JÄWÄ's 'Experimental' Price Indecision System

Trading Systems Free Forex Trading Systems
1

This is something i have been working on tediously for weeks and i really like the outcome so far :smiley: This is however still in testing and any comments, suggestions, critiques, and questions are appreciated :slight_smile: The goal of this system is to trade a psychology based method with as little interpretation (and error) as possible

Official Forex Strategy

Currency Pair: GBP/JPY, AUD/JPY, EUR/JPY, AUD/USD
(Any pair that has high volatility and daily pip ranges)

Time Frame: 4 Hour

Indicators: 1 Hour Chart

BUY:

Entry:

  1. Place buy order on an indecision candle that is confirmed by movement on the 1 hour chart.
  2. Place buy order on a morning star formation.
  3. Place buy stop order at the high of the mother bar in an inside bar formation.

SELL:

Entry:

  1. Place sell order on an indecision candle that is confirmed by movement on the 1 hour chart.
  2. Place sell order on an evening star formation.
  3. Place sell stop order at the low of the mother bar in an inside bar formation.

TAKE PROFIT: ATR (14) (half take profit), ATR (14) x 2 (full take profit), at each new signal move up stop losses and take profits to the new trades price carrying the trade forward to the new signal

STOP LOSS: ATR (14) x .75, after half take profits move stop loss to break even

LOT SIZE: Risk 3% per trade

NOTES: If you have multiple entries open on a chart, when you take half profits for an entry you must also take half profits on all of the entered trades before it (i.e. if you have three buy trades and the final one hits its half take profit, you must take half profit for the first two trades as well even if they havent hit half tp themselves)

When there is more than one signal in a row (ie you enter a trade based on a 4 hour signal, and than the next four hour candle also produces a signal), and the second signal is opposing the first signal (ie the first signal says buy and the second one says sell) than you use both 4 hour periods as a filter to determine whether or not the opposing signal is valid, (you use the combined 8 one hour candles from both signals), to do this, the second signals close must break the high of all the previous candles closes (if looking to buy), and the second signals close must break the low of all the precious candles closes (if looking to sell), If the signal does not pass the filter, ignore the signal (no trade)

Here is an example of three consecutive signals:


On the first signal (candles 1-4) we see the fourth candle closes higher than the first, so we buy, and then when the next signal comes we see that its fourth close is lower than its first so we look to sell, but first we must pass it through the filter to see if it is valid, and as we can see its final candles close closes lower than all of the previous candles closes (candles 1-7), and than 4 hours pass and another signal occurs! So we use all 12 candles for the filter, and as we can see the final close of the third signal failed to break higher than the closes of all the other candles, so we ignore that signal

Signal Definitions:

Indecision Candles: Indecision Candles are candles that have a long wick that takes up atleast 50% of the total length of the candle and a body that takes up no more than 35% of the total length of the candle

Morning and evening stars: Stars are a three candle formation that is defined as follows:

  1. A candle of the current trend in place (bullish or bearish)
  2. A candle signalling indecision (indecision candle, doji, hammer etc.)
  3. Confirmation of a reversal in price (A candle contrary to the current trend in place)

The final candle in the formation must close atleast halfway down the body of the first candle in the formation and cannot be an indecision candle

The way we determine the trend in place for the first candle is:

  1. take the first candle in the star formation and the three candles before it
  2. define the Highest High
  3. define the Lowest Low
  4. define the average price of those two value (like this : Highest Price + Lowest Price / divided by 2)
  5. If the close of the first candle in the star formation is higher than the average price and the candle is bullish, sell!
  6. If the close of the first candle in the star formation is lower than the average price and the candle is bearish, buy!

Inside Bars: An inside Bar is a two candle formation that includes any candle and a second candle that is entirely contained within the previous candle (meaning the wicks of the candle does not surpass the previous candles high or low), I only trade inside bars as a continuation meaning i only trade in the direction of the current market movement, how do i define that?

