Forex Minute Trader

Forex Minute Trader (FMT) is a Forex scalper robot (Expert Advisor) that is developed by Adam Liddiard of New Millennium Investments Inc. and works on the MetaTrader 4 platform. The robot has been programmed to work on 5 currency pairs, i.e. EUR/JPY, EUR/USD, GBP/USD, USD/CHF and USD/JPY.

The following are the features of Forex Minute Trader:

• 100% hands free, set and forget
• FIFO compliant
• No GMT or time zone trading restrictions
• No news release contingencies required
• No hedging
• No minimum or maximum leverage requirements
• Extremely low maximum relative drawdown versus monthly returns ratio
• Positive risk to reward ratio on each trade by using a small stop-loss
• A daily trader that trades frequently
• Trades close within 1- 60 minutes, never held open over weekend
• All orders are pending and hard stopped, no market execution orders
• Trailing stop-loss to lock in profits
• No martingale, grid, or cost averaging

The full package of Forex Minute Trader includes:

1. Forex Minute Trader EA
2. Forex Minute Trader Manual
3. 1 Year Of Free Updates

Forex Minute Trader is priced at $189 (one-time payment) and is only applicable on four of NMI's recommended brokers, i.e. Axi Trader, LMAX, IC Markets and Traders Way. These brokers have been tested to deliver good results with the system and therefore users must use one of these brokers in order to utilise the system.

All purchases include a 60-Day Money Back Guarantee. Therefore, interested traders can try it out without any risks.

For more information about Forex Minute Trader and its backtesting results, visit its official product page.

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PipRipper Forex System

The PipRipper Forex System is an indicator that works on the MetaTrader 4 platform providing exact buy and sell signals on the charts. Trading signals will be generated by way of arrows on the open of a bar so that each trade will be entered as soon as the bar is opened.

In addition, the arrows do not disappear or repaint when the chart is refreshed. The indicator works on any currency pairs and on any timeframes. The indicator also includes an adjustable sound and popup alerts, minimizing the need for traders to continually monitor the charts.

The input settings of the indicator can be adjusted to achieve the best results on certain currency pairs. An overview of backtesting results of the indicator over a 5-year period are as follows:

• AUDUSD (Aust Dollar / US Dollar) 89.86% Winning Trades
• CHFJPY (Swiss Franc / Japanese Yen) 90.74% Winning Trades
• EURCHF (Euro / Swiss Franc) 88.22% Winning Trades
• EURUSD (Euro / US Dollar) 90.21% Winning Trades
• GBPNZD (British Pound / New Zealand $) 91.07% Winning Trades
• USDDKK (US Dollar / Danish Krone) 89.90% Winning Trades
• USDJPY (US Dollar / Japanese Yen) 81.85% Winning Trades

For traders who prefer to automate their trades, there is also a Robot that executes this system automatically. 

A 45-page manual is included detailing the different input settings that can be made to the indicator to maximize the trading results. 

The PipRipper Forex System is priced at $67 (for the indicator only) and $97 (for both indicator and Robot), and includes a 60-Day Money Back Guarantee. Therefore, traders can try it out without risks. 

Find out more about PipRipper Forex System now!

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Trending Markets and Retracements

First and foremost, if the market you like to trade is not always trending on a higher timeframe like the Daily chart, don't worry. Due to the fractal nature of liquid financial markets, the characteristics of trending price action tend to look the same on all timeframes. Therefore, we might be in a corrective or consolidation sequence higher up, but when a high Reward/Risk setup is not available, one of those seemingly insignificant legs of the correction as seen on the H4 chart might actually be a sound short-lived 'trend', which is good enough for a scalping trade, when viewed on the M5 or M1 charts.


Identifying A Trending Market
So what do we mean by a trend? It's an extremely simple and important point, but one often forgotten: a down trending market creates consecutively lower lows and lower highs over time. Conversely, an up trending market creates consecutively higher highs and higher lows over time. So what we want to look for, before we even bother with indicators like Moving Averages, is Swing Points in succession that satisfy this relationship, as illustrated below.

Another way to identify trending markets without any technical indicators is to look for those legs in price action that have an almost 'linear' look to them. That is, those that move decisively with little interruption, and covering a relatively large amount of ground in a short period of time. When a sequence of lower lows and highs, or higher highs and lows, are strung together, it is likely that the market is trending.

