Okay since a lot of individuals disagree with me about the 5 pip egie let's put my theory to the evaluation. This way you can see for yourself if I am gambling or scalping or trade in accore with a precise workable plan.
1. If there is a trend, we only trade.
2. Also we dont wanna enter on the beginning of the trend. We wanna wait
until the tendency is underway before we get in. That way we'll maintain profits
straight away. And within moments you'll close your commerce with 5 pips
profit.
3. We need the following Indiors:
you'll be able to use this little fad cher on any time period from 3 minutes to daily charts. I will play with it on the 5 minute and 15 minute time frames.
We need the ADX indior and set .
Draw two horizontal lines on the ADX. Establish the parameters to 25 and 35 respectively. As we all know the concept supporting ADX is that the tendency is strong once the ADX split above 35 degree (some say 25, others 40, others 30). But because I am conservative trader just searching for A-grade trades I will use 35 level. Sometimes even 40 level. And ADX under 25 is ranging market, one where you DO NOT wanna trade. We also know that the ADX does not show fad direction but trend strength. And I just wanna commerce the powerful tendencies. Afterall I just wanna make 5 pips maybe not 100. So I dont care if I combine later than most other traders. If you wanna get the direction the look in the DMI lines.
If you like me and just trade A-grade trades then you await the ADX to pull under the 25 level. ADX under 25 degree tells me the market isn't trending and in such manner. So now I will not be interested in gambling. The moment the ADX breaks thru 25 and starts moving upward towards the 35 degree you begin to show curiosity cause you may have a A-grade commerce coming up. Once ADX breaks over 35 horisontal line you need confirmation that a trend has really started. The confirmation comes when the candlestick where the ADX broke thru the 35 degree CLOSES along with the ADX is still ABOVE the 35 level. I then enter a transaction on the opening of the following candlestick.
If you want additional visual confirmation that the tendency has begun then add two moving averages to your chart.
Easy Moving Average set to 4 and applied to shut
Easy Moving Average set to 11 and applied to shut
We all know the concept behind moving averages. Await 4SMA to cross up over the 11SMA then we're in uptrend. When the 4SMA crosses under the 11SMA then we've got a downtrend.
Okay so now you have a ADX that crossed above the 35 level. And you have just two simple moving averages which have crossed. When 4 crossed above the 11 then we're searching to buy. When 4 crossed down thru 11 then we're seeking to sell. You can even use the DMI and DMI on your ADX. We all know that after the DMI crossed up over the DMI then we're wanting to buy and if the DMI crossed up within the DMI we are searching to sell. But to be sure you are investing in a strong tendency await the DMI to also cross over the 35 level. When it is the DMI that crosses over the 35 degree then we've got a strong uptrend. When it is the -DMI that crosses over the 35 degree then we've got a strong downtrend.
4. I will aim for 5 pip profit
5. I will use a 20 pip stop loss
Trade signal:
1. The sma has to cross.
2. Wait for ADX to rise above the 35 degree
3. Then enter the trade
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