module 1enlight.s3.amazonaws.com/system4/poseidon.pdf · −the basics of forex −the basics of...
TRANSCRIPT
1
Module 1
Getting Started
Setting Up the Charts, Timeframes, and Currency Pairs
2
Precursors
� This system is easy enough to learn even for newcomers, however you will be better off if you have knowledge of the following:
− The basics of Forex
− The basics of Charting
− How to make a trade using your brokers software
� For those unfamiliar with Forex, start with a practice account
3
In This Video
� Overview – Indicators, Timeframes, Currency
� The elements of the trading system
� Setting up your charts to get ready to trade
� Saving the system as a template to easily access it later.
Note: This system will work with most charting software, however since Metatrader is the most popular all examples will show that software
4
Meta Trader
� If you don’t yet have it, get MetaTrader from one of the following brokers
− Alpari
− FXDD
− FXCM
− Any other broker that has Metatrader as an option.
� Even if you don’t plan to use it always, open a practice account and use MetaTrader to follow through the videos.
5
Components of the System
� MACD Histogram (3,6,3).
� Exponential Moving Average 9-period
� Exponential Moving Average 20-period
� Exponential Moving Average 50-period
� Exponential Moving Average 200-period
6
Timeframes to Use
� This system can be used with the following charts:
− 1 hour
− 4 hour
− Daily
� We will use the 1 hour and 4 hour charts in our videos.
7
Currency Pairs
� The following currency pairs are recommended to start:
− EUR/USD
− GBP/USD
− GBP/JPY
− USD/CHF
− EUR/JPY
− USD/JPY
� You can use other currencies, but back test first!
8
Setting up a Chart – First Time
� Open up a chart. At this point it doesn’t matter which one, we just want to setup a template in metatrader.
� Add the elements of system:− MACD Histogram (3,6,3).
− EMA 9, Purple Color
− EMA 20, Blue Color
− EMA50, Green Color
− EMA200, Orange Color
9
The Finished Chart
10
Save the System as a Template
Move on to the next video.
11
Module 2
System Overview
Reading the charts, and determining trends
12
System Overview
� This trading system used the trends and is essentially a TREND system.
� You need to be able to read the uptrend and downtrends
� Longer term charts (ie 1 hour, 4 hour, or Daily) are best if you are just starting out.
13
In this Video
� Determining an Upward Trend using our charts
� Determining a Down Trend using our charts
� What a retracement is and how to chart them with this system.
� We won’t be covering entry signals just yet, but we need to be able to read the charts.
14
Trend Basics
� When the currency is moving up, and has been for a while, we are in an up trend.
15
Trend Basics 2
� When the currency is moving down, and has been for a while, we’re in a down trend
16
Trend Basics 3
� Trading with the trends allows us a certain margin of safety.
� By using the trends and specific indicators to help us determine when the best time to enter/exit is, we help to increase that safety margin.
� You need to be able to quickly determine the trends using our indicators.
17
The Trends with Our Charts
� Up Trend
− Price is above both EMA50 and EMA200
− EMA50 just crossed EMA200, and is currently above EMA200.
− MACD value is positive.
18
The Trends with Our Charts
� Down Trend
− Price is below both EMA50 and EMA200
− EMA50 just crossed EMA200, and is currently below EMA200.
− MACD value is negative.
19
Retracements
� Even when trending prices to move in waves. They move with the trend, then retrace slightly, and then continues to move with the trend.
20
MACD Indicator and Retracements
� This can help us find entry points
21
Conclusion
� Take some time to study the trends, and watch how the MACD reacts to price movement. Specifically when a retracement occurs.
� Then move onto the next video to start with short trades.
22
Module 3
Short Trades and Examples
Entry signals, exit strategies, and sample trades.
23
Short Trades Overview
� We determine the trend is in fact down.
� We look for a sell indicator
� We enter the trade as per our rules
� We use our exit strategies to exit the trade at the right times.
24
Entering a Trade
� Trend Determination− Price is below both EMA50 and EMA200
− EMA50 just crossed EMA200, and is currently below EMA200.
− MACD value is negative.
� Entry Signal - Retracement− When price rises, it makes MACD value increase and MACD
value eventually becomes positive.
− The trigger is when MACD value turns from positive back to negative.
� Place the Order− When that happens, we enter at market price with two
lots.
25
Rules for Entering the Trade
� Enter at market price with 2 lots (or multiples of 2)
� We place a protective stop loss 1 pip above the Highest Price of the Pull-Back (Retracement).
� Follow one of our two exit strategies (covered shortly)
26
Entry Example - Trend
� We are in a down trend. − Price is below both EMA50 and EMA200
− EMA50 just crossed EMA200, and is currently below EMA200.
− MACD value is negative.
27
Entry Example - Signal
� Entry Signal− When price rises, it makes MACD value increase and MACD
value eventually becomes positive.
− The trigger is when MACD value turns from positive back to negative.
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Entry Example - Order
� We place an order for two lots. − Enter at market price with 2 lots (or multiples of 2)
− We place a protective stop loss 1 pip above the Highest Price of the Pull-Back (Retracement).
− Follow one of our two exit strategies (covered shortly)
29
Exit Strategy 1
� We exit the first lot when MACD turns from negative to positive. At this time, we might also move the stop loss for the second lot to break-even.
30
Exit Strategy 2
� We exit the second lot when EMA9 cross EMA20 to the upside.
31
Trade Examples
� Watch the trade examples
� Once you’re done move onto video 4 to learn about long trades.
32
Module 4
Long Trade and Examples
Entry signals, exit strategies, and sample trades.
33
Long Trades Overview
� We determine the trend is in fact up.
� We look for a buy indicator
� We enter the trade as per our rules
� We use our exit strategies to exit the trade at the right times.
34
Entering a Trade
� Trend Determination− Price is above both EMA50 and EMA200
− EMA50 just crossed EMA200, and is currently above EMA200.
− MACD value is positive.
� Entry Signal - Retracement− When price falls, it makes MACD value decrease and MACD
value eventually becomes negative.
− The trigger is when MACD value turns from negative back to positive
� Place the Order− When that happens, we enter at market price with two
lots.
35
Rules for Entering the Trade
� Enter at market price with 2 lots (or multiples of 2)
� We place a protective stop loss 1 pip above the Highest Price of the Pull-Back (Retracement).
� Follow one of our two exit strategies (covered shortly)
36
Entry Example - Trend
� We are in an up trend. − Price is above both EMA50 and EMA200
− EMA50 just crossed EMA200, and is currently above EMA200.
− MACD value is positive.
37
Entry Example - Signal
� Entry Signal− When price falls, it makes MACD value decrease and MACD
value eventually becomes negative.
− The trigger is when MACD value turns from negative back to positive
38
Entry Example - Order
� We place an order for two lots. − Enter at market price with 2 lots (or multiples of 2)
− We place a protective stop loss 1 pip below the lowest Price of the Pull-Back (Retracement).
− Follow our exit strategies.
39
Exit Strategy 1
� We exit the first lot when MACD turns from positive to negative. At this point we may set our stop loss to break even.
40
Exit Strategy 2
� We exit the second lot when EMA9 cross EMA20 to the downside
41
Trade Examples
� Watch the trade examples
� Once you’re done move onto video 5 for money management rules and tips to stay profitable.
42
Module 5
System Advanced
Money management, and tips to stay profitable in the long run.
43
Why Money Management
� There is no such thing as a trading system that wins 100% of the time.
� By managing our money correctly we capitalize on our winning trades and protect the money we have earned.
� We also protect ourselves from large drawn downs if we do encounter a losing streak.
44
Elements of a Good Money Management System
� A clearly defined %R – that is the amount we are willing to risk on any given trade defined as a percentage of our account balance.
� A method to calculate the correct trade size according to our stop loss and our %R
45
Calculating Per Pip Value
� (one pip, with proper decimal placement/currency exchange rate) x (Notional Amount)
� Example 1 USD/JPY (.01/126.26) x USD100,000 = $7.92
� If the USD is on the right the value is $1 per pip for a mini-lot and $10 per pip for a full lot
46
Using the Per Pip Value to Calculate Potential Loss
� We enter a long trade on the EUR/USD at 1.5020
� Our initial stop is set to 1.4995
� We are risking 1.5020 – 1.4995 = 0.0025 or 25 pips.
� 25 pips x $10 per pip = $250 risked with every lot we trade.
47
Calculating Trade Size
� With our per lot risk, we can then calculate a trade size. Assuming your account balance was $120,222 and your %R is 2%:
� You can risk 120,222 x .02 = 2404.44 with any trade.
� From that we can trade 2404/250 = 9.61 lots
48
With Our System
� Since the system we are teaching uses multiples of 2 for trades you need to trade 2 lots or multiples of 2.
� If you could trade both full lots and mini lots, using the last example you would trade 4 lots and 8 mini lots twice.
� If you can’t trade mini lots you would round down to 8 or 9 lots for the trade.
49
Tips to Stay Profitable
� Start with longer term charts. Trends are more defined over the longer term.
� Use a practice account until you are completely comfortable trading the system.
� Practice money management rules religiously.
� Learn the currency pairs you trade well. This will help you to avoid false signals