A Million USD Forex Strategy Part 3

Hi Forex Traders!!

I hope that most of you had a great and profitable trading month of May! My month was great so very happy about that.

On Monday we will intensely analyze the weekly and monthly charts to get a better sense of direction for the month of June, so make sure to watch out for the release of that article!

If you want to get a warning / heads-up of the article release, just simply add us to your twitter following list and you will see the article release: https://twitter.com/@winnersedgetrad.

In the previous weeks of course we already release the 1st and 2nd parts of the Strategy article called “A Million USD Forex strategy.” Please click on thelink here for the 1st partand here for the 2nd part.

Today it is time for the 3rd part: the optimizers! I am sure you are going to LOVE it!

And the good thing is… Just like the last parts were free Forex strategies…  the bonus parts will be revealed, for free as well!

In return I do have ONE favor…. I do not think it is really much to ask. In exchange for the free strategy, I would like to ask if you could write 1 comment down below? I would really appreciate that!!

I am sure you already realize the awesome potential this strategy has in the Forex market. You can see that the Million Dollar Strategy is simple and requires low maintenance, but yields great reward and lots of pips.

There are a few things which can help you optimize the strategy. To be clear, the main strategy is all you need. BUT, the add-ons allow for more flexibility for those Forex traders seeking better Rate of Returns. So here is the continuation of this great free Forex strategy.

Risk management

Risk management is a vital element for every single Forex trader on the planet.

The usual approach is to take a standard low sized risk on each trade.

This approach certainly has its advantages because the Forex trader is capitalizing on their strategy edge.

Adjusting the risk management profile however could make sense if a Forex trader is able to successfully define trades with higher probabilities.

a)      When a currency setup has better statistical odds to succeed, it would be prudent to increase the risk levels;

b)      When a currency setup has worse statistical odds to succeed, it would be prudent to decrease the risk levels.

Logically speaking, any increase or decrease should stay within our maximum risk tolerance. Let us provide an example:

a)      An usual maximum level of risk is for example 2-3% of the trading account capital;

b)      The standard risk on every trade is 0.5% in order for the trader to have multiple open positions;

c)       The risk on a trade setup with higher odds could, for example, be increased by 20% to 0.6% and a risk setup with lower odds could be decreased by 20% to 0.4% risk.

What kind of filter could give us that slight edge to vary the risk management structure on the trade setups?

Moving averages. It is truly that simple. Moving averages are just a great indication of the longer term momentum.

Yes, the Million Dollar Strategy setup actually uses classical highs and lows on the week and day chart for the trend definition. The moving averages do NOT change anything in this regard. They only give us an idea where we might want to slightly adjust the risk levels.

Here is the method:

1)      Place an EMA (exponential moving average) of the value 50 on the day chart;

2)      Place an EMA (exponential moving average) of the value 150 on the day chart.

Your task a Forex trader is to analyze where price action is in relationship to the moving averages and the moving average is in relationship to the moving average. These are the potential scenarios:

For an uptrend:

a)      Fractal above 50 ema / 50 ema above 150 ema à strong uptrend / increase risk

b)      Fractal above 50 ema / 50 ema below 150 ema à reversal retracement / same risk

c)       Fractal below 50 ema / 50 ema below 150 ema à weakness / decrease risk

d)      Fractal below 50 ema / 50 ema above 150 ema à continuation retracement / same risk

example 16

For an downtrend:

e)      Fractal below 50 ema / 50 ema below 150 ema à strong downtrend / increase risk

f)       Fractal below 50 ema / 50 ema above 150 ema à reversal retracement / same risk

g)      Fractal above 50 ema / 50 ema above 150 ema à weakness / decrease risk

h)      Fractal above 50 ema / 50 ema below 150 ema à continuation retracement / same risk

This is a great way of using a moving average: the risk management levels can be altered depending on the position of price versus the moving averages.

Read more about the importance of risk management, minimizing risk and maximizing reward, and money management in Forex by clicking on the links.

Be careful with overtrading

There are cases when multiple fractals occur at the same spot or close to each other. It is neither necessary nor advisable to take all of these fractal breaks.

