一个简单的外汇交易系统 Simple Pips Generating Machine

THESIMPLE PIPS GENERATINGMACHINECREATED BYEKONYE G. KINGXd_analyst (Marketiva id)Yahoo chat id: powerking02Email: pkingx@THE SIMPLE PIPS GENERATING MACHINEThe Foreign Exchange market ‘FOREX’ as it is popularly called no doubt is the largest financial market in the world today with transactions worth several trillions of US dollars exchanging hands on a daily basis.Trading forex might be a highly profitable business venture but I must say this; its not a get-rich-quick avenue that any Tom, Dick and Harry could just jump into and hope to become a millionaire overnight…it requires a lot of hard work, discipline and patience as well as a touch of sound money management practice for one to be able to see the bright side of Forex at least consistently. I am just a little over 3 years in trading forex however and most unfortunately too, I spent a greater part of that 3 years in a fruitless search for the ‘Holy Grail’ the one I will love to call ‘Traders Paradise’ a paradise where price moves in a straight line (no swings), a paradise where every opened position ends in profit…hmmm…very funny isn’t it? It took the latter part of my trading career to finally realize the truth about trading forex profitably…believe it or not, ‘the most profitable trading systems applied in forex are the simplest that ever existed’A good and profitable trading system in my own view should have at least the following characteristics;1.Simple2.Trend following3.Consistent and4.Applicable to all pairsHaving pointed all these out, now let’s get down to the point of this publication, the trading system I call ‘The simple pips generating machine’. I have a strong believe that this trading system isn’t new to most traders, it is probably one of those systems most have come across and neglected in the past in the quest for ‘The Holy Grail’ , it is very simple to setup, it follows trend, it is consistent and can be applied to any pair.SIMPLE PIPS GENERATING MACHINETIME FRAME: 1hr and 4hrs (Recommended)PAIRS: All pairsINDICATORS:1.SMA 5 (simple moving average set to period 5 applied to ‘close’ price)2.SMA 20 (simple moving average set to period 20 applied to ‘close’ price)3.MACD (set at default settings)SETUP:Your chart should appear like the one below; I took the liberty of adding color varieties to help make reading easy. Red for sma20, blue for sma5 and blue for macd bars.From the setup above, what we shall be looking out to trade will be crosses of sma5 and sma20, when sma5 crosses above sma20, it indicates a buy signal and when it crosses below sma20, it indicates a sell signal. More so, when sma5 stays above sma20 it suggests bullishness and when below sma20, it suggests bearishness. However, it’s not as simple as said because in the forex market, whether you like it or not price must swing and due to some irregular swings and whipsaws most times due to fundamental events or news releases, we are bound to see false crosses of sma5 and sma20 and in such situation what do we do? How do we fish out false crosses from valid ones? Also, in cases where we are able to spot valid crosses, I found out from experience and back testing that in the course of waiting to confirm a valid cross of sma5 and sma20 or waiting for a sizeable angular divergence between the two moving averages before making an entry you would have lost valuable amount of pips not only that, such late entry would expose you to setting your stoploss level way too far from entry with respect to most recent swings thereby also exposing you to what I love to term as ‘Poor Risk Reward Ratio’ such as 2:1,3:1 or worse.The chart below is an illustration of what am trying to buttress above for a trader who waits for a full cross-over or reasonable divergence of sma5 and sma20 after a cross before making an entry.A close look at the above chart, the entry was made after the move have gone by over80pips though it isn’t that bad but the point am making is that, it is still possible to find an entry way below that point of entry even before sma5 crossed above sma20 and by so doing, one would have succeeded in reducing that stoploss margin from over 100pips to even less than 50pips thereby improving the risk/reward ratio positively.This is the point where our MACD will now come to the rescue. The macd will be used as filter to help fish out false crosses from true ones, help spot the move way earlier before the actual cross between sma5 and sma20 occurs, furthermore, it will also help avoid exiting a position prematurely for those who likes to let their profit run.Now let’s get down to business…BUY SIGNAL:The MACD combines wonderfully with sma5 and sma20 to help spot early signs of reversals with respect to the time frame under study.When MACD is combined with sma5 and sma20, I found out a lot of interesting things. For a buy signal, macd is the first to show signs, for a buy signal to occur on macd, there must have been a downtrend previously which means the blue macd bars pierces through the red signal line downwards below the 0.00 line. The first blue bar that pulls away fromthe red macd signal line (or goes above it) and towards the 0.00 line gives the first buy alert.At this point, when sma5 and sma20 are yet to cross, I observed over 90% of the times, price does rises towards sma20 and over 85% of the times, it hits or pierces through sma20 then bounces back to form a low higher than the previous low (forms lower low too in very rare cases) with respect to the time frame under study. I also observed that after the bounce off sma20 to the new higher low/lower low, price reacts so very swiftly and head to break and close above sma20 and that is when you start noticing signs of crossing of sma5 and sma20.RECOMMENDED ENTRY:Your long entry is made at first shoot or close of price candle below sma5 right after the bounce off sma20 to form new higher low/lower low and set your stoploss some 10-15pips below the previous low. With this, you would have succeeded in making an entry at a better price