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					5EMAs Forex System
 Advanced Module
                                 TABLE OF CONTENTS


LEGAL NOTICES .....................................................................................       I
   Copyright Information ................................................................................ i
   Disclaimer and Risk Warnings ..................................................................... ii
   U.S. Government Required Disclaimer .........................................................iii

PREFACE ..............................................................................................1
   Understanding the rules: ........................................................................... 1
   Technical Indicators: ................................................................................. 1

ADVANCED METHOD 1: 5EMAS BREAKOUT SYSTEM .......................................2
 5EMAs Breakout Rules .............................................................................. 5
  Breakout Rule 1........................................................................................ 5
  Breakout Rule 2........................................................................................ 7
  Breakout Rule 3........................................................................................ 7
  Breakout Rule 4........................................................................................ 8
 Conclusion for Advanced Method 1 ......................................................... 15

ADVANCED METHOD 2: 5EMAS STANDARD ON DAILY BASIS “A”....................17

ADVANCED METHOD 2: 5EMAS STANDARD ON DAILY BASIS “B”....................21

ADVANCED METHOD 3: 5EMAS - STANDARD AND CUSTOM INDICATORS ...........26
Legal Notices
Copyright Information

REPRODUCTION AND OR TRANSLATION OF ANY PART OF THIS WORK
BY ANY MEANS ELECTRONIC OR MECHANICAL INCLUDING
PHOTOCOPYING BEYOND THAT PERMITTED BY COPYRIGHT LAW
WITHOUT PERMISSION IN WRITING OF THE PUBLISHER IS UNLAWFUL.


Copyright © 2007, 5emas-forex-trading-system.com


Revision 2.1, July 2007


     Author      :   Oleg Alexandrovich But
     Website     :   5emas-forex-trading-system.com
     E-Mail      :   sales@5emas-forex-trading-system.com
     Publisher   :   Adam Burgoyne


Note About Currency:

Unless otherwise stated in this book, all numbers preceded by the “$”
sign refer to an amount in U.S. Dollars.




  DISTRIBUTION OF THIS E-BOOK IN ANY
     FORM IS STRICTLY PROHIBITED

            Reward for Reporting Offenders


                                    i
Disclaimer and Risk Warnings

Trading any financial market involves risk. This e-book and the website
5emas-forex-trading-system.com and its contents are neither a
solicitation nor an offer to Buy/Sell any financial market. The contents of
this e-book are for general information purposes only (contents shall
also mean the website 5emas-forex-trading-system.com and any e-mail
correspondence or newsletters related to the website).


Although every attempt has been made to assure accuracy, we do not
give any express or implied warranty as to its accuracy. We do not
accept any liability for error or omission. Examples are provided for
illustrative purposes only and should not be construed as investment
advice or strategy.


No representation is being made that any account or trader will or is
likely to achieve profits or losses similar to those discussed in this e-
book. Past performance is not indicative of future results.


By purchasing the e-book, subscribing to our mailing list or using the
website you will be deemed to have accepted these terms in full.


Oleg A. But (author), Adam Burgoyne (publisher), the website, e-book,
and its representatives do not and can not give investment advice or
invite customers to engage in investments through this e-book.


We do our best to insure the website is available 24 hours per day but
we cannot be held liable if for any reason the site is not available.


The information provided in this e-book is not intended for distribution
to or for use by any person or entity in any jurisdiction or country where
such distribution or use would be contrary to law or regulation or which
would subject us to any registration requirement within such jurisdiction
or country.

                                      ii
Hypothetical performance results have many inherent limitations, some
of which are mentioned below. No representation is being made that any
account will or is likely to achieve profits or losses similar to those
shown. In fact, there are frequently sharp differences between
hypothetical performance results and actual results subsequently
achieved by any particular trading program.


One of the limitations of hypothetical performance results is that they
are generally prepared with the benefit of hindsight. In addition,
hypothetical trading does not involve financial risk and no hypothetical
trading record can completely account for the impact of financial risk in
actual trading.


For example: the ability to withstand losses or to adhere to a particular
trading program in spite of trading losses are material points which can
also adversely affect trading results. There are numerous other factors
related to the market in general and to the implementation of any
specific trading program, which cannot be fully accounted for in the
preparation of hypothetical performance results, all of which can
adversely affect actual trading results.


We reserve the right to change these terms and conditions without
notice. You can check for updates to this disclaimer at any time without
notification.


The content of 5emas-forex-trading-system.com and this e-book are
copyright and may not be copied or reproduced in whole or in part.