Candlesticks can also be used to enhance the identification of trending markets. For instance, there are more down closes in a downtrend (red), and more up closes in an uptrend (green), as shown in the chart below.

Identifying Retracements
The term retracement (or sometimes referred to as a correction or pullback) generally refers to any type of counter-trend price action that interrupts the broader flow of the market for a defined period of time without reversing it on the degree of trend in which it is encountered. Put simply, we are looking for instances of where the market is moving in the 'wrong direction' relative to a trend, recovering a portion of the preceding impulsive movement, but without exceeding its startiog point.

The simple and practical way to explain why the market behaves this way is that at critical support and resistance levels, some portion of the market is taking profit. For example, as numerous traders cover shorts in a downtrend (effectively going long) at or near a confluence of support targets, selling pressure will disappear for a period of time before the market consolidation process is complete allowing for a return to trend. The traders who were more bearish than those covering their short positions sell into the buying, and away we go again.

Unlike the trend of the market, retracements have a very different appearance. In addition to recovering only a portion of the preceding impulsive movement, they often feature a lot of overlap in terms of the smaller waves comprising them, and often (but not always) unfold in sequences of threes. The important point is that without having a method of identifying these patterns, a lot of traders will be in despair at all the supposedly random 'noise' and compressed volatility they're seeing, hoping a trending market will return, but having no idea when.

The following diagram illustrates a typical contrast between these two varieties of price action, which we can call impulsive (the often 'linear' looking sequences aligned with trend) and corrective (the three-wave overlapping sequences which temporarily interrupt the trend). The downtrend is reflected in the relatively smooth and brisk movement of the down leg to the left. By contrast, we can see the strained, overlapping progress of price action once a temporary bottom is made (at a price level that represents one of those 'confluences of support' mentioned above).

In this example, we have plotted a Fibonacci retracement level which shows that at the point where the three larger subdivisions of the correction are finished (at the dashed horizontal line), the whole sequence has retraced - to a precise degree of accuracy - the Golden Mean ratio of 61.8%, a fairly standard proportion for Fibonacci retracements.

Putting It Together
So how do these two concepts - trending markets and retracements - combine? To put it simply, it is at the expected point of termination of a retracement where we're looking to jump into the market in the direction of a trend at higher degree. So a retracement slanted in the sideways-to-up direction against a valid downtrend is the 'rally' we're looking to sell. Conversely, a retracement slanted in the sideways-to-down direction against a valid uptrend is the 'dip' we're looking to buy.

We don't have to worry that on the hourly chart, for example, the retracement doesn't have the same look as the illustration above - often, pullbacks are briefer and simpler in construction, particularly in a fast-moving market. The key is that we're keeping the trend in mind, looking to trade only in that direction, and focusing our attention on finding a confluence of support or resistance that strongly suggests the end-point of the retracement.

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The Core Principle of Successful Trading

Trading methods come and go. Some of them are software-based, programmed from purportedly top-secret algorithms that claim to make profits with little or no involvement from the trader whatsoever (simply plug 'n play and you're a millionaire!). Some would avoid the automation route in favor of chart patterns so extremely complex that by the time you've finally recognized them, the trading opportunity has come and gone.

There is one principle however, that is not only much more simple and easier to understand and to see on your charts, but which also stands the test of time as the highest probability route to success in trading. That principle - which you have surely heard before - is as follows:

Buy the Dips in an Uptrend, Sell the Rallies in a Downtrend

Simple, isn't it? And yet so many traders, even after hearing the advice, fail to apply it in their trading. Instead, they spend much of their time trying to find the latest indicator-driven strategy, or spending thousands of dollars on those fancy charting packages (only to learn later that they didn't measure up to the sales hype). Others would give in to the temptation of chasing a  non-trending market, for fear that they would end their trading session feeling they failed simply for not taking a trade.

If you want to make your trading endeavour a success and also a whole lot easier, then make it your mission to buy the dips in an uptrend, and sell the rallies in a downtrend. OK, so as simple as it sounds, what exactly do we mean with this principle and why is this so crucial?

