Step #7 | TP placement | Stay In – Exit Criteria

Take-Profit placement is based on the principle that “Successful Trader is not the one who MAKES the most pips but the one who KEEPS the most FASTER”. That’s why it is of critical importance to secure our profits as fast as possible before price action cancels most part of them during its minor fluctuations or major moves.

Having set our Trading Plan, we already know that we can turn $1000 into $1Million after 10 Doublings and have already estimated the 10 Doublings’ Milestones and noted them on our Calendar.

Therefore, by securing each Day’s Pips we’re on our way to our GOAL already and any extra pips we can make are a BONUS.

A practical rule to maximize profits within the shortest possible time interval is to place our TP at the 2/3 of estimated Move’s -REWARD’s- length. By doing this, we keep more pips than our Daily Pips Target, FAST.

STAY-IN and EXIT Criteria are the two sides of the same coin and actually coincide.

1) STAY IN while candlesticks CLOSE above/below Tenkan Sen. EXIT when one candlestick CLOSES to the opposite side of Tenkan Sen.
2) STAY IN while Median BBand goes UP/DOWN. EXIT when Median BBand turns FLAT.
3) STAY IN Long while Stochastics go UP. EXIT if they make a Bearish Crossover above 80-level line. STAY IN Short while Srochastics go DOWN. EXIT if they make a Bullish Crossover below 20-level line.
4) STAY IN Long while Kijun Sen goes UP. EXIT when Kijun Sen goes DOWN. STAY IN Short while Kijun Sen goes DOWN. EXIT when Kijun Sen goes UP.
5) STAY IN Long while PSAR Dots go UP. EXIT when you see the first PSAR Dot above price action (ideally on the immediately smaller Time-Frame). STAY IN Short while PSAR Dots go DOWN. EXIT when you see the first PSAR Dot below price action (ideally on the immediately smaller Time-Frame).
6) STAY IN Long while price is moving above the KUMO. EXIT when Kijun Sen starts going DOWN. STAY IN Short while price is moving below the KUMO. EXIT when Kijun Sen starts going UP.
7) STAY IN Long while MACD Bullish Histogram Lines grow taller ABOVE Signal Line. EXIT when MACD Histogram falls below Signal Line (ideally EXIT when there is inconsistency between Bullish MACD Histogram’s Line and Signal Line because Bullish Histogram’s Line is shorter but Signal Line goes UP). STAY IN Short while Bearish MACD Histogram Lines grow bigger BELOW Signal Line. EXIT when MACD Histogram jumps above Signal Line. (ideally EXIT when there is inconsistency between Bearish MACD Histogram’s Line and Signal Line because Bearish Histogram’s Line is smaller but Signal Line goes UP)
8) STAY IN Long while candlesticks are closing ABOVE Alligator. EXIT when one bearish candlestick closes below Alligator’s Lips (Green Line). STAY IN Short while candlesticks close BELOW Alligator. EXIT when one bullish candlestick closes above Alligator’s Lips (Green Line).

Depending on Market’s Condition and the Strategy we’re using, there may be some additions or modifications to our STAY-IN /EXIT Criteria.

