Mouteki/ Demark Trading

Greetings all,
My name is Dr. PIPs, what better ways to pass time in a slow market than to learn and refine your technical trading skills huh?
In this thread I will be exploring various techniques of TA, most of it created not by myself but by a famous technician named Tom Demark ( no this is not an advertisment to sell his books :smiley: )- [I][U]we will be exploring entry and exit opportunities as the market presents itself.[/U][/I]
most of what he taught will be shared here. althought you should really get a copy of his book if you want to learn more.
I have been live trading the forex market for five years to date. I have experimented with many systems out there and have created several of my own, the problem is all the trading systems are based on indicators which in my perspective are all lagging and have limited value in the most dynamic market in the world. In the world of Forex, where you will fall in love with one Fad, a new indicator and new system after another. IN a full cirle, one will gradually find that the simplest methods are often the best ones.
In my experience, every and any good system will confluence to give you the same information, none is really better than another.

currently , I am using no more than simple trendlines, price action and sometimes a simple oscillator , and I have been consistently profitable.

Some of this will be sharing simple drawing of trendlines and breakouts , nothing more, yet the results it yields will be far better than one with a million indicators and lines drawn across a ilegible computer screen:D

Combined with proper discipline, trading with the trend, having a disciplined plan, diversifying , cuttiing losses short, letting profits ride, using adequate capital and having patience.Anyone can be a profitable trader :slight_smile:
please see attached rules below

Example of a Gbp/Jpy trade 300+ pips :slight_smile:
I will continue to post examples in forward testing as they crop up.

gbpjpy trade.bmp (791 KB)

gbpjpy pay out.BMP (791 KB)

…what stoploss management would you advocate off the 4hr TF?

Hello :slight_smile:
please see stop loss management attached below.

THere are also rules to prevent false breakouts .
they are the following :
1.Breakout qualifiers:
to validate a buy signal, the close the day before a buy signal is a down close.
to validate a sell signal, the close the day before a sell signal is an up close.

2.Breakout qualifiers2 :
To validate a buy signal, a price open greater than the breakout price must occur.
To validate a sell signal, a price open less than the breakout price must occur

3.Breakout qualifiers3 :
To validate a buy signal, the value arrived at by adding the difference between the close and the low the day prior to a breakout or the close 2 days before whichever is less to the day’s close must be less than the breakout price.
To validate a sell signal, the value arrived at by subtracting the difference between the high or the close 2 days before whichever is greater and the close the day prior to a breakout from that same day’s close must be greater than the breakout price.
Sorry if this appears confusing in words, I will attach some graphs to illustrate this better
I will explore them more as time goes by.
Please trade on a demo account:)

Many thanks :slight_smile:

Hi,
If anyone is interested, a thread on this already exists here on babypips…and it has an Indicator!

http://forums.babypips.com/free-forex-trading-systems/4020-mouteki-trading-6.html

i have being using Mouteki system of trading and find it fascinating, only that most people don’t seem to talk about it any longer, is it that it is no more profitable?
i want to know it there are any more people trading it and how has there progress being, and if there are any modification that might make the system more profitable/ reliable?

Hello Foxy

The Mouteki system is profitable,I recommend it as part of a complete system rather than a standalone system by itself.
My students and myself have been using it successfully by

  1. Trading with the trend
  2. knowing which hours of the day to trade
  3. trading with patience, a proper usage of money management and basic additional knowledge needed in trading ( price action, trendlines, fib , support and resistances etc)

will make this an invaluable system.

best regards
Dr. PIPs

thanks Dr PIPS
regarding your post about mouteki as stand alone, how do you use it with other indicators to make it profitable.
can you kindly teach the community as it will be very helpful and educative in this world of win win win!!!

Regards
Forexdarling

Hello FD
I think the system will really depend on your personality, for example, are you a scalper, momentum trader or a swing trader?
I am a momentum trader which means i “stalk” the market for appropriate moments before waiting for a breakout to take my trade. usually lasting anywhere from 5mins to 8 hours.

Decisively, you need to keep a pulse regularly on the market, look at charts in the longer time frames 4hrs, daily, weekly , monthly. is there a clear trend? is it up or down? if it is neither, you do not trade, if you are clearly trading with the trend , there is a 95% chance you will be profitable if you are patient.

indicators wise, i believe most indicators are lagging, which doesn’t mean they are useless… it just means they are lagging …:stuck_out_tongue:
my take would be you master price action if you have not already. this will allow you to take very low risk trades for very high profit margins .

another mistake most would make would be trading without clear stop losses. which would probably not be your problem, i assume you are an experienced trader:)

before any trade

  1. plan your stop loss ( BEFORE you plan your Take profit targets)
  • your stop loss should be honored at all costs, and should be within your money management limit and behind FIb levels, trendlines and support/resistances etc) if it is too far away( not viable) this means it is simply a not viable trade:)
  1. plan your take profit targets. again TPs should be at appropriate FIB levels, trendlines / support/resistances. observe how the price react to this level before you take profit and let it run further if possible.
    a scalp trade can always turn into a swing trade

