A Better TDI? Converting WIlliam Percent

In my last post I wrote about the Trader's Dynamic Index, or TDI. I don't really like it that much though. The reason I don't like it is because it does not update until after a candle closes. While this is helpful for avoiding headfakes, it is not so good when price reverses with a substantial candle. Since reversals are much more frequent than headfakes, I prefer something else.

I prefer to use the Williams Percent (%) indicator instead. I will explain how to set this up and then you can experiment with it and determine whether or not you like it's signals.

You should build this in these steps. The bollinger band must be the first indicator installed or it will not install correctly. First install the indicator window. Set the periods to whatever you want, and choose the color NONE. Then drag a bollinger band on top of it, set it to 34 periods, (like the TDI), Deviation 2, First Indicator. Next, drag a moving average, period 3, Simple, First Indicator. Next, another moving average, period 4, Simple, First Indicator. Finally another moving average, period 34, Simple, First Indicator. The color choices are up to you. What you have now is a smoothed Williams % designed like a TDI. It maintains the chararcteristics of the Williams % as far as the -20 and -80 line, but adds the additional upper and lower control limits of the bollinger band, as well as crossovers of the moving averages.

You might find this useful:) Good Luck:)

Trader's Dynamic Index (TDI)

The Trader's Dynamic Index, or TDI is a really nice tool that could almost be used exclusively. I remember making one by scratch a few years ago and it wasn't until later that I found out someone had a name for it:) Funny:)

The TDI is basically a crossover of two RSI's surrounded by a bollinger band. It could also be an RSI and moving average crossover, depending on what TDI you have. The standard RSI settings are 2 and 7, which can lead to distance before they cross. The standard bollinger band setting is 34, and though I suppose it is used because it is a fibonacci number, I am not quite sure why that is the standard setting.

The drawback of this indicator is that it doesn't update until the close of the candle. If you get a big move against you, it will not show on the TDI until it has completed the move of that candle. On the other hand, if the candle retraces within itself, the TDI would have kept you in the trade. So, sometimes you would be out with less profit, other times you will continue the trade.

The minor crosses of the two RSI are often not worth trading against. Most often the best entry is a cross of the centerline of the bollinger band and the best exit is a cross to the inside of the upper/lower bollinger band. There are other ways to use it for trading too, and so it is really up to you which signal you want to follow. If you right click on the indicator and then click modify, the majority of TDI's have suggested trading rules written in the preface to the code.

Changing the RSI period only moves the graph up or down within the range. Normally the range is 32-68. You can experiment with different RSI settings and notice it merely moves the lines up or down, as a whole, and does not interfere with line crossovers. Some people trade according to the levels of 32, 50, and 68 though, so if this is important to you, then you will need to tweak it to get your desired results.

If you change the 2 to a 3 or higher, it will smooth out the line. If you change the 7 to a lower number, you will get faster crossovers. I don't really think it is necessary to change these values for most traders because they are either trading the level the line is on, or when it strikes the bollinger band. A setting of 2 is going to give a faster signal for either of those conditions.

The only thing that is suspect then is the 34 period bollinger band. While you can change this value to anything you want, I propose you consider something else that is outside the box, once you determine your preferred setting. Nevermind what setting you use, but why use only one? Just like a 10 period moving average on a 1HR chart is a 40 period moving average on a 15M chart, you can do the same thing with the TDI. For instance, if you use the standard 34 period bollinger band on a 15M chart, then try placing a 136 period bollinger band on top of the TDI indicator. Simply drag the bollinger band indicator on top of the TDI and let go. Input 136 periods, deviation "1", choose a color, and change it from Close to First Indicator's Data. You can now see the 1HR TDI and 15M TDI at the same time. You can do this for whatever timeframe you like to trade. The idea is to be able to see the TDI signal of your preferred timeframe, and the signal of a higher timeframe at the same time. Additionally, you might consider putting those same two bollinger bands periods you use on the TDI onto the price chart. Use deviation 1 on the indicator, deviation 2 on the price chart. Might mean something to you:)

If you like trading RSI, then one other trick is to use the slope direction line indicator. It reacts like an RSI on the price chart. So, if you like to trade to a particular RSI crossover and would like to see it on the price chart, you can use the slope direction indicator to create it.

