FXKeys Trading Systems & Examples V4.3 PDF
FXKeys Trading Systems & Examples V4.3 PDF
FXKeys Trading Systems & Examples V4.3 PDF
copywrite FXKeys©
2. To be profitable (1) (2) (3) (4) one needs a collection of constructive entry/exit points based on the price action records and careful buying
and selling using pre-tested, high probability strategies. What a trader looks for are simple trigger points that signal beginning and end of
major trend patterns. It is the longer time periods (Daily, Weekly, Monthly) that offer the most reliable signals.
Contents: Note:
Underlined blue = link to FXKeys site
*Underlined Blue* = link within this document
• Only a fool fights the trend. To survive, it never matters what you BELIEVE, it only matters what the markets believe. To be a Trading Mind Talk
good trader, you must constantly question your position. The instant you just assume you are right, that is when you lose Videos
everything. Trust by verify. A good trader ALWAYS assumes he is wrong. Then constantly verifies his position Martin Armstrong
created by Ted Mahachi
• A good trader takes action only based on the market reactions. The market should tell us what to do. We can not tell the
market to go up or down. Many traders lose because they trade based on what they “think”, not what the market shows
Trading Mind Talk (1)
them. So, wait for the market to show you a good and strong signal. Chris Pottorff FXKeys
Trading Mind Talk (2)
ARE YOU RIGHT? “The greatest danger in analysis is the Uncertainty Principle for the experience of the analyst becomes the most critical role. There is the hidden
problem of bias and preconceived notions”. Martin Armstrong
To illustrate this point, consider the story of the ship's Captain standing on the bridge of his giant supertanker on a very dark night. Out in the distance, the captain
sees what appears to be the lights of another ship.
He turns to his signalman and says, "Use your signal-lamp and send a message to that ship to turn to starboard (right) 10 degrees." The message is sent and very
quickly, a reply is flashed back which states, "YOU turn to port (left) 10 degrees.“ The captain becomes annoyed and tells his signalman to flash another message,
"I am a Captain and I insist that you turn to starboard 10 degrees." Back comes a message, "I am a seaman first-class, and I insist that YOU turn to port 10
degrees." The captain becomes very angry and shouts at his signalman to send the message, "I am standing on the bridge of a giant supertanker and as a Captain,
I demand that you turn to starboard 10 degrees immediately."
Very quickly came the reply, "I am a seaman first-class, and I am standing in a lighthouse"! Unknown author
Learn from your losses. You paid for that training experience. EVERYONE takes a loss; if they never have, then they are not really a trader. Martin Armstrong
MY JOB as a forex trader is to determine who has taken control over price and then take the proper positions in the market. FXKeys
A “TRADER” is someone who follows the price, not someone who tries to go ahead of the price. FXKeys
Consistency is the foremost key to making a success in everything. Trading FOREX is no exception. FXKeys
And Thomas Edison on ‘What is Genius?’ “Well, about 99 percent of it is a knowledge of the thing that will not work. The other 1 percent may be
genius, but the only way I know to accomplish anything is everlastingly to keep working with patient observation.”
And Henry Ford: “Whether you think you can, or you cannot, you are right”.
3
*To Contents* System Design by Chris Pottorff - Compilation by Peter Wagner - copywrite FXKeys©
MINDSET 2
Change your mindset, and you will see everything around you change!
My Belief:
1. I believe Forex trading is a business through which I CAN make EXTRA-ORDINARY money EASILY.
2. To do this, I believe I need to spend only a few hours per day. I must be wise, precise and disciplined.
3. I believe I already have everything it takes to become a wealthy forex trader, exactly as those, who have become wealthy,
have… the same markets, charts, platforms. I am only required to plan, set my goal and start moving toward it.
4. I believe a wealthy person does not work hard. I take MY steps by actioning the correct RULES.
my job: to distinguish who has taken the control in the market and not to predict who will take the control. I
enter only when I know which party has taken control! I do not enter when the market is in indecision! In
determining who has control, I read the charts and recognise the too-strong candle patterns. Too-strong
patterns show who has control and this indicates the true trend because it has been manifested by the
actions of buyers and sellers. I can then take action. Taking action means that I do this without EMOTION
and with PATIENCE, waiting only for too-strong signals and then taking a position with the trend, safely. It is
then required that I keep my nerve and let my position run knowing it is safeguarded with a stop. I check
the charts once daily, to verify the validity of a current trade, review my stop position and observe for new
opportunities.
“Our greatest weakness lies in giving up. The most certain way to succeed is always to try just one more
time.” Thomas Edison …. Consistency is the biggest key to success in everything including FOREX trading. FXKeys
Affirmation: Many traders make fortunes through forex trading so it is possible to make money through forex trading and I
can do it because others have done it and I have what they have. I have what it takes to make a lot of money through Forex
Trading. It is coming and it is soon here. I can feel it very close. My practice brings me to success. I am becoming very wealthy
and living financially free is upon me. The best trader ever? … YES… FXKeys
*To Contents* System Design by Chris Pottorff - Compilation by Peter Wagner - copywrite FXKeys© 4
SUMMARY - FX Keys SYSTEM
Link to the path: http://www.fxkeys.com/become-a-profitable-forex-trader-in-5-easy-steps/
• First to acquire KNOWLEDGE by learning the BASICS of candlestick formations and too-strong patterns and other required
technical indicators and become familiar with the terms and parameters of the MARKET to be traded including TRADING
PLATFORMS and BROKERS.
• Then to determine who has taken control in the market . This requires the formation of a too-strong candlestick pattern with a
too-strong or strong Bollinger Bands breakout while formed on an exhausted market. This means that such a trade will be
trading with the trend in most cases.
• Once a too-strong candlestick pattern has formed it is required to determine an adequate stop loss (SL) price position by
answering the question « I will know I have got the trend direction wrong if the price advances/falls past this point?»
• Once I know the SL position I calculate a position size (lot size to trade) using a maximum of 2% to 3% of my trading account
capital as risk capital.
• 2 (two) positions are opened: Both have the same SL condition; A Take Profit (TP1) target of 5(variable) times the SL is preset for
one position and the other position (TP2) is left open. The 2nd position is closed when a strong-enough chart signal, indicating a
change in trend, forms.
• Once decided on, the SL is never adjusted to a worse position. The SL is moved to break even (BE), to protect my account from
loss, when the TP1 position is filled and then again, to protect some profit, when chart events indicate it to be prudential.
• Effective, stress free trading requires a no EGO mental state, conditioned with the following (Trading Psychology):
• Discipline 1 – Discipline 2
• Consistency
• Patience
• Devoid of Emotion – especially FEAR (1) (2) (3) (4) and GREED (1) – but always with a smile.
• A WIN is something to learn from (and just a gain to the business)– A LOSS is something to learn from (and just a cost to
the business)– THEY are parts of the game.
• Performance
The OBJECTIVE is to make TRADING a BUSINESS, manifesting account GROWTH by SLOW-CONSISTENT-GAIN – to win the MATCH not just kick the best goal
i. Frequency: Usually I trade 3 to 5 trade setups every month. I trade the strong and 100 score trade setups only, and forget about the other trade setups that have some
risks. The 90-95 score trade setups can be traded only by special control of positions by managing the risk.
System: A trade setup forms when the candles are closed in the period. It is gauged for strength according to the perceived risk to price movement. However what will happen in
future is always unknown and even with the strongest trade setups, our stop loss will be hit sometimes. However, following the strong trade setups makes us profitable in long term.
To have a strong trade setup there must be (1) a *too-strong-candlestick pattern* with (2) a too-strong or strong Bollinger Bands breakout and (3) it has to form on an *exhausted
market*.
2. Setups: We take positions when the setup is too strong. We ignore the other setups.
i. Daily Period: When the forming trade setup is too strong and I see it, I enter immediately after the market closes. Sometimes, if the setup indicates that the market
could be oversold/overbought I wait a little for a better entry price to appear.
ii. Weekly Period: On Friday afternoon, when I see that the forming trade set up is too strong, I enter at the last hour on Friday, because usually, there is a gap that is
agreeable to the trade setup direction, when the market re-opens, on Sunday afternoon (see item General Rules B 5). Generally, this gap prevents market entry at a
good price. However, sometimes I miss the chance to enter on Friday and the price opens on Sunday afternoon with a gap against the trade setup direction. The gap
can help us enter with a better price.
iii. Monthly Period: Ditto weekly but on the last day of the month. The Monthly Time Frame is KING.
iv. When a too strong setup forms on a time frame, we take it without consideration of the other time frames, even longer ones
4. Psyche: It is not all a matter of locating the too strong trade setups. Controlling emotion is important when you have identified a strong trade setup whether you are on time,
late or already have a position . Trading rules and strategy must be set in a way that emotions cannot interfere:
i. Always take the strongest setups only and ignore others.
ii. Enter the market on time. Do not take positions if you are late (the price has already moved away from the setup entry price).
iii. Don’t overtrade with a big position which is outside the money management rules so that you can be calm even if the price goes against you.
iv. Set a proper and reasonable stop loss and let it be triggered if the price goes against you, because … it may not be triggered.
v. Trade long time frames only. Emotional stress is higher when trading short time frames.
vi. Don’t check your positions too often. Take your positions, set the stop loss and target orders and come back the next day.
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System Design by Chris Pottorff - Compilation by Peter Wagner -
copywrite FXKeys©
6
GENERAL RULES - FX Keys B 1 - 12
1. Market Top/Bottom Setups: When the LONG/SHORT setup is formed at the very bottom/top of a strong bear/bull market I ignore the setup unless the signal
is really too strong. If it is too strong, its strength can neutralise the strength of the bear/bull market . It is possible that I don’t enter right away, but wait for
an additional confirmation, then I enter. Of-course it is possible that we miss the opportunity. We can only wait and see what happens.
2. Trend: As retail traders, we have to distinguish whether the ‘PARTICIPANTS’ have decided to buy or sell. When we conclude that they have decided to buy,
then we have to buy too and, when we find out that they have decided to sell, then we have to sell. Going against these participants’ decision is like swimming
against the tide.
3. Consolidation v Ranging: Consolidation is shorter than a Ranging Market. When a sideways Consolidation becomes too long, then we will have a Ranging
Market, and the Consolidation will not be known as a Trend Continuation, it becomes an each way possibility. If a consolidation/accumulation pattern forms,
followed by a strong buy signal, we can trade that as we would a continuation trade setup
4. Exhaustion (*1*) (2) : An uptrend/downtrend is exhausted when it stops going up/down consistently strong. If the trend is sharp (angle) and strong (relatively
big candles) it is a bull/bear market. However, eventually it will form some bearish/bullish (mixed) candles, and instead of going up/down directly, it forms
swing highs and lows more quickly, and maybe candlestick patterns like butterfly/bat, head and shoulders, triangles, double tops & bottoms etc. form. It
means bulls/bears are exhausted. If a strong sell/buy signal then forms, we can trade it.. See Appendix A1.1 for an example of exhaustion:
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System Design by Chris Pottorff - Compilation by Peter Wagner -
copywrite FXKeys©
7
8. Patterns:
i. W & M: When a W pattern forms following formation of two short setups, the big candle in the pattern, means bears have
taken the control and the price will collapse at least for the same size as the last W leg. Contra condition for M pattern in a bear
market.
ii. DOJI: One of the most important things we do in our trading is that we determine whether a candlestick is indicating strong bullish
or bearish pressure. Sometimes, a strong Doji with a long upper shadow that has broken out of the Bollinger Upper Band forms.
However, we must wait for the confirmation candlestick to form. If the confirmation candlestick closes with a strong bearish body,
then we know that bears have taken over control, otherwise, even though the Doji has a strong upper shadow, it has to be
ignored. The reason is that we need to know which party, bulls or bears, have taken the control, so we must wait for this signal. A
Doji alone doesn’t tell us. A Doji, even with strong shadows, just reflects indecision. A Doji means both bears and bulls have the
same power. The shadows just show the price fluctuation, but the fact that the open and close prices are the same or close, means
that none of the parties have been able to take the control finally. If the next candlestick closes with a strong bearish body on the
same time frame, then it means bears have taken the control, because they have been able to take the price down and keep it
there until the candlestick closes. The conclusion is that:
i. A big Doji with long shadows means nothing but indecision.
A ii. However a candlestick with strong bullish or bearish body means one party has taken the control and most probably will
move the price accordingly for some time. It is the candlestick body that shows the price direction, not the Doji
shadows.
iii. A Doji cannot be called confirmation. However, when a Hammer with a long lower shadow forms and then a Doji that also
has a long lower shadow, then most probably the next candlestick will be bullish and the price will go up. It can be known
as a long trade setup somehow.
