Trade What You See - Almost Naked Trading

Chart Enthusiast Method

I started this topic for those of us who love charts...observe them...study them...analyze them, and of course make money from them.

My system is simple. This is the basic trend using weekly, daily and H4 charts. I've made a lot of money using this system, although I can't say I "discovered" it.

I have been trading Forex for about 4 years, have lost over a few thousand dollars, and have responded to more than one $99 Holy Grail special offer. I followed several threads on FF, some more successfully than others, downloading every indicator known to man. But it wasn't until I removed all indicators (except one) and started drawing trend lines and support/resistance levels that I started making real money.

I didn't involve my ego in the topic, as I've noticed many "topic starters" do. I have been a successful attorney for many years without having to prove anything to myself or others. However, I do believe in helping others and can't think of a better way than to share a little bit of my knowledge with other like-minded traders in the hope that we can all become more successful together.

I've posted on two other FF forums and I've had so many traders asking about my trades and charts...so many in fact that I thought now would be a good time to work out my approach once and for all so that I no longer have to respond to private messages and emails individually. So let’s get started:

Trade any market session that makes sense for your lifestyle. Don't worry about which market is open and which is closed.

A. Chart settings

Save as template:

H4 candlestick chart period separator . Add to this chart a Standard Relative Strength Index indicator with a period (3). That’s it… that’s it! See the first chart below. It is almost a bare diagram and it is the basis for all trading setups I will discuss below.

B. Check the trend of weekly chart, daily chart and H4 chart

This is the most important part of the method. All three (3) timeframes (TF) must agree (confirm) on the direction.
Perhaps, the easiest way is to attach the RSI Arrow indicator to your chart. Indicators and directions can be found here: http://www.forexfactory.com/showpost.php?p=4127792

It is important to develop the ability to confirm RSI direction without using indicators, as you should visually verify the RSI position on H4, daily and weekly charts before entering a trade.
Scan any or all currency pairs you want to trade and note only the pairs that have directional confirmation on all three TFs. Do this by looking at the RSI .

think about the clock face

For bulls: RSI should point between 12:00 and 2:00 points . 3:00 is neutral.

For the short: The RSI should point between the 4:00 and 6:00 points . Again, 3:00 is a neutral time

Please note on the chart below, the direction is down or short term. (RSI between 4:00 and 5:00)

Now take a look at the recent price action (PA) on the chart below. Note that it's also very short. This would be an "interesting" pair if and only if the direction of the daily and weekly charts confirms the direction of the H4 chart.

C. Focus only on those currency pairs that have trend confirmation, one at a time:

Take a closer look at what you see on the H4 chart. From previous scans of these pairs, you know the direction to look for. (Marking with arrows helps provide quick reference to directions.)

Draw a trend line (TL) connecting the long bottom and the short top.

Notes on recent chart #2 below - USD/CHF

D. Entries

This is where patience comes into play. Only enter in the specified direction after PA hits the trend line 3 times (3 times...oh, okay). This "improvement" was David's idea on the topic of trendline scalping... Thanks David.

Note Chart #2 below - USD/CHF...the third click required 9 candles (36 hours)! That’s patience, man! ...but look at the payoff...

E. Take Profit (TP) and Stop Loss (SL)

If you're more comfortable with this, you can set take profit and stop loss levels. I use support and resistance levels for both. Keep in mind that the H4 and larger TF have to have more breathing room, so don't place the SL too tightly.

If there's anything that needs further explanation, please let me know.

F. Most recently asked October 27, 2010

Q: Should I wait for the third candle to close before entering the market or enter the market immediately?

A: When the desired trade is long and the third candle is long (green on my chart), enter immediately. When the desired trade is short and the third candle is short (red on my chart), enter immediately as both are a setup and a trigger . Each of these scenarios has happened.

Q: I've noticed that usually when the third click occurs, the RSI does not support the direction of the desired trade. Is the direction of the H4 RSI supporting the weekly and daily RSI important at this time?

A: It is important that the H4 RSI, Daily and Weekly RSI show the same direction before entering a trade. Remember, there is a difference between trade setup and trade triggering. Set to 3 taps, trigger to PA in correct direction . This is consistent with the question above.

Q: Do you use M30 or M15 charts in 3-tap trading?

A: While I do not use shorter time frames (TF) for 3-tap trades, some traders have stated to me that they use these TFs to observe price action (PA) before entering a trade. I do use TF for breakout trades (BO) as described below.

Another trading setup from our trading library - below:



I have added a new trade setup to the 3 Tap trade discussed above. It is closely related to 3 Tap trading.

Often we can see a PA going in one direction and want to get in, but need a logical way to do it. Of course 3 Tap is one way to do it, but what if you don't see a good 3 Tap setup on your H4 chart? Then go to the H1 chart and take a look .