The easiest way to determine how you want to use the TDI, or any indicator for that matter, is to draw a vertical line on a low price and another line on a high price. Observe the indicator's behaviour between the 2 lines and either adjust the indicator or make notes about how it identifies trading opportunities. I would further recommend to be sure there are some flat areas between your high and low values so you can also see how the indicator identifies those areas. You might find the TDI useful for this measurement too:)

A Tip For Battle Hardened Newbies

Are you having problems winning trades? Have you been reading all the "guru" newsletters and buying their products and still not performing? Ever wonder why gurus spend so much time discussing money management? LOL!! Yeah, that's right. When you lose alot you have to protect your account.

How would like some real advice? While I won't provide you my guarded indicator settings, I am not against setting you on a different path than the "traders" who seem too interested in selling you things. I studied Sales many years ago and in sales they are fond of saying that the definition of insanity is doing the same things over and over and expecting different results. Would you like to hear something completely new for once?

First of all, I am hereby proclaiming myself as an indicator technologist. Thomas Edison was the most famous technologist ever. I never knew him, obviously, but he is still a role model to me. I cannot count how many times I have seen products and ways to improve them. I spent quite a few years working with the military on improving how they did their various jobs and loved doing it. I used to think my dream job would be to work for Dow in their Think Tank:) I don't know if they still have that or not, but when I was younger I heard about it and saw the many products they produced and thought it would be a wonderful place to work. That never happened for me though, so I turned all that energy and thought to the markets. After analyzing hundreds of indicators and modifying quite a few too, I feel I am in a little bit of a qualified position to bestow some knowledge on you.

The majority of indicators are written with data derived from moving averages. Shocked? It is true. A few years ago I had a fancy EA made for me that allowed me to backtest moving average crossovers. In fact, if I wanted to, I could set parameters for two moving average crossovers, and I had a pip distance delay too. What is that? I could specify how many pips after the cross the trade would open to avoid flutter at intersection points and eat up spreads until price moved away from that point X number of pips. Fancy? I did backtests on hundreds of moving average crossovers, singles, and with using pairs of crossovers for filtering. The result? There is no consistently profitable moving average crossover. Don't throw in the towel just yet though:)

Why would that be? The answer is relatively simple actually. It is because the exit point of a trade is not determined by its vertical movement. It is determined by its horizontal support and resistance. Until you can train your eyes to see the horizontal levels that control price, you will never make any money trading. Okay you ask, why is that? Again, it is relatively simple. You will work yourself into a frenzy trying to find an indicator that will follow the market while it moves up and down. You will set your indicators to periods that are so low they will headfake you. You will try settings that are so high you will kick yourself for missed trades. You will try settings in between and barely break even. Why? Your indicators are based on moving averages and unless the market is literally moving up or down, they are worthless to you. As soon as the market goes sideways your moving averages and all the indicators written against them stop working.

Alot of gurus will tell you that moving averages are not good because they lag. Other marketing gurus state all indicators lag and so you need to use theirs:)))) LOL. Really? If data is required to predict the future and the data must be created first...then doesn't everything lag? Nice try:) Moving averages do not lag they way they want you to believe. They are repainting constantly with every tick of the market. How could they be lagging when they are constantly repainting? What lags are their ability to follow the candlestick pattern. The candlestick, or bar, takes off, but the moving averages are measuring previous price positions on the chart. If you are using a 10 period moving average, and price moved up for 9 candles and then suddenly fell, that move is 1/10 of the measured period, so there is the appearance of a lag. Of course, mathematically you can adjust the rate of the moving average by using exponential, weighted, simple, etc, but generally speaking it is not going to mimic a candlestick. If that is a real problem to you, then trade the candlestick:)

