SAFT System | Forex indicator download-MT4/MT5 resources-MetaTrader 5 resources

Hello everyone.

I would like to propose a strategy for trading commodities, forex, stocks or any market driven trading instrument.

This is called the SAFT Strategy which stands for Strength A Analysis F Orex T Rating . This strategy is designed to track the strength of price action moves and make decisions based on technical breakouts of trend and momentum to identify turning points in price action. This strategy is designed to counter the trend and look for levels where the existing price action trend is broken and a change in direction occurs.

In order to better understand this strategy, it is important to first gain a thorough understanding of the entire system using a ratio-based system whereby one increases the account balance as a percentage of the account balance as a risk, a growth plan, a profit-loss ratio, and a take-profit or exit strategy.

Before I get into the specific part of the method, it is necessary to set up the strategy where the account growth plan, order size, account protection and stop loss , indicators - order entry, money management and exit strategy are all created to maximize profits and minimize losses.

Part 1: Account Growth Plan

The SAFT strategy is based on a basic 2 win to 1 loss ratio. Therefore, when a person places an order, he hopes to earn twice the amount risked on each trade. From a statistical perspective SAFT is designed based on the following basic ratios. If we look at a 50% profit rate and a 50% loss rate, we can see that at a 2 to 1 profit rate, one can still make a profit.

(0.10 lots for 100 trades)

2 to 1
Win....50%....50 trades.............100$
Loss..50%...50 trades... 50$
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Profit 50$

Now, I'm not saying that SAFT only has a 50% chance of winning. SAFT has an average winning rate of 76% and a losing rate of 24% in test and trial "real" accounts. But as you can see from the above ratio, even if the success rate is 50%, you can indeed make money.

Also, let me further clarify that I define losing trades as trades that hit stop loss and winning trades that hit take profit. Because I use a dynamic stop loss system, most of my losing trades are actually winning trades because the stop loss moves quickly to protect the order. (Discussed in Part 3)

Now, applying this basic formula to a 5% weekly growth strategy, one would want their account to grow 5% each week. If all components of the plan are followed, this slower growth plan based on 104 weeks (2 years) can provide tremendous results by the end of that period. SAFT method. (Attached is a spreadsheet)

Part 2: Order Entry Size (Lots)

It is important to maintain the proper mindset of the Account Balance Ratio System (ABRS) based on the size of the total account balance. This is to ensure that the account does not become overextended and suffer significant account losses, or even a margin call on the account resulting in the loss of all tradable capital in the account. Additionally, it is equally important to maintain an order sizing plan through which the account can earn returns large enough to make the trading rewards worth the risk of entering the market in the first place. It is therefore important that an appropriate Account Balance Ratio System (ABRS) is developed to meet these needs. In order to do this correctly, a ratio system needs to be established based on the 1000 basis point ratio rule.

ABRS basically states that every 1000 lots in the account will equal a trading lot allowance of 0.10 lots. Therefore, the maximum total trading volume for 1000 accounts is 0.10 lots. Based on this system, you will maintain the following ratios.

ABRS ratio system
1000 equals 0.10 lots
2000 equals 0.20 lots
3000 equals 0.30 lots
4000 equals 0.40 lots
5000 equals 0.50 lots
6000 equals 0.60 lots
7000 equals 0.70 lots
8000 equals 0.80 lots
9000 equals 0.90 lots
10000 equals 1.00 lots etc...


Part 3: Stop Loss and Account Balance Protection (ABP)

Before discussing trade entries, I would like to review trading stops and Account Balance Protection (ABP). The basic stop loss strategy in SAFT is very simple. When placing an order, all stops are initiated from the last major swing low or swing high of recent price action. Therefore, the actual value or spread loss will vary depending on the extent of the price movement. Some orders may have a stop loss of 80 pips, others may have a stop loss as small as 15 pips, but on average, the stop loss on the 15 minute time frame is usually 32 pips lower than the order.

However, this is only a temporary stage in the life cycle of a trading order using the SAFT method because in SAFT one needs to learn and practice the dynamic stop loss system seriously.

(dynamic stop loss)
The key is to protect your orders as much as possible, as quickly as possible, and strive to minimize losses and maximize profits. Therefore, once the pips exceed 30 pips (the market moves 30 pips in your favor) or 1x stop loss, move the stop loss to 3 pips in front of the order to prevent any losses on the trade. This will ensure you gain at least 3 pips of profit if market conditions suddenly change.

For example, let's say the swing low/high is 15 pips, which is the stop loss for your order. In this case, the price movement moves 16 pips instead of the fixed 30 pips. Because the price action has moved the stop loss size, you will move the stop loss to +3 pips again instead of waiting for the 30 pip move because your order has already reached the 50% level of the order life and the goal is always to protect the overall account balance.

Yes, in a wash operation, you may be stopped out more frequently, but in this case, it usually means that the market is not ready to move in the direction of your order and you can wait for new pricing behavior, which usually means that the second pending order will soon appear at a better price than the first pending order, because the market is simply not ready.

Part 4: Indicators - Order Entry

SAFT is a very basic system setup based on price action trend, divergence and momentum. SAFT uses only one basic indicator (the trader's ability to draw trend lines) and another additional indicator that serves as a signal that tells one it's time to draw a trend line and start looking for a change in price action direction.