Firstly, note that we are trading with the trend, not against it. We buy in an uptrend and we sell in a downtrend. However, it does depend on the degree of the trend: the higher up you go (for example, to a Weekly chart) the longer the duration and the more distance covered in the significant counter-trend moves, which may in fact represent decent trading opportunity. But as a general rule of thumb - especially for day trading styles - buying the dips and selling the rallies means aligning ourselves with the market flow, the direction it is heading on the timeframe we're looking at, which is the path of least resistance.

If we do the opposite, for example, selling the rallies in an uptrend, we put ourselves in the direction of a corrective action, which can be a really bumpy ride. Corrective action tends to be unnatural, prone to whipsaws and market 'noise'. Its price targets are often much more difficult to hit, and less reliable. A trending market, by contrast, tends to move more smoothly and effortlessly towards its objective, more linear than overlapping in appearance. Putting ourselves on the right side of the trend allows us to take advantage of those really big moves that can be very profitable. 

As shown in the chart below (showing green arrows for buys, red arrows for sells), the other advantage of buying the dips and selling the rallies, is that it minimizes risk. In a trending market, a correction should only go so far. Once it's exhausted, the return to trend can be relatively quick - in other words, the market moves off the counter trend extreme with little hesitation. If we jump in at that point, then there is a much lower chance that the market will tum against us later, triggering a stop. This in turn allows precise entry points with limited risk to be set. 

In order to buy the dips and sell the rallies, we need an analytical approach that effectively comprises two  components. Firstly, we need a reliable method of identifying a market that is trending. It is going to be difficult to sell the rallies in a downtrend if we don't even know whether we are in a downtrend. Secondly, we need a reliable method of identifying the retracements (the dips in an uptrend or rallies in a downtrend): where they start, where they are likely to end, and some sense of certainty that they are merely a pullback. 

There is no point in selling a rally in a downtrend if that rally is expected to confirm a reversal. Therefore, we need to understand how to detect these important components of price action relatively unaided. This means that we need to start developing a general idea for what trending markets and retracements tend to look like on the chart with recourse only to price action itself.

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Creating Your Forex Trading Plan

Forex trading is a business and every trader should approach his or her business professionally. Contrary to what the Forex 'gurus' and 'marketers' are telling you, Forex trading isn't a video game in which you aim and shoot at a target on the screen for fun and hope to see a gold coin appear. Instead, we're effectively taking part in a highly competitive domain populated by large, powerful players like banks and hedge funds. Therefore,  a planned approach that is detailed, realistic, and well formulated will be needed if you really want to be successful in this business.

We cannot hope to compete with the professionals if we don't trade like them. The basis of a planned approach is to have a set of well defined trading objectives in terms of your personal trading situation and target profit on a monthly and/or annual basis, the opportunity profile (for each and every currency pair traded), risk management, and account equity. If you don't take the time to learn and understand how these variables can affect your results, then your chances of success will be much lower.

Your Personal Trading Situation
The first step in setting a useful target for tradiug profit is to carefully consider the variables which characterize one's personal trading situation, including the number of currency pairs traded and the volatility of each pair (measured by Average Daily Range (ADR)), personal trading style, times of day available to trade (in relation to important trading session opens and closes), and the total time available each week for trading.

As an example, here is my personal trading profile based on the above criteria:

• Number of pairs traded: 1 (GBP/JPY)
• Volatility (ADR): 250 pips (approximate)
• Personal trading style: Primarily swing trading (100 pip targets)
• Times of day available for trading: 6 hours, 8:30pm - 2:30am PT
• Total time available each week to trade: 30 hours (6 hrs/day, 5 days/week)

Based on the above profile, my starting point is a belief that by focusing exclusively on the GBP/JPY pair (which has a relatively high ADR) during the late Asian/early London session times, it should be possible to consistently earn 500 pips per month. In other words, to earn 500 pips per month is equivalent to capturing the entire ADR for GBP/JPY just twice per month.

In contrast, a target of 500 pips per month might be an unrealistic target for someone who has only, say, 2-4 trading hours per day, twice per week, focusing on scalping on a pair such as EUR/CHF, which has a lower ADR. Therefore, it is necessary for each trader to realistically consider his or her own personal trading situation in order to derive a challenging but achievable target for monthly trading profit.

