manual system

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ProTradeSimulator Advanced

DISCLAIMER

While all attempts have been made to verify information provided in this publication, neither the

author nor the Publisher assumes any responsibility for errors, omissions or contrary interpretations of

the subject matter herein. This publication is not intended for use as a source of legal or financial

advice. The Publisher wants to stress that the information contained herein may be subject to varying

state and/or local laws or regulations. All users are advised to retain competent counsel to determine

what state and/or local laws or regulations may apply to the users particular business or personal

circumstances.

The purchaser or reader of this publication assumes responsibility for the use of these materials and

information. Adherence to all applicable laws and regulations, both federal, state and local, governing

investing in financial markets, professional licensing, business practices, advertising and all other

aspects of doing business in any jurisdiction is the sole responsibility of the purchaser or reader. The

author and Publisher assume no responsibility or liability whatsoever on behalf of any purchaser or

reader of these materials. We expressly do not guarantee any result you may or may not get as a

result of following our recommendations. You must test everything for yourself. Any perceived slight

of specific people or organizations is unintentional.

Before making an investment or trading decision based on the advice or material hereon, the

recipient should consider carefully the appropriateness of the advice in light of his or her financial

circumstances. This material is for informational & educational purposes only. It is not intended as an

offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation

of any transaction. All market prices, data and other information are not warranted as to

completeness or accuracy and are subject to change without notice.

Disclaimer: Trading is not without risk. Trading involves risk in the form of financial loss.

While there is opportunity for incredible wealth building, there is also the risk of losing even

more than you invested. But informed traders are the best traders! Past performance of any

security or derivative is not an indication of future performance.


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Table of Contents

Table of Contents .................................................................................................................................... 3Preface......................................................................................................................................................... 6The Extraordinary Forex Market ....................................................................................................... 14Foreign Exchange Jargon, Benefits & Features .......................................................................... 16What is the Forex market and how does it work? ..................................................................... 17Economic Influences ............................................................................................................................ 17Supply and Demand ............................................................................................................................ 18Currency Pairs ......................................................................................................................................... 19

Codes ................................................................................................................................................ 20How Is Money Made Through Currency Trading? ..................................................................... 21PIPS............................................................................................................................................................. 21Calculating Profit and Loss ................................................................................................................ 22Leverage ................................................................................................................................................... 22Lots ............................................................................................................................................................. 22

Standard Account ............................................................................................................................. 23Mini Account ...................................................................................................................................... 23Micro Account .................................................................................................................................... 23

Calculating the Profit and Loss ........................................................................................................ 24GOING LONG (profit from a rising market) ......................................................................... 24GOING SHORT (profit from a falling market) ..................................................................... 24

Short Selling (Going Short) ................................................................................................................ 25Long Position ..................................................................................................................................... 25Short Position .................................................................................................................................... 26

Risk Management & Money Management .................................................................................. 26Money Management........................................................................................................................ 28


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Stop Loss.............................................................................................................................................. 29Stop Loss Order Types .................................................................................................................... 31More Risk Reducing Strategies .................................................................................................... 32Risk Management Summary ......................................................................................................... 36

Trading Psychology (Money Mindset) ........................................................................................... 37Market Analysis: Technical & Fundamental ............................................................................... 42Charting Software .......................................................................Error! Bookmark not defined.ProTradeSimulator CTF Advanced Trading Plan ........................................................................ 44

Overview .............................................................................................................................................. 44Money Management Rules............................................................................................................ 46Risk Management Rules ................................................................................................................. 46Entry Rules........................................................................................................................................... 47Entry Tools .......................................................................................................................................... 47

Bar Chart Reading ................................................................................................................................. 48Moving Average Rules within the Entry Rules ............................................................................ 54COMBINING ALL ENTRY RULES TOGETHER ................................................................................ 55Stop Loss Rule ........................................................................................................................................ 58Trailing Stop Loss Rule ........................................................................................................................ 60Profit Taking Rule .................................................................................................................................. 61Re-Entry Rules ........................................................................................................................................ 64Trade Reversal Rules ............................................................................................................................ 68Trade by Trade ....................................................................................................................................... 70Back Testing Exercises ......................................................................................................................... 73PROTRADESIMULATOR CTF ADVANCED ..................................................................................... 76TRADING WALL CHECK LIST ............................................................................................................. 76PROTRADESIMULATOR CTF ADVANCED ..................................................................................... 77TRADING WALL CHECK LIST ............................................................................................................. 77PROTRADESIMULATOR CTF ADVANCED ..................................................................................... 78


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TRADING WALL CHECK LIST ............................................................................................................. 78Trading Psychology Rules .................................................................................................................. 79Reasons why Trading wouldnt work for you.............................................................................. 80


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Preface

I recommend that you read this workbook through a number of times - to become a

consistently successful trader you need to internalise the information, which can only

be done through repetition.

They say there is a Recession coming, even what could be a Depression! And one

that could last until the year 2020 If this is true, do you have a plan?

It is my opinion that the Foreign Exchange Market offers a powerful solution to the

unstable economic times we may see ahead. This market is also known as Forex Spot

Trading, Currency Trading, FX and even 4X and I believe, it is the most powerful

investment vehicle available.

This power comes not only from the reason it is the biggest of the financial markets,

where it dwarfs many of the markets combined, but from the grounds that the

knowledgeable investors who trade this market in particular, and move beyond

stocks and other traditional markets, can avoid downturns in economic times.

There are many myths around the financial markets, and it is the people who

believe these myths that miss the real opportunities available.


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The common misunderstandings are;

You lose money when the prices fall or there is a market crash. You need a lot of money to invest in the markets. Trading is gambling or risky. You need a high IQ or to be very smart to be able to invest.

It is these common misunderstandings that have people either lose considerable

amounts of money within the financial markets or they avoid investing altogether.

But just because you dont fully understand something, doesnt mean it couldnt be

good for you.

First I want to touch on the misunderstanding where people believe that everyone is

losing money when the markets are falling.

It is important you understand that money can be made both in rising and in falling

markets and that is for all financial markets; equities (shares), CFDs, currencies,

commodities, futures etc.

This single piece of information made me realise that all I had to do was learn how

to successfully trade, as it didnt matter which direction the markets were going;

what I needed to do was be on the right side.


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This new insight gave me great inspiration to do what was required to morph myself

into the type of person that could trade the financial markets as a profession. When

a trader is looking to profit from a rising market the term is called going long, whist

if they are looking to profit from a declining market the term is called going short

or short selling. There is a dedicated section on Short Selling later in this workbook

so I will not go into any great detail here.

I feel that once a person starts to see and understand the phenomenal benefits of

the financial markets only then will they commit the necessary time and effort that

they will certainly reap into the future.

I believe that the Foreign Exchange outshines many of the other markets because of

its size, (the obvious global presence), and also that as you are simultaneously

buying and selling one currency against the other, there is no way there could be a

Short Selling ban like we have recently seen across the global equity markets in theGovernments attempts to stop or slow the freefalling markets.

This workbook was created with the beginner in mind and also as a refresher for the

more experienced trader. The first section gives you a brief overview of the history of

the Foreign Exchange so you have background and a deeper understanding of how

this supersonic beast arrived at its current sophisticated model.

However, the Forex is not the golden key. Finding the right investment vehicle is

only one component, the other is to find the right trading system. Following those

the most crucial element is creating the discipline to always stick to each and every

rule within the parameters of the system.


