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3rd Place Demo Trading

December 08 Challenge

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Name Udochi Paul Ebere

Position 3rd PlacePercentage Gained 1014.05%

Age 26Country NigeriaOccupation Petroleum Engineer

Bio After some 12 months of unprofitable trading I took to working on mytrading psychology. I learnt that the universe does not favor the coward, greedyand stingy. I gave up the last traces of these unhelpful traits and that's thebeginning of my ceaseless profitability in forex trading.

The D8D3 System

OverviewMarkets Traded Forex, GBPUSD onlyCharts 4 hour, 1 Hour, 30 Minute, 15 Minute, 5 Minute, 1 MinuteCharting Software AnyIndicatorsPivot PointsBollinger Bands (20, 2)5 Period Exponential Moving Average10 Period Exponential Moving AverageRSI (14)

ADX (14)

Lot Size 0.2 (It is recommended that you use these lot size but you arewelcome to increase the lot size as your balance increases)

Pivot PointsPivot points have become a very well known and widely used technical analysistool. To understand Pivot Points you need to understand Support andResistance.

Heres a link to a free tool which will calculate Pivot Point levels for you. It isavailable in an online version as well as a desktop version which you candownload to your computer. To download or use this free tool simply Click Here.

It would be best to download the desktop version so you have it on yourcomputer and do not need to access the website all the time. Once you havedownloaded the tool, double click the icon to start it up and it should be similar tothe image below: Have a look at the following image:

http://www.surefire-forex-trading.com/PP.htmlhttp://www.surefire-forex-trading.com/PP.html

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Figure 1.1 The Risk Probabil ity Calculator

In order to calculate your Pivot Points simply enter the High, Low and Closeprices for the previous day and then press the Calculate button.

The Pivot, Support and Resistance levels will be calculated for you and all youthen need to do is add these lines to your chart as horizontal lines. We will usesome of these levels as possible targets.

Bollinger BandsThe purpose of Bollinger Bands is to provide a relative definition of high and low.By definition, prices are high at the upper band and low at the lower band.

One of the first things that you will notice is that the price always moves from oneextreme to the other. In other words, once price action has run its course at thelower band, it will eventually make its way to the upper band and visa versa.

Have a look at the following chart:

Figure 1.2 Bollinger Bands Contracting and Expanding

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The indicator is made up of 3 bands, the Upper Band, the Middle Band and theLower Band. We are looking for the bands to contract, which shows low volatility.We are then looking for the bands to expand, demonstrating high volatility. Weonly want to trade during times of high volatility.

At Point A the bands contracted and we would have paid close attention to themarket at this point waiting for it to breakout of the range and start expanding. AtPoint B you will notice the bands have expanded. Once we notice the bandsstarting to expand we would have switched down to our lower time frames andlooked to enter the market on the short side.

Exponential Moving AveragesThis is a type of moving average that is similar to a simple moving averageexcept that more weight is given to the latest data.

When a shorter and longer moving average cross each other, a bullish or bearishsignal is generated, depending on the direction of the crossover.

A bullish signal is generated when the shorter moving average crosses above thelonger moving average. A bearish signal is generated when the shorter movingaverage crosses below the longer moving average.

Have a look at the chart below:

Figure 1.3 Exponential Moving Average Cross Over

Look at the following chart. The RED line represents the 5 Period ExponentialMoving Average (5 EMA) which is the shorter moving average. The BLUE linerepresents the 10 Period Exponential Moving Average (10 EMA) which is thelonger moving average.

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At Point A the 5 EMA crosses below the 10 EMA signaling that the trend is down.From this point on we would be looking to SELL.

At Point B the 5 EMA crosses above the 10 EMA signaling that the trend is up.From this point on we would be looking to BUY.

Relative Strength IndexRSI measures the internal strength of a currency (or any other security) bycomparing the current price against the average price.

When price rises above 70 it is considered to be overbought, when price dropsbelow 30 it is considered oversold. Markets can remain in the overbought oroversold areas for extended periods of time so this may not be the best time totrade.

The 50 RSI level is the level we are most interested in when trading thisparticular system. When price rises above the 50 line it is considered bullish andwhen price crosses below the 50 line it is considered bearish. Have a look at the

following chart:

Figure 1.4 The Relative Strength Index Ind icator

The blue line represents the RSI line and the dashed black line represents the 50level.

At Point A RSI had crossed below the 50 line and at this point we would haveonly been looking to enter short trades. At Point B the RSI Line crossed over the50 line and at this point we would only be looking to enter long trades. At Point Cthe RSI Line had crossed below the 50 line once more and again we would haveonly been looking to enter short trades.

