Earth & Sky Trading System

By Pierre Du Plessis

CopyrightForex MentorPro2011.Allrightsreserved.

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ThecontentsofthiseBookareforinformationalpurposesonly.Nopartofthispublication
isasolicitationoranoffertobuyorsellanyfinancialmarket.

Examplesareprovidedforillustrationpurposesonlyandshouldnotbeconstruedas
investmentadviceorstrategy.

Alltradeexamplesarehypothetical.

Norepresentationismadethatanyaccountortraderwillorislikelytoachieveprofitsor
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CFTCRULE4.41
HYPOTHETICALORSIMULATEDPERFORMANCERESULTSHAVECERTAINLIMITATIONS.
UNLIKEANACTUALPERFORMANCERECORD,IMULATEDRESULTSDONOTREPRESENT
ACTUALTRADING.ALSO,SINCETHETRADESHAVENOTBEENEXECUTED,THERESULTSMAY
HAVEUNDEROROVERCOMPENSATEDFORTHEIMPACT,IFANY,OFCERTAINMARKET
FACTORS,SUCHASLACKOFLIQUIDITY.SIMULATEDTRADINGPROGRAMSINGENERALARE
ALSOSUBJECTTOTHEFACTTHATTHEYAREDESIGNEDWITHTHEBENEFITOFHINDSIGHT.
NOREPRESENTATIONISBEINGMADETHATANYACCOUNTWILLORISLIKELYTOACHIEVE
PROFITORLOSSESSIMILARTOTHOSESHOWN.

BroughttoYoubyForexMentorPro.com

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Earth&SkyTradingSystem

IntroductionAboutMe

Name:PierreduPlessis
Country:SouthAfrica
Age:38years
Occupation:ProfessionalFulltimeCurrencyTrader.
BioIliveintheGardenRoute,SouthAfricaandammarriedwith
threechildren.Iamalsoknownasdaddy.daycaretomyfriends.I
tradefromhomehenceveryinvolvedwiththedaytodayfamily
needs.Schoollifts,hockey,rugby,karateyounameit,
daddy.daycarewillbethere.
I`vebeenacurrencytraderforthelast4years.Alotofmyrecent
successcameaboutwhenIjoinedtheForexMentorProprogram
andIchangedtotrading4houranddailycharts.Ihavespentyears
trading15minutechartswithsomesuccess,butthischangeof
directionhastakenmetoadifferentlevel.Onceyouhavemastered
tradingfrombiggertimeframesyouwillneverlookback.
MytradingmethodisacombinationofMarc`sM2systemandafew
twistsofmyown.

Withthissystemyouwilltradewiththemaintrendandthatwilltest
yourpatience.
Whatdoesthewordpatiencemean?
Patience emphasizes calmness, selfcontrol, and the willingness or
abilitytotoleratedelay.
I personally like the part where it says ability to tolerate delay.
Thats the secret of trading to tolerate delay and wait for the
markettocometoyou.
Soinshort,therewillbetimeswhereyouneedtowaitforpriceto
cometoyou,thebestwaytodothatwithoutgettingimpatientor
triggerhappyistogetahobby.Getsomethingthatwilldistractyou
fromtradinguntilthepricegetstothepreferredtradingzone.
Whatdoestheworddisciplinemean?
DISCIPLINE(noun)
ThenounDISCIPLINEhas5senses:
1.abranchofknowledge
2.asystemofrulesofconductormethodofpractice
3.thetraitofbeingwellbehaved
4.trainingtoimprovestrengthorselfcontrol
5.theactofpunishing
Familiarityinformation:DISCIPLINEusedasanouniscommon.

DISCIPLINE(verb)
TheverbDISCIPLINEhas2senses:
1.trainbyinstructionandpractice;especiallytoteachself
control
2.punishinordertogaincontrolorenforceobedience

Whydidyouneedtoknowthedefinitionofthesetwowordsbefore

westart?Asystemisuselessifyoudonthavepatienceand
discipline.Icangiveyouthebestsystemsintheworldthatmakes
otherpeopleplentyofmoney,butifyouasanindividualdonthave
thedisciplineorthepatiencetotradeasystem,Iwillguarantyyou,
asatraderyouwillnotbesuccessful.Thesetwofactorswillbethe
keytoyoursuccessasatrader.

Youmustrememberthatsomepointyouregoingtohavetofigure
outhowitisthatyouwanttotrade.Thisrequiresdecidingonan
approachthatissuitableforYOU,andcommittingtoit.
Veryfewpeopleactuallydothis,ontheotherhandthosethatdo,
generallygetverywellrewardedforit.
Thissystemwillguideyouintotherightdirection.