9. Correlations:
i. If we take the strongest setups only, we don’t have to be worried about anything else, even correlation in the currency pairs. A too
strong setup on a long time frame shows the trend, no matter how the other pairs are moving. I am not saying this is a 100%
perfect and a “no risk” trading method, but it has been working better than other methods so far.
ii. Example: GBPCAD and AUDCAD are correlated because of CAD, but they can move differently because of
the commodity currency (GBP and AUD). After Scotland’s independence referendum, GBP had bullish
pressure again, because the fear against the value of the GBP had been eliminated. So it made sense to
have a long position with a GBP cross currency pair that had formed a too strong long trade setup some
weeks before. Even if the value of CAD increased, GBPCAD could still be bullish. However, this could not B
be true for AUDCAD. Appreciation of the value of CAD could make a strong short setup on AUDCAD at the
same time that GBPCAD was going up.
10. FIRST REACTIONS FOLLOWING A SIGNIFICANT TREND:
i. Do not go long at the first advance that follows a down trend bottom. It is likely a CONTINUATION signal
ii. Do not go short at the first retracement that follows an up trend top. It is likely a CONTINUATION signal
Note the difference between Doji A & Doji B! – A closes well above BMB & B closes under BMB
Doji A upper shadow made a re-test of BMB as expected
Doji B – has a deceptively small upper shadow indicating buyer control – it needed 2 more candles for control to finally be handed to bears
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System Design by Chris Pottorff - Compilation by Peter Wagner - 8
copywrite FXKeys©
11. LE SECRETE:
1. Taking the too strong setups is my key secret. I am very picky in choosing the setups. These setups usually work and hit the x 5 target.
i. I use the riskier stop loss, and I re-enter if it is triggered because I trust the setup and I know it will make the price move accordingly.
a. I risk a little more than what traders should risk.
i. The first reason is the setups I take. I pick the strongest ones and I avoid the others.
ii. The second reason is my account size. I start with a relatively small amount of money, and turn it into a big capital, and then
withdraw the whole profit. Even if I lose the whole account (which has never happened so far), I don’t lose my shirt because
99% of it is my profit & not my hard earned savings. I have never traded with money I cannot afford to lose.
ii. I set the first position’s TP to 5xSL. I move the stop loss of the second position to breakeven when the first one hits the target. I wait for the
exhaustion or a reversal signal to close the second position and collect my profit.
iii. I don’t check the shorter time frames to confirm a strong trade setup on a longer time frame. However, it may be better to check the longer
time frames and see if they agree and confirm the shorter time frame’s trade setup or not (refer 11 below).
iv. As traders, our job is to distinguish who has taken the control. It is not to predict who will take the control. We should enter when we know that
a party has taken the control. We do not enter when the market is still in indecision.
13. HOW LONG TO HOLD A POSITION: The question is when should I cancel an already formed strong trade setup, and go for a JUST formed
strong trade setup – either on the SAME or a DIFFERENT time frame?
1. Example: We are long, based on a too strong long trade setup on the weekly chart, and all of a sudden a too strong short trade setup forms on
the daily chart. Should we stick to the weekly long trade setup that was formed before and hold our long position, or we should close the long
positions and take the short trade setup on the daily chart?
2. There is no doubt that when a too strong reversal trade setup forms on any of the time frames, we have to forget about the previous trade
setup, close the positions we had and collect our profit or take our loss. Market conditions can change suddenly and a trader has to be as
accurate as the most recent market movement. A fresh trade setup is what we have to follow, specially when it is too strong.
3. I hold the 2nd position until a reversal forms, or until a setup is negated by a candle pattern. In some rare cases, I move the second position’s
stop loss again to lock-in some profit. That is all I do.
4. A too strong trade setup is valid only until another too strong trade setup forms. One way to come to the conclusion that you have to close your
position, is that you see a too strong opposite trade setup formed either on the same time frame or any of a longer or shorter time frame (we
follow only the daily, weekly and monthly time frames).
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A Technical Analysis Software to Locate the Forex Market Buy-Sell Signals
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How it works : https://drive.google.com/file/d/0ByXdZtKd6FhaQUVSVU41ZEZGVlU/view?usp=sharing
• FXKeys UNIVERSAL INDICATOR LINK – compliments of Majid (FXKeys follower) version “7.52” of FxKeys Indicator https://docs.google.com/file/d/0B9J0pwuYaT-qZVM1U1lxUGg1VGs/edit
• “LastVisit” indicator https://docs.google.com/file/d/0B9J0pwuYaT-qOENuMVluS1JDZTQ/edit the documentation for last visit https://docs.google.com/file/d/0B9J0pwuYaT-qVjRGTUxzU0k1dTA/edit
1. We have to wait for a strong candlestick pattern to form. A “strong candlestick pattern” means a pattern like “Dark Cloud Cover“, “Bearish Engulfing“,
“Piercing Line“, and “Bullish Engulfing”. Many of these patterns can be located on the charts in all time frames. However, we need the strong ones on the
longer time frames of Daily, Weekly & Monthly . Each of the above patterns require two candlesticks to form completely. The second candlestick in the
pattern is the most important and it has to be really strong. For example:
• In the Dark Cloud Cover, (2nd candlestick in the pattern opens higher or equal to close of 1 st candlestick & closes above the open price of the 1 st
candlestick). It forms at the top of a bull market
• the first candlestick , to be strong, must have a long (relative to the recent previously formed candles) bullish body, and
• the second candlestick , to be strong, has to be a bearish candlestick, that has a body which engulfs more than 90% of the body of the first
candlestick and preferably with a long upper shadow and preferably, none or small (a few pips 15) lower shadow.
• In the Piercing Line pattern: (2nd candlestick in the pattern opens lower or equal to close of 1st candlestick.) [it is the bullish form of Dark Cloud Cover
pattern and forms at the bottom of a bear market].
• the first candlestick , to be strong, must have a long (relative to the recent previously formed candles) bearish body, and
• the second candlestick , to be strong, has to be a bullish candlestick, that has a body which engulfs more than 90% of the body of the first
candlestick and preferably with a long lower shadow and preferably, none or small (a few pips 15) upper shadow.
• Other Forms of candlesticks like Shooting Star, Doji, Hammer, Hanging Man, Spinning Top, Morning Star, Evening Star, and… not only have to be strong in
themselves, but must be confirmed strongly by the next candlestick.
• So, the first thing we need is a “too strong” candlestick pattern. If a candle pattern does not fulfil the above
conditions then it must be ignored as a strong trade set-up.
*To Contents* System Design by Chris Pottorff - Compilation by Peter Wagner -
copywrite FXKeys©
11
2. The already formed, strong, candlestick pattern must have a strong Bollinger Band Breakout. The first and the second candlestick, that
forms the pattern, must break out of the Bollinger Bands strongly, otherwise the pattern must be ignored as a strong trade set-up.
So, the second thing we need is a “too strong” Upper or Lower, Bollinger Band breakout.
So the rules 1 and 2 above show a sign which indicates that the price wants to change – either to collapse, (in the case of a Bearish signal (formed on
an uptrend)) or advance, (in the case of a Bullish signal (formed on an downtrend)) – BUT the sign does not mean nor guarantee that price will do
what the sign indicates – it only tells us what it is getting ready to do. It tells us only that one of the parties either buyers (bulls) or sellers (bears), is
getting tired and is giving up or switching sides in the market. The rules also require that:
3. The strong candlestick pattern with the strong Bollinger Band breakout must be formed where one of the parties, either buyers (bulls) or
sellers (bears) do not have full control over the price movement, and where one of them is becoming exhausted of the struggle for control. This
means:
• If any strong candlestick pattern (1) (as described above), forms at the very top of a strong upward price move (one that has only
minor price reactions on the way up), then it must be ignored as a strong trade setup. This is because the buyers still have influence
over the price, more than the sellers, and the price will probably rise further, so it is too risky to trade.
• If any strong candlestick pattern (2) (as described above), forms at the very bottom of a strong downward price move (one that has
only minor price reactions on the way down), then it must be ignored as a strong trade setup. This is because the sellers still have
influence over the price, more than the buyers, and the price will probably fall further, so it is too risky to trade.
So the third thing we need is a market showing *signs of exhaustion*, where either the buyers (bulls) or the sellers
(bears), respectively, do not have control of price.
If we do not have all the three points condition above it is too risky to take the trade setup for a long or
short trade.
That is all we need for a trade setup. Any trade setup that doesn’t meet these three requirements has to be ignored. Note that:
i. price may move quickly and strongly even without all the above rules being filled and that
ii. when the rules are fulfilled as a trade setup, the price may not move strongly.
We never know what will happen after a trade setup forms on the chart. All we know is that a trade setup has formed, and we have to make our
decision based on it. If it looks risky, then we have to ignore it, and wait for another setup. Keep in mind We Are Traders, Not Fortune Tellers.
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System Design by Chris Pottorff - Compilation by Peter Wagner -
copywrite FXKeys©
12
How to Place & Manage the Stop Loss in Forex Trading
The rule says that you should place the stop loss in a position that becomes triggered only when the chosen
market direction is completely wrong. So when I want to set the stop loss, I ask myself under what condition
is the position I have taken wrong. The answer I give to this question is the position of the stop loss.
Stop loss position is very important. having a tight stop loss may mean that it will be triggered, creating a loss,
even when you choose the right direction.
Stop loss should be placed in a position that will be triggered only when the direction you have chosen is
absolutely wrong. For example the price is going up. You wait for a reversal signal. The price changes its
direction and starts going down and you take a short position. So the high that the price made before it
changed and went down is a resistance.
A stop loss is placed a few pips above/below the pick (resistance/support). In the case of a sell (short) order
the spread must be added into the stop calculation.
Example short , Resistance level is at 212.39 + 5 pips + 8 pips = 212.52
Example Long order Support level is at 213.56 - 5 pips = 213.61.
In the case of patterns – eg Triangular - To determine the stop loss position, you have to extend the triangle
broken resistance and then find a suitable position under the broken resistance. In this case it is 1.4588.
There is no special rule for stop loss like “your stop loss should be 50 pips under the buy price…”. Stop loss
position is different from one trade to another even for the same currency pair and time frame. Sometimes
your stop loss will be 20 pips under your buy price and sometimes it has to be as high as 200 pips.
When you work with bigger time frames you use the above stages to determine your stop loss position in the
same manner but, as the bigger time frames have bigger scales, your stop loss value will be much bigger.
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Fortunately, we can set a stop loss for each position. That helps us limit our losses. AND. We can move our stop losses, which is a great feature. Learning to
locate the best place to set a stop loss for each position is paramount. Moving the stop loss to breakeven when your position is in profit eliminates the risk to
hold the position.
If you don’t move your stop loss to breakeven on time, then it is possible that you lose in several positions consecutively. And this will be too hard to recover,
both technically and psychologically. It is not only your money (management) that you have to take care of. It is your mental situation too. You can easily lose
your confidence if you don’t limit your losses.
Move the stop loss as soon as the chart allows. If the market moves toward your trade direction for a few candles (1-3 candles), you have to move your stop
loss to breakeven, no matter what time frame you are working with. If you have a x3 or x4 target filled, it is prudent to move the stop loss to break-even
following a x1 price advance. Or you can move the stop loss to breakeven and let your open position run.
Be aware that sometimes your stop loss will be triggered at its original level, before the market gives you the chance to move the stop loss to breakeven. You
have to be ready for such a situation too. Something that helps you a lot is that you set a reasonable stop loss. A reasonable stop loss is not too wide nor too
tight. It is reasonable. Your position size should not be so big that you lose a lot if the price hits the stop loss. A novice trader should start trading a live
account using a risk factor not greater than 2% of the account.
Applying all the above diligently does not prevent losses occuring sometimes but it does minimise them.
OVERTRADING: the most common mistakes - A trader should avoid over-trading , using too much leverage, and attempting to pick the tops and bottoms.
Under such conditions, if the market moves (which it mostly does) against their position even by just a small amount, it can result in considerable losses. It has
been generally observed that a new trader is very likely to press the panic button, get emotional and nervous and close the trade for a sizable loss before its
time and then see the trade turn around. This destroys a traders confidence.