The vast majority of indicators are using moving averages or moving average arrays in their calculations. This means that the indicators are just showing you a distance that price has moved from whatever moving average period setting you input. Let's stick with a 10 SMA. Load a CCI and you will notice that when a 10 period CCI crosses the 0 line, the price crosses the 10 SMA. Load a stochastics and you will notice that when the 10 period stochastics crosses the 50 line, the price crosses the 10 SMA. Load a bulls/bears indicator, like a fisher, and you will notice that when the 10 period fisher crosses the 0 line, the price crosses the 10 SMA. Shall I continue? The only difference is the range the indicator uses to measure and expand the distance of price from the moving average line.

Since there is no magic moving average crossover that makes a profit, and nearly every indicator is written against a moving average, you cannot be profitable using indicators. Well, you can, but when someone tells you their system is rule based and you enter and exit according to specific rules...>RUN<. Indicators are great for determining entry points, but you should rely on discretionary exits.

You cannot use discretionary exits until you learn to trade horizontally. It is quite okay to enter vertically. I think it is a safe method. Once I establish an exit point, it does not mean I should enter the opposite direction right then. Some confirmation is a good thing and keeps the stress down:) Waiting for the confirmation entry is vertical trading. I am relying on my moving average-based indicators to predict the future and so I have to wait on them to tell me what that future is. However, once I enter the market I know is not going to continue that direction indefinitely. At some point it will turn again. This is how you exit using discretion and not a moving average indicator. That discretion is some form of support and resistance. Depending on what type of trader you are, the exit will be different for each of us.

If you are a scalper, you might consider intraday fibonacci levels. If you are an intraday trader, you might consider pivot points on smaller time frames. If you are a swing trader, you might consider both tools on a higher timeframe. If you are a position trader, I have no advice for you because that is not trading...it's investing. If you trade Renko bars, then the size of your box will help you determine which style trader you are.

The fibonacci levels will change on any turn of the market. It is up to you to decide which turn you want to use. If you use the highest high and lowest low, you will get common levels, but it is still a wild guess as to which one will hold price. In fact I have it on good authority that while bank traders use fibonacci levels, they do not use the same formula for calculating levels that the standard indicator you would use does. Welcome to yet another skummy portion of trading:)

Pivot points are actually quite good, but most are calculated daily, so if your trades last for more than a day, they might be useless to you. Personally I don't know why anyone would trade high timeframes, but I also don't preach money management:))

Too much reading? Sorry about that. There is much to know and it takes a bit of writing to even discuss it broadly. The bottom line tip is this: You need to learn to exit according to horizontal levels and not according to vertical movement. Enter the market on vertical movement. Exit on a horizontal level.

While I personally use pivot points to guide me to the future, I also use bollinger bands. I use my indicators to find entries and alert me to changes in momentum. I can then easily see where price is most likely to reverse according to nearby support and resistance and the deviation of the bollinger band(s). How I do that exactly is a secret, but it is worth your time to explore your own method. Start by looking for indicators other than CCI, RSI, Stochastics, Moving Average, QQE, etc. They all say the same thing, so how many do you need? Any of them can give you an entry signal. Concentrate on finding something that will show you exhaustion at a horizontal level. Then exit the market and WAIT until your moving average indicators say it is okay to enter again. This should turn your trades into profit:))

KISS Your Forex Trading System

You have probably heard of the acronym KISS, right? Keep It Simple, Stupid is how I learned it:) When it comes to Forex trading, this is very true.

I have seen a great many systems over the years. I have developed nearly a thousand of my own. When you are making yours you will likely make many changes along the way until you are comfortable and confident. Be careful though that you do not put too many indicators on your charts.

For instance, a CCI, an RSI, a TDI, and a QQE all have nearly the same signal. So, if at all possible, pick one, maybe 2, but certainly not all.

Why is KISS important? Obviously the first thing that likely springs to your mind is the ability to analyze so many indicators at once. If it takes awhile to find your entry or exit point, and the market isn't stopping to wait on you, what do you suppose is going to happen?

