wave principle to A.J. Frost, who provided weekly financial commentary on the Financial News Network in the 1980s. Frost co-authored Elliott Wave Principle with Robert Prechter in 1978.

Rediscovery and current use

Robert Prechter came across Elliott's works while working as a market technician at Merrill Lynch. His prominence as a forecaster during the bull market of the 1980s brought the greatest exposure to date to Elliott's work, and today Prechter remains the most widely known Elliott analyst.

Among market technicians, wave analysis is widely accepted as a component of their trade. Elliott's Wave principle is among the methods included on the exam that analysts must pass to earn the Chartered Market Technician (CMT) designation, the professional accreditation developed by the Market Technicians Association (MTA).

Robin Wilkin, Ex-Global Head of FX and Commodity Technical Strategy at JPMorgan Chase, says "the Elliott Wave principle ... provides a probability framework as to when to enter a particular market and where to get out, whether for a profit or a loss."

Jordan Kotick, Global Head of Technical Strategy at Barclays Capital and past President of the Market Technicians Association, has said that R. N. Elliott's "discovery was well ahead of its time. In fact, over the last decade or two, many prominent academics have embraced Elliott’s idea and have been aggressively advocating the existence of financial market fractals."

One such academic is the physicist Didier Sornette, visiting professor at the Department of Earth and Space Science and the Institute of Geophysics and Planetary Physics at UCLA. In a paper he co-authored in 1996 ("Stock Market Crashes, Precursors and Replicas") Sornette said,

    It is intriguing that the log-periodic structures documented here bear some similarity with the "Elliott waves" of technical analysis ... A lot of effort has been developed in finance both by academic and trading institutions and more recently by physicists (using some of their statistical tools developed to deal with complex times series) to analyze past data to get information on the future. The 'Elliott wave' technique is probably the most famous in this field. We speculate that the "Elliott waves", so strongly rooted in the financial analysts’ folklore, could be a signature of an underlying critical structure of the stock market.

Paul Tudor Jones, the billionaire commodity trader, calls Prechter and Frost's standard text on Elliott "a classic," and one of "the four Bibles of the business":

    [Magee and Edwards'] Technical Analysis of Stock Trends and The Elliott Wave Theorist both give very specific and systematic ways to approach developing great reward/risk ratios for entering into a business contract with the marketplace, which is what every trade should be if properly and thoughtfully executed.

Criticism

The premise that markets unfold in recognizable patterns contradicts the efficient market hypothesis, which states that prices cannot be predicted from market data such as moving averages and volume. By this reasoning, if successful market forecasts were possible, investors would buy (or sell) when the method predicted a price increase (or decrease), to the point that prices would rise (or fall) immediately, thus destroying the profitability and predictive power of the method. In efficient markets, knowledge of the Elliott Wave Principle among traders would lead to the disappearance of the very patterns they tried to anticipate, rendering the method, and all forms of technical analysis, useless.

Benoit Mandelbrot has questioned whether Elliott waves can predict financial markets:

    But Wave prediction is a very uncertain business. It is an art to which the subjective judgement of the chartists matters more than the objective, replicable verdict of the numbers. The record of this, as of most technical analysis, is at best mixed.

Robert Prechter had previously stated that ideas in an article by Mandelbrot[16] "originated with Ralph Nelson Elliott, who put them forth more comprehensively and more accurately with respect to real-world markets in his 1938 book The Wave Principle."

Critics also warn the wave principle is too vague to be useful, since it cannot consistently identify when a wave begins or ends, and that Elliott wave forecasts are prone to subjective revision. Some who advocate technical analysis of markets have questioned the value of Elliott wave analysis. Technical analyst David Aronson wrote:

    The Elliott Wave Principle, as popularly practiced, is not a legitimate theory, but a story, and a compelling one that is eloquently told by Robert Prechter. The account is especially persuasive because EWP has the seemingly remarkable ability to fit any segment of market history down to its most minute fluctuations. I contend this is made possible by the method's loosely defined rules and the ability to postulate a large number of nested waves of varying magnitude. This gives the Elliott analyst the same freedom and flexibility that allowed pre-Copernican astronomers to explain all observed planet movements even though their underlying theory of an Earth-centered universe was wrong.

source: www.wikipedia.org


Best regards,
^^_Lord_Ice_^^

How to add an indicator over the oscillator on the MetaTrader 4 ?


If you will need to add an indicator over an oscillator you have to follow those simple steps:

1. Click on the navigator button .

2. Select from the Indicator menu the one you want to add. Let's say you want to add MA on RSI.



3. Select MA by click - drag & drop on RSI.

4. In the section " Apply to" select "First Indicator's data" and press Ok.


5. Now you will have a MA over the RSI Oscillator and looks like this:



Best Regards,
^^_Lord_Ice_^^

How to install an EA (Expert Advisor) on the MetaTrader 4 ?


To install an EA we need same files as for installing an indicator.




Copy those files to :C:\Program Files\Meta Trader 4\experts

 * Meta Trader 4 folder, usually has the name of the broker. 

Restart the platform, and open navigator menu by clicking on the .

Click on the Expert Advisor tab    then click on the EA installed + drag & drop to chart.


In the top right corner will look like this:




 


To activate it, you must have a "smilly face" instead of a "sad face". To do that: right click on the chart - Expert Advisors - Properties.






Best Regards,
^^_Lord_Ice_^^

How to install an indicator on the MetaTrader 4 ?


An indicator can be found in 2 formats (extensions): "name.MQ4" and "name.EX4". The MQ4 is the source code, and the EX4 is the compiled version of the code.



You don't need to use both extensions of the indicator. If you have only the EX4 extension of the indicator, it's fine, but you just wont see the MQ4 in the installed folder. If you have only the MQ4 extension, it will make automatically the EX4 extension in the folder of the platform. If you have both files, you can copy them directly in the next location:

C:\Program Files\Meta Trader 4\experts\indicators

 * Meta Trader 4 folder, usually has the name of the broker.

Restart now MT4 - click on the Indicators button - Custom - click on the indicator installed to attach it to the chart.





Best Regards,
^^_Lord_Ice_^^


Best color setup for my trading platform !


Trading for many hours every day, can be sometimes painful for your eyes. Specially if you are using multi-monitors like I do. That's why, after many years of testing different color setups, I have some conclusions to make.

If your trading on daily light, a few hours/day, in a lighter room you can use default colours. But if you use your trading platform more then 8 hours/day, mostly in the middle of the night, like I do, you need a special setup.

For colors setup options, right click on the chart - properties - colors.  


My default colors setup is like this:



From the common section, I've removed the grid. The chart is becoming too complicated when you add more tools for your technical analysis.

For the oscillators section, I use Dodger Blue colour.




Levels for all the oscillators, have the same colour as my grid:



In case I use the 3rd oscillator I use Light Sea Green colour:


In the end this is how it's looks like:


With this colors setup, I establish a personal record 48 h of trading, with no pain for my eyes. Of course with 10 min break, each 2 hours. 

Hope you'll find this useful for your day by day trading activity.


Best Regards,

^^_Lord_Ice_^^