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I have learned and attempted to trade some of the most complex strategies available

only to find that it is the simplistic ones, with the least subjectivity, that are the

easiest to trade, and therefore giving me the most profitable outcomes.

Although, it is so important to understand that it doesnt matter how simplistic or

complex your trading system is, or how good its back tested results are, at the end of

the day the predominant factor of true consistent success comes from the

psychology of the individual trader.

Not very many people have a clear understanding of the whole investor psychology

notion that many trading educational books and courses speak of. Like anything, you

can only really grasp the true concept of something when you have lived through it

and have had the experience firsthand.

So traders who are either novice or are not yet obtaining the results that they would

like, really need to read the Psychology section of this workbook through a few times

(at the very least), because it is your ability to stay emotionally in control during your

trading which determines your success and most importantly consistent success.

Supply and demand is what drives all markets; fuelled by the emotions of the

participants, which most of the time are very irrational. When money is on the line

people tend to disregard all logic and they function from a state that is quite close to

instinctual where we are often panic stricken in a fight or flight mode and cant think

clearly.


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0 ProTradeSimulator Advanced

The trading environment is one that is extremely unique, in the fact that there are no

external influences imposed upon the trader to take any actions it must come

purely from the internal discipline of the traders themselves.

This environment is one that people are not used to. Throughout our lives from

children to adults, we have always had someone or something dictating our next

moves, (parents, teachers, employers, spouses, family, even the clock).

So when suddenly faced with an environment that has no rules or boundaries, it can

cause big problems. This is because people are not used to, or have never

experienced an environment like this before. And it can take a while for them to

even realise this very important fact.

So until such time that the trader understands what their role is within the marketand how to function effectively in the unruly environment, they will find it very hard

to succeed consistently through changing market conditions.


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It is the traders job is to:

1. Obtain a successful, consistent Trading Plan with little or no subjectivity.2. Learn that Trading Plan inside and out (internalise it).3. Execute all components to the Trading Plan without fail.

As simple as these 3 steps sound, many traders fail. Funnily enough it is usually the

most simplest of tasks that we find hardest to conquer. I would rather point this fact

out to you early rather than embellish things and have you fail. Ensure you do what

is required from the start as you will reap the benefits much earlier.

People are so used to being controlled externally; most of the time by influences we

dont even realise. So in the trading arena we can act either too aggressive as though

we are trying to influence the market and controls it next movement, or we are

waiting in total ambivalence for a decision to be made for us.

I will take you through detailed scenarios and analogies to assist you with your

understanding on the uniqueness of the financial market environment later

throughout this workbook. Also looking at how our own unique make up of the way

we perceive and react to various events, plus the reason we handle money the way

we do as all this impacts our trading results.

This journey you are about to embark upon is more to do with serious introspection

of the person you are, than actually finding a golden trading strategy


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If you are finding that you are skipping from one trading plan, new indicator or

strategy to another, the thing you are doing is wasting precious time. You must

understand that there are many brilliant trading plans out there; most are just as

good as the other.

Your problem is not creating the patience and discipline to stick with one simple

plan until you understand and execute all facets completely. You have wasted time

where you could have instead closely learned, effectively implemented and executed

the very first plan and become competent in that.

Many traders fail to realise it is not the plan they are using that does not work, it has

been their inability to fully understand it, then competently apply and execute every

single facet. But again, there are many trading plans out there that are so complex

and also have a high degree of subjectivity which makes it virtually impossible for

traders to understand properly and apply correctly.

I want traders to ensure that they realise the key to their success, regardless if it is

trading or any other endeavour, lies deep within their own self and their ability to

remain focused and do what is required. By this, doing what is required I mean

you need to learn your system inside and out. Where it becomes so ingrained and

internalised that it becomes second nature to you.

You dont need to guess or even think what you need to do next. You simply

know. Your reactions are automatic.


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Once you are at this point, through back testing and forward testing your system,

(through various market conditions), you will have gained the confidence to execute

all criteria of your Trading Plan within the live market with real money.

This confidence in your system will allow you to override the emotional turmoil that

will be tempting you one way or the other. It is when you are in this position that

you will be able to flow with the markets movements quite calmly as you have a

rule within your Trading Plan that identifies all potential future movements and

gives you a direction to take next.

Sure there will be times where you will experience anxiety whilst trading, but you will

be able to identify these emotions and not make irrational decisions against your

trading rules.

The ProTradeSimulator CTF Advanced trading system was created on a daily chart,

but I use it very successfully on a 5-minute chart (recommend only for very

experienced traders). Sometimes I will trade for 2 hours and make a substantial

profit where I can close the computer down and realise those profits. It takes great

discipline to do this, but I would rather not get too greedy because taking more

trades does not mean you will make greater profits.

Remember - do what is required, it is worth it.


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The Extraordinary Forex Market

For hundreds and hundreds of years the foreign exchange has played an active rolebetween economies ever since the clunky Barter system was abolished some time

during the Middle Ages.

It was extremely hard for citizens of different countries to agree upon an equal and

immediate exchange for goods and services. So, when money, in the form of paper

and coins took the place of the need to barter, economies around the worldflourished, promoting growth and production.

The foreign exchange as we know it today has changed significantly over the past

100 years due to the amount of speculators coming to the market after WWII.

Speculators are traders who are purely involved only to profit from the price

movement of the currencies.

Today the Foreign Exchange is the largest most liquid and most critical financial

services market in the world. It transacts over an astounding $3 TRILLION dollars

daily.

This is a figure that most of us cannot really comprehend. But it highlights that the

Forex market could never disappear or easily be manipulated for any period of time,

simply for its sheer size. This assures honesty within the market prices.


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With the invention of the internet and technologies, it has and still will only get

bigger as the world becomes smaller and more interconnected with goods and

services being traded at faster speeds. Plus the accessibility for the average personhas further promoted its enormous and rapid growth.

Traders can trade via their laptops or mobile phones to check their accounts any

time they wish, with full and instant control over their positions for entries, exits and

changes.

Historically, the foreign exchange market was a fairly closed market dominated by

large corporations, banks, governments and the extremely wealthy. Now anyone with

a few hundred to a thousand dollars is able to get involved.


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Foreign Exchange Jargon, Benefits & Features

Like in any new topic, there are always copious amounts of jargon that beginners

need to sift through.

Most of the time it is just ten different words or terms meaning the exact same thing,

but once you get used to these it becomes so much easier so dont get intimidated

or overwhelmed by it. The more you go over the information the easier it becomes

as you create references within your mind.

Plus, you dont actually need to be an expert with all the different jargon, as long as

you can identify your entries and exits on your charts whilst always practicing good

money and risk management strategies within your Trading Plan for every single

trade - then you will be successful; it isnt if you can rattle off all the jargon or not.

The Forex market is open 24 hours over 5 days each week, opening in New Zealand

(Sunday night US Eastern Standard time) and closing in New York on their Friday

close (5pm their local time), and is rarely closed for a holiday (only the major global

holidays).

It operates out of major centres in cities such as; Auckland, Sydney, Tokyo, London,

Frankfurt, Zurich, New York, and Paris. There are no Exchanges like the stock market

instead it operates through an interbank system.

Market participants are retail customers, currency exchange bureaus, importers and

exporters, fund managers, banks, corporations, governments, with a whopping 95%

being speculators. It is certainly an arena where the big players invest.


