Here is my trading system that I have spent over 10 years of my life developing. I am a full time currency trader and US equities trader. It may seem similar to others that you have seen BUT there are small things that make it different and much more profitable. This works best on 5 and 15 minute time frames but can also work on higher time frames. As I set forth the rules below please remember to trade the trend ONLY. There are rare occasions where I do not trade with the trend on the current and higher time frame but those trades should not be taken if you are new or dont have a great understanding of the markets. Please remember what price is doing is really all that I care about. Your indicators are basically worthless and patterns are what Im looking for! I love to help trade so if you have questions about what I am doing or questions about the market in general PLEASE ask. I would love to connect with you and help you in whatever way that I can.
1. First of all what I consider is the time of day. I am willing to trade during the Asian Session IF IT IS ACTIVE (8 pm til midnight EST) or I am willing to trade a portion of the London Session (4 am until 10 am EST). I have found during the latter portion of the London market, which is often referred to as the London close you have v shaped reversals or just reversals period which is where many losers come from because the trend shifts so I avoid those times. Also, trading off market hours I have found to be very slow and very boring with sideways price action so I avoid those times as well.
2. I look for a strong trend on the 5 minute and the 15 minute time frames. This simply means that price should be trading below the 60 period Linear Weighted Moving Average on both time frames for the most successful trading opportunites. If you are looking at a long trade on the 5 minute because the trend is up yet the trend is down on the 15 minute you are really adding risk and trading counter trend which I do not recommend. I do it on rare occassion if the opportunity looks great. I did this on the NZD/USD on friday for about 12 pips with about 12 pips of risk. As often occurs price then shifted back to the 15 minute time frames direction.
3. I am looking for price pattern breakouts and then QUICK retracements back to the breakout area, with the trend. This is probably where most will get this "system" all wrong. I am basically looking for breakdowns or breakouts of say a triple top or triple bottom with the trend on both 5 and 15 minute time frames OR 15 minute and 1 hour time frames. Once price sees a clean break and confirmation candle I will then look to see a price retest of that area which is where I get in. Here is the key: this should happen within a few bars!! I cannot stress this enough. If it takes 10 bars to get back to the retest area it is VERY possible a new trend could be developing and your likelihood of a stop loss is MUCH greater. I have also found that breakdowns are much more consistent winners than break ups. I don't know why this is, its just how it is. So if you want the very best signals, look for price to break down and take sell trades ONLY. I average 70-80% winners with at least 1 to 1 reward to risk or better using both directions. I will definitely be expounding more on this concept of quick retests. This is where most traders fail at systems like this.
4. I also look at the 6 period LWMA set to high and set to low as seen on my charts when taking a trade. If you see a HUGE crash on your charts (I will show examples), about 90% of the time when price hits the upper band it will sell and drop back down to the lower band, AND often continue to make new lows. With proper money management alone you will be able to make money trading a system like this. This set up occurs ALOT after news trades because of the really quick collapses and retracements. The key here is the move has to be VERY LARGE AND FAST. Also, when taking retest trades, if the retest price of the broken support/resistance area is also at the 60 period LWMA and/or a daily pivot or s1-2/r1-3 this will GREATLY increase your chances of winning. You will often find that trades breakdown areas such as they did friday and never retrace back to that area. While frustrating, I dont mind missing these trades because I want to keep my win to lose ratio high and often times if you get in at a break you will find price will quickly reverse as MM stop out the crowd and reverse price. Hence the need for CONFIRMATION of the breakout and subsequent retest.
5. Do NOT overtrade. When trading REMEMBER you only need 1 or 2 good trades a day to make good money. I actually remind myself of this when I get up in the morning to trade. "All i need is 1 or 2 good set ups today so be very selective."
6. Keep stops tight, but leave room to move. I normally keep my stop losses just above recent resistance or below recent support or about 2 grid bars works as well (for those who are not as good at figuring out r/s levels or if those levels seem to be pretty distant. I normally take half off when i reach my 1:1 reward to risk and if price stalls I may take off the entire position there. I normally do not let trades run more than 2 to 1. I am somewhat impatient and I dont like to be i trades long so I dont hold them forever. I find most of the time markets are not in a strong trend so its really more profitable to not go for the huge wins and just take your consistent gains.
Now for an example. I will continue to post examples as I trade them in the future so I can give better understanding of what Im seeing and doing here. I had 6 winners, 2 losers and 1 breakeven last week. Thats a pretty standard week; you cant win them all so learn to take losses, thats what the pros do. 1 of my losers was only a partial loss. Remember, IF YOU KNOW PRICE IS HEADED TO YOUR STOP LOSS GET OUT. Save yourself some money instead of wishful thinking! How often do you sit and hope and pray price reverses and you get stopped out. Keep track, I think it will save you a bundle!