1. Risk is the amount of the money that you may lose in a trade. One should not risk more than 2-3% of our capital in each trade. It means when we
find a trade setup and we find a proper place for the stop loss, we have to choose a position lot size in a way such that if the market hits our stop
loss, we lose a maximum of 2-3% of our capital. For example we have found a trade setup with EUR/USD that must have a 80 pips stop loss. We
have a $5000 account. If EUR/USD hits our stop loss, we should lose $150 which is 3% of our capital (0.03 x $5000 = $150). It means 80 pips equals
$150. This $150 is our risk. But what is the reward?
2. Reward is the profit that we can make in a trade. In the above example, if we choose a 160 pips target for our trade and EUR/USD hits this target,
we will make $300 (when 80 pips equals $150, so 160 pips equals $300). This $300 profit is the reward.
3. Risk/reward ratio of this trade? 150:300 = 1:2. The larger the profit (target) against the loss (stop loss), the smaller the risk/reward ratio which
means your risk is smaller than your reward. For example, if your stop loss is 20 pips in a trade and your target is 100 pips, your risk/reward ratio
will be 1:5 in this trade.
4. 1:3 or 1:5 risk/reward ratio is achievable when the market trends after forming a too strong trade setup, and you enter on time. In most cases you
should be able to hit the top and bottom of the trends, no matter on what time frame you trade.
5. If you enter at the middle of the way, then the trend should be strong enough to give you another big movement and make a profit which is 3 or 5
times bigger than your stop loss. You can do that. But there are a few problems:
1. Markets form a trend in less than 30% of the cases and it ranges 70% of the time
2. If you enter with delay and while they are at the middle of the way some trends are not strong enough to hit your target which is 3 or 5
times bigger than your stop loss.
3. There are many cases in which you miss the trends; you hesitate to enter and so you miss the chance; you think you have found a trend
whereas you are wrong and it returns and hits your stop loss and… . So you lose in many trades, because you want to catch a big one.
6. How is it possible to catch a 1:3 or 1:5 trade without losing so many other trades?
1. One solution is in moving the stop loss. You should not let your stop loss remain at its initial position. To have a 1:3 trade, the distance of
your entry and your final target should be split into 3 parts (150 pip target would have 3 x 50 pip levels). The stop loss is then moved in
three stages – like a trailing stop but manually done.
2. Another solution is in taking the too strong trade setups on the long time frames like daily, weekly and monthly. If you wait for the too
strong trade setup, they are usually strong enough to move the price for hundreds of pips, and so you can have wide targets.
3. If price comes close to the final target, you should move the stop loss to 2/3 level (assuming 1:3). Then you have to wait until it hits the
final target or returns and hits the stop loss.
7. It is the market that determines how your trade should end. One really never knows how many trades will be end as 1:3 and 1:5 trades.
*To Contents* System Design by Chris Pottorff - Compilation by Peter Wagner -
copywrite FXKeys©
15
APPENDIX 1
technical analysis , Symmetrical Triangle, Ascending Triangle , Descending Triangle, trend lines , resistance levels , sideways markets ,
How to Trade Using Trendlines, Head and Shoulders, Triangles, Double Tops and Bottoms, Flags, Pennants, Wedges … , support & resistance breakout
EUR/GBP Moving Inside A Symmetrical Triangle On The Daily Chart ,
*To Contents*
iii. Candlestick #3 is even smaller than #2. It also has a long upper shadow which has the same meaning as the upper
shadow of candlestick #2, but the significant difference is that it closed with a bearish body. Although the body is too
small, the fact that the price closed below the open, means that the bears are getting stronger and taking control from
Candlesticks #2, #3, #4, #5 and the bulls.
#6 are called High-Wave
a. Candlestick #3 is a Shooting Star which is a special form of candlestick.
candlesticks.
b. On the other hand, candlestick #3 is also a Inside Day Candlestick which is a kind of reversal pattern.
It is a reversal signal/pattern. This is more news telling us that strong changes may be on the way. Some traders go short as soon as they see the Inside
Day candlestick (see inside day pattern). However, I prefer to wait for more confirmation.
Some traders go short when
these candlesticks form on a The information given by candlestick #3 is that price is still under buying pressure, but the number of sellers increased and
bull market, and they would be took the price lower before the candlestick close and candlestick #3 closed below its open. It means the bears are getting
right in the above example stronger.
because this long story finally iv. Candlestick #4 opened with a gap up. Some bulls bought and tried to take the price up. Some bears sold and took the
ended to a complete bears
price down. Bulls and bears fight closely and the price went up and down and formed the upper and lower shadows.
victory. They took control from
the bulls and sold the price Finally candlestick #4 closed a little above the open price which can be seen as a small victory for bulls. However,
down, and candlestick #7 closed neither the bulls or bears have been able to take control. They are almost “even”, and so the market is in an indecision
as a HUGE bearish candlestick. situation. It doesn’t know whether to go up or down. And this means no action for us too.
v. Candlesticks #5 and #6 are almost the same, and they send the same message as candlestick #4: Indecision… Indecision
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For High Waves, we do not have to wait for a confirmation candle . If the Doji candles have long upper and lower shadows, then most probably the price will reverse very
*To Contents* strongly soon. Waiting for a confirmation candle, can cause us to miss a big movement.
System Design by Chris Pottorff - Compilation by Peter Wagner - 18
copywrite FXKeys©
A1.3 – Candles not requiring a confirmation candle
Another case that does not need any
confirmation candle is when there is a very
A big and strong strong Bollinger Band breakout. Like in the
bullish/bearish example below where almost 95% of the candle
engulfing with a is formed out of the Bollinger Lower Band.
strong Bollinger Band Additionally, the candle is a big and long candle.
breakout. When it The bigger the candle and its shadows and the
forms on the chart, stronger the BB breakout, the stronger the
you can take the reversal movement:
position at the close When 100% of a candle forms out of the
of the engulfing Bollinger Bands; Do you think that we had to
candle, and without wait for a confirmation candle? Definitely not.
having to wait for
any confirmation. This Dragonfly Doji was too strong, and so it did not need any
Please note that confirmation. I went long while the next candlestick (2014.08.11)
Piercing Line and was forming. However, some traders may criticise that these kinds
Dark Cloud cover are of candlestick patterns have to be confirmed by the next candlestick.
both different kinds They can be right, but when the candlestick is too strong (the way
of engulfing patterns. that it was explained above), I don’t wait for the confirmation
So they have to be candlestick, and I take the position.
treated the same. I
mean when they are
There are a few things that you have to note if you want to
strong with strong
pick the strong Dragonfly Doji reversal setups that will make
BB breakout, they
money for you:
don’t need
confirmation
1. The longer the lower shadow, the stronger the reversal
This confirmation pressure. The lower shadow of the candlestick has to be
candlestick doesn’t too long when compared with the length of the other
necessarily have to be the candlesticks formed before the Dragonfly Doji. It has to
next candlestick. It can be
be an exceptionally big candlestick, otherwise it cannot
done by one of the next
few candlesticks too. make the price reverse, and it has to be ignored.
All the other cases of candlestick signals and patterns need confirmation. 2. Bollinger Bands have a very important role in picking the
Please note that even when there is a very strong signal like the above examples, having a strong Dragonfly Doji reversal signals. The lower shadow
reasonable stop loss is a must. Nothing is guaranteed in the forex market. Therefore, even MUST form a very strong breakout with the Bollinger
when the strongest signal/pattern forms, you have to enter with a reasonable and proper
Lower Band, otherwise you have to ignore the signal.
stop loss. That is not all. You have to move your stop loss to breakeven when it is time.
*To Contents* *To Header* System Design by Chris Pottorff - Compilation by Peter Wagner -
copywrite FXKeys©
19
APPENDIX 2
OTHER TRADING SYSTEM OPTIONS:
• Link to download : robot for locating DBB developed by SINGH (FXKeys follower) https://drive.google.com/file/d/0ByXdZtKd6FhaeWo0Q3cweTVVU1k/view?usp=sharing
How it works : https://drive.google.com/file/d/0ByXdZtKd6FhaQUVSVU41ZEZGVlU/view?usp=sharing
• FXKeys UNIVERSAL INDICATOR LINK – compliments of Majid (FXKeys follower) https://docs.google.com/file/d/0B9J0pwuYaT-qZVM1U1lxUGg1VGs/edit
*To Contents*
System Design by Chris Pottorff - Compilation by Peter Wagner - copywrite
FXKeys©
20
A2.1 - TRADING THE 90 SCORE ON A SHORTER TIME FRAME
This strategy is not difficult at all. However you must apply discipline to follow it and trade it properly. To trade this strategy you have to:
1. Wait for a *trade setup* on the daily, weekly or monthly time frames to form, or a candlestick on any of these time frames that points to a special
direction clearly and sharply, and
2. Refer to a shorter time frame like 4hrs or 1hr, locate a valid support/resistance line, and wait for its breakout to enter the market.
i. A strong 100 score trade setup by a candlestick pattern and Bollinger Bands, the way it is explained in the FXKeys
trading system above.
ii. A weak trade setup that doesn’t get a 100 score, and has some negative points and looks riskier than a 100 score trade
setup.
iii. A candlestick form or pattern that closes in a way that points to a special price direction.
One of the above three events has to occur on one of the daily, weekly or monthly time frames.
2. When one of the above events has occurred on a daily, weekly or monthly time frame, then you have to refer to a shorter
time frame, first 4hrs and then 1hr, and try to locate a support or resistance line on one of these time frames. If you cannot
locate any line on the 4hrs chart, then you have to refer to the 1hr chart and try to locate a line on that time frame.
i. If a short trade setup forms on one of the longer time frames, then you have to locate a support line either on 4hrs or
1hr chart and wait for its breakout, to go short. resistance breakout (1) (2) (3) (4)
ii. If a long trade setup forms on one of the longer time frames, then you have to locate a resistance line either on 4hrs or
1hr chart and wait for its breakout, to go long.
iii. If a candlestick strongly points to the upward direction on one of the long time frames, then you have to locate a
resistance line either on 4hrs or 1hr chart and wait for its breakout to go long. If a candlestick strongly points to the
downward direction on one of the long time frames, then you have to locate a support line either on 4hrs or 1hr chart
and wait for its breakout to go short.
Therefore, one only holds a 2.5% risk from the initial balance, while the
previously taken positions are safe and only the last position has a 2.5% stop
loss.
An example of a strategy from a friend:
On 2014.05.08 he took a EURUSD short position when the 2014.05.08 candlestick closed on EUR/USD daily chart (candlestick #1 on the above chart). This is what I did too.
However, the difference was that my first position hit the target and made 250 pips, and I closed the second position when 2014.06.05 candlestick closed. But my friend, moved
his first position’s stop loss to breakeven when 2014.06.05 candlestick formed, and took the second position when a continuation setup formed by candlestick #2. Later on, when
another continuation setup formed (candlestick #3), he moved his second position’s stop loss to breakeven and took another position.
All of his three positions are still open. Let’s calculate how much profit he has made so far with a – let’s say – $10,000 account.
Risking 2% of the balance and having a 50 pips stop loss, he had to take a 0.4 lots position each time. A 0.4 lots EUR/USD position has a $4.00 pip value. His first position is in 930
pips profit ($3,720), and his second and third positions are in 700 ($2,800) and 500 ($2,000) pips profit respectively, which is $8,520 in total. It means he would have almost
doubled his $10,000 account taking a 2% risk only.
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copywrite FXKeys© 22
Links to FYKeys DBB System: (1) (2) (3) (4) (5) (6)
A2.2 DOUBLE BOLLINGER BANDS SYSTEM – LONG SETUP
Long Trade Setups:
To go long (to buy), you have to wait for one of the candlesticks to close above the BB1
upper band. Then you should check the previous two candlesticks to see whether their
close prices are below the BB1 upper band or not. If all three points comply, you have a
long trade setup (buy signal). Please see the opposite chart. It is USD/JPY daily chart. As
you see, candlestick #3 is closed above BB1 upper band, and at the same time the two
previous candlesticks (#1 and #2) are closed right below BB1 upper band. This is a long
trade setup. It means you should buy at close of candlestick #3:
Stop loss has to be set at the low price of the candlestick which has pierced the BB1
upper band (I mean candlestick #3), and the target can be at least twice of the stop loss
3 more DBB
Entry size (2 x SL). You can move the stop loss to breakeven if the price moves according to the
Long
trade setup for 1 x SL. For example, when your stop loss is 60 pips, then you can move
Examples
the stop loss to breakeven if the price goes up for 60 pips. Of course I will tell you how to
BB1 Bands trail the price to maximize the profit in case you don’t want to get out with a 2 x SL
A target.
Note: When candlestick #3 is too long, you can set the stop loss higher than its low price,
not to have a too wide stop loss.
