A Million USD Forex Strategy Part 2

Welcome back Traders! Hope you had an awesome trading week…

I can imagine that some of the traders are excited about the release of part 2. And everyone should be, because today’s article will be discussing on details and specifics! So get ready for a fun ride!

Just in case you missed last’s week article, you can read it by clicking on this link. Last week’s article was just to make sure that everyone is on the same page.

The strategy s is a very simple yet highly effective and profitable trading strategy. And I believe that the entire article will provide you with a great blueprint and an example of how anyone can trade with a Forex strategy.

Best yet: I will be giving away all the details of this strategy for FREE of charge. That is the kind of thing we do here at Winners Edge Trading!

I do have one favor I want to ask from you… In exchange for the free strategy, I would like to ask you ONE THING :)

Could you write 1 comment down below? I would really appreciate that!!

Also, don’t forget add us to twitter. We send our great content day in day out so it would benefit you tremendously. https://twitter.com/@winnersedgetrad. Read on for more info on how to trade using a Forex strategy.

 

TREND CONTINUATION TRADE

So now we will be discussing the details on how to trade the Forex strategy.

A trend continuation trade is taken when the currency pauses for 2 days without breaking the high/low and then breaks through the high/low (see last article for a full explanation of that here).

For an uptrend this means: a break above the high which signals trend continuation.

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For a downtrend this means: a break below the low which signals trend continuation.

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The trade setup is based on an entry order and not on a candle close. The break is a pending entry order of 15 pips below the low (in downtrend) or above the high (in uptrend) – more information on the trade details in the trade management section.

WE hope you are enjoying this article on how to trade using a Forex strategy. I think that a free Forex strategy is always useful, isn’t it?! :)

TREND REVERSAL TRADE

This one is a tad more complicated and more risky!

Remember due to reduce the risk on this trade setup. The trade is counter-trend and anticipating a reversal so make sure to reduce the risk by at least half of your usual risk. If not more!

We need the same pattern as above: the currency pauses for 2 days without breaking the high/low.

But here is the key difference: the currency also pauses for 1 or 2 days in the opposite direction.

A trend reversal trade is only taken when the opposite high or low gets broken.

For an uptrend this means:

a) Filter: a failure to break the day candle high 2 days in a row;

b) Filter: a new low which has not been breached for 1 or 2 days;

c) Confirmation: a push through the low which signals trend reversal.

For a down trend this means:

a) Filter: a failure to break the day candle low 2 days in a row;

b) Filter: a new high which has not been breached for 1 or 2 days;

c) Confirmation: a push through the high which signals trend reversal.

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So now that we covered the basics of how to trade a Forex strategy, let us move on to the first optimizer.


THE WEEKLY FILTER

It is possible to take ALL trend continuation and trend reversal signals. BUT the results will be better and enhanced when you use the weekly chart as a filter!

The weekly chart is our guide through the forest! This chart is very influential and the best trading happens when Forex traders align themselves with the weekly trend.

In an uptrend it is important to make sure that the weekly low is not broken. A break of the high would be great to confirm the uptrend of higher highs and higher lows.

In the downtrend is important to make sure that the weekly high is not broken. A break of the low would be great to confirm the uptrend of lower highs and lower lows.

Here is the Golden Rule on the weekly:

Check recent price action. Do you see lower highs or higher lows?

If there are lower highs on the chart, then you are in a down trend!
–> You may only look for short trades on the day chart.

If there are higher lows on the chart, then you are in an uptrend!
–> You may only look for long trades on the day chart.

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With the weekly filter in play, a trader should NOT be looking for trades in the opposite direction of weekly trend. A potential short trade on the day chart would therefore not qualify. If you take the counter trend reversal trade, always remember to lower your risk substantially (more than 50% at bare minimum) and aim for sufficient reward to risk ratio.

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With the weekly filter the following trade would NOT be taken:

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THE TRADE DETAILS

Now that we have worked through the details of the Forex trading strategy, lets us now examine the actually details of how to trade the setup.

Entry level

The entries for both buy and sell stops are placed 15 pips above the entry candle high or low. The candle does NOT have to close above the high or low – a price break is sufficient.

1)      For an uptrend the buy stop is placed 15 pips above the fractal/candle high.

2)      For a downtrend the sell stop is placed 15 pips below the fractal/candle low.

Stop loss

The Stop loss is also placed 15 pips below or above the fractal.

1)      In a down trend the stop loss is placed above the fractal.

2)      In an uptrend the stop loss is placed under the fractal.

Read more about stop losses in this famous article called “the ultimate guide on Stop Losses.”

Take profit

We will split the trade up in 3 parts.

Two of the three trades will have a hard take profit at Fib targets;

One of the three parts will trail stop the currency.

