The market, like a pendulum, is a
never ending sequence of extremes. It forever tries to reach the mean but never
succeeds, constantly overshooting it´s mark, reversing and trying it again but
always failing to reach balance. This system attempts to capture those
extremes. It is a compendium of my understanding of the market, brought to it´s
simplest expression. Up front I will say that this is not a fully tested
system. That´s what we will be doing in the coming weeks and months.
The principles are not complicated.
The first indicator, the smoothed TMA shows us the average of the path that the
price action in the market is following. As such, it is a backward looking
indicator and attempts to determine the future from the recent history. It
corrects itself by repainting itself. It has two outer bands that show us the
outer boundaries of price movement that we are searching for. Our second
indicator, the TMA Slope indicator will show us the relative change in the
slope of TMA as compared to previous candles. It determines in which direction
a trade must be placed and also shows divergences to price. For example, if
price is rising but the slope indicator is dropping, it is announcing a high
probability of a drop in price in the near future. The steeper the drop in the
indicator the higher the probability of a drop in price. The same concept
applies in reverse in the case of a dropping price and a rising slope
indicator. A third use of the slope indicator is for exiting purposes as
described in the exit options below. On the right side of the Slope indicator
you will see the value (white) of the current chart time frame. Above it
(Grey), the value of a user selectable time frame and below the trade status of
the current chart TF. The third and final indicator is Trix (THV4 System) which
we will use solely as a visual guide as to the direction and strength of price
action. We will be talking more of THV and especially of the great importance
that the Coral (Multicolor line) and the 200 SMA (Dark Blue) on trading and in
relation to each other.
MTF
TMA: Included in the templates are 3 TMA indicators. The M15 TMA (dashed grey
lines), the H1 TMA (solid orange lines) and the H4 TMA (solid magenta lines).
You can use any of the three without leaving the M15 chart, for entry and exit
purposes. M15 TMA will be used as a short term scalping tool (trades of 2 to 4
hours and potential gain of 30 to 50 pips), H1 (trades of 8 to 36 hours and
potential gain of 80 to 130 pips) and H4 (trades of 1 to 5 days and potential
gain of 170 to 250 pips). If you set the chart time frame to M15 or lower, you
will see all 3 TMAs, the current time frame TMA and the H1 and H4 TMAs. If you
set the chart to H1, you will only see the H1 and H4 TMAs. If you set the chart
to H4, you will only see the H4 TMA. I recommend setting your chart time frame
to M15. Having 3 TMAs on one chart is extremely helpful for determining longer
time frame trends and combined, they have high predictive value of future
market moves
Stop Loss Use: There are various
options in this department and I won´t recommend any particular one. A natural
level to place your SL would be above a previous high for a short and below a
previous low for a long. I myself use only an emergency SL very far away from
the PA (100 Pips). If a trade goes against me, I will use Recovery Trades to
exit the trade at breakeven. I have included detailed instructions describing
the Recovery system in the Documents folder contained in the Packet.zip file.
Attachments: I am enclosing Templates, Indicators, Documents and 3 EAs, compressed as a Packet.zip file. Extract it and as usual, place the indicators (.mq4 and .ex4 files) in the Experts/Indicators folder of your MT4 installation. Place the 2 EA (5x5) files and the CaveManager file in the Experts folder, not in the Indicators folder. Place the Templates (.tpl files) in the Templates folder. The Extreme TMA Large templates are designed to follow one currency pair on one screen. The Extreme TMA Small templates are designed to follow 4 pairs on one screen. The CaveManager EA is a fantastic money management
1- We will first determine trend in the TMA by using the TMA
Slope indicator value of the TF you are trading. Ranging TMA (-0.25 to 0.25):
Trades can be placed in both directions. Buy Only TMA (Above 0.25): Place ONLY
Long trades. Sell Only TMA (Below -0.25): Place ONLY Short trades.
