FXKeys Trading Systems & Examples V4.3

The FXKeys FXKeys Trading Trading Systems & Methods STRONG TRADE SETUPS copywrite FXKeys©

with GAUGED examples V4.3 April 2015

*To Contents*

blue underline – link to FXKeys article *blue underline* - link within this doc.

You can start here: Become A Profitable Forex Trader In 5 Easy Steps

READ * READ *Disclaimer Disclaimer & Risk Warning* IT We never know what will happen after a setup forms on the chart. We have no control over a markets future movements. We can control the amount of risk we take and we limit this risk: By setting a proper *stop loss* position By calculating a proper lot size to trade By then trading only a *high odds trade setup* = a too strong signal • • •

Methodology: 1.

price action is defined as the advance and decline in the value of a currency Our main trading strategy (1) (2) (3) (3) is is based on the price action ( price over a period of time). The fact that we are deeply dependent on the candlestick patterns (1) (2) (3) in this trading system (1) (2) (2),, is because we want to have a tool to follow the price and hear what price i s saying. Nothing is better than price to show us the way and inform us about the next decisions and directions. The reason is that the decisions of the markets big participants, which is the most important market motivator, can only be reflected (manifested) on the price chart and only traded by following the signals left by price movement. Candlesticks are the best informant for following price action and therefore determining the bias of the market. The basic element for any trading is charting the price action.

2.

To be profitable (1) (2) (3) (4) (4) one 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 o f major trend patterns. It is the longer time periods (Daily, Weekly, Monthly) that offer the most reliable reliable signals.

Contents:

Note: Underlined blue = link to FXKeys site *Underlined Blue* = link within this document


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*MindSet 1 & 2 ….. 3 – 4*

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*Summary …..…

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*General Rules A ....6* ....6*

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*General Rules B .. 7 – 9*

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*Defaults & Settings – Indicators – FXKeys links … 10*

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*Trading System ………………………… 11 – 12*

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*How to Place & Manage Stops ….. 13 – 14*

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*Overtrading - a rule ……… 14*

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*Lot Size & Risk:Reward ………………. 15*

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*Appendix 1 - Patterns & Examples ……

5*

READ * READ *Disclaimer Disclaimer & Risk Warning* IT •

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*Appendix 3 – Gauged Examples & selected selected links to FXKeys sites. sites. 40 – 113* •

*A3.1 – 100 Score: ………………….……

41 – 51*

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*A3.2 – 95 +Score ………………………..

52 – 64*

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*A3.3 - 90 – 95 Score ………………….

65 – 91*

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*A3.4 - 80 – 90 Score ………………….

92 - 104*

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*A3.5 – Patterns to be IGNORED …

105 – 113*

16 – 19*

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*A1.1 Exhausted Market Example .. 17*

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*A1.2 – High Wave Pattern Example .. 18*

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*A1.3 – Candles not requiring a confirmation candle .. 19*

*Appendix 2 - Other Trading System Options: …………

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20 – 40*

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*A2.1 Trading The 90 90 Score On A Shorter Time Frame Frame …21*

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*A2.2 Scaling Up …………………………………………..

22*

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*A2.3 Double Bollinger Bands System ………….

23 – 25*

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*A2.4 50 Day Moving Average ……………………….

26 – 31*

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*A2.5 – Inside Day Candle – As a Reversal Pattern… 32 – 33*

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*A2.6 – Bollinger Band Squeese …… …………………… 34 – 35*

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*A2.7 – The Inside Bar False Break – Signal Pattern 36 – 40*

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Fibonacci Trading – How To Use Fibonacci in Forex Trading

*Appendix 4 – the MetaTrader Platform…..114 – 116* •

*Platform Installation Procedure* …. 115*

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*Placing an Indicator in MT4* …..

116*

Final Pages *About the Manual* Manual* *About the Author* Author*

100 Gauged Benchmark Examples *1* 1 *2* 2

System Design by Chris Pottorff - Compilation by Peter Wagner - copywrite FXKeys©

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Contents:

Note: Underlined blue = link to FXKeys site *Underlined Blue* = link within this document


•

*MindSet 1 & 2 ….. 3 – 4*

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*Summary …..…

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*General Rules A ....6* ....6*

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*General Rules B .. 7 – 9*

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*Defaults & Settings – Indicators – FXKeys links … 10*

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*Trading System ………………………… 11 – 12*

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*How to Place & Manage Stops ….. 13 – 14*

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*Overtrading - a rule ……… 14*

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*Lot Size & Risk:Reward ………………. 15*

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*Appendix 1 - Patterns & Examples ……

5*

READ * READ *Disclaimer Disclaimer & Risk Warning* IT •

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*Appendix 3 – Gauged Examples & selected selected links to FXKeys sites. sites. 40 – 113* •

*A3.1 – 100 Score: ………………….……

41 – 51*

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*A3.2 – 95 +Score ………………………..

52 – 64*

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*A3.3 - 90 – 95 Score ………………….

65 – 91*

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*A3.4 - 80 – 90 Score ………………….

92 - 104*

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*A3.5 – Patterns to be IGNORED …

105 – 113*

16 – 19*

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*A1.1 Exhausted Market Example .. 17*

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*A1.2 – High Wave Pattern Example .. 18*

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*A1.3 – Candles not requiring a confirmation candle .. 19*

*Appendix 2 - Other Trading System Options: …………

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20 – 40*

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*A2.1 Trading The 90 90 Score On A Shorter Time Frame Frame …21*

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*A2.2 Scaling Up …………………………………………..

22*

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*A2.3 Double Bollinger Bands System ………….

23 – 25*

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*A2.4 50 Day Moving Average ……………………….

26 – 31*

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*A2.5 – Inside Day Candle – As a Reversal Pattern… 32 – 33*

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*Appendix 4 – the MetaTrader Platform…..114 – 116* •

*Platform Installation Procedure* …. 115*

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*Placing an Indicator in MT4* …..

116*

Final Pages *About the Manual* Manual* *About the Author* Author*

100 Gauged Benchmark Examples *1* 1 *2* 2


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MINDSET 1 •

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Change your mindset, and you will see everything around you change!

How to control Mind Talk

Only a fool fights the trend. To survive, it never matters what you BELIEVE, it only matters what the markets believe. To be a good trader , you must constantly question your position. The instant you just assume you are right, that is when you lose everything. Trust by verify. A good trader ALWAYS assumes he is wrong. Then constantly verifies his position Martin Armstrong 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 them. So, wait for the market to show you a good and strong signal. Chris Pottorff FXKeys

Trading Mind Talk Videos created by Ted Mahachi Trading Mind Talk (1) 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 t he 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 Consistency is the foremost key to making a success in everything. Trading FOREX is no exception. FXKeys

As Michael Jordan, the world’s greatest basketball player says, quote: “ I have missed more than 9,000 shots in my career. I have lost almost 300 games. On 26 occasions, I have been entrusted to take the game winning shot… and I missed. I have failed over and over and over again in my life. And that’s precisely why I succeed .” 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 anything is everlastingly to keep working with patient observation.”

And Henry Ford: “Whether you think you can, or you cannot, you are right”.

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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 do thi this, s, I believe I need to spend only a few hours per day. I must be wise, precise and disciplined . 3. I believe I already al ready have everything it takes to become a wealthy forex trader, 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 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 h as 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 char ts 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 Taking action means that I do this without wit hout EMOTION and with PATIENCE, PATIENCE, waiting only for too-strong signals an d then taking a position pos ition with the trend, t rend, 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 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 through forex trading trading so it is possible to make money through forex trading and I Affirmation: Many traders make fortunes through 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. Tr ading. 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 P eter Wagner - copywrite FXKeys©

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SUMMARY - FX Keys SYSTEM Link to the path: http://www.fxke http://www.fxkeys.com/beco ys.com/become-a-profitab me-a-profitable-forex-trader-in le-forex-trader-in-5-easy-steps/ -5-easy-steps/ •

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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 includingTRADING 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. market. This means that t hat such a trade will be trading with the trend in most cases. loss (SL) price position by Once a too-strong candlestick pattern has formed it is required to determine an adequate stop loss (SL) 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 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, Effective, stress free trading requires a no EGO mental state, conditioned with the following (Trading (Trading Psychology): 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 LOSS is something to learn from (and just a cost to A WIN is something to learn from (and just a gain to the business) – the business) – THEY are parts of the game. Performance • • • • •

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The OBJECTIVE is to make TRADING a BUSINESS, manifesting account GROWTH by SLOW-CONSISTENT-GAIN SLOW-CONSISTENT-GAIN – to win the MATCH not just kick the best goal *To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner copywrite FXKeys©

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GENERAL RULES A - FX Keys 1 - 4 1.

I trade trade the follow following ing pairs: pairs: EURUSD, GBPUSD EURUSD, GBPUSD,, USDCHF USDCHF,, USDJPY USDJPY,, GBPJPY GBPJPY,, EURJPY EURJPY,, USDCAD USDCAD,, AUDUSD AUDUSD,, NZDUSD NZDUSD,, EURGBP, GBPAUD, GBPCAD, GBPCHF, EURAUD, EURCAD, CHFJPY, AUDJPY, CADJPY, AUDCAD , Gold.. However, based on the Gold the FxKeys followers’ request, now, I also check these: AUD/CHF, CAD/CHF, NZD/CHF - [in alphabetical order - AUDCAD AUD/CHF AUDJPY AUDUSD CAD/CHF CADJPY CHFJPY EURAUD EURCAD EURGBP EURJPY EURUSD GBPAUD GBPCAD GBPCHF GBPCHF GBPJPY GBPUSD NZD/CHF NZDUSD USDCAD USDCHF USDJPY Gold ¨]. ¨]. (key: dark blue = information exists on FXKeys website (about the history and how to trade the pair); Green Green = = no specific information exists on the website ; Light Blue – not not traded by Chris Pottorff, but analysed. 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* 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 setup is too strong. We ignore 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 gap that 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. iii. Mont Monthl hly y Peri Period od: Ditto weekly but on the last day of the month. The Monthly Time Frame is KING. KING . iv. When a too strong setup forms setup forms on a time frame, we take it without consideration of the other time frames, even longer ones

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Positions: I take two positions with the same SL level. i. The The fir first st has has a 5xSL 5xSL targ target et and and ii. The second second has no target target.. I move the SL for the the 2nd to break break even when when the first first one hits hits target. I hold hold the 2nd 2nd position position until a reversal reversal forms, forms, or until until a setup is is negated by a candle pattern. In some rare cases, I move the second position’s stop loss again to lock-in some profit. This is all I do. iii. If the price hits hits the stop loss at the beginning beginning and I am confident confident of the pattern, I enter again at a better price and usually with a better stop loss position. I can do this this because I only take the too strong setups, and even if a price spike hits the stop loss orders at the beginning, the setup is strong and reliable enough to enter again.

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, Psyche: late or already have a position . Trading rules and strategy must be set in a way that emotions cannot interfere: i. Always Always take take the strong strongest est setups setups only only and ignore ignore others others.. ii. Enter Enter the market market on time. time. Do not not take positio positions ns if you are are late (the (the price price has already already moved moved away from from the setup setup entry entry price). price). 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. iii. iv. Set a proper proper and and reasonab reasonable le stop loss loss and let let it be trigger triggered ed if the price price goes again against st you, because … it may not be triggered. v. Trade long time frames frames only. Emotional Emotional stress stress is highe higherr when trading trading short short time time frames. frames. Don’t check your positions too often. Take your positions, set the stop loss and target orders and come back the next day. vi. *To Contents*


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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.

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Trend: As retail traders, we have to di stinguish 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 h ave decided to sell, then we have to sell. Going against these parti cipants’ decision is like swimming against the tide.

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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

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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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Gaps: (1) (2) (3) a) SHORT: i. I prefer not to enter when I want to short and the market opens with a gap down. I will enter if the price goes up and fills the gap. ii. When I want to go short and the market opens with a gap up, I enter right at the market open. b) LONG: - The opposite actions to SHORT

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If I am late and the price has already moved accordingly, do I enter? a) The short answer is no. I like to be on time. When a too strong trade setup forms, I enter at the close of the candlestick which has formed the setup, or while the next candlestick is moving against the trade setup, so that I can enter with a better price. I don’t enter when I a m late, because I care about my stop loss level, and if I enter when the market has already moved according to the trade setup, my stop loss has to be wid er. This reduces my position size and I do not like this. b) I don’t sit and lament a missed too strong trade setup. There is always another one on the way. The most important thing is t hat a good strong set up will create a smile on your face.

