Hey Mike! Well, how was your vacation this week? I'm very curious of what you've been up to, regarding your business. Did you accomplish what you wanted this week, like you said?
Well Journal, you should know me by now. I did have very much time to get some things done. And I took advantage of every minute I could. Look, me and the wife didn't really go anywhere this week. But, each day, we did venture out and made the most of a day. She was not cooking this week. So we found nice places to eat everyday. We just really took it easy. See, we're workers. Responsible, reliable, dedicated, very hard working kind of people. And when it comes time for our vacation, all we want is to NOT work. We don't care about going anywhere far away and such. It's just not the time now. Our kids are just about on their way out.
In fact, just yesterday we went to our daughters' high school graduation. And now we are down to only one more child. In one years time, from now, we won't have kids in school anymore. So the point being, in a few more years (hopefully) we should be childless. You know, time to leave the coop, and get on with their own lives. And that's when our lives will start. Anew. And that should be around the time when my business will be up and running. Then.....life will change for us. That will be the time of life, for us, when we can start taking real vacations. You know, like a cruise. In fact, we talked about it, that is what we want for our first real vacation. Ok,..... yeah, .......that's nice. You get the point now right Journal? In anycase, this past week was very relaxing, but, you better believe I was up early everyday. Journal....I never worked so hard on my business, than this week. There are many reasons for that. First off, the main thing that kept going through my head was our last conversation together. See, I promised you that I would come up with a plan, strategy, by the end of the week. That is an important character of mine. 'True to my word'. So therefore, yes, I was on it. And the other biggest reason why I could have done that, is because I am not weighted down anymore with 'running the numbers'. (I've been wanting to tell you this for a couple weeks now Journal). I mean, I knew I was spending sooooo very much time with the figures of the market. And it did take hours to do. And it doesn't help that I'm a creature of habit. I won't stop. I can be so dedicated to something, it ain't even funny. It made me feel good accomplishing that, but never produced results in my trading.
See, normally, tragedy must strike in order for me to realize that I'm doing something not too smart. There are better and easier ways of doing things. So, my point there is, I have had so much more time available to concentrate on the most important aspect for me now. Finding the strategy. You would have been proud of me Journal. I mean, the fervency that I went through is amazing.
Nice Mike! I am! So, what did you uncover, accomplish?
Well, after so much writing stuff down on paper, notes like crazy, this is it. I will give it to you up front, and then explain it.
3 EMA/// 8 EMA. I fully believe, now, that this is what I've been missing for such a long time now.
Journal, I know your aware of all that stuff, but I know I must explain it enough that a child can understand it.
From big to small here we go. That chart set up right there is my most important view of the market. The top row (and across) is all of AUD. The middle row is NZD. Bottom row is CAD. The first column down is the USD. 2nd column is JPY. 3rd is CHF. 4th is EUR. And last column is GBP. This is really the only way I look at the market. It tells me pretty much all I need to know, in regards to how I am trading. All in one view!
Yeah, before, I thought it was important to see each and every 28 pairs. I was wrong. This view tells me about whether risk is on, or off. Who's the stronger within each camp. If I want to know what the Majors are doing, I will be concentrating on the columns (top to bottom). If Comms, then will be looking at the rows (across). And so, I need a little bit more perspective also. So, I have a total of 3 tabs. That tab right there is the 'daily' tab. I have a '4hr' tab, and '1hr' tab. It all looks the same, except for the time frame.
You know, putting it all into a time perspective is very important. Especially in how I am trading.