Or, what if you want everything to line up perfectly before you place the trade? Depending on the indicators you are using, and their settings, you could be sitting there waiting a long, long time and then when you finally do enter, the trade is not very profitable. Waiting for too many signals is a lesson in patience, as well as not very profitable.

These might appear as obvious reasons for limiting the number of indicators you use in your system. There is another reason that might not be so obvious. When you have too many indicators and a trade is going against you, you will actively hunt for any indicator that agrees with your losing position. Rather than closing for a loss, you will be hard at work finding the indicator that agrees with you despite the fact that price is not agreeing with you. You have effectively lit the fuse on the dynamite and are standing there holding it to see if it will really burn down to the stick of dynamite and blow up. Crazy, yes? But, you will do it!! So, be aware of this.

Of course as you are learning what to use and what to not use you might have an overabundance of indicators on your system. That is fine for demo trading. As you demo trade, keep track of what indicators you are actually using and begin eliminating the ones you are not. As more time goes by and you have less indicators, you will be able to focus on the ones that are basically the same and choose which one you prefer.

Consider this also. Do you really need a moving average on your chart to know if price is going up or down? You can find free moving average expert advisors on the Internet and if you don't know by now how useless their signal is, I recommend you get an expert advisor, plug in some crossovers you think you like, and then have a look at the results page. It is a real eye-opener. When you see the crossovers on the historical charts, they seem exciting and easy to you. What you have not figured in though, is where the price is when the crossover occurs. Most of the time it is not at the crossover and you are VERY late to the party. Don't fall into the trap of lowering the period settings of your moving averages either. When they are too sensitive they give false signals, when they are set to common sense settings, they give late signals. Hmm. Worthless?

Remember, anything that signals wrong...is wrong. Anything that signals the same as another indicator should be deleted. Determine what indicators you are actually using most of the time and then adjust them to meet your criteria. I use a few indicators but each one is set to a different period setting. This allows me to see multiple time frame signals on one chart. It is usually a math solution, but it can be a little off because of candle formation differences. It doesn't really matter though.

Have you ever used a multiple time frame indicator and noticed how the lines are drawn? You can try changing the initial indicator to a higher period setting instead and have a more smooth analysis. For instance, if you are trading 15M charts and want to see 1HR chart indicators, then simply try multiplying your 15M period settings by 4. If you are using a 12 period RSI, then rather than using an MTF indicator that draws weird, use a (12 x 4) = 48 RSI setting. Although I would also look at a 24 and a 36 if it were me. A 24 mostly mirrors the 30M chart. The 36 would be like a 45M chart, which is probably a pretty decent view:). I don't know for sure, but since 1hr candles retrace, just like any other timeframe candle, a setting of less than maximum will preserve capital.

I have probably just gone way over your head now. Sorry about that. Just remember you can be creative in your design. You can attempt to see what is going on in higher periods without using multiple charts. Finally, another trick you may not know is that you can drag moving averages and bollinger bands and stochastics and whatever other indicators you use on top of other indicators. You can create a moving average crossover inside your indicator. This type of crossover actually means something:) Just left click and drag the moving average on top of the indicator. Let go. The indicator settings box will appear. Adjust your setting and before you click okay, click on the CLOSE arrow and select Apply to First Indicator's Data. The designs you can create are awesome and more than likely will actually aid in your trading ability more than any other indicator you use.

Lastly, if you only use one stochastic, consider just moving it on top of another indicator, rather than burning up space using its own window. Or any other indicators that you can double up on and not have problems understanding.