U.S. Government Required Disclaimer

Commodity Futures Trading Commission Futures and Options trading
has large potential rewards, but also large potential risk. You must be
aware of the risks and be willing to accept them in order to invest in the
FOREX, futures and options markets.


                                    iii
The past performance of any trading system or methodology is not
necessarily indicative of future results.




                                  iv
Preface
Many clients have e-mailed and asked us: “How can I improve the
system to get more trades and how can I adapt it to the daily chart?”


In fact, whilst the system has been developed to work optimally using
60 minute charts, it can also be used very effectively with daily charts.


In this “Advanced” module, we cover additional methods of using the
5EMAs Forex System. It includes using the system on a daily basis and
also using other technical indicators with the system.


Understanding the rules:

The advanced methods outlined in this book are based on and build
upon the main rules specified for the 5EMAs Forex System in the
“Building Millions on FOREX” e-book. Please ensure that you have read
and understand the standard strategy rules before proceeding with
these advanced methods.


Technical Indicators:

There are many indicators available for MetaTrader – some are sold and
some are provided free. We do not sell or resell Technical indicators
which can be downloaded freely from certain websites i.e. the site
maintained by the developers of the MetaTrader terminal.




                                    1
Advanced Method 1:
5EMAs Breakout System
This method relies on using of lines of Support & Resistance together
with the standard 5EMAs approach. You therefore need to determine a
range with its highest and lowest levels to trade breakouts in addition to
trading pullbacks.


It is important to realize that the 5EMAsAlert EA determines the trend
by following the standard rules of the 5EMAs Forex System i.e. it uses
EMAs and MACD. If, however, you apply lines of Support & Resistance
then you’ll gain several advantages. Let’s see what they are:


   1. You’ll be able to determine the existence of flat market conditions,
      in which the standard 5EMAs Forex System is not designed to
      work.


   2. You’ll be able to use the 5EMAs system as a Moving Average
      crossover system, however, only to provide an additional trade
      confirmation in our case.


   3. The standard 5EMAs Forex System is a trend following system
      aimed at trading pullbacks, but now you can trade breakouts too.


Look at the chart on the following page for an example:




                                    2
As you can see from looking at this chart, there is quite a good
movement from about 123.16 down to about 121.26.


If you were using the standard 5EMAs Forex System rules then you
would only get a signal at the 121.86 level and could trade it down to
about 121.08. The result was only 78 pips. In other words, you missed
out on the movement from 123.16 down to 121.86. This is 123 pips!


But how could we have gained more of a trading opportunity from this
scenario?


By approaching the market like this:



                                    3
Notice the two red lines at 123.48 and 123.16 – these indicate the
previous price range.


When the market is ranging after reasonable movement, it indicates
that volatility is reducing and a breakout is possible in the near future.


As you can see from the chart, the breakout happened in a downward
direction. We must therefore have trading rules to capitalize on this type
of scenario and, fortunately, we do!




                                     4
5EMAs Breakout Rules

Breakout Rule 1

We need to determine the highest and lowest levels of a range. For this
we need at least one extreme point for each level and, for drawing lines
of Support & Resistance, we need at least two points.




Point 1 is at 123.50 and point two is at 123.48. By drawing a line at the
123.50 level (the higher of the two), we have determined the upper
level of the range.




                                    5
Now it is time to determine the lower level so look at the following
chart:




Point 3 is at 123.17 and point 4 is at 123.16. We use the 123.16 level
accordingly, being the lower of the two, and draw a trend line.


Stop Orders:

There are many methods for trading breakouts; the most widely used is
to place Stop orders at levels 3-5 pips above and below the defined
range levels, however, we have our own approach.




                                    6
Breakout Rule 2

We should wait until a one hour candle/bar closes above the Resistance
level for a long position or below the Support level for a short position.




Breakout Rule 3

For a long position, the 5EMA of the Lows must have crossed the 20EMA
of the Closes from below to above and for a short position, the 5EMA of
the Highs must have crossed the 20EMA of the Closes from above to
below.




                                     7
Breakout Rule 4

For a long position, the MACD must be in the positive zone and for a
short position, in the negative zone.


That covers all the conditions for the first part of the 5EMAs Forex
System Breakouts Trading strategy.




                                    8
As you should have noticed, we covered trading rules for long and short
positions in the first part of this strategy. Now, let’s continue with the
second part of the strategy, again for a short position in this example.


