Trading Made Simple for Day Charts

Update 1/11/2015 - I've posted some updates to the current process to reflect: http://www.forexfactory.com/showthre...64#post7983964

There are no major changes to the approach, and Article 1 is still a must-read. - ps sorry about the font - the editor doesn't play well! The indicators at the end of this post are still good - you can always check back and see any latest releases in Paperclip

Add-ons depend heavily on personal risk tolerance and account/money management, so basic rules will apply regarding how many trades you make and what percentage of your account is at risk.

To date I have not seen supporting evidence of a successful EA with Trade Explorer, so until that happens I will continue to trade manually - most people who post Trade Explorer accounts on FF will run well for a while and then seem to crash, so not sure if these are serious long term investors or just people playing with high risk strategies - please note.

Start by reading this article and the referenced articles and you should be on the right track.

Following the huge success of Eelfranz - Big E's Trading Made Simple forum and X-Man's Super Simple System - some traders requested a new thread for TMS trading using daily charts only.

I did update this article with general rules and adjustments as I see them on the daily chart, and will also incorporate comments from other members. I will review and post training charts and trading summaries from time to time, and I will delete posts that are not compliant - my prerogative - I started this thread. I will also add any new insights/clarifications/techniques and references to applicable post #s in this post, so post #1 will most likely become quite lengthy. If you wish to quote a member's post, please include the post number and member's name.

Once you've finished reading this post, read through the trading charts throughout the entries and add-ons, and then you can jump to post 1081 where I started revising the template. All the indicators you need are attached or described/referenced in this article and are part of the standard MT4 indicators such as MA and Bill Williams.

Please take the time and effort to read this article and the cited articles carefully - take notes, read and run backtests again, and then ask questions. We all love helping newbies, but only if you put some effort into your trading. We've all been newbies once.

The most important rule is that this forum is for Rituals only and is based on the time trusted and proven TMS method adapted and introduced by Big E (RIP), so let's uphold the spirit of TMS and keep Big E's memory and dreams alive. Open trades are welcome along with active trades or trade summaries/reasons for entry/exit. We also want to see the bad situations – and the lessons learned from the pain and suffering suffered!

Disclaimer:
Any trading or analysis-related comments posted by myself or anyone else in this thread should not be construed as anything other than the opinions of the corresponding poster and are not intended to serve as advice to enter or exit a trade . Individual trading rules may be subject to interpretation. It is your responsibility as the trader to decide which information to use and which to ignore, and you do so at your own risk. Use these ideas and/or modify them to suit your trading style. It is recommended that you test your trading system yourself in a demo account before investing real money. All investments are the responsibility of each trader. In extreme market conditions, the risk level of a plan can increase dramatically.

Trade setup and comments:
Here are the trade setup/comment suggestions from fxjourney posted in Post #17:
1. Entry setup and a brief explanation of why you think the setup looks good (not just technical setup reasons, but also risk/reward)
2. Trading stop loss management
3. Effective exit strategy

My current commitments do not allow me to trade on shorter time frames, so I have switched to daily charts. My broker is IBFX and my new day candle starts at 4pm PST. I usually trade between 8pm and 10pm PST (this is the second H4 candle of the day). These trades were either pending trades with sell stops or buy stop levels set for a fractal breakout or potential TDI crossover, specifically from a move below 32 or above 68. Price action is key, so pay attention to momentum for support signals. Look to the left and understand the support and resistance levels/fractals.

When using RSI(10) I consider 25 as oversold and 75 as overbought - when RSI(10) crosses 50, a trade entry opportunity usually occurs once you confirm with PA - watch the values ​​in the data window as this will overload the indicator on the screen. Any RSI hovering around 50 then you would consider consolidation, so wait for a fractal breakout/S/R level breakout.

Multi-time frame analysis:
As far as MTFA goes, I do check the trend direction for the week and always check what the 200 EMA is doing - this is a favorite institutional EMA and acts as a very dynamic S/R area - I probably pay very little attention to the lower time frames - if the day looks good I'll get in.

Supply and demand levels:
I've been cleaning up my charts and going back to basics, so the II_SupDem.ex4 indicator is optional and allows you to consider supply and demand/S/R levels.

Breakouts/reversals usually coincide with APB color changes for good reversal signals. The basic rule here is to sell when the candle leaves the supply zone to the south and buy when the PA leaves the demand zone to the north. If price breaks out of a certain area, it simply means the trend has held and will usually give you pause before bouncing back and continuing.

For the daily chart, this requires patience and avoiding entering a trade just for a few pips. If you study some of the material available - whether it's posts in FF, or in the e-books that are being circulated a lot in the hope of attracting you to subscribe to the service, then you will find that there are no real set rules for this type of entry - it all depends on your trading style and trading plan.