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*Scaling UP* / Down: (Adding to positions) -

a) An alternative method to taking 2 positions (details in item A1.2) – b) I generally do not follow this method. *To Contents*


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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 bull ish 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. I f 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. 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.

A

9. Correlations: i.

ii.

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.

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 i ncreased, GBPCAD could still be bullish. However, this could not be true for AUDCAD. Appreciation of the value o f CAD could make a strong short setup on AUDCAD at the same time that GBPCAD was going up.

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10. FIRST REACTIONS FOLLOWING A SIGNIFICANT TREND: i. ii.

Do not go long at the first advance that follows a down trend bottom. It is likely aCONTINUATION signal 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 B MB 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 *To Contents*

System Design by Chris Pottorff - Compilation by P eter Wagner copywrite FXKeys©

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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. 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 t arget. I wait for the ii. 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.

12. SUPPORT & RESISTANCE LEVELS : 1.

2.

Usually when the trade setup is too strong, price can break through all support/resistance lines and levels including Bollinger Middle Band which may have been a strong obstacle for some time. Therefore, when a too strong trade setup forms, I take it, even if it is too close to the middl e band or a strong support/resistance level. The reason is that a too strong trade setup formed by candlesticks along with a strong Bollinger Band breakout, is indeed an accurate report from the most recent market conditions, however, a strong support/resistance level can be related to long time ago and it i s not clear how the market will react to it. In spite of this, sometimes a strong support/resistance level or Bollinger Middle Band is able to stop the price even when there is a too strong trade setup already formed on the chart. Nothing has a guarantee in this world, and forex market is not an exception.

13. HOW LONG TO HOLD A POSITION: 1.

2.

3. 4.

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?

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 hol d our long position, or we shou ld close the long positions and take the short trade setup on the dail y chart? 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. 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 . 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).

*To Contents*


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DEFAULTS & SETTINGS ON INDICATORS – MT4 Platform Which Indicators are recommended:

FXKeys Site: Categories

What Indicators Can We Trust and Do We Need the Most?

Bollinger Bands How to Trade Using Doji Candlestick and Bollinger Bands Again Noise Above Bollinger Middle Band How to Use Bollinger Bands in Forex and Stock Trading What Is Bollinger Bands Squeeze and How to Trade It? Trading the Spikes, Blow Offs and Breakouts Using Bollinger Bands, RSI and Stochastic Bollinger Bands As A Great Currency Volatility Indicator How to Trade Using Doji Candlestick and Bollinger Bands 1. 2.

MACD:

MACD (Moving Average Convergence-Divergence) How to Use MACD in Forex Trading How To Use Slower Settings Of MACD Indicator? MACD is too delayed - it http://www.fxkeys.com/downloads/FxKeys-MACD.ex4 never agrees with strong

1. 2.

RSI:

Main system settings: Period = 20; Shift = 0; Deviations = 2.0 DBB System settings: Period = 20; Shift = 0; Deviations = 1.0

Main System settings: FastEMA = 24; SlowEMA = 52; SignalEMA = 9 MA50 System settings: FastEMA = 24; SlowEMA = 52 SignalEMA = 0

reversal candlestick signals.

rsi-support-and-resistance-breakout Relative Strength Index or RSI I ndicator In Forex Trading RSI Divergence and Convergence The Importance of RSI 50 Level to Confirm the Trade Setups Intraday Trading System to Trade Forex with RSI and Stochastic Divergence and Candlestick Patterns RSI As A Great Overbought Oversold Indicator For Forex Trading Settings: Over Bought Line .. 70% Over Sold Line ……. 30% Add …. 50% Line

MOVING AVERAGE: SMA – Simple Moving Average

Moving Average What Are Moving Averages And How To Use Them In Forex Trading? 200-Day Moving Average and Its Use in Forex Trading Using Weighted Moving Average In Forex Trade Follow the Trends with 50-Day Moving Average and Locate the Strong Trade Setups 1. 2.

MA50 settings: ‘Period ’ = 50; Shift = 0; ‘Method ’ = Simple; ‘ Apply to’ = Close MA200 settings: ‘Period ’ = 200; ‘Shift’ = 0; ‘Method’ = Simple; ‘ Apply to’ = Close

Basics Candlesticks Forex Brokers Investment Market Analysis Miscellaneous Technical Analysis Trading Psychology Trading Systems Videos Pages Home About Archive Contact Dictionary Privacy Policy FxKeys Toolbar Forex Market Analysis Disclaimer and Risk Warning

FXKeys TREND & TREND LINE ROBOT : Interpreting Trend Lines In Forex Trading Waiting For the Price to Pullback and T est a Trend Line Elliott Wave Theory in Forex Trading to Follow Trends Trading the Support and Resistance Levels How to Trade Using Support, Resistance and Gaps Going Long or Holding Long Positions Above Resistance Line A Technical Analysis Software to Locate the Forex Market Buy-Sell Signals Settings for Trend ROBOT: 1. Support_Resistance _Strength 3 = Major Swings, 1 = Minor Swings & 2 = in between 3 & 1 2. MACD set to SLOW – ‘fast EMA’ = 24; ‘Slow EMA’ = 52; ‘MACD SMA’ = 14

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Link to download : robot for locating DBB compliments of 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) version “7.52” of FxKeys Indicator https://docs.google.com/file/d/0B9J0pwuYaT-qZVM1U1lxUGg1VGs/edit

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“LastVisit” indicator https://docs.google.com/file/d/0B9J0pwuYaT-qOENuMVluS1JDZTQ/edit

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*To Contents*

the documentation for last visit

https://docs.google.com/file/d/0B9J0pwuYaT-qVjRGTUxzU0k1dTA/edit

Follow the FOREX Setups: forming-formed-forex-market-trade-setups System Design by Chris Pottorff - Compilation by Peter Wagner - copywrite FXKeys©

10

The FXKeys, 3 point, Trading System 1.

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By Chris Pottorff

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 1st candlestick & closes above the open price of the 1st 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. • •

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In the Bearish Engulfing pattern, the first candlestick , to be strong, must have a long (relative to the previously formed candles) bullish body, and the second candlestick, to be strong, must be a long bearish candlestick that a. has a body that engulfs 100% of the body of the first candlestick and preferably with a long upper shadow b. Has a size (including shadows) that engulfs the total size of the first candlestick – BUT if the first candlestick is not that long, then the second candlestick has to cover the body of a few of the previous candlesticks. • •

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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. • •

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In Bullish Engulfing pattern: the first candlestick , to be strong, must have a long bearish body and preferably short shadows, and the second candlestick, to be strong, must be a long bullish candlestick that a. has a body that engulfs 100% of the body of the first candlestick and preferably with a long lower shadow b. Has a size (including shadows) that engulfs the total size of the first candlestick – BUT if the first candlestick is not that long, then the second candlestick has to cover the body of a few of the previous candlesticks. • •

•

•

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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 .

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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. •

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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. *To Contents*


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How to Place & Manage the Stop Loss in Forex Trading Best Place for Stop Loss and Limit Orders

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 d irection 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 y our 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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MANAGING THE STOP : It is very important how to take a position and enter the market. And, it is also very important to know how to manage the position to keep your risk as low as possible. One must minimise losses. And learn to protect ones account balance very carefully and religiously. If one limits losses, one will win. 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 reasonabl e 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 alive account using a risk factor not greater than 2% of the account. Applying all the above dil igently 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, an d attempting to pick the tops and bottoms. There are the aspects of a trader: Is using too much leverage especially with a small account balance, and: Succumbs to the desire to get into big trades . • •

Under such conditions, if the market moves (which it mostly d oes) against their position even by just a small amount, it can result in considerable l osses. It has been generally observed that a new t rader is very likely to press the pani c button, get emotional and nervous and close the t rade for a sizable loss before its time and then see the trade turn around. This destroys a traders confidence. There are the Over-Trading aspects of trading. This type of over trading happens when: Traders try to look for trading signals that are not really there . This happens especially with the new traders all too often, because they just want to trade regardless of the real situation and trading while observing account management. They want to do something. The result is generally a poorly executed trade that results in an eventual loss. Traders make too many trades , all at the same time, using more margin than their initial invested capital can bear and not in accordance with the money management rules. •

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14

Lot Size & Risk Reward Ratio , risk/reward ratio Link to the position size calculator : 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 hi ts our stop loss, we lose a maximum of 2-3% of our capital. For example we have found a trade setup withEUR/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 pipstarget for our trade and EUR/USD hits this target, we will make $300 (when 80 pi ps 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, i f 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 p roblems: 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 b ig 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 pi p 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.

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APPENDIX 1 Patterns Examples to Recognize *A1.1 Exhausted Market…. 17* *A1.2 High Wave Pattern…. 18* *A1.3 Candles that do not need Confirmation…. 19*

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 ,

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16

A1.1 EXHAUSTED MARKET EXAMPLE

EURUSD: Red DOTS -price started going up from 2014.02.03 (1st) . It formed the first high on 2014.03.13 (2nd), and it went down and formed a low on 2014.04.04 (3rd). This means bulls had become exhausted and gave the control to bears, and so the price went down and formed a low. Then it went up again, but formed a TOO strong short setup on 2014.05.08 (4th) almost without breaking above the last high. This is known as a short setup formed when the bulls were exhausted and disappointed. And this is a strong positive point for a trade setup.

AUDJPY: Red ARROWS - Compare the left side of the below chart which is the AUDJPY weekly chart, with the right side (the thick and thin red arrows). At the left, there is a strong bull market, and at the right there is an exhausted bull market.

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A1.2 – HIGH WAVE PATTERN : Chart example description: The market was strongly bullish and the price was going up. You can tell this from the strong bullish candlesticks that have strong bullish bodies. Suddenly, some candlesticks with small bodies and long shadows appear. They are Doji candlesticks and together in pattern are called High-Wave candlesticks. And after these candlesticks, some huge bearish candlesticks form. i. Candlestick #1 also closed as a strong bullish candlestick while most of the previous candlesticks were strongly bullish too. So the market was strongly bullish before the candlestick #1 formed and also when candlestick #1 closed. ii. Candlestick #2 is completely different from #1. It doesn’t have the strong bullish body. It is much smaller. It has a longer upper shadow which means the price went up a nd the candlestick was closed when the price was up. Before the candlestick close, the price went down and formed a long upper shadow, and the candlestick closed with a small body and long upper shadow. This is a sign that a. Most of those who were buying (bulls,) stopped buying. It means that the bulls are getting tired of buying, they are becoming exhausted. b. Many of those who had already bought, started selling, so that the price went down and could not advance as strongly as it had been. c. Some participants who had not already bought, now decide to sell (which is stupid), because they “ think” the price will go down soon. So candlestick #2 gives us a lot of information. It tells us that probably some changes are on the way, but we cannot do anything based on what candlestick #2 says. It gives us some information, but that is not enough for us to make any decision. We have to wait for stronger information to be given to us by the following candlesticks. iii. Candlesticks #2, #3, #4, #5 and #6 are called High-Wave candlesticks. It is a reversal signal/pattern. Some traders go short when these candlesticks form on a bull market, and they would be right in the above example because this long story finally ended to a complete bears victory. They took control from the bulls and sold the price down, and candlestick #7 closed as a HUGE bearish candlestick. *To Header* *To Contents*

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 the bulls. a. Candlestick #3 is a Shooting Star which is a special form of candlestick. b. On the other hand, candlestick #3 is also a Inside Day Candlestick which is a kind of reversal 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. The information given by candlestick #3 is that price is still under buying pressure, but the number of sellers increased and took the price lower before the candlestick close and candlestick #3 closed below its open. It means the bears are getting stronger. iv. Candlestick #4 opened with a gap up. Some bulls bought and tried to take the price up. Some bears sold and took the price down. Bulls and bears fight closely and the price went up and down and formed the upper and lower shadows. Finally candlestick #4 closed a little above the open price which can be seen as a small victory for bulls. However, neither the bulls or bears have been able to take control. They are almost “even”, and so the market is in an indecision 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

For High Waves, we do not have to wait for a confirmation candle . If the Doji candles have long upper and l ower shadows, then most probably the price will reverse very strongly soon. Waiting for a confirmation candle, can cause us to miss a bi g movement.


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A1.3 – Candles not requiring a confirmation candle A big and strong bullish/bearish engulfing with a strong Bollinger Band breakout. When it forms on the chart, you can take the position at the close of the engulfing candle, and without having to wait for any confirmation. Please note that Piercing Line and Dark Cloud cover are both different kinds of engulfing patterns. So they have to be treated the same. I mean when they are strong with strong BB breakout, they don’t need confirmation

Another case that does not need any confirmation candle is when there is a very strong Bollinger Band breakout. Like in the example below where almost 95% of the candle is formed out of the Bollinger Lower Band. Additionally, the candle is a big and long candle. The bigger the candle and its shadows and the stronger the BB breakout, the stronger the reversal movement: When 100% of a candle forms out of the Bollinger Bands; Do you think that we had to wait for a confirmation candle? Definitely not. This Dragonfly Doji was too strong, and so 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 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 for the confirmation candlestick, and I take the position. There are a few things that you have to note if you want to pick the strong Dragonfly Doji reversal setups that will make money for you: 1.

The longer the lower shadow, the stronger the reversal pressure. The lower shadow of the candlestick has to be too long when compared with the length of the other candlesticks formed before the Dragonfly Doji. It has to be an exceptionally big candlestick, otherwise it cannot make the price reverse, and it has to be ignored.

2.

Bollinger Bands have a very important role in picking the strong Dragonfly Doji reversal signals. The lower shadow MUST form a very strong breakout with the Bollinger Lower Band, otherwise you have to ignore the signal.

This confirmation candlestick doesn’t necessarily have to be the next candlestick. It can be done by one of the next few candlesticks too. All the other cases of candlestick signals and patterns need confirmation. Please note that even when there is a very strong signal like the above examples, h aving a reasonable stop loss is a must. Nothing is guaranteed in the forex market. Therefore, even when the strongest signal/pattern forms, you have to enter with a reasonable and proper stop loss. That is not all. You have to move y our stop loss to breakeven when it i s time. *To Contents*

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APPENDIX 2 OTHER TRADING SYSTEM OPTIONS:

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*A2.1 TRADING THE 90 SCORE ON A SHORTER TIME FRAME …. 21*

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*A2.2 SCALING UP ……… 22*

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*A2.3 DOUBLE BOLLINGER BANDS SYSTEM – BB1 … 23-25*

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*A2.4 50 DAY MOVING AVERAGE …26 -31*

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*A2.5 Inside Day Candlestick Pattern … 32 - 33*

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Double Bollinger Band System Links - System Design by Kamel A. 1. DBB Trading System Rules For Long And Short Trade Setups 2. Forming Trade Setups Based on the DBB trading system 3. When a DBB Trade Setup Is Supported by another Agreeable Trade Setup 4. How to Follow a Missed Trade Setup Using DBB System

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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*


20

A2.1 - TRADING THE 90 SCORE ON A SHORTER TIME FRAME This strategy is not difficult at all. However y ou 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.

The 90 score trading system strategy: 1. We have to wait for one of the below events to occur on one of the daily, weekly or monthly charts:

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 10 0 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 thelong 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.

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A2.2 SCALING UP OR ADDING SYSTEM maximising profit strategy - Links (1) (2)

Maximising Profit: 1.

In order to trade and maximize the profit , we have to know how to take the “strong trade setups “, i. ii. have an optimum entry, iii. a reasonably tight stop loss, and also iv. the ability of taking the continuation trade setups,

otherwise it is impossible to Scale Up properly and maximize the profit. 2.

Enter the market when a strong trade setup forms. 1. Take only one 2.5% risk position, with a proper and reasonable stop loss, but no target. 2. Allow the price to run accordingly. When a continuation trade setup forms, move the initial position’s stop loss to breakeven, and take another 2.5% risk position. 3. When the stop loss is moved to breakeven, there is no risk anymore, and the first 2.5% risk is zeroed. It means your capital is safe even if the price turns around and goes against you. Therefore, you can take another position with peace of mind, as if you have no open position at all.

3.

Repeat as long as continuation signals form

2014/06/05

As the position is in profit, and equity is increased, there is more ‘equity’ room for the second position. However, it is prudent to keep the 2.5% risk for the second position based on the account initi al balance, not equity. 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, w hen 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 po sition 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, w hich is $8,520 in total. It means he would have almost doubled his $10,000 account taking a 2% risk only. *To Contents*

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A2.2 DOUBLE BOLLINGER BANDS SYSTEM – LONG SETUP

Links to FYKeys DBB System: (1) (2) (3) (4) (5) (6) 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 3 more DBB Entry Long Examples

upper band (I mean candlestick #3), and the target can be at least twice of the stop loss size (2 x SL). You can move the stop loss to breakeven if the price moves according to the trade setup for 1 x SL. F or example, when your stop loss is 60 pips, then you can move the stop loss to breakeven if the price goes up for 60 pips. Of course I will tell you how to trail the price to maximize the profit in case you don’t want to get out with a 2 x SL

BB1 Bands

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 a n 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) *To Contents*

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At right is what I call a bad DBB long trade setup. It is still a trade 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, 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

Here is two other bad DBB long trade setups.

Bad DBB long set-up examples

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 Almost perfect DBB short setup Negative - C2 is bullish

price goes down for 1 x SL. With short trade setups it is better to have candlesticks #1 and #2 formed below Bollinger Middle Band and above BB1 Lower Band when a short position forms. Also the closer the candlesticks #1 and #2 close prices to the BB1 Lower Band, the stronger the setup. Everything I explained above long trade setups has to be considered for short trade setups too, but from the opposite direction.

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A2.2 DOUBLE BOLLINGER BANDS SYSTEM Strategy & Profit Maximising

This trading system is great in catching the trends. Therefore it is better to take advantage of the strong movements and maximize your profit. Here is one way: 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. In case of a long position, hold the second position as long as the candlesticks form between the BB1 and BB2 upper bands, or above the Bollinger Middle Band. Close the second position when candlesticks start crossing the BB1 and BB2 upper bands, or when one of the candlesticks breaks below the Bollinger Middle Band : In case of a short position, hold the second position as long as the candlesticks form between the BB1 and BB2 lower bands, or below the Bollinger Middle Band. Close the second position when candlesticks start crossing the BB1 and BB2 lower bands, or when one of the candlesticks breaks above the Bollinger Middle Band: 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 li ke. 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. Double Bollinger Bands Trading Strategy works on all time frames, but I use it on the daily and longer time frames, because it is easier, safer and more profitable. Never think that you will make more profit if you apply this trading system on 5min or 15min charts. Trading short time frames give nothing but a headache, and you will not make more profit for the effort.

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A2.4 50 DAY MOVING AVERAGE – TRADING SYSTEM

Links to FXKeys site: (MA’s) (SMA) (200MA) (weighted ave) (50MA(1)) (50MA(2)

Defining The 50-Day Moving Average In simple terms we can define this as a technical indicator that is used to identify price trends based on the average rate at which at an entity closed over the past 50 days. Thus inherently it is a trailing i ndex based on past price trends. These points (of average rates) often work as support or resistance zones for a variety of ‘other’ (extra) trades with the same currency pair. Peculiar aspects of this moving average are: 1. when prices rise, the 50-day Moving Average will always be below the price 2. when prices fall, the 50-day Moving Average will always be above the price At best it is an indicator of the immediate term with implications over the longer term if studied in perspective with the200-day Moving Average.

Why do we need the 50-Day Moving Average? 1. It is because on the CHART it is a crucial dividing line between the healthy and not so healthy zones in the market. 2. The percentage of the total currencies trading above their 50-Day Moving Average is also indicative of the overall health of the market. Higher the number, the better it is. 3. It can be either the point from which the currency goes on to make higher highs or the point from where it starts the downward reversal 4. It signals key entry and exit points to enter and exit the market. It gives indications of the price range that can form a good place to enter the market or the exit point where losses are minimized or profit protected. 5. It is a good measure of the support and the resistance points 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.

To have a long trade setup based on the 50-Day SMA: 1. First the price has to break above the 50-Day SMA and keep on going up strongly to start an uptrend, so that the 50-Day SMA also points to the upward direction. 2. Then the price has to go down to retest the 50-Day MA while this moving average is ascending strongly. If the price hits the 50-Day SMA and 3. Forms a buy signal above or on it by the candlesticks, then we will have a long trade setup. For example, it forms a Piercing Line or Bullish Engulfing pattern above or on the 50-Day MA. 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 onl y 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. • • •

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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.

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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. *To Header*


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A2.3 50 DAY MOVING AVERAGE – TRADING SYSTEM - LONG

To go long: 1. Wait for the price to break above the 50SMA and stay above it. 2. Wait for the price to go down and retest the 50SMA and start going up again while the 50SMA is ascending. 3. Go long and set the stop loss below the last low the price made while retesting the 50SMA. Set a 2x SL target at least. Or you can hold the position as long as the price is moving above the 50SMA. 4. A resistance break-out confirms and supports the 50MA break

In order to have a long trade setup, 50SMA must be ascending already

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In order to have a short trade setup, 50SMA must be descending already

A2.3 50 DAY MOVING AVERAGE – TRADING SYSTEM - SHORT

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 p revious candlestick (the mother). So it is entirely formed inside the previous candlestick. Like all the other patterns we need two candlesticks to have the pattern completely formed. 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 . When the price hits the Bollinger Upper or Lower Band on the daily chart, then we can wait for an “Inside Day” candlestick to form.

2. 3.

4.

5.

According to Jamie Saettele, (refer the opposite chart) i. only the candlestick #1 and #3 should be considered and taken as a reversal signal. ii. Candlestick #2 formed on Bollinger Middle Band. It reversed the price strongly but it did not foll ow our Bollinger Bands breakout. iii. Candlestick #4 and its previous candlestick did not hit the Bollinger Upper Band, and so they have to be ignored (the trade setup is not complete).

6.

The opposite chart shows two strong Inside Day candlesticks formed consecutively at the bottom of a bear market. i. It is an interesting screenshot, because it shows one inside day candlestick formed (#1) and then another one formed inside the first inside day candlestick (#2). There is a nice and strong Bollinger Lower Band breakout, both by the first candlestick (the mother), and the first inside day (#1). ii. There is another inside day candlestick which is marked with ~ on the below chart. Although it is engulfed by the previous candlestick, it has to be ignored because neither the previous n or the inside day candlestick have not hit the Bollinger Lower Band:

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! Jamie Saettele! Specifically, the inside candle represents a period of contracted volatility. If, in an uptrend, volatility begins to slow and the market fails to make a new high (as illustrated by the inside candle), then we can deduce that strength is waning and that the chance for a reversal exists. When combined with a Bollinger Band®, we ensure that we are trading a reversal only by either selling high prices (higher Bollinger Band®) or buying low prices (lower Bollinger Band®). In this way, we trade for the big move; not necessarily selling the low tick or buying the bottom tick but definitely buying near the relative bottom and selling near the relative top. The key is confirmation.

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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 p rice up to and higher than the previous days high. It means buyers have started changing their minds, and now they are t hinking 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.

8.

How to Trade the Inside Day Candlestick? i. When you locate an inside day candlestick on the daily chart, and there is a good and visible Bollinger Band breakout too (the way you learned above), you enter at the close of the inside day candlestick (which is the open of the next candlestick). ii. If formed on a bull market while hitting the Bollinger Upper Band, then you go short, set the stop loss several pips above the high price of the inside day candlestick (riskier), or preferably above the high price (safer) of the p revious candlestick (the mother). ii i. If formed on a bear market while hitting the Bollinger Lower Band, then you go long, set the stop loss several pips below the low price of the inside day candlestick (riskier), or preferably below the low price of the previous candlestick (safer). iv. The target can be at least x2 or x3 of the initial stop loss size. If the inside day candlestick you locate is the beginning of a strong trend, then you can make up to x10 of your stop loss size.

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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A2.6 Bollinger Bands Squeeze

How to Use Bollinger Bands in Forex and Stock Trading 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 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 loss and wide target 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 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 theBollinger the Bollinger Bands. 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 EUR/USD 15min 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 candles (the (the red arrows). Candle #1 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 shadow is 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 breakout.. So BBQ setups are really profitable and have a great risk/reward ratio. ratio.