One or maybe two of these fractal breaks is sufficient because it is in fact taking the same trade setup, with only a small difference in entry value.

Please the example here below.

example 17

Using the parabolic

The parabolic is an indicator which can be found on any Forex chart. Please read here an article on how to trade with the Parabolic SAR indicator.

This indicator is unique because it automatically trails price action. At first the trail stop is quite distant away from current price action. This means that the parabolic is below price action for an uptrend and above price action for a down trend.

The parabolic attempts to give trade time and space to develop in the direction of the trend. There are two scenarios:

a)      Trend continues: price action continues in trend and the parabolic continues to follow price action;

b)      Trend does not continue: price action reverses and goes in opposite direction, price then hits the parabolic and the parabolic is placed on the opposite side.

The interesting part of the parabolic is that it trails price action closer and closer as the trade matures.

Due to this feature a Forex trader can use the Parabolic as a trail stop.

The advantage of the Parabolic indicator is its uniqueness in giving a trade more space at first, but later on trail stopping price action tighter and tighter.

The advantage of our tail stop method mentioned in the first part of the eBook is that it is usually an even tighter method of locking in profit.

The choice is yours. Both are great ways of trail stopping a trade.

example 19

Candle stick patterns

By the way, just as a friendly reminder… In return for this strategy, I do have ONE favor…. It only takes a few seconds of your time and it would make me very happy. You don’t want me to be sad this weekend right? LOL. I would like to ask if you could write 1 comment down below? I would really appreciate that!! I would like to see what you think and get to know you better, thanks again!

Using basic candle stick patterns is always a great extra tool. That philosophy holds true for our Million Dollar Strategy as well!

First of all read this great article on how to trade using no indicators.

You don’t want to miss out on these 3 articles as well:

-          Simple Forex trading: impulsive moves

-          Trading breakouts

-          Pinbars

When applying this strategy we advise to use the weekly chart for candle stick formations that provide guidance and a heads-up of future events.

You might wonder why not use the candle sticks on the day chart?

Generally speaking there is nothing wrong with using day chart candle stick patterns. But we do not recommend it for this strategy.

Our Million Dollar strategy has its own specific rules for implementation. When a Forex trader would use price action signals on the day chart, there is a strong likelihood that they are going to mess around with the trade too prematurely.

The rules are there for a reason.

With that said, the weekly chart is of a higher time frame. Four times as high. We do not want to ignore the signals this chart communicates to us.

Here is an example:

example 20

 

So that was the entire free currency strategy! :) Now you have a clear idea how to trade the Forex market :)

Just a friendly question, whether you have enjoyed the article on how to trade a Forex strategy?

1)      Please write a comment on our blog with your feedback!

2)      Also, thank you SO MUCH for sharing this bonus article with your friends and via social media! 

Thank you for reading!

And wish you Good Trading in June!!!!

Chris Svorcik
Winners Edge Trader, Writer, Educator

https://twitter.com/@winnersedgetrad

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Chris is the head of the mentoring program and trading room at Winner's Edge Trading. He has a passion for technical analysis and helping Forex traders achieve their goals in trading. Chris has been trading for almost 10 years and is most fond of the Double Trend Trap (as a strategy), moving averages (as an indicator) and Fibonacci (as a tool).
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  • nerikas

    Marvelous presentation, very concise, easy to understand and well planned materials. Thank you for sharing those stuff, surprisingly they are FOC. Those stuffs are free articles but you guy present those professionally.
    I am yet to be your premium member but ponders what winnersedgetrading members benefit from you guys.

  • Hubi

    Hey there,

    this system seems to be as simple as possible while not making things simpler. Very cool!

    As far as I understood parabolic SAR can be used for the trace stop.

    Another good method here is (I have made good experience with it) to consider the outside days (inside days) for moving the stop. So you are able to follow long trends
    .

  • zech

    I just finished the articles, and it is really good work.

    I go through some charts and found that AUSUSD is about to break the low fractal which set on 29 May. However, using the high fractal on 3 Jun of about 300 pips are really risky! Is this still a good setup?

    Also, I found NZDUSD had similar setup. The low fractal on 23 May was broken on 31 May. Is it still ok to get in if the price had retraced up?