Forex Trading, Forex copy, Trading signals, Trading systems, Daily chart analysis, Chart of the day: March 2016

Hello dear valued visitor, I want to welcome you formally to my blog and at the same time am hoping that as you read through the contents of this blog, you will find my posts and ideas useful in your daily trading activities. Like I mentioned in my blog description panel, this blog was setup solely for all newbies/inexperienced traders out there looking for useful trading tools and tips to get started with or add to their trading arsenal. Let me make it very clear that when I say “newbie” trader, I meant those who have already gone past the forex basics and are now familiar with common forex terminologies and more importantly, have a fair knowledge of how to use the popular metatrader trading platform in terms of setting up charts and placing trades and orders etc.

What am about to do here is to share with you a simple basic trading system I developed that will help you make little and consistent profits on the long term while you still go about getting yourselves well-grounded with the rudiments of this over 5 trillion dollar a day business. So if you are here reading this blog post right now and are completely new to forex trading and are eager to learn, I will suggest you visit this website www.babypips.com and get yourself familiar with basic education on what forex is all about with their free on line courses and then you can return here to try out my system.

Through my years of trading forex, I have come to realize that the best systems that can guarantee one a fair amount of consistency in terms of profit making or account growth generally are trend following systems. There are so many trend indicators out there both basic and custom indicators but the ones I found most suitable and simple enough most especially for beginners are moving averages. Moving averages gives you a clear insight on the direction the market is headed and the good thing about them is that it can work for any financial instrument you can think of, be it currencies, metals, commodities etc. another thing is, it will work on any time frame of your choice.

For beginners, the system am about sharing with you will work best for you on lower time frames like 5 minutes, 15 minutes and 30 minutes but I will specifically recommend you start with 15 minutes chart. The system is simply awesome on the 15 minutes charts.

SETTING UP YOUR CHART

Open a new chart window of any currency pair of your choice, switch to 15 mins time frame and then add to it a simple moving average period 60 and set to close price (sma60). Make sure the period separators are turned on and then remove the grid lines (optional). For the benefit of those who do not know, period separators are vertical broken lines that separate one trading day from another. Your chart should look just like this one below;

If you scroll back into history, you will observe that on each trading day, two things are bound to happen;

1. Price will either trend above the sma60 line or

2. It will trend below the sma60 line.

Pretty interesting isn't it? I think it is.

Now the question is, how do we use this fine observation to our advantage? It is simple. Add these 2 other moving averages to your chart and make sure they are all of different colors.

1. 1. Exponential moving average period 6 set to close price (ema6) and

2. 2. Exponential moving average period 14 set to close price (ema14)

Now your chart should look just like mine below;

On the chart, sma60, which is the slowest of the 3 MAs in terms of responding to price change, plays the role of a dynamic support/resistance tool. Support and resistance points are very vital points on any price chart. They mark points where market momentum tends to slow down when hit and at such points, two events are bound to happen;

1. 1. Market reversal and change of trend or

2. 2. Price breakouts and continuation of trend.

Remember, a wise trader will sell at resistance and buy at support. Also, he/she will place stop loss above resistance when selling and below support when buying.

SETTING UP A POSITION

The ema6, which is the fastest of the 3 MAs, will serve the purpose of a signaling tool. What this means is that for as long as ema6 stays above sma60, it is assumed that the market is bullish and it stays that way until ema6 crossover to below sma60 signaling end of the uptrend and signaling the beginning of a down trend (downward reversal). Similarly, for as long as ema6 stays below sma60, it is assumed that the market is bearish and it stays that way until ema6 crossover to above sma60 signaling end of the downtrend and the beginning of an uptrend (upward reversal). Pretty simple and interesting isn't it? I believe it is!

WHEN TO BUY (Long position)

This is simple! There are 2 scenarios,

1. 1. When price hit sma60 and ema6 is above sma60 as shown in the chart below, go long!

Set your stop loss at not less than 5pips below the most recent valid swing low below sma60 or at a fixed 25-35pips below sma60 (not entry point) and then set your exit target at not more than 30-50pips above entry point.