Opportunity Assessment
An effective method of conducting an opportunity assessment is to look back over an intraday chart for the past 1-6 months. On the chart, highlight the times of day and days of the week when you are generally available to trade. In relation to your trading style, how many setups were apparent on that chart, and how many pips potential did they offer relative to the realistic take-profit levels where you would have exited the trade?

Performing the above assessment with respect to my chosen currency specialization over an annual cycle, I believe the following activity profile (winning trades only) represents an achievable performance target for gross profit:

Risk Management
Obviously, winning trades are only one part of the profit equation. The other part is unprofitable trades, which have to be accounted for in deriving a realistic bottom-line objective. Unless you really and honestly believe there is such thing as a 'holy grail' trading system that generates almost no losses over a long period of time, it is critical that your trading plan specifically allow for losses.

Trading loss can be divided into two components: the average size of stop loss employed, and the frequency of trades being stopped out. If you maintain a record of your trading activity, whether in a demo or live account, it can be useful to simply plug in your actual figures for average stop loss and Win/Loss and assume those performance metrics can be projected into the future.

On the other hand, if you don't know your long-term performance results, it may be safer and more prudent to allow for more conservative targets, at least in terms of Win/Loss. My trading style tends to stress a relatively low, precisely defined stop-loss risk which is employed on each and every trade. This is possible because with the time I have available to trade, I can afford to wait patiently for a well-timed, low-level entry point.

If your trading situation does not allow for this, you may need to consider wider stop losses, which will in turn have some effect on Reward/Risk and position sizing. While my Win/Loss ratio over time tends to exceed 65%, I like to allow for a lower benchmark:, as a way of building in a margin of safety in my trading objectives. Therefore, assuming a more conservative win rate of just 50%, and an average stop loss of 30 pips per trade, the annual activity profile shown in the table above can be translated into the following targets for net trading profit:

So, based on defined targets encompassing my Personal Trading Situation, Opportunity Assessment, and Risk Management, I have a plan which concludes that an annual net trading profit of about 6,800 pips is possible by targeting a 50% Win/Loss ratio, 3: 1 Reward/Risk ratio (100 pips profit, 30 pips loss) and 6-7 trade attempts per month over 11 months of the year. That equates to an average monthly target of 6,840/11 = 622 pips.

With reference to my initial assumption of 500 pips per month, I see that this is an obviously achievable target. To build an even more conservative margin for error into my planning, I defer to the original 500 pip target, which is about 20% lower than the projected activity levels.

Account Equity
Depending on Account Equity,  a lot of dollar profit can be generated from 500 pips per month. The table below  translates 500 pips per month operating profit into a financial profit in USD (assuming a US dollar trading account and 500 pips realized on a USD quote pair).

As indicated above, with a 30-pip stop and risking 1.5% of account equity on any single trade, 500 pips equates to $2,500 profit for every 10K increment in Equity. This results in an actual leverage utilization of 5: 1, which is apparently much lower than the maximum leverage traditionally offered by many brokers.

Note that the money management benchmarks in the table above are very general that they do not reflect partial lot sizing for levels of account equity between the categories quoted above. In other words, profit-per-trade potential can be further optimized by calculating position size (number of mini lots per order) each and every time a trade is about to be entered, relative to the current actual account size using the 30-pip stop and 1.5% account risk formula illustrated above.

Based on the above, we can see how Account Equity can affect our financial profit, increasing our operating profit (in pips) through leverage. Thus, the question every trader inevitably faces when opening a new account - "how much money should I put in?" - needs to reflect consideration for the maximum amount that could be lost entirely without disrupting household finances, while at the same time addressing the question "how much do I want to make?"

If you want to earn $10,000 per month on 500 pips, for example, the table above indicates that your trading account needs to be funded to the tune of $40,000. If that is not possible, then the target for financial profit (in dollars) will need to be reduced, or the target for operating profit (in pips) will need to be increased (or some combination thereof).

For some traders, the concept of not to target big profits on a small trading account can be a real letdown. However, trading with a 'slow and steady wins the race' attitude may be one of the most important safeguards to prevent you from joining the 95% of traders who blow their entire trading account before they have mastered the markets. You would certainly be much better off building up your trading confidence by building up your account slowly and consistently over time than to have to repeatedly, answering margin call after margin call from your broker not knowing when you might win it all back.