My preference is to let the candle close and then follow the momentum of PA. From the chart I posted now, you will see that the 100ema and 200ema will generally act as floating S/R - be aware of this when trading in the direction of these EMAs, especially when your entry is within 100 pips, and especially when 100 and 200 are running horizontally together - check out this post - http://www.forexfactory.com/showthre...97#post5779197

I saw a very well written article that talked about how to sense/interpret momentum. The emphasis is on the second half of the candle's life as this indicates support and demand for the current PA. You can have a huge bull push in the first half of the candle and hit new highs, but the bears will take over, which will leave you with a pullback candle with a large wick - which will negate any momentum achieved earlier in the day. This often happens around the S/R level, where people will be fooled by the initial strength of the candle, only to watch it disappear at the end of the day.

However, if the bear push continues into the second half of the day, then you have a strong momentum candle, and if this manages to break out of the S/R, then look for continued momentum to push PA.

This supports Big E's message that not all TDI crosses are the same and you still have to master the basics of Forex.

Trade items:
Is there a perfect setup? For long-term reversals, my ideal scenarios are as follows (they do happen):

APB/HA closes and changes color
A PA move with a certain strength - meaning its intraday ATR(1) is at 75% of its ATR(7) or higher - should also emphasize that the body of the candle needs to be solid - a larger body than the shadow.
RSI rises above 51/breaks through 50 with strong momentum
TDI crossed over and moved up from the 32 area within the last 1 or 2 candles The daily chart shows the recent volatile trading range (next supply/demand area 150 + pips)

For short entries:
APB color changes to red
PA varies with ATR(1), reaching 75% or higher of ATR(7)
RSI falls below 49
TDI crossed within the last 1 or 2 candles and moved down from the 68 area

Generally speaking, entering the 200 EMA is bad news - a strong enough PA will break the 200 EMA and move on. If the 200 EMA is completely flat, PA will likely follow it and consolidate - waiting for a breakout.

Enter using trading signal lines <br> Check out post #1419 http://www.forexfactory.com/showthre...53#post6623553 to see how this works.

Thoughts on APB color change View post #1267 http://www.forexfactory.com/showthre...67#post6434367

Trade exit:
For those who follow Big E, his trading style is designed to preserve ideas, so he will exit on TDI flats/pegs/pullbacks and then look to re-enter the position. Additionally, Big E does not trade the daily charts - he does trade H4 and the lower time frames of the London/New York open. I have a flexible approach to exits that may change based on S/R or overall momentum. If you exit early, look for H4 re-entry possibilities.

As with any indicator that has overbought/oversold zones - once these indicators are in the OB/OS zones they are no longer reliable as the trend may continue to increase by hundreds of pips after entering these zones - watch out for candle sizes/S/R levels and further breakouts - very few indicators can help you here - price action is always king!

Stop loss and take profit levels:
From the TMS thread - dcginc made several posts about setting stop loss and take profit levels using ATR(7), which I adapted to fit my approach.

I now run 3 entries per setup and base my stops on the current ATR(7) - usually 1.5XATR(7) or the previous swing H/L/fractal.

The TP1 for reversal is 1.5XATR(7) - this means that on volatile currency pairs, the stop loss level is sometimes 200+ pips.

TP2 - The options here are to set TP2 to 3XATR(7) or, with TP2, you can always leave it open and manage trades manually. My advice is to start with a fixed

TP3 - No fixed level - Runs by manually adjusting SL level

Try TP1 and TP2 and see how it works, modify as needed but don't let the greed gland take over your trading plan

Once TP1 is reached, move TP2 and TP3 to B/E and then manage your trading plan.

Trade Management:
There are several posts about manual transaction management, for example: 164/204/246. I always have TP1 close my trades, so for my trade management this is for TP2 and add-ons. For the trend run, I manually move the stop to the previous (2 candles prior) candle L for long (wick not body) and H for short.

When the trend runs close to the major S/L level, with TDI at 200EMA/big integer/32/68 and RSi(10) at 25/75, please note that trades may stall or bounce, so if S/R is broken and the move continues, consider a manual exit and then re-enter.
Typically, the TDI will level off in the overbought (>68) and oversold (<32) areas, and the TDI will begin to give exit signals regarding trade slowdowns and stagnation.

When candles begin to shorten, it is a sign that momentum is waning. The end result is one of three options - Congested/Range Market, Trend Stagnation followed by Reversal, Trend Stagnation followed by Continuation (with the added possibility of looking for a new fractal breakout).

Other possibilities include using a TS setting to account for your ATR(7) - currently it is recommended that TS be no less than ATR(7), but it depends on what you are willing to sacrifice from your hard earned points. Remember, it’s not how much you make, but how much you keep!

