Applying the Fib-Stoch Strategy to the real time market, and getting to know your platform

You have my very warmest and sincerest of welcomes and greetings, dear reader. Please honor -and humor- me by letting me tell you that I’ve been rocking in my core for quite a few modicums in time to finally put together a concise, comprehensive and constructive utility which will enable our novice- to advanced traders in our syndicated society to learn how to finally make the cash money we’ve all been mentally salivating over J

Without further ado, I present to you the first of many entries in the now-official:

FXBlogUP

Proudly endorsed by the University of Pretoria’s TradersUP; Society of Market Traders.

Here is a bit more insight on what is to be expected from this blog in terms of frequency of posting, relevant material as well as educative practical guidance within profitable FOREX trade taking: The best summary I can give in simple terms, is that this blog will mainly be used to expand and apply what we have learned in the lecture series. This will be where I will respond to questions concerning trades. This is where we will discuss the ins and outs of the future “real” as well as “fake” trades we make. Most importantly, this is for you to expand your knowledge application skills which will ultimately result in each and every one of our members to become a profitable trader in the daily currency exchange economy.I SAY THIS AGAIN: I, your host, LEX, have spent the better part of 2.5 years becoming even remotely profitable, and am myself, not the maker of these concepts. I am merely a relay from the real masters to the traders of the future. This means that I will learn just as much as you do… Most of the time anyway… :P This also means that I welcome any constructively challenging questions about the work and everything it touches. I am here to guide, and to be guided by the needs of you, my students. LET’S GET DOWN TO BUSINESS, SHALL WE?ENTRY 1 Applying the Fib-Stoch Strategy to the real time market, and getting to know your platformTo clarify once again: There is not enough time for me to go through the very basics on how to operate the trading platform you will use to trade. For ease, convenience and consistency, I recommend that you use MetaTrader 4 as your platform as it has all the necessary currency pairs, indicators and tools to carry out this, and many other profitable strategies, in great success. Besides, it is really easy to make an account. Follow these instructions:http://www.luckscout.com/how-to-sign-up-for-a-demo-account-on-mt4/ Once you have the charts in front of you, get to know your platform by adding in the indicators as clearly depicted and specified in LECTURE 1. (When activating the ZigZag indicator, set the Depth to 12 and leave the rest be)Once there, you should get to something like this:

Note that this might take some getting used to in terms of finding the indicators, the correct settings, etc. Feel free to use the same website referenced earlier by searching “metatrader” in the main search bar. Let your mind guide you to what you need to find out.

Let us start applying this strategy the right way:

The two most important aspects/criteria for this trade; or in other words, the thing you should ALWAYS consider first is:

1. Was a LEVEL BROKEN by the PRICE MOVEMENT???

2. IF SO: Does the THE BREAKOUT in the ?

Let that ring in your mind for a while. I am going to back up step by step to systematically address each aspect of taking a trade in this strategy.

SUPPORT/RESISTANCE

It is imperative to understand that this strategy only works on the strong/strongest levels in terms of price movement. Setups formed with weak levels HAVE TO BE IGNORED.

STRONG VS WEAK

A great rule of thumb when judging a level as strong or weak is to see how the price reacted to that level (Did it bounce off strongly? Did it do so more than once? Simply, how big was the movement that created the level) This becomes much easier to explain when we look at the charts themselves:Here I show you a picture of the EURCAD pair on the 1D chart. I am sure that most you you at quick glance (with the help of the ZigZag) can clearly see big peaks, big troughs and small peaks as well as small troughs.

For instants, if we take a look at the above charts again, we can identify all four factors mentioned: It must be noted that everything ‘small’ is insignificant for any trade, but we will still get a good fell for what is big/small enough. Now, how do these become levels which we make trades on?

In short, a level is represented as a perpendicular line touching the peak or the trough. Depicted below is a strong resistance level supported by 2 peaks. As you can see, on the 4H EURGBP, when it reached the level for a third time, it was actually broken by the price. This is where we theorize that the price will keep going once it breaks this strong level. This is a potential viable trade setup.

This is but one example of the many times this pattern repeats itself in the markets.

This brings us to just a quick recap on the fact that this strategy also relies on the trending nature of the pair at the time of the trade. Look at the previous picture once again to see that while the price broke out, it was traveling far above the 200 EMA, which is a good signal for a Buy trade. Same goes for downtrends but the price must travel well under the 200 EMA. If the 200 EMA is continuously being broken up and about such as on earlier in the same above picture, then the market is not trending enough to trade safely.

The question that remains is: Would we have taken this trade based on what we see? To find out, we need to only consider one more criteria: The stochastic. If the stochastic was ABOVE the 80-Line with the candle that broke the line, we have a trade. If not, sorry, peeps, strictly no trade.

Let us see if this one was valid or not by taking a closer look at the candle which broke the resistance line:

We can clearly see that despite the breakout, the candlesticks at which the position would have to be taken, did not correspond to a stochastic main signal above the 80 line. Thus, theoretically, the price will most probably not excel enough to hit a potential profit target, and thus, we IGNORE THE TRADE. Tough I know.

ANOMALY!

If you take a closer look at the chart showing our potential trade setup, you’ll see that despite us ignoring the trade, it indeed went up quite significantly. DOES THAT MEAN WE WERE WRONG AND OUR STRATEGY SUCKS? NO!

It means that this time, the occurance went against the major probability (even though it had a very high chance of failing, it succeeded and vice versa can also occur). Sometimes even when all the signs point to a valid setup, the trade does not work out. But I do guarantee that it only has to work at LEAST half the time for it to generate money. I assure you, this strategy has a long term yield of much higher than 50%. Almost all chart traders would agree with this concept.

It is the most important thing in forex trading to realise that no strategy is 100% accurate. BUT, keep in mind that every strategy with an above-50% accuracy will result in long term profit if adequate money management is used.

THAT IS IT, LADIES AND GENTLEMEN. That is our first blog entry. You should be at least a little bit more comfortable spotting trade setups at least to the extent of seeing if it is valid enough to take or not, based on what I’ve taught today. Please, feel free to ask me anything concerning the above. I will respond to my full capacity of thinking. This will all get better with practice. We will practice this together in the times to come.

It has been my honor and my pleasure writing this and I am ecstatic to keep writing until we are all richer than we were in the past.

Yours truly and respectfully,

Janco aLEXander van Jaarsveld