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Trend Following System With Formations

Trend Following System With Formations (TFSWF) is a Forex trading manual written by Dr. Dariusz Swierk, PhD of Forex Institute, providing a comprehensive explanation of the 3SMA (3 simple moving averages) trading system.

With this system, the moving averages are used to filter and identify a strong market trend, taking into account the existence of a price action at the trend lines. Then a confluence of support or resistance levels (such as Fibonacci levels, round numbers, previous highs or lows, etc.) are identified. A lower time frame chart is then used to determine the counter trend line and price is then being waited to break this line and then makes a pull back, from which an entry is made. This entire strategy is being referred to as Breakout, Pullback & Continuation (BPC).

The system also utilises chart formations like the flags, triangles and wedges that are considered to be good signals about the turning points in the market. There are also sections covering capital management, trade management and risk reward ratios, which are essential for beginners and intermediate traders alike.

A highlight of the contents in the manual is as follows:

• Description of the most profitable and proven formations which have been used by institutional traders
  
• Description of the real operations of the market, levels of support and resistance, round numbers, trend lines, and countertrends
  
• How to use the confluence – a tool used by the most experienced traders for predicting market turning points effectively
  
• Determining which entry is “the safest” and why
  
• Knowing when you shouldn’t enter the market, even though there is a clear signal
  
• Ways to choose exit points from the market for the most profitable formations: flags
  
• System principles to make trading easier and to not forget some significant elements of the system
  
• Carefully described and illustrated with dozens of screenshots of where markets often “turn back”, where the trend ends and starts new movement

The complete TFSWF package includes:

1. The Manual: "TFSWF - Trend Following System With Formations Version 2.0". It contains over 380 illustrations and over 270 pages in PDF format.
   
2. A Zip file with indicators and tables for the system (These indicators work in Metatrader MT4)
   
3. The system’s summary on one page (actual cheat sheet) - to print and use each day before entering the market

There are also three bonus items as follows:

1. BONUS #1: A supporting manual with 57 examples of Breakout, Pullback & Continuation (BPC), Stop loss and Entry levels illustrations with 137 illustrative charts
   
2. BONUS #2: A 54-page interview with Dr. Dariusz Swierk on the conclusions from the research on the best traders, the causes of successes, failures, problems in the path of development and how to solve them
   
3. BONUS #3: A Special Report: Illusion that Takes Away Your Money" by Dr. Dariusz Swierk that discusses the psychological aspects of Forex trading and how the right mentality can improve your trading results dramatically

Trend Following System With Formations is priced at $97 and includes an unconditional 60-Day Money Back Guarantee. Therefore, traders can try it out without any risks.

Find out more about Trend Following System With Formations now!

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DeMark Trend Indicator

The DeMark Trend Indicator is a very simple yet powerful indicator that works on the MetaTrader4 (MT4) platform, plotting two trend lines (an upper trend line and a lower trend line) that are used to identify a trading opportunity. When price breaks out on the upper trend line, a BUY signal is generated. Conversely, when price breaks out on the lower trend line, a SELL signal is generated. The indicator also plots the projected profit levels automatically. There is also a sound alert when price breaks the trend lines, so that you do not have to monitor the charts all the time.

This indicator is most profitable when used on higher timeframes, i.e. H1 and above, since these timeframes have much less market 'noise'.

The following currency pairs are recommended when using this indicator:

• EUR/USD
  
• GBP/USD
  
• USD/JPY
  
• USD/CHF
  
• EUR/JPY
  
• GBP/CHF

I have included an explanation of the principles behind this indicator for those who are interested.

Download DeMark Trend Indicator

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Understanding The Forex Market

An important aspect in trading the Forex market is to understand what drives the market and equally critical, what doesn't. Regardless of whether they can be proven practically or theoretically, the following is a summary of my core beliefs about how the market moves and why so:

• The market may react to news and fundamentals, but that reaction is often short-lived and irrational (e.g. the news is positive but the market goes down, only to go up again later) and therefore do not usually indicate high quality swing or position trades. In other words, any quality trade that does occur in connection with a specific news event is likely to be predicted by a technical setup. This simply means that you need to pay attention to chart technicals in order to trade fundamentals.
  
