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2nd Place Demo Trading February 09 Challenge

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Name Olga Astakhova Position 2nd Place Percentage Gained 388.54% Age 45 Country Russia Occupation Informational Analytics Bio - I started learning Forex trading in 2004. In 2006 I opened the first real account and tortured it for two years. It was well up and well down, and I have passed all the stages of the traders mind (seems there are ten of them). Now Im sure that our psychological state is really very important. If you can properly estimate your mind problems you will always know what to do and where to go. I have found that many of my everyday behavior patterns are revealed while trading. Unfortunately it took too long to understand it. But as soon as I did - everything changed immediately. If you are really fond of trading - never give up, it is always possible to find the reason for a failure and to go to the next step.

The F9D2 System Overview Markets Traded Forex, EUR/USD and GBP/USD Charts 1 Hour, 15 Minutes Charting Software MetaTrader4 Indicators ZigZag (MT4) (15,5,3) ZigZag1 (custom) (100,75,15) ZigZag2 (custom) (34,5,3) Price Alert (level signal indicator, custom) The source code for the custom indicators can be found in the F9D2 section. Lot Size 0.1 in EUR/USD and 0.1 in GBP/USD for every 1000

USD of a mini account.

Description Choose the right moment, the fortunate place, the secret bait, wait, wait, wait and boast your Big Fish! Sometimes the fish is lost, sometimes it is too small, but the real fish lovers will always have their catch! This approach has the greatest temptation which is trying to find the exact reverse point of every swing. The main indicator is the price itself. All the ZigZags only measure the possibilities and do not serve as signals. Basically we determine the entry and stop levels and follow mechanically. When you get accustomed to this primary principle you will be able to refine your trade paying attention to the general market mood, patterns, divergences, etc. Its best to monitor the market on an hourly basis. The system can be adapted for the 4-hourly charts as well. Please note that this strategy may not be suitable for beginners as some of it requires strict trading discipline. If you are a beginner and you continue working with this system on a demo account it will be a perfect training of your imperturbability. Chart Setup This system uses 2 timeframes a 1 hour chart (H1) and a 15 minute chart (M15), or optionally a 30 minute chart (M30) and 4 hour chart (H4). The trading situation is estimated mainly on the H1 chart and checked on the H4 chart. The trades are made on the M15 chart. Add the following indicators with the settings shown below to the EUR/USD 1H chart to create a template. ZigZag (MT4) (15,5,3) ZigZag1 (custom) (100,75,15) ZigZag2 (custom) (34,5,3)

Pic.1

Note: On Pic.1 you can see a lot of steelblue little arrows. They belong to ZigZag1 indicator. When the price is moving further this indicator shows with the little arrows where the first reverse signal appeared and how many times it was repainted. The last level which remained fixed is marked with a big green arrow. ZigZag2 indicator doesnt have the function of such additional arrows. Save the template. Open a new H1 chart for the GBP/USD pair, load the template. Open two more charts - EUR/USD M15 chart and GBP/USD M15 chart. Add the price alert indicator to the M15 charts. (Pic.2).

Pic.2

To avoid the sound of the alert line select the line with the double click and move it to some other place. If you dont know the control level is, just move the control line somewhere else on the chart. Keep the H1 charts open to watch the market. The M15 charts are usually minimized. You will need them only when a trade is coming up. System Rules The essence of this strategy is that we open trades when a candle closes at a certain level. We accept a Stop-Loss when a candle closes at certain level. NOT by TOUCH, but ONLY at CLOSE. If you dont wish to be glued to the computer waiting for those levels you can use the Price Alert indicator. Put the line on the desired level and you will hear a sound if/when the price touches the line. Then you can wait for the price to be fixed at the control level.

Entry Rules We assume that every reverse movement can start when indicated by the arrows of our ZigZags and will continue until the appearance of a ZigZag arrow in the opposite direction.

1. Wait for a ZigZag arrow. Evaluate its significance check if there is a corresponding arrow on the H4 chart. a. If the H4 chart has a similar arrow A reversal is a high possibility. b. If the H4 chart does not have a similar arrow yet The continuation movement is very probable. c. If the H4 chart does not have a similar arrow yet but you have doubts about the trend strength Wait.

2. Switch to the 15-min chart. When any 15-min candle closes at 40 pips or more from the minimum/maximum pointed by ZigZag arrow - open a BUY (if you had a minimum) or a SELL (if you had a maximum). If the 15-min candle closed at MORE than 50 pips from the control level (that is more than 90 pips from min/max) dont trade. Pullback is highly possible. If so open at the pullback.

