Before we get going into the system itself let me start with a little introduction. (and let me say that at the bottom I have 3 videos that describe the system if you don't want to read through everything)
I made my living as a professional gambler for about 20 years and I was quite successful with it. I am absolutely convinced that a large reason for my success was being nearly fanatical with money management. More than 7 years ago now I started looking at trading various markets and I quickly discovered that money management was equally important and some of the same approaches that made me a successful gambler also worked in the world of trading.
Just a touch over six years ago now I stopped gambling all together and I've been making my full time living as a trader. I'm saying this for a very important reason.
If your money management isn't up to par there isn't a single system on the planet that has any hope of being profitable.
In my opinion if you're going to trade micro-lots then you need an account size of at least 1k. That's the minimum. 5k is better. At mini-lot size trading you'd need 10k at least and really you should have 50k (which means if you have 10k you should probably still be trading micro-lots). You don't need to be a math whiz to see where this is going.
You never want any one trade to represent more than a very small percentage of your total trading bankroll. That will let you trade more rationally and with less emotion.
SECONDLY, I am a firm believer in the stock market phrase of "cut your losers and let your winners ride." By that I mean it is often better to close a trade that is negative and take the hit on the loss than it is to keep it open and "hope" the market changes and moves back in your favor. I am VERY quick to close a trade that is negative and very slow to close a trade that is profitable.
There is a reason for this. ALL TRADES OPEN IN THE NEGATIVE. Every trade represents a losing position when you open it because of the bid/ask spread. Every new trade represents a risk.
However, there is no real risk to letting a profitable trade stay open especially if you're smart and you add in trailing stops so that you know your profitable trade MUST close profitably. You can leave it open and let it run.
With the preliminaries out of the way, the system itself begins with the T which stands for "trend." Below is an EURUSD monthly chart.
The system starts by looking at a pair on the monthly chart and identifying the trend that it is currently in. You can see from the chart that EURUSD has been in a down trend since 2008.
So, for starters, until the trend changes we will only trade this pair short. In my system I only trade with the trend, never against it.
However I believe that knowing WHY they trend is going that direction is important. So the "A" in the system is for analysis. Now I'm not talking about technical analysis here. I'm talking about fundamental and sentiment analysis. This is important because this type of analysis can help you determine when/if the trend might be changing. Sentiment analysis can also help to give you an understanding of when to close out a profitable trade.
As an example the eurozone is still a total mess. The sovereign debt problem is becoming worse, not better. However, trader sentiment is still somewhat positive that the eurozone will fix its issues and so over the last few months the pair pushed upward and is now sitting against long term resistance.
Once you have looked at the long term trend and performed your analysis, it's time to look at the "W" ... the "waves". Now I'm not talking about elliot waves here or something like that. I'm talking about the way the market pushes and pulls even within the trend.
Below is the EURUSD daily chart.
You can see that the pair is back to moving downward with the trend.
Now, lets talk about rules for entry/exit
If you notice, EURUSD is in a down trend but over the last few months has moved back up until it basically touched resistance. From here we look at the daily time frame. The entry at this point is AT LEAST THREE candles (basically three consecutive days) of the pair bouncing off resistance and moving back in the direction of the trend.
This is why you can see on my daily chart so many other lines.
I stick to the long term view until the first setup happens. (pair against resistance)
Then I change to the daily and start looking for the bounce off resistance which you can see did happen.
Now, and this is important. Simply getting 3 days of bounce off resistance IS NOT ENOUGH. I want my fundamental analysis to tell me that there's a reason the pair is back to moving with the trend.
Otherwise current sentiment can overwhelm the short term bounce and you end up opening a losing trade.
Not only that, but when you look at the EURUSD on the daily chart there still hasn't been 3 consecutive days of the pair moving with the trend.
However there ARE fundamental reasons why EURUSD is back to moving down and we have the "rumor" of the FOMC announcing some tightening on Wednesday as I type this. So while the "rule" is 3 consecutive ... we perform the analysis to give us a more complete look at the pair.
Not only that, but when you very first open the trade, knowing your S/R lines means that you have a better understanding of where to place your stop loss.
So, to exit a pair, I will exit on a loss if the pair moves more 12 pips past my S/R line.