Yeah, that's nice, but now, I have found a way to trade. You know I have been searching for an indicator. And after sooooo much research on the hundreds of them out there I uncovered this. I have to give credit to those teachers out there (on the web) who put it all out there and have their web sites dedicated to teaching forex. Well, I kept coming back to one particular persons website. He's called the 'The Forex Guy'. He does a good job explaining all of the different indicators. And I appreciate his work. But it's funny, that at the end of EVERY one, he always says, 'it's such nonsense'. 'You really don't need any indicators because Price Action is really the only thing you need.' Look Journal, I have read a lot on Forex. And I have subscribed to that mentality, since my beginning. Everything is nothing but a lagging indicator because it's just plotting the history of price. And price doesn't always do what it did in the past. Ok...yeah,...so what I found was very interesting was that that guy 'Forex Guy' ALWAYS said at the end of his write-ups was how the way he trades. He does not use any indicators. EXCEPT that he uses 2 EMA's. (Exponential Moving Average). Well, in my mind, that is an indicator. Maybe I was wrong, but I used to think that anything on the chart was one. So bottom line is he uses only Price Action and 2 EMA's. I couldn't find out which one's, but I knew then that I had to find out for myself which ones would work best for me. I brought back some memories of things that I have read in the past. And it struck me that someone (wow, I just remembered where I read that, it was in a book, 'Trading for Dummies') used 2 EMA's that were on the small side.
I won't go into the reasons, but I do believe these are the best for my trading time table. And now my eyes have been opened. When these are plotted on the chart, it does tell me about the flow. You know, when you see the 3 EMA, it rides pretty close to the actual price. It actually is the average of the last 3 candles, exponentially added up. And the 8 EMA is the average of the last 8 candles. So, when the 3 EMA is above the 8 EMA, that means it's trending high. And if it's below the 8 EMA, it is trending low. And now I have, at an instant, the flow (aka trend). Which ever currency follows the 3 EMA, is trending high. And the way I have my chart set up, I can pretty quickly see the Major/Comm flow. Not only that, this gives me a signal!!
Of when to get in, and when to get out. The signals will be when they cross over. The cross overs indicate a change of flow. But....I still need more, in the way of perspective. That's why I have everything in either the Daily, 4 HR, or 1 HR time frames. My rules pretty much follow this. I will only be in a trade when it's trending high on the daily time frame. So that will be the function of the Daily time frame. Whether or not I will consider that pair. (I do keep a daily track of these 15 pairs. I will show my table later). Then the function of the 4 HR time frame will be to tell me if I can get in or not. Because see, price can be trending high on the Daily but not on the 4 HR. The 3 EMA will have to cross over the 8 for me to be able to get in.
And the reason why I have the 1 HR time frame is to better help me get in at the best time. But I pretty much will be concentrating on the 4 HR one. For entries. And I do realize that I must wait till the candles close. I have done much looking back (if you want to call it backtesting)....ok....for the entire month of May, every 4 hrs how much did the 3 cross the 8. On every pair. And it's like up around 90% of the time there is one cross over. To generalize it, it's like this. If the pair is trending strongly, there will not be a cross over. If it's consolidating, there will always be one cross over (that's out of a possible 6 candles, 4 hours each candle, one cross over). And yes, I do keep track of that also. I'll show you that chart. Whoa Mike, don't be getting crazy on those charts, like you were
. Yeah, I know, and that's why I only have 2 charts that I have. That's better than 7. Geeeez. I'm such a dummy. Oh well, live and learn.... And get old.
Well Journal, I think I'm exhausting this post. I do have much more I want to tell you. But here is what I've been talking about. Look.
This is the AUD/USD. Daily time frame. So, the AUD is the yellow (3 EMA). It finally crossed over the 8 EMA.
Here's the 4 hr chart. I can see that there has been some indication that the AUD has been wanting to turn the flow. And sure enough, NFP Friday made it clear.
And this is one of my 2 tables that I keep track of. It's the data from May. Someday I'll explain it. But, believe me, it tells me who is trending high. Blue squares are Major trending high. Pink is Comm high. Inside the squares are the 4hr crossovers. The first letter is the state of the start and the end letter (either Major or Comm) is the ending state, trending high only. So any letter means who is trending high.
We'll be in touch Journal!