Basic systems of trading 2 (Part 1)

Supposition 2: ANOTHER WAY TO OPERATE - Part 1

  • PRELIMINARY: THE THEORETICAL CAPITAL FOR TRADEAR: 10.000 $

1.1.  Objective monthly (20 days): 40 points

1.2 Daily total objective: 2 points (1 for contract). If once fulfilled the daily aim “we open” more trades, the losses will be limited, inexcusably, to 2 points of the daily aim, if this is fulfilled, we will not return to operate, and will end the day only with the losses corresponding to the commissions of the broker. If for strong movements of the market we reach a total of 6 points (3 for contract) in the day, we will stop of operating necessarily.

1.3 Maximum daily losses authorized (to see paragraph 1.11):

=> 2% of capital to trade = $ 200 = 4 points ($ 200 / $ 50 per point) with 2 contracts would be 2 points by contract or

=> 1 stop = 2 points per contract, with 2 contracts would be 4 points (4 x $ 50 per point = $ 200)

Whichever comes first. Inexcusably, all entrances to the market will be covered by “stops” of losses.

1.4 hours to trade:

Opening: 1st) from 15:45 hours (*)                    2nd) from 19:00 / 19:30 hours
(*) See paragraphs 13.1 and 20

Closure: At: 17:00 / 17:15 (*)            At: 21:30 pm (**)

(*) From this time the market is often put side.
(**) Though it is indicated as closing time at this time is usually activate the market.

1.5 Minimum number of contracts to trade: 1

1.6 Maximum authorized of contracts to trade: 2

1.7 Maximum daily operations authorized 4

1.8 Each trade is “open”, usually with 2 contracts and It will be “closed” with 2 points maximum, ie 1 point per contract. Exceptions: see paragraphs 2.1, options 1st and 2nd, and paragraphs 3 and 4.4.

1.9 Cannot “bear” more of the maximum allowable losses for each day. If we accrued benefits by trade in the previous day, the limit is still the benefits of day.

1.10 As an alternative to opening a trade with total authorized contracts (2), we can open it with one contract and then, if we are in profit, “augment” with another contract to complete the maximum authorized contracts (2). NEVER a trade will increase in losses (see section 3 option 1st).

1.11 Established points for a stop loss with 2 contracts are applied based on the price situation as follows:

● General theoretical stop: 2 points

=> In retests fibonacci (see section 2.2): 1.5 points
=> In cutting guideline: 2 points
=> At break level (support or resistance): 2 points

1.12 Only use logarithmic graphs (also called percentage).

2 INPUTS/OUTPUTS

Entries (openings) and outputs (closures) will be made from the graph of 1 m. The follow-up to short of the trend will be realized from the graph of 3 m.

The tracking of the trend in the day we will do it from the graph of 5 m. Although entry techniques are easy to understand, the rules for managing the risk taken must be followed and executed without thinking until close the position (see “Trades Management”).

2.1 First trades

1st. trade: being in the graph of 1 m., we entered in the minutes following the opening of the market, i.e. after 15:30 hours, always taking advantage of to the start and the sense (bullish or bearish) candle that we decide. There is a seasonal pattern that occurs at the beginning of the session – from 15:30 to 15:45 hours – by means of which the candles of 1 m. they are in the habit of having, on normal days, a distance of at least 2 points then abruptly changes the direction of the trend (this is called “deception”). Of the possible 2 mentioned points we will try to obtain a maximum of 1,5 points with 2 contracts (0,75 points for contract), looking for the 1 ª part of the “deception”. If we are wrong, we give, immediately, the “return” to the trade and we will not try to gain points, only recover the losses, since in the beginning of the market the volatility is high and dangerous.

2do. trade: Then and following by 1m., we enter searching (not to apply section 4.3):

● The 2nd part of “cheating” for which there has to be a shift in the trend (see previous section) or

● If the output of market is behaving just as an outlet “updown” (*) and the 1st. trade have achieved 1.5 points provided, we will open, just once, the 2nd trade when the price breaks the support or the resistance of the channel corresponding to the maxima and minima of the “updown” (this channel we will have drawn before entering), since these outputs have many possibilities of becoming, at the time of the rupture of the channel, outputs “lightning” (*).