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What is the Forex market and how does it work?

Foreign Exchange is simply the exchange of one currency for another; a foreign

exchange transaction (FET). This is also called a SPOT transaction.

Exactly like when you go on holidays from your home country to another, and you

need to swap or exchange your currency for the other countrys currency that you

are visiting. Then when you return home, if you have any cash left you would be

likely to exchange it back into your own currency.

Economic Influences

Economic factors significantly influence the price movements of the Forex market.

Things like Employment Figures, Gross National Product, Inflation, Gross Domestic

Product, World & Political events and even natural crisis.

These data releases are generally monthly or quarterly, and when released can affect

the market immediately; as it is open 24hours traders can react as soon as they hear

the news, so there is no delay like with other markets which may be closed when

news is released.


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Supply and Demand

It is supply and demand that drives every market.

And currency is just like any other economic good; its market value is determined

by whether it is available (supply) and whether there is a need or want for it

(demand).

The currency prices will rise because there is more buying (demand) than there is

selling (supply). The opposite applies if the currency prices are falling, there is more

selling than buying there is no demand.

And it is peoples perceptions of information that creates either too much supply or

a greater demand for the market, therefore pushing the prices higher or driving

them lower.

Exactly like in real estate, if there is only one house in a well sort after location, and it

has many people wanting to buy it, the price will be pushed up until such time that

the buyers decide the price is too high.

On the other hand, if there were many similar houses in a location where there was

little interest, then the sellers need to lower their prices to attract buyers and the

buyer could very likely negotiate the price down even further.

The financial markets are exactly the same it is the buyers and sellers who

determine the prices through supply and demand.


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Currency Pairs

Currencies are traded in pairs.

They are quoted in a shortened code form, such as EUR/USD. This pair is the Euro

against the US Dollar. The pair is simply comparing the value of one currency against

another. So if one currency is rising in value, the other is falling in comparison.

The first code quoted of the currency pair is known as the BASE currency whilst the

second is known as the COUNTERcurrency (or quote currency). The price displayed

represents the COUNTER currency. Therefore if you are trading the EUR/USD then

the profit and loss is displayed in US Dollars.

It is the BASE currency that is valued at $1 and stays at that price, and the COUNTER

currency moves in comparison to it. So if you are trading the EUR/USD, the Euro is

valued at $1, and stays at that price, whilst the US dollar fluctuations in comparison

to it. Looking at my EUR/USD chart right now, the US dollar shows to be valued at

1.2622 in comparison to every $1 Euro dollar.

The most popular currencies are called the MAJORS, whilst the not so popular pairs

are called the CROSSES.

I suggest that traders stay within the Majors, as there is more than enough

opportunity within these 85% of market participants trade these as they provide

nice volatility moves that traders can profit from.


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The smaller pairs, the CROSSES, have much less liquidity.

Another thing to ensure is that you trade no more than 3 markets at the one time.

Otherwise you can become overwhelmed and easily confused. More markets do not

mean more money.

Below I have displayed for you all the codes for the Majors, plus their names and

nickname if there is one. The Major currencies are all compared to the US Dollar.

Codes

EUR/USD Euro/Dollar from the Euro Zone & USA

GBP/USD Sterling/Dollar from United Kingdom & USA (Cable or Sterling)

AUD/USD Australian/Dollar from Australia & USA (Oz or Aussie)

NZD/USD New Zealand/Dollar from New Zealand & USA (Kiwi)

USD/JPY Dollar/Yen from USA against & Japan

USD/CHF Dollar/Swiss from USA and Switzerland (Swizzy)

USD/CAD Dollar/Canada from USA and Canada (Loonie)

Important Note: The ProTradeSimulator CTF Advanced Trading Plan was developed

on the EUR/USD. It is likely to work on the other Majors however I have not yet

tested it so I suggest you back test it first prior to doing so. Personally I find being

specialised in the one market works best for me.


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How Is Money Made Through Currency Trading?

Traders or Speculators make a profit or loss based upon the difference between the

opening price and the closing price of each trade they take. As mentioned earlier,

the trader needs to get the direction right so need to also open their position

correctly, (Long or Short).

PIPS

The Profit and Loss is calculated in PIPS, (Price Interest Points).

The PIP is located on the very left of the numbers quoted.1.2665

If this market moved upward by 2 pips then the new price would bequoted as;

1.2667

If the market then moved up by 200 pips it would be then quoted as1.2867


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Calculating Profit and Loss

The most common form of currency trading is done so through leveraged positions

(Margin Forex - explained further below). Depending on the type of Forex CFD

contract or FX account you choose will depend on the amount of leverage you use

on each trade. The smaller your trading account the smaller the leverage you should

use, otherwise you will be risking too much.

Leverage

Currency trading is also known as margin Forex trading or leveraged trading. The pip

is actually a fraction of a cent, and only a very tiny movement in price.

It is the leverage used within currency trading as to why profits can be made very

quickly. Leverage also allows investors with smaller amounts of capital to enter the

market.

Depending if you are trading the Foreign Exchange through an FX Broker or a CFD

Provider (Contracts For Difference) then you will need to choose the type of account

or Contract, and this determines the amount of leverage you use each trade.

Lots

Currencies are traded in Lots (or Contracts) and the value of these is either;

1 x Standard Lot (1.0) = $100,000 currency units

1 x Mini Lot (0.10) = $10,000 currency units

1 x Micro Lot (0.01) = $1,000 currency units


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So if a trader was to trade 2 Lots they would effectively be trading;

Standard Account = $200,000 currency units

Mini Account = $20,000 currency units

Micro Account = $2,000 currency units

Standard Account

The value of the pip movement of the currency you are trading within either a

Standard Account (FX Broker) or a Standard Contract (CFD provider) depends on the

currency pair, but is generally around $10 per pip which is calculated in the

COUNTER currency (2nd quoted of the currency pair).

So for example:

EUR/USD: In a Standard Account/Contract the trader is winning orlosing US$10 for every pip gained or lost.

Mini Account

Again, similar to above, the value of pip movement of the currency you are trading is

around $1 per pip gained or lost.

Micro Account

Again, similar to above, the value of pip movement of the currency you are trading is

around $0.10 per pip gained or lost.

Important: Ensure you understand the leverage of your Trading Account prior to

entering your trade. Start with smaller amounts until your confidence and

competence increases.


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Calculating the Profit and Loss

So once you know how much you are winning or losing per pip movement you can

then work out how much your profit is.

So for a trader to make money first they would need to ensure that they get the

direction right; it isnt just if the market has gone up or down that determines

whether you have made money, it is how you initially OPENED your trade, (which

direction you intended to profit from).

Lets have a quick look at how you profit from either direction.

GOING LONG (profit from a rising market)

If the trader believes the market is going to rise they need to open aLONG position to profit.

If the market fell, this trader would lose money, (the difference betweentheir opening and closing price).

The trader clicks on the BUY button in their trading platform to open aposition Long.

GOING SHORT (profit from a falling market)

If the trader believes the market is going to fall they would need toopen a SHORT position to profit.

If the market rose, this trader would lose money, (the differencebetween their opening and closing price).

The trader clicks on the SELL button in their trading platform to open aposition Short.


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Short Selling (Going Short)

Short Selling is quite an uncommon concept for most people.

