This is something i have been working on tediously for weeks and i really like the outcome so far This is however still in testing and any comments, suggestions, critiques, and questions are appreciated 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:
- Place buy order on an indecision candle that is confirmed by movement on the 1 hour chart.
- Place buy order on a morning star formation.
- Place buy stop order at the high of the mother bar in an inside bar formation.
SELL:
Entry:
- Place sell order on an indecision candle that is confirmed by movement on the 1 hour chart.
- Place sell order on an evening star formation.
- 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:
- A candle of the current trend in place (bullish or bearish)
- A candle signalling indecision (indecision candle, doji, hammer etc.)
- 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:
- take the first candle in the star formation and the three candles before it
- define the Highest High
- define the Lowest Low
- define the average price of those two value (like this : Highest Price + Lowest Price / divided by 2)
- If the close of the first candle in the star formation is higher than the average price and the candle is bullish, sell!
- 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?
- take the last 4 four hour candles (including the mother bar)
- define the Highest High
- define the Lowest Low
- define the average price of those two value (like this : Highest Price + Lowest Price / divided by 2)
- If the close of the inside bar is higher than the average price, buy!
- 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
- The price will continue in the same direction
- The price will reverse and go the opposite way
- 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
Indecision Candles and Stars: http://forums.babypips.com/free-forex-trading-systems/44602-j-w-s-experimental-price-indecision-system-21.html#post354058
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)