• The market is also driven by crowd psychology - which contains news and fundamentals - and is revealed by way of fractals. A fractal is simply a chart pattern that may be found at all degrees of trend possessing the same basic form and function regardless of where it occurs. The only difference between a fractal found on the Weekly chart and one found on the 30m chart is the distance the market is likely to travel more on higher timeframes, less on lower.
  
• As a result of the above, my belief is that it is possible to trade profitably based primarily on technical analysis, supported only by a specifically 'contrarian' reading of fundamentals. For instance, being aware of how the Carry Trade was likely to be impacted by the Sub-Prime mortgage crisis of 2007 helped position informed traders to the short side of that market.

The reason these core beliefs are mentioned is not to say whether they are right or wrong, but rather to point out that as traders, we all hold beliefs about the market. These beliefs directly affect how we trade and why, so regardless of whether you agree with those listed above, the point is you should take the time to clearly document what your personal beliefs about the market are.

Perhaps you have reason to believe, for example, that news does drive the market. How is that belief going to affect your trading plan? How are you going to trade the news, what's your game plan? When you have the answers to those questions, write them down.

Also, it is important to note that certain markets tend to maintain a strong positive (or negative) correlation over time. To put it simply, we can characterize this as a dollar-versus-everything-else scenario. As more speculators enter the market (from the former Carry Trade, to oil, stocks and gold), the US dollar has tended to weaken. Conversely, as liquidity declines, the US Dollar has tended to strengthen.

According to some commentators, this reflects the fact that the global debt market is denominated primarily in US dollars, and as these debts are retired in a deflationary trend, demand for dollars accelerates; moreover, at a faster pace than would allow for the kind of price inflation many people expect when dollars are being printed and liquidity is being expanded.

The point here is that knowing how the dollar is faring in relation to stocks and other markets can give you a much clearer perspective as to which way a Forex major pair is likely to trend over time. In addition, it is important to be aware of certain long standing rule-of-thumb relationships, such as the fact that EUR/USD and the USDX (US Dollar index) are almost perfectly inverse of one another, due to the high weighting of the Euro within the basket of currencies comprising the USDX.

Specific correlation values among individual currency pairs are available through many online services or brokers such as Oanda. If you know with a high level of probability, for example, that EUR/USD is in a prolonged downtrend, and that EUR/USD has an extremely strong inverse correlation with USD/CHF (in excess of -0.95 over time), then the probability of success with a position trade to the long side on USD/CHF will tend to increase, regardless of the intraday picture for that pair.

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How Do You Approach The Market?

The first step in trading the Forex market is to determine how you are going to approach the market itself, i.e. defining your style of trading. Personally, I consider myself as an adaptive trader, which means I adapt my trading style (defined primarily by time in the trade and size of profit objective) to suit the structural implications of chart analysis.

For instance, if I spot an upcoming corrective sequence that is expected to move 100 pips, then I will approach the opportunity as a day trader seeking a more immediate exit for fewer pips. Alternatively, if a Weekly-degree turn appears to be setting up for an expected rally of 1,000 pips, then I will approach the setup as a position trader planning to carry the trade longer with a more aggressive limit exit.

No matter what the trading scenarios might be, it is the implications of a structural analysis of price action that determines the decision as to what type of trading style to apply. The reason why I prefer an adaptive trading style is because it is much more flexible than a single-minded approach focusing only on one style of trading. It is certainly not profit-maximizing to scalp for 20 pips in a fast-moving market offering 500 pips potential; and conversely, there's no point asserting on a very large trade when the market is not breaking out on a higher degree of trend.

Regardless of these considerations, I always require a Reward/Risk ratio of at least 3:1 to
consider entering a trade. This is equivalent to a minimum profit target of approximately 100 pips with an average 30-pip stop loss, including the dealing spread. If the trade setup does not appear to be offering this potential, then I do not take the trade.