KISS your Forex system and you will increase decision-making speed. You will gain confidence and know that when you are wrong, then you are wrong. It is not your fault, things just happen. Trust your system and you will be flexible and close positions before you marry them and effectively lower your losses. When it comes time to enter, you will enter and not stumble around looking to see if every single little thing lines up. It makes a big difference. Even if your system does not win 90% of the time, as long as it tells you when conditions have changed and you are going to lose money, and you trust it, then you accept the loss and either change direction or wait for your next signal. Taking an early loss is much better than riding it out until it is a big loss. And if your system actually tells you that you are going to lose, then did it also tell you to enter the other direction? So make sure that is what you do and more often than not, you will make your loss right back, and then some. Of course this really depends on your system settings, I know, so if you find your system whipsaws you or headfakes you, then you probably are using settings that are too low. In Statistics Math this is called your sample size, or "n". The larger your "n", the better the signal.

Keep It Simple, Stupid:))

Setting up your system for newbies

While this is primarily focused for new traders, veterans might find this useful too. To begin, it is logical to consider what is equilibrium? Once you can figure out what is considered to be equilibrium, or the middle of the range, then you can adjust your settings to trade when price moves away from it.

Consider this: Most traders rely on the 50 EMA and 200 EMA as major support and resistance lines. Since most people would like more profit and more activity in their trading, then you should probably consider the 50 EMA as the primary equilibrium price. While obviously price goes above and below it, and occasionally bounces off of it, it is as good a place to start as any other. So, if you are using the 50 EMA, then put it into perspective. It means you are looking at 50 periods, right? There are 24 hours in a day, so the best timeframe to see 50 periods would be the 30M chart right? And, to further validate this timeframe, what if you wanted to use the 200 EMA as equilibrium? There are about 120 hours in a week of trading, so if you use the 30M chart, then you have 200 periods for the week.

Hopefully this makes sense. It doesn't matter what timeframe you decide to trade with your system, you will get more accurate indicator settings if you develop the system using a 30M chart. Good Luck:))

Market Timer Algorithm

The latest flavor of the week is the Market Timer Algorithm.

The sales video keeps dying around the 12 minute mark, but that is okay. From what I heard in those 12 minutes, this guy is kinda making up facts. Understandable, since he is marketing something, but obviously a scenario is only a scenario. I am sure my idea of probability is different than his so I would likely not be interested anyway. Besides that, I am thinking he probably wants to sell whatever it is for some ridiculous amount of money and I am about 99.999999% positive I can already out-trade him. I only got my degree from an actual top university and graduated Summa Cum Laude (that's all A's in every course from start to finish). I always smile a bit when I hear guys tout themselves because it reminds of the scene in Armaggedon, where the scientist tells the general..."I know the President's advisor. We went to MIT together. At a time like this would you rather take the advice of someone who got a C- in AstroPhysics, or someone who got an A?" I hope you understand what I mean:))

So I don't know what the content is, but from looking around the page it appears to be about the stock market and maybe options?

I will tell you how to make a killing in options. It is really pretty easy, especially since the stock market has tools to track volume. But, if you have the Investools search engine, do a search for Insider Trading in the last 2-3 months. Once the search engine gives you the results, arrange them by the ones with the best fundamentals. Then open a yearly chart and see where the 12/26/9 macd, 14 period stochastics, and 21 period SMA are in relation to the price. If they are not overbought, go buy an option. It is really a no-brainer and extremely hard to lose. Of course, this strategy will not work in Forex, and the indicator settings are extremely crappy if you actually want to make money in Forex, so I wouldn't recommend using them.

I know I am trashing this system without a full understanding of it, so I am sorry if it's the cat's ass for you. If you like it, judge for yourself and do as you please. After all, there is more than one way to profit from the markets. Each of us has an opinion of how to do, and even though I might disagree, it is only my opinion. I do enjoy seeing other people's ideas because I never know if they might lead to an improvement in how I trade. So, please do not take it personal, okay? The real systems, like mine, never come to market because they actually work:)) Sometimes I am just annoyed by all the junk that doesn't.

I am also disappointed with the macro chart I saw in the part of the video that was working and the analysis of the market. His analysis was that eventually the price will come down. That's comforting. I know right where to enter now....gag! Gotta love historical chart analysis, right? LOL!! An understanding of market behavior is much more important than any indicator. If it wasn't a historical chart, what would he say if it blew right through the resistance? I suppose nothing. He would just find another example. Soooooo clueless, and yet trying to make a fortune teaching people to trade when he doesn't even know how himself. So aggravating!!