Note: The DBB system can be used on an uptrend when we are not already long or to
add to an existing trade.
However, there is another thing that we have to care about. It is the position of candlestick #1 and #2 with Bollinger Middle Band. Experience shows that:
1. in long trade setups, the trade setup works better and makes the price go up stronger if candlesticks #1 and #2 close above Bollinger Middle Band and below BB1 Upper Band. It means they close
between Bollinger Middle Band and BB1 Upper Band.
2. the closer candlesticks #1 and #2 close prices are to BB1 Upper Band, the stronger is the trade setup.
NOTE:
1. Sometimes, candlesticks #1 and #2 close as bearish candlesticks either below Bollinger Middle Band or a little above it. Or one of them closes below Bollinger Middle Band and the other one
above it. Suddenly candlestick #3 goes up and closes above BB1 Upper Band, and so a long trade setup forms.
2. This cannot be a strong long trade setup, because when the last 3 candlesticks close like that, it means the market is choppy and unstable. It means bulls have not taken the full control yet, and so
it is possible that the next candlestick goes down and hits the stop loss.
On image A above I am showing you two long trade setups that are formed under the conditions I explained above (specially the left one). As you see in the left trade setup, candlesticks #1 and #2 are
closed above Bollinger Middle Band and so close to BB1 Upper Band. This is the example of a good and typical long trade setup.
The second one (the one at right) is also good. The problem is that candlestick #1 is bearish. In spite of this, its lower shadow reflects the bullish pressure which is good. It is still a good long trade setup,
but the left one is much better.
Whenever you locate a long trade setup, compare it to the left trade setup on the below screenshot and take it if they look similar. (see example of a not-valid setup next slide)
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At right is what I call a bad DBB long trade setup. It is still a trade Here is two other bad DBB long trade setups.
setup, but it is not a good one.
1. Candlesticks #1 and #2 are closed almost below Bollinger
Middle Band which means bears are still strong. As you see,
Bad DBB long set-up examples
the price doesn’t go up strongly when candlestick #3 closes. It
goes up only for 2 small candlesticks and then it goes down
strongly.
2. The other thing is that candlestick #3 closed not only above
BB1 Upper Band, but also above BB2 Upper Band. It means
this candlestick has made the market a little overbought and
so a bearish counter-attack is possible:
A2.2 DOUBLE BOLLINGER BANDS SYSTEM – SHORT SETUP Short Trade Setups:
To go short (to sell), you have to wait for one of the candlesticks to close below the
BB1 lower band. Then you should check the previous two candlesticks to see whether
their close prices are above the BB1 lower band or not. If all three points comply, you
have a short trade setup (sell signal), and you can go short (sell) at close of the
candlestick which has broken below the BB1 lower band.
Candlestick #3 on the below chart has closed below BB1 lower band while
BB1 Bands candlesticks #1 and #2 have closed above it. This is a short trade setup.
Stop loss has to be set at the high price of candlestick #3, and target can be at least
twice of the stop loss size (2 x SL). You can move the stop loss to breakeven if the
Everything I explained above long trade setups has to be considered for short trade setups
too, but from the opposite direction.
When there is a strong DBB trade setup, you can take two
positions with the same stop loss. Set a 2 x SL target for the first
position, and no target for the second one. If the first position hits
the target, move the second’s position stop loss to breakeven and
hold it.
Of course, markets don’t trend all the time. Indeed they trend
30% of the time. It means you should not expect to make
hundreds of pips from each trade setup.
You can trail the stop loss if you like. For example when your
initial stop loss is 80 pips, then you can move your stop loss
further for every 80 pips that it moves toward the favoured
direction.
METHOD:
We have to monitor the charts on a daily basis until they form a trade setup, or we come to the conclusion that they have to be ignored.
If the initial upward movement starts after or is followed by a resistance breakout (1) (2) (3) (4), then the trend will be stronger and the trade setup more
reliable.
Sometimes, when the price hits the 50-Day SMA it breaks below it and then turns around and breaks above the 50-Day SMA again which happens in noisy markets:
• Sometimes , after breaking below the 50-Day SMA, the price continues up again strongly.
• Sometimes, after breaking below the 50-Day SMA, the market is about to move sideways.
• Therefore, if you like to have a higher success rate and a higher number of winning positions, it is better to avoid these kinds of setups, and only take
the ones where price precisely touches (re-tests) the 50-Day SMA after going up and forming a buy signal (strong candle pattern) above it.
It is the same with the short trade setups, but from the opposite direction
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copywrite FXKeys©
26
A2.4 50 DAY MOVING AVERAGE – TRADING SYSTEM - NOTES
1. Usually, during an uptrend in the market, prices tend to remain above the 50-day Moving Average:
i. Two or more market closes above this crucial mark is an indicator of the beginning of an uptrend.
ii. A pullback, when coupled with strong volumes with increasing prices and lower volumes with lower prices,
indicates a healthy uptrend in the market.
2. As investors, you need to take a cautious approach and time your entry or exit well during such a pullback. These are
additional entry and exit points.
3. When the 50Day MA is at high levels it is actually a warning that a reversal is in the making and a downward trend
might soon follow. It is also a signal of euphoria in the market place and also shows the presence of very few new
buyers
4. Similarly, extremely low readings are indicators of a turnaround in the forex market and show that bears are
gradually in losing control. These low readings also show that the market is close to forming a base and a new
upside might be looming up in near future.
5. When two key moving averages cross, such as the 50-day Moving Average with the 200-Day Moving Average (called
the Golden Cross):
i. When this short-term measure breaches (crosses to higher) the long-term indicator, it is generally seen as a
sign of good times and a reign of the bulls is expected. This fact is generally supported by the very high
trading volumes seen at such a crossroad in the market.
ii. The opposite or the inverse of this situation is called the Death Cross in the market.
6. At the end of the day, one must remember a tool is just a tool, how effective it is depends upon the ability of the
user. If one is alert, aware and engages earnestly in forex market trading, the 50-day Moving Average will continue
to be a weapon of choice to overcome short-term roadblocks that may arise. Due to widespread use its
effectiveness as a predictive tool is diminishing – but it is still currently effective.
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30
In order to have a
short trade setup,
50SMA must be
descending already
To go short:
1. Wait for the price to break below the 50SMA and stay below it.
2. Wait for the price to go up and retest the 50SMA and start going
down again while the 50SMA is descending.
3. Go short and set the stop loss above the last high price made while
retesting the 50SMA. Set a 2xSL target at least. Or you can hold the
position as long as the price is moving below the 50SMA.
4. A support break-out confirms and supports the 50MA break
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A2.5 INSIDE DAY CANDLESTICK PATTERN – TRADING SYSTEM - NOTES
1. The “Inside Day” is the second candlestick (the baby) in the Harami pattern. It is engulfed by the previous
candlestick (the mother). So it is entirely formed inside the previous candlestick.
2. Like all the other patterns we need two candlesticks to have the pattern completely formed.
3. Bollinger Bands® indicator has an important role in this pattern too. even the most professional stock traders also
use the Bollinger Bands to locate and trade the “Inside Day Candlestick”. According to Jamie Saettele, Inside Day
works as a good reversal signal when there is a visible Bollinger Upper or Lower band breakout either by the first
candlestick (the mother), or the second candlestick (the baby), or preferably both.
4. When the price hits the Bollinger Upper or Lower Band on the daily chart, then we can wait for an “Inside Day” ! Jamie Saettele!
candlestick to form. Specifically, the inside candle
represents a period of
5. According to Jamie Saettele, (refer the opposite chart) contracted volatility. If, in an
uptrend, volatility begins to
i. only the candlestick #1 and #3 should be considered and taken as a slow and the market fails to
reversal signal. make a new high (as illustrated
ii. Candlestick #2 formed on Bollinger Middle Band. It reversed the by the inside candle), then we
price strongly but it did not follow our Bollinger Bands breakout. can deduce that strength is
waning and that the chance for
iii. Candlestick #4 and its previous candlestick did not hit the Bollinger a reversal exists. When
Upper Band, and so they have to be ignored (the trade setup is not combined with a Bollinger
complete). Band®, we ensure that we are
trading a reversal only by either
selling high prices (higher
6. The opposite chart shows two strong Inside Day candlesticks formed Bollinger Band®) or buying low
consecutively at the bottom of a bear market. prices (lower Bollinger Band®).
i. It is an interesting screenshot, because it shows one inside day In this way, we trade for the big
candlestick formed (#1) and then another one formed inside the first move; not necessarily selling
the low tick or buying the
inside day candlestick (#2). There is a nice and strong Bollinger Lower bottom tick but definitely
Band breakout, both by the first candlestick (the mother), and the first buying near the relative bottom
inside day (#1). and selling near the relative
ii. There is another inside day candlestick which is marked with ~ on the top. The key is confirmation.
below chart. Although it is engulfed by the previous candlestick, it has
to be ignored because neither the previous nor the inside day
candlestick have not hit the Bollinger Lower Band:
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7. Why Does the Price Change Its Direction When the Inside Day Candlestick Forms?
Candlesticks reflect the psychology of the markets (buyers and sellers). When the price is going up strongly and several bullish candlesticks
have formed, it means traders are buying and money is being injected to the market. All of a sudden, when a candlestick forms “inside”
the high/low range of another candlestick, it means traders have stopped buying as strongly as they had been previously and the money
that is being injected into the market is now not enough to take the price up to and higher than the previous days high. It means buyers
have started changing their minds, and now they are thinking about selling what they had bought. And some of them have already started
to sell. So the price will go down the next day after the inside day is formed. This reasoning applies for the case when an inside day forms
on a bear market.
9. The inside day Bollinger Band® setup can also be used to identify major turns on weekly or even monthly charts for the longer-term position trader.
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How to Use Bollinger Bands in Forex and Stock Trading
A2.6 Bollinger Bands Squeeze How to Trade Using Doji Candlestick and Bollinger Bands
Daily Candlesticks and Bollinger Middle Band
How to Trade the Continuation Chart Patterns with Candlesticks and Bollinger Bands
Bollinger Band Squeeze is a great pattern that enables you to locate strong and profitable trade setups. When the market becomes too slow and there is a low volatility, the price moves sideways
and the Bollinger upper and lower bands become close to each other. This is called Bollinger Band Squeeze. You can see it on all time frames, specially the shorter ones like 15min.
Sometimes Bollinger Band Squeeze continues for several candlesticks, and sometimes it is only for a few candlesticks. It really does not matter how many candlesticks are inside the
squeezed Bollinger Bands. The market is not going to remain calm and quiet forever, and it is certain that a period of low volatility will be followed by a strong movement. To be profitable we must
catch this strong movement by entering on time. What makes the Bollinger Band Squeeze trade setups great is that the movement after the squeeze is usually a strong one, and above all, the trade
can be entered with a very tight stop loss and wide target. In many cases we can take a 1:10 position which is great. Therefore Bollinger Band Squeeze trade setups are well profitable and have a
great risk to reward ratio. Further it is very easy to locate such trade setups. You just need to be on time with an entry.
Q: Why can a BB squeeze and then its breakout lead the price to the direction of the breakout?
A: BB squeeze means none of the bulls and bears have the price control and none of them have a tendency to take the control. So the market becomes too slow and Bollinger Upper and Lower
Bands get close to each other. Suddenly one party takes the control and makes the price hit one of the Bollinger Bands. Usually that party keeps the control and makes the price move to the
same direction for a while.
Examples of Bollinger Band Squeeze trade setups and the way you could take them. (BUB = Bollinger
Upper Band BLB = Bollinger Lower Band, BBQ = BB Squeeze)
The chart below shows a BBQ example formed on EUR/USD 15min chart. These patterns appear on the
5min and 15min charts often and BBQ is one of the most important strategies of many day traders. The
below screenshot shows you how profitable these trade setups can be.
The Bollinger upper and lower bands became close to each other for a few candles (the red arrows).
Candle #1 is the center of this BBQ which is a very short form of BBQ.
When we should enter the market when BBQ forms on the chart?
We should take a position as soon as the market breaks out of the range and starts moving strongly. As
you see, it has been moving sideways for several candles before the candle #1. When a candle has
touched and closed on or outside the BUB or BLB it signals that the market has decided to break out of
the range and wants to move strongly again? This also signals when to enter.
If it touches the BUB, it means the market wants to break above the range and go up. If it touches the
BLB it means the market wants to break below the range and go down. The candle’s body should touch
the upper or lower band and close outside the band. Touching by the candle shadow is not enough. The
body should break the band.