Throughout our upbringing we are taught that money is only made when prices rise.

Buy something for $5 and sell it for $12, and you have made a $7 profit. Quite

logical.

So comprehending short selling can be quite difficult at first. What you need to

ensure you understand is that regardless of the direction, the way you profit is the

price difference between the open price and close price.

This way you will understand the concept more easily.

As mentioned, you need to ensure at the beginning you open the position up

correctly so you profit from the direction you believe the market is going to go. Lets

look at the scenario of a 20 pip movement both upward and downward and the

result whether you opened the position as a Long or a Short trade.

Long Position

Open the position by BUYING into the market.

Eg; Open at - 1.2000 Close at - 1.2020 (20 pips profit)

Open at - 1.2000 Close at - 1.1980 (20 pip loss)


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Short Position

Open the position by SELLING into the market.

Eg; Open at - 1.2000 Close at - 1.2020 (20 pips loss)

Open at - 1.2000 Close at - 1.1980 (20 pip profit)

The ability to short sell gives the financial market a powerful advantage over other

investment vehicles.

Risk Management & Money Management

Many people say that investing is risky. The answer to that is anything is risky if

you dont have knowledge or the ability to apply that knowledge.

Risk can certainly be managed and minimised dramatically if you have the

knowledge of tools and strategies available to avoid or minimise the associated risks.

You wouldnt get in and drive a car that wasnt fitted with brakes, would you? Or

without learning how to use them first?

The brakes of a car significantly reduce the risks associated with driving and are a

standard instrument. Otherwise, without them, driving would be the biggest risk

ever!


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This is the same with trading, you have strategies that you must understand and

implement without fail each and every time you trade.

I would never say that investing or trading is totally safe, even with risk strategies. As

sometimes there are things beyond your control that happen, like if your internet

connection goes down before you get the chance to place your Stop Loss or you

miss something through human error. This is the same as driving there is the

chance that your brakes could fail or you fail to react in a timely manner.

The most important component to trading, regardless of the market, is effective Risk

and Money Management. What this means is your ability to manage and minimise

the risks associated with investing in the financial markets, whenever possible.

At times there can be adverse market movements, or simply the trade just doesnt go

into your favour so if you risk 30% of your account on each trade, you would be

totally out if you had a run of losing trades.

Most new traders start with their focus solely on finding good Entry and Exit

strategies; when in reality your entries and exits are something you refine to enhance

your results once you have effective risk and money management strategies in place.

The ProTradeSimulator CTF Advanced Trading Plan has both Risk and Money

Management strategies inbuilt into it and gives traders options to ensure it suits

their individual risk profile and trading account balance.

So lets look at each of these individually.


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Money Management

This function is where the trader decides upon a maximum amount of their account

that they are prepared to risk on any one trade.

A good industry standard and rule of thumb is a maximum of 2%.

So if you had a $10,000 trading account, you would never risk more than $200per trade, ($10,000 x 2% = $200).

A $1,000 account would not risk more than $20 per trade or a $100,000 notmore than $2,000 per trade.

As you can see the trader would need to be wrong a lot of times before they have

blown their whole account.

This figure may be changed and depends upon your own individual risk profile. If

you are uncomfortable with the 2% level, then it is better to reduce it to 1% or even

0.5%, or whatever allows you to feel the most comfortable.

If you are a more aggressive trader, you may feel very comfortable with increasing it

to 2.5% or 3%.

Although, I suggest that until you know your trading plan and prove yourself to be

competent, then it is better to risk a much smaller amount, then build up as you gain

competency and confidence in the trading plan and your ability to follow it.


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Just because someone else has success with a trading plan, you need to do the

ground work to get to their level. And this is from your understanding and correct

application of the material gained through repetition.

Stop Loss

The Stop Loss is another risk reducing tool. And you should NEVER trade without

one especially in the currency market as at times there are very quick movements

that change directions at high speed.

The Stop Loss is your worst case scenario exit price. This price is predetermined and the potential loss is calculated prior to you

even entering the trade.

The Stop Loss is an order that is placed via your Trading Platform whichautomatically closes out your trade should that price be hit.

This means, if the market went against the direction you intend to profit from your

position would automatically be closed out at that Stop Loss price Level.

For example, you may intent to profit from a rising market, and you may set your

stop loss 15 pips from your Entry Price.

This means you could lose 15 pips, times the value per lot, plus times the number of

Lots you hold on that particular trade.


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Eg; if the leverage was a Mini Account/Contract the loss would be:

$1 X 15 pips X the # of Contracts (Lots)

So this trader could lose $15 per Contract.

Eg; if the leverage was a Standard Account/Contract the loss would be:

$10 X 15 pips X the # of Contracts (Lots)

So this trader could lose $150 per Contract.

Looking now at an image of a chart we can see the market has fallen and is starting

to rise up again.

A trader may believe the market is going to continue rising and wishes to profit from

this next potential price move that he believes may be upward.

Therefore, the trader would need to take a LONG Position by BUYING into the

market.


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At the same time, if the trader does not wish to lose more than 15 pips then he

would need to attach a Stop Loss order of 15 pips below the Entry Price, (Stop Loss is

indicated by a blue line).

In this next image we can see that the market did not continue into the traders

direction and has since fallen below the Stop Loss, (the system automatically closes

out the trade so that the trader does not lose any more than their intended

maximum risk).

Stop Loss Order Types

There are a couple of different types of Stop Losses.

Ordinary Stop Loss - (no cost) Guaranteed Stop Loss (CFD Providers premium paid)

The difference between the two is that with the Guaranteed Stop Loss (through CFD

Providers) the trader is guaranteed to exit the trade at the price they requested,

(regardless of what the market does; e.g. free fall or rally hard).


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Whereas with the ordinary type of Stop Loss if the market is moving quickly there

could be some slippage, (this means that there may just not be any market there to

support the price that you requested so instead your order will be filled at the nextbest available price).

There of course is a premium paid for the peace of mind that goes with the

Guaranteed Stop Loss, and could be an extra 3 pips added to the spread of the trade.

But this cost to some people is worth it; knowing exactly what price the trade could

end in (worst case scenario).

Depending on your regularity of trades, paying this extra cost (approx 3 pips per

trade) may eventually become more expensive than a bit of extra slippage every now

and then, so it is something you would need to keep a close eye on and gauge as

you go.

More Risk Reducing Strategies

The trader who learns to effectively manage their risk will be the trader who remains

in the market for the long term. Below you will find strategies that assist the trader

to further reduce their risk.

Moving the Entry Stop to the Entry Price.

It is good, wherever possible, to not let a profitable trade turn into a losing one. So a

great strategy is to move your Entry Stop Loss quickly to your Entry Price once the

market has moved into your favour. This immediately puts your trade at a "break

even" status should the market reverse and hit this stop.


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However, a downfall to this strategy is that the stop loss is hit and the market

continues into the traders favour and you miss the profitable trade.

The key is to not move it until the price has moved a reasonable distance from your

entry.

For example:

Weekly Chart 200 pips Daily Chart 150 pips 60 Minute Chart 60 pips

So once the market has moved to the exact price quoted above, only then can you

move your Stop Loss up to your entry price. This is a great strategy that helps traders

that are a little more cautious.


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Risk & Money Management Scenario Calculation

CALCULATION - Money Management:

Lets assume that you have a $10,000 trading account, and you have already

calculated out your Money Management and decided that you do not want to risk

any more than 2% of your total account on any one trade.