Sorry my soapbox is getting rather large. I am just really getting tired of a new flavor of the week, every week. It is like the carpet baggers infesting the South after the Civil War. Every week some new moron comes out of the woodwork with the latest greatest thing and doesn't have a clue what he is talking about. ARGH!!

Not interested in affliate sales

While I am thinking about, I want you to know I am not interested in selling you another guy's junk. So, I won't have links to buy systems, and I certainly am not going to link to google for sporadic and unreviewed ads to appear on my site.

No, I am prepared to take your money on the field of battle...not under the bleachers:) Let's rock!

02/12/12 Results

USD/CHF:
Buy at 0.9127, Close at 0.9153. +26 pips.
Sell at 0.9153, Close at 0.9110. +43 pips.
Buy at 0.9113, Close at 0.9184. +71 pips.

AUD/USD:
Buy at 1.0696, Close at 1.0739. +43 pips.
Buy at 1.0741, Close at 1.0770. +29 pips.
Sell at 1.0762. Close at 1.0732. +30 pips.
Sell at 1.0745, Close at 1.0708. +37 pips.

Total = 7 winning trades, 0 losing trades. +279 pips.

Oh no! Another $1997 system!!

Wow. The sales page finally arrived for the system I talked about earlier. They want $1997 to show you how it works. Wow! So, since I make 100 times more pips than they do then I could sell mine for $199,700, right? Unbelievable. See what I mean? Institutional traders spending other people's money in order to have large account balances, while using strategies that the average "person" cannot afford to employ. Then, because their systems really don't make that much, they periodically sell systems to make enough money to pay their bills:)) Do you know these guys can actually have a losing month because of the time it takes for their trades to end? You might think 1200 pips on a month-long trade is good, but that is investor thinking, not trader thinking. It is like the age old question of the penny. Do you want $1M pennies right now, or start with 1 penny and double it everyday? While they were busy make 1200 pips that month, I made 3800. Interesting:)) I say that sarcastically. It is actually disgusting, but if you haven't made any money trading Forex yet, and you have $2000 more to give away...they are your guys((((

Forex volume and the Fisher Bulls/Bears Indicator

Volume in the Forex market is not measured like the familiar method of the stock market. In my opinion, anything associated with volume is useless.

The next best thing is bulls/bears measurement. This can be done in a variety of ways, but I will mention 3 most common. The first is the bulls/bears indicator. This indicator is not very user friendly and I do not recommend it. The next is an mt4 product called the sefc indicator. It is a box system that changes color according to buying or selling behavior. It will adjust, or repaint, quite often, and is therefore useless for actual trading. Looks awesome in history though:)

My recommendation is to use the data of the sefc indicator as a histogram, with a line graph installed on top of it. The most common histogram of this data is called a fisher yurik indicator. There are some important things to know about this indicator though. First, you will likely see alot of complaints about it because it will adjust to market conditions just like the sefc. Traders call that repainting and it can be annoying to be fooled by your indicator, particularly because a "repaint" means you are losing the trade. Second though, and most importantly, for whatever reason, the formula in the indicator has been altered. I don't know if someone thought they knew what they were doing, or if it was intentional, but the math is wrong. The indicator was meant to be associated with standard deviation and based on 10 periods. Of course you can change the periods, but you have to keep the standard deviation formula intact!! DUH!! If you download it from the internet, be sure to get the version that ends in mq4. Once you have loaded it to your mt4, find it in your custom indicators folder and right click on it. Then click modify. Scroll down until you see this formula:

Value = 0.33*2*((price-MinL)/(MaxH-MinL)-0.5) + 0.67*Value1;    
      Value=MathMin(MathMax(Value,-0.999),0.999);
      ExtBuffer0[i]=0.5*MathLog((1+Value)/(1-Value))+0.5*Fish1;