STEP #7 Rules :
Two Traders can trade the same pair simultaneously, one BUYING, the other SELLING and BOTH of them can be profitable. The difference is in the TIME OF EXIT and in Traders’ Mentality. Lets say that Trader A BUYS from DAILY Time-Frame because he sees a nice Upward Move. He EXITS 5 Trading Days later having made 260pips. Trader B SELLS from H1 Time-Frame trading a Downward Correction. He EXITS4 Hours later having made 80pips. I mention this REAL LIFE example -which you can DEMO Check for yourself anytime you want- to prove to you the fact that everything depends on Your Way of thinking. The Market is always the same just like the Sea is always there. You determine your way of trading just like a captain determines his way of sailing. If you are an extremely energetic individual, Scalp from M5/M15 keeping your finger ready to hit the mouse giving the “close position” order, trade from M30, H1 or H4 Time checking when each Candlestick Closes to see if your EXIT Criterion is met and BE FAST. If you are a sophisticated Trader with the mentality of an investor switch gradually from lower Time-Frames to Higher Ones, slowly trail your SL to Break Even level and then… PATIENT. Let the time work for you. As trade matures, accumulating pips, you’ll be checking your trade only to see if you can add position.
While you are a Beginner, trade only Trending Market’s Conditions, Trend-following from relatively higher Time-Frames (Daily, H4 or H1) that give you enough time not only to check if your Entry Criteria are met before you Enter, but also to make sure that your STAY IN Criteria are met and EXIT the right time. Trend-following may last days or even weeks. Trading a Range-Bound Market or Swing-Trading is a good match for a more experienced Trader , not because of its technical skills requirements -it’s based on extremely simple principles- but mainly because Swing Traders have no Bullish or Bearish Biases on the pair they’re trading. They don’t hesitate a single moment EXITING when the move is over and RE-ENTERING by Reversing Position. Scalping from M5/M15 Time-Frames is a trading style you should follow when you are an experienced Trader. I would suggest you go Scalping only after you have successfully DOUBLED your Account’s Equity at least 4 times. When Scalping, everything is allowed. You may enter when a M15 candlestick opens and EXIT three candlesticks later without waiting for the last candlestick to close. With Scalping, you practically RE-WRITE the rules and you’ve got to EXIT at FLASH-SPEED 🙂
Most Traders experience LOSSES not because they Entered Wrongly or they Exited Wrongly either. They are hit by the Market’s Euphoria Syndrome right after they EXIT keeping profits. This Syndrome disarms reasonable thinking, you forget about Entry Criteria and the only deafening voices shouting inside your mind are the ones saying “I WANT MORE PIPS….AND I WANT THEM NOW!” The result of the Euphoria Syndrome is that you RE-ENTER to the Wrong Direction and as Market starts moving against you, your reflexes are still numb from the winning feelings of the previous profitable move and you hate the idea of jumping out with minor losses which soon turn into ….devastating ones. When you realize you’re trapped in a Reversal, your profits have turned into losses and now your Equity is bleeding. In most of the cases, your Euphoria-damaged psychology doesn’t allow you to think reasonably and hedge your losing position making the necessary effort to recover your Account. Most killed accounts died right after a period of great profitability due to the Euphoria Syndrome that led to Wrong RE-ENTRIES after Right EXITS. To avoid that, if you are so filthy ambitious that you want to take ONE MORE TRADE after you just EXITED a profitable one, WAIT at least 5 CANDLESTICKS till you make a new Trading Decision. You can thank me later 🙂

Step #6 | Entry Criteria | SL Placement | SL Trailing

We want to Enter EARLY either at the beginning of a Reversal – preferably on a relatively high Time Frame such as H1, H4 or DAILY- or a Correction – only from M15 or M5 Time Frame. On ICHIMOKU KINKO HYO, the earliest Signal that price is changing direction is Price/Tenkan Sen Cross. But this is not enough because if price just closes above/below a Flat Tenkan Sen, it can continue to the previous direction right after. So we need a confirmation about price’s intention to go to the new direction and that is Tenkan Sen’s inclination. If we are going to BUY , we want to see Tenkan Sen angled or curved UPwards and if we want to SELL, Tenkan Sen must be angled/curved DOWNwards.

But since our money is at stake, using multiple confirmations before we Enter is IMPERATIVE. One of the most useful Indicators we’re using is Bollinger Bands System. BBands show price action’s volatility, and range but they also show direction. If Upper and Lower BBands are price action’s “muscles”, Median BBand is price action’s “bone”. So when the Median BBand is forming a “knee” going Up or Down, we get a very strong confirmation about a change in direction.

Furthermore we need to look at Chikou Span (ICHIMOKU Green Line which is price action’s clone shifted in the past) because this magical line makes things happen when it crosses past price action and here is where another extra confirmation comes from.

And of course Stochastics must both go to the same direction confirming our Entry.

So here are the Basic ENTRY Criteria we should be looking for :

BUY if :
1. price CLOSES above Tenkan Sen
2. Tenkan Sen is angled/Curved UPwards
3. Median BBand is curved UPwards
4. Chikou Span has just crossed above past price action going UP
5. Stochastics are both going UP

SELL if :
1. price CLOSES below Tenkan Sen
2. Tenkan Sen is angled/Curved DOWNwards
3. Median BBand is curved DOWNwards
4. Chikou Span has just crossed below past price action going DOWN
5. Stochastics are both going DOWN

Depending on the Market’s Condition and the Trading Strategy we’re going to use, we may be looking for some extra confirmations or even fewer.

SL Placement is based on the basic principle that we only take a Risk to allow price fluctuation to go as low as a strong Support Level can allow when we BUY, or as high as a Strong Resistance Level can allow when we SELL.

SL Trailing is an essential part of Trade Management serving the 3 priorities :

1. Eliminate RISK
2. Lock Daily Pips
3. Maximize Profits milking the Trend.

Depending on Market’s Condition :

1. There is no need to Trail our SL on a Rangebound Market
2. We can use Kijun Sen or Fractals corresponding to Higher Lows on Uptrend and Lower Highs on Downtrend when the Market is Trending and of course there are detailed SL Trailing Criteria per Strategy
3. When trading the Breakout after a Consolidating Market, we can either pick one of the various SL Trailing options or EXIT as soon as possible either using the Take-Profit placement Rule (placing TP at 2/3 of expected move’s length) or using one of the STAY-IN/EXIT Criteria.