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More Examples of Bollinger Ban d 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 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 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 did not have to be at its open price and it could be set at the middle of the 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.

Avoid

GBPCAD daily

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 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 usually troublesome.

GBPUSD 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 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, 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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A2.7 How to Trade Trade the Inside Bar False Break Setup or the Fakey 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 inside bar false break, also known as ‘the fakey’, is a setup of three main candles. It starts with a candle referred to as the “mother”, this is candle 1. Then forms an inside candle. This is candle 2. It is formed within the high and low of the mother and which must be the next candle after the mother. A few inside candles may or may not form before the third and important candle in the pattern and is known as as the breakout candle. candle. A breakout candle may may not necessarily necessarily form every time.

The theory: when an inside inside bar is formed the market is said to be resting or at a point of equilibrium. Neither the bulls or bears, within the day, have been able to make price go higher or lower than the previous day’s high or low. So is formed a smaller candle within the range of the previous candle.

The breakout candle (the 3 rd candle in the recognition pattern is also known as the 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 “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 3 rd candle) was a false break. Hence the name “Fakey”.

Criteria - What is important is : 1.

This chart has what I (C Hodgson) would call a perfect trade as it meets all the criteria . 1. The trade trade setup setup is in line line with with the monthl monthlyy up trend trend and is is rejectin rejecting g off the the monthly middle Bollinger Band, 2. The The set setup up has has for forme med d on on a support level and level and 3. The confi confirmati rmation on candle candle has broken broken out out of the lower lower Bollin Bollinger ger Band Band 4. I t is a st st ro ron g hammer hammer and and 5. Has Has a long long shad shadow ow..

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The The PATT PATTER ERN: N: 1. The moth mother er candl candle e AND The The in insid side e candle candle – there is not one without the other. The inside candle tells us to watch for the breakout candle. 2. The breakout breakout candl candle e which must must break break the high high or low low of the the mother mother candle candle and which must reject the price price (H or L of Mother Candle) at the level by closing inside the range of the Mother candle. This candle is the confirmation candle. The best confirmation candles can be any form of DOJI (especially shooting stars, hammers, spinning tops). 2. SUPP SUPPOR ORT T OR OR RESI RESIST STAN ANCE CE – This makes for a stronger setup. setup. We look for: 1. A support support or resista resistance nce trend trend line, line, or level level that suppor supports ts the favoured favoured trade trade direction. These can be found on the the time frame on which the setup has appeared (usually Daily) – or a longer time frame (weekly or monthly) 3. TREND 1. The Bolling Bollinger er Middle Middle Band (BMB) and and or the 50 SMA is slopin sloping g in a direction direction favourable to the trade. 4. BOLL BOLLIN INGE GER R BAN BAND D BREA BREAKO KOUT UT 1. This This is not not a MUST MUST – but it is preferable and adds strength to the setup. 2. It is preferabl preferable e that either either the mother mother candle or or the confirmat confirmation ion candle candle breaks breaks the Upper or Lower Bollinger Band (the 2.0 deviation band (also called BB2) 3. If no breakou breakoutt exists exists then we prefer prefer to to see the the price reject reject the the BMB by by close price. What is not important is: 1. The size, size, the colour colour or the the shadows shadows of the mother mother candle candle or the the inside inside candle. candle.

System Design by Chris Hodgson - Compilation by Peter Wagner - copywrite FXKeys©

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WHERE TO SET: ENTRY – EXIT – STOP LOSS – TAKE PROFIT After we have a confirmed setup and it has met at least one of the above *criteria* we can now enter the trade. We enter at the open of the next day after the confirmation candle has closed and we always place the stop loss above the high of the confirmation candle for short OR below the low of the confirmation candle for long. The stop is always set at high or low of the confirmation candle, regardless of its size or wether or not all the criteria has been met at the same time. See below:

B A

Confirmation: Entry on close

C

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 loosely is on the monthly. I took this setup but closed my position after the 2015-04-02 candle had formed, because candle 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 to not be working to take price up against this too strong downtrend. Better to get out when y ou 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 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 correct. It will be interesting to see where price goes now but too risky to take any position. – see middle image

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B A mother

insides

break

Stop loss

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As with all SETUPS be VIGILANT – SEE BELOW

EURJPY day EURJPY day

These are IBFB Setups – BUT - Don’t forget to look for other confirmation signals for these setups. 1. EURJPY is a nice setup with a good false break candle off the middle bollinger band and an old support level - however there are some negative points too. 1. short term up trend is not strong enough 2. weekly chart looks like it is retesting broken support which could then act as resistance against a long setup. 3. 2015-02-11 candle has a higher high than the mother candle which is not good for where this setup is located 2.

GBPJPY – similar to EURJPY – also 1. Strong pin bar (red arrow – 201502-12 candle) has failed to breakup BMB, even with a strong bullish ending in itself. 2. Even though not a setup the 201502-12 candle was a false break to the low 2014-12-16. 3. It is also actually a Mother Candle (MC) to the 6 following candles including the current False Break Confirmation Candle (CC). A messy setup. 4. The current MC could not break up the previous high 2015-02-18.

Both gbp and eur setups are not strong enough for me (C Hodgson)to take a position but the gbpjpy setup can be a good confirmation to stay in any long positions you might already be i n. *To Contents*

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week

GBPJPY day GBPJPY day

GBPJPY week

System Design by Chris Hodgson - Compilation by Peter Wagner copywrite FXKeys©

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Questions & Answers - Inside Bar / False Break - Chris Hodgson Q: A:

How many inside candles can happen (before a confirmation candle forms) that makes the developing set up void? There is no rule to how many before the setup becomes void but as a guide I would suggest 3-4. If you have multiple inside candles and it just looks messy than leave it and wait for another setup.

Q: A:

Do we only get this harami pattern after weekends? And, should we only trade this harami pattern after the weekends? No we can get this pattern on any day throughout the week. It can be traded on any given day that it forms.

Q: A:

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? 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.

CH wrote:

«I close half of my positions at 100% profit» & “I move the rest of my position to break even after the trade has moved substantially in my favour and I exit all positions when price fails to move beyond support/resistance”

Q1: A1:

Are you able to say approximately what ‘substantial’ is – in your experience? 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 po sition 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. 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 m iddle 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 f or 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.

A2:

Q3: A3:

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? 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: A4:

One of the examples given (in your article), XAUUSD, did not actually break the BUB – is a break mandatory for the FAKEY setup? 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*

» *A3.2

STRONG 95+ score PATTERNS .. 52 – 64*

» *A3.3

STRONG 90-95 score PATTERNS .. 65 – 91*

» *A3.4

STRONG 80-90 score PATTERNS .. 92 – 104*

» *A3.5

STRONG SETUPS TO BE IGNORED .. 105 – 113*

The Gauge (1) (2)

100 Gauge Benchmark Examples *1* 1 *2* 2

General 1 - Candlestick’s Shadow versus Candlestick’s Body Setups 1 - What do I mean by a strong trade setup Setups 2 - Forex trading couldn’t be easier Setups 3 – When a Butterfly pattern suppoprts a Candlestick Pattern Setups 4 – To trade or not to trade, that is the question Setups 5 – Strong and Scary Trade setups Setups 6 – September 14 trade setups review Setups 7 – When a trade st confirms another trade setup

General – 2 How Candlesticks Approve The Validity Of A Resistance Line Setups 8 – Are we overconfident about our trading system Setups 9 – The power of strong trade setups Setups 10 – The Trade Setups that Form at the Right Place Right Time Setups 11 - The Trade Setups that Form at the Wrong Place Wrong Time Setups 12 – Trade setups that have to be ignored Setups 13 – The importance of negative points for a trade setup Setups 14 - How Long Is A Strong Trade Setup Valid?

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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

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41

GBP/CAD Daily Chart 5/08/14 – 100PTS Setup & Result

Original article

100PTS-

BENCHMARK 1

THE GAUGE

GBPCAD 06/08/14 confirmation candle: 1. The previous candle is a too strong bull candle 2. Confirmation candle is a too strong dark cloud cover taking almost all of previous body and with a small lower shadow 3. Both candles have a good BUB breakout – 4. 4th lower top on long ranging market at highs – not making resistance 5. Confirmation candle also broke BUB 6. Negative point is support line – but far enough away

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D

D

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 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 lower than this, unless something extra-ordinary occurs.

Swing fell 900pts – possible 700 tradable *To Contents*

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42

AUD/JPY Daily Chart – 100PTS Strong Dragonfly Doji or Pin Bar Candlestick

100PTSBENCHMARK 2 THE GAUGE

There are a few things that you have to note if you want to pick the strong Dragonfly Doji reversal setups that will make money for you: 1.

The longer longer the the low lower er shad shadow ow,, the strong stronger er the the rever reversal sal pressu pressure. re. The lower shadow of the candlestick has to be too long in comparison with the length of the other candlesticks formed before the Dragonfly Doji. It has to be an exceptionally big candlestick, otherwise it cannot make the price reverse, and it has to be ignored.

2.

Bollin Bollinger ger Bands Bands has has a very very impo importa rtant nt role role in pick picking ing the strong strong Dragonfly Doji reversal signals. The lower shadow MUST form a very strong breakout with the Bollinger Lower Band, Band, otherwise you have to ignore the signal.

D Original article

The Dragonfly Doji formed on AUD/JPY daily chart, on 2014.08.08, has everything that a strong Dragonfly Doji reversal signal needs. The AUD/JPY 2014.08.08 Dragonfly Doji candlestick candlestick

D

1.

has a very very long long lowe lowerr shad shadow ow..

2.

It has also broken broken out out of the Bolling Bollinger er Lower Lower Band very very strongl strongly: y:

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 confirmation forming. However, some traders may criticise that these kinds of 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. confirmation 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 anymore, because I believed that it was too late.

D

D

close signal

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475.1 PIPS

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System Design by Chris Pottorff - Compilation by Peter Wagner -copywrite FXKeys©

43

EURUSD:: Daily - 100PTS EURUSD Chart 1

The 2014.05.08 candlestick has formed 1.

a too too stro strong ng Bearish Engulfing Pattern. Pattern.

2.

It has a very very strong strong upper upper shadow shadow and a bearish bearish body. body.

3.

The Bollinger Upper Band breakout is also too strong.

4.

Above all, the the trade trade setup setup is formed at the top of of a too too exhausted bull bull market, market, so that, it can be considered as a good reversal trade setup.

This trade setup is prefect prefect and and I give it a 100 score. score. I don’t see any negative point in it.

b

1.

c 2. 3. z c

4. 5.

Probable close point at ‘a’ which is not a 100 signal due to very bottom of Bear Market 1493 pips move H to L Close point ‘b’ not a strong set up - 1635 pips Close point ‘z’ too much upper shadow but market still bearish but showing signs of exhaustion 1714 pips ‘c’ points are possible continuation trades Red dash dash line line is meaning meaningles lesss

a

Candle not finished

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100PTS


44

USDCHF : Daily 100 PTS

Chart 2

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 formed by 2014.04 2014.04.04 .04 and the next next candlest candlestick ick (2014.04.11). The 2014.04.04 candlestick is a strong Shooting Star with a long upper shadow and shadow and 2. a stron strong g Bolling Bollinger er Upper Upper Band Band break breakout out.. 3. The previou previouss candles candlestic tickk (2014.0 (2014.04.0 4.03) 3) Bollinger Upper Band breakout is breakout is also good. 4. The Shootin Shooting g Star Star is strong strongly ly confirmed confirmed by by the next candlestick (2014.04.11) which is a strong bearish candlestick: 5. If we look at at the bigger bigger picture, picture, we we will see that that the short trade setup is formed in a bear market. 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

D

Close signal 250 pips

100PTS *To Contents*

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45

USDCHF Daily 100 PTS

Chart 2

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 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.

Close signal not received at 2014-12-05 1096 pips so far

100PTS

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46

AUDCAD(1) (2) : Daily100 pts

D

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 too strong bullish candlesticks formed right before the 2014.10.16 candlestick. The next two candlesticks after the 2014.10.16 candlestick did not follow the short trade setup. They went up to test the 0.9936 resistance level. In spite of this, the trade setup and the resistance level were strong enough to prevent the price from going up, and they made the today’s candlestick that will be closed after about an hour, have a big bearish body. If this candlestick closes with such a strong bearish body, then we will have a 100 score short trade setup on AUD/CAD daily chart:

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100pts *To Contents*

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47

AUDJPY(1) (2): Weekly 100 pts

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This is a too strong long trade setup, and a typical example of a Doji with its confirmation that is formed right after: 1. 2014.10.12 candlestick is a strong Doji with a too strong Bollinger Lower Band breakout. 2. The next candlestick (2014.10.19) has confirmed the Doji very strongly.