$10,000 x 2% = $200Next you calculate your Risk Management ...

CALCULATION - Risk Management:

You may be trading a daily chart and decide that you do not want to risk any more

than 150 pips on any trade.

So your Stop Loss is set at 150 pips away from your Entry Price.

This means your total risk per Lot is;

Mini Account at $1 per pip = $150 per lot (150 x $1) Micro Account at 10 cents per pip = $15 per lot (150 x $0.10)

Next is working out the number of lots you can enter...


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CALCULATION - Number of Lots

Now that you know exactly the total amount you are willing to risk on your Trading

Account ($200) and how far away you intend to set your Stop Loss (150 pips) then

you can finally work out the number of Contracts (Lots) you can enter into and still

fulfil your maximum Account Risk rule (max 2% risk).

So to do this, you simply divide your maximum account risk (e.g. 2%) by the total

maximum risk per trade/per contract (150 pips x $0.10). I am using the Micro Lots

for easier workings.

Micro Account/Contract

$200 divided by $15 = 13.3 So in a Micro Account where you are risking $0.10 per pip you could purchase

13 mini lots (0.13 lots).

Important Note: I prefer to round down to an even number as will be explained

in further detail within the CTF Trading Plan.


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Risk Management SummarySo, you can see, it is the traders that trade with knowledge, supported by strategies

that they follow 100% of the time, are the ones who stay in the game for longer and

find consistent success.

They predetermine the potential risk of every single trade, and in cases they pay a

premium for peace of mind so they can know exactly the amount they couldpotentially lose well before they even enter the trade.

And, if this figure is not comfortable for them, the do not take the trade or they

reduce it to a more comfortable figure.

The majority of people who lose money in the financial markets most certainly are

not practicing these sorts of strategies or any strategies at all. They have no idea the

amount they could potentially lose or there are others who do know, but dont have

the discipline to execute their strategies.

Therefore, trading is NOT risky, as the risk can be managed. It could only be called

risky if you are you are trading with no knowledge and no strategies.


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Trading Psychology (Money Mindset)

As mentioned at the beginning of this Workbook, it is the traders individual

psychology (mindset and emotional control) that determines their success. When I

speak of Trading Psychology I am referring to the traders ability to control their

emotions.

This is the main area of introspection that I spoke of earlier. A trader needs to knowwhat their typical reactions are to various life situations. Like if they get easily

flustered, anxious or angry.

The majority of people react to varying everyday life situations via automatic

responses, most of which were learned from our parents (or the most highly

influential people in our lives). We have been taught through conditioning how todeal with external events.

Recently there was a great advertisement on TV where they showed kids mimicking

their parents; shadowing their reactions to external events, (following in their

footsteps). The aim of the advert was to get people to realise that the way we deal

with situations is teaching our children to do exactly the same.

So by the way our parents responded to peak hour traffic, to the way they interact

with people of different ethnicity, to parenting skills, how they treat their spouse,

they way they deal with difficult situations; each of us are conditioned to behave the

same way. Unless and until, we make a conscious choice to behave otherwise.


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If you have not been taught good coping skills to deal with stressful situations you

will need to take the time to learn and develop those areas of weakness.

But, no one was born a perfect trader.

So to become one we need to be realistic and identify and acknowledge our

weaknesses so that we can turn them into strengths or outsource those that we

cannot conquer to someone who is competent in that area or function.

However, even a person with the calmest nature does not mean they will succeed.

The reason is the next component under this banner; this one is determined by the

traders money habits.

Money habits are how we handle and think about money. Each of these has a

massive impact on how you manage all the money that comes into your life, and this

has a direct impact on your final trading and investment results.

Money can easily come and go in trading. It is the efficient management of your

money combined with risk minimisation strategies that will ensure your longevity

within the trading arena.

Most traders do not even realise that they are functioning from habits which may or

may not bring favourable results to their trading.


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Each of us learn our money handling skills mostly from our parents or the people in

our lives with the most influence. By doing so we fall under one of the following

three categories.

1. Deficit Spender

These people spend more than they earn. They have large household debt;

many credit cards and little if no investments. They spend money on items

that depreciate rather than appreciate. They are quickly peddling backwards.

They are living beyond their means.

2. Break Even Spender

These people spend what they earn. Again they dont really put much, if any,

money towards investing or saving.

3. Surplus Spenders

This group of people save and invest a minimum of %percentage of what they

earn, (a common rule of thumb is 10%). They are conscious of whether they

are buying items that appreciate or depreciate. They are keen investors and

understand the economic cycles. They spend less than they earn.

So what has all of that got to do with the success of a trader?

Well, making more money is never the answer to becoming wealthy.


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The answer to true wealth; is what we do with the money that comes into our lives

that determines if we will be wealthy.

There are plenty of people who are earning a fairly low salary who end up as

millionaires. And many who earn hundreds of thousands per year with hardly

anything to show.

If a trader cannot resist the temptation to take profits out of their trading account

and go on a spending spree, they will not achieve the powerful affects of

compounding interest where you are earning money on the money made (earning

interest on the interest made).

Albert Einstein says that compounding interest is the 8th wonder of the world which

just goes to show how important that can be when propelling your wealth creation.

So regardless of how good a trader may be in making profit by their entering and

exiting the market, if that person regularly draws money out of their trading account

or is too aggressive with their position sizing or risk management, then they can go

backwards very quickly.


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Lets quickly look over all the components mentioned which a Trader needs;

A consistent, successful Trading Plan.

Trader must understand their Trading Plan intimately.

Trader must have good emotional control and does not get swayedby temptations to go against their Trading Plan.

Trader has good money handling skills.


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Market Analysis: Technical & Fundamental

There are two ways that traders and investors can analyse the market; which areTechnical Analysis and Fundamental Analysis.

Personally I prefer Technical Analysis as it removes the need to decipher copious

amounts of market commentary and news reports which most often are simply

another persons perception or interpretation of events.

Plus, I believe the charts are a true indication of each and every traders perception

of the market and events, who are both in and out of the market, at any given time

it is all reflected in the current price.

Staying purely with the charts allows me to do my best at remaining unemotional.Listening to news and other people opinions only entices you to second-guess and

go against your trading plan.

The currency market is much more susceptible to international and domestic news,

political events, economic data, even natural disaster, where shares in a company are

much less likely to be unless the news is specific the sector that it belongs to.

The type of news release or event does not determine the price direction good

news does not ensure prices will rise and vice versa.


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ProTradeSimulatorCTF AdvancedTrading Plan


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ProTradeSimulator CTF Advanced Trading Plan

Overview

This trading plan was created on the DAILY chart, with the aim of capturing medium

to longer-term trends. So can therefore be perfect for the busy professional, busy

housewife/househusband, right through to the carefree investor.

However, through periods of great volatility on the daily chart, I have found greatsuccess intraday trading on the hourly chart. So traders can certainly use it on a time

frame they find suits them best.

One word of caution: I do not suggest you trade the 1 hour chart until you can

successfully trade a longer time frame the reason is that the market moves much

faster in time (not necessarily in price) and you need to make quick decisions if youdont know the trading plan solidly then do not trade a smaller time frame.

For this trading plan I have chosen to not include complex and subjective indicators

that have traders guessing and questioning their understanding of the rules, the

application of the rules, or interpretation of the rules.

