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.

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Module 2

System Overview

Reading the charts, and determining trends

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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.

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Trend Basics 2

� When the currency is moving down, and has been for a while, we’re in a down trend

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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.

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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.

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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)

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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.

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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.

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Exit Strategy 2

� We exit the second lot when EMA9 cross EMA20 to the upside.

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Trade Examples

� Watch the trade examples

� Once you’re done move onto video 4 to learn about long trades.

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Module 4

Long Trade and Examples

Entry signals, exit strategies, and sample trades.

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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

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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 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.

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Exit Strategy 2

� We exit the second lot when EMA9 cross EMA20 to the downside

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Trade Examples

� Watch the trade examples

� Once you’re done move onto video 5 for money management rules and tips to stay profitable.

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Module 5

System Advanced

Money management, and tips to stay profitable in the long run.

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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.

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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

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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.

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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

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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.

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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