On the chart below, body of candle #2 has barely touched the upper band. We could go long at the close
of this candle. However, as the body has not touched the upper band strongly, we wait for another
candle to form. The body of candle #3 has strongly touched the upper band. It does not have to be that
strong. This trade setup is traded by going long at the close of the candle #2 or while the candle #3 is
forming. The entry would be somewhere around the 1.36194 level. I would place the stop loss at the low
price of candle #2 or a little below it giving a 2 to 5 pips stop loss. The market went up for 50 pips after
the BBQ breakout. So BBQ setups are really profitable and have a great risk/reward ratio.
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More Examples of Bollinger Band Squeeze trade setups
The non coloured chart shows two examples of a longer BBQ than the
previous example. The one at the left side of the chart has something more
than an ordinary trade for you to learn. As you see, after such a long time of
price moving sideways and inside the squeezed Bollinger Bands, the body of
candle #1 touches the upper band. According to what I told you above, we
would go long at the close of this candle and the stop loss had to be below the Avoid
low price of the candle. However, as you see it would not work and the
market went down and triggered the stop loss. I brought up this example here
to tell that even the BBQ patterns sometimes don’t work. That is why
we must always have a reasonable stop loss there to protect our money.
Although our first entry did not work and we lost about 12 pips, the market
goes down and candle #3 touches the lower band while the BBQ is still there
and the upper and lower bands are still moving parallel to each other. So we
could go short at the close of the candle #3. As it is a long candle, the stop loss GBPCAD
did not have to be at its open price and it could be set at the middle of the daily
candle (a 9 pips stop loss). A 90 pips target (1:10 position) could be easily
triggered because the price goes down for 100 pips after the candle #3 close.
The second BBQ at the right side of the uncoloured chart is the example of
a BBQ that we should not take. The reason is clear. The candle that its body
has touched and broken out of the Bollinger lower band (candle #4) is a too
long candle, and usually the price turns around when such candles form on
the charts. We need normal candles to trade. Huge and exotic candles are GBPUSD
usually troublesome. daily
The last thing I have to emphasize about the Bollinger Band Squeeze is
that sometimes the market becomes too slow, but it is not moving sideways
completely and the candles now make an angle with the horizontal line while
the BBQ forms on the chart too. You’d better to avoid this kind of BBQ setups
and wait for the ones that the candles are moving completely horizontal, like
the above three examples that I showed you.
The coloured charts are examples on the Daily timframe, of a possible failed
BBQ trade (GBPUSD) and a successful one (GBPCAD)
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35
copywrite FXKeys©
A2.7 How to Trade the Inside Bar False Break Setup or the Fakey by Chris Hodgson
HOW TO TRADE: The most reliable way to trade the inside bar (candle)is by trading an inside
bar false break.
The theory: when an inside bar is The inside bar false break, also known as ‘the fakey’, is a setup of three main candles. It starts
formed the market is said to be with a candle referred to as the “mother”, this is candle 1. Then forms an inside candle. This is
resting or at a point of equilibrium. candle 2. It is formed within the high and low of the mother and which must be the next
Neither the bulls or bears, within the candle after the mother.
day, have been able to make price go A few inside candles may or may not form before the third and important candle in the
higher or lower than the previous pattern and is known as the breakout candle. A breakout candle may not necessarily form
day’s high or low. So is formed a every time.
smaller candle within the range of
The breakout candle (the 3rd candle in the recognition pattern is also known as the
the previous candle.
confirmation candle. It must break above the high or under the low of the mother candle to
be called a breakout candle and then it must close back within the range of the mother
candle and so doing forms the “inside-bar-false-break-pattern”. So the breakout candle
shows that the price at this level has been rejected because it closes back within the range of
the mother candle. This tells us that the inside bar break (the 3rd candle) was a false break.
Hence the name “Fakey”.
B
A
Confirmation:
C
Entry on close
AUDUSD 2015-02-03 candle (image on right & middle) was a an inside bar false break. It has a nice confirmation candle and BB
break on both the mother and confirmation candle. It is a reversal setup so we need it to be around a support zone which it B
loosely is on the monthly. I took this setup but closed my position after the 2015-04-02 candle had formed, because candle A A
closed with a long upper wick, this is a red flag for me. The setup itself was really good but the support on the monthly seems mother
to not be working to take price up against this too strong downtrend. Better to get out when you see a candle like A on a
reversal setup, if it wasn’t a reversal I may have let it play out.
The 6th feb (B) candle can be considered a fakey. It is a continuation with the current trend but the candle itself hasn’t break
insides
rejected off upper or middle bollinger bands so I won’t trade it. It is also confirms to me that getting out of the long trade was Stop
correct. loss
It will be interesting to see where price goes now but too risky to take any position. – see middle image
Q: Do we only get this harami pattern after weekends? And, should we only trade this harami pattern after the weekends?
A: No we can get this pattern on any day throughout the week. It can be traded on any given day that it forms.
Q: If there is no false breakout confirmation candle and price goes beyond the mother candle high or low, then what should be the reasonable stoploss?
A: The candle would have to close above or below the high/low of mother candle first. The safe stop would be a few pips above/ below high/low of the mother
candle. Usually that is a large stop. If you are going to trade the breaks of inside bar setups then you need to be picky about the candles which form. As I
mentioned in the article I don’t take these setups, but rather use them as confirmation to stay in a previous trade or for market direction.
Q1: Are you able to say approximately what ‘substantial’ is – in your experience?
A1: It really depends on the candles that form. If you are short and two or three large bearish candles form then it gives me confidence to bring the stop loss to BE. But
if a few normal size bearish candles form then I might let the setup play out a bit longer. Also I don’t look at how far a position has moved in pips or percentage as
a gauge but rather how far the distance of a move is and what that represents compared to the previous months e.g a 200 pip move can represent a large
distance for price to travel compared to the previous months of movement or a 200 pip move could be one candle and not a great distance compared to the past
couple or months.
Q2: Are you able to say how long you wait to exit at the Support/Resistance (S/R)? for example the price may resist at the Bollinger Middle Band for a few days
without clear direction.
A2: This is a tricky one and no matter which way you go some trades will work out better than others… If price is hanging around the middle BB and I am in a free
trade or break even trade then I just leave it open. If I haven’t hit first profit target and price is seriously struggling for a few days around middle BB then I get out
but that rarely happens because my first profit target is easily reached. If its a S/R level then it depends on how much profit I have already made and the rejection
candle that forms at that level. If some big wicks form at a level against my direction then I take my profits and run. But that is my style too. Price can always
continue even if it fails at a S/R level first. But I would rather make a 500% return today than potentially make a 1000% return tomorrow.
Q3: Would you please explain closing half of positions at 100% profit? Does it mean 100% of your total positions or just one position and so 1xSLoss?
A3: Yes, I sell half of my total position at 100% profit which is 1xstop loss. If I had 10 contracts then I would sell 5 at 100% profit or 1xstop loss and the other 5 would
still be open. This gives me a free trade.
Q4: One of the examples given (in your article), XAUUSD, did not actually break the BUB – is a break mandatory for the FAKEY setup?
A4: It is not mandatory. It does help though. That trade was in line with the daily weekly monthly trend. If it wasn’t then we wouldn’t take it as there is no resistance or
BB break out
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39
APPENDIX 3
GAUGED EXAMPLES
» *A3.1 STRONG 100 score PATTERNS .. 41-51*
• *Why we are Traders not Fortune Tellers ..51*
The Gauge (1) (2) 100 Gauge Benchmark Examples *1* 1 *2* 2
General 1 - Candlestick’s Shadow versus Candlestick’s Body General – 2 How Candlesticks Approve The Validity Of A Resistance Line
Setups 1 - What do I mean by a strong trade setup Setups 8 – Are we overconfident about our trading system
Setups 2 - Forex trading couldn’t be easier Setups 9 – The power of strong trade setups
Setups 3 – When a Butterfly pattern suppoprts a Candlestick Pattern Setups 10 – The Trade Setups that Form at the Right Place Right Time
Setups 4 – To trade or not to trade, that is the question Setups 11 - The Trade Setups that Form at the Wrong Place Wrong Time
Setups 5 – Strong and Scary Trade setups Setups 12 – Trade setups that have to be ignored
Setups 6 – September 14 trade setups review Setups 13 – The importance of negative points for a trade setup
Setups 7 – When a trade st confirms another trade setup Setups 14 - How Long Is A Strong Trade Setup Valid?
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System Design by Chris Pottorff - Compilation by Peter Wagner -
copywrite FXKeys©
40
APPENDIX 3.1
GAUGED EXAMPLES
STRONG 100 score PATTERNS
100 Benchmark Points *1* 1 *2* 2
It is only price reaction to a support or resistance level [(1) (2) (3) (4)], that
tells whether it will go up above the level or not. It is less risky to wait for the
price to tell you what the market has decided and then trade with the trend. If
you trade just because the price has reached a line or level, you are leaving
yourself open to fate (the markets whim) which can be opposite to what you
desire. What we call “trading” is something different. A “trader” is someone who
follows the price, not someone who goes ahead of the price. FXKeys
The strong Dark Cloud Cover was formed by the candlestick #1.
I took two short positions when candlestick #2 was forming.
Candlestick #3 hit my stop loss and I lost 32 pips in each of my
positions. As I was confident about the trade setup, I took two
other short positions immediately, and set a 30 pips stop loss for
each, and a 150 pips (x5) target for one of them. The first
position hit the target, and so I recovered my loss and made a
x3 profit. The second position has no target and is still open.
Candlestick #6 went down strongly and closed below a local
support line. That gave me more confidence to hold my
position. Later, some bullish reactions formed (the green
arrows) but none of them got confirmed by their next
D candlestick (see The Importance of the Confirmation
Candlestick) which means most probably the price will keep on
going down.
Candlestick #7 was trying to close as a strong bullish
candlestick, but because the bearish pressure was too strong,
initially started by a strong Dark Cloud Cover, bulls could not
resist and gave the control to bears again, so that candlestick #7
closed with a long upper shadow. I expect GBP/CAD to go
D
lower than this, unless something extra-ordinary occurs.
1. The longer the lower shadow, the stronger the reversal pressure.
2. It has also broken out of the Bollinger Lower Band very strongly:
This Dragonfly Doji was too strong, so that it did not need any
confirmation. I went long while the next candlestick (2014.08.11) was
forming. However, some traders may criticise that these kinds of
D D candlestick patterns have to be confirmed by the next candlestick. They
can be right, but when the candlestick is too strong (the way that it
was explained above), I don’t wait (candlesticks not needing
confirmation) for the confirmation candlestick, and I take the position.
To be at the safe side, we could go long after the close of the 2014.08.12
candlestick which closed as a small bullish candlestick, however, if this
candle was closed as a big bullish candlestick, I would not go long
D anymore, because I believed that it was too late.
close signal
475.1 PIPS
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System Design by Chris Pottorff - Compilation by Peter Wagner -copywrite FXKeys©
43
EURUSD: Daily - 100PTS
Chart 1 The 2014.05.08 candlestick has formed
Candle not
finished
100PTS
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copywrite FXKeys©
USDCHF : Daily 100 PTS There are two trade setups marked in this chart. There are
other trade setups that are not that strong and important.
The first trade setup (the arrow at the left)
1. is formed by 2014.04.04 and the next candlestick
Chart 2 (2014.04.11). The 2014.04.04 candlestick is a strong
Shooting Star with a long upper shadow and
2. a strong Bollinger Upper Band breakout.
3. The previous candlestick (2014.04.03) Bollinger Upper
Band breakout is also good.
4. The Shooting Star is strongly confirmed by the next
candlestick (2014.04.11) which is a strong bearish
candlestick:
5. If we look at the bigger picture, we will see that the
short trade setup is formed in a bear market. This can be
known as another positive point for a short trade setup.
D
I give a 100 score to this trade setup.
D
cont
Close signal
250 pips
100PTS
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System Design by Chris Pottorff - Compilation by Peter Wagner -
copywrite FXKeys©
45
USDCHF Daily 100 PTS The second trade setup on Chart #2 is formed by 2014.05.08 candlestick and two
previous candlesticks (2014.05.06 and 2014.05.07).
1. The 2014.05.06 and the next candlestick have formed a small Piercing Line.
2. At the same time, the 2014.05.07 candlestick is a good and typical example
Chart 2 of an Inside Day candlestick.
So a good long trade setup is formed by 2014.05.06 and 2014.05.07 candlesticks
so far.
1. Then, 2014.05.08 candlestick appears with such a
1. long lower shadow,
2. strong Bollinger Lower Band breakout, and
3. a strong bullish body that forms a strong Bullish Engulfing Pattern.