AnOverviewofCurrencyTrading
Allofusoccasionallyneedourmindsjoggingsoitishopedthiswill
help.
ForexWhatisit?
TheForeignExchangemarketisthefullnamebutitisknownby
manyothertitles,aselectionofwhichareFOREXorForex.
AdditionallytermsuchasRetailForex:,FX,orSpotFXor
indeedSpotalldescribewhatis,atpresent,theworldslargest
financialmarket.Thismarkettradesatinexcessof$4trilliondaily.
ThedailyamounttradedontheNewYorkStockMarketiscirca$25
billiondaily,thusonecanobservethatthemultipleis160greateron
theForexmarket.Thisleadsustoaskthefollowingquestion.
WhatistheForeignExchangeMarketconstitutedof?
Putsimplytheanswerismoney,butthismustnotbeseenas
necessarilyhardcash.Thetradesarealmostpredominantly
electronicandassuchrepresentthebuyingofonecurrencyandthe
saleofanothereffectivelybacktobacktransactions.
Tradeisconventionallyundertakenviaabrokerordealer.Thereisan
establishedpatternofpairssuchasEUROUSDorUSDGBP,butone
shouldbeawarethatwiththeintroductionofcurrenciessuchasthe
roublenewpatternsarerapidlybeingestablished.
Aspreviouslystatedtradeisnotalways,indeedispredominantly
not,physicalthusasoneneedstoputonesmindaroundthat
concept.Ifonecanthinkinthesomewhatabstracttermsof
acquiringashareinsaytheJapaneseeconomy,andsubstitutethat
forthetangiblecurrency,andthenlinkthattotheinflationaryor
recessionarytrendsintheeconomy,thepictureisdrawn.

Itisfairtosaythattheexchangerateofacurrencybearsstrong
relationshiptothestateofaneconomy.However,inthecaseofa
currencylinkedtomanycountriessuchastheEuro,itisthe
combinedeffectofanumberofcountrieseconomieswhichwill
affecttheexchangerateofthatcurrency.
SpotRate
Thishasneitheraphysicalorcentrallocation.Itisaspreviously
statedlargelyelectronicthusitisakintoanOvertheCounter(OTC)
orInterbankmarket,asitisrunwithinanetworkofbanksona
continuousbasisfor24hours5daysoftheweeki.e.Mondayto
Friday.
RetailTraders
Untilabout20yearsagoForexwasthesoledomainofmajorplayers
inthefieldofbanking.Substantiallimitedcapitalintheregionof
between$10$50millionwasrequired,whichprecludedany
involvementbytheindividual.ThegrowthoftheInternethas
revolutionisedthatposition,andnowtradingaccountsareavailable
towhatonemaytermasRetailTraders.
Alloneneedstobecomeoneofthesetradersisacomputer,good
broadband,solidinformationonthebasicsoftradingForexand
time.Intheinitialstagesoftrading,investmentisbestundertakenin
relativelysmallamounts,accompaniedbyplentyoftimetothink
throughyourstrategies.Toformulatetheseoneneedtounderstand
thetwotypesoftrading.
TypesofTrading
Thereexisttwotypesofanalysiswhichshouldbeexplained:
TechnicalandFundamental.
TechnicalAnalysisinvolvesthedissectionandbreakdownofprice
movementsthroughthemediumofcharts.Thisallowsforthe

identificationoftrends,allowingforanunderstandingofprofitable
tradingopportunities.
Fundamentalanalysisfocusesonmarketanalysisthroughthe
strengthorweaknessesofitseconomy.
Acombinationofthetwotypesofanalysiswillallowforsuccess.
ChartTypes
Thetypesare:
1. Linecharts
2. Barcharts
3. Candlestickcharts
Lineandbarchartswillbefamiliartoalmostallpeoplesotheyneed
noexplanation,whereascandlestickchartswillbenewtomost
investors.Thesehavebeendevelopedandevolvedtoprice
movementsofasecurity,derivativeorcurrencyovergivenperiodsof
time.
Theycanbestbedepictedasacombinationoflineandbarcharts,
butarefrequentlyusedtoobtaintechnicalanalysisofpricing
patterns.Candlesticksareseenasmoreinformativethanbarcharts.
Theydisplayabsolutepricesandrelationshipstopriorperiodprices.
Toassistindelineatingthefigures,quitefrequently,candlesticksare
coloured.

Candlesticks(AKACandlestickCharts)
Candlesticksareformedbyusingthehigh,open,closeandlow
prices.
Thelines(wicks)whichprotrudeaboveorbelowthebodyof
thecandleindicatethehighandlowpricingbands.Theseare
calledshadows.
Thetopoftheuppershadowisthehigh,whilstconverselythe
bottomofthelowershadowisthelow.
Thelongerthewickthestrongerthebuyingorsellinginthe
periodinquestion.Theshorterthewicktheindicationisless
buyingandsellinghastranspired.Inthetraditionalparlanceofthe
financialworldwehavebothbullandbearmarkets.