3. Switch to the 15-min chart. When any 15-min candle closes above the maximum or below the minimum pointed by the ZigZag arrow - open a BUY (if you had a maximum) or a SELL (if you had a minimum). If you prefer to trade only the reversals but the min/max has moved to a new position move your control level and so on, until your bait is swallowed. Important: Move the entry control level only once in an hour, at the closing of the candle.

Optional: You can trade the situations indicated with the red line ZigZag with the same approach but with the only difference. Always control the virtual Stop-Loss on the M15 chart (not on 1H chart). It is safer to take the trades following the direction of the ZigZag arrows. Optional: If you have little spare time you can trade on the H4 hour chart. Check the ZigZag arrows on the H4 chart. Control your entry/stop levels on the 1H chart. Stop-Loss Rules Put a standard MT4 stop order as a panic Stop-Loss at 200 pips. The real Stop-Loss will be VIRTUAL. a. For reversal trades. Accept the Stop-loss if any hour closes lower than the last minimum (for a BUY trade) or higher than the last maximum (for a SELL trade). For the conservative style you can use this approach on the M15 charts. That is - If any 15-min candle closes lower than the last hourly minimum (for a BUY trade) or higher than the last hourly maximum (for a SELL trade). Use the Price Alert indicator to control these levels.

b. For continuation trades. Accept the Stop-loss if any hour closes lower than the control level of 40 pips from the last maximum (for a BUY trade) or higher than the control level of 40 pips from the last minimum (for a SELL trade). For the conservative style you can use this approach on the M15 charts. That is - If any 15-min candle closes lower than the control level of 40 pips from the last maximum (for a BUY trade) or higher than the control level of 40 pips from the last minimum (for a SELL trade). Use the Price Alert indicator to control these levels. Put in a breakeven for EUR/USD at 35-40 pips, for GBP/USD at 45-50 pips. If it is really your trade it will remain untouched. If the price comes back from 40-50 pips levels an opposite movement can be expected, very likely. At best you will be able to start again from the 15-min chart. Take Profit Levels If not eaten at least bitten. Switch to the 15-min chart. Wait for an opposite ZigZag arrow. This could be a first target. Switch to the 30-min chart. Wait for an opposite ZigZag arrow there. This will be the second target. Dont forget to protect at least 10 pips of your trade. Wait for an opposite ZigZag arrow on the 1H chart. Or even on the 4H chart. When you have enough equity you can double or triple your trades and apply different profit targets for them, closing the trades step by step.

Short Trade Example Perfect short trade On the next H1 chart we have a maximum and two ZigZag arrows at 1.3093. Our SELL trade will take place if the 15-min candle closes below the 1.3053 level marked with the dash blue line. Pic.3

Checking the H4 chart: Pic.4

Well, here we see one ZigZag arrow, this is a good confirmation of the possible reverse.

Switch to M15 chart. Pic.5

The candle that closed lower than our control level was a valid signal (it closed at 1.30305). The SELL trade was open with the market order at 1.3035. The Stop-loss level was 1.3093. If we return back to pic.3 (the H1 chart) we see that the stop level was not touched. The profit could be taken somewhere at the candle marked with the pink X when the first opposite arrow on the M15 chart appeared (approximately 170 pips). If we wait for the second profit target on the M30 chart it could be approximately 210 pips, see the orange X on the pic.6. It is a very decent profit for the EUR/USD pair and it is certainly time to close the trade.

Pic.6

Two short consecutive trades Inside the pale blue zone (pic.7) we see a lot of signals and we move our entry level. Checking the H4 chart we found that there were also strong reverse signals (pic.8). Pic.7

Pic.8

At last at the candle marked with the red arrow the price came below the control entry line. Lets go to the M15 chart. (Pic.9)

Pic.9

The candle marked with A closed below the entry level. But the impulse was strong and we waited a little for a pullback. A SELL trade was open at 1.4542, with the stop-level at 1.4598. If we return to the H1 chart (pic.7) we see that 3 hours later the hour candle closed above the stop-level and we closed the trade with the loss of 80 pips. But the reverse signals are very strong and we continue our attempts for a short trade. See the H1 chart again (pic.10).

Pic.10

New levels are found at the candle marked with the red arrow. Lets go to the M15 chart (pic.11)

Pic.11

The candle marked with A closed below the entry level. We opened a SELL trade at 1.4605 with the stop-level at 1.4652. On the pic.10 you can see that this time our stop-level remained safe. The trade was closed when the reversal arrow appeared on M30 chart, at the candle marked with the red X (pic.12). The profit was about 120 pips.