Change it to look like this:

Value = 0.5*2*((price-MinL)/(MaxH-MinL)-0.5) + 0.5*Value1;    
      Value=MathMin(MathMax(Value,-0.999),0.999);
      ExtBuffer0[i]=0.25*MathLog((1+Value)/(1-Value))+0.5*Fish1;

The indicator will still adjust to market movement and "repaint", but it is much more stable. If it were me, I would change the fisher period to 5. Then I would put a 5 period, deviation 1 bollinger band on top of the fisher. Then I would add a 5 period SMA of a different color. This will change the color of the median line of the bollinger band and show crossovers. While the upper and lower limits are not exactly the same as a 1 period SMA, they are close enough. Now you have a fast acting fisher to possibly give you some advance notice of changes in direction, and with the 5 period bollinger band and moving average you also have a 10 period fisher at the same time. The crossover of the 5 period moving average equates to a 10 period fisher. While I would not use this as stand-alone indicator, I think you will find it helpful in determining price direction.

Next I would experiment with the sister indicator called Fisher Transform. Once again, check the math and make sure it is 0.5 and 0.25 in the appropriate places. While the optimal period setting is 10, I think you will like 8:)

These are not really tradable indicators, but will help you see the flow of the market and can help you validate your entries and exits. If you decide to use their signals, be sure to have some other type of indicator to confirm it. Of course you can always chance it. If you use an 8 period fisher you will outperform the latest robot from Rita Lasker, lol, but that doesn't mean it is foolproof. A signal is not always a signal because consolidation can cause exaggerated movement of indicators.

Renko Bars versus Time Charts

Renko bars versus time charts. I spent several months using renko bars and would like to share my opinion. It is difficult to determine the proper box size to use. Too small, and you are whipsawed. Too large and you are stuck with drawdowns. Alot of indicators will work with renko charts, but even the fastest settings will not react until 2 boxes into the trade. If you have a trade that lasts 6 boxes, you will not be in the trade until 2 boxes signal the entry, and you will not exit until 2 boxes signal the close. That leaves you a profit of 2 boxes. In this case 1/3 of the move. You need 5 boxes to make 1 box of profit. The only option you have is to "guess" where the exit might be and probably be wrong. I am still wondering what I am supposed to do when the market does not move 5 boxes? Punt?

While they look awesome because they eliminate market noise, that is probably also their downfall. When you understand market maker behavior and patterns, you realize you actually need to see consolidation periods and changes in the ATR. These are important clues to determine market direction. These clues are not included in renko charts, and therefore I would only use them for reference and not as my main trading chart.

Three components to successful Forex trading.

In my opinion there are three components to trading. One is fundamental, or news trading. The second is technical analysis, or indicator trading. The third, and only one that matters is market maker trading, or supply and demand. If you want to be successful, you will need to understand all three.

News is required to make the market move. The market does not have to move in the direction of the news though. This is important to understand. In general, good news for a currency moves in that currency's favor and bad news moves against it. This is NOT always the case. Market makers occasionally use news to take your money. Have you ever seen price spike on a news release only to retrace and continue in the direction it was originally going? Happens all the time. However, major economic news will drive a market in the right direction...eventually.

Technical analysis is how the majority of people trade. Me included, although I also use the other two components to my advantage. This involves using some type of indicator, or series of indicators to attempt to determine where the market is most likely headed over your preferred time allotment. Finding the right set of indicators to use, and then finding the right settings to use on them is extremely frustrating though.