Especially if you eventually use this trading plan intra-day, (buying and selling in the

one day), you dont have the time to be applying copious amounts of analysi s and

tools onto the chart as the price moves very quickly, and your application of the

tools/indicators needs to be done speedily.


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The ProTradeSimulator CTF Advanced Trading Plan covers everything;

Money Management Rules

Risk Management Rules

Entry Rules

Profit Taking Rule

Trailing Stop Loss Rule

Trade Reversal Rules

Trading Psychology Rules


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Money Management Rules

CTF RULE: Never risk more than 2% maximum of your trading capital.

As previously discussed, this would mean if you have a $10,000 tradingaccount, on each trade you would never risk anymore than $200.

Likewise, if you had $100,000 in your trading account, you would never riskany more than $2,000 on any one trade.

Ensure this level is comfortable for you.

Risk Management Rules

Depending on the time frame you are trading will depend on how far away you will

place your stop loss. The smaller the time frame, the closer the stop loss; the bigger

the time frame, the further your stop loss can be.

Here are some suggestions of your Stop Loss no closer than these.

Daily Chart = 150 pips

Hourly Chart = 60 pips


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Entry Rules

CTF ENTRY RULE: Strong Bar with the Open and Close on opposite ends of the

bar crossing & closing over the 70-Moving Average (blue).

Entry Tools

Bar Chart

20-Simple Moving Average (red)

70-Simple Moving Average (blue)

First I will go through each Tool so that the Entry Rule makes sense for you.


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Bar Chart Reading

The bar chart is a wonderful visual tool showing the trader the movement of Price

over Time.

Each bar represents a time frame, and connects together 4 important prices for that

particular time session: the HIGH price, LOW price, OPEN price and CLOSE price.

*An alternative to using a Bar Chart is using a Candlestick Chart this gives traders

an even better visual insight.

OPEN PRICE = Tick to the left of the bar.

HIGH PRICE = Top of the vertical bar.

LOW PRICE = Bottom of the vertical bar.

CLOSE PRICE = Tick to the right of the bar.


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Bar Characteristics & Traders Psychology representation

1. This bar has a long range (difference between high and low)

and the Open price and Close price are on the opposite ends

of the bar.

The psychology of the traders behind this bar is that they are

very bullish and aggressively buying this market.

2. This next bar has a small range. When the trading session

opened it moved upward only slightly before closing down

midway on the bar.

In this session the traders are quite undecided upon the

direction, there is no real strength.

3. This bar shows there are more sellers in the market for this

session than there are buyers. The market opened then fell

away for the remainder of the session. Also the close is low

on the bar, confirming weakness in the market.

4. This session has its open and close quite equal on the bar,

again showing indecision on direction, or agreement

between the traders upon price.


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ProTradeSimulator CTF Advanced ENTRY RULE:



Lets look at the first part of the ENTRY RULE.

Strong Bar

First of all the trader needs to determine if the CURRENT BAR (Indicatorbar/last full bar formed) is a STRONG BAR.

This is done by comparing the CURRENT (most recent fully completed) baragainst the PREVIOUS bar.

The INDICATOR bar MUST be equal to or larger than the previous bar.

INCORRECTThe second bar (or most current bar) is the important bar

that we are looking at here and is referred to as the

INDICATOR bar.

In this image it does not fit our criteria, because the range

(the difference between high and low) is shorter, than the

previous (first) bar.


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CORRECTThis next set of bars clearly shows that the Indicator Bar

(second bar or most current bar) has a much longer range

than the previous bar.


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Now lets look at the next component of the Entry Rule

Open and Close are on opposite ends of the bar

It is important that the Open and the Close are in opposite thirds of the bar the

reason for this is that when the market opens then travels into either direction and

closes at the other end of that bar, it shows there is strength into that direction.

Long Trades: The Close must be above the Open. Short Trades: The Close must be below the Open.

Most of the time you can visually see that the open and the close are in opposite

thirds.

If you get a bar that you are not too sure of, you can place your curser over the top

of the bar and your charting software should give you the range of the bar, eg; 9 pips

this will allow you to determine if the open and the close are no more than 3 pips

from the high and the low of the bar.


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As you can see in the images below, if you were to slice the bar up into three equal

parts, the open and the close need to be on opposite ends of the bar, and either in

the top third or the bottom third.


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Now for the third part of the Entry Rule

crossing and closing over the 70-Moving Average (blue)

Moving Average Rules

The ProTradeSimulator CTF Advanced uses 2 moving averages. A faster MA and a

slower MA.

Moving averages are an Indicator that smooth price action out over time. The faster

MAs are a lot more reactive and sensitive to the price movement and therefore

follow the price movement much more closely. Whereas, the slower moving average

does not react very much in comparison.

MOVING AVERAGE 1: 20-Simple Moving Average (faster) (red) MOVING AVERGAGE 2: 70-Simple Moving Average (slower) (blue)

Moving Average Rules within the Entry Rules

LONG: The market must close ABOVE the 70-MA (blue)

SHORT: The market must close BELOW the 70-MA (blue)


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COMBINING ALL ENTRY RULES TOGETHER



LONG RULES

1. The 70-MA (blue) must be above or have touched the 20-MA.2. The market must have a STRONG bar closing ABOVE the 70-MA (equal or

larger than previous bar).

3. The Indicator Bar (most recent bar) must have its OPEN & CLOSE inopposite thirds of the bar.

In this Image you will notice that the first time which

the market moved above the 70-moving average,

(marked with an arrow), it did so with a nice strong

bar (equal or larger in comparison to the previous bar),

and it also fulfilled the rule where the Open and the

Close are in opposite thirds.

The Trader is eligible to enter this market (At Market)

on the bar following.

At Market means you are entering the market at

whatever the current price is quoted at.


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The next image shows a similar scenario with a short trade where the market has

fallen below the 70-moving average, with a Strong bar with its Open and Close in

opposite thirds. The trader can enter on open of the next bar At Market.

Looking at the next chart, the market made its first close ABOVE the 70-movingaverage (marked with the first x on the left) the bar was stronger (equal or larger

range) than the previous bar, however it did NOT fulfil the rule where the open and

the close must be in opposite thirds of the bar.


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The market then fell away and rose up above the 70-moving average for a second

time (marked with the second x). Again the bar was stronger (equal or larger range)

than the previous bar, however it did NOT fulfil the rule where the open and the

close must be in opposite thirds of the bar.

The third time that the market rose and closed above the 70-moving average it

fulfilled that criteria, however it did not fulfil the criteria of being equal or larger than

the previous bar so is not a valid entry.

Finally the bar marked with a tick fulfils all entry criteria so the trader can enter

immediately on the following bar, At Market.

Important Note: A trader MUST wait for the indicator bar to be fully formed before

a decision can be made the Forex market can move quickly and may look like it is

about to fulfil the rules but doesnt by the close of that bar.

So be patient and wait for the bar to have formed completely for that time period.

Dont try and jump the gun as it may not be a valid entry.


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Stop Loss Rule

Traders must always trade with a Stop Loss. A Stop Loss is the traders worst case scenario exit point. The Stop Loss will differ depending on what time frame you are trading. The

smaller your time frame the closer your stop can be. Otherwise if your stop is

too close you could get stopped out unnecessarily or you may be risking too

much.