Once a pair is 50 pips in profit I'll set an initial profit stop at 10 pips in profit.
Once it is 80 pips in profit I'll set a 50 pip trailing stop.
The idea here is that I don't want to have to babysit a trade.
I go to bed and end a trading session all the time with trades open knowing that no trade can lose more than a certain amount or those trades that are profitable must close in profit.
Now, this is the high level basics of the system. I am well aware that there's a lot of detail still left out. I'm going to be going into more detail in subsequent posts.
I want to say one more thing. This is my system and it works well with how I think and do things. It is not BY ANY MEANS some kind of holy grail or the only right way to trade.
In fact let me go one step further. You should use what you learn from my system as a way of creating a system OF YOUR OWN that works with how you think and view the markets.
I trade over long time frames and leave trades open because I'm a fairly risk averse trader. I'm also somewhat lazy and I just don't want to have to put in the REALLY hard work of trading constantly and babysitting every trade and all of that (which also seems far too stressful to me).
I'm not suggesting that you shouldn't trade that way if it works better for you. I'm simply letting you know what works for me and hopefully you can use it to improve your own trading.
Lastly, I will be doing some fairly extensive analysis of various markets beyond forex at my YouTube channel that can be found here: https://www.youtube.com/channel/UCLOHtOu2AIhXsOGirneFoEQ (just scroll to the "uploads" section below the "about me" to see the analysis videos)
Okay, now here are the videos I have about the system up to this point (and the thread itself has more information as well).. Some of them might have some "dead air" in the beginning, if you let them play the audio will start.
This video is the intro
https://www.youtube.com/watch?v=4V2ZEAf6BdM&t=21s
In this video I take a bit of a tangent and talk about Arbitrage, what it is and how to do it (arbitrage isn't a part of the system but there's so many misconceptions about what it is that I wanted to give some information on it).
https://www.youtube.com/watch?v=-gs3uFmOMSM
In one of the next two videos there might be a little bit of dead air in the middle when I had to hit pause because of noise going on around me.
https://www.youtube.com/watch?v=TH-XsgtO3iY&t=119s
https://www.youtube.com/watch?v=Xc3m57NQjFo
I made my living as a professional gambler for about 20 years and I was quite successful with it. I am absolutely convinced that a large reason for my success was being nearly fanatical with money management. More than 7 years ago now I started looking at trading various markets and I quickly discovered that money management was equally important and some of the same approaches that made me a successful gambler also worked in the world of trading.
Just a touch over six years ago now I stopped gambling all together and I've been making my full time living as a trader. I'm saying this for a very important reason.
If your money management isn't up to par there isn't a single system on the planet that has any hope of being profitable.
In my opinion if you're going to trade micro-lots then you need an account size of at least 1k. That's the minimum. 5k is better. At mini-lot size trading you'd need 10k at least and really you should have 50k (which means if you have 10k you should probably still be trading micro-lots). You don't need to be a math whiz to see where this is going.
You never want any one trade to represent more than a very small percentage of your total trading bankroll. That will let you trade more rationally and with less emotion.
SECONDLY, I am a firm believer in the stock market phrase of "cut your losers and let your winners ride." By that I mean it is often better to close a trade that is negative and take the hit on the loss than it is to keep it open and "hope" the market changes and moves back in your favor. I am VERY quick to close a trade that is negative and very slow to close a trade that is profitable.
There is a reason for this. ALL TRADES OPEN IN THE NEGATIVE. Every trade represents a losing position when you open it because of the bid/ask spread. Every new trade represents a risk.
However, there is no real risk to letting a profitable trade stay open especially if you're smart and you add in trailing stops so that you know your profitable trade MUST close profitably. You can leave it open and let it run.
With the preliminaries out of the way, the system itself begins with the T which stands for "trend." Below is an EURUSD monthly chart.
Attached Image
The system starts by looking at a pair on the monthly chart and identifying the trend that it is currently in. You can see from the chart that EURUSD has been in a down trend since 2008.
So, for starters, until the trend changes we will only trade this pair short. In my system I only trade with the trend, never against it.
However I believe that knowing WHY they trend is going that direction is important. So the "A" in the system is for analysis. Now I'm not talking about technical analysis here. I'm talking about fundamental and sentiment analysis. This is important because this type of analysis can help you determine when/if the trend might be changing. Sentiment analysis can also help to give you an understanding of when to close out a profitable trade.