  1. take the last 4 four hour candles (including the mother bar)
  2. define the Highest High
  3. define the Lowest Low
  4. define the average price of those two value (like this : Highest Price + Lowest Price / divided by 2)
  5. If the close of the inside bar is higher than the average price, buy!
  6. If the close of the inside bar is lower than the average price, sell!

Explanation: The basic idea behind this system is simple, when there is indecision in the market there are only three things that can happen

  1. The price will continue in the same direction
  2. The price will reverse and go the opposite way
  3. The price will stay indecisive

So all this system does is find the signs of indecision then decide where it is most probable the market will go, the major signals of indecision I use are indecision candles for instance, the long wicks on the candles on the 4 hour chart signal major indecision and possible reversal in the market, so every time i see an indecision candle i zoom into the 4 1 hour candles that make up that one 4 hour candle and see what is going on, and i trade in the direction the price is going, the way i determine where it is most likely price will go is by looking at the closing prices of the first and last candle within the signal, if the closing price of the fourth 1 hour candle in the one 4 hour signal is higher than the close of the first candle, we buy, if it is lower than the close of the first candle, we sell

Here is an example: we see an indecision candle signalling indecision on the 4 hour chart


so we zoom in to the 1 hour chart to see what is going on


we can see the the first candles close is higher than the last candles close, meaning that movement is downard, so we sell


and price drops

Further Explanation:

Custom Indicator by jonkie76: http://forums.babypips.com/free-forex-trading-systems/44602-j-w-s-experimental-price-indecision-system-7.html#post352264

Stop Loss and Take Profit Calculator: Calculator for JAWA System - Made by Kaboemm

EA by Jonah: http://forums.babypips.com/free-forex-trading-systems/44602-j-w-s-experimental-price-indecision-system-14.html#post352919

ATR: http://forums.babypips.com/free-forex-trading-systems/44602-j-w-s-experimental-price-indecision-system-60.html#post358989

Indecision Candles and Stars: http://forums.babypips.com/free-forex-trading-systems/44602-j-w-s-experimental-price-indecision-system-21.html#post354058

Inside Bars: http://forums.babypips.com/free-forex-trading-systems/44602-j-w-s-experimental-price-indecision-system-22.html#post354114

System Checklist: http://forums.babypips.com/free-forex-trading-systems/44602-j-w-s-experimental-price-indecision-system-26.html#post354725

Trading Journal: http://forums.babypips.com/free-forex-trading-systems/44602-j-w-s-experimental-price-indecision-system-54.html#post358379

Price Alert Service for Half Take Profits: Forex Charts | Economic Indicators | Economic News | SMS Mobile News and Price Alerts

Visual Aid for Indecision Candle 1 Hour Charts: http://forums.babypips.com/free-forex-trading-systems/44602-j-w-s-experimental-price-indecision-system-27.html#post354938 (thanks smacko :D)

1 Like
2

In all 15 trades were made this past week on GBP/JPY, i just realized it would be completely confusing to show with pictures every single trade so i numbered them, remember, i get the signals on the 4 hour chart and look to the 4 one hour candles that make up the signal for direction

Capture1.jpg700×409 25.5 KB

  1. The fourth one hour candle closed lower than the first one hour candle, sell!

  2. The fourth one hour candle closed lower than the first one hour candle, sell!

  3. Price formed a perfect morning star, close out previous sell positions and buy!

  4. The fourth one hour candle closed higher than the first one hour candle, buy!

  5. The fourth one hour candle closed lower than the first one hour candle and closed lower than the previous signals closes, sell!

  6. The fourth one hour candle closed higher than the first one hour candle, buy!

  7. The fourth one hour candle closed higher than the first one hour candle, buy!

  8. The fourth one hour candle closed lower than the first one hour candle, sell!

  9. Inside bar formation, sell stop placed at the low of the mother candle

  10. The fourth one hour candle closed higher than the first one hour candle, buy!

  11. The fourth one hour candle closed higher than the first one hour candle, buy!

  12. The fourth one hour candle closed lower than the first one hour candle, sell!

  13. The fourth one hour candle closed lower than the first one hour candle, sell!

  14. a perfect evening star formation, sell order placed

  15. The fourth one hour candle closed lower than the first one hour candle, sell!

  16. The fourth one hour candle closed higher than the first one hour candle, buy!

  17. The fourth one hour candle closed higher than the first one hour candle, buy!

In all, including all of my half take profits, i made 280 pips roughly :3

EDIT: I changed this post to show how i would’ve traded the final version of this system in post 1 :slight_smile:

3

SJ, I am finding this explanation of the principles of your system much easier to understand and I’m looking forward to giving this a test drive this week. Good job!

4

this was easy to understand

thank you

5

SethJawa,

Fantastic! You have been working hard. A question. When I go to the one hour let’s say a short is indicated by the zones and the wicks I also like to see the 5 ema below the 10 ema for a short on the one hour chart. What do you think of that idea
SethJawa?

GJ

6

SethJawa,

Just to confirm, we are no longer using Bolinger Bands, correct?

Thanks,
GJ

PS It makes sense to me.

7

@Merchantprince: awesome! go for it :smiley: I’ve decided this is going to be the only system i trade now, i say its not complete but that is only because i am still tinkering with different EMA settings, volumes, and price action patterns, but it is still an extreeeeemely viable system to use :slight_smile:

@Greg Jones: aha yeah i’ve probably spent atleast 60ish hours in the past two weeks working on this alone, for your first question the 5 EMA cross is a great system by itself, in fact that was one of the first systems i traded which is why i still use the 5 and 10 EMA’s, I used to wait for the 5 EMA to cross over or below the 10 EMA to enter in my trade, it is nice to see the extra level of confluence of the EMA crossover but it isnt necassary, after all most of the signals we trade are reversal signals and you’ll notice if you check them all out that most of the signals have us enter before the EMA cross (especially after large moves), of course if you want to cut down on the amount of trades and add a slightly higher probability to your trades you can wait for a signal to occur on an EMA cross or in agreement with BBands, I personally am a very aggressive trader so for me once i see the indecision in the market i jump on it, but again you can wait for the extra confluence of the EMA cross or BBands (or S/R lines, or fib retracements etc. whatever floats your boat, typically you want atleast two levels of confluence on every trade entry but with price action signals already being so strong i just wait for the zone jump)

8

Hi SithJawa,

Good work, that is a savage amount of pips!

If you were going to trade daily charts what adjustments if any would you make?

9

Subscribed… much improvement to your previous system SJ… easier to understand now… will be very interested to see how you use volume with this system :slight_smile:

Can it be traded on the EUR/USD and GBP/USD too?

I too would be interested trading this method on the daily charts, would you use the 6 hour and 90 min charts (24h/4 = 6h and 6h/4 = 1 1/2h or 90 mins)?

The 6h and 90 mins charts are not your standard timeframes on mt4 but they can me easily be made using an EA or script file as offline files.

10

Two more quick questions,

For evening and morning stars the first candle must be of the current trend in place, I can’t work out what defines signal 8 as a trade? Do you just class it as a pinbar?

Also by “3. Place buy stop order at the high of the mother bar in an inside bar formation that has no price action signals within it (pin bars, hammers, dojis etc.)”

Do you mean if any buy orders are open then close them?

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@slipp3ryWhippit & trizone13: I have already backtested it on the daily charts and it works very well, it actually has a higher W/L than using the 4 hour, the problem for all price action traders on the dailies however is that there are very few signals a month, although i know using pin bars AND inside bars will increase how many you find considerably, you might be able to find 10 a month per chart if its a good month, that being said I backtested it using the daily and the 4 hour and it worked out very well, the reason for zooming in to the lower timeframes is to see all the data contained within the one signal candle to determine where the price is going, the more candles you have to look at the better, so using the six 4 hour candles contained within the one daily candle seems good :slight_smile:

I like GBP/USD alot because it has a low spread and high daily pip movements, the only reason i dont trade it is because the charts i do use are slightly better suited for this system in my opinion and if you are only trading with so much money it makes more sense to only use the better charts, however if you want lower risk trading you can trade the EUR/USD (and its confluent pair USD/CHF) and GBP/USD with stop losses of 35 pips and take profits of 65-70, just remember to take half profits at half way to your full take profit, this past week on the GBP/JPY there were no examples of why this is important but it definitely is, if you look back at previous weeks you’ll see as many as half of the moves only get to 40 pips before turning around, lock in pips while you can :3

@slipp3ryWhippit: Yes sorry if i wasn’t clear :3 the first candle has to be of the trend in place, so if its a downtrend it has to be a bearish candle and if its an uptrend it has to be a bullish candle, and yeah order #8 was not an inside bar (because it was a price action signal instead), i think I accidentally covered up some of its wick with the number 8 aha, but it was a valid entry

This is something that confuses A LOT of people, in fact it took me hours of trying to figure it out (thank you google), It helps to think of it like this

If i just bought a currency and i want it to go up, now that i have bought my order all i can do with it is sell it when i want too, and that is what stop losses and take profits are, once your buy orders price goes to a certain price you automatically sell it all, whether it is lower (stop loss) or higher (take profit[also known as a limit order]), the key words here are stop and limit, here is something i found online -

Buy Limit — buy provided the future “ASK” price is equal to the pre-defined value. The current price level is higher than the value of the placed order. Orders of this type are usually placed in anticipation of that the security price, having fallen to a certain level, will increase;

Buy Stop — buy provided the future “ASK” price is equal to the pre-defined value. The current price level is lower than the value of the placed order. Orders of this type are usually placed in anticipation of that the security price, having reached a certain level, will keep on increasing;

Sell Limit — sell provided the future “BID” price is equal to the pre-defined value. The current price level is lower than the value of the placed order. Orders of this type are usually placed in anticipation of that the security price, having increased to a certain level, will fall;

Sell Stop — sell provided the future “BID” price is equal to the pre-defined value. The current price level is higher than the value of the placed order. Orders of this type are usually placed in anticipation of that the security price, having reached a certain level, will keep on falling.

buy and sell stops just mean that you think once a price hits a certain price it will continue travelling in that direction, limits mean the opposite :3

and no i have multiple orders open at once, sometimes i’ll have to sell orders in with one sell stop order about to be hit, trades #8 & #9 are perfect examples, i already had trade #8 in when trade #9 occurred, so i just placed my sell stop and waited for it to be hit, then i had two trades in, one from the #8 pin bar and one from the #9 inside bar

12

Quick question. In the rules you had stated:

If 3/4 candles on the 1 hour chart touch both EMA’S, do not trade that signal.

In this image aren’t bars 1, 3 and 4 touching both EMAs?

Or were you referring to the bar bodies only?

13

@Jonah: sorry, yeah its the bodies, i changed it :3 a good thing to remember is when price is riding the EMA’s very closely price is ready for a breakout

14

Jawa, what monthly % return do you aim for?

Sorry I’ve got a few basic questions, which color ema is which? My only chance to look at charts for most of the day is my mobile. On my mt mobile, ema has an option “apply to” which default setting is close. Is that correct?

Very interested in your system as I should still be able to trade it while at work

15

honestly i wouldn’t aim for a monthly or even a weekly goal, we are all at the mercy of the market and the systems we trade, you should be able to know on average how much your system will make for you, but be ready to take less or more, THAT BEING SAID :stuck_out_tongue: this system can easily get anyone 1,000 - 1,500 pips a week (the easy part being the system, although very few traders can trade like robots and apply systems to the letter), and i might get flamed for this but i like to achieve 200% a month, but when i don’t its okay too :smiley:

the 5 EMA is blue and the 10 EMA is yellow :slight_smile: as you can see i made my chart very colorful… and yes you apply to the EMA’s to the close, this means that it averages out the closing price rather than the open or the average and all the other options, nothing is for certain until it is close :[

And yeah up until they updated the mt4 app it was near impossible to trade this on my iphone, but since they did a couple weeks ago it is definitely the best charting app for mobile and it is extremely easy to trade this on it :slight_smile: in fact all of my trades this week have been from my phone

I would like to quickly say that although this system has great potential (as do most systems) i dont want to fool people into thinking it will be easy, it wont be… the easy part of trading is finding a system that works, the hard part is applying it, no one will be a good trader until they can break themselves and trade like a machine, no perfect signal no entry, dont work on hunches or almosts and you’ll be fine, and when you see your trade 35 pips in the negative you keep it there, once i open a trade i do not close it, no matter what, you always need to be confident in why you are entering a trade, with this system especially you’ll notice that many times trades start off teetering for a day or two or in the negative, but more often then not the signals will go in the direction we trade

EDIT: again, i would like to re-iterate that i have spent hundreds if not thousands of hours studying, backtesting, and trading, unless your mind is bent towards trading you will need a lot of work before you can become profitable and fabulously so…

16

Can you explain the rules for inside bars? From reading the rules it sounds as though two pending orders are placed. One above the high of the mother bar and one below the low of the mother bar. Does zone jumping apply to inside bars?

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Inside Bar Forex Trading Setup - Trading Inside Bars - YouTube

This is one of Nial Fullers vidoes on price action, he is an amazing price action trader and it is worth looking through all of his videos if you have the time, listen to his explanation on what the inside bar is, not so much how he trades it but how he defines it :stuck_out_tongue:

we only want to look to inside bars as continuation patterns, basically we have a candle thats total length (wick to wick) is entirely within the highest and lowest price of the previous candle, it is engulfed by the previous candle

this means that the market was consolidating, it failed to make new highs or new lows therefore there is a high probability that it is just a retracement of the inner trend of the current move, it is an extremely accurate signal :smiley: however i find pin bars to be more accurate for directional purposes therefore i dont trade inside bars that have a pin bar inside of it, i only trade the pin bar

you place the entry order at the high of the mother bar if you want to buy and at the low if you want to sell, you only place one order as the most probable direction the inside bar will travel is in a continuation (meaning i dont trade trend reversal inside bars at all), so in my example #9 i placed the sell stop at the low of the mother bar

And no zone jumping does not apply to inside bars, im editing that now sorry :3 i tried to lay out all the information as clearly as i could but i guess i left a hole or two

18

Hey SithJawa

I think your Strategy is nice on the first look… But unfortunately I can not speak or read very good English :smiley:
What languages do you speak? May it be translatable into German, Italian?

If not then I will study it more carefully :wink:

19

Hey jawa I’ve been looking for a slightly more mechanical approach to price action trading and like what I’m seeing here, I have a couple of questions though, precisely where do you place your buy/ sell orders? If the signal is a pin bar for example do you place an order the spreads value past the break of the high/low? I may of missed it but it’s not clear to me exactly where we would enter for the different candlestick formations. Also if a signal is forming on the current 4hr candle would you wait for that candle to close before assessing the trade? Sorry for all the questions! Thanks

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@aserafino: unfortunately i only speak english :3 HOWEVER i do know that if you have “google chrome” as your browser, they have an option that lets you translate entire web pages while you are browsing, including german and italian :slight_smile: so i would try that, google how maybe

@juicypips: That’s what i was looking for too! Price action trading relies to heavily on traders to weed out good from bad signals using S/R and other fourth dimensional concepts, and i know for a fact it is much safer to remove humans as much as possible from the trade deciding process, so it is nice to do something that is cut and dry :slight_smile:

ALWAYS place orders on the close of a candle, if it hasn’t closed price could go anywhere and what you are doing is gambling, the signal isn’t official until you know it is a legitimate signal that cant change, i normally have the charts i might entire a trade on lined up 2 minutes before the candles close so once they do i quickly go to each chart, check to see if the signal is good, and than immediately enter my trade, then after all my trades are entered i enter my stop losses and take profits

Again, ALWAYS wait for the candles close to enter, it is the same thing with inside bars, you wait until the candle is closed to put your pending order