Pic.12

Long Trade Examples Losing long trade On the pic.13, in the pale blue zone we see a lot of signals. The price is moving lower and we also move the control entry level and monitor the M15 chart. On the H4 chart there was also a corresponding arrow. Pic.13

At last the 15-min candle (marked with the red arrow) closed at 1.2647 that is above the control level (blue dash line at 1.2641), see pic.14. We open a BUY trade at the next candle, at 1.2643. The stop-loss level is at 1.2601.

Pic.14

We return to the H1 chart and see that several hours later the candle marked with the red X closed below the stop-level line. We close the trade. The loss is approximately 50 pips. (pic.15)

Pic.15

Special opportunity for a long trade On the chart in pic.16 in the pale blue zone there are no arrows. But please pay attention to the previous up-arrow. We are very close to its level and it is possible to use it as a trading setup. The control level for a BUY trade will be at 1.4174, the stop-loss level will be at 1.4134. Pic.16

Lets check the H4 chart (pic.17) Pic.17

There are no arrows in the pale blue zone. The red ZigZag line wasnt formed there. We should take special care about this trade and watch the stop-loss on the M15 chart (not on the H1 chart).

Lets go the M15 chart (pic.18). Pic.18

When we opened the trading platform (it was Monday morning) we saw that the price was below the control level (the blue dash line) and is going up again. At the moment when we saw it, the price still was not far from the control level. And we opened a BUY trade at 1.4203. The stop level (the red dash line) was not even touched. We remember that there were no clear signals on the H4 chart. So we take the profit on the M15 chart after the appearance of the blue opposite arrow, somewhere in the zone marked by a short handmade line. The profit is approximately 90 pips.

Long trade with good potential but small result The candle marked with the red arrow has a steelblue arrow. There was a main reverse signal from ZigZag1 indicator. Now, when preparing this example, the situation has already changed and ZigZag1 moved lower. But at that moment, on February, 12, it was a signal for a coming trade. The stop level is marked with the red dash line (1.2720), the entry level is marked with the blue dash line (1.2760). (pic.19) Pic.19

Lets check the H4 chart (pic.20)

Pic.20

There were no strong signals at that moment on H4 chart. There was a signal from the red line zigzag, but it is considered optional. So we should be very careful if we decide to take a countertrend trade. Lets go to the M15 chart (pic.21)

Pic.21

The candle marked with A closed above the control entry level and we opened a BUY trade at 1.2775. Soon after, the price was well up (about 70 pips) and we put the protective stop in at 1.2785. At the moment marked with the red X the trade was stopped with +10 pips result. What could be done not to lose this trade which immediately turned profitable again? We could take those 70 pips trusting our intuition and experience not bad for EUR/USD. But this approach is beyond the discussion for the moment. Within the basic system principles we could do two things. a. When you see that the price is going nowhere find the support level (here it is marked with the green dash line). When the 15-candle closed below this level, we could close the trade. b. When the trade was stopped we could immediately reopen it with the same stop-level at 1.2720. But since there were no clear signals on the H4 chart it could be rather risky.

Long countertrend trade At the moment marked with the red arrow there were not any signals except the red line ZigZag (pic.22). Obviously such trade should not be taken in normal situation. But we see the Sunday gap and follow the traditional rule The gap should be filled. Pic.22

Lets go to the M15 chart (pic.23).

The stop-level is at 1.4149, the entry level is at 1.4189. The candle marked with A closed above the control level. We opened a BUY trade at 1.42035. At the next candle the price went up for more than 40 pips. But we decided not to place the breakeven because the movement was very fast and did not demonstrate if it was the real price direction. The stop-level was not touched. After the appearance of the opposite blue ZigZag arrow we immediately closed the trade with 110 pips of profit. Pic.23

Comments You should have good discipline to use virtual Stop-Losses. If you hate stops trade with very small lots and without virtual stop-losses. May be you will have luck and the price will turn to your favor. If not you will get the panic Stop at 200 pips. You cant neglect this last Stop. It could be a trend, and this strategy is not for trends, basically. If you chose to trade this system you can use your other favorite indicators to determine the market mood. More over, it is very advisable to use all your experience and look for patterns, divergences, etc. which could help to determine the possibility of the reverse. But if you use your indicators for signals it will be absolutely different system. Here we only need to find the control entry/stop levels and follow them mechanically.

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