STEP #6 Rules :
Successful Traders make more money WAITING than Entering Trades. This happens because they’re true “Bosses” of their trades. They WAIT for ALL Entry Criteria to be met before they Enter. They WAIT for the move to get exhausted before they EXIT. They don’t rush. They’re extremely slow -turtle slow- with their Entries seeking multiple confirmations.
For every Trade Set Up, you should be aware of the Market’s Condition in order to pick the right Strategy and in most cases you must see candlesticks CLOSE -except if your Strategy’s Criteria mention cross and no close or if you see a Breakout Candlestick which has a body bigger than the last 10 candlesticks and moves to one direction only- before you Enter.
SL Trailing is not always a blessing. It can be a Trader’s Plague when applied wrongly. Some of my best trades were the ones I neglected Trailing my SL. I know there is the reasoning that “well, if I’m stopped out, I can always re-enter” which is correct but impractical. Because if you are stopped out of a great trade that took you hours to study and Enter because a silly spike hit your Trailed SL, you may FREEZE, you may make all possible mistakes and invent even more, you may get out of sync out of tune out of balance with your own thinking as you’ll be watching price going to the initial direction making hundreds of pips for other traders but not for you. Except Swing Trading -RangeBound Market’s Trading- and Scalping, where SL Trailing doesn’t apply, there is plenty of empirical evidence that you should let the trade evolve without Trailing your SL. I know this sounds contradictory to what I have already described as “SL Trailing benefits”, but I suggest you Trail your SL till you reach the level of confidence to let the trade breathe freely and evolve without you approaching or almost “touching” price action in a rather masochistic mood.

Step #5 | Picking Strategy

Depending on the Market’s Condition we currently see on DAILY Time-Frame we pick the appropriate Trading Strategy that goes with it . Below are a few Strategies we can use per Market’s Condition :

#1 Range-Bound Market : when price is moving in a ZIG-ZAG MODE within a Range
1a. Trading the Zig-Zag Daily to H1 TF
1b. Trading the Zig-Zag H4 TF to M15 TF
1c. Bollinger Bands + Stochastics on Daily TF
1d. Bollinger Bands – MACD -PSAR
1e. Bollinger Bands -Heiken Ashi – ADX

#2 Trending Market : when price is moving UP making Higher Highs and Higher Lows or DOWN making Lower Lows and Lower Highs
2a. ICHIMOKU 4 Time-Frames
2b. Bollinger Bands – Fractals – Alligator
2c.“Catching the Bus”
2d. Fibonacci Retracement Tool
2e. Scalping from M15 with ICHIMOKU & BBands
2f. Rainbow System
2g. Trendlines

#3 Consolidating Market : when price is in a stasis moving sideways in a horizontal mode maintaining the same price level
3a. Bottlenecks and Funnels

STEP #5 Rules :
Trading is not about fashion and variety. Which means, you should learn ONE Trading System very well and always look for Market’s Conditions ideal for you to apply it. Don’t look to trade ALL Market’s Conditions, ALL Pairs, ALL the time. Be selective and monotonous. Be deadly boring doing AGAIN AND AGAIN what’s making you pips. Be like a hammer hitting a nail and hit that damn nail NON-STOP! If you want to specialize on trading Breakouts after Consolidation, using for example “Bottlenecks & Funnels”, become a KILLER on “Bottlenecks & Funnels” and trade NOTHING ELSE. By the way, it’s not bad to seek multiple confirmations before you enter with one System, by checking another System too making sure they both agree.
When you’re in , be 1001% confident with your Strategy -1000% is not enough-apply its Criteria and Rules religiously and don’t mess with your Trade. Set it and forget it. (Check it only as often as the Time-Frame you monitor the trade from requires. Remember that candlesticks are valid ONLY when they close. While they’re open, they behave like electrons, being everywhere at the same time.)
Remember that there are no “A’s” in FOREX Trading. It is a SOLO Sport. You are the athlete, the coach and the audience. Don’t pick the sexiest or the most sophisticated Strategy. There is no one to impress. Pick the SIMPLEST ONE that you are extremely familiar with and will stack more money to your Bank Account. And if your personality is more a Bull than a Bear, go only for Long Trades. If on the other hand you are a Bear, well….that’s your problem….hahahaha…