Above all, these nice events have not occurred right at the bottom of a bear
market. Instead, they are formed when the bears were exhausted and the
Bollinger Upper and Lower Bands were not pointing down.
This is a 100 score trade setup without any doubt.
100PTS
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copywrite FXKeys©
46
AUDCAD(1) (2) : Daily100 pts Candlestick 2014.10.16 formed strong Dark Cloud
Cover or Bearish Engulfing pattern on the daily chart.
It was a strong candlestick pattern. I did not give it a
100 score (see prev. slide) , because there was a few
D too strong bullish candlesticks formed right before
the 2014.10.16 candlestick.
100pts
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M
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1. 2014.10.12 candlestick
is a strong Doji with a
too strong Bollinger
Lower Band breakout.
Negative Points:
1. There is no negative point on the daily chart.
This is a too strong 100 score trade setup. However, please note that
some bullish movements and bullish candlesticks above the Bollinger
Middle Band are possible on the daily chart, before the price goes down
seriously. This is what we also had when the 2014.09.07 Dark Cloud Cover
formed (left side of the above chart), and one of the candlesticks that
formed above the middle band hit my riskier stop loss, but I entered again.
D
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copywrite FXKeys©
*return gbpaud* GBPCAD:
What we currently have on GBP/CAD weekly
GBPCAD weekly chart is the typical sample of a strong Piercing Line Pattern. 100PTS chart is the typical sample of a strong Piercing
Line Pattern. This pattern is the bullish form of
Dark Cloud Cover pattern. The Piercing Line
which is formed on GBP/CAD weekly chart
by 2014.09.07 candlestick, is indeed the
strongest Piercing Line ever. One of the reasons
of its strength is the huge gap down we had on
GBP cross currency pairs last week: Weekend
W Gaps and Your Pending, Stop Loss and Target
Orders
The GBP/CAD long trade setup has
several positive points:
Also 1. The 2014.09.07 candlestick is a too strong
100 bullish candlestick that has covered almost
the whole body of the previous candlestick.
2. The 2014.09.07 and its previous candlestick
have broken out of the Bollinger Lower
Band very strongly.
3. The long trade setup is formed on small
bearish market (the red arrow on the
below image) which is formed after a
strong uptrend (the big green arrow on the
below image)
4. and bull market on the weekly and monthly
charts.
AUDCAD(1) (2) (3) Daily - 100 pts the current candlestick has moved up very
strongly, maybe because of the Bollinger Middle
100PTS Band on the daily chart. Such a huge candlestick
that goes against the trade setup makes it
invalid. The current daily candlestick still has
AUDCAD :100 pts several hours to close. It can go down and close
with a long upper shadow. We have to wait and
see:
9:58am
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copywrite FXKeys© 52
GBPUSD Daily: 98-100 PTS
This trade setup
1. is formed by 2009.08.06 candlestick, a strong
Chart 4
bearish candlestick which has engulfed the body
of two previous candlesticks completely, and also
most of the body of the third candlestick.
2. The 2009.08.03, which is the third candlestick
before the 2009.08.06 candlestick has broken
out of the Bollinger Upper Band very strongly.
3. The next two candlesticks, 2009.08.04
and 2009.08.05, have formed out of the Bollinger
Upper Band completely.
4. The 2009.08.06 candlestick itself doesn’t have a
too strong Bollinger Upper Band breakout, but its
breakout still is not too bad. Besides, the strong
Bollinger Upper Band breakout of the previous
three candlesticks is more than enough, and so
we can ignore that the 2009.08.06 candlestick
Bollinger Upper Band breakout is not too
impressive.
5. The other positive point of this trade setup is
that, it is not formed right at the top of the bull
market. It is formed when the bullish trend was
exhausted and
6. a too strong reversal pattern, the big Butterfly
Pattern[ (1) (2) (3) ], is formed.
7. Of course, I would be worried about the big
bullish body of the 2009.08.03 candlestick, and
its previous candlestick (2009.07.31), however,
1. the strong Bollinger Upper band
breakout formed by 2009.08.03
candlestick, and
2. the too strong Butterfly pattern would
make me go for the trade setup.
I give a 98-100 score to this trade setup:
Chart 6 1. This candlestick formed another strong Bearish Engulfing Pattern with a
relatively good Bollinger Upper Band breakout.
2. The other good thing about this trade setup is that it formed below the
high price that the 2010.06.18 and 2010.06.21 candlesticks (the first trade
setup) had formed.
I mean this trade setup formed while there was a “lower high” on the chart.
The lower high means although bulls were still strong and tried to take the
price up, but they were not strong enough to break above the last high, and
make a higher high. It means they had become more exhausted compared to
the time that the 2010.06.21 setup was formed. And this is a positive point for
the second trade setup.
A small Butterfly Pattern was formed between the first trade setup and the
second one (below). Having another Butterfly pattern formed before the
second trade setup, was another reason indicating that bulls were getting
exhausted enough to leave the control to bears.
The second trade setup (2010.06.28) confirmed the first trade setup
(2010.06.21) like when a strong bearish candlestick confirms a Hanging Man
or Shooting Star candlestick.
The second trade setup can be known as a 98 score trade setup because it is
just a little weaker compared to our GBP/CAD trade setup. However, I would
take it because it formed right after another strong trade setup, and while
having the Butterfly patterns, the lower high, and… that were explained
above.
This is a good example that showed you how trade setups that form
consecutively, can confirm each other. A strong trade setup is strong by itself,
but it becomes stronger when it is confirmed by another strong trade setup
that forms right after.
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copywrite FXKeys©
USDCHF : Daily 95-100 PTS The last trade setup of chart #1 is related to another strong
short trade setup formed by 2013.09.06 candlestick.
1. It is such a strong Dark Cloud Cover, formed in a ranging
market that was slightly going down too (look at the big
Chart 1 red arrow). Having a short trade setup under such a
condition is a good chance to go short:
95-100PTS
Chart 1
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copywrite FXKeys© 56
The chart trade setup is formed by 2010.06.21 candlestick.
GOLD Daily 95-98 PTS A 1. It is a strong Bearish Engulfing Pattern with a good Bollinger Upper Band
breakout. and also
2. its previous candlestick (2010.06.18) has broken above the Bollinger Band
Chart 6 strongly.
we compare all the short trade setups we locate with our GBP/CAD short
trade setup, because it was a nice and strong trade setup that had no negative
points. Above all, it really made the price go down strongly. So it is a good
short trade setup to be used to gauge the other trade setups.
Let’s compare the 2010.06.21 short trade setup on gold daily chart with our
GBP/CAD trade setup.
1. the 2010.06.21 trade setup has a stronger bearish engulfing and also
Bollinger Upper Band breakout compared to our GBP/CAD trade setup.
2. The only weak point of this trade setup is that it is formed while the
uptrend was still strong. It did not form RIGHT at the top of the bull
market, and it formed when some strong bearish movements were
already formed (red arrow on the below chart), which meant that bulls
were getting exhausted while the GBP/CAD trade setup, was formed on a
long ranging market that was formed after a strong uptrend. This is the
biggest weak point the 2010.06.21 trade setup has, in comparison to
GBP/CAD trade setup. However it seems the 2010.06.21 trade setup, has
a stronger bearish engulfing power, and also stronger Bollinger Upper
Band breakout.
Chart 5 & 6 There is a “W” or Butterfly Pattern formed before the 2010.06.21 trade setup.
This is another positive point for this trade setup, because “W” or Butterfly
Pattern[ (1) (2) (3) ], is a strong reversal pattern.
In general, the 2010.06.21 trade setup is a strong trade setup, but because of
the weak point not 100. It is a 95 to 98 score, as its bearish engulfing and
Bollinger Upper Band breakout power are too strong and the strong “W” or
Butterfly Pattern formed before the trade setup.
The weak point is not insignificant, the Bollinger Middle Band worked as a
strong support that did not allow the price to go down for several candlesticks.
This is because of nothing, but the residual of the uptrend strength that was
95-98 PTS not too exhausted. This movement could hit all the stop loss orders .
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copywrite FXKeys©
USDCAD (1) (2) : Daily 90-98 PTS
USD/CAD
While the 2014.12.01 candlestick was forming on the daily chart yesterday, I
made an analysis on this currency pair and informed you that a strong setup
was forming. Many of you asked about the score and strength of this setup.
D Today, I am going to analyze it more and outline the negative and positive
points it has.
Positive Points:
1. The candlestick pattern is too strong.
2. Some strong exhaustion signs are already formed on USD/CAD daily
chart. I mean the bearish movement from 2014.10.15 to 2014.10.29,
and from 2014.11.05 to 2014.11.21. It means that although the uptrend
is still in “uptrend”, the bulls look exhausted now and it is easier for the
bears to take the control.
Negative Points:
1. There is a Bollinger Upper Band breakout formed by yesterday’s daily
candlestick(2014.12.01) and also the previous candlestick. However, it is
not that strong.
2. The 2014.12.01 candlestick that has formed the trade setup and the
Bearish Engulfing Pattern, has touched the Bollinger Middle Band and
has closed right above it. In case the middle band works as a support, it
can prevent the price from going down.
3. Although some exhaustionsigns have already formed on the chart, the
D uptrend has not yet turned to an exhausted sideways market.
Therefore, this is a 95 score trade setup and because the candlestick pattern
is too strong, I can give it a 98 score, but it is not 100.
Now, about the support line that I talked about yesterday, it is almost 60 pips
below the close price of 2014.12.01 candlestick
95PTS
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Result: 691 pips H to L
95PTS
System Design by Chris Pottorff - Compilation by Peter Wagner - 60
copywrite FXKeys©
GBPUSD Daily: 95 PTS The above chart shows three trade setups. The first
one (left side of the chart) is formed on GBP/USD daily
chart by 2013.11.13 candlestick. If you locate this
candlestick on your platform, you will see that
Chart 1
1. 2013.11.13 candlestick is formed almost at the
support of a consolidation that was formed after a
strong bullish market (see the below chart).
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95PTS
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61
USDCHF Daily: 95 PTS
This trade setup is formed by 2012.03.15 candlestick.
Positive Points:
Chart 3
1. The candlesticks sizes are good.
2. The short trade setup is formed almost at the bottom of
bear market, and
3. while the Bollinger Upper and Lower Bands were almost
horizontal.
Negative Points:
95pts M
strongly, because as I mentioned above bulls are still
strong. Of course, it can break below both of the support
lines very strongly too, but this is less probable, because
of the bulls strength. I expect to see one more high
formed above these line. I am explaining this to make you
aware of the risks that the formed short trade setup has.
5. The only negative point that this trade setup has is that
the 2014.09.10 candlestick is too big. Its body is 157
pips long. This makes the market already overbought,
which means it is possible that we see some bearish
candlesticks that probably try to retest the broken
Bollinger Middle Band strongly. They can even close
below the Bollinger Middle Band. This is something
that you have to be aware of. The probable bearish
movements can threaten our stop loss orders.
W 2. Above all, this candlestick and the previous one have broken out of the
Bollinger Upper Band strongly
90-95PTS
Weekly Chart:
The green arrow shows the bullish movement I talked about above. The (1) red
arrow shows the first probable movement after the 2014.09.07 bearish engulfing
pattern. The (2) arrow shows the possible bullish movement we may see, before
AUD/CHF goes down seriously.
Monthly Chart:
As you see the current monthly candlestick has already retested the Bollinger Middle
Band and is going down now.
Daily Chart:
M *To Contents* The green arrow shows the possible movement that can occur above the support
line. Please note that it is possible that the support line is invalid and the AUD/CHF
*To Header* market shows no reaction to it.
AUD/CHF
Positive Points:
1. The 2014.09.07 candlestick has such a strong bearish body which has covered the body of
three previous candlesticks.
2. The 2014.09.07 and its previous candlestick have broken out of the Bollinger Upper Band
strongly.
3. The current monthly candlestick (2014.09.01) has already tried to test the Bollinger Middle
Band strongly, but this moving average worked as a strong resistance, and so bulls got
disappointed and gave the control to bears.
Result Wk: not complete 4. There is a strong downtrend on the monthly chart.
Negative points:
1. The 2014.09.07 candlestick has formed at the top of a newly started uptrend on the weekly
chart. The bullish movement that was started almost from the beginning of the current year
D (the 2014.01.26 candlestick on the weekly chart) is too sharp.
2. The 2014.09.07 candlestick is really too big. Under such a condition, sometimes the next
candlestick becomes a bullish candlestick, because the market is already oversold on the
shorter time frames.
