# The Right Stuff

Here is a trading system that I have come across, I don’t know who the original creator is. It is a fairly easy system and has been fairly successful. This system can be used on any time frame but works best on 15 min charts.

This system is based on three indicators and Fibonacci lines.

Exponential Moving Average (period 21, high)
Exponential Moving Average (period 21, low)
Williams’ Percent Range (period 35, add -50 line)
Fibonacci Lines (instructions below)

Here is the template for MT4:

therightstuff.zip (668 Bytes)

Set up chart using the template above and then add Fibonacci Lines as per instructions below:

1. Draw a Fibonacci retracement on the previous month’s data.

a. You can use the Daily or the Monthly chart.

b. On the Daily chart, start at the beginning of the previous month. The previous month’s data can be identified by the white vertical Period Separator lines on your chart. At this stage, all you need to do is identify where the previous month’s data begins and ends.

c. If the open at the beginning of the previous month is lower than the close at the end of the previous month draw your Fibonacci retracement starting from the low to the high.

d. If the open at the beginning of the previous month is higher than the close at the end of the previous month draw your Fibonacci retracement starting from the high to the low.

e. If you are using the Monthly chart simply look at the previous candle.

f. If it is a Bullish candle draw your Fibonacci retracement starting from the low to the high.

g. If it is a Bearish candle draw your Fibonacci retracement starting from the high to the low.

1. Draw a Fibonacci retracement on the previous week’s data.

a. You can use the Weekly or the 4 Hour chart.

b. On the 4 Hour chart, start at the beginning of the previous week. The previous week’s data can be identified by the white vertical Period Separator lines on your chart. At this stage, all you need to do is identify where the previous month’s data begins and ends.

c. If the open at the beginning of the previous week is lower than the close at the end of the previous week draw your Fibonacci retracement starting from the low to the high.

d. If the open at the beginning of the previous week is higher than the close at the end of the previous week draw your Fibonacci retracement starting from the high to the low.

Or you could use the Weekly chart to insert the Fibonacci retracement instead.

e. If you are using the Weekly chart simply look at the previous candle.

f. If it is a Bullish candle draw your Fibonacci retracement starting from the low to the high.

g. If it is a Bearish candle draw your Fibonacci retracement starting from the high to the low.

h. The Fibonacci retracement on the Weekly chart does not require the 23.6 and 38.2 levels.

Entry Rules:

Go to the 15 Minute chart to identify an entry.

Long Entry:

1. Wait for a candle to close above the 21 EMA of the Highs.

2. As long as price remains above the 21 EMA of the Highs wait for a candle to close above any of the Fibonacci retracement levels.

3. If both the conditions above are met and the Williams % R is above 50 enter a Buy trade at the open of the next candle.

4. Place your stop loss 27 pips away from the Fibonacci level that was breached by the set up candle.

5. Place your Take Profit 45 pips away from your entry price.

Short Entry:

1. Wait for a candle to close below the 21 EMA of the Lows.

2. As long as price remains below the 21 EMA of the Lows wait for a candle to close below any of the Fibonacci retracement levels.

3. If both the conditions above are met and the Williams % R is below 50 enter a Sell trade at the open of the next candle.

4. Place your stop loss 27 pips away from the Fibonacci level that was breached by the set up candle.

5. Place your Take Profit 45 pips away from your entry price.

Where did you find this? Looks simple enough. Have you tried it out yourself? If you have, please upload some sample charts please. Thanks!

Also some backtest results if you have. I’m sure Robopip will be interested in trying it out for himself too!

Here is a short entry that occurred on Friday. You can see that a candle has closed below the 21 EMA of the Lows, then the set up candle (vertical yellow dotted line) has closed below a Fibonacci line (horizontal red dotted line) & is below -50 of the Williams % R. Entry is at open of next candle 129.79, the SL (horizontal red solid line) is at 130.08 and the TP (horizontal green solid line) is at 129.34.

Another thing to take into account is where the next Fibonacci line is, if the next Fibonacci line is within your TP target then place your TP a couple of pips before the Fibonacci line.

Happy hunting.

[B]Conditions:[/B]

Below are some conditions that I have as part of my trading plan. These conditions are not part of the system mentioned above, they are conditions I use regardless of which trading system I am using.

I never trade 15 mins before or 30 mins after:

a. Opening time for the Tokyo, London & New York sessions.
b. Any reports or announcements.

I use the following site to find out when announcements or reports will be on, Forex Calendar: Economic Calendar for FX Trading News & Event Risk. I only bother with high & med impact.

I don’t trade on Mondays.

I don’t trade after New York lunch time on Friday.

I never consider a trade if the set up candle is abnormally bigger than other candles on the chart I am using to trade, I also disregard candles that have a large spike.

I like to check the direction of the market on a higher time frame like the H4 and prefer to enter trades in that direction for that currency pair. That doesn’t mean I won’t enter a trade in the opposite direction, I just make sure that all the rules are spot on before considering that trade.

I never trade if the market is ranging, I switch to another currency pair.

Personally I only trade the following currency pairs:

AUDJPY
AUDUSD
EURJPY
EURUSD
GBPJPY
GBPUSD
USDJPY
NZDUSD

please upload big pictures with detailed instructions to illustrate this strategy, not sure i understand it completely, thanks.

Sorry Sailormoon, that’s the best picture I can do. If you have any questions please let me know.

i’m a little bit confused about how to draw the fibs. here is an example, eurjpy, last month is a bearish doji candle
high: 132,413 low: 127.954 open: 130.154 close: 129.775

d. If the open at the beginning of the previous month is higher than the close at the end of the previous month draw your Fibonacci retracement starting from the high to the low.

according to this rule i shall draw the fib from the high to the low. so the 100% line should be 132.413, and the 0% line should be 127.954, right?

another question, can we use the extension like 161.8% etc.
Thanks!
just found out babypips reduced my image size. i use tinypic.com, it looks much clearer and i think others should find some good image hosts too.

Hi Sailormoon,

That is correct. If the candle in question is a bearish candle then the Fib line starts at the top and finishes at the bottom. You have it right, the high price of 132.413 will show the 100% Fib line and the low price of 127.954 will show the 0% Fib line.

All the Fib lines are usable except for the 23.6 and 38.2 levels on the weekly candle Fib lines, you go into your objects list and edit, then delete those two levels.

Once you have placed the Fib lines on the chart you only need to go into the objects list to edit the value under the parameters tab each week and month instead of redrawing the Fib lines on your chart, don’t forget to change the dates as well. I hope this makes sense.

Hi?

I’ve managed to set it up this system to have a look at but am very confused by the entry points for a trade. The OP hasnt logged in for a couple of years so was hoping one of you clever traders could advise please if thats ok?

Basically I’ve applied the template to the 15 minute chart and then created the FIB levels on both the daily chart (for monthly) and the 4HR chart (for weekly) as instructed.
But then he says ‘go to the 15 minute chart for your entry’? That chart has the 2 SMAs on it only and not the Fib levels, but the Fib levels are part of the entry rules - am I missing something obvious?

Cheers,
Simon