For the hard take profits we will use a Fibonacci retracement tool. Place a Fibonacci retracement tool between the most recent two fractals.  Read this article to know more about Fibonacci (Fibs / Fibos): “The Fibonacci Mystery: more than just math.”

Also, make sure that you add the Fibonacci levels -0.272, -0.618, -1.000, -1.618 and -2.000 to your Fibonacci retracement tool by clicking on the Fibonacci properties on any Fib on your chart.

See the example down below to see how to do that.

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Once your Fibonacci tool is correctly placed, then do the following:

1)      Measure the distance between your stop loss and the entry point;

2)      Measure the distance between your entry point and the -0.618 take profit level.

Determine the following:

3)      If the stop loss size is larger than the take profit size, then take a unit of profit at the -1.000 and at the -1.618 targets.

4)      If the the take profit size is equal to or larger than the stop loss size, then take a unit of profit at the -0.618 and at the -1.000 targets.

This is to ensure that the trade always has a 1:1 reward to risk potential!

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The third and last part is traded by using a trail stop. After the 1st target has been hit you can trail stop the 3rd part by going 15 pips above the new daily highs for downside, or below the new daily lows for upside. The 3rd target may be clicked out at a higher target as well, such as -1.618 or -2.000 target.

Read more details in this article on “the secret of taking profit.

Now we have covered the basics of the entry, stop loss and take profit, we will you more specifics of the trade management so that there is no doubt how to trade this Forex strategy.


The Trade Management

Moving to break even: once the -0.618 target gets hit we will move the entire trade to Break Even. This means that the Stop Loss will be moved to 1 pip profit. That would be 1 pip under the entry level for a short trade and 1 pip above the entry level for a long trade.

Trailing stops: all stop losses will be moved above and under fractals. We will use the natural support and resistance that fractals provide to the chart and thereby protect our trade and capital.

1)      The stop loss will be moved 15 pips above the fractal for short trades;

2)      The stop loss will be moved 1 5 pips below the fractal for long trades.

Trail stops after target hit: after the 1st target is hit (either -0.618 or -1.000, see above) trail stop the trade using the daily lows or highs instead of the fractal. This is to ensure that the profit potential is locked in sooner.

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Enjoyed the article on how to trade a Forex strategy?

Did you enjoy the article on how to trade this free Forex strategy? We sure hope you did!

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

2)      Also, please share this strategy via social media! 

We sincerely thank you!

Warning

Of course, any Forex trader must make sure they are implementing correct risk management, money management, trade management, trading psychology, etc before all the rewards can be reaped. I can explain the strategy and the trade management side of the strategy in this article in detail, but anybody who is reading still needs to do the successful analysis, follow the trading plan correctly, and implement and manage risk, of course, before seeing higher levels of rate of return and success.

Read this article for more guidance on: “trading psychology”.

Read this article for more guidance on “pinbars” and “price action”.

Risk management

Always make sure that you have a clear risk management plan and that you stay within your risk management parameters!  Read more information on risk management in this great article: “the importance of risk management”.  And here is one more on “minimizing risk and maximizing reward.”

Also make sure to read this fantastic article on “money management in Forex: more than just trading.”

Practice, practice, practice!

Now that you got a taste of a successful strategy I am sure you are excited and ready to implement your new knowledge! We at Winners Edge Trading definitely encourage that. BUT please practice the new Forex strategy and trade management on a demo account first. It takes time to learn all the ins and outs and implement the strategy without making any mistakes. Don’t make the mistake of trading live immediately. Take your time, and learn the strategy first. Then go live.

Looking for strategy optimizations? We have it!

Furthermore, there are also some optimizations of the strategy, which make the strategy even more profitable! However, the article would become too long. So make sure to read next week’s article to get all the bonuses. It will be released on Friday June the 1st.

ONCE AGAIN I will ask if 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, please share this strategy via social media! 

Thank you so much!!!!

And wish you Good Trading

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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  • http://www.skratchfx.com/ Christine Grimley

    Just now I’m going back through some of your old articles. Man you have written a lot of articles – they’re great.

    I REALLY LIKE the: if price doesn’t make a new daily high there’s a minor resistance, if two days in a row, major resistance.
    Already sounds to me like I got a new MQL4 project on my hands :D!!!!

    I’ve currently got my trading plan set and am in testing mode. I’m interested in theory of pyramiding trades. What happens if you have a trade on and it’s still going, but then you get another signal?

    My thoughts are: 1% risk per trade, up to two open trades, and no more pyramiding until these trades have profit locked in (S/L to BE of course, gotta make a rule for that)

    hmm.

  • Dave Hanna

    Great article, Chris. Sounds like a sound strategy. Is it reasonable to try to implement this strategy in one’s trading plan at the same time as learning the trading room strategy?