Suppose that you missed the first trade signal - it is impossible to trade
all the time! - (breakout – 123.16) and you want to trade the next
opportunity. How can we find it? For this we have some tools too.


Please note: as long as price remains below both the 5EMA of the Highs
and the 20EMA, we can go short – conditions would simply need to be
reversed (using the 5EMA of the Lows) for a long position.




                                    9
The zone for short trade possibilities is shown by the red rectangle
which is drawn from the 123.16 breakout level across to the candle
indicated by the green comment “First up-close above two EMAs”.


That particular candle also indicates an exit point based on one of the
“exit strategies” in the standard 5EMAs Forex System course.


So, what additional trade(s) can we find, having missed the first one?
Well, look at the next chart:




                                   10
Within the zone of the red rectangle (shorting possibilities) on the
previous chart we have a pullback beginning at 121.87 and ending at
122.33 which has been marked with red lines.


Line 121.87 is indicating both the end of the pullback and another
breakout level, however, the pullback did not create a trade signal using
the standard 5EMAs Forex System trading rules.


You are probably wondering: “Well, how do I predict the beginning and
end of a pullback?” As usual, we’ll be revealing the proprietary method
which we developed and use, not something copied from some other
system.




                                   11
As can be seen on the previous chart:


   1. The pullback didn’t extend beyond either the 5 or 20EMA levels.


   2. During the pullback, the MACD remained negative.


These points indicated a failed pullback with the possibility of a second
breakout to the downside (the current main trend direction in this case).


To clarify, the market moved up after a strong downward movement
creating the first white (bullish) candle – it indicates the beginning of
the pullback.


After that, a second white (bullish) candle was formed, followed by a
black (bearish) candle.


All this occurred while price remained below both the 5 and 20EMAs and
with the MACD in the negative zone, as shown on the following chart:




                                     12
If you look at the following chart, you will see where (when the move
was almost over) a clear trade entry signal was finally generated using
the rules of standard 5EMAs Forex System:




                                   13
The best possible trade that could have been obtained from the standard
signal was from 121.86 down to about 121.08 – a move of 78 pips.




                                  14
Conclusion for Advanced Method 1

If using only the standard 5EMAs Forex System strategy we would have
identified just one signal and gained a maximum of 78 pips. By using
Advanced Method 1, the entire move from the initial breakout level of
123.16 down to 121.08 was possible – potentially, 208 pips.


So far, we have covered a short (SELL) position. Now let’s look at an
example of a long (BUY) position.




Look at the chart above. All conditions have been met; but in this case,
for a long position. The red Support & Resistance lines indicate the
range as being between 1.3594 and 1.3642, which has finally been

                                   15
broken by the candle indicated (the green line at 1.3654 indicates the
breakout level). Also we see crossover of the 5EMA of the Lows and the
20EMA of the Closes from below and the positive condition of the MACD.


Following this, we can see two pullbacks which resulted in breakouts in
the direction of the original upward breakout and new main trend.




From the example above, it is very easy to understand that if we had
been using just the standard 5EMAs Forex System trading rules, we
would not have got a single trade entry signal during the upward move.




                                   16
Advanced Method 2:
5EMAs Standard on Daily Basis “A”
This method is actually very simple. You just need to lengthen the
timeframe.


Whereas the standard 5EMAs Forex System uses the 60 minute and 15
minute timeframes, here we need to use the Daily and 60 minute
timeframes instead.


Of course, this approach results in a slight “problem”: a longer
timeframe requires a correspondingly larger Stop Loss.


Can you allow yourself (and do you want) to use a 130-200 pips Stop
Loss when trading – that is a question only you can answer.


Standard 5EMAs on a Daily Basis can be used only to determine the
trend direction. There is one main exception to the standard criteria:
you don’t need to use the “3+ MACD bars” rule for this method, the
MACD simply needs to be positive for a long position and negative for a
short position.


Also, the normal Exit Strategies defined in the standard 5EMAs Forex
System are unsuitable for trading on a daily timeframe. It is far better
to use Support & Resistance levels to indicate exit levels.


Let’s see what we can do with it. For this, we need to look at the next
chart:




                                   17
Just look at the chart and identify how many “delicious” trades you
could make, using the Standard 5EMAs on a Daily Basis method.


Let’s define zones for both long and short positions...




                                    18
The small rectangle (on the left) shows the “short positions” zone. The
large rectangle (on the right) shows the “long positions” zone.


There is no need to reiterate the standard strategy rules, simply
remember the differences:


   •   No “3+ MACD bars” rule.