Money management:
Leonaforex left a great comment in post #295
For my trades, I trade 3% of my account at any time until I have 3 winning trades in a row.
I then increased the funds in the account to 4.5%.
A loss is recovered to 3%.
Two losses recovered to 1.5%.
Three or more people get into 1% of the account and stay there until you figure out what you're missing.
Once you get 2 wins in a row again, 3% is transferred to your account.

Again - before implementing, backtest your trading methods and then plug in different money management methods to see how withdrawals affect your account and how quickly it recovers. Many people use a fixed 2% maximum, which is fairly safe.

This is what I read on another thread:

Before entering a position, you should classify any prospective trade into one of the following five categories:
a. Entering a congestion state
b. Transactions in congestion
c. Break through the crowded area
d. Trend operation
e. Trend reversal

Unless trades are properly categorized before entering into a trade, it will be difficult for traders to develop a successful and informed risk/reward (entry/exit) plan.

Candle pattern:
Note the candle reversal pattern in the attachment.

Candlestick vs APB vs HA - see post #305
Regarding candles - I prefer traditional old style candle charts - however, Heikin Ashi or Synergy APB (Average Price Bar) also work well and continue to do so on the original TMS and X-Man's threads. The APB/HA approach is centered around color changes on the daily chart - when a color change occurs, go see it - review the PA and if it has momentum, then it has a reasonable probability of success - PA is always prioritized in the decision-making process.

With daily charts, you don't make hasty trading decisions, so you have time to verify PA using APB and candlesticks/price bars. Using candlesticks certainly requires some understanding of candlestick charts, especially reversal patterns. Again, like many other aspects of forex - pick what works for you and use it - you have to be comfortable with your chart setup and not be one of the herd trying to make something unfamiliar work just because of what everyone else is doing.

For general reading about TMS and trading strategies - see the following members (most are from the original TMS Thread, and while these are not necessarily daily chart traders, their methods and methods are sound and can translate to any time frame):
Eelfranz/dcginc/X-Man/Phx62/Emmanuel7788/Vantage/Dean/Lawgirl - apologies to those I missed - didn't mean to, just chalked it up to brain cells lost over the years.

In terms of trading opportunities, you'll likely see one good setup per currency pair each week, and all pairs will typically have several high-probability trading setups each week - if the market moves - just ignore it and come back to it another day. The daily chart will bring you ideas easily, with less stress and fewer false signals. My experience since starting using TMS in July is 800 to 1200 points per month. This can be achieved on a single currency pair or on multiple currency pairs.

Abbreviations used in posts

TP1 - Entry #1 Take Profit
TP2 - Entry #2 Take Profit
TP3 - Entry #3 Take Profit
AOC - Additional Candle
BE - break even
S/R - Support/Resistance
S/D - Supply/Demand
DD - Drawback

Install the indicator to your MT4 platform - the folder name is "experts" and then the subfolder name is "indicators"

Chart Indicators (Daily)
Synergy_APB_[C]
ATR Pips UL Corner – Color to None – Period 1 – Multiplier 1 – This will give you the ATR of a single candle
ATR Pips UL Corner – Color None – Period 7 – Multiplier 1 (read dcginc post to learn how to use this feature and set Stop Loss and Take Profit)
EMA 200 – Blue Dots – Typical Prices
EMA 100 – Aqua Dotted – Typical Price Fractal (Bill Williams)
Supply and Demand Indicator II_SupDem - Optional

Instruction window 1
TMSTDI Watchdog – All settings are default – Set alerts you don’t want false alarms to, and adjust the font size accordingly based on your settings. Color is a personal preference for TDI lines - I don't use "Bollinger Bands" so I stick with TSL/RSI and MBL
Setting the RSI to 10, without color - just personal preference - the probability of trading is higher when the RSI(10) is above 51 for longs and below 49 for shorts. Again - another one for the data window.

TMS links to other topics:
Further reading on everything related to trading made easy:

Harlem posted this on the TMS thread - it's a compilation of posts from some of the top TMS traders, including posts from BigE, Phx62, dcginc
http://www.forexfactory.com/showthre...35#post6634735

Xaphod does update all TMS related metrics and pulls them from various sources - make sure to download the latest version - this is page 1 of his thread
http://www.forexfactory.com/showthre...40#post4619540
Here is the link to the attachment which contains all other discussed indicators http://www.forexfactory.com/misc.php...ments&t=294327

X-Man is having fun with the Sonic Pointer - here is a link to page 1 of his post
http://www.forexfactory.com/showthre...32#post5167732

For those who want to learn TMS from scratch, here is page 1 of the Trading Made Simple topic initiated by Eelfranz
http://www.forexfactory.com/showthre...74#post4569574

Posts to view
http://www.forexfactory.com/showthre...22#post5767722 - Template changes and some neat indicators

http://www.forexfactory.com/showthre...53#post5814153 - Detailed look at entries and add-on candles

http://www.forexfactory.com/showthre...38#post5786338 - Overview on Currency Index Training