level with a tighter stoploss than the trader who is busy waiting for clear cross of sma5 and sma20. Let’s take a look at the same chart used earlier but with macd added this time if there would be any difference.Now take a good look at the new chart with macd added much difference I guess? Yea sure so much, it gave two very profitable entry opportunities, same stoploss level as first but this time tighter because of early entry signal given by macd and richer risk/reward ratio compared to the entry made in earlier chart without macd filter. So amazing isn’t it? …lol.First entry on chart without macd was at 1.6208, exit target at 1.6365 and stoploss below 1.6107 while entries made on chart with macd was at 1.6149 (with hope that it may just be a spike) and 1.6119 (an actual close below sma5) but with same stoploss as the first at below 1.6107 and same exit target at 1.6365. Now who is more rewarded? I will leave that for you to figure out at least you have the figures so do the calculations.EXCEPTION:There are times when price may have closed above sma20 before macd signals a buy, in such case, please wait for price to pullback to hit sma20 then you may now make your entry. In a case like this, your stop loss should be placed at a reasonable distance below sma20 depending on volatility of currency pair in question. The chart below shows is an illustration of what I am trying to point out.Now lets take a look at the opposite side of buy…sell signal…lets go…SELL SIGNAL:A sell signal can easily be spotted applying this system; it’s just the direct opposite of a buy signal. Just like the case of a buy signal, the macd is first to show signs of possible move of price action to the downside, the first macd blue bar that pulls right below the red signal line towards 0.00 line gives first sign of change in trend or reversal with respect to time frame under observation. At this time sma5 and sma20 are yet to cross, next you wait for price to hit sma20 and an inevitable bounce back is seen in most cases and then a new lower high/higher high is formed and at that point, you may take a short entry at first shoot or close of price above sma5 and set your stoploss 10-15pips above previous high or 25-30pips above new high whichever case it may be.See chart below for illustration,EXCEPTION:There are times when price may have closed below sma20 before macd signals a sell, in such case, please wait for price to pullback up to hit sma20 then you may now make your entry. In a case like this, your stop loss should be placed at a reasonable distance above sma20 depending on volatility of currency pair in question. See chart below for illustration.EXIT TARGET ISSUES:This issue is one that may cause so much to worry about, I am a full time intraday trader and with this system, I found out I am able to get good trade setups more often so i decided to always place my target moderately. I have tried this system on the following pairs listed below and came up with an average must-hit exit targets both on 1hr and 4hrs time frames respectively (for non-greedy traders);1hr (pips) 4hr (pips)EUR/USD 60 100GBP/USD 80 150EUR/JPY 80 120GBP/JPY 100 200AUD/USD 70 100USD/CHF 50 100USD/CAD 80 120USD/JPY 50 100EUR/GBP 40 80GBP/CHF 70 120NZD/USD 60 100EUR/AUD 100 140EUR/CHF 50 80AUD/JPY 80 150Another observation I made was that after each cross of sma5 over sma20, a newhigh/low is reached and then most of the times, price retraces to retest sma20 then goesback to break that new high/low made and in such cases, one can apply knowledge of 1-2-3 formation and calculate price projection to figure out how far up/down its likely to goafter breaking the said new high/low it made after the cross of sma5 over sma20.CONCLUSION/GENERAL DISCUSSIONThis system is however not limited to 1hr and 4hr time frames, it can as well be appliedto lower and higher time frames at least back testing have been able to prove this.Another very important issue is that their are cases where failures occurred that is after anmacd buy/sell trigger, it trades for a while and then the bars starts extending back towardsthe signal line, I will advice at such situation if stoploss is yet to trigger then exitingmanually wont be that bad otherwise stoploss is always there to rescue. For those whowill prefer trading the hourly time frame, I will like to add this, there are times when the1hr chart will seem clumsy without a clear pattern or direction most times due toprolonged period of price being range bound and this will tend to lead to macd givingmultiple buy/sell signals within very short time intervals which may not be right, pleaseyou should see 4hr chart to help in taking a decision. There is also the issue of timing; Iobserved that buy/sell triggers that occurred between 03.00hours GMT and 10.00hoursGMT are more likely valid most of the time than any other time of the day so please dokeep this at the back of your mind.Finally, this system will appear more profitable if one applies a fair knowledge ofsupport/resistance as well as trend lines/price channels to it.Should there be any part of this document that lacks clarity, please do not hesitate tocontact me using any of the contact means listed on the cover page so we can treat ittogether and if you have ideas that could improve the strength or add more filter to thissystem, please I would be more than glad to have you share it with me.Lets all work together so that we will be able to combat losses and have it reduced to thebarest minimum but please always remember that however perfect a trading system mayseem, it definitely can ‘NEVER’ guarantee 100% wins.Good luck everyone!d_analystTrading Futures and Options on Futures and Cash Forex transactions involves substantialrisk of loss and may not be suitable for all investors. You should carefully considerwhether trading is suitable for you in light of your circumstances, knowledge, andfinancial resources. You may lose all or more of your initial investment. Opinions, marketdata, and recommendations are subject to change at any time.。