   •   Support & Resistance levels replace the standard exit strategies.


On a Daily chart, Support & Resistance levels are usually the Low and
High of the previous day.


For instance, if a trade signal occurred on 10 June, Support & Resistance
levels for this day would be the Low and High of 9 June.

                                    19
A short position example:




Look at chart above.


The first trade signal (short position) occurred on 2007.01.16, marked
by the green horizontal line at 1.2976.


As a target, we should use the Low of the previous day – 2007.01.15 -
marked by the red horizontal line at 1.2915.




                                  20
Advanced Method 2:
5EMAs Standard on Daily Basis “B”
Method 2 “B” involves using both the 5EMAs of the Lows and Highs to
indicate the range for intraday trades.


Trading Rules:


   1. The MACD should be positive for a long position and negative for a
      short position, as for all 5EMAs methods.


   2. Before going short, price should touch the 5EMA of the Highs.
      Before going long, price should touch the 5EMA of the Low.


That’s simple enough, so let’s examine a couple of examples, beginning
with the first trade signal of our buying zone closest to the current date.


The goal of this process is to prove that such trade opportunities occur
all of the time.


And so, time to look at the next chart:




                                    21
The buying zone is to the right of the red vertical line (dated
2007.06.27).


The first trade signal we encounter is on 2007.07.10. Let’s magnify the
chart to see things more clearly:




                                    22
We could have used the first candle after the red vertical line and, in
fact, the next candle too but these were not clear 5EMAs signals.


The candle dated 2007.07.10 and marked with a red rectangle on the
chart is a clear 5EMAs signal for going long.


Ok! Let’s locate this day on the 60 minute chart:




                                    23
On that day, the market opened at 1.3620 (marked by green horizontal
line) then came down to 1.3594, which coincides with the 5EMA of the
Lows on the Daily chart, after which it retraced and moved back upward.


The range from 1.3594 to 1.3784 can be used as the trading range for
intraday trading on that day – it would be perfect, but remember what
we discussed at the beginning of this section… to use both of the 5EMAs
(of the Highs and Lows) to indicate the trading range. That way, it would
be right to use the range from 1.3594 to about 1.3675 (81 pips, not
counting the spread) as shown on the following chart.




                                   24
The range mentioned is indicated by the green horizontal lines on the
chart above.


That’s all. Knowing the main rules of the standard 5EMAs Forex System,
you will understand how to use these methods very quickly.


Now let’s examine an example of whether we can combine the 5EMAs
Forex System with other technical indicators or even with custom (non-
standard) technical indicators.


In the next section, we are not going to examine many technical
indicators and are going to use only one of them.




                                  25
Advanced Method 3:
5EMAs - Standard and Custom Indicators
We will be explaining how to use one particular custom indicator,
available free from the link below but you have probably already
downloaded it from the 5EMAs website where it is called
“5EMAsAdvanced.mq4”.


Its correct name is “SnakeInBorders” - the author of this custom
technical indicator is Bookkeeper, 2006, yuzefovich@gmail.com.


You can download this indicator from here: http://forum.alpari-
idc.ru/attachment.php?attachmentid=42126&d=1172129276


We will be using it instead of the Stochastic indicator that normally
forms part of the 5EMAs strategy. In addition, when using this approach
and indicator, we don’t need to adhere to the “3+ bars of MACD” rule.


The goal of this section is not specifically to show how the 5EMAs Forex
System works with other indicators – more to demonstrate that
complete trading systems can be successfully combined with other
indicators and/or Expert Advisors to further enhance the quality of entry
signals. Experimentation is the key!


Once copied to the “indicators” folder of your MetaTrader4 installation
(each MetaTrader supplier has their own program folder but it will be
something like:


C:\Program Files\Interbank FX Trader 4\experts\indicators


When added to a chart, it will look similar to the chart on the following
page:


                                    26
The trading rules are very straightforward...


…using the rules of the 5EMAs Forex System, only enter:


   •   long positions when the green bars of SnakeInBorders are solid.


   •   Short positions when the red bars of SnakeInBorders are solid.


As previously explained, we don’t require Stochastic in this case, but we
still need the MACD to be in the positive zone for long positions and in
the negative zone for short positions.




                                   27
On the chart above we have marked BUY opportunity zones with red
rectangles and a SELL opportunity zone with a green rectangle.


This indicator can serve as great filter for avoiding false entries that are
sometimes generated by the standard trading rules and indicators of the
5EMAs Forex System.


To your success,


5EMAs Forex System Team




                                    28

				
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