The 10XROI System - A High "R" Factor Ap
I don't post frequently on ForexFactory, nor do I start many threads. However, a new thread is needed today to discuss and test a trading system that I consider to be technically sound and valuable. It's not just a system...it's a paradigm shift in its own right in terms of reward/risk and transaction management. It's called the 10XROI system and was first introduced a few days ago by another ForexFactory member who unfortunately must remain anonymous and cannot post here due to business restrictions. He has been very generous in sharing this system with the community for free.
Lately, I've been looking for some missing components in my own trading. Over the past three years or so, I've long since solved the problem of appropriate money management parameters, but I still needed specific strategies to advance my overall high R/R money management strategy. I firmly believe that the best R/R opportunities occur when settings are recognized on a higher TF and entries occur on a lower TF. Doing so will naturally design your trade into a high R/R structure. IMHO, a tight stop on low TF combined with a higher TF target is the way to go. If this approach suits your trading style and money management profile, then this system will be worth your time. If it doesn't appeal to you, then I invite you to consider taking a look and possibly change your paradigm regarding money management and high R/R systems. I think if you do this, your current thinking will be greatly challenged.
Okay, let's outline the purpose of threads and system rules as clearly as possible.
Purpose of thread:
My goal with this post is first and foremost to provide a place for those interested in trading this method to collaborate, post trading setups/entries, and learn the method properly from the get-go. In order to achieve this, we must resolutely resist all attempts and temptations to "tweak" the approach until we have empirically demonstrated that the need for some specific adjustments exists. “Tweakitis” is probably the deadliest disease known from trading system forum threads. If anyone starts suggesting that we add this or that new indicator, or that we change any system rules, before they bother to do substantial testing, you will be asked to leave. If you have suggestions for improvements, please publish them with supporting data, or don't publish them. No adjustments should be made to any system without first being fully tested. If you are changing the rules of a system on the fly on a whim without data to indicate a change is needed, then you are trading another system. We don’t fall into that teenage trap. We will avoid and resolutely resist this waste of time and money, and conduct appropriate testing according to the rules stipulated by the system. For the benefit of all involved, please respect these instructions. Don't become a distraction from your goals. 'Nave said...
Second, we will look to conduct forward and backward testing. This system should work well for backtesting on ForexTester2 and/or Vhands. I personally prefer FXT2 and use it myself. I will also do forward testing with very low live leverage. It is definitely recommended to demo test the web currency until you:
1. Know the rules
2. You have proven that you can consistently enforce the rules
3. Make sure the system suits your trading style and needs
System overview:
We are looking to identify a specific candle pattern on the D1 chart, which must then be qualified by the presence of supporting elements that provide a positive trading backdrop. Eligible entries will be selected from the H1 chart. The overall goal of trade management is to obtain a 10R trade, a trade that returns 10 times the initial amount risked. Please note that this system has a specific funding and transaction management structure that is an integral and fundamental part of the system. If you change or omit money and trade management, you will no longer trade with this system.
Core Candlestick Patterns:
This system focuses on one major candlestick pattern. It is called a "push/pull" candle pattern. It only works when seen on a D1 chart and there are certain supporting elements that provide the necessary positive trading context. There are several variations of this pattern, which we'll specifically identify when we develop threads using the chart example. We are looking for momentum, S/R levels, and background elements of price action patterns. These are discussed further below with examples.
Trading/charting tools used:
With minimal analysis tools, the chart will be fairly clear. There are no indicators per se, just candles and some simple moving averages. Use the 3-period and 10-period SMA to identify the presence of momentum in the market. If anyone wants to use it, I'll post a template file for ease of use. I will also include a fib tool that I have modified to include entry, stop loss and target levels from 1R to 10R. This is just a money management tool. You simply anchor on your entry price and stop loss price and it will predict your R level from there.
Commonly used terms:
When discussing reward/risk, I prefer to use the terminology coined by Van Tharp, which expresses trades and/or profits as an "R" factor, where "R" represents the initial risk involved in the trade. So if your trade had a stop loss of 10 pips and a profit target of 20 pips, the trade would be a 2R trade. This system can secure a 10R trade, or gain 10 times the risk if possible. I think this is the simplest way to express "reward/risk", "risk/reward", "R/R" or any variation of what traders call it. It would be great if we all adopted this convention in our posts. This is not mandatory and I don't want to be the forum police, but I think it will be helpful to our mutual discussion.
I will add more posts with additional information to further explain the system and provide visual examples.
EDIT: I've added two templates to this post. One is the color scheme I use for the 10XROI system that has MA loaded. The second template is the Fib archive template and must be applied to the EURJPY monthly chart so that you can see the Fib tool. I've added a fib tool with preset levels and labels to show you profit levels from 1R to 10R. Anchor points are marked STOP and ENTRY. Once you have anchored on your stop loss and entry price, you will know exactly where the various R profit levels are located. To put this fib into the chart, just change its color in the fib property and it will become your temporary default fib. Then apply the small fiber to any chart you want. Don't delete the archive template, you will have a convenient place to store various fib or other similar tools with preset levels that you don't want to rebuild. Be sure to open this template on EJ Monthly, otherwise Little Lies and other objects will be out of visual price range.
EDIT: 11/24/2013: I received feedback that I didn't explain this method clearly enough. This is a more succinct summary of what I'm trying to do, and hopefully more clarity.
10XROI Lite
Lately, I've been looking for some missing components in my own trading. Over the past three years or so, I've long since solved the problem of appropriate money management parameters, but I still needed specific strategies to advance my overall high R/R money management strategy. I firmly believe that the best R/R opportunities occur when settings are recognized on a higher TF and entries occur on a lower TF. Doing so will naturally design your trade into a high R/R structure. IMHO, a tight stop on low TF combined with a higher TF target is the way to go. If this approach suits your trading style and money management profile, then this system will be worth your time. If it doesn't appeal to you, then I invite you to consider taking a look and possibly change your paradigm regarding money management and high R/R systems. I think if you do this, your current thinking will be greatly challenged.
Okay, let's outline the purpose of threads and system rules as clearly as possible.
Purpose of thread:
My goal with this post is first and foremost to provide a place for those interested in trading this method to collaborate, post trading setups/entries, and learn the method properly from the get-go. In order to achieve this, we must resolutely resist all attempts and temptations to "tweak" the approach until we have empirically demonstrated that the need for some specific adjustments exists. “Tweakitis” is probably the deadliest disease known from trading system forum threads. If anyone starts suggesting that we add this or that new indicator, or that we change any system rules, before they bother to do substantial testing, you will be asked to leave. If you have suggestions for improvements, please publish them with supporting data, or don't publish them. No adjustments should be made to any system without first being fully tested. If you are changing the rules of a system on the fly on a whim without data to indicate a change is needed, then you are trading another system. We don’t fall into that teenage trap. We will avoid and resolutely resist this waste of time and money, and conduct appropriate testing according to the rules stipulated by the system. For the benefit of all involved, please respect these instructions. Don't become a distraction from your goals. 'Nave said...
Second, we will look to conduct forward and backward testing. This system should work well for backtesting on ForexTester2 and/or Vhands. I personally prefer FXT2 and use it myself. I will also do forward testing with very low live leverage. It is definitely recommended to demo test the web currency until you:
1. Know the rules
2. You have proven that you can consistently enforce the rules
3. Make sure the system suits your trading style and needs
System overview:
We are looking to identify a specific candle pattern on the D1 chart, which must then be qualified by the presence of supporting elements that provide a positive trading backdrop. Eligible entries will be selected from the H1 chart. The overall goal of trade management is to obtain a 10R trade, a trade that returns 10 times the initial amount risked. Please note that this system has a specific funding and transaction management structure that is an integral and fundamental part of the system. If you change or omit money and trade management, you will no longer trade with this system.