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M

This is a 100 score trade setup formed on AUD/JPY weekly chart

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I don’t see any negative points with this trade setup. The only thing is the Bollinger Middle Band which is about 70 pips above the last weekly candlestick close price, but I am not too worried about it.

100pts System Design by Chris Pottorff - Compilation by Peter Wagner copywrite FXKeys©

48

GBPCAD: Daily 100 pts

D

W 2014-10-21

100pts

The last closed candlestick on the daily chart formed a too strong Bearish Engulfing Pattern. It seems the Bollinger Middle Band on the weekly chart worked as a too strong resistance and made the price go down strongly. What we have on the dail y chart now looks like a too strong 100 score short trade setup. As the Bearish Engulfing Pattern formed by the last closed daily candlestick (2014.10.21) is too strong, it is highly possible that the price breaks below the broken resistance line too. If you already have a long position based on the weekly l ong trade setup formed by the 2014.09.07 candlestick on the weekly chart, you may want to close your position and collect your profit or move your SL to breakeven if you still want to hold the position. The newly formed Bearish Engulfing Pattern is so similar to the Dark Cloud Cover that formed by the 2014-08-06 candle (left side of the daily chart). Since that time, we have used t he short trade setup that was formed by the 2014.09.07 candlestick as the typical example of a too strong 100 score short trade setup to compare the other short trade setups with. The market condition is changed now. I consider the 2014.10.21 Bearish Engulfing Pattern as a 100 score short trade setup Positive Points: 1. The Bearish Engulfing Pattern is too strong by itself. 2. The Bollinger Upper Band breakout is strong enough. 3. The pattern is formed where there is no strong uptrend and bulls are not strong. 4. The price is below the Bollinger Middle Band on the weekly chart, which is good (although we don’t check the longer time frames when a too strong trade setup forms on a time frame like daily). 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, b efore 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 hi t my riskier stop loss, but I entered again.

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49

*return gbpaud*

GBPCAD weekly chart is the typical sample of a strong Piercing Line Pattern.

100PTS

W

Also 100

GBPCAD: What we currently have on GBP/CAD weekly 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 Gaps and Your Pending, Stop Loss and Target Orders The GBP/CAD long trade setup has several positive points: 1. The 2014.09.07 candlestick is a too strong 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.

Therefore, this long trade setup can be known as the continuation(1) (2) of the uptrend, which is better than a long trade setup that forms at the bottom of a strong bear market.

M

D

Please note that this trade setup is formed o n the weekly time frame, which means you will have to hold your position for several weeks.

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100PTS

50

Why we are *Traders* and not Fortune Tellers!

AUDCAD(1) (2) (3) Daily - 100 pts

100PTS AUDCAD :100 pts

the current candlestick has moved up very strongly, maybe because of the Bollinger Middle Band on the daily chart. Such a huge candlestick that goes against the trade setup makes it invalid. The current daily candlestick still has several hours to close. It can go down and close with a long upper shadow. We have to wait and see:

Turned back by BMB?

9:58am

In general, the Bearish Engulfing Pattern formed on the daily chart is strong and can be known as a strong short trade setup. I give it a 95100 score. I cannot give it a 100 score with confidence because the 2014.10.13 candlestick is a too strong and bullish candlestick and has broken above the Bollinger Middle Band on the daily chart strongly.

95-100PTS

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51

APPENDIX 3.2 GAUGED EXAMPLES STRONG 95+ score PATTERNS

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52

GBPUSD Daily: 98-100 PTS

This trade setup 1. is formed by 2009.08.06 candlestick, a strong 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 4

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Result : 929 pips

98-100PTS


53

GOLD : Daily 98 PTS B Chart 6

98 PTS

The bulls attack above the Bollinger Middle Band was continued till the 2010.06.28 candlestick formed. 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 a nd 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 n ot 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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54

USDCHF : Daily 95-100 PTS

Chart 1

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 red arrow). Having a short trade setup under such a condition is a good chance to go short: The only negative point of this trade setup is the 2013.09.06 candlestick lower shadow that reflects some bullish pressure. All the other factors, like 1. the candlesticks sizes, 2. Bollinger Upper Band breakout, and above all, 3. the market ranging condition that was explained above, are all good. So this is a 95-100 trade setup. I would take this short trade setup. It is a nice one.

95-100PTS Chart 1

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Result: 565 pips H to L

55

AUDCAD(1) (2) (3) : Daily 95-100pts

AUD/CAD has formed a 1. strong Dark Cloud Cover or Bearish Engulfing Pattern on the daily chart below the 0.9936 resistance level. 2. both of the participant candles in this pattern have broken out the Bollinger Upper Band very strongly 3. The pattern is formed on a bearish market on the daily chart and It is strong by itself

D

The weekly chart is also bearish and has reacted to the resistance level

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M

In general, the Bearish Engulfing Pattern formed on the daily chart is strong and can be known as a strong short trade setup. I give it a 95-100 score. I cannot give it a 100 score with confidence because the 2014.10.13 candlestick is a too strong and bullish candlestick and has broken above the Bollinger Middle Band on the daily chart strongly.

95-100pts *To Contents*

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On the monthly chart, the second shoulder of a head and shoulders pattern is formed, and most probably the price is going to go down to test the head and shoulders neckline. It is about 450 pips above the neckline now. After hitting the neckline, it is p ossible that it bounces up (#1 on the bel ow chart), breaks below the neckline (#2) and keeps on going down. The last monthly candlestick has broken below the Bollinger Middle Band and the current candlestick has been retesting the middle band so far.

System Design by Chris Pottorff - Compilation by Pe ter Wagner copywrite FXKeys©

56

The chart trade setup is formed by 2010.06.21 candlestick. 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 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 oth er trade setups. Let’s compare the 2010.06.21 short trade setup on gold daily ch art with our GBP/CAD trade setup.

GOLD Daily 95-98 PTS A Chart 6

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.

Chart 5 & 6

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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 com parison 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. 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 th e uptrend strength that was not too exhausted. This movement could hit all the stop loss orders .


57

USDCAD (1) (2) : Daily 90-98 PTS USD/CAD While the 2014.12.01 candlestick was forming on the dail y 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. Today, I am going to analyze it more and outline the negative and positive points it has.

D

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.

D

Negative Points: 1. There i s a Bollinger Upper Band breakout formed by yesterday’s daily candlestick(2014.12.01) and al so 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 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

Failed Pattern

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90-98PTS


58

GBPCHF : Daily 95 PTS GBP/CHF now has formed a long trade setup above the uptrend support line on the weekly chart. This long trade setup formed by t he last closed weekly candlestick (#2 on the below chart) is a 1. relatively weak Bullish Engulfing Pattern with a 2. not too strong Bollinger Lower Band breakout. 3. The previous candlestick (#1) is a too long bearish candlestick and unfortunately candlestick #2 is not long enough to make a too strong Bullish Engulfing Pattern.

W

Result to wk 2014-11-30

However, as this “long” trade setup is formed on an “uptrend”, it has more power. I give it a 95 score, because candlestick #2 has not engulfed the candlestick #1, and has not broken out of the Bollinger Lower Band strongly:

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59

AUDJPY Weekly: 95 PTS Such a beautiful Bearish Engulfing Pattern is formed on AUD/JPY weekly chart by the 2014.09.07 candlestick. Positive Points: 1. The 2014.09.07 candlestick has a strong bearish body which has covered the body of two previous candlesticks. 2. The Bollinger Upper Band breakout in this AUD/JPY Bearish Engulfing Pattern is even stronger than the above AUD/CHF short trade setup. 3. Although the AUD/JPY Bearish Engulfing Pattern is formed at the top of a bull market, the uptrend looks too weak and exhausted and it is ready t o collapse at any time. 4. The monthly time frame is bullish, but there is another strong Bearish Engulfing Pattern formed by the 2013.05.01 candlestick, and so the market went down strongly, but was stopped by the Bollinger Middle Band. Since that time, AUD/JPY has tested the Bollinger Middle Band as a support several times, however it has not been able to go up and make a higher high. Now, it looks exhausted, and so it is highly possible that it collapses sooner than later. Therefore, not only there is nothing serious on the AUD/JPY monthly chart, against the Bearish Engulfing Pattern on the weekly chart, but also the Bearish Engulfing Pattern formed by the 2013.05.01 candlestick on the monthly chart is a big support for the weekly chart. I give a 95 score to this AUD/JPY short trade setup, because the AUD/JPY short trade setup is formed on a relatively weak bullish market, not a ranging market formed after a strong uptrend.

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95PTS

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60

The above chart shows three trade setups. The first one (left side of the chart) i s formed on GBP/USD daily chart by 2013.11.13 candlestick. If you locate this candlestick on your platform, you will see that

GBPUSD Daily: 95 PTS

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).

2.

Therefore, the long trade setup formed by 2013.11.13 candlestick, which is a Bullish Engulfing Pattern, is indeed a continuation trade setup indicating that the uptrend wants to be continued after the consolidation. This is a great advantage, because it is much safer and better to go long on a bull market. Continuation trade setups on the strong bull or bear markets are much safer, better and more profitable to take. 2013.11.13 candlestick is a strong bullish candlestick formed at the bottom of a consolidation on a strong bull market.

3.

The previous candlestick (2013.11.12) lower shadow has broken out of the Bollinger Lower Band strongly,

4.

but the Bollinger Lower Band breakout of 2013.11.13 candlestick itself is not impressive. This is the only negative point that this trade setup has.

Result 748 pips H to L

I give a 95 score to thi s trade setup just because its Bollinger Band breakout is not strong. However, it is such a strong and good trade setup, because of the strong uptrend that is formed before:

95PTS *To Contents*

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61

USDCHF Daily: 95 PTS

This trade setup is formed by 2012.03.15 candlestick. Positive Points: Chart 3

1. 2. 3.

The candlesticks sizes are good. The short trade setup is formed almost at the bottom of bear market, and while the Bollinger Upper and Lower Bands were almost horizontal.

Negative Points:

1.

The Bollinger Upper Band breakout is not too impressive.

If a 100 score trade setup is the one with so many positive points, and no negative point, then this trade setup’s score should be about 95 .


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95 PTS 62

USDJPY: Weekly 95pts

USD/JPY has formed a 1. too strong Bearish Engulfing Pattern on the weekly chart. The 2014.10.05 candlestick is closed with a long bearish body that almost has engulfed the body of three previously closed candlesticks. 2. It is a short trade setup, but there is one negative point with it. It is formed when the bulls are still too strong. Therefore, I can not give it a 100 score, however, as the candlestick pattern is too strong by itself, I give it a 95 score. It is as simple as that. Although the formed candlestick pattern is too strong, and i t has formed a strong short trade setup, but when we give it a 95 score because of the negative point it has, you know that it is riskier than a 100 score trade setup. Therefore, you either ignore it, or if you take it you do it when you are aware of the risk and you enter with caution and with a smaller than usual lot size. On the monthly chart, USD/JPY is strongly bullish, and the bad news is that currently the market is not below a strong resistance level that can support the short trade setup formed on the weekly chart. It means this short trade setup is formed right at the middle of nowhere without any clear reason. The two yellow rectangles on the monthly chart look li ke the places that the USD/JPY price has reacted to them, but they are not that strong:

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95pts 63

USDCAD: Daily 95 pts USD/CAD. 1. The 2014.11.07 candlestick (#3 on the below chart) closed with a long bearish body that engulfed the body of three previous candlesticks and also about 40% of the body of 2014.11.03 candlesticks. It has formed a too strong Bearish Engulfing Pattern. 2. The Bollinger Upper Band breakout formed by all the involving candlesticks is also too strong. Candlestick #1 has almost formed out of the Bolli nger Bands completely.

D

The only negative point is that the pattern is formed on an uptrend which is still strong. Therefore, although the candlestick pattern and its Bollinger Band breakout are too strong, it has formed a +95 score trade setup.