As an example the eurozone is still a total mess. The sovereign debt problem is becoming worse, not better. However, trader sentiment is still somewhat positive that the eurozone will fix its issues and so over the last few months the pair pushed upward and is now sitting against long term resistance.
Once you have looked at the long term trend and performed your analysis, it's time to look at the "W" ... the "waves". Now I'm not talking about elliot waves here or something like that. I'm talking about the way the market pushes and pulls even within the trend.
Below is the EURUSD daily chart.
Attached Image
You can see that the pair is back to moving downward with the trend.
Now, lets talk about rules for entry/exit
If you notice, EURUSD is in a down trend but over the last few months has moved back up until it basically touched resistance. From here we look at the daily time frame. The entry at this point is AT LEAST THREE candles (basically three consecutive days) of the pair bouncing off resistance and moving back in the direction of the trend.
This is why you can see on my daily chart so many other lines.
I stick to the long term view until the first setup happens. (pair against resistance)
Then I change to the daily and start looking for the bounce off resistance which you can see did happen.
Now, and this is important. Simply getting 3 days of bounce off resistance IS NOT ENOUGH. I want my fundamental analysis to tell me that there's a reason the pair is back to moving with the trend.
Otherwise current sentiment can overwhelm the short term bounce and you end up opening a losing trade.
Not only that, but when you look at the EURUSD on the daily chart there still hasn't been 3 consecutive days of the pair moving with the trend.
However there ARE fundamental reasons why EURUSD is back to moving down and we have the "rumor" of the FOMC announcing some tightening on Wednesday as I type this. So while the "rule" is 3 consecutive ... we perform the analysis to give us a more complete look at the pair.
Not only that, but when you very first open the trade, knowing your S/R lines means that you have a better understanding of where to place your stop loss.
So, to exit a pair, I will exit on a loss if the pair moves more 12 pips past my S/R line.
Once a pair is 50 pips in profit I'll set an initial profit stop at 10 pips in profit.
Once it is 80 pips in profit I'll set a 50 pip trailing stop.
The idea here is that I don't want to have to babysit a trade.
I go to bed and end a trading session all the time with trades open knowing that no trade can lose more than a certain amount or those trades that are profitable must close in profit.
Now, this is the high level basics of the system. I am well aware that there's a lot of detail still left out. I'm going to be going into more detail in subsequent posts.
I want to say one more thing. This is my system and it works well with how I think and do things. It is not BY ANY MEANS some kind of holy grail or the only right way to trade.
In fact let me go one step further. You should use what you learn from my system as a way of creating a system OF YOUR OWN that works with how you think and view the markets.
I trade over long time frames and leave trades open because I'm a fairly risk averse trader. I'm also somewhat lazy and I just don't want to have to put in the REALLY hard work of trading constantly and babysitting every trade and all of that (which also seems far too stressful to me).
I'm not suggesting that you shouldn't trade that way if it works better for you. I'm simply letting you know what works for me and hopefully you can use it to improve your own trading.
Lastly, I will be doing some fairly extensive analysis of various markets beyond forex at my YouTube channel that can be found here: https://www.youtube.com/channel/UCLOHtOu2AIhXsOGirneFoEQ (just scroll to the "uploads" section below the "about me" to see the analysis videos)
Okay, now here are the videos I have about the system up to this point (and the thread itself has more information as well).. Some of them might have some "dead air" in the beginning, if you let them play the audio will start.
This video is the intro
https://www.youtube.com/watch?v=4V2ZEAf6BdM&t=21s
In this video I take a bit of a tangent and talk about Arbitrage, what it is and how to do it (arbitrage isn't a part of the system but there's so many misconceptions about what it is that I wanted to give some information on it).
https://www.youtube.com/watch?v=-gs3uFmOMSM
In one of the next two videos there might be a little bit of dead air in the middle when I had to hit pause because of noise going on around me.
https://www.youtube.com/watch?v=TH-XsgtO3iY&t=119s
https://www.youtube.com/watch?v=Xc3m57NQjFo
Woohiye is a Lakota Sioux word that means success, or overcoming obstacles