ADX Average Direct ional Movement IndexAverage Directional Index (ADX) is used to evaluate the strength of a currenttrend, be it up or down.

The ADX oscillator fluctuates between 0 and 100 but readings above 60 arerelatively rare. Low readings, below 20, indicate a weak trend and high readings,above 40, indicate a strong trend.

The ADX indicator does not tell you whether the trend is bullish or bearish but itassesses the strength of the current trend. For example, a reading above 40 canindicate a strong downtrend as well as a strong uptrend.

Have a look at the following chart:

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Figure 1.5 The ADX Indicator

The blue line represents the ADX line which signifies the strength of the currenttrend. The dashed green and red lines are the +DI and DI respectively.

+DI measures the force of the upward moves and -DI measures the force of thedownward moves over a set period (in our example we are using the default ADXperiod which is 14).

At Point A the -DI line is above the +DI line and the ADX crosses 25 and headstowards 40 and above, this is a high sell and we would only be looking foropportunities to SELL at this point.

At Point B the +DI line is above the -DI line and the ADX crosses 25 and headstowards 40 and above, this is a high buy and we would only be looking foropportunities to BUY at this point.

Setting Up Your Charts

This system uses 6 time frames, a 4 hour chart, a 1 hour chart, a 30 minutechart, a 15 minute chart, a 5 minute chart and a 1 minute chart.

Most of your trades will be made on the 1 minute chart but we will still look for

setups on the other time frames as well.

Add the following indicators with the settings shown below to both charts andthey should look similar to the charts shown below.

Pivot PointsBollinger Bands (20, 2)5 Period Exponential Moving Average10 Period Exponential Moving AverageRSI (14)

ADX (14)

Add the same indicators to all the other time frames listed above as well.

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Figure 1.6 Setting Up Your Charts

RULES1. Calculate the daily pivot using the highest, lowest and closing prices of the

previous day's trade and add these to your charts. You can also use the PivotPoint indicator if your trading platform has this or the Pivot levels you obtain fromyour brokerage, if any.2. Check the 4 Hour chart to determine the overall trend. When the 5 EMA isabove the 10 EMA, the RSI is above 50 and the +DI line is above the -DI line withthe ADX above 25, the trend is UP. When the 5 EMA is below the 10 EMA, theRSI is below 50 and the +DI line is below the -DI line with the ADX above 25, thetrend is DOWN.3. After determining the trend on the 4 hour chart, go to the 1 minute chart andwait for an expansion of the Bollinger Bands and a break out in the direction ofthe trend as determined on the 4 hour chart.

6. Wait for all EMA's, RSI and ADX to give you a signal before you follow theBollinger Band breakout and enter any trades.7. If you are going long wait for the Bollinger Bands to expand and then look for acandle to form a high or close above the upper band, then place your entry order2 pips above the high of this candle once it closes. If you are going short , wait forthe Bollinger Bands to expand and then look for a candle to form a low or closebelow the lower band, then place your entry order 2 pips below the low of thiscandle once it closes.8. Place your target limit 20 pips away from your entry level.9. This system does NOT use a stop loss so you are not required to place a stoploss.

10. If the 5 minute chart also has a Bollinger Band break out in the samedirection as the trend, you can either modify the order by setting the target profitto 30 pips or enter a new position using the 5 minute chart. If the 15 minute charthas a breakout in the same direction as the trend, you can either modify theorder by setting the target profit to 40 pips or enter a new position using the 15minute chart. If the 30 minute chart has a Bollinger Band breakout in the samedirection as the trend, you can either modify the order by setting the profit targetto 50 pips or enter a new position using the 30 minute chart. If the 1 hour charthas a Bollinger Band breakout in the same direction as the trend, you can eithermodify the order by setting the target profit to the nearest pivot point level oropen a new position using the 1 hour chart.

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Long Trade Example:

Have a look at the following chart. This is a 4 hour chart of the GBPUSD pair. AtPoint A you can see I have added my Pivot levels.

Figure 1.7 Determining the Trend on the 4 Hour Chart

At Point B the 5 EMA has just crossed over the 10 EMA which gives us a signalto buy.

At Point C the RSI line has moved above the 50 line which is another indicationthat we should be looking to buy.

At Point D the +DI line has just moved above the -DI line with the ADX above 25

which tells us that the trend is UP so we will now be switching to our one minutechart where we will be looking for opportunities to BUY. Have a look at thefollowing chart:

Figure 1.8 Entry Positions on the 1 Minute Chart

The chart above is our 1 minute chart. At Point A the market was inconsolidation. As you can see the upper and lower Bollinger Bands had

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contracted so we would have been looking for the bands to start expanding fromthis point onwards.