1. 2. When ema6 crossover to above sma60, go long as soon as price makes a retrace to test ema6 at a point not more than 10-15pips above sma60. However, most times, this entry scenario can provide multiple entry opportunities;

a. When price retrace to test ema6 at not more than 10-15pips above sma60 as mentioned above

b. When price retrace to test ema14 at not more than 10-15pips above sma60 and

c. When price retrace to test sma60 itself.

WHEN TO EXIT LONG POSITION (in the event of a possible reversal)

Exit long position manually if ema6 crossover to below sma60. Do not wait for your stop loss to get hit. Once reversal is confirmed, get off the trade! It is better to get off with a 10-15pips loss than to allow a 25-35pips or more stop loss to hit.

WHEN TO SELL (short position)

This is simply the direct opposite of conditions for taking a long position.

There are 2 scenarios as well,

1. 1. When price hit sma60 and ema6 is below sma60 as shown in the chart below, go short!

Set your stop loss at not less than 5pips above the most recent valid swing high above sma60 or at a fixed 25-35pips above sma60 (not entry point) and then set your exit target at not more than 30-50pips below entry point.

1. 2. When ema6 crossover to below sma60, go short as soon as price makes a retrace to test ema6 at a point not more than 10-15pips below sma60. However, most times, this entry scenario can provide multiple entry opportunities;

a. When price retrace to test ema6 at not more than 10-15pips below sma60 as mentioned above

a. When price retrace to test ema14 at not more than 10-15pips below sma60 and

b. When price retrace to test sma60 itself.

WHEN TO EXIT SHORT POSITION (in the event of a possible reversal)

Exit short position manually if ema6 crossover to above sma60. Do not wait for your stop loss to get hit. Once reversal is confirmed, get off the trade! It is better to get off with a 10-15pips loss than to allow a 25-35pips or more stop loss to hit as a result of hoping in an obviously hopeless situation.

EMA-6 vs EMA-14

Apart from taking trades at ema14 soon after an ema6/sma60 crossover, the real role ema14 plays on the chart is to provide full confirmation of trend change or market reversal. Ema6 provides an early signal of possible trend change which we are expected to act upon but soon as ema14 follows suit (ema14/sma60 crossover), that indicates a full confirmation of trend reversal and it also means it is ok to take a walk and let the system do its work.

Finally, I will like to bring your attention to an important fact. This system is not some kind of Holy Grail, it has its own bad days just like every other system out there however, if you stick to the rules I have laid out for you, I assure you that you will close each trading month in a profit no matter how little. 3, 5, 8 or 10% return a month, to me, is huge success as long as it is consistent. What matters most in this business is consistency. As a beginner, I will also advice you stick to 2 or 3 currency pair for a start in other to avoid over trading.

If you have any questions or areas of this post you need more clarity on, please do so using the comment section. All manners of questions are welcomed.

MONEY MANAGEMENT

Being a successful trader does not just circle around having a winning system. Experience has taught me that even with a winning system, if your funds are poorly managed, you will definitely end up losing at the long run. For those of you who are interested in setting long term trading goals, here is a simple money management module I prepared, it’s a 12-phase stage and starting with a $100 investment. Each phase has no fixed time frame, what you do is keep trading until you double your investment of $100 and then move to next phase and so on till you complete the full 12 phases. The idea is to grow a $100 to $409,600 at the end of the 12^th phase and it doesn’t matter how long it takes, all it requires is to keep the focus high and steady. I recommend you open a live account with Instaforex by clicking on the link below and fund it with $100 and make sure you set the leverage to 1:1000 for a start so as to fit in for the recommended lot size for phase-1 and when you get to phase-2 you can reduce the leverage if you so wish.

CLICK HERE TO OPEN AN ACCOUNT WITH INSTAFOREX

Now you have a not just a winning system but also a winning money management plan to go with. Follow the rules, stay focused and I guarantee you success!

You can bookmark this page and keep the visit regular because from time to time I will be posting free signals based on my system in a variety of currency pairs and all for free. Feel free to follow me on the following social media lets win together;

Twitter: @theblaqxamurai

Instagram: @theblaqxamurai

And don’t forget; leave a comment at the comment section!

Thanks for the visit! Wish you the very best!

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