Core Candlestick Patterns:
This system focuses on one major candlestick pattern. It is called a "push/pull" candle pattern. It only works when seen on a D1 chart and there are certain supporting elements that provide the necessary positive trading context. There are several variations of this pattern, which we'll specifically identify when we develop threads using the chart example. We are looking for momentum, S/R levels, and background elements of price action patterns. These are discussed further below with examples.
Trading/charting tools used:
With minimal analysis tools, the chart will be fairly clear. There are no indicators per se, just candles and some simple moving averages. Use the 3-period and 10-period SMA to identify the presence of momentum in the market. If anyone wants to use it, I'll post a template file for ease of use. I will also include a fib tool that I have modified to include entry, stop loss and target levels from 1R to 10R. This is just a money management tool. You simply anchor on your entry price and stop loss price and it will predict your R level from there.
Commonly used terms:
When discussing reward/risk, I prefer to use the terminology coined by Van Tharp, which expresses trades and/or profits as an "R" factor, where "R" represents the initial risk involved in the trade. So if your trade had a stop loss of 10 pips and a profit target of 20 pips, the trade would be a 2R trade. This system can secure a 10R trade, or gain 10 times the risk if possible. I think this is the simplest way to express "reward/risk", "risk/reward", "R/R" or any variation of what traders call it. It would be great if we all adopted this convention in our posts. This is not mandatory and I don't want to be the forum police, but I think it will be helpful to our mutual discussion.
I will add more posts with additional information to further explain the system and provide visual examples.
EDIT: I've added two templates to this post. One is the color scheme I use for the 10XROI system that has MA loaded. The second template is the Fib archive template and must be applied to the EURJPY monthly chart so that you can see the Fib tool. I've added a fib tool with preset levels and labels to show you profit levels from 1R to 10R. Anchor points are marked STOP and ENTRY. Once you have anchored on your stop loss and entry price, you will know exactly where the various R profit levels are located. To put this fib into the chart, just change its color in the fib property and it will become your temporary default fib. Then apply the small fiber to any chart you want. Don't delete the archive template, you will have a convenient place to store various fib or other similar tools with preset levels that you don't want to rebuild. Be sure to open this template on EJ Monthly, otherwise Little Lies and other objects will be out of visual price range.
EDIT: 11/24/2013: I received feedback that I didn't explain this method clearly enough. This is a more succinct summary of what I'm trying to do, and hopefully more clarity.
10XROI Lite
- The setup comes in the form of a "push/pull" candle pattern (see example at the beginning of the thread) and is only found on the daily chart of this system. The condition of strong momentum is a prerequisite that must be established in order to validate the candle pattern. The 3SMA and 10SMA are the primary tools for identifying the presence of strong momentum in a valid push/pull pattern. Other trade "context" factors are desirable and are described in the first article.
- Once a setup is identified, you will look for an entry on the H1 chart into the direction of the momentum of the D1 setup. The nature of the push/pull candlestick pattern is that it only prompts you to start looking for entry points after a pullback against a strong momentum push. The idea is to place a tight stop on H1 entry at a point where price is likely to regain its original D1 directional momentum.
- Use whatever technique you like, such as trend breakouts, pivot candle breakouts, or any entry method of your choice that you think will give you a tight stop loss. Strict stop loss = 40 pips or less. Remember, you are looking for a 10R return. So if you place a 40 pip stop loss, the market will have to move 300 pips in your favor. If your stop loss is only 15 pips, then you only need 150 pips for profit. The tighter the stop, the greater the chance of success at 10R.
- Once you enter the trade, do not move your stop to BE after the first significant hourly retracement. This is somewhat subjective, but a proper pullback should be more than just a 3 or 4 candle fractal.
- Your target price should be set at 10 times your initial risk, or a profit factor of 10R.
- If you are trading a currency pair with a lower ADR, then you may want to buy 8R instead of 10R.
- Rinse and repeat.
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