At Point B the Bollinger Bands had started to expand and we did have abreakout, but to the short side. We determined that the trend on the 4 hour chartwas up so even though we had a valid breakout to the short side on the 1 minutechart we did not enter a trade.

We will continue to wait until the Bollinger Bands expand again and we have abreakout to the long side. At Point C the bands were expanding and we had aclose above the upper Bollinger Band so we placed an entry order 2 pips abovethe high of this candle.

We then placed a target limit 20 pips above this candle. As you can see it was awhile before our order was opened but once it was opened it did not take long forour target to be reached.

At Point D our target had just been taken and we had another breakout of the

upper Bollinger Band which was a signal to enter the market so we placed anentry order 2 pips above this candle with a target limit of 20 pips.

The order was filled and the target achieved not long after placing the order andwe had another breakout and entry signal at Point E. We placed an entry order 2pips above the high of the candle with a target limit of 20 pips and within a fewminutes the order was opened. Shortly after that the target limit was reached.

So we placed 3 orders and made 20 pips on each but there was more to come,have a look at the following chart:

Figure 1.9 More entry posi tions on the 1 Minute Chart

After our last order closed for a profit the market consolidated for a bit so westayed out, but at Point G we had another entry signal and we placed an entryorder 2 pips above this bar with a target at 20 pips, which we eventuallyachieved.

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Later on at Point H we had another breakout of the upper Bollinger Band so weplaced another entry order 2 pips above the high of this bar with a 20 pip targetwhich was reached in no time.

While we entered these positions on the 1 minute chart we kept an eye on the 5minute, 15 minute, 30 minute and 1 hour charts as well as looking for possibleentries. During the uptrend we had a few entry signals on these time frames aswell. Have a look at the following chart:

Figure 1.10 Another entry posit ion on the 5 Minute Chart

At point A on the 5 minute chart above, there was a breakout of the upperBollinger Band as the bands were starting to expand, so we placed an entryorder 2 pips above the high of this candle with a target of 30 pips.

The order was opened on the next candle and the target was easily achieved bythe time the next candle had closed.

So while youre trading the 1 minute chart it is a good idea to keep an eye onwhats going on with the other time frames because signals will appear on thesetime frames as well.

Short Trade Example:

Have a look at the following chart. This is a 4 hour chart of the GBPUSD pair. AtPoint A you can see I have added my Pivot levels.

At Point B the market turned bearish. The 5 EMA crosses below the 10 EMA atPoint C. The RSI is below the 50 line at Point D.

At Point E the -DI line has just moved above the +DI line with the ADX above 25which tells us that the trend is DOWN so we will be now be switching to our oneminute chart where we will be looking for opportunities to SELL.

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Figure 1.11 Determin ing the Trend on the 4 Hour chart

Have a look at the 1 Minute chart below. Point A is the area at which the trendhad turned bearish on our 4 hour chart. As you can see at Point B, the BollingerBands had started to contract, so we would have been looking for expansion ofthe bands and a breakout from that point onwards.

At Point C the Bollinger Bands had already started to expand and we had ourfirst breakout of the lower band so we placed a Sell entry order with a 20 pipprofit target 2 pips below the low of this candle.

The order was opened and the target achieved within a few bars before themarket started to retrace.

At Point D we got another entry signal. The Bollinger Bands were still expandingand we had a breakout of the lower band at this point so we placed a Sell entryorder with a 20 pip profit target 2 pips below the low of this candle.

Again the order was opened and the target achieved easily before we receivedanother entry signal at point E. The Bollinger Bands continued expanding and wehad a breakout of the lower band at this point so we placed a Sell entry orderwith a 20 pip profit target 2 pips below the low of this candle.

The order was opened and the target was easily achieved within a few bars. Atthis point setup signals were yet to form on the other time frames we weremonitoring and while we did not make any trades on these time frames in thisexample, we still monitored these charts from time to time looking for a validsetup and an opportunity to go short.

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Figure 1.12 Entry posi tions on the 1 Minute chart

Remember that this system does not use a stop loss and there will be timeswhen the market goes against you. When trading this system there wereoccasions when the market went against us as much as 200 pips, but it dideventually come back in our direction and our targets were achieved.

If you find the market has gone in the opposite direction it is best to exit the tradefor a small loss as opposed to letting the market go further against you. Eachtrader has a different level of risk that they are comfortable with so its best thatyou decide before hand how far you will let the market go against you beforedeciding to close the order.

If you decide that 100 pips is acceptable for you then you could set a stop loss ortrailing stop every time you place a trade or monitor the trade and close theposition manually when it goes 100 pips against you.

We highly recommend that you use some kind of risk management. Whatever

you decide to set your stop loss at will be entirely up to you.