This entry can be used to make trades more “long” than the 1st option. We enter with 2 contracts and we go out with 2 points (1 point per contract) or at most with 4 points (2 points per contract).

(*) Is said the price moving up and down zigzag, coming to form a side channel.

(**) Is said the price moves up or down without stopping on their way to form the corresponding pull-backs (see definition in the section 4.17.)

2.2 Remainder of trades until the close

Before operating must be drawn guidelines, supports and / or resistance (levels) in three minutes.

It is opening with 2 contracts and maximum profit of 1.75 points per contract, applying some of the following strategies (see paragraph 27) and always following the market trend:

● In 1m. formations in “V” or inverted “V” not define trend, although in principle we should be with the one that begins after the turn of the trend as 2nd movement, which has as LIMIT, for us, the beginning of 1st. movement. Always enter in the 2nd movement, once confirmed the turn, and come out with 2 points as maximum.

● In 1m. enter in the break of guidelines (upwards or downwards).

● In 3 m. enter (after 4 candles of retests as minimum) in the retests (*) of support (upwards) or retests of resistance (down) and hold the position until the next support or resistance.

(*)It is the price that bounces several times in an support (level) or against a resistance (level). In support, the tendency of the price could become bullish. In resistance, the tendency of the price could become bearish.

● In 1m. find double tops (bullish momentum – correction – new bullish NOT exceed the previous high causing the falling price) and double floors (bearish momentum – correction – new bearish momentum NOT exceeds the previous minimum causing up the price) to enter .

● In 1m. in the movements “impulsive” (“lightning”), enter in movements “corrective” (elliott waves) according to the following detail:

1) In downtrends

=> Get along in the beginning of the corrective momentum (in this impulse the price up). Note that the risk of loss on these trades is HIGH On having become opposite to the principal trend..

=> Go short during the progress of corrective impulse or end (in this impulse the price up). The risk of loss can be considered relatively LOW.

In addition, we must be pending of the evolution of the volume of each candle to confirm the movements. (in bearish trends, greater volume in impulsive movements and lower volume in corrective movements).

2 º) In bullish trends:

=> Go short at the start of corrective momentum (in this impulse the price down). Note that the risk of loss on these trades is HIGH by putting us against to the main trend.

=> Go longer during the progress of corrective impulse or end (in this impulse the price drops). The risk of loss can be considered relatively low.

We must also be aware of the evolution of the volume of each candle to confirm the movements (in bullish trend, impulsive moves higher volume and lower volume in corrective movements).

● In 1m. and 3 m. search in the following percentages retests to enter or not in Fibonacci retracements (*) ALWAYS that the price is in trend (moving average of 20-40-200 indicating a clear trend) and back to a level of support or resistance:

=> 38.2%: probable rebound and continuation the initial trend (open trade in the direction of the trend after 4 candles retests as minimum).

(The opening of trades in this percentage has a relatively LOW risk of loss which increases the chances of “get right”).

=> In 50%: expected rebound and continuation the initial trend (open trade in the direction of the trend after 4 candles retests as minimum).

(The opening of trades in this percentage has a relatively HIGH risk of loss due to an increase in the chances of NOT meet the requirement).

=> In 68.1%: NOT there is likely that the rebound expected occur, if the price it exceeds will go to the origin of the initial trend (open trade contrary to the initial trend after 4 candles retests as minimum).

(The opening of trades in this percentage has a relatively LOW risk of loss which increases the chances of “get right”).

(*) Fibonacci retracements: In technical analysis, Fibonacci retracements refer to the possibility that the price of a financial asset back off a considerable portion of the original move and find support or resistance levels on the levels established by the numbers Fibonacci before continuing at the above address. These levels are constructed by drawing a trend line between the end points of the movement in question, and applied to the vertical distance key percentages 38.2%, 50%, 61.8% and 100%.

Author: Traderpirate.com

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Erick Gálvez

Administrador at ASD Forex
Webmaster of ASDForex.com and trader of forex market since 2008. I'm in charge of the publication and editing of news and analysis www.asdforex.com

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