BasicCandlestickPatterns
N.B.:Thefollowingcandlestickexamplesareblackandwhitefor
demonstrationonly.Onthechartsblackequalsdown(bear)and
whiteequalsup(bull).
SpinningTops
Candlestickswithalongupperandlowershadowandsmallred
bodieshavethenameSpinningTops.Thebodycolourisnot

10

relevant.Thepatternindicatestheindecisionbetweenbuyersand
sellers.

Thebody(holloworfilled)reflectsminimalmovementbetween
openandclose,whilsttheshadowsareindicativethatneitherbuyer
norsellercouldgaintheupperhand.
Althoughthesessionopenedandclosedwithminimalmovement,
becausetherewasnoupperhandgained,therewasaneffective
stalemate.
Whenaspinningtopdevelopsinanuptrend,itwillindicatethereare
fewbuyersandareversalofdirectioncouldbepending.
Shouldaspinningtopformduringadowntrend,thissignifiesfew
sellersareleftandapotentialreversalindirectioncouldoccur.
Marubozu
Marubozustatesthattherearenoshadowsfromthebodies.
Dependingonwhetherthecandlesticksbodyisfilledorhollow,the
highandlowarethesameasitsopenorclose.Thepicturesportray
thetwotypes.
AGreenMarubozu(aJapanesecandlestickindicatingstronglytraded
stockinonedirectionduringasessionandclosingatahighorlow
dailyprice)normallycontainsalonggreenbodywithnoshadows.
Openpriceequalsthelowpriceandtheclosepriceequalsthehigh
price.Onemayrefertothisasabullishcandleasitindicatesthat
buyerscontrolledthewholesession.

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ARedMarubozucontainsalongredbodywithnoshadows.Open
priceequalsthehighandclosethelow.Asopposedtothegreen
candlethisisbearishandcontrolledbysellers.
Doji
ADojicandlestickrepresentstheequilibriumbetweensupplyand
demand.Thesecandlestickshavevirtuallythesameopenandclose
price.TheDojithushasaverysmallbodythatappearsasathinline.
Dojiisanindicationofindecisionorafighttogetturfpositioning
betweenbuyersandsellers.Pricesoscillatearoundtheopenprice
duringthesession,butcloseneartotheopenprice.Neitherbuyer
norsellerhasobtainedamajoritydecision.
TherearefourspecialtypesofDojilines.

12

LongLeggedDoji
Designatedbylongupperandlowershadows,almostsynonymousin
length,buttradersshouldbevigilantinobservingtheclosein
relationtothemidpoint.Aclosebelowthemidpointisashowof
weakness.
DragonflyDoji
Formswhenopen,high,closeandlowcreatealonglowershadow.
Theindicationsfromtheseeventsarethatsellersareforcingprices
downduringthesession,butbuyersareforcingpricesbacktothe
openinglevelorbetter.
GravestoneDoji
Ithasalonguppershadowwithnolowershadow,andisformed
whentheopen,lowandcloseareequal.Thehighcreatesthelong
uppershadow.TheGravestoneDojiindicatesbuyersdrivingup
pricesduringthesession,andsellersbringingdownthepricesbelow
theopeninglevel.
FourPriceDoji
Open,low,highandcloseareallequal.Thisistheclearestexample
ofindecisionbetweenbullsandbears.
Whenadojiformsonyourchart,payspecialattentiontothe
precedingcandlesticks.
IfaDojiiscreatedafteraseriesofcandlestickswithlonghollow
bodies,thesignspointtowardsthebuyersbecomingweaker.To
maintainarisingpositionmorebuyersarerequiredbuttheyare
conspicuousbytheirabsence.Sellersareinthewingstodrivedown
theprices.

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RetaininyourmindthataDojidoesnotmeanashortisalways
existent.Lookforfurtherclarification.Waitforabearishcandlestick
toclosebelowthelonggreencandlesticksopen.

ShouldaDojiformafteraseriesofcandlestickswithlongfilled
bodies,(akintoredMarubozu),theDojiisindicatingsellersare
fallingaway.Theyneedmoresellerstostrengthentheirposition.
Buyersareloiteringtoforcethepricesbackup.

Whilethedeclineisfalteringasnewsellersareinadearth,further
buyingstrengthisrequiredtocementanyreversal.Keepalookout
foragreencandlesticktocloseabovethelongredcandlesticks
open.

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ReversalPatterns
PriorTrend
Forapatterntoqualifyasareversalpatternthereshouldbeaprior
trendtoreverse.Bullishreversalsaremarkedbyapreceding
downwardtrendasopposedtotheprioruptrenddepictingabearish
reversal.Thetrendistraceableviatechnicalanalysis.
Thetrendlinedeterminedthetrenddirectionbeforethereversal.

15

HammerandHangingMan
Thevisualappearanceofbothchartsisthesamebutbothhavea
differentmeaningdependingonapastpriceaction.Bothhavelittle
bodies,(greenorred),longlowershadowsandshortorindeed
absentuppershadows.