The ProTradeSimulator CTF Advanced Stop Loss Rule


15 Minute Chart = 60 pips

You can use the ProTradeSimulator CTF Advanced on other time frames, you will just

need to test the most effective Stop Loss level for that time frame.

The way you do this, is to apply your analysis over historical data and look at every

valid entry. Then pick a Stop Loss level that is comfortable for you. Now see if you

applied this Stop Loss level to all those historical trades how effective was it in

cutting your losses quickly, but not interfering with your profitable trades?


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To effectively compare this information put the data into a spreadsheet. I like to use

a scenario of 2-3 different stop losses and record the outcome of each of these.

You may find the need to move the Stop Loss a little should the market become

more volatile and the average movement for that time period increase. But

remember you must always keep within your Money Management Maximum

Account Risk Rule.

I trade this trading plan on a 1-minute chart, and have found that I can have even up

to 3 or more losing trades in a row. Now this may rattle many traders, but it is our

job to ignore these and keep taking every trade. As in the Forex when you get on a

big run, which do come quite regularly, these make up for those losses and more,

again then it is our job to stick with that trend.


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Trailing Stop Loss Rule

The 20-MA becomes your Trailing Stop Loss. But only comes into effect after 10 bars following the entry bar.

CTF TRAILING STOP RULE: Exit after 1 Strong Close below (Long) or above

(Short) the 20-MA. The Open & Close must be on opposite thirds.

A trailing stop loss follows the market at a reasonable distance so that should there

suddenly be an adverse movement in the market you do not lose all of your profit.

The ProTradeSimulator CTF Advanced Trailing Stop does not come into effect until

after the 10

th

bar following the entry bar.

(Prior to that time the only time you would exit the market is if it goes against your

favour and hits your initial Entry Stop Loss).


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Profit Taking Rule

The ProTradeSimulator CTF Advanced looks to take a Profit immediately from the

market by closing 50% of its holding as soon as the price level (profit target) is hit.


15 Minute Chart = 100 pips

It is important to close 50% of your position at the Profit Target, as this assists to

reduce the risk on the trade. However, there is a way to capture more profit should

you be able to watch the market live.

This of course works better with the shorter-term time frames as the longer time

frames take much longer to hit their profit targets and you very likely dont want to

sit there waiting and watching. The shorter time frames can hit their Profit Targets

within minutes.

The opportunity arises if the market moves quickly through your Profit Target.

Normally traders will pre-set an order in their trading system that will automatically

closes out 50% of their position should the profit target be hit. This strategy works

best for people who dont have the time or desire to watch the market.


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However, if you are watching the market and see it shoot through the Profit Target

Level, what you can do is rather than immediately close out, (realising that profit and

leaving the remaining 50% of contracts in the trade), you can set a Stop Loss for 50%

of the position at the Profit Target Level now that the market has quickly moved past

it.

This allows you to hold on to 100% of your contracts making more money as the

market progresses. Should the market retrace back to your profit target level, then

it will close out 50% of your holding as though you had done so earlier, capturing

the profit at that level.

Personally, when I am trading this plan, I like to do this as it enables me to capture a

significant amount more on the trades that move quickly through this level.

I do find that often the market will hover and fluctuate around my Profit Target so, if

in doubt I just take the 50% profit, as at times when I have hesitated the market has

retraced back down to hit my Entry Stop Loss with 100% of the contracts bearing the

full brunt of the positions loss rather than only 50% of the position and a profit on

the other half.


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As you can see in the image below the market moved quickly through the Profit

Target Level.

And as mentioned, if you are watching the market live you can set a Stop Loss to at

your profit target (which is now underneath the current market price) to

automatically sell out 50% of the position as a worst case scenario.

And as the market continues into your favour you have a stronger positioning in the

market with double the number of lots/contracts.

Either way that you capture profit at the 50% profit target, it needs to be done as a

minimum standard, most importantly because it reduces the risk of the trade.

Never take trades without implementing either of these two strategies as quite often

the market will go to, or slightly beyond, your Profit Target before reversing and

hitting your Entry Stop Loss, and you therefore you will take the brunt of the whole

loss of 100% of contracts held.


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Re-Entry Rules

Quite often the market will come down below the 20-MA (Long), which is yourTrailing Stop Loss, or above (Short), giving you the signal to exit the trade, but often

will then cross back to the other side again and continue into its original direction.

You can re-enter the market when the market moves back above (Long) or below

(Short), as long as it is a Strong Bar with its open and close in opposite thirds of the

bar.

EXTRA RE-RULE (Long ONLY):

I actually add another rule only for Long trades. Which is, to wait for the market to

break and close above the previous major high in that movement upward (the

highest point following the last movement upward that there was a valid long entry).

The reason for this extra rule is that markets move upward a lot slower than when

they fall, as people are prone to be less optimistic than they are driven by fear, (see

chart images next page).

Alternatively, you may like to enter upon just when there is a strong close above the

20-MA, without waiting for the break above the major high, but instead only with

half positions.

LONG EXAMPLE WITHOUT EXTRA RULE (see next image)

1. The market moves above the 70-MA fulfilling all the long entry criteria.2. The trader sets their Profit Target and is counting 10 bars after the entry to

see when they will commence using the 20-MA as the Trailing Stop Loss.


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3. The trade continues into the traders favour and hits the profit target.4. The trader is now using the 20-MA as their exit point for the remaining

positions as it is 10 bars after their entry.

5. The market continues upward but then falls down below fulfilling the Exitcriteria, so the trader closes the remaining position.

6. Now the trader looks for either a re-entry Long or entry criteria to go Short.7. The opportunity arises to re-enter Long. As you can see the bar that closes

back over the 20-MA (red) fulfils the re-entry criteria (in this instance the

trader may decide to only purchase half contracts as this rule (long direction

only) is not as high success as if the market takes out the previous major high

(extra Long re-entry rule).

8. If the trader decides to wait for the previous major high to be broken andclosed above, then they can enter with a full number of contracts.

9. Next the trader is looking for the placement of the next Profit Target, andcounting 10 bars after entry to look to use the 20-MA.


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LONG EXAMPLE WITHOUT EXTRA RULE (see next image)

1. I much prefer to avoid trades where the market has not yet broken theprevious major high (see next image blue dotted line marking the end of

the previous major advance upward).

2. As you can see this trader who did not use the Extra Long Re -Entry rule, re-entered the market twice (green arrows) following the initial long trade, and

both were losing positions as their Stop Loss was hit (smaller blue solid lines).

3. If this trader instead patiently waited for the previous major high to bebroken they would have avoided more than necessary losing trades.

4. This will be explained and shown in more detail in the Trade by Trade scenariolater in this Workbook and the live trading Video Tutorials.


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SHORT EXAMPLE (see next image)

1. The market moves below the 70-MA fulfilling all the Short entry criteria.2. The trader sets the Profit Target Level and is also counting 10 bars after the

entry to see when they will commence using the 20-MA as the Trailing Stop

Loss.

3. After 10 bars the trader is now using the 20-MA as their exit point for theremaining positions.

4. The trade continues into the traders favour and hits the profit target.5. The market continues down but then rallies up above the 20-MA fulfilling the

Exit criteria, so the trader closes the remaining position.

6. Now looking for a re-entry Short or entry criteria for a Long position.7. The opportunity arises to re-enter Short, as you can see the bar that closes

back over the 20-MA (red) and fulfils the Short re-entry criteria.

