This is one of my most profitable systems.. I have learned it from a great friend of mine who is also my trading mentor.
Anyway, I have traded it for the last 4 weeks, works just amazingly. Its only drawback is that there are no many trades - about 2\3 per week, so make sure you have other systems unless you want to spend your time staring at your screen meaninglessly...
The logic behind it is the following:
Take less trades, but better trades.I concentrate on high-probability setups that have little chance to fail, and ones I know and am familiar with. I don't seek highly complex setups as they are hard to confirm and trade.
So what I will look for is:
A Channel.
If you don't know what a channel is, Google it and come back.
Now, normally traders trade inside channels; that is, they take long trades near the support and take short traders near resistance, hoping to profit from the range inside the channel. I won't do that. I like high-quality trades which have better profitability factor.
I take the trades
AFTER THE BREAKOUT.
After a channel has been broken, I will look for pullback - price to come back to the channel and retest support\resistance. If price touches the resistance\support and bounces from it, I will take the trade. There are rules of entry, which are a bit different for short and long trades. In the next post I will get under the hood about these trades...
How to Take Profit
Calculate
size of channel - substract the resistance value from support value. This is the target.
Add this amount to the price where the pullback occured - and this is your take profit. Move it several pips closer, to have some safety margin in case price comes very close to your take profit but don't actually touch it.
Example:
When not to trade
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Don't trade if the ratio between your Stop Loss and your Take Profit is not at least 2.
-Don't trade if there is a strong support\resistance blocking your way to the target.
-Don't trade if this is the second time price pullbacks. Only trade the first pullback.
Money Management
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Despite this system's high probability of success I ALWAYS STRESS OUT, RISK 1% OF YOUR ACCOUNT ON A SINGLE TRADE!
Well, this is it. I will post trades every day here, and you are all welcome to post questions.
Now close your browser and start making money!
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