W

95pts

M

What Do I Expect From This Setup? This strong Bearish EngulfingPattern can take the price down to test the support lines I have plotted on USD/CAD daily chart. The upper one is plotted based on the close price (line chart) and the lower one is p lotted based on the low price. USD/CAD can react to both of these lines 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 explai ning this to make you aware of the risks that the formed short trade setup has.

Weekly is strongly bullish. The only bearish signal is the long upper shadow of the last closed weekly candlestick (#4 on the below chart) that has to be confirmed by any of the next a few of few candlesticks to be known as a short trade setup. It is not a short trade setup by itself. Additionally, the 1.1277 resistance level is broken too Monthly chart is strongly bullish too: *To Contents*

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64

APPENDIX 3.3 GAUGED EXAMPLES STRONG 90-95 score PATTERNS

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65

GBPCAD: Weekly 90-95 PTS

Result to wk 2014-12-21

W

W

90-95PTS D

M

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Since the 2014.10.21 GBP/CAD candle that formed a short trade setup on the daily chart we have been waiting for a long trade setup on the weekly or daily chart, or both, because the GBP/CAD uptrend is still strong on the weekly chart and the last long trade setup formed by 2014.09.07 weekly candlestick formed a support level at 1.7534 that has made the price bounce up. GBP/CAD went down and hit the support level last week and bounced up. It has formed a long trade setup on the weekly chart. Positive Points: 1. This long trade setup is formed while the market is still bullish on the weekly and monthly time frames. 2. 2014.11.23 candlestick (#3 on the below chart) is a big and strong candlestick that has engulfed the previous candlestick (#2) as well as over 50% of candlestick #1. So, it has formed a strong Bullish Engulfing Pattern. 3. The 1.7534 support level is one of the other positive points for this trade setup. Negative Points: 1. The 2014.11.23 and its previous candlestick have not broken out of the Bollinger Lower Band strongly. However, they both have a breakout, so it is not that bad. So, this cannot be known as a strong negative point. 2. The upper shadow of candlestick #3 which is the main candlestick in this pattern and long trade setup, signals a bullish pressure that can be related to a resistance 3. The last closed daily candlestick has reacted to the Bollinger Middle Band on the daily chart, and has closed with a long upper shadow. This is the reason behind the weekly candlestick upper shadow. This is a strong negative point and those who want to go l ong have to be aware that it is strongly possible that some bearish candlesticks form, and GBP/CAD goes down before it follows the weekly long trade setup seriously It cannot be a 100 score trade setup, because of the negative points it has. I give it a 90 score if I want to be too strict, but it can have a 95 score because of the strong uptrend on the weekly and monthly time frames


66

The 2014.09.10 daily candlestick closed with a big bullish body.

GBPCHF : Daily - 90-95PTS

1.

Its body and shadows have covered the body of several previous candlesticks, and so this candlestick has formed a very strong bullish engulfing pattern.

2.

Its long lower shadow and a small portion of its body have broken out of the Bollinger Lower Band.

3.

The previous two candlesticks, specially the 2014.09.08, have broken out of the Bollinger Lower Band too. Although we prefer to have a strong Bollinger Band breakout, but this one is not too bad. So this Bullish Engulfing Pattern has also an acceptable Bollinger Lower Band breakout.

4.

The other thing is that the 2014.09.10 candlestick has already broken above the Bollinger Middle Band, which is another positive point for this long trade setup.

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.

Result: 561 pips L to H

If we give a 100 score to our GBP/CAD and AUD/JPY trade setups’ strength and accuracy, the above trade setup’s score is 90 to 95, just because of the negative point I mentioned above. Stopped & re-entry

The other thing I have to let you know about this trade setup is that there is a resistance line on the way. It seems the bulls are strong enough to break above the resistance line, however it can cause some bearish reactions: System Design by Chris Pottorff - Compilation by Peter Wagner 67 copywrite FXKeys©

90-95PTS

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AUDCHF weekly pt1:. 90-95PTS

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1.

A strong Bearish Engulfing Pattern is formed by the last closed weekly candlestick (2014.09.07) on AUD/CHF weekly chart. which covered the body of three previous candlesticks.

2.

Above all, this candlestick and the previous one have broken out of the Bollinger Upper Band strongly

D

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.

M


Daily Chart: The green arrow shows the possible movement that can occur above the support line. Please note that it i s possible that the support line is invalid and the AUD/CHF market shows no reaction to it.


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AUD/CHF Weekly pt2:. 90-95PTS

W

M

AUD/CHF: SEE PREVIOUS SLIDE = A strong Bearish Engulfing Pattern is formed by the last closed weekly candlestick (2014.09.07) on AUD/CHF weekly chart. This candlestick has covered the body of three previous candlesticks. Above all, this candlestick and the previous one have broken out of the Bollinger Upper Band strongly. 90-95PTS

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. 4. There is a strong downtrend on the monthly chart.

Result Wk: not complete

D

Result D: 538 pips H to L

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 (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 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, y ou may have to hold your position for several weeks. The other thing is that AUD/CHF short position will have a negative swap. *To Contents* *To Header*


90-95PTS 69

GBPUSD: Daily 90-95 PTS Chart 4

The trade setup formed by 2010.01.20 candlestick: 1. a shooting star which is not too strong. For a strong setup we need a strong upper shadow with a stronger BUB breakout. 2. The confirmation candlestick is bearish which is good, but it is a relatively long lower shadow. However, it is not a bad confirmation candlestick. 3. The trade setup is formed where the Bollinger Bands were almost horizontal with a tendency to go down, and while the market was not bullish and we already had a strong short trade setup formed by 2009.08.06 candlestick. These are all positive points. 4. So a 90 score. Q) How important in points is the first reaction after an exhausted bull market? A) It depends on the reaction. If it is strong enough, then we can consider it as a strong positive point. It can be different. We have to analyse it in each individual setup.

Q) it looks like the Shooting Star is the final shoulder of a Head & Shoulders pattern – any points for this? A) The second shoulder will form when the

price goes down for several candles after the shooting star and its confirmation candlestick. However, sooner than the second shoulder, we could see the big “W” which is important and can even make us give a 95 score to this setup. *To Contents*

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Continuation trade MA50 – note MA50 not yet decending but BMB favouring & strengthening short trade decision

90-95PTS System Design by Chris Pottorff - Compilation by Peter Wagner copywrite FXKeys©

70

GOLD Daily 90-95 PTS B Chart 10

The trade setup of this chart is formed by the 2014.03.17 candlestick. 1. It is a perfect trading setup regarding the size of the 2014.03.17 candlestick and its previous candlestick. The 2014.03.17 candlestick is a strong bearish candlestick with a long upper shadow that reflects the strong bearish pressure. 2. It has broken out of the Bollinger Upper Band strongly. The previous candlestick (2014.03.14) also has formed a too strong Bollinger Upper Band Breakout. The only negative point of this trade setup is that it is formed on a strong bull market, while the uptrend was strong and there was no sign of bulls’ exhaustion.

Continuation trade BMB

So I give it a 90 score. It can take a 95 score too because the candlestick pattern and BB breakout is too strong by itself.

Continuation trade MA50

continuation trade DBB

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90-95 PTS


71

EURGBP: Daily - 90-95 PTS

90-95PTS

Results: 299 pips H to L

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At the same time that a long trade setup was formed on GBP/CHF dai ly chart, a short trade setup formed on EUR/GBP daily chart. The EUR/GBP short trade setup is formed by the 2014.09.10 candlestick. This 2014.09.10 candlestick is a 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 middl e 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 t rade 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 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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72

CADCHF (1) (2) : 90-95 PTS

CAD/CHF:

1. a Bearish Engulfing Pattern, is formed by the last closed weekly candlestick (2014.09.07). The difference is that 2014.09.07 candlestick is much stronger in AUD/CHF.

W

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 So this CADCHF trade setup score is 90- 95. D

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.

W

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73

EURAUD (1) (2) : weekly 90PTS The long trade setup, formed by the 2014-09-07 candlestick: 1. Although the Bullish Engulfing Pattern is too strong The bearish movement on which it is formed is quite strong Therefore, this trade set-up should be about 90PTS Result: +1344 pips L to H – still going

90PTS

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74

EURUSD daily 90 PTS This is a relatively strong Dark Cloud Cover formed by the 2009.11.26 candlestick on EUR/USD daily chart. 1. The Bollinger Upper Band breakout is not bad, 2. and the 2009.11.26 candlestick size is good. 3.

The only problem is the lower shadow of 2009.11.26 candlestick. It is longer than usual in a Dark Cloud Cover pattern, and it reflects the bullish pressure in the market.

4. The next candlestick (2009.11.27) long lower shadow formed above the Bollinger Middle Band confirms that bulls are still strong. This is the most important negative point of this trade setup that doesn’t allow us to scale it as a 100 trade setup. 5. The trade setup is formed at the top of a strong uptrend, but at the time, the uptrend was exhausted and was not too sharp, and 6. the Bollinger Upper and Lower Bands were getting close to each other, and had become almost horizontal. So this cannot be known as an important negative point.



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Continuation trade DBB

Result: + 3268 pips H to L

90PTS

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75

EURUSD Daily - 90PTS Chart 2

The trade setup is formed by 2013.12.27 candlestick on EUR/USD daily chart. The 2013.12.27 candlestick is: 1. a Shooting Star with a too long upper shadow, Result: + 385 pips H to L (1.35071) 2. formed almost at the equal top of bull market. 3. The Bollinger Upper Band breakout is not too bad. It is formed while the Bollinger Upper and Lower Bands were still too far from each other which means bulls were still strong. This makes me not to give it more than a 90 score. *To Contents*

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90PTS 76


This trade setup is formed by 2013.02.04 candlestick 1. The previous candlestick (2013.02.01) has a relatively strong Bollinger Upper Band Breakout,


2. the 2013.02.04 candlestick itself is a strong bearish candlestick which has formed a strong Engulfing pattern. 3. The most important negative point is the uptrend and Bollinger Bands direction and distance. *To Contents* *To Header*




So this one will also have a 90 score. System Design by Chris Pottorff - Compilation by P eter Wagner copywrite FXKeys©

90PTS 77


The red arrow shows the 2012.02.29 candlestick which is the candle that has formed the strong trade setup. 1. The 2012.02.27 candlestick which is two candles before the 2012.02.29 candlestick has also formed a trade setup (Dark Cloud Cover), however it is too weak because of the candlestick size which is too small. 2. The 2012.02.29 candlestick has formed a strong Bearish Engulfing Pattern. 3. The Bollinger Upper Band breakout is not impressive, and the previous candlesticks are too bullish. 4. It has formed almost at the top of a strong bull market. So this trade setup is a 90 score. *To Contents*


Continuation trade MA50 Continuation trade DBB


90PTS

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78

GBPUSD: Daily 90 PTS The trade setup is formed by 2014.01.24 candlestick.

Chart 1

1. It is a strong Bearish Engulfing Pattern. 2. The Bollinger Upper Band breakout formed by 2014.01.24 candlestick and also its previous candlestick is good. 3. There are two negative points with this trade setup. The first one is that the trade setup is formed when the market is still a little bullish. Bulls look exhausted, but they are still strong. •

•

The second negative point is the 2014.01.24 candlestick size. It i s a too big bearish candlestick that has already made the market a little oversold on the shorter time frames, and so, some bullish movements above the Bollinger Middle Band was possible.

So the overall score of this trade setup is 90 . Continuation trade MA50





90PTS 79

GBPUSD: Daily 90 PTS Chart 2

90PTS The trade setup (left) is formed by 2011.04.28 and 2011.05.02 candlesticks. 1. 2011.04.28 candlestick is closed as a strong Shooting Star that needed to be confirmed by the next candlestick. 2. The next candlestick did not confirm the Shooting Star, however, the 2011.05.02 candlestick did it. The 2011.04.28 candlestick Bollinger Upper Band Breakout is great. 3. The big negative point of this trade setup is that it is formed at the top of a strong bullish market while the bullish candlesticks were too strong and Bollinger Upper and Lower Bands were pointing up strongly. I give a 90 score to this trade setup: *To Contents*

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80

GBPUSD : Daily 90 PTS

The trade setup is formed by 2011.07.12 candlestick.