The table below summarizes the different types of trading style I use by parameters of duration, profit and risk:

Based on my trading experiences, the single most important factor that determines long-term success in Forex trading is not the individual trading methods being chosen or the level of detail of technical analysis being conducted. Instead, it is the ability to consistently apply a risk management model that completely integrates the elements of risk, reward, profit target and position sizing into a smooth decision-making system.

Put it simply, a successful trader does not spend a lot of time researching about whether Gartley patterns is better than trendline analysis, or whether Stochastics is better than MACD, but rather: what is the combination of risk and reward that will best serve his/her trading objectives over time? As long as your trading system allows for the achievement of these objectives, then it is probably the right one for you, or at least as 'right' as it needs to be.

The above principle is illustrated in the following table which shows a series of 10 trades with various Win/Loss situations, targeting a minimum Reward/Risk ratio of 3:1. By using such a systematic approach, it is possible to trade profitably even with a Win/Loss ratio of well under 50%. In fact, in this scenario, breakeven does not occur until below 30%!

Professional traders know this to be virtually an obvious truth: it's not important to make the right call every time (or even most of the time), but it is important to manage risk as a variable within a system.

The reason why a trading system like this is so critical is that it allows the trader to maintain a sense of confidence and assurance even after experiencing a series of losses over time. On the contrary, to make money with an unplanned approach that realizes a Reward/Risk ratio of less than 1:1 would require an extremely high Win/Loss ratio, which may be difficult to maintain over time. In the latter scenario, when the trader hits the unavoidable bad stretch and loses several consecutive trades, emotional stress and lack of confidence can then easily take their toll resulting in even worse tendencies, like over-trading.

The following table shows the profitability impact of a low Reward/Risk system (in this example, risking 20 pips to make 20 pips). As you can see, the breakeven point in this system occurs at a much higher win ratio (50%), and the highest Average Net of 20 pips per trade requires a 100% win ratio, whereas with a 3:1 ratio as shown in the table above, a win ratio of less than 40% could produce the same Average Net. In other words, a high Reward/Risk trading system is much more forgiving of failures than is a low Reward/Risk trading system.

With this in mind, it's time for you to determine your trading system to approach the market.

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Simple Price Based Forex System

Simple Price Based Forex System is a very interesting strategy that utilises no indicators whatsoever, but only price levels and setting of pending orders. The strategy works on higher time frame charts (H1 and above) with any currency pairs and in all market conditions.

Here is how it works:

1. Firstly, we need to calculate a "Key Value" based on the current price of the currency pair. For quotes with 4 decimal places, the key value is the current price multiplied by 10 and then rounded. For quotes with 2 decimal places, the key value is the current price divided by 10 and the rounded.
   
2. Place a pending Buy Order at Current Price + (2 * Key value).
   
3. Place a pending Sell Order at Current Price - (2 * Key value).
   
4. Place a stop-loss for pending Buy Order at Open Price - (2 * Key value).
   
5. Place a stop-loss for pending Sell Order at Open Price + (2 * Key value).
   
6. Take-profit for both orders is calculated similarly to the key value but the current price should be multiplied by 100 and then rounded.
   
7. Place a Trailing Stop to both order at 2.5 * Key value.
   
8. When one of the order get triggered, cancel the other untriggered order.

Let's look at an example of a EUR/USD H4 chart below and how these values should be calculated.

1. The current price is 1.4810 and the current candle's open price is 1.4832.
   
2. The price is quoted with 4 decimal places. Therefore, the "Key Value" is calculated as 1.4810 * 10 = 14.8. Rounding it results in 15 pips.
   
3. Pending Buy Order is calculated as 1.4810 + (2 * 15) = 1.4840.
   
4. Pending Sell Order is calculated as 1.4810 - (2 * 15) = 1.4780.
   
5. Stop-loss for pending Buy Order is calculated as 1.4832 - (2 * 15) = 1.4802.
   
6. Stop-loss for pending Sell Order is calculated as 1.4832 + (2 * 15) = 1.4862.
   
7. Take-profit for both pending orders is calculated as 1.4810 * 100 = 148.1, which is
   148 pips after rounding up.
   
8. Therefore, the Take-profit for pending Buy Order is set to 1.4840 + 148 = 1.4988.
   The Take-profit for pending Sell Order is set to 1.4780 - 148 = 1.4632.
   
