Hello everyone. I’m excited to post this method I have been trading for some months now. I want to give credit to nomask and his trading major lines thread on forexfactory in the trading systems section. You can also go there and get what I am going to tell you here. I am not good at posting pics but I am going to try so bear with me.
We will use the eur/usd for now. First pull up a weekly chart of the euro. Now clear all your indicators. You want a clean chart. Now place a horizontal line at the 1.40000 and every 1000 pips below and above. Now look at the chart and notice how price reacts at those major levels. Interesting isn’t it. Why is that? Major institutions trading millions and even billions are interested in these levels and target them. As retail traders all you and I can do is try to ride on their coat tails and that is what this method is about. How can we catch a ride with the big guys.
Ok we will continue. Our initial setup occurs when a weekly candle closes above or below a major line. A major line is the 1.40000, 1.50000, 1.60000, etc. Nothing else. Look at your weekly euro chart. The March 13th weekly candle closed above the 1.4000. Once this happens you draw a fibonacci from the low to the high of that weekly candle. Then change your chart to a 4 hour chart. Adjust the fibonacci on the 4 hour chart making sure it remains at the low and high of the weekly candle. You can see on the attached photo 2 red vertical lines. This contains the weekly price action. The fib is drawn on the 4 hour chart that represents this weekly time frame. Now you wait for price to retrace to a significant fib level, the 38.2, 50 or 61.8 level. I do not consider the 23.6 level a significant retracement. Next we will talk about what to do when price retraces to a significant level.
Onward. Once price has retraced on your 4 hour chart to a significant fib you want to wait for a bullish 4 hour candle. Why bullish? Because once the weekly candle closed ABOVE the major line our bias became LONG. So we will be looking only for long trades. When you have a decent bullish candle at a sigificant fib you will now draw a fib on that 4 hour candle. You should delete the weekly fib so you don’t get confused. I have a separate weekly chart that I keep handy. Now you change your chart to a 5 or 15 minute chart. This is where your entry will occur. Adjust your fib to make it clear but make sure to keep it at the low to the high of the 4 hour candle. Now you will wait for price to retract to a significant level just like we did on the weekly candle with the 4 hour chart.
Once price retraces on your 5 or 15 minute chart now you start looking for entries. This method relies on cofirmation so you should not enter just because price has touched a significant fib level. You want to wait for price to start moving long. This is where price action is important but is not the focus of this post. I like pinbars and engulfing candles. Once such a candle closes I am likely to enter. Entry can occur on the break of a previous swing too.
So now you have a trade going on your 5 or 15 minute chart. What next? The beauty of this method is it keeps losses to a minimum. I do not let the trade go in the negative more that 10 pips. If it does I close it and wait for price action to prove itself. I will make no more that 3 attempts on any 4 hour candle. By that time another 4 hour candle is probably nearing closing and I will reevaluate if it is acceptable. If not I wait for the next 4 hour candle. If you trade moves in your direction set yhour stop loss to breakeven when you are up 20 pips. Then you let it ride. If it gets stopped so be it. Wait for the next trade. If you want to get a 1000 pips then you have to be patient. This is not a scalping system nor is it a short term system. We are targeting the next major level. Currently euro is nearing the 1.50000 level therefore we do not want to enter any trades at this time based on this method. We will need to see reaction at the 1.50000 line. Okay more to come but you have the basics. I intend to post my trades but not necessarily as they occur. I am going to learn to post pics so I’m off to do that.
On the chart shown there is a red vertical line that points out a retracement on the 4 hour chart to the 50% fib. Now if you look closely you will see that I have adjusted the fib upwards. This is because after the weekly close above the 1.4000 price continued upwards for about another 30 hours before beginning to retrace. You should adjust the fib in this situation. Now that we have a significant retrace on the 4 hour chart we need to still wait for a bullish 4 hour candle which as you can see is the next candle. Now we will place a fib directly on this large bullish 4 hour candle. Now we move to the 15 minute chart. You will need to adjust the fib. Now there is a pink arrow pointing to a 15 minute candle. This candle is a pretty good example of a bullish pinbar. At the close of this candle would be a good entry. Notice how an entry here would have take almost no heat and it took off. Once you are up 20 pips put you stop loss to break even and let it ride. Remember we are not looking for 20, 50 or even a 100 pips. We want 250, 500 or even a 1000 pips!
is someone still trade this system?