3. The 2014.09.07 candlestick has closed a little above the Bollinger Middle Band. It is possible
that the Bollinger Middle Band doesn’t allow the price to go down easily and some bullish
Result D: 538 pips H to L
movements and ups and downs forms around the middle band.
4. The last daily candlestick is closed right above a resistance line which can be strong. It is
possible that AUD/CHF goes up above this resistance line, and forms another high, before it
follows the weekly chart short trade setup formed by the 2014.09.07 candlestick.
5. Most probably AUD/CHF will go down very strongly, but it can be mixed with some bullish
movements too. The strength of the candlestick pattern and the positive points it has, can
overcome the negative points to some extent. So this AUD/CHF trade setup score is 90-95.
Please note that this trade setup is formed on the weekly chart, and each candlestick takes one
week to mature. If you take this trade setup, you may have to hold your position for several
weeks.
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The other thing is that AUD/CHF short position will have a negative swap. 90-95PTS
System Design by Chris Pottorff - Compilation by Peter Wagner - 69
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copywrite FXKeys©
GBPUSD: Daily 90-95 PTS
Chart 4
Chart 10
The trade setup of this chart is formed by
the 2014.03.17 candlestick.
90-95PTS big bearish candlestick which has covered several previous candlestick bodies
and shadows. So the pattern is a strong Bearish Engulfing Pattern.
1. The Bollinger Upper Band breakout is not that strong, but is not bad. The
very strong bearish body and upper shadow that the 2014.09.10
candlestick has, reflects the bears strength. It has also broken below the
Bollinger Middle Band which is another good sign. It seems the current
forming candlestick (2014.09.11) has tried once to retest the broken
Bollinger Middle Band, but so far the middle band has worked as a strong
resistance.
2. A negative point is the very strong bearish body of the 2014.09.10
candlestick. This can make the market oversold, which can end in some
bullish attacks that can be strong enough to threaten our stop loss orders.
3. Another negative point is the strong downtrend. Although it is wise to go
short based on a strong short trade setup on a strong bear market, we have
to consider that the market is extremely oversold and can reverse at any
time. Therefore, a reasonable stop loss is strictly recommended.
This strong short trade setup is related to GBP up movement during the past
two days, and also the excessive fundamental weakness of Euro.
If we give a 100 score to our GBP/CAD and AUD/JPY, and a 90 to 95 score to our
GBP/CHF trade setups’ strength and accuracy, the current EUR/GBP trade
setup’s score is 90 to 95 too. Although it has more negative points than
GBP/CHF, I give it the same score, because bears are usually stronger than bulls
and they move the price much faster and stronger. The reason is that “fear” is
behind a bear market, whereas the price goes up because of greed. Fear is
stronger than greed.
Also please note like the GBP/CHF long trade setup that had a resistance on the
way, there is a support line here too: The strong and long bearish body
of 2014.09.10 candlestick is a negative point for this trade setup, and it showed
its effect and caused the next candlesticks to retest the Bollinger Middle Band
strongly.
All of the candlesticks that opened after 2014.09.10 candlestick, tested the
Results: 299 pips H to L Middle Band strongly.
The good thing is that 2014.09.16 candlestick closed with a too-long upper
shadow, below the Bollinger Middle Band. This reflects the strong bearish
pressure that hopefully will be end with a strong down movement.
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copywrite FXKeys©
CADCHF (1) (2) : 90-95 PTS
CAD/CHF:
Negative points :
1. The 2014.09.07 candlestick has formed at the top of an
uptrend on the weekly chart which was started in
March 2014 is quite sharp.
2. The last daily candlestick is closed right below BMB
(red arrow). It is good to close below but it may be
testing the BMB as support which has happened
90-95PTS
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EURAUD (1) (2) : weekly 90PTS
90PTS
Chart 2
Chart 3
Chart 4
Chart 1
The trade setup is formed by 2014.01.24 candlestick.
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Chart 2
90PTS
The trade setup (left) is formed by 2011.04.28
and 2011.05.02 candlesticks.
90PTS
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82
USDCHF Daily 90 PTS
Chart 3
90 PTS
The trade setup formed by the 2012.01.09 candlestick:
Positive Points:
1. Both candlesticks Bollinger Upper Band breakout is strong.
2. There is a Butterfly Pattern formed before the 2012.01.09 candlestick
trade setup. As you know, Butterfly is strong reversal pattern.
Negative Points:
1. The candlesticks sizes is not impressive.
2. Although there is a Butterfly pattern there, bulls and uptrend are still Result: 664 pips H to L
strong.
I give a 90 score to this trade setup.
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GBPAUD: Weekly 90 PTS
90 PTS
Similar to *GBPCAD* (2014-09-07),
A long trade setup is formed on
GBP/AUD weekly time frame. The
difference is that
the 2014.09.07 candlestick on
GBPAUD weekly chart, is almost
touching the Bollinger Middle
Band, which means there is a
higher probability for a bearish
reaction to occur. There is a
resistance line very close too:
current date
I give it a 90 score.
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GOLD: Daily 90 PTS but tradeable due to too strong signal candle the above trade setup is formed by 2008.03.17
candlestick:
1. a strong and huge Doji. This Doji has a strong
upper shadow that has
2. broken out of the Bollinger Upper band strongly.
Chart 2 As you know, Doji candlesticks have to be
confirmed by the next candlestick.
3. The next candlestick (2008.03.18) is closed as a
relatively strong bearish candlestick which is a
strong confirmation for the 2008.03.17 Doji.
There is no doubt that this is a strong short trade
setup. But how strong?
Positive Points:
1. 2008.03.17 Doji and its upper shadow is strong
enough.
2. Confirmation candlestick is strong enough too.
3. Bollinger Upper Band breakout formed by the
Doji upper shadow is strong enough.
Negative Points:
1. The only negative point is that 2008.03.17 Doji is
formed at the stop of a strong bull market.
continuation trade DBB
If this Doji and its confirmation had not been as
strong as they are formed now, then we would have
to ignore the short trade setup, just because of this
negative point.
This is a 90 score trade setup because it is formed at the top of a strong uptrend. The
strength of this trade setup has come from the strong bearish body and Bearish Engulfing
that 2009.02.24 candlestick has, otherwise the trade setup had to be totally ignored.
One of the most important things we do in our trading is that we determine whether a
the 2009.02.20 candlestick candlestick indicates a strong bullish or bearish pressure. Sometimes, a strong Doji with a
upper shadow that has broken long upper shadow that has broken out of the Bollinger Upper Band strongly forms.
out of the Bollinger Band However, still we have to wait for the confirmation candlestick to form. If the
means almost nothing, as long confirmation candlestick closes with a strong bearish body like the 2009.02.24
as the next candlestick(s) candlestick on the above chart, then we know that bears have taken the control,
doesn’t confirm that bears otherwise although the Doji has a strong upper shadow, but it has to be ignored. Why?
have taken the control. This is The reason is that we want to know which party, bulls or bears, have taken the control.
what the next candlestick This is what a Doji doesn’t tell us. A Doji, even with strong shadows, just reflects the
(2009.02.23) didn’t do, market indecision. A Doji means both bears and bulls have the same power, because the
because it closed as a Hanging price is closed almost where it was opened. The shadows just show the price fluctuation,
Man that also reflects some but the fact that the open and close prices are the same means that none of the parties
levels of indecision. However, have been able to take the control finally.
the 2009.02.24 candlestick Now, if the next candlestick closes with a strong bearish body on the same time frame,
proved by its strong bearish then it means bears have taken the control, because they have been able to take the
body that bears succeeded to price down and keep it there until the candlestick closes. Like the below example. Look at
take the control. the strong bearish candlestick that formed after the Doji:
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GOLD Daily 90 PTS
The trade setup is formed by 2010.01.11 and 2010.01.12
Chart 5 candlesticks.
90 PTS
continuation trade DBB
Therefore, this is a strong trade setup, but there are some risks with
it. It is not a 100 score trade setup definitely.
I give it a 90 score because bears are still too strong.
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90pts
copywrite FXKeys© 90
USDCHF: Daily 90 pts
USDCHF
D 1. formed a Dark Cloud Cover on the daily
D chart.
2. weekly is strongly bullish but monthly is
almost ranging and below a resistance
level, but
3. the problem is the Dark Cloud Cover
formed on the daily chart is not that
strong itself.
1. Its Bollinger Upper Band breakout
is not that strong, but is not too
bad. Also
2. the uptrend is still strong on the
daily chart.
90pts
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APPENDIX 3.4
GAUGED EXAMPLES
If you look at the bigger picture (below), you will see that
the trade setup is formed below a resistance level on a
ranging and sideways market. Therefore, those several
bullish candlesticks that are formed before the trade setup,
can not be known as a negative point, because the market
was a ranging market and was not a strong bullish market.
In general, it is an 85 to 90 trade setup.
85-90 PTS
2. The Bollinger Bands are pointing down, where the trade setup is
formed. Although the down movement is not too steep, some of
the bearish candlesticks look strong.
Chart 6
This trade setup is a High-Wave set of candlesticks NOTE: For High Waves,
formed around 2011.05.04. we do not have to wait for
a confirmation candle . If
the Doji candles have long
1. They are formed right at the top of a strong bull
upper and lower shadows,
market, and then most probably the
price will reverse very
2. their Bollinger Upper Band breakout is not strong strongly soon. Waiting for
at all. a confirmation candle, can
Continuation trade MA50
cause us to miss a big
movement.
I give this one an 80-90 score. Result: 970 pips H to L
Chart 1
There are two negative points with this trade setup:
1. It is formed right at the top of a strong bull market.
2. There is no strong Bollinger Upper Band breakout.
85PTS
This is
1. a strong Bullish Engulfing Pattern with a
continuation trade DBB
2. strong Bollinger Lower Band breakout
8OPTS
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100
GBPUSD: Daily 80 PTS
Chart 3
current date
80PTS
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The trade setup is formed by
GOLD Daily 80 PTS
80 PTS 1. a Hammer candlestick on 2010.02.05. As you know, candlestick forms like Hammer,
different kinds of Doji, Hanging Man, Shooting Star, Spinning Top, and… have to be
confirmed by the next candlestick
Chart 5 2. The candlestick next to 2010.02.05, which is 2010.02.08 candlestick doesn’t confirm
the 2010.02.05 Hammer, and it closed as an Inverted Hammer. A Hammer and an
Inverted Hammer next to each other, reflect the market indecision, and they both
have to be confirmed by the next candlestick too.
3. The next candlestick (2010.02.09) closes with a bullish body which is the confirmation
that bulls have taken control. So finally the long trade setup is formed, but do you
think it is a good and strong trade setup?
There are some negative points here that kept me from taking this trade setup.
1. 2010.02.05 candlestick has broken out of the Bollinger Lower Band strongly, but it is
not a big and strong candlestick in general. Its BB breakout is not that strong also.
2. The previous candlestick (2010.02.05) is a TOO strong bearish candlestick that makes
me scared to go long.
So this is an 80 score trade setup by itself. However, there are some other factors that
formed on the chart later, and gave some power to this 80 score trade setup.
There was a resistance line that formed before the 2010.02.05 trade setup (resistance #1
on the opposite chart). It didn’t look like a valid trade setup, but when it was broken
by 2010.02.16 candlestick, it was retested by the next candlesticks accurately and precisely
(2010.02.25). An accurate and precise retesting is a good confirmation for
a resistance/support line and its breakout validity.
Later on, another resistance was formed (resistance #2 on the below chart) that was also
retested accurately and precisely. It was a chance to go long when 2010.04.19 candlestick
closed.
The other thing that could encourage me to go long after the second resistance breakout,
is the triple bottom or “M” pattern or Inverted Head and Shoulders:
What I am trying to say is that technical analysis can support the candlestick trade setups.
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copywrite FXKeys©
CADJPY : Weekly 80 PTS
1. A strong “W” pattern is already formed.
2. It seems a resistance line is already broken, and
the CADJPY short trade setup is formed above the
80 PTS broke resistance line.
Chart 4
The trade setup that is formed by the 2009.06.03 candlestick definitely has
to be ignored, because although the candlestick pattern is strong, it is
formed right at the top of a TOO strong bull market.
Continuation trade MA50
Do you dare to go short at the top of such a strong bull market?
I am sure you don’t. continuation trade DBB
ignore
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GBPUSD: Daily IGNORE
The trade setup is formed by 2009.06.30
Chart 4 candlestick. Unlike the first trade setup,
1. this one is not formed right at the top of bull
market, however,
ignore
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USDCHF: Daily ignore
Chart 3
3. The trade setup is a too strong trade setup, continuation trade DBB
however as it is formed RIGHT at the top of a
strong bull market, ignore
it has to be ignored definitely.