Chart 2

1. It is a Hammer or Dragonfly Doji with a too long lower shadow which has broken out of the Bollinger Lower Band strongly. 2. The confirmation candlestick is a too big bullish candlestick which is closed above the Bollinger Middle Band. 3. The biggest negative point of this trade setup is that it is formed at the bottom of a relatively strong bear market. I give a 90 score to this trade setup, because although the 2011.07.12 candlestick lower shadow and its Bollinger Lower Band breakout is too strong it is formed at the bottom of a bear market



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90PTS System Design by Chris Pottorff - Compilation by Peter Wagner copywrite FXKeys©

81

GBPUSD : Daily 90 PTS Inside-day candle

The trade setup on is formed by 2011.08.19 candlestick. 1. It has a relatively long upper shadow which has broken out of the Bollinger Upper Band not strongly. 2. The previous candlesticks size, shadows and Bollinger Upper Band breakout is not impressive.

Chart 2

3. The trade setup is formed at the top of a relatively strong bull market. 4. The only important thing about this trade setup is that the 2011.08.18 candlestick has formed an Inside Day pattern which is also a reversal signal. So in total I give a 90 score to this trade setup: continuation trade DBB

90PTS *To Contents*

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90PTS System Design by Chris Pottorff - Compilation by Peter Wagner copywrite FXKeys©

82

USDCHF Daily 90 PTS Chart 3

90 PTS The trade setup formed by the 2012.01.09 candlestick: 1. 2.

is a Bearish Engulfing Pattern formed by 2012.01.09 and its previous candlesticks.

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 strong. I give a 90 score to t his trade setup. *To Contents*

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83

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

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84

GOLD: Daily 90 PTS Continuation trade MA50

90 PTS

Chart 1


The trade setup is formed by 2007.08.16 and 2007.08.17 candlesticks. 1. It is formed while the Bollinger Bands were almost horizontal which is good. 2. The candlesticks Bollinger Lower Band breakout is good. 3. The only negative point is the upper shadow and small body of 2007.08.17 candlestick, otherwise it would be a 100 score trade setup. I give it a 90 score. *To Contents*

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85

GOLD: Daily 90 PTS but tradeable due to too strong signal candle

Chart 2

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. 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.


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. However, although the 2008.03.17 Doji is formed on a strong bull market, the Doji and its confirmation are strong enough to take the control from bulls.

90 PTS tradeable *To Contents*

The conclusion is that this is not a 100 score trade setup, but it can be taken after considering the risks. It is a 90 score trade setup .

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86

GOLD Daily 90 PTS Chart 4

90 PTS

The chart shows a trade setup formed by candlestick 2009.02.20 and the next two candlesticks. 1. The candlestick (2009.02.20) is a relatively strong bullish candlestick with a not too big upper shadow which has completely broken out of the Bollinger Upper Band. 2. However, it is not a trade setup by itself. It could be known as part of a trade setup when the next candlestick ( 2009.02.23) and the candlestick after (2009.02.24) were formed. 3. The 2009.02.23 candlestick is a Hanging Man with a small upper shadow that should not be seen in typical Hanging Man candlesticks. Its lower shadow reflects the bearish pressure, because it shows that bears took the price down, but then left the control to bulls and allowed the price to go up again. It is a strong uptrend after all, and bulls are still strong. 4. Finally the 2009.02.24 candlestick proved that bears succeeded to take the control, and most probably the price would go down. This is a 90 score trade setup because it is f ormed 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.

the 2009.02.20 candlestick upper shadow that has broken out of the Bollinger Band means almost nothing, as long as the next candlestick(s) doesn’t confirm that bears have taken the control. This is what the next candlestick (2009.02.23) didn’t do, because it closed as a Hanging Man that also reflects some levels of indecision. However, the 2009.02.24 candlestick proved by its strong bearish body that bears succeeded to take the control.

One of the most important things we do in our trading is that we determine whether a candlestick indicates a strong bullish or bearish pressure. Sometimes, a strong Doji with a long upper shadow that has broken out of the Boll inger Upper Band strongly forms. However, still we have to wait for the confirmation candlestick to form. If the confirmation candlestick closes with a strong bearish body like the 2009.02.24 candlestick on the above chart, then we know that bears have taken the control, otherwise although the Doji has a strong upper shadow, but it has to be ignored. Why? The reason is that we want to know which party, bull s or bears, have taken the control. This is what a Doji doesn’t tell us. A Doji, even with strong shadows, just reflects the market indecision. A Doji means both bears and bulls have the same power, because the price is closed almost where it was opened. The shadows just show the price fl uctuation, but the fact that the open and close prices are the same means that none of the parties have been able to take the control finally. Now, 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 unti l the candlestick closes. Like the below example. Look at the strong bearish candlestick that formed after the Doji:



87

GOLD Daily

90 PTS The trade setup is formed by 2010.01.11 and 2010.01.12 candlesticks.

Chart 5

1. The first candlestick is not something exceptional. It has a bullish body and a not too big upper shadow that has broken out of the Bollinger Upper Band. However, 2. 2010.01.12 candlestick has formed a strong bearish engulfing pattern. It is the candlestick that has formed the trade setup.

3. This trade setup is formed after a strong uptrend, when bulls give the control to bears (see the red arrow on opposite chart), then this is a positive point. If it was formed right at the stop of the uptrend (where the green arrow is pointed to), then it had to be ignored definitely. 4. The only negative point is that 2010.01.11 and 2010.01.12 candlesticks have not broken out of the Bollinger Upper Band strongly. Therefore, it is a 90 score trade setup.

90 PTS continuation trade DBB *To Contents*

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88

GBPUSD: Daily 90pts

90pts

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a Hammer formed on GBP/USD weekly chart, last week. The next candlestick which was supposed to be the confirmation candlestick, has a lot of ups and downs and finally closed as a Doji with a small body and long shadows that are related to the past week Great Britain events. there is no trade setup on GBP/USD weekly chart. In spite of this, a continuation short trade setup is formed on GBP/USD daily chart. There is a strong downtrend on GBP/USD daily chart, and the last closed daily c andlestick (2014.09.19) is closed as a big bearish candlestick with a long upper shadow, below the Bollinger Middle Band. This is a strong continuation trade setup formed below the Bollinger Middle Band on a downtrend: Daily Candlesticks and Bollinger Middle Band® Positive Points: The downtrend is too strong and there is a huge bearish pressure. 2014.09.19 candlestick is a big bearish candlestick with a long bearish body, and a strong upper shadow that both reflect the bearish pressure. Bollinger Middle Band is tested, but it has worked as a st rong resistance and has not allowed the price to go up. Negative Points: Bollinger Middle Band is a tricky area, and in spite of having a strong trade setup formed there, the price can behave unexpectedly. The current monthly candlestick is testing the Bollinger Middle Band, and it seems this moving average is working as a strong support, because the monthly candlestick has formed a long lower shadow in reaction to Bollinger Middle Band. Of course, the monthly candlestick has not closed yet, and it sill has 9 days to go. But, there is no doubt that Bollinger Middle Band is working as a strong support on the monthly chart, and this h as to be known as a negative point. Having the negative points into consideration, I give a 90 score to this trade setup. It would be an 80 trade setup, if 2014.09.19 candlestick was not such a strong candlestick formed below the Bollinger Middle Band on the daily chart. I mean the biggest positive point of this trade setup is the 2014.09.19 ca ndlestick size and the strong role of Bollinger Middle Band as a resistance on the daily chart.


89

GBPJPY: Daily 90pts

A too strong Bullish Engulfing Candlestick pattern has formed on GBP/JPY daily chart (2014.10.15 ). 1. There is one important negative point with this pattern. It is formed while bears are too strong and t he Bollinger Upper and 2. Lower Bands are too far from each other. The positive point is that 1. the candlestick pattern is too strong by itself. Additionally, 2. both the bullish candlestick and the previous candlestick have formed a strong Bollinger Lower Band breakout. 3. The other positive point is that this Bullish Engulfing pattern has formed while the market is still bullish on the weekly and monthly charts: 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. *To Contents*

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90pts 90

USDCHF: Daily 90 pts USDCHF 1. formed a Dark Cloud Cover on the daily 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.

D D

M

W

This is a 90 score short trade setup. If the 2014.11.07 candlestick (#2 on the below chart) was longer and had engulfed the body of its previous candlestick (#1) completely, I would take this setup. But it is risky now. I am not saying that USD/CHF will not go down. No, it is possible that it goes down for as low as where the Bollinger Middle Band is right now (which is a ~120 pips downward movement), or even lower, but we never know. To be at the safe side, I prefer to take ONLY too strong setups

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91

APPENDIX 3.4 GAUGED EXAMPLES STRONG 80-90 score PATTERNS

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92

GOLD Daily: 85 – 90 PTS The first trade setup is formed by 2007.07.24 candlestick on gold daily chart. Chart 1

1.

It is a Shooting Star with a not too strong upper shadow and Bollinger Upper Band breakout.

2.

The previous two candlestick have a relatively stronger Bollinger Upper Band breakout.

3.

The Shooting Star is confirmed by the next candlestick (2007.07.25) strongly, however the confirmation candlestick has a relatively long lower shadow that could be known as a negative point.

If you look at the bigger picture (below), y ou 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. Result : 459 pips H to L

85-90 PTS

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93

EURUSD: Daily - 85 – 90 PTS

That is a Hammer that had to be confirmed by the next candlestick. So it is not a formed trade setup yet, and it can not be gauged. However, the confirmation candlestick formed as a strong bullish candlestick, and so the long trade setup became completed. Now the question is how this completed trade setup can be gauged? I give an 85 to 90 score to this long trade setup because: 1.

2.

3. 4.

A relatively big hammer (2007.06.13) has formed completely out of the Bollinger Band and the Hammer (2007.06.14) also has a strong Bollinger Lower Band Breakout. This trade setup is formed in a consolidation that was formed after a strong uptrend . Therefore, it can be known as the continuation of the uptrend. The confirmation candlestick is a big and strong bullish candlestick. The consolidation is bearish, but it is not a too strong bearish market.

Why I don’t give it a 95 or 100 score then ?

1.

The 2007.06.13 candlestick is “relatively” big, but for a too strong 100 score trade setup, the candlesticks that form the trade setup have to be bigger than this (l ook at the lower shadow of our AUD/JPY Dragonfly Doji).

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.

That is why this trade setup is not a 95 or 100 trade setup. continuation trade DBB Continuation trade BMB

Result: 588 pips L to H

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85-90PTS


94

EURUSD: Daily - 80-90PTS

Chart 6

This trade setup is a High-Wave set of candlesticks formed around 2011.05.04. 1. They are formed right at the top of a strong bull market, and 2. their Bollinger Upper Band breakout is not strong at all. I give this one an 80-90 score.

NOTE: 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 strongly soon. Waiting for a confirmation candle, can cause us to miss a big movement.



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95

USDCHF: Daily 80-90 PTS

There are three trade setups in thi s chart. The first one is formed > 1. by 2013.05.23 candlestick. It is a strong bearish engulfing pattern. The size of the engulfing candlestick (2013.05.23) is great.

80-90PTS

There are two negative points with this t rade setup: 1. It is formed right at the top of a strong bull market. 2. There is no strong Bollinger Upper Band breakout.

Chart 1

Therefore, this trade setup can not be known as a 100 score trade setup. I give it a 80-90 score. I do not enter the market when such a trade setup forms, because of the negative points I mentioned above. There is another trade setup formed by 2013.05.15 candlestick which is a strong Shooting Star with a strong upper shadow that is broken out of the Bolli nger Upper Band strongly. I would not take this trade setup either, even if the confirmation candlestick would close as a strong bearish candlestick (you know that Shooting Star has to be confirmed by the next candlestick). The reason is that this trade setup is also formed right at the top of a strong bull market.

Result: 708 pips H to L Continuation trade MA50 continuation trade DBB

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After the 2013.05.23 trade setup, which is an 80-90 score trade setup, another strong bearish candlestick formed (2013.05.29). I would go short after the close of this candlestick, because it confirms that although the 2013.05.23 trade setup was not strong enough, bears have taken the control now, and so the price will go down. I know that there is no Bolli nger Upper Band breakout with this candlestick, but as it is formed right after the 2013.05.23 trade setup, it could be known as a strong confirmation to go short.


96

USD:CHF Daily 80-90 PTS Chart 1

Another trade setup is formed by 2013.07.10 candlestick. 1.

The bearish candlestick size is great. It has engulfed the body of 2.5 previous candlesticks.

2.

The Bollinger Upper Band breakout is not impressive, but is not too bad.

3.

The other negative point is that this trade setup has also formed at the top of a strong bull market.

Based on these negative points, this trade setup can not be a 100 score trade setup also, however, I would

go short after its formation. Do you know why? The reason is that if you look at the bigger picture, you will see that …. this trade setup is formed in a ranging market, and below the resistance level(s), or I’d better to say “resistance band (yellow)” of the previous “highs” that were made by the three previous trade setups. Formation of such a strong Bearish Engulfing Pattern below a resistance area is a good sign indicating a strong bearish attack

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Continuation trade MA50 continuation trade DBB Continuation trade BMB

80-90PTS

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GBPUSD: Daily 85 PTS

The trade setup is formed by 2014.01.02 candlesticks. 1. It is a strong Bearish Engulfing Pattern.

Chart 1

2. The Bollinger Upper Band breakout formed by 2014.01.02 candlestick, and also some of the previous candlesticks including 2013.12.31 , 2013.12.30 and 2013.12.27 is good. 3. The only negative point of this trade setup is that it is formed almost at the top of a strong bull market and up movement formed by the 2013.11.13 strong trade setup. So I give an 85 score to this trade setup:

85PTS

Continuation trade MA50 continuation trade DBB *To Contents*

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EURUSD: Daily 8O-85PTS

Chart 5

This is 1. a strong Bullish Engulfing Pattern with a continuation trade DBB

2.

strong Bollinger Lower Band breakout

3.

the pattern is formed right at the bottom of a strong bear market while

4.

the Bollinger Upper and Lower Bands are still too far from each other and are strongly pointing down.

If this pattern was formed somewhere like where you see on Chart #6, then this trade setup would be a 95-100 score too, but now that it has formed right when the trend is still too strong, I give it an 80 to 85 score. Compared to the above trade setup (Chart #6), this trade setup has a much higher risk. You may say, but the Chart #6 trade setup also moved like the Chart #5, and these two trade setups both made the price reverse very strongly. Why are you saying that Chart #5 trade setup has a higher risk? Yes, they both moved the price very strongly, but this is what we never know when the t rade setup forms. Nobody knows how the market will move after a trade setup. A ll we can do is that we analyse the setup and determine our risk. When a trade setup looks too risky, we have to stay away from it.

Carnival chart #6 point

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80-85PTS

99

EURUSD: Daily - 8OPTS

1. The market is strongly bullish when the trade setup forms by 2007.10.23 candlestick above Bollinger Middle Band. 2. The 2007.10.23 candlestick itself is not a strong bullish candlestick. 3. Additionally the Bollinger Middle Band is a tricky area. Therefore, this trade setup score is 80:

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100

GBPUSD: Daily 80 PTS

Chart 3

The chart shows two short trade setups. The first one is formed by 2010.10.15, and the second one by 2010.11.05 candlesticks. 1. The first one is a Shooting Star with a not too longupper shadow, & 2. a not very strong Bollinger Upper Band breakout, 3. formed right at the top of a strong bull market. Therefore, I can not give it more than an 80 score.

80PTS

The second one (2010.11.05), 1. is a weak Dark Cloud Cover, with 2. a not impressive Bollinger Upper Band breakout, 3. formed at the top of a bull market. This trade setup score is also 80. *To Contents*

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EURCAD : Weekly 80 PTS EURCAD Bullish Engulfing Pattern is much weaker than GBPCAD, GBPAUD, and EURAUD, while the bearish market that the EURCAD Bullish Engulfing Pattern is formed at its bottom, is strong.

current date

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102

GOLD Daily 80 PTS

80 PTS

The trade setup is formed by 1.

2.

Chart 5

3.

a Hammer candlestick on 2010.02.05. As y ou know, candlestick forms like Hammer, different kinds of Doji, Hanging Man, Shooting Star, Spinning Top, and… have to be confirmed by the next candlestick 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. The next candlestick (2010.02.09) closes with a bull ish 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 t he 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.

3.

The confirmation candlestick is not that strong.

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. *To Contents*

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103

CADJPY : Weekly 80 PTS

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 broke resistance line. As the short trade setup formed by the last closed weekly candlestick (2014.09.21 ) is not strong enough, I consider it as the beginning of a retesting attempt. I mean, the price just wants to go down and retest the broken resistance. Although I am not 100% sure about the validity of the resistance line and its breakout, still the 2014.09.21 trade setup is not strong enough for me to go short. 1. The previous candlestick (2014.09.14) is a too strong bullish candlestick, and 2. the bearish candlestick which has formed the short trade setup (the bearish engulfing pattern) has not been able to engulf the 2014.09.14 candlestick properly. I am not saying that CADJPY will not go down based on this trade setup. It is highly possible that it goes down. However, I need a stronger trade setup to go short. The way that the “W” pattern is formed, we can not say that CADJPY is forming a consolidation like what EURJPY and CHFJPY are doing. Let’s wait and see how the broken resistance will react to the retesting attempt (of course if the price goes down to retest). I give an 80 score to this trade setup.

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104

APPENDIX A3.5 STRONG SETUPS to be IGNORED

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105

GBPUSD: Daily IGNORE

Chart 4

The trade setup is formed by 2009.06.03 candlestick. 1. 2.

It is a strong Bearish Engulfing Pattern, but it is formed right at the top of a TOO strong bullish market.

So it has to be ignored defini tely, and I am not going to give it any score, because I score the trade setups that are either too strong and good and suitable for taking a position, or even if they are not too strong, but still can be considered for trading. 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. *To Contents*

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ignore 106

GBPUSD: Daily IGNORE The trade setup is formed by 2009.06.30 candlestick. Unlike the first trade setup, 1. this one is not formed right at the top of bull market, however,

Chart 4

2. the trade setup is not strong itself. The 2009.06.30 candlestick and its Bollinger Upper Band breakout is not that strong. 3. There is a small and deformed Butterfly pattern before the 2009.06.30 candlestick. Butterfly or W is a strong reversal pattern, but even with this pattern I prefer to ignore the trade setup. Continuation trade MA50


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107

USDCHF: Daily ignore Chart 3

The trade setup is formed by 2011.12.15 which is 1. a too strong bearish candlestick, with a too strong Bollinger Upper Band breakout, formed by the 2011.12.15 candlestick itself, and 2. also the previous two candlesticks.


3. The trade setup is a too strong trade setup, however as it is formed RIGHT at the top of a strong bull market,


ignore

it has to be ignored definitely. *To Contents*

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108

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

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109

GOLD: Daily IGNORE

This trade setup is formed by 2008.09.11 and 2008.09.12 candlesticks.

Chart 3

1.

It is a Bullish Engulfing Pattern. 2008.09.11 candlestick is completely formed out of the Bollinger Bands, and

2.

2008.09.12 candlestick has a good Bollinger Lower Band breakout. However,

3.

there are two important negative points with this trade setup. 1. The first one is that none of the candlesticks have a reasonable size. And 2. the second negative point is that the trade setup is formed almost at the bottom of a strong bear market.

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 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.

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110

GOLD: Daily

IGNORE Chart 3

The second trade setup is formed by 2008.09.18. 1. It is a huge candlestick with a long upper shadow which has broken out of the Bollinger Upper Band Strongly. 2. It is a Doji (with a bigger than usual body). Therefore, it had to be confirmed by the next candlestick. 3. the next candlestick (2008.09.19) did not confirm the Doji and closed with a big lower shadow, and also a big bullish body indicating that bulls were still strong.

IGNORE

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111

The third trade setup that was shown here is formed by 2008.10.10 candlestick. However, I am going to show you another trade setup that formed between the 2008.09.18 and 2008.10.10 candlesticks.

GOLD : Daily IGNORE

Chart 3

1.

It is a strong Bearish Engulfing Pattern formed by 2008.09.30 candlestick.

2.

It is not among the typical trade setups that we follow.

3.

It is a strong Bearish Engulfing Pattern but has no Bollinger Upper Band breakout

4.

However, as it is formed a few candlesticks after the 2008.09.18 Doji, it could be a signal indicating that bulls were getting exhausted and we would have a reversal sooner than later.

The third trade setup is formed by 2008.10.10 candlestick 1. which is a huge Bearish Engulfing Pattern. It has some positive points.

IGNORE *To Contents*

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 bull s 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 ty pical 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 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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112

GOLD : Daily IGNORE

IGNORE Chart 3


The fourth trade setup is formed by 2008.10.24 candlestick. 1. It has a relatively strong lower shadow, with a strong Bollinger Lower Band breakout formed by 2008.10.24 and 2. its previous candlestick. 3. Because of the special shape of 2008.10.24 candlestick, it has to be known as a non-typical Hammer that has to be confirmed by the next candlestick (of course all kinds of Hammer have to be confirmed by the next candlestick). 4. It is not confirmed by the next candlestick(s) properly. On the other hand, as 2008.10.24 candlestick is formed RIGHT at the bottom of strong downtrend that was formed after a short trade setup formed by 2008.10.10 candlestick, then it was a risky trade setup, and so, it had to be ignored. *To Contents*

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113

APPENDIX A4 MetaTrader 4 - Platform

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114

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 ins truction 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… Click on the “Next” button. 1. 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. 5. 6. 7.

Click on the “Next” button and finish the installation. So you are done with the first installation . Repeat the same process from the scratch and this time add a (2) or – 2 to the installation folder address: 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. 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

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115

Placing an indicator in MT4

How to Install Indicators, Expert Advisors and Scripts in MetaTrader 4

1.

If the indicator you want is obtained from a link on a web page, right click and then click “save target as” and save via one of the processes A or B below. 2. If the indicator you want has been saved to the «downloads» directory already – then from the downloads directory, right click and copy file. Then save it via one of the processes A or B below.

3.

click on the downloaded file, because when y ou do it your computer wants to open the file. You don’t need to open the file. You hav e to place it in the “Indicators” folder as I explained above

A Method to save Directly into your computer 1. Browse to the Indicators folder on your computer found as follows: The folder that indicators are kept in on your computer (PC) is: \\ name of your computer\Users\name of user\AppData\Roaming\MetaQuotes\Terminal\9662C61C6715C26397817D3943CECEEC …. there are no spaces in the address – the last folder, the long number noted in red, is a number set automatically by MT4 and the one you have in your computer may be different 2. Once this folder is opened you go to \MQL4\Indicators\ 3. and paste the indicator into this folder. 4. You must then close &/or restart MT4 •

B

1. 2. 3. 4. 5. 6. 7.

Method to Save by using the MT4 platform Browse to the location by: Click on “File” menu at the top left of your MT4 platform. Click on “Open Data Folder”. Open the “MQL4″ folder. Open the “Indicators” folder. Copy and paste the EA to “Indicators” folder. Restart the MT4 platform.

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116

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, pl ease 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 advi ce provided here by fxkeys.com, it’s employees, directors or fellow members. Futures, options, and spot currency trading have large poten tial rewards, but also large potential risk. You must be aware of the risks and be will ing to accept them in order to invest in the futures and opti onsmarkets. 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 l ikely to achieve profits or losses similar to those di scussed in any material on this website. The past performance of any trading system or methodology i s 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 willin g to accept them in order to trade in these markets. Forex trading invol ves substantial risk of loss and is not suitable for all investors. Please do n ot trade with borrowed money or money you cannot afford to lose. Any opinions, news, research, analysis, prices, or other information contained on this website i s 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. Pl ease remember that the past performance of any trading system or methodology is not necessarily indicative of future results.

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ABOUT THE MANUAL - FXKeys TRADING SYSTEM Collated and produced by Peter Wagner – USING INFORMATION DESIGNED BY Chris Pottorff of FXKeys.com - DEC 2014

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 art icle 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. • •

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What will the Manual do for you? Why Share it? Nothing – It’s you who has to do it. But it can be a starting point. However: I noticed that some followers were asking about previously posted information that they were uncertain of and did not now know where to locate it. And that Chris often re-answered similar questions over time, from new and existing followers. So I thought that if the manual helped me re -find and keep the knowledge then it may benefit others as well. •

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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 [email protected] *To Contents*

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Who am I?

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.

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FXKeys Trading Systems & Examples V4.3

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