  2. Once again always trade with the trend , if you don’t know what the trend is, stay out of the market.unless you are scalping for small change.

warm regards
Pips

Dr Pip

I am wondering if you would be good enough to post some charts with your detailed analysis as you work the trades…

You seem to have a very analytic approach to this system and perhaps could enlighten a few of us as to its nuances…

I would greatly appreciate your insights…

Thanks

dave

Dr. PIPS,
thanks for your prompt replies. i kind of know about the market but we don’t seem to know all, but i will like to learn from the best.
please i will like to ask some questions hope it doesn’t sound stupid and funny to you i only want you to throw more light.
talking about mouteki trade i like the setup, but adding it up with fib lines, makes it more interesting because of his (mouteki) new thread on FF.
price projection from the breakout of the trendline makes it very likely for the trade to hit profit if there is no strong resistance, though i like to trade when the market annoucement (fundamentals) are already out, why? because i have a days job and when i come back there is no much movement or noise of the maret, the market seems to move in it’s main direction.
kindly let me know more about fib lines (how do i know that one line is resistance or support, i hear about drawing lines on weekly waves and monthly wave even on 4hour chart).

forexdarling

Hi Dr PIPS,
the drawing of trendlines has really made me some pips last week and still going though there have being some ups and downs but more in “Green”, i use some indicators which was against the manual and filters which mouteki didn’t use.

Hello Blaiser and FD
I apologize for the late response as had been rather busy.

I will put up some charts once I have the time.
the main advantage of any trend trader is of course to know the trend :slight_smile:
simply scale out your charts to weekly , daily, 4 hrly, hourly etc… if they all align… this is the trend :slight_smile: ( ie up or down trend , you trade WITH it not against it, don’t try to pick bottoms- it is the easiest way to blow your account)

the angle of the slope should be approxiamately 25%-45% (2 to 5 O Clock angles) and beyond, if the slope is flat, there is no trend and does not warrant trading

you can use one of the MAs to help discern the trend a bit further( altho it is lagging)

look at the divergence section under the school section here, use an oscillator ( i usually use default MACD) so that you are warned early in advance of any likely change in trends. this will be where you need to be more careful and prepare to take profit.
be aware that divergences may take a while to act out , depending on the time frame you are looking at.

Use mouteki and demarks’s techniques as breakouts. this should be adequate to make you a good trader.

FD, good to hear you are doing well:)
as for FIBS , T/Ls and S/Rs , T/Ls are easy and their use cannot be overstated :slight_smile:
FIbs wise. there is a good Fibo course by PFX ( I am not associated with them. but this was painstakingly put together by him , and it is pretty comprehensive)

Forex Technical Analysis Education and Reports | Forex Market Education, Analysis and Reports | Forex

I am sorry I have no time to put together a private course for you guys at the moment but will do so once there is.

I hope this helps and best of luck with your trading

Thanks for that reply… some excellent insights…!!

since i have a day job i will like to know which time frame (4hr, 1hr) to trade the mouteki setup, since i come back late in the evening when the market would have being volatile and fast. my time is GMT +1.

My suggestion would be daily or 4 hour charts… I tend to stay away from the fast charts for this type of system…

I will be interested to see what others may reply…

dave

Hi everyone,

Just a couple of questions from a newbie about this system.

I’ve been backtesting and find many breakouts but frequently come across 2 major points of confusion:

  1. Sometimes 2 trendlines can be drawn, one sloping up and the other sloping down, because the candle formations are there for both.

Which should I use, or should I just back out when this happens?

  1. I frequently see the candle pairs on either side of a chosen candle fulfil the criteria but only by a TINY fraction! ie. they are only a couple of pips lower/higher than the chosen candle.

Are these viable or should I only use candle wicks that are more pronounced?

Examples of both issues can be seen on the chart pic. Both points for the upward sloping line use candlewick lows that are only a FRACTION lower than the pairs on either side:

You can see the breakout, so a short order would have yielded many pips, but not knowing which trendline to use, I wouldn’t have traded.

with the chart posted and what you said, that is where there is a little variation of the same system, because there are filters that demark uses before entering a trade while mouteki system says enter at the very beginning of the 4hr candle, irrespective of demarks filters which on most time keeps one out of bad trades.
so read the filters and analyse your charts.:cool:

Dr Pips,

In your first post, the second image…

Why did you choose those particular Mouteki points? I can see a few others.

I’m trying to clarify my understanding of this method. I thought you HAD to pick the two closest Mouteki points from right to left and not skip any. Now it seems that you’ve arbitrarily picked points and overlooked 2 or 3 on your chart.