Thehammerformsduringadownwardtrendandindicatesabullish
reversalpattern.Thenamehasbeenappliedtothistrendasthe
marketishammeringoutabottom.Hammerssignalthatthe
bottomisimminentandpriceswillrecover.Thistrendoccurswhen
priceisfalling.Thelonglowershadowindicatesthatsellerspushed
priceslower,andthatdespitesellingpressurebuyerscouldsustain
themarkettoallowpricetocloseneartheopen.
Onedoeshoweverneedtoretainasenseofcautionwhenseeinga
hammerforminadownwardtrend.Itmaybeatriggertobuybut
caveatemptorisalwaysagoodpolicy.Amorebullishindicator
wouldassistinreducingyourrisk,

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RecognitionCriteria
Thelongshadowisabouttwoorthreetimesthelengthofthe
realbody.
Littleornouppershadow.
Therealbodyisattheupperendofthetradingrange.
Thecolouroftherealbodyisnoimportance.
Thesearesimilartotheabove,savethatthebodycolouris
unimportant,thougharedbodyismorebearishthanagreenbody.
Thehangingmanwhichmarksastrongresistancelevelrepresentsa
bearishreversalpattern.Aspricesrise,theformationofahanging
manpredictssellersareinpreponderanceoverbuyers.Thelong
lowershadowelicitsthatpriceswerepushedlowerbytheseller.
Buyersdidforcepricesupbutonlytoapositionneartheopen.The
indicationisnobuyersareavailabletoraisetheprice.

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InvertedHammerandShootingStar
Theinvertedhammerandshootingstarlookidentical.The
singulardifferenceiswhetherthetrendisupwardor
downward.Bothcandlestickshaveminutebodies,(filledand
hollow)longuppershadowsandsmallorabsentlowers
shadows.

TheInvertedHammerindicatesthepossibilityofareversalas
thepricehasbeenonthefall.Itslonguppershadowshowsthe
buyerstriedtobidthepricehigher.Nonetheless,sellers
reactedtothebuyersactionsandattemptedtoreversetheir
actions,butthebuyersmaintainedtheirpositionbyclosing
neartheopen.Thisallowsustopresumethatthesellers
positionwasweaksothebuyersassumetheirposition.
Theshootingstarisidenticaltotheinvertedhammerinthatit
isabearishreversalpattern,butoccurswhenthepricehas
beenrising.Itsshapeshowsthatthepriceopenedatitslow,
recovered,butfellbacktoitsbase.Inthissituationthesellers

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haveoverpoweredthebuyers.Thisisabearishindicatordueto
theabsenceofbuyers.

SummaryofCandlesticks
Candlesticksuseallfourpositions,open,high,lowandclose.
Strongbuyingorsellingisindicatedbylongbodies.Thelongerthe
body,themoreintensethebuyingorsellingpressure.
Converselyshortbodiesareindicativeoflittlebuyingorselling.
Uppershadowssignifythesessionhigh.
Lowershadowssignifythesessionlow.
Candlestickswithalonguppershadow,longlowershadowandsmall
realbodiesarecalledspinningtops.Thepatternallowsonetosee
theindecisionbetweensellersandbuyers.
Marubozumeanstherearenoshadowsfromthebodies.Dependant
onwhetherthecandlesticksbodyisfilledorhollow,thehighand
lowarethesameasitsopenorclose.
Dojicandlestickshavethesameopenandclosepriceoratleasttheir
bodiesareextremelyshort.
Thehammertakesonabullishreversalwhichemanatesfroma
downwardtrend.Youwillrecallthehammerissonamedbecauseit
ishammeringoutabottom.
Thehangingmanisabearishreversalpatternindicativeofatopor
strongresistancelevel.
Whenpriceisfalling,thepossibilityofareversalisindicatedandan
invertedhammeroccurs.

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Theshootingstarisabearishreversalpatternthatreflectsthe
internalhammer,butoccurswhenarisingpriceispresent.
Thisisimportantinformation
Makeachartofallthesebasiccandlepatternsandreversal
candlestickpatterns,laminateitandstickitonyourdeskorwall.It
willcomeinveryhandytoidentifyreversalpatternsoncepricegets
intoyourtradingzone.
Okafterthatmouthfulletsmoveontosomeotherfunstuff,the
indicatorswewillusewiththissystem.

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SupportandResistance
Supportandresistanceisoneofthemostwidelyusedconceptsin
trading.Thepriceconcernpresentproducesalackofconsistencyin
application.
Whenthereisanupwardmovement,andthenareversalinthe
market,thehighestpointbeforeitispulledbackisknownas
resistance.
Whenthemarketregainsitsupwardtrend,thelowestpointreached
beforeitstartedtorecoverisknownassupport.

