The Mogwai Strategy

What Is the Mogwai Strategy?

The Mogwai Strategy is our latest and most popular strategy to join the Binary Destroyer line up. The reason for its

popularity amongst the Binary Destroyer members is due to how easy it is to understand the rules. The Mogwai uses a

new set of arrows which are based on two Relative Strength Indexes, so when used effectively can produce some

extremely powerful signals. If you understand Relative Strength Indexes you will know they are used to guide traders on

how strong or weak the momentum is in the market and when price is overbought or sold. When you combine this

combination with the Binary Destroyer and Support & Resistance, it becomes a recipe for a profitable strategy.

The Rules

The rules for this strategy can be very diverse. As the arrows are based off two RSIs you can easily change the settings for

this strategy to produce more or less signals, depending on your trading style. We will guide and educate you on our

preferred settings and entry points; but please don’t be alarmed if you see other members trading this strategy

differently. This strategy can be adapted to suit every type of trader from swing traders to scalpers.

Setting up the Mogwai Strategy.

As we explained earlier, this strategy can be used to either scalp or

swing trade the market. A lot of members will change the settings

to best suit their style of trading. The settings to the left are not

actually the default settings when you first install the Binary

Destroyer, but we do recommend you use these. These settings are

the most commonly used and this is what we use when doing our

training and webinars.

As you will notice the Mogwai Parameters are based off the

Relative Strength Index. This is the key to the Mogwai’s success. A

Mogwai arrow will only appear when the RSI signal line has crossed

over the overbought or oversold line of the RSI. The more extreme

these levels are, the more overbought or oversold the market is.

This in turn will produce a more actuate signal. The downside to

changing the RSI levels is you will get less signals. We found these

settings are the best for all around accuracy and consistently. You

are free to change these settings and experiment for yourself.

The Secret to the success?

On the left you have an example of pure price action trading

and it’s this example that explains perfectly why the Mogwai

strategy is so successful. Every single trader out there will

agree that Support & Resistance is key to mastering the

markets. Some will have opinions on what works and what

doesn’t work but everyone will agree that S & R is key to

making profits.

Now when you are trading Support and Resistance levels you

don’t want to just take trades when price comes to these

levels. You want to see some kind of rejection or

confirmation for us to want to enter a trade. This is where

the Relative strength index comes into play.

The RSI is designed to guide traders on when the market is

overbought or sold. To keep it simple, when we should be

buying, and when we should be selling the market. The RSI is

an oscillator and we can’t solely rely on this to enter trades,

but having this part of our trader’s tool box is important; and

here is why:

Relative Strength Index

The example on the left shows what happens

to price when the RSI goes overbought or

oversold.

When the RSI crosses the oversold level, Price

will go up.

When the RSI crosses the overbought level,

Price will go down.

Now in theory this seems pretty easy, but in

fact it’s not. Trading isn’t that simple

unfortunately. We cannot solely rely on the

RSI crossing over the overbought/sold levels

and then take a trade. This is where Support

and Resistance comes into play.

In the example on the left, if price comes

down to a support line and the RSI is oversold

then it now gives us a greater chance that

price will bounce off this level and go up.

Why?

As a trader you have to remember that price is controlled by human input and supply and demand. The more traders buy

the more price will go up. The more traders sell, the more price will go down. The RSI is measuring the momentum in the

market and calculates when price is likely to be overbought or sold. (Over extended market). Traders use this to gauge on

when to enter the market. Now when you also factor in that traders will also buy and sell around Support and Resistance

zones, adding the two together makes it a pretty strong indication when to enter a trade.

The Mogwai arrow will only appear when the RSI line crosses over the overbought level or oversold level. The more

extreme these levels are, the more powerful they become.

So How do we master the Mogwai Strategy?

So now you understand why Mogwai arrow appears, we now need to know how to select the right arrows to take. When

an arrow appears we know the RSI will be overbought or sold so we can use this to our advantage. The next factor we

need to take into consideration is Support and Resistance zones. Support and Resistance zones are areas on the chart

where price has bounced or rejected from in the past. Traders use these zones as possible arears where price will likely

reverse again. As a rule of thumb in trading you want to draw your support and resistance zones on the higher time

frames. Ideally it needs to be two time frames above the one you are trading.

So for example if you are trading off the 5 minute time frame, you want to be drawing your support and resistance zones

off the 15 and 30 minutes.

If you are new to drawing support and resistance zones then it’s a good idea to change your

charts to a line graph. This will highlight the highs and lows in the currency pair and you can

draw these points together. You want at least 2 or 3 previous touches of a

support/resistance zone to be counted as a valid area. Remember that support and

resistance zones can be the same thing. If a support zone is broken, then that area can

become a resistance zone in the future.

Relative strength Index & MAC’D Indicator

Our final entry point for the Mogwai strategy is waiting for the RSI or MAC’D line to be overbought or sold. The RSI on the

bottom of our charts is separate to the Mogwai arrows so we can use this as an advantage to us. We use the standard

settings for the RSI which is a period of 14 and an oversold/bought level of 80/20. Let’s look at an example of when a

Mogwai arrow appears outside of the zone; RSI is overbought and price is near a resistance level.

In this example you can see how price has come up to the resistance area and the BD

has popped a Mogwai arrow. Notice how the RSI at the bottom has turned red

signifying the market is overbought. This is a really good example of a nice sell trade

using the Mogwai Strategy.

The Signal Arrow

With all of our strategies with the Binary Destroyer it’s important to note when a

signal arrow appears to have a look at where the signal candle is located. For a valid

trade to happen we want to see the signal candle outside of the zone or at least 90%

out. It doesn’t matter where the arrow is located, for a valid setup to happen; the

signal candle has to be outside of the zone. The more the candle is outside the zone

the better the signal. In extreme cases some experienced members will bend this

rule slightly if price is near a strong support and resistance zone. If you are a

beginner to trading then we suggest being patient and following our rules.

MAC’D Indicator

Instead of using the RSI indicator that comes standard with the Binary Destroyer, we can also use a MAC’D indicator. This

indicator works similarly to the RSI by confirming when a currency pair is overbought or oversold.

Can you see how the MAC’D line crosses over the oversold level? When

this happens we can use this to confirm our entries. The MAC’D is

considered a more stable trading indicator to use than most momentum

indicators, so it’s good to have this part of our trading tool box.

The Rules

The Mogwai is a relatively simple strategy and this is why it’s become hugely successful among the BD members. The most

difficult part of this strategy is understanding Support and Resistance. Understanding Support and Resistance in Mogwai is

crucial; therefore we recommend that you learn basic market structure before you trade this strategy. Support and

Resistance zones can appear everywhere on your charts, so it’s important you understand which ones are important and

which aren’t.

Rule 1 - Mogwai Arrow candle outside the zone

Rule 2 - RSI/MAC’D Indicator is overbought or sold

Rule 3 – Support and Resistance

This strategy is awesome for beginners as it teaches the trader the significance and impact of support/resistance and

overbought/oversold markets. Once you understand this strategy, you will have the foundations necessary to progress

your career as a Price Action Trader.

Taking a Trade

When it comes to Forex trading it’s all about managing your trades and money

correctly. It doesn’t matter how good a strategy is, if you can’t manage your trades

properly then you won’t stay consistent. When placing a Mogwai trade you

always want to set your stop-loss 2-5 pips above or below the previous support

and resistance. We want to do this so our stop-loss is protected by the support and

resistance zones. This means that if price goes against us then the Support &

Resistance will protect us first before our stop-loss gets hit.

Our Take Profit should always be a minimum 1:1 risk reward ratio depending on

what time frame you are trading. If you are trading the higher time frames like 1-4

hour, then you can target a lot more pips. If you are scalping off the 5-15 minute

time frames then you want to target a 1:1 or 1:2 risk reward ratio.

This means if your stop loss is 5 pips then your take profit should be 5 or 10 pips.

This is the important part of trading; understanding money management is critical

and you must learn the fundamentals of money management if you want to make

consistent profits. As soon as a trade goes into profit you can close off half of your

position or use a trailing stop loss. These are techniques that we can do to

maximise our profits and protect our capital. If you do not understand all this then

we do recommend you take our ‘Manage Your Trades’ course. It will help you a lot

with this!

Key Information

So hopefully by now you have got the fundamental key points to mastering this strategy. If you do not understand any

part or have any questions then please reach out to us so we can help you. When mastering this strategy you want to

write down these entry points on a piece of paper and keep it next to you when trading. This acts as a tick sheet for when

you get setups, and you can check they meet the entry rules.

Is the Arrow outside of the Zone?

Is the RSI/MAC’D overbought or sold?

Is there a clear Support & Resistance zone?

We suggest you download a trading simulator and do some back testing with this first. Simulating your trading will

massively increase your learning speed as you don’t have to wait for setups to appear. You can speed up the markets to

give you setups one after another. You can simulator an entire weeks trading in less than 30 minutes.

We wish you all the best in your trading career and don’t be afraid to ask questions if you struggle.

Jamie Palmer