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GOLD: Daily IGNORE
a Doji or Inverted Dragonfly Doji formed
on 2009.09.08. As you see, this Doji is not
strong enough. At the same time, it has
formed right on a relatively strong bull
market, and the confirmation candlestick
is not strong enough also (it doesn’t have
a strong bearish body). Finally, the
candlestick formed after the confirmation
candlestick (2009.09.10) closed with a
long lower shadow and a bullish body
which meant the uptrend wanted to be
continued:
IGNORE
You may say that in spite of these negative points, the price
has moved up strongly after the trade setup was formed.
Why?
That is right. Sometimes the price moves very strongly
when there is a weak trade setup. Sometimes it moves
strongly even when there is no trade setup at all. However,
this is what we never know. The only option we have is that
we wait for a strong trade setup. Let me show you two
examples on the same screenshot. Two other weak long
trade setups formed on 2008.08.18 and 2008.08.13 (the
black arrows). And as you see the price did not go up
Chart 3
strongly after they formed. It means the cases that the
price moves strongly when there is no trade setup, or when
there is a weak trade setup are rare, and so, we should
never trust weak trade setups if we want to be profitable in
long term.
IGNORE
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IGNORE
3. It is a strong Bearish Engulfing Pattern but has no Bollinger Upper Band breakout
2. The first one is that it is formed right after 2008.09.18 and 2008.09.30 short
trade setups, which can be known as a strong confirmation for those two trade
setups.
3. The second positive point is that 2008.10.10 candlestick is closed below the
Bollinger Middle Band indicating that bulls were getting exhausted.
4. If you look carefully, you will see that there is a deformed Butterfly or W pattern
on that area too. This patterns reflects the bulls and bears close competition in
taking the control, that was finally ended to bears’ victory when 2008.10.10
candlestick formed.
Although the 2008.10.10 trade setup has no Bollinger Upper Band breakout, it is
known as a strong trade setup because of the two previously formed setups and also
the W pattern.
The next candlestick (2008.10.13) first retested the Bollinger Middle Band, and then
went down strongly.
As this trade setup is not among the typical trade setups that we have taught on
FxKeys so far, I am not going to gauge it and give it a score, not to make you
confused. However, it is among the setups that I personally take. For now, I don’t
IGNORE want to overload you by teaching too many things, because if you learn the typical
trade setups that form by candlesticks and Bollinger Bands, and you learn to gauge
and differentiate the strong ones from the weak ones, it would be enough.
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GOLD : Daily IGNORE
IGNORE
Chart 3 continuation trade DBB
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How to Run Multiple Instances of MetaTrader on the Same Computer February 23rd, 2015 by Chris Pottorff
To set up one only instance of MT4 on your computer – carry out the below instruction once only. – Click Here for instructions!
Sometimes you need to run multiple instances of MetaTrader platform on your computer at the same time. For example, you follow more than one trading system and you have a different
template for each. It is a pain to switch between the different templates or profiles on the same platform any time you want to check the charts based on one of the trading systems. But you can
simply install and run multiple instances of MetaTrader on your computer and have only one of the systems and its related template and profile on each. They can work on your computer at the
same time and to check the charts based on each trading system you only need to click on each platform icon on your computer taskbar.
Also, some traders have more than one monitor. They have to run a separate instance of MetaTrader for each monitor, because unlike some other trading platforms, with MetaTrader you cannot
take the price charts out of the platform main window, and so you cannot have a chart from the same instance of MetaTrader on each monitor. If you want to use several monitors
with MetaTrader, the only solution is running multiple instances of the platform.
You can login to the same account through each of the MetaTrader platforms you run on your computer, so that you can take positions through any of them.
Now the question is how we can install and run several instances of MetaTrader platform on the same machine?
It is very easy. You have to install MetaTrader in different folders and run it from each folder separately.
First, you have to download the MetaTrader installation file from your broker’s website. If you have not signed up with a broker yet, then you can simply choose a broker and
download MetaTrader installation file from their website, and then sign up for a demo account after the installation. Also, you can simply refer to MetaQuotes Software Corp website and
download the MetaTrader installation file for free. Click Here to learn how to download and install MetaTrader from MetaQuotes Software Corp website.
Now I assume that you have already downloaded and saved the installation file on your computer. The file name is mt4setup.exe. Just double click on it. The installation wizard will be started.
Then…
1. Click on the “Next” button.
2. Agree with the terms and click on the “Next” button.
3. This step is where you have to determine whether you want to have multiple instances of the same platform on your computer or not. You will see this in the installation folder textbox:
C:\Program Files (x86)\MetaTrader 4
If you want to have several instances of the same MetaTrader, then you can edit the above address by adding a (1) or – 1 to the end: C:\Program Files (x86)\MetaTrader 4 (1)
Or C:\Program Files (x86)\MetaTrader 4 – 1. Therefore, the first MetaTrader will be installed in MetaTrader 4 (1) folder:
4. Click on the “Next” button and finish the installation. So you are done with the first installation.
5. Repeat the same process from the scratch and this time add a (2) or – 2 to the installation folder address:
6. Repeat this as many times as you want. If you want to run 3 instances of MetaTrader, then you have to repeat this 3 times.
7. Now you can run the platforms. If you click on the shortcut the installation wizard has placed on the desktop, then only the
last instance of MetaTrader will be launched. To run all of them, you have to refer to the below folders one by one and click
on the terminal.exe file:
C:\Program Files (x86)\MetaTrader 4 (1)
C:\Program Files (x86)\MetaTrader 4 (2)
C:\Program Files (x86)\MetaTrader 4 (3)
Please note that there are two terminal files. One of them is terminal.exe file that runs the platform. The other one is just an icon
file which is not functional and cannot run the platform. You have to click on the functional file which has a different icon:
After running each platform, you can either sign up for a demo account at File>Open an Account at top left, or login to the account
you already have at File>Login to Trade Account
3. click on the downloaded file, because when you do it your computer wants to open the file. You don’t need to open the file. You have to place it in
the “Indicators” folder as I explained above
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Disclaimer and Risk Warning
Disclaimer: Any Advice or information on this website is General Advice Only – It does not take into account your personal circumstances, please do
not trade or invest based solely on this information. By Viewing any material or using the information within this site you agree that this is general
education material and you will not hold any person or entity responsible for loss or damages resulting from the content or general advice provided
here by fxkeys.com, it’s employees, directors or fellow members. Futures, options, and spot currency trading have large potential rewards, but also
large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don’t trade
with money you can’t afford to lose. This website is neither a solicitation nor an offer to Buy/Sell futures, spot forex, CFD’s, options or other financial
products. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in any material on
this website. The past performance of any trading system or methodology is not necessarily indicative of future results.
High Risk Warning: Forex, Futures, and Options trading has large potential rewards, but also large potential risks. The high degree of leverage can
work against you as well as for you. You must be aware of the risks of investing in forex, futures, and options and be willing to accept them in order
to trade in these markets. Forex trading involves substantial risk of loss and is not suitable for all investors. Please do not trade with borrowed
money or money you cannot afford to lose. Any opinions, news, research, analysis, prices, or other information contained on this website is
provided as general market commentary and does not constitute investment advice. We will not accept liability for any loss or damage, including
without limitation to, any loss of profit, which may arise directly or indirectly from the use of or reliance on such information. Please remember that
the past performance of any trading system or methodology is not necessarily indicative of future results.
Why make a Manual? Or a better question “Why did I collate some of the FXKeys information into a Manual when all the
information exists on the FYKeys Website and new articles appear every day which can be accessed by a few mouse clicks”. It’s
because:
• My memory is not as good as I think it is:
• My state of mind, when I read a new article or the reasons for a new setup, is never the same each time. I have no idea how
much of it, or what aspects of it, I will retain.
• I do not always have time to retrieve and re-read the articles or setups when necessary. Chasing links to find a detail creates
stress, which is negative for trading.
• Even though I remember seeing a detail somewhere in the broadcast of information, I cannot always remember in which
article it was written.
• In making the Manual I had to read and select which information was best to help clarity. This activity helped me to embed
the information into my Psyche and knowledge.
• The manual helps to compare quickly a possible setup with similar setups that have been gauged.
• When something feels wrong – I have quick access to the positive thinking statements that have been offered by FXKeys. To
help change my state.
• While being patient waiting for trade setups, producing a Manual helped pass the time constructively and to keep the system
strategies fully in front of me
• I use it to tune my understanding of the facts – quickly – at the time it is needed.
Please note that I have included links to the trade ‘carnival’ setups and the specific setup article analysis where I could – please
feel free to find the mistakes I will have made and notify me peterwagner618@gmail.com
I studied and proved that I could pass exams: I became an Engineer, MBA, Educational Trainer/Assessor.
I am an experienced construction project manager and later ran my own construction business for many years – recently ceasing
business to become a ‘trader’.
I chose to study the market because I had decided that it was the perfect mobile business - I could go anywhere in the world to live
and earn an income from trading, while being independent from people know as clients, customers, suppliers, tradesmen and
regulators.
However I discovered that the real reason for learning the trading-game, was that I loved technical analysis. I spent thousands of
hours putting pretty coloured lines and details on charts. Finally, I found that I could always reveal why the market turned in
hindsight, but when I had to determine what the future held and make money, I was wrong more often than not. I now realise that
technical analysis is just using another way to represent (present) the same data – the price / time action – doing more and more
and expecting a different result, is an example of Einsteins’ definition of ‘madness’. So I now take the advise of others on which
indicators to use, because they have proved them.
During some courses in personal development I decided on an affirmation, that the “market would reveal itself to me”. In following
this I have paid large amounts to many people for ‘information’ that would uncover the market secrets. I have written many trading
plans and still could only manage losses, including seriously diminishing 2 live accounts. Harbouring ‘lack of success’, I handed my
account to my broker to trade for me, which failed. My trading account has stood dormant since then. I finally realised that it was
stupid to think that the market would reveal itself – and changed to the idea that the market was just the market – it only writes a
storey and I had to learn to read it. After the false exchange of money for knowledge I found that the best information is obtained
free, via the internet, from benevolent individuals who are willing to share their know-how.
I found a successful intraday trader (Peter K) who was on a commercial forum I subscribed to and then by fortune, a trend trader
(Chris P), of the FXKeys site, while I was searching for yet another technical indicator that would help refine my analysis. I am
grateful to these two individuals.
I made my live first trade while on holiday – I made no journal record– I do not know why I placed this trade now (and because I
could not remember why I made the trade I now keep a journal of trade signals and follow them to conclusion) – I placed the
trade with great difficulty psychologically – I had checked the analysis and was about to click go, when huge fear & doubt about
being a trader came in – my mouse hand shook and I had to create positive head-talk over the negative in order to execute it. The
next day it was fear (of loss of profit) caused me to close this trade prematurely.
Following this success live – I became the greatest trader in the world and had another successful trade – also closed early due to
the same fear and then proceeded to make a series of losses until I halted live trading and went back to demo trading. I had never
consistently grown a demo account.
Demo trading has taught me to calm down (hand shake has gone), trust the FXKeys system to take the strong signals – keep a
journal (I have to have a reason to make a trade because I have to write it down) – understand my Brokers trading platform better
– be aware of the spread at the time of placement and/or just before market close and after open – pay attention to risk rules –
and not to watch the action in motion. It taught me to routinely move and manage the stop & take a profit when signals indicated.
It taught me how easy it is to check quickly the daily signals and make a list for a little more study prior to execution. It taught me
to control my emotions – I do not freak out or despair when I see a losing positon appear nor claim victory on a winning one – I
immediately look for “why” there was pips+ or pips- and towards the next trade … AND it has shown me that patience is a virtue
necessary for trading AND that more trades = more stress not necessarily more money.
Results – I am in the process to become a full time trader.
My journal is a scrapbook – I write down the reason for the trade and other factual information and then paste in a clipping of the
chart at the time of trade and/or at completion of the move. This is time consuming – but I will not always need to do this.
I back-test the systems – this is a paramount practice for signal recognition and confidence in the trading system.
And now?
I’m almost there! I believe that I will always be ‘almost there’ because I will never again think that I know what the market will do
next. There are just some possibilities. I can thank my intraday mentor Peter K and trend trader, Chris Pottorff of FXKeys for this
progress. As my intraday trading buddy says, when asked what he thinks the market will do he says “I’ll tell you when it gets
there”.