9. Finally, the Trailing Stop for both orders are set to 2.5 * 15 = 37.5, which is 38 pips after rounding up.

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The Forex Profit System

The Forex Profit System is a trend following strategy that uses only 2 types of technical indicators, i.e. the Parabolic SAR and the Exponential Moving Average (EMA). These indicators will indicate the direction of the market as well as be used for determining entry and exit points.

Here is how it works:

CHART SETUP

1. Setup a H1 USD/CHF chart. This is my favorite currency pair to trade because it swings up and down the most. You can choose any major pairs that you prefer as long as they have high volatility.
   
2. Insert the Parabolic SAR indicator and set 0.02 and 0.2 for its acceleration factor and constant respectively.
   
3. Insert 3 Exponential Moving Averages, i.e. EMA 10, EMA 25 and EMA 50, all with closing prices.

ENTRY
A trading opportunity arises when the EMA 10 crosses both the EMA 25 and EMA 50.

If it crosses up from the bottom, a BUY entry should be made. Conversely, if it crosses down from the top, then a SELL entry should be made.

In addition, ensure that the Parabolic SAR is at the bottom of the price before a BUY entry is placed and at the top of the price when a SELL entry is placed.

In the chart below, notice that I placed a SELL entry as the EMA 10 (green) crosses both the EMA 25 (red) and EMA 50 (blue) from the top. In addition, the Parabolic SAR is at the top of the price when the entry was placed.

Important: If you are trading the hourly charts like in the above example, make sure that the Parabolic SAR on the M15 chart is in the same direction. Never trade against the M15 Parabolic SAR!

EXIT
The ideal time to exit the trade is when price crosses over all 3 EMAs on the chart. In the chart above, I exited the trade when price crossed over all the 3 EMAs after approximately a week. This trade generated over 140 pips profit!

STOP LOSS
The initial stop loss for the trade should be set at the most recent swing low (for BUY entry) or swing high (for SELL entry). When price moves in your direction, the stop loss should be moved to near the 50 EMA accordingly.

In the chart above, I have set my initial stop loss at the most recent swing high. I would then move my stop loss lower to be close to the EMA 50 as price gets lower. This way, if price subsequently moves against you, you would have locked in some profits.

This strategy should be used on higher time frames, i.e. H1 and above, as on lower time frames price will sometimes ‘whipsaw’ back and forth, causing trades to be stopped out early.

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The Forex Gap Strategy

The Forex Gap Strategy is an interesting trading system that utilizes one of the most disturbing phenomenon of the Forex market — a weekly gap between the last Friday's close price and the current Monday's open price. The gap itself takes its origin in the fact that the interbank currency market continues to react on the fundamental news during the weekend, opening on Monday at the level with the most liquidity.

This strategy is based on the assumption that the gap is a result of speculations and excess volatility, thus a position in the opposite direction should probably become profitable after a few days.

Here is how it works:

1. Select a currency pair with a relatively high level of volatility. I recommend GBP/JPY as it showed the best results during my tests. But other JPY-based pairs should work too. By the way, it's a good strategy to use on all major currency pairs at the same time.
   
2. When a new week starts look if there is a gap. A gap should be at least 5 times the average spread for the pair. Otherwise it can't be considered a real signal.
   
3. If Monday's (or late Sunday's if you trade from North or South America) open is below the Friday's (or early Saturday's if you trade from Oceania or Eastern Asia) close, the gap is negative and you should open a Long position.
   
4. If Monday's open is above the Friday's close, the gap is positive and you should open a Short position.
   
5. Don't set a stop-loss or a take-profit level (it's a rare occasion but a stop-loss isn't recommended in this strategy).
   
6. Immediately before the end of the weekly trading session (e.g. 5 minutes before close) you need to close the position.

The GBP/JPY chart below shows the last 7 weeks (as of May 24, 2010) and all of them have gaps. 6 out of 7 gaps gave correct signals that result in a lot of profits. The last gap gave a wrong signal and yields a medium loss. The average spread for GBP/JPY was 3 pips during this period and all gaps were much wider than 15 pips, making them all qualifying signals. The net total profit was 1,612 pips in 7 weeks, which is not bad at all!

Before using this strategy on a live account, make sure to try it out on demo first.

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