A Disciplined 15min method | Foreign exchange EA download- MT4/MT5 resources
Can you control yourself and remain disciplined in your trading? Can you wait for the right setups and skip the questionable ones? Can you close a losing trade for a small loss instead of letting it turn into a big loss? Then this method may be suitable for you.
This is a variation of a 4hr method I use to use a couple years ago...and there are a lot of similarities and some slight changes. Below are the general settings and rules. I use the word "rules" loosely as they are not meant to be hard/strict rules to follow...more like guidelines. But in a rapidly changing market, one must remain flexible. What we are trying to do overall is put the odds of the trade in our favor in the simplest way possible on the 15min chart.
Look for the Obvious trade...DO NOT TAKE the trades you are unsure about and gamble your money away!!!
Chart settings
1) I use the 15 minute chart, which I find to be very reliable for day trading and usually gives you one to two good setups per pair per day.
2) Draw 12, 50, 200, 800 EMA on the chart in any color you want.
3) Use a stochastics indicator with settings of (K period 5, D period 3, Slowing 3, and MA method of Simple). Put a 20 and 80 level on there...those are your references for oversold/overbought areas.
Finding deals is as easy as 1-2-3...
1) Price action ...basically I look two things: A) Candle sticks patterns: Pinbars/Hammers and Tweezers/RailRoad tracks. These candlestick patterns basically tell me that the market is trying to trick you one way and then reverses and goes the other way. B) Price Patterns: Head & Shoulders pattern or the M & W patterns(sometimes called double tops/bottoms). These patterns help me recognize when price might be reversing.
Additionally, you need to have a rough idea of how many points (ADR) the price typically moves during the day so that you can understand if the price will continue to move in the same direction, or if it has followed its course for the day and may start to consolidate or reverse. And finally, Divergence...that can help you spot a possible reversal coming.
2) Moving averages ...you want to see how price reacts around the higher moving averages like 800, 200 and 50...these can act as support/resistance areas. I like to use the 12ema to keep a profitable trade going...or if price diverges too far from it, it may give you a hint that price is getting ready to reverse.
3) Stochastics ...you want stochastics to help give you an idea where price is overbought or oversold. This is just a support indicator to help you stay away from bad trades. Example: If you are looking to go short based on price action and moving averages... but the stochastic is falling around the 20 level, you should probably skip the trade as it most likely has a low probability of success.
And that's basically it...it's really just 1-2-3...PA, MA, Stochastics. You must already know how to read candlestick patterns and chart patterns. Additionally, you must use all three components simultaneously. If you don't have confirmation of all three telling you to go short or long, then you are most likely going to have a losing trade. So stay disciplined!
Some additional tips: Take a look at the 1hr, 4hr and Daily charts every so often so you can spot some major support/resistance areas(just look left...that should be obvious areas). Also, get a feel for the overall trend of the market...if you see an uptrend/upchannel....then your best trade, for example, would be a long setup near that trendline or the bottom of the upchannel. Just use common sense. If you see a consolidation range on the 4hr chart...don't go long near the top of that range and don't go short near the bottom....the better trades would be long near the bottom of the range and short near the top. You will only be wrong once (when price finally breaks out of the range)...and it's only a small loss!
I used it right
This method has been tested on GU, EU, EJ, AU, pairing... I have not tested on any other device.
Money management
(Warning...this worked for me...feel free to adjust your target price and stop loss to suit you).
1) I set an initial emergency stop loss of 50pips in case the market does something weird like surprise news, flash crash, or if you lose power for a while...at least you won't blow your account.
2) My target price is set at 50 pips...even though most trades are profitable between 20-50 pips.
3) You should exit your trade on the first candle that closes on the opposite side of your entry candle if your Target Price has not been hit within a couple hours. If the entry is correct, your loss should be around 30 pips or less.
4) Stay away from huge candles...generally you want to enter on 30 pips or less candles...give or take a few pips.
5) Stay away from major news such as non-farm payrolls, interest rates, or anything that could cause big price swings. You are looking for quality deals...you should not gamble away your money...again, this requires discipline!