This indicator is the most basic indicator used by the SAFT strategy and is included in standard Metatrader. This indicator is a "Balanced Volume" indicator.

On-balance volume (OBV) measures buying and selling pressure as a cumulative indicator that increases volume on up days and decreases volume on down days. OBV was developed by Joe Granville and introduced in his 1963 book "Granville's New Key to Stock Market Profits". It is one of the earliest indicators to measure positive and negative volume flow. Chartists can look for differences between OBV and price to predict price movements or use OBV to confirm price trends.

calculate

The On-Balance Volume (OBV) line is simply the running sum of positive and negative volume. Volume during a period is positive when the closing price is higher than the previous closing price. Volume is negative for a period when the closing price is lower than the previous closing price.

If the closing price is higher than the previous closing price, then:

Current OBV = Previous OBV + Current Volume

If the closing price is lower than the previous closing price, then:

Current OBV = Previous OBV - Current Volume

If the closing price is equal to the previous closing price, then:

Current OBV = Previous OBV (no change)

This indicator determines the price action momentum of the price action. One can see how strongly a bull or bear market controls market price movements.

Basic order entry standards:

One can draw and then draw the correct trend line connecting the trend line upper in a downtrend or lower in an uptrend with the Price Action and OBV indicators. Once the trendline into both parts is broken, this is the point to place an entry order. (see screenshot)

Additionally, Stop Loss will be assigned at the last swing low/high of price action. The target take profit level is 2 times the size of the stop loss originally set. (see screenshot)

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(Edited July 2012 Plugin Indicator)

Plug-in Indicator; Additionally, divergence in price action is a key sign that price action is in the process of a directional change. Therefore, an additional indicator that I find useful is the FX5 MACD Divergence Indicator. When an indicator that indicates a possible divergence meets the criteria, the indicator will start drawing a divergence line. However, I only use this indicator as an early warning that it's time for one to start looking at the charts to draw their own trend lines and start looking for entry points. Additionally, sometimes the trade I want to place an order for may have a trendline direction opposite to what the indicator is showing. Regardless, I have found this indicator to be an excellent early warning tool for when one should start looking at the chart to construct trend lines and look for breakouts when price action and momentum change direction. (Attachment in post #1)

(edit 8/15/2012 possible plugin indicator)

To add to the discussion of good indicators to help draw trend lines, you can use one of the following: zigzag, semafor, fractal, or high/low. However, I have been testing and an indicator that I do like to help with trendlines is an indicator called DeMark Trendline Trader. I think it does a pretty good job, but the downside is that when it draws a new line, it immediately deletes the past one. I like to use some past lines when drawing trend lines, so my manual is my go-to. However, the indicator does a good job and provides both upward and downward trend lines to choose from. Because my OBV is always the decider of market direction.
(See attachment in post #1 for this metric)


(Edited August 19, 2012 SAFT using MA lines and drawing trend lines)

It has been discussed and found that using the MA Line Crossover and OBV indicators applied to price action can come very close to representing manually drawing trend lines and then looking for breakouts to trigger orders. So I've attached the "strengthanalysisforextrading template.tpl" to this post which does a great job of getting the same conclusions as using manual drawing of trend lines and looking for crossovers. However, I recommend not using this feature during Asian market hours due to the lack of liquidity during Asian hours.
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Part 5: Money Management and Exit Strategies

Proper money management skills are crucial to becoming a successful trader. Money management is by far the most important skill to master. Money management is simply a management skill set that effectively preserves capital while increasing profits. In other words, a good system will help you avoid losing all your money and help you make money.

One of the most difficult tasks for a trader is when to take profits. Knowing when and where to take profits can make a big difference, as knowing when to take profits can turn a very profitable order into an unprofitable or loss-making one. Therefore, it is important to know when to exit a trade. Here are three exit strategies I use SAFT to determine the level of risk a person is willing to take while increasing the account balance to meet the goals of a growth plan.

Exit strategy 1 (most conservative)

Once the order is opened and the 2x stop loss target is determined, you can set a take profit in MetaTrader and take the full profit of the order when the target level is reached.

Exit strategy 2 (moderate balance)

Once the order is initiated and the target 2x stop loss is established, we watch the order and remove 1/2 of the order size when the target "take profit" level is reached. The remaining 2/2 of the order is reserved, and the order is assigned a trailing stop of the same size as the order's original stop. Orders are allowed to run until the price action reaches a level where a counter signal appears or the stop loss is hit.

Exit Strategy 3 (The Most Aggressive)

Once an order is initiated and the target 2x stop is determined and reached; the trailing stop is assigned to the order and is the same size as the order's original stop. Orders are allowed to run until the price action reaches a level where a counter signal appears or the stop loss is hit.

The SAFT system uses:

The SAFT system can be used on any currency pair, commodity, futures or stock trading market. The SAFT system can be used with just about anything . However, I find that timeframes below 15 minutes are more prone to more unpredictable moves because lower timeframes are more prone to exaggerated moves on larger timeframes, which tend to have more stable, predictable price movements.

in conclusion:

I believe that if one uses a secure system with consistency and discipline, one can easily start growing accounts in a consistent manner. The degree of success will vary based on one's risk tolerance and skill level, but if all one's parts are achieved, one should be able to profit overall. Security systems are all equally utilized.

Reviewed by: Nerd: