We offer complex trade strategy Forex with the enticing name – FWR. Each element of the system can work as an independent technique, but in a set, they give an incredibly powerful filter for trade signals – risks are really minimum.
Of course, classical approaches to the technical analysis are checked by time and allow today's traders to earn not less successfully, than 100 years ago. But the modern markets became more dynamic, nervously reacting to political and natural factors, that is the traditional analysis of several time frames according to Elder, who worked only at exchange assets, it`s not enough anymore to the Forex market.
As a matter of fact, any beginner understands that almost nothing happens without risk in real life, especially – Forex, but this complex system really differs in high precision. Risks are minimized due to three popular trade ideas − Elder's screens, price levels and Price Action, that is trend methods, the analysis of volumes, the analysis of levels of the demand/offer and usual trade logic are combined.
A certain group of developers has combined all three techniques of the analysis in one technical tool named «Indicator FWR» and sells it as a commercial product as an absolutely new, «superprofitable» system and also actively advertise the paid training video courses and mailings of trade signals. But now there is a special indicator simplifying the analysis according to the theory of three screens, it can be downloaded free out of the network, and other used tools – public classics.
The periods for the analysis
The basis of the FWR strategy is made by a combination of Price Action patterns and Elder`s theory of screens, for the determination of an entry point, two separate techniques and three periods are used.
First of all, we will define the settlement periods for the analysis. According to the logic of «Elder`s three screens» every the subsequent time frame has to be «shorter» previous approximately by 5 times, therefore, and for the complex trade strategy «Forex without risk» we choose:
- for long-term trade − W1 (the 1st screen), D1 (2nd), H4 (3rd);
- for medium-term – similar (D1, H4, H1);
- for short-term respectively (H4, H1, M15).
It is assumed that strategy is purely technical, not demanding the news and fundamental analysis. Medium-term trade is optimum for work on this technique and for small deposits, the most qualitative transactions and a minimum of false signals are on the period not lower than 1 day. More patient players can choose long-term option (there will be few signals!), but then you definitely won`t do anything without long-term fundamental analysis.
2 screens from Elder's technique will be necessary for you for the analysis (the first filter), support of the transaction will be carried out on the third screen. We will define an entry point and the TakeProfit/StopLoss parameters by key levels (the second filter) and the Price Action systems (the third filter).
The first analysis stage according to the FWR system
We argue traditionally: on the first screen we define the direction, on the second – correction depth, on the third – we look for an entry point on Price Action set ups and we determine StopLoss/TakeProfit according to price levels.
The direction of a trend on the first screen is defined by the simplest logic – by means of standard MACD and EMA (13) indicators. The ascending trend demands the growing histogram and the movement of the price above the EMA line. As a result of the analysis, we consider only purchases. Similarly: the histogram of MACD consistently falls, the price is lower than the EMA line – we have the descending trend, therefore, we are adjusted only for sales.
For the assessment of overbought/oversold condition, we add the Stochastic oscillator to the analysis on the second screen. We will remind: the oversold zone – is lower than a mark 20 (a purchase signal); the overbought zone – is higher than a mark 80 (a sale signal).
If the first screen defines the current trend as ascending, then on the second screen Stochastic Oscillator has to be in a zone of oversold or move towards it. If the first test of a trend assumes only sales, then Stochastic Oscillator has to move to an oversold zone. If necessary – we wait for such situation while the line of the oscillator out of critical zones − an entrance to the transaction isn't allowed.
In practice for simplification of process of the analysis, it is used
Elder`s Three Screens indicator
The offered indicator allows analyzing at the same time a set of trade assets that allows using the additional moments for transactions with a good profit. Currency pairs are just added in settings, the main thing that data were allocated on your working screen.
A crowd of parameters allows to make a thin adjustment of the indicator, and on several time frames simultaneously. Fans of multiple currency trades can take out this indicator on the separate working screen.
The color of the indicator is defined by the logic of calculation of the making elements:
- the green signal – the current tic of MACD histogram is higher previous, red – respectively, below;
- in relation to EMA: the price is higher than the line − a green signal, lower than the line − red signal.
- the STOCH1 field defines the position of the main Stochastic line: the green signal – the line of the indicator is lower than the level 20(30), red − it is higher than the level 80(70), yellow color − the line moves in the central area between 20(30) and 80 (70);
- the STOCH2 field checks crossing of the main and auxiliary Stochastic lines (that is – the price turn fact): the point is lower than the level 20(30) – green, it is higher than the level 80(70) – a red signal, lines are crossed in an average zone – yellow.
Logically – the first three green signals are obligatory for purchase, for sale – three red. If at the same time the fourth field is respective color – a signal very strong: if yellow – a signal weaker, but a possible entrance to the transaction isn't canceled, it is possible just to wait. Any other combinations are considered as weak signals and aren't suitable for the opening of a position.
Visually signals arrive from basic indicators of the system: MACD, EMA, Stochastic. Different types of alert are offered: the signal with parameters of the possible transaction can be submitted to you by e-mail, information can appear in a pop-up window or in the form of the notice on your smartphone.
Upon determination of a trend on the first screen and confirmations on the second, according to the classical idea, the Elder`s third screen has to show an entry point. Adherents of the Elder`s three screens blank theory make the trade decision on the basis of signals only of this indicator.
But complex trade strategy «Forex without risk» doesn't jump to conclusions: additional filters, Price Action set ups and price levels, join the game. We pass to the second analysis stage for which it is required
Second analysis stage: key levels indicator
The entrance to transactions in a zone of strong price levels always gives a chance of a decent profit with small risk. A task of such indicator – to determine entrance zones by a trend at the end of correction on various price ranges, that is to allocate those sites from which with a high probability the strong pulse movements will begin. The more senior time frame the levels are stronger and more important.
The indicator has to find extrema of price waves, build lines at High/Low/Open/Close prices (either on all together or on average value), and the closer to the current time − the more often, the deeper we go into price «history», the lines will appear less often. Accuracy depends on the number of bars which are included in the calculation, the force of level is defined by the number of points of a turn from this zone on the chosen time frame. «Rigidity» of the line influences display of levels, the higher “rigidity”, the fewer levels are displayed.
To apply key levels on the schedule automatically, the Levels indicator is used (naturally, too paid) in the original FWR strategy. We will consider its characteristics briefly. At adjustment, it is necessary to choose three settlement periods, according to the system of the analysis on three screens. After that, different levels are displayed on graphics. The levels with time frames D1, H4 and H1 are shown below on an example.
Several remarks to indicator parameters:
- Trend deviation index: the more value, the farther levels, constructed by the indicator, from each other, that is they will be rarer, but «strong».
- levels smoothing index: usually it is chosen small, the accuracy of levels considerably decreases.
- A number
- The color
Correctly constructed Levels look approximately so:
Calculation of the Levels indicator rather simple: resistance/support dynamic lines are defined by MA lines, and static are calculated from the range of the senior period (the prices of High, Low and Close are used). Extrema are calculated on different time frames and the more such points get to the built line, the stronger level is considered. Visually levels are slightly averaged. Actually, that is all features of the paid Levels indicator, favorable to trade, it is possible to note only a window for display of levels of the different periods on one screen.
Equally well it is possible to use any other indicators of levels which are calculated, for example, according to the Pivot method or on key fractals for the definition of similar zones of support/resistance of the purposes – more exact results turn out and it is absolutely free.
Having determined necessary price levels, we pass to the following item.
Third analysis stage: Search of Price Action patterns
Now we will look for PA set ups which are created in a zone of the strong levels (determined by the second filter) or as they say – lean on them. Work with the postponed orders is meant, that allows making in a quiet situation the trade plan and by that to reduce the psychological load to the trader. We remind: we always open transactions only in the direction of a global trend (see the result of a stage No. 1).
Internal/external Bar, absorption models, the Morning star and the Pin bars often found Price Action patterns are considered as the most reliable for the FWR strategy, but it is necessary to trace them on several periods, that is visually rather difficult to make, especially, to beginners.
This process can be also simplified by technical indicators which are able to distinguish automatically necessary constructions on the price schedule. As a result of installation of a set of indicators on one of schedules of a trade asset (as in an example!) information window will appear on the screen, which markers give a signal of emergence of the necessary set ups on the time frames from M5 to W1 and, moreover, «will draw» the corresponding pointer near a pattern.
Some practical remarks
A full-fledged signal from the three screens indicator and obligatory formation of PA pattern near key levels is necessary for an optimum entrance on complex trade strategy «Forex without risk». Only in that case, it is possible to expect on advertized high (85-90%) probability of success. For adoption of the trade decision Price Action set ups are analyzed on the Elder`s 3rd screen, but similar constructions on additional time frames only increase the quality of an entry point.
If «PinBar» appeared on the Elder`s third screen, which leans on the level of support and the general situation (surely!) meets conditions for purchases according to the «Three screens» indicator, we will enter the transaction by the postponed BuyStop order for 2-5 points higher the High price, and we will place StopLoss at the same distance lower the Low price of a signal candle. It is possible to use the closest level of resistance for TakeProfit and further, in case of a transaction output in the black, it is possible to use a trailing with an average step of 10-15 points.
The appearance of «Internal bar» means that the current trend weakens and precarious equilibrium sellers/buyers was set. However, this setup, as a rule, bargains as turning model, it is used extremely seldom for the continuation of a trend.
For the bull model «Internal Bar» we place BuyStop 2-5 points higher than max internal, StopLos − is slightly lower than a key candle. For sales we argue similarly: we put the SellStop order under min of an internal candle, and StopLoss − is slightly higher than a key candle.
«Pin bar», created near the strong level of support/resistance is considered the most correct and effective.
The «Pin bar» pattern is always fulfilled in the opposite direction from its «Nose»: if the shadow is created up – buyers fulfilled the interest and the price will go down, if «Nose» looks down – sellers left the market and the price shall grow. BuyStop/SellStop orders shall settle down 3-5 points above/below than the «Pin bar» base. We remind: the probability of the correct fulfillment of «Pin bar» sharply decreases on the time frame below H1.
By search of the Price Action schemes you should not forget about classical situations of false breakthrough: a bull/bear trap, a bull/bear snare – all of them meet normal frequency. PA set ups shall confirm accurately entry point and in case of the slightest doubt, it is recommended to return to the previous analysis stages.
Complex trade strategy «Forex without risk» demands trend assets with stable volatility, for instance, of GBP/USD, EUR/USD, USD/JPY, EUR/JPY, GBP/JPY, AUD/USD, USD/CAD. Price Action set ups are badly identified on exotic currency pairs and key levels are less reliable.
Round price levels traditionally are considered as strong, but the behavior of the price in these zones is, as a rule, caused by active speculation, and, therefore, the interpretation of Price Action patterns can be false, especially for medium-term positions. Such levels are visible to most of the traders and enjoy unhealthy «popularity». Therefore for the opening of positions near such levels, all requirements of FWR strategy have to be checked especially carefully not to think that speculative throws are the price breakthrough of the level, a turn or the beginning of a new trend.
From the point of view of the money management, two types of an entrance are possible by this technique: aggressive (according to the signals of «Three screens» indicator and key levels) and conservative (signals from all indicators, including the emergence of PA patterns). As the main trade idea of Alexander Elder is in the center of FWR strategy, judging by his logic, the money management assumes risk on one transaction at the level of 2% of a deposit and level of cumulative losses in a month – no more than 6% (from the general chain of unsuccessful transactions!). The first level of protection (2%) saves you from large predators, and the rule of 6% protects from small. In case of achievement of an admissible level of losses trade stops, at least, for 2-3 weeks (according to Elder − until the end of the current month), mistakes are analyzed and, if necessary, all strategy is corrected.
And as the conclusion …
Rather a large number of criteria which need to be kept track for a profitable entrance to the market (it is necessary to watch three periods at once!) seem as lack of this strategy to beginners. Perhaps, that`s why there was an idea to optimize the process of the analysis to trace automatically several trade assets and to facilitate work (and responsibility!) the trader who should only check the existence of signals and open the transaction.
There are no secrets in separate components of the system, therefore, the competent trader can quite trace signals by three techniques («Elder`s three screens», «Price Action» and «Levels») absolutely free, without the purchase of the super-indicator and the «special» training course. The basic analysis considerably simplifies the use of the «Elder`s three screens» indicator − it shows the main notifications about possible transactions, the analysis of PA patterns comes with practical experience. However, if the sum of costs for the purchase of a software package (about $150-200) doesn't confuse you – you can join the «Forex without Risk» project, especially, as the closed seminars are included in the package and versions of «FWR Indicator» are constantly updated.
The offered technique is almost not sensitive to trade assets and because of elements of the volumes analysis, except currencies, successfully works at futures and stocks, naturally, except for the unstable market (news, force majeure, low liquidity). It effectively considers indications of all indicators and mutually compensates their shortcomings.
It is possible to vary the settlement periods, to change settings of indicators and to adjust a money management under real conditions, but, actually, only condition for work on the FWR system – an obvious trend on the first Elder`s two screens, and confirmation on the third screen, in principle, can be executed by any methods. Use of Price Action also imposes certain conditions on a technique. Complex trade strategy «Forex without risk» is recommended to all who are sure in the standard technical analysis, except, naturally, superactive scalpers. Source: DewinforexSocial button for Joomla