2- Once trade direction is determined, we will look at the
TMA and wait for price to cross one of the 2 outer bands of the TF you are
trading, the top band for a short order or the bottom band for a long order.
The further price moves across the bands, the more reliable the trade will be.
3- We will now look at the TMA Slope Indicator and only
enter long positions if the Slope value is rising and only enter short
positions if Slope value is falling. The steeper the rise or fall on the
indicator, the stronger the signal.
4- When trading charts with time frames of H1 or less, the
H4 channel must be ranging (-0.25 to 0.25) or rising for a long trade and
ranging (-025 to 0.25) or falling for a short trade. On H4 TF, the same
conditions mentioned must apply to the Daily channel.
Entering the Trade: There are two ways to enter the trade,
depending on your risk management profile:
A- Without Tight Stop Loss: If you do not use a tight stop
loss (within 30 pips of entry price or less), after complying with the 4 rules
mentioned above, Sell as the first Heiken Ashi candle changes color to Red. Buy
as the first Heiken Ashi candle changes color to Blue. Waiting for a close of
the candle is not necessary but will give a higher percentage signal.
B- With a Tight Stop Loss: If you use a tight stop loss
(within 30 pips of entry price or less), at this point apply to the chart the
correct EA of the two supplied. The 5 x 5 Buy EA for a long trade or the 5 x 5
Sell EA for a short trade. Please, be aware that this option will reduce your
profit by several pips per trade. The trade off is less risk, since you enter
the trade in the desired direction.
The 5 x 5 EA will trigger an order once price crosses the
Smoothed 5 period, 5 shift moving average (Not shown on the chart). When the EA
triggers and enters the order automatically, it will suspend itself, so it will
only enter one order in that direction. Once suspended (you will see "EA
is Suspended" on the upper left of your screen), you can remove it from the
chart and follow the Exit Rules.
Ranging Exit Rules (Recommended when TMS Slope is Ranging at
the moment of exit):
Conservative: Close 1/2 of the position after price moves 20
pips in your favor, move the stop of the remaining half to break even and close
the other 1/2 when either PA touches the opposite outer band OR the TMA Slope
indicator closes one bar in the opposite direction of the previous trend.
Normal: Move Stop to break even after 20 pips in your favor.
Close the position when PA touches the opposite outer band. Trail the stop at
1/2 the TMA size (distance between bands in pips). Example: If the TMA size is
40 pips, set a trailing stop at 20 pips.
Aggressive: Move the stop to break even after 30 pips in
your favor. Close the position when PA touches the opposite outer band, or
trail the stop at 1/3 the TMA size (distance between bands in pips). Example:
If the TMA size is 60 pips, set a trailing stop at 20 pips.
Trend Exit Rule (Recommended when TMA Slope is Buy Only or
Sell Only at the planned moment of exit): If upon reaching your Exit Target,
the TMA Slope indicator has changed to Buy Only if you are long or Sell Only if
you are short, it is recommended that you remain in the trade until the Slope
indicator signals Ranging again at the close of a bar, at which point you must
close the trade or trail a stop, 1 pip below the last closed Heiken Ashi candle
if in a long position or 1 pip above the last closed Heiken Ashi candle if in a
short position, until you are stopped out.
Concept behind the Trend Rule: All trends start in a Ranging
market. When a Trend begins, it can go a long way. It is intelligent to ride it
until it becomes a ranging market again.
Example of how the chart should look after installing the stuffs
Attachments:
I am enclosing Templates, Indicators, Documents and 3 EAs, compressed as a
Packet.zip file. Extract it and as usual, place the indicators (.mq4 and .ex4
files) in the Experts/Indicators folder of your MT4 installation. Place the 2 EA
(5x5) files and the CaveManager file in the Experts folder, not in the
Indicators folder. Place the Templates (.tpl files) in the Templates folder.
The Extreme TMA Large templates are designed to follow one currency pair on one
screen. The Extreme TMA Small templates are designed to follow 4 pairs on one
screen. The CaveManager EA is a fantastic money management