Technical analysis is frustrating because of the middlemen. Between you and the price and what your indicators are telling you are market makers and brokers. Their function is to make you lose your money to them. This means that, in essence, it really doesn't matter what your indicators are telling you, they will do whatever they want to do, within reason. Imagine you are the main guy buying and selling currencies for the whole world. You have huge transactions from banks that are both selling and buying. Then you have the small retail traders who have absolutely no influence on the market. Now imagine you just have to fill those orders, eventually, but certainly not all at once. There is no reason you can't play with the price and sell some of the sell orders, then buy some of the buy orders and just do that over and over and over. Meanwhile, this up and down and all around is destroying the retail trader's indicator readings. Add to that, the market makers and brokers can see the distribution between buyers and sellers and will turn the market in the direction of least profit...usually in a hurry. Also realize they can see your stop loss and if it is within reach, and will put you in the negative, there is a really good chance they will trigger it. Finally, speaking of triggers, lol, if you are unfortunate enough to place a pending order on the side of a suspected breakout, you should be prepared to have it triggered right before they race the price the other direction. Are these all things YOU would do if you were in control and had to make money by forcing traders to lose? There is hope though:) In roulette you can bet on black or red, and unless it lands on 0 or 00, you have an almost 50% chance of winning. In trading, it will go up or down, or both at nearly the same time, but you have a 50% chance of being right. The hard part is the wheel doesn't stop turning in Forex, so you have to know when enough is enough.

Isn't this fun?:))

Summa Cum Laude, School of Hard Knocks

I started educating myself with trading in October of 2004. I started out learning about the stock market and stock options through Investools. It was mostly based on technical analysis of yearly charts. Their search engines were incredible and I did very well choosing profitable options.

In April of 2007 I started working on creating a trading strategy for Forex. The strategy I used for options trading did not work effectively in Forex. I believe this is mostly because the volatility is much greater in Forex and you would need alot of money to trade it off yearly charts.

So began a pursuit to match indicators and create a consistent and reliable strategy for the Forex market. I have spent thousands of hours analyzing hundreds of indicators, expert advisors, and strategies. I have been involved with several Forex forums and receive emails daily from a number of self-proclaimed trading experts.

Why should you bother reading my posts? If you have any interest at all of making money trading, then it is worth your time. Unlike the vast majority of Forex "traders", I am not a marketer, nor an investor. I am a trader. Marketers are more interested in selling you their garbage without any real proof it works. Occasionally you get "some" kind of proof, but if you look real close they are either scalping for a few pips per trade and jacking up the lot value to make it look incredible, or they are posting losses along with the earnings to make it seem more realistic. Sometimes I add up those numbers, and I would encourage you to do it, just for fun, and to help you open your eyes to the garbage. They never add up. Even if they did add up, I don't know why anyone would accept so many losses??

Then you have the other group of institutional traders and supposed hedge fund managers. You will recognize these guys cause they will try to sell you strategies to trade 4HR, Daily, or even Weekly charts. Hmm...are you already rich?? You are going to need to be. These guys are completely out of touch with retail traders and should basically be ignored. These are the guys that say losses are alright as long as you control your money management. In other words, predetermine how much money you are willing to lose before you place the trade and be prepared to actually lose it.

Any of this sound familiar? If not, it will soon if you continue to dig for more and more input. I got an email just today with the sender telling me about this "holy grail" system and to listen to the voice of the guy on the video as he explains "just a normal" trade. Hmm. First of all, I don't know who ever decided to call a good trading system a holy grail. From this moment on, I will refer to it as a flying pig:) I do not think we need to associate Jesus to trading, though I would guess many people pray to Him for success:) Second, I compared my system's trades to the flying pig system's trades and I made twice as many pips. So, what would that make my system called? I just call it lfx:)

Short Blog Page Description

Hello. You have stumbled upon my Forex trading page. I hope you will find it informative and inspirational. I do not agree with alot of so-called trading gurus and so I have my own unique way of doing things. I am one of those guys who actually likes reinventing the wheel. As with anything and everything, someone did it first:)

I have four trading friends and together we have bled and sweated together to get to where we are. We are a diversified group, each with their own talents, ideas, knowledge, and experience. Together we have developed a really good strategy and if you like trading Forex, you will like hanging out with us:) We trade to win, and the money is a by-product. None of us has a boss, so we are some of the most dangerous traders on the planet:) Five brainiacs left on their own with no one to stop them:))