As you can see, as long as I enter it correctly... my risk to reward ratio is about 1:1!
Let's look at some examples...
This is a variation of a 4hr method I use to use a couple years ago...and there are a lot of similarities and some slight changes. Below are the general settings and rules. I use the word "rules" loosely as they are not meant to be hard/strict rules to follow...more like guidelines. But in a rapidly changing market, one must remain flexible. What we are trying to do overall is put the odds of the trade in our favor in the simplest way possible on the 15min chart.
Look for the Obvious trade...DO NOT TAKE the trades you are unsure about and gamble your money away!!!
Chart settings
1) I use the 15 minute chart, which I find to be very reliable for day trading and usually gives you one to two good setups per pair per day.
2) Draw 12, 50, 200, 800 EMA on the chart in any color you want.
3) Use a stochastics indicator with settings of (K period 5, D period 3, Slowing 3, and MA method of Simple). Put a 20 and 80 level on there...those are your references for oversold/overbought areas.
Finding deals is as easy as 1-2-3...
1) Price action ...basically I look two things: A) Candle sticks patterns: Pinbars/Hammers and Tweezers/RailRoad tracks. These candlestick patterns basically tell me that the market is trying to trick you one way and then reverses and goes the other way. B) Price Patterns: Head & Shoulders pattern or the M & W patterns(sometimes called double tops/bottoms). These patterns help me recognize when price might be reversing.
Additionally, you need to have a rough idea of how many points (ADR) the price typically moves during the day so that you can understand if the price will continue to move in the same direction, or if it has followed its course for the day and may start to consolidate or reverse. And finally, Divergence...that can help you spot a possible reversal coming.
2) Moving averages ...you want to see how price reacts around the higher moving averages like 800, 200 and 50...these can act as support/resistance areas. I like to use the 12ema to keep a profitable trade going...or if price diverges too far from it, it may give you a hint that price is getting ready to reverse.
3) Stochastics ...you want stochastics to help give you an idea where price is overbought or oversold. This is just a support indicator to help you stay away from bad trades. Example: If you are looking to go short based on price action and moving averages... but the stochastic is falling around the 20 level, you should probably skip the trade as it most likely has a low probability of success.
And that's basically it...it's really just 1-2-3...PA, MA, Stochastics. You must already know how to read candlestick patterns and chart patterns. Additionally, you must use all three components simultaneously. If you don't have confirmation of all three telling you to go short or long, then you are most likely going to have a losing trade. So stay disciplined!
Some additional tips: Take a look at the 1hr, 4hr and Daily charts every so often so you can spot some major support/resistance areas(just look left...that should be obvious areas). Also, get a feel for the overall trend of the market...if you see an uptrend/upchannel....then your best trade, for example, would be a long setup near that trendline or the bottom of the upchannel. Just use common sense. If you see a consolidation range on the 4hr chart...don't go long near the top of that range and don't go short near the bottom....the better trades would be long near the bottom of the range and short near the top. You will only be wrong once (when price finally breaks out of the range)...and it's only a small loss!
I used it right
This method has been tested on GU, EU, EJ, AU, pairing... I have not tested on any other device.
Money management
(Warning...this worked for me...feel free to adjust your target price and stop loss to suit you).
1) I set an initial emergency stop loss of 50pips in case the market does something weird like surprise news, flash crash, or if you lose power for a while...at least you won't blow your account.
2) My target price is set at 50 pips...even though most trades are profitable between 20-50 pips.
3) You should exit your trade on the first candle that closes on the opposite side of your entry candle if your Target Price has not been hit within a couple hours. If the entry is correct, your loss should be around 30 pips or less.
4) Stay away from huge candles...generally you want to enter on 30 pips or less candles...give or take a few pips.
5) Stay away from major news such as non-farm payrolls, interest rates, or anything that could cause big price swings. You are looking for quality deals...you should not gamble away your money...again, this requires discipline!
As you can see, as long as I enter it correctly... my risk to reward ratio is about 1:1!
Let's look at some examples...
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