Hi everyone, I just learned of Forex last Wendsday and am excited to try some demo trading with Oanda. I have read all I can find on this site, others and read the book “Forex Made Easy” and have devised a system I think might work, but would appreciate feedback from some veteran traders.
Basically this is my system:
Look at 1 day candle charts with RSI, Stochastic and MCAD and Bollinger Bands.
Look for Stock and RSI to be over 70 to sell, or under 30 to buy.
Next look at the candles to see if if any hanging men or hammers appear at the top or bottom of a the bollinger bands.
When the immediate trend that resulted in the over bought/over sold indicators reverses, wait for confirmation, meaning two consecutive days of the reverse of the previous trend.
Pull the trigger and set a stop loss so that max loss =1% of initial capital.
Let me give you an example:
I have $500 theoretical in an Oanda account.
As of 3/3/07 Here is the promising trend for the US/JPY:
Full Stoch,(14:3:3) 5.56, %K merging with%D and appears to be readying to go over.
MCAD(12,26,9) -1.1382 and diverging
Current price is at bottom of Bollinger band,
All this tells me that US/JPY is extremely oversold and likely to reverse trend.
Therefore I wait for a positive close, to indicate a likely turnaround, but don’t go long US/JPY until there is a second consecutive close and Stock, RSI both start heading up, and MCAD begins to at least converge, if not exactly cross over.
Once this happens I go long $1000, a 2:1 leverage and set the stop loss at 47 pips below my entry, thus guranteeing a lost of only $5 if I’m faked out.
I close the position only when one of two things occurs:
I am stopped out or:(if I am making a profit)
I see two negative closes in a row with RSI below 50 and headed down with MCAD converging and %K Stock dipping beneath %D StocK.
Any advice on whether or not this system makes any sense?
Is it too simplistic? Overly complicated? Naive?
Anyone try it or something like it before?
Any comments would be greatly appreciated.