H1 4 candle breakout setup:

Answer: This is a Price Action (PA) trade and the weekly RSI direction does not need to match the direction of the trade. Since this is considered a "quick" trade...meaning to end in a few hours at most...only the H4 and H1 candles need to confirm the direction, but they will do so if the PA moves in the desired direction.

B. You will see the body number of the first four H1 candles of the new trading day...ignore the tails (wicks)...whenever suits you. This is one of the reasons why you need to put period separators on your charts.

C. Place horizontal lines at the highest points of these four candle bodies (excluding the tails, if any) and at the lowest points of these four candle bodies again, ignoring the tails. These lines are really just R/S lines.

D. Wait for a breakthrough in the biased direction. Sometimes I will place a pending order below/above the R/S line before going to bed.

E. Enter from the M15 chart when at least one candle completely clears the R/S line in the desired direction. Enter with caution as it is important to observe the quality of the candles.

Note: You can set this up hours after the fourth candle is observed. For example: My first four candles are from 2:00 PM to 6:00 PM. I probably won't get there until 8 or 9 p.m. In fact, it doesn't matter, so you have time to observe PA. However, please verify the directional deviation again.

See posts #1029 - 1032 on page 69 for comments and chart examples



Please do not use Scrutch's Trade Filter 3 Click H4 Trade and H1 4C BO Trading System until you are fully familiar and comfortable with it.

Q: Are you considering an A++ trade where both setups occur on the same pair?

A : Yes, both setups require agreement on an A++ transaction.
If you only have one of the two setups and the RSI is aligned, I consider this an A+ trade. When they happen at the same time, great, trade increases dramatically. As long as these two conditions are true, I will not take these measures.

I , hope to see H4-3T happen first, when the RSI will most likely not be fully aligned.
Then , I'd like to see the breakthrough happen within a few hours, two or three hours at the most, four hours at the most. After four hours I felt like the real advantage had worn off. It's not that it won't or can't still be a really good deal, it just doesn't have the power of the double confirmation behind it anymore.

The Canadian dollar/yen breakout occurred approximately two and a half hours after H4-3T.
The USD/CAD breakout occurred approximately three hours after H4-3T.

For any of these trades, I would look at the M15 chart to confirm the breakout, and yes, the price action needs to reflect momentum as well.

IF, the H4-3T setup happens and the H1-4C-BO setup is done in thirty minutes or less, then... , I think this will be an A+++ deal. When this happens I usually look at the M5 chart to enter as I want to get in early...again depending on price action.

Q : Do you limit the number of currency pairs you can view and trade?

A : I mainly watch professional games, but I also pay attention to other games. Keeping tabs on all of this is a bit daunting, but it's doable due to the timeframe involved. I do pay close attention to spreads and this will influence whether or not I want to place a trade. If the spread is too large, then I will abandon the trade.

I draw all the potential H4-3Ts I see and adjust them as the market changes, no matter what the RSI is. Sometimes I will draw two H4-3Ts, bullish and bearish. I then adjust them based on where the market is indicating.

I plot all H1-4C-BO from period separator to period separator on the fourth hourly bar close. Sometimes I start drawing these sooner...depending on what the RSI is showing me.



RSI Arrow Indicator http://www.forexfactory.com/showpost.php?p=4127792 - Read the explanation and download the chart .

(Money Tree) Added May 18, 2011
To commemorate reaching page 1000, while waiting for the tedium of monthly chart trading, I've been making a new entry on the daily chart, which seems to be working pretty well. It's very simple.

1. Both parties must have direction confirmation on the weekly and daily RSI . It would be nice if it was also done once a month, but it is not necessary.

2. Enter using H1 4C BO entry or 3 Tap entry or other entry of your choice in RSI direction within the first few hours of the start of a new daily candle (regardless of time of day) if possible, say within the first 6 hours (although 6 hours is arbitrary). The point is, we try to capture as much of the entire day as possible.

3. Immediately place a 30 pip stop loss. Then just forget about it.

5. Check the transaction the next day around the same time. It will do one of three things: a) hit the SL, b) jump, or c) hang around.

If:
a) Oh, okay... on to the next trade;

b) Great, if the direction determines whether it is TP or increase the position to continue;

c) Wait,

That’s all.
Rinse and repeat....
Attached picture http://www.forexfactory.com/attachme...1&d=1305732916 http://www.forexfactory.com/attachme...1&d=1305732928

http://www.forexfactory.com/images/m...ading_dark.gif

There are three trading methods in this post. The first two are 3Tap H4 and H1 4C BO, which can be found in post #1. Please read this article carefully.

The third method is called Zorro Continuation (ZC) and you can find all the information about it here:
http://www.forexfactory.com/showthre...rn#post4249295

When you read about the 3Tap H4, the only indi you need can be found in the 1st article. Its specific settings can be found in the following post:

http://www.forexfactory.com/showpost...postcount=6248

Finally, the box template for the H1 BO transaction can be found here:

http://www.forexfactory.com/showpost...postcount=6254