8. After the Short re-entry the trader is looking for the placement of the nextProfit Target, and counting 10 bars after entry to start using the 20-MA.

9. Shortly after the Profit Target is hit the market closes back over the 20-MAclosing out the remaining position as it is after the minimum 10 bar criteria

for the Trailing Stop.


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Trade Reversal Rules

The following chart is a continuation of the Short trade chart shown previously. Here

I am showing you how a trade is reversed from one direction into the other.

1. Once the trader is stopped out from the second short entry (re-entry) aftereach profit target was hit they gain a third short entry (a re-entry) however

that is quickly stopped out at its entry Stop Loss.

2. Soon after the market crosses above the 70-MA allowing the trader to look fora Long entry, this same bar that crosses also gives a valid Long entry.


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3. The trader now sets their Profit Target Level and is now also counting 10 barsto commence using the 20-MA as the Trailing Stop.

4. Next the Profit Target is hit.5. The market continues into the traders favour finally closing out the remainder

of the position when the market weakens and crosses the 20-MA (the trailing

stop loss).


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Trade by Trade

In the following image I will take you through trade by trade and explain some of thepros and cons you will come across with the various stages of trades, especially re-

entering Long without the extra rule where you need to wait for the Previous Major

High to be broken.

Quite often the Forex market will trend sideways through a time phase before it

shoots into either direction of a price phase. During these times the trader mayexperience many false entries or volatile movements where they need to exit as the

ranges of the bars are large and swing quickly into both directions.

POSITION 1: Starting from the left the trader was long in the market. At position #1

the trader closed out the full position and realised the profit as the market fell below

the 20-MA with a strong bar that had the open and the close in opposite thirds.


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POSITION 2: At position #2 if the trader chooses to re-enter the market they may

do so should they decided not to include the extra Long re-entry rule. However, as

they know there is a higher risk with this trade, they may decide to do enter with

only half the number of contracts. This trade quickly reversed and was stopped out,resulting in a losing trade.

POSITION 3: The market falls down and crosses below the 70-MA but does not fulfil

the Short entry criteria, therefore the trader cannot enter the market.

POSITION 4: The market reverses again and crosses up above the 20-MA giving the

trader a chance to re-enter long if they are not using the extra Long rule where it

must break above the Previous Major High. They may choose to reduce this higher

risk trade by only entering with half the amount of contracts.

This trade does reach its 150 pip Profit Target (daily chart) but then quickly falls

down below its Entry Stop prior, at the same time it simultaneously reaches 10 bars

and fulfils the Trailing Stop Exit Rule.

POSITION 5: At the same time that the market hits the previous trades Entry Stop it

also gives the trader entry signals to sell Short. However, quickly after the short

trade hits its entry Stop.

POSITION 6: Similar to above, the same time that the market hit its Entry Stop it

also forms a bar that allows the trader to re-enter the market long (should the trader

not be using the extra Long re-entry rule. This trade also reaches its 150 pip profit

target (daily chart) and then falls again to hit its Entry Stop.

POSITION 7: Soon after trade #6 is stopped out, the market moves back above the

Moving Averages, and fulfils the normal long ENTRY rules here (without the need for

the Previous Major High to be broken for a Re-Entry rule), as the both Moving

Averages touch. Within the normal Long Entry rules the Blue 70-MA must be above

the Red 20-MA or at minimum to have touched, which they have done here. The 150

pip Profit Target is then hit and the trade continues for quite some time into the

traders favour.


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Profit Examples using the Extra Long Re-Entry Rule

Lets look at a couple of scenarios of whether the trader would be better off to re-

enter all those long trades; with half positions, full positions and none at all.

Entry Exit 1 Exit 2 Half RE Full RE No RE

Trade 1 - Long 1. 3750 1.4634 1. 4634 0.3536 0.3536 0.3536

Trade 2 - Long (re-entry) 1. 4760 1. 4610 1. 4610 - 0. 0300 - 0. 0600

Trade 4 - Long (re-entry) 1. 4260 1.4460 1. 4110 0.0050 0.0100

Trade 5 - Short 1. 4454 1. 4604 1. 4754 - 0. 0900 - 0. 0900 - 0. 0900

Trade 6 - Long (re-entry) 1. 4753 1.4953 1. 4603 0.0050 0.0100Trade 7 - Long 1. 4726 1.4926 1. 6000 0.2948 0.2948 0.2948

0.5384 0.5184 0.5584

Summary of Long Re-Entries comparing the extra rule.

The final profit in the above table is displayed in pips (yellow boxes). Overall the trader was better off not taking any re-entries prior to the Previous

Major High being broken.

If the trader did decided to take the re-entries, it shows to be much better totake only half positions.

Another key point to remember, that after going through a sideways periodlike this with the potential to experience a number of losing trades the trader

needs to be able to handle the psychological pressure, and keep on tradingnot letting the losses bother them (which hinder future profitable trades).


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Back Testing Exercises

On the following chart start from the very left and place a TICK for your valid entries

and a CROSS for your valid exits.

You are to assume that the trader only makes Long re-entry trades should the

market break and close above the previous Major high.

(Answers can be found on page following).


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Please view answers on Chart further below.

Position 1 Valid Long entry. Position 2 No valid Short entry (the close of the bar is just outside of the

opposite thirds rule).

Position 3 Valid Long entry. Position 4 No valid Short entry (subsequent bars are not stronger than

previous bars ... plus the open & closes do not fill the opposite thirds rule).

Position 5 The trader could enter here long as both MAs touched and themarket fulfilled the normal entry criteria with a Strong bar, (the trader does

not need to wait for the previous major high to be broken to re-enter long as

it is fulfilling the normal entry rules).


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PROTRADESIMULATOR CTF ADVANCED

TRADING WALL CHECK LIST

LONG ENTRY

Is the 70-Moving Average (blue) ABOVE or have touched the 20-Moving (red)Average?

Has the market closed the current trading session (current bar/indicator bar)ABOVE the 70-Moving Average?

Does the current/indicator bar have a range (distance between High & Low)EQUAL to or LARGER than the previous bar?Are the Open & Close of the current/indicator bar in opposite thirds of the bar?

If YES to all the above you can go ahead and enter At Market.

LONG OPEN TRADE

At the same time as entering the market ATTACH YOUR STOP LOSS and yourProfit Target Level to close 50% of your position.

Count 10 bars following your entry. Following this 10th bar the 20-MovingAverage will become active as your TRAILING STOP LOSS.

EXIT THE MARKET ONLY IF;1. Your Entry Stop is Hit (automatic close).2. 50% at Profit Target (automatic close/manual close).3. Trailing Stop Loss 1 Strong Close BELOW 20-MA with Open & Close

in opposite thirds (manual close).


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PROTRADESIMULATOR CTF ADVANCED

TRADING WALL CHECK LIST

SHORT ENTRY

Is the 70-Moving Average (blue) BELOW or have touched the 20-Moving (red)Average?

Has the market closed the current trading session (current bar/indicator bar)BELOW the 70-Moving Average?

Does the current/indicator bar have a range (distance between High & Low)EQUAL to or LARGER than the previous bar?

Are the Open & Close of the current/indicator bar in opposite thirds of the bar?If YES to all the above you can go ahead and enter At Market.

SHORT OPEN TRADE

At the same time as entering the

manual system

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