Indicators
Twokindsofindicatorsoccur:leadingandlagging.
Beforeanewtrendorreversaloccursaleadingindicatorwill
appear.
Alaggingindicatorlagsbehindthetrend.
Technicalindicatorshavetwocategories:Oscillatorsandtrend
followingormomentumindicators.
OscillatorscanbeStochastic,RSI,andParabolicSAR.
MomentumindicatorscanbeMACD,MovingAverages.
Fromthetypeofmarketyouaretradinginyoucanestablish
theappropriatedirection.

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ChartIndicators
Asyouaccumulateknowledgeyouareeffectivelybuildingyouown
toolbox.Someofthetoolsyoumighthaveare:
Stochastic
Indicatesovertradedconditions.
Thetimetosellbecausethemarketisoverboughtwhenthe
movingaveragelinesareabove80.
Thetimetobuyiswhenthemarketisoversoldandtheaverage
linesarebelow20.

RelativeStrengthIndex(RSI)
AkininprincipaltoStochasticinthatitportraysoverbuyingor
overselling.
Whentheindicatorisabove75,themarketisoverboughtand
sellingisthebestpath.
WhenRSIisbelow25,themarketisoversoldandbuyingshould
kickin.
RSIisalsoeffectiveintrendformations.Ifatrendisinthe
offingwaitfortheRSItogoaboveorbelow50.
Indicatorsarehoweveronlyguides,thusacombinationofthem,
alliedtoyourexperience,isthewisestapproach.Yourown
preferencescanbeestablished.

22

MACD
Agoodindicatorofspottingearlytrendmovements.
Itismadeupoftwodiametricallyopposedmovingaverages
andverticallinesasinahistogram,achartwhichmeasuresthe
distancebetweentwomovingaverages.
Movingaveragelinesarethoseofothermovingaverages.
Theproblemisthatasitusesmanymovingaveragesitisa
laggingindicator.
OnepossibleapproachtoaMACDistowaitforthefastlineto
eithercrossoverorcrossundertheslowlineandenterthe
tradeaccordingly,asitindicatesafreshtrend.

Thefollowingindicatorsarepositionedatthetopofthechart.
MovingAverage
Amovingaveragecanbeusedtoleveloutpriceaction.
Therearenumeroustypesofmovingaverages.The2most
commontypesare:SimpleMovingAverageandExponential
MovingAverage.
Simplemovingaveragesgivethemostadvantageousformof
movingaverages,butthespikingeffectrathernegatestheir
benefits.
Exponentialmovingaveragesstrengthentheweighttorecent
pricesandthusgiveabetterpictureoftradingactivity.

23

Thecurrentactivitiestakeprecedenceoverpastorfuture
predictedmarketactivities.
Irregularmovingaveragesrespondquickertopriceactionand
reacttotrendsbetter.Thedrawbackisthatthespikingeffect
againkicksinandthatcanremoveyoufromthemarket.
Smoothmovingaverageshaveatimelagtopriceaction,but
benefitfromthedeletionofspikesandfakeouts.Nonetheless,
duetotheirslowreaction,onecanmissoutontrade
opportunities.Theyareratherabeltandbracesapproachto
trading.
SimplemovingaveragesaresmootherthanExponentialmoving
averages.
Longerperiodmovingaveragesaresmootherthanshorter
periodmovingaverages.
WewilluseExponentialMovingAveragesonourcharts.
BollingerBands
Ameasureofthemarketsvolatility.
Seenasactinginasimilarfashiontominisupportand
resistancelevels.
ThetopBollingerbandwillbeamovingresistanceareaandthe
bottomBollingerbandwillbeamovingsupportarea.
Weekly/MonthlyPivotPoints
Pivotpointsfallintotherealmofprofessionaltradersand
marketmakers,andareusedtoestablishentryandexitpoints
basedoncurrentdaystradinginoppositiontothatofthe
priorday.Trendsneedtobefullyunderstoodbeforeusingthis
method,andprobablythisisanareaforprofessionalsandnot
retailtraders.
PivotsareseenasusefulinForex,asmanycurrencypairshave
atendencytofluctuatebetweentheselevels.

24

Rangeboundtradersentrancethemarketnearspecificsupport
levels,whilstwhenthepairsshowresistancetheywillissuea
sellorder.
BreakoutTradersusepivotpointstolocatekeylevelsthatneed
tobedisturbedforamovetobeconsideredasbonafide.
Aspivotalpointsarenoncomplexinthemain,placethemin
yourtoolbox.Theygivevisibilityofthecausaleffectsofprice
movement.Effectivelyyoucansynchroniseyourthinkingwith
marketchanges.
Supportpivotpointswithothertechnicalanalysistoolssuchas
candlestickpatterns,MACDcrossover,MovingAverages
Crossovers,Stochasticoverbought/oversoldlevelsandtrend
linebreakatpivotpointareas.
Alwaysrememberthatinalltradingthereisrisk,sothegreaterthe
analysisandsupportingpatternsyouemploytosupportthedecision
youtake,thechancesofasuccessfultradeareincreased.
ThiswasasuccinctapproachtoForex,butbynomeansa
comprehensiveoutline.Ithasbeendrawnuptokeepyoufromthe
initialpitfallsoftrading.Oneshouldneverforgetthatthrough
tradingyouwillbuildupabankofknowledgewhichwillbebasedon
thesolidfoundationsgainedfromtheprecedingdefinitionsandtips.
Sonowwearereadytomoveon.Itisgoodtoreviewsomechart
examplesandindicators.

25

Chart1:OnthischartwehaveanexampleofaBollingerbandand
threeExponentialMovingAverages

26

Chart2:OnthischartwehaveanexampleofStochastic,RSIand
MACDindicatorwithourEMAsandBollingerbands

27

Chart3:Onthischartwehaveanexampleofweeklypivotpoints
ona4hourchart

28

Chart4:Onthisexamplewehaveacompletechartwithallour
indicators
Thisishowyour4hourorDailychartwilllooklikedontworryitis
notasbadasitlooks.

Nowyouarealmostreadytotrade

29

Earth&SkyTradingSystemOverview
1) MarketTraded:Currencies.
2) Sessions:Thesystemissuitableforanysession.
3) Pairs:Iplacemycurrencypairsinto4groupsanyoneofthe
pairscanbetradedinthisgroup.
4) Charts:Dailyand4hourchartswitha30/60min.chartentry
whenpricegetstoapreferredtradingzone.
5) ChartingSoftware:MetaTrader4
6) Accounttype:MiniaccountThemaximumamountofmoney
youcanhaveinthistypeofaccountwithsomebrokersare
$50000.Whyaminiaccount?Onelotsizeequalsonedollar.This
makesmylifeeasiertochoosethepreferredlotsizetotrade
whenIplaceanorderandingeneralmakethinguncomplicated.
7) Indicators:Stochastic,MACD,RSI,Bollingerbands,EMAs,
Weekly/MonthlyPivotPoints,DailyRangeCalculatorandmy
verticallinesthatwillhelpyoutodrawtheFiblinesonaDailyor4
hourchartyouneedfortheupcomingtradingweekormonth.
(Rightclickonyourchart,gotoproperties,inpropertiesgoto
`COMMON`thenclickonthe`Showperiodseparator`)
8) Thissystemwillhelpyouwithfourthingsmosttradersstruggle
with:Thepreferredtrend,areastolookforentries,areastolook
forstops,areastolookforprofittake.

30

AStressFreeTradingPlanandSystem
Inordertobecomeaprofitablecurrencytrader,youwillneeda
descenttradingplan.Atradingplanwillbeyourrulebookand
currencybible.Withoutityouwontsecedeasatrader.Readitevery
dayandsticktoit.
Youcanhaveallthetradingtoolsintheworld,butifyoudonthave
aplanonhowyouwillusethem,youwillneverbesuccessful.
Remember,youarestartingabusiness,andifyouwantyour
businesstosucceed,youneedtohaveaPLAN!
Whatcurrencieswillyoutrade?
1)EURUSDagainsttheUSDCHF.(Moveinoppositedirection).
109pipsperday
2)EURJPYagainsttheGBPUSD.(Moveinsamedirection).
112pipsperday
3)AUDUSDagainsttheAUDJPY.(Movesamedirection).
72pipsperday
4)EURGBPandtheUSDJPY.(Leftoverpairs).62pipsperday
Thepipsyouseenexttoeachgrouparethedailyaverageforthe
specificgroup.Thisishandyformanualprofittake.Althoughitsa
dailyrange,italsohassignificanceontheweeklyrange.Soletssay
IaminaEURUSDtradeandIam109pipsinprofit,youmightwant
tostarttolookforreasonswhypricemightstarttostruggleatthis
areaandmanuallyexitthetrade.

31

Letsseewhatcorrelationmeans
Correlation:Correlationisastatisticalmeasurementofthe
relationshipbetweentwovariables.Possiblecorrelationsrangefrom
+1to1.
Azerocorrelationindicatesthatthereisnorelationshipbetweenthe
variables.
Acorrelationof1indicatesaperfectnegativecorrelation,meaning
thatasonevariablegoesup,theothergoesdown.
Acorrelationof+1indicatesaperfectpositivecorrelation,meaning
thatbothvariablesmoveinthesamedirectiontogether.
IdontliketheCADpairssoIdonttradethem
AfterdumpingtheCADpairsitwillleaveyouwith8pairs.Butnow
youhavetobecareful.Why?Someofthemarecorrelated
meaningtheygointhesamedirectionorthesomeoftheminthe
oppositedirection.Ihave2monitorsallocatedforchartssoIplace
thefollowingpairsnexttoeachotherin4groups.
The4Groupsare
1)EURJPYagainsttheGBPUSD(Positivecorrelation).
2)AUDJPYagainsttheAUDUSD(Positivecorrelation).
3)EURUSDagainsttheUSDCHF(NegativeCorrelation).
4)EURGBPagainsttheUSDJPY(Leftoverpairs).
Sonowyouonlyhave4possiblecurrenciestotradefortheweek.
Whyonly4currencies?Becauseofthecorrelationthatcomesinto
play.Ifyougetasignalforasetupyouwillonlytakeonepairata
time.Whenthesechartsarenexttoeachotheryouwillbeableto
seethebettertradeofthetwothatisformingorwhichonehasthe
biggerprofittakepotentialwiththesmalleststop.
Placingthepairsnexttoeachothercanalsobeusedasconfirmation
ifyouwanttotakeatrade.Sosayyoumightwanttotakeanentry

32

ontheEURUSDbecauseofatrendlinebreakataweeklypivotlevel
changesaregoodyouwillseeitontheUSDCHFchartaswell.
Itcanalsoshowyouwhennottotradethisgroup.Ifitlookslikethe
correlationofthegroupisabitmessyfortheweekdonttradethat
specificgroup.
Exampleofcorrelationplacingtwochartsnexttoeachother
Thisisa4hourAUDUSDandanAUDJPYchartnexttoeachother.
Thesetwopairsmoveinthesamedirection.Whenontrendsdown
theotheronewillfollow.Havealookonthechartsattheblue
rectangles.Noticehowbothcurrencypairswentoutsidethe
Bollingerbandbeforebothstartedtotrenddown.Thisiscorrelation
atwork.

33

TradingTimes
MondaytoThursday:
YouwillmanageopentradesonFridays.
YouwillhavenonewentriesonFridays.
YouwillnottradeNonFarmPayrollNews(noproblemyou
donttradeFridays).
Youwillnottradeinterestrateannouncements.
Youwillnottradeanyotherkindofnews.
YouwillnottradeUSAorEuropeanbankholidays.

34

Fibonacci

YourFibonacci(Fib)Settings:0,50,62.5,75and100.(Yourtrading
zonewillbebetweenthe50%and75%Fiblevel)Thatwillbethe
lightblueareaonmychartexamples.

Thisistheonlyareawhereyouwillstarttolookforyourweekly
entries.Ifpricegetstothetradingzoneandyouhavethetime
movedowntothesmallertimeframeslikethe60minor30min
chartandwaitforacurrenttrendlinebreak.

Ifyouwaitforthetrendlinebreak,pricewillshowyouwhereto
placeyourstop.Thiswillbeabovetheprevioushighorlowbefore
thetrendlinebreakhappenedoryoucanlookatthecandlestothe
leftofthechartafterthetrendlinebrakethatwillgiveyousupport
orresistancelevelsthatcanbeusedforstopareas.

ThisisyourTradingZoneBetweenthe50%and75%Fibpullback
area.Onlywhenpricegetshereyouwillattempttohitahomerun.

35

Exampleofatradingzoneona4hourchart

Gettoloveacurrenttrendline!

YouwouldhavenoticeinmypreviouspoststhatIabsolutelylove
currenttrendlines.Why?Itgivesyoutheconfirmationyouneedto
takeatrade.

Youcantjusttrustareasofsupport,resistance,pivots,Fiblevelsand
therestofitforanentry!!Thiswillbetheareasofinterestforus
wherewewilllookforpotentialtradesetups.

InorderforustotakethetradeweneedconfirmationHow?A
currenttrendlinebreakwillgiveyouthatconfirmation.Ifwewaitfor
thetrendlinebreak,wewillbeabletoseewheretoplaceourstops
andwheretolookforprofittakeareas.

Hereissomethingthatissosimplethatyoualwaysmustaskyourself
beforeyouplaceatrade.(Youcantdoitwithaforwardorder)

36

Sayyouarelookingtogoshortatalevelbutpricegetstoyour
50%Fibtradingzonelevelaskyourself`Self,didpricebreakmy
currentbulltrendline?`

Iftheanswerisnowhydoyouwanttoshorthere?Nowpricegets
tothenextlevelofinterestaskthesamequestiondontjusttrust
EMAspivotsandtherestoftheindicators.Toassumethingsin
tradingisdangerous..................assumestandsfor:MakinganASS
OFYOUANDME!!

Rememberalltheindicatorsweusecangiveusanindication,aguide
lineifpriceisinanoverboughtoroversoldareabutatrendline
breakwillgiveustheconfirmationthatthepricehasturnedand
swingtheoddstoourside.

THEONLYTHINGYOUNEEDTOTRUSTISTHEQUESTION
`Didpricebreakmycurrenttrendline?`

WhatisthemeaningofConfirmation?
1.
a.Theactofconfirming.(Areawherepricemightreactlike,inthe
tradingzoneatEMAs,Fibs,pivotpointsthistypeofthing.)
b.Somethingthatconfirms;verification.(Pricebrokethetrendline
attheseaeries)
2.
a.AChristianriteadmittingabaptizedpersontofullmembershipina
church.(Sothatyoucanstartprayingthatyoudidtherightthing.)
b.AceremonyinJudaismthatmarksthecompletionofayoung
person'sreligioustraining.(Everybodyishavingapartybecauseyou
madeitasatrader)

Trendlinesareprobablythemostcommonformoftechnical
analysesusedtoday.Theyareprobablyoneofthemost
underutilizedaswell.

37

Ifdrawncorrectly,theycanbeasaccurateasanyothermethod.
Unfortunately,mosttradersdon'tdrawthemcorrectlyortheytryto
makethelinefitthemarketinsteadoftheotherwayaround.
Intheirmostbasicform,anuptrendlineisdrawnalongthebottom
ofeasilyidentifiablesupportareas(valleys).Inadowntrend,the
trendlineisdrawnalongthetopofeasilyidentifiableresistance
areas(peaks)

Howtodrawacurrenttrendline:

1) DownTrend:Connectthelatestcyclehightothelastcycle
high,whichmustbehigherthanthefirstonedrawingfrom
righttoleft.

38

2) UpTrend:Connectthelatestcyclelowtothelastcyclelow,
whichmustbelowerthanthefirstonedrawingfromrightto
left.

39

Yourtradingwindowsyouwillhaveopenonyourplatform

DailychartwithmonthlyFibssetwith......200,55,34EMA,
BollingerBandssetat2002.The34/55EMAsetsthemain
tradingdirection.

40

4HourchartwithweeklyFibs,setwith......200,55,34EMA,
BollingerBandsetat2002.The34/55EMAsetsthe
current4hourtradingdirection.

MACDwithsettings:12,26,9.
Stochasticwithsettings:Kperiod12,slow6andDperiod3
(8020).
RSIwithsettings:9withamiddlelineat50(7525).

41

Setupforentry
Youwilltrytoonlytradethe4hourchartwhenthedirectionof
the4hourandtheDaily34/55EMAarepointinginthesame
direction.(Havealookatthe34and55EMAonbothcharts
theyarebothtrendingdownaccordingtothe34and55EMA.)

42

Earth&Sky

34EMABlue(Sky)55EMABrown(Earth)Ifblueisabovebrown,
youwilllookforlongs,ifblueisunderbrown,youwilllookforshorts
inthemarket.Remembertheblue=Skyandbrown=Earth.Thiswill
giveyouanimmediatesenseofdirectioninthemarket.IftheSkyis
abovetheEarththenthemarketislong,iftheSkyisundertheEarth
thenthemarketisshortonthatspecifictimeframe.

ThisisanexamplewheretheSkyisundertheEarth=marketis
shortonthis4hourchart.Thatmeanswewillonlylookforentries
toshorttofollowthe4hourtrenddirection.

43

Ifthe4hourEMAisdifferentfromtheDailyEMA,thenyouwill
moveawayfromthe4hourchartonthispairandlookforan
entryonlyonthedailychart.RemembertheDailychartwill
havethemonthlyFibonit,nottheweeklyFib.Let`shavea
lookatanexamplewithFibsonaDailychart.
The34EMAisabovethe55EMA,sothedirectionisup.Last
monthsopeningpricewaslowerthantheclosingpricesowe
canFibfromthebottomtothetopfrompoint1topoint2on
thechart.CanyouseehowtheverticallinesontheDailychart
breaksuptheareaintomonthlypartsalsonoticeonthechart
thatpricedidntgiveasthepullbackwewantedinthe
beginningofthemonthandhowIfollowedpricewithmyFib
untilwedidgetthepullback(blueareaonthechartatpoint2)
Youwillonlystarttradingthe4hourchartwhenthedirection
isthesameagainastheDaily.

DailychartwithmonthlyFib

44

Ifyouwanttostayonthe4hourchartbutcantFibthe
previousweekbecausetheclosingprice(likeinthischart)was
higherthantheopeningpriceoflastweekbuttheEMAsstill
tellsyouthedirectionisdownyoucanplaceweeklypivotson
the4hourcharttoidentifyotherareasofinterest.Havealook
atthisexample.TheEMAstoldusthedirectionisdown.Notice
priceisatthe1steweeklypivotresistanceareawitha200EMA
intheway.PriceisalsooutsidetheBollingerband.Nowyou
willmovedowntoasmallertimeframe,placeyourcurrent
trendlineandwaitforthetrendlinebreakbeforeweplacean
ordertogoshort.

4HourChartwithweeklypivots:

45

OnaDailyChartwewillhavethemonthlytradingzone
betweenthe50%75%Fibarea.
Ona4HourChartwewillhavetheweeklytradingzone
betweenthe50%75%Fibareas.
Nowyouhaveidentifiedapossibletradingzoneareawithyour
Fibwherepricemightreact.

4HourChartwiththeupcomingweekstradingzoneandMarc
WaltonsForexