Trading market extremes: The Guaranteed Pips

[topchess]

Hello traders.

I know that there is no perfect set-up to make profit in this FX, often choppy and consolidating. It's crazy!

But let us take some examples, how I made about 300 pips last week with only simple thinking about chart extremes. I have examples, I do not say I do magic. we will walkthrough this.


Please have your MT4 ready and open, we got to need 4HR daily or 1W. and add a default RSI 14 to your chart, with levels 20:80. yes 20, and 80 not 30 and 70.

Now let us take example one by one.

[topchess]

You know what? I do not really depend on MAs and trying to identify the market trend, and so over.

I just use RSI, one indicator to show me when the market is overbought and trending up, oversold and trending down. and when there is divergence.. that's all. Nothing too complicated.

1. GBPUSD Daily 18/7

GBPUSD really made a nice move and it's appreciated, but notice how the RSI value is clearly touching or above 80 line. extremely overbought.. I shouted "Short!!!"

RSI posted a value of 81.30 here, and I shorted it at 2.0535.. waiting for a correction in the overbought area. and it did happen, GBPUSD dropped 70 pips to pave the way for another rally. I didn't get the 70 pips, but I could short-get out-then short then get out as the price moves around 80 RSI value. once the 80 value is cleared I exit by market sense. say at 76, 75 reading..

It was really that easy!
I know what you want to ask me? What if it ignored the reading.. I will answer simply, I start with small lot, if it goes up against me, I keep adding shorts, and I tell you "I am certain It will make a nice correction" and my shorts will profit together later

So I call it safer trade, even if it comes not too often. Safer pips for me, and I feel confident about my trade.

[topchess]

2. USDCAD

Just look at the following 1W chart for USDCAD, and see RSI value. 23!
It was 21 when USDCAD hit 1.0399 it was a nice buy. There is always a correction after reaching the extreme 20, or 80.

You could really benefit simple +50 pips with lowest effort last week on this. Also, you would not panic if usdcad even dropped 100 or 200 pips more. It's not going anywhere below 18,19 in rsi calculation. even if it did, it is coming back sharply, believe me!

see next picture for USDCAD figure2 ..december 2004.. the USDCAD was dropping sharply RSI reaching 19.50 If you took a buy at 1.1750 for example, it made a 600 pips correction that you could really get, and we are having a similar situation with difference that I think USDCAD bottomed with this reading 23. we will see anyway.

[topchess]

Now I will start showing real-time example step by step with you.

Let us start by this trade

Short AUDUSD next week, small lot
I will use 5000 units in Oanda. $.50 pip value on this trade.

See chart. RSI 81.
Going short with no take profit or stoploss.

Pay attention I do not use Stoploss anymore. I either leave it open, or scalp it ..how? take 20 pips profit, then wait for another entry. ofcourse it might reverse and I do not get any more opportunities, but that's it nothing is perfect. you need to time your exit with some market sense and rsi reading and overall trend can help you.. and shout "Exit, the longer term trend is against you.. take little profit" or "Stay in.. it's a reversal"

Short AUDUSD 0.8800 $0.50pip value
Please do not trade this in less than 5K account.

[topchess]

This is all for now. Please add the RSI default to your chart..and examine, please examine, not just D1 or W1 timeframe.. go further deep, and test more currencies but majors preferred..

You will find the answer, how the market reacts every time when its at 80RSI or at 20RSI. It repaints itself every time. You will also find how to scalp these moves during intraday, and how to add to your losses in your own favour.

[rannoch]

Hi, Topchess, Have you been using that method long and also when you said you add to your position if the trade is still moving against you do you use a stoploss.

[topchess]

Hello,

I've alwyas used this method to trade the market because I never found such consistency with any other method, with other methods remain good and this one is "rare" but I call it 'safe-pips'.. when you enter a trade and you are certain you wil make profit from it at the end. This is a good feeling.

It makes sense, when the market is overbought, we sell and vice versa.

If you just check the history of charts and how the price react everytime it reaches these levels, please examine

22,20,19,18,17. or 80,81,82,83.. it won't penetrate these areas, unless you play with a top volatile pair.. EURCAD for example RSI reach 90 just recently but after then dropped 1600 pips!

[rannoch]

Hi again, I will keep reading this thread to learn more.bye for now.

[adamgalas]

keep in mind that you should always use SL, its part of the Forex gospel. If you don't, you risk an unknown % of your account. You could do 3:1 leverage, go to sleep and find out in the morning that some news came out or something and the market moved against you 100-200 pips! Suddenly you are out 3-6% of your account! Draw down can be a *****.

Of course what you say is also very exciting and an excellent system.

It may offer less trades, but I'd bet that you can get 75% winning trades this way.

Here is a helpfull suggestion.

Instead of not useing TP, try a manual trailing stop.

set SL at some level, such as 50 pips, which is 2:1 leverage at 1% account risk, or 4:1 leverage for 2% account risk.

Then check in occasionally, as often as you can, and if you see 20-29 pip profit, change SL to +5, 30-39 pip profit, +10, over 40 +50% profit.

The reason this is a good idea for your system is that an RSI over 80, or under 20 is great for swing entries, but what about exits?

You have no confirmation in your system. No way of saying, "Ok now its time to end it, and celebrate." Without TP you could go to bed with a 200 pip paper profit and wake up to find out your up only 35 pips.

With a manual trailing stop loss you at least lock in profitable trades and keep them from becoming negative.

I will test your system on a 3 hr chart. Good thinking overall.

[rannoch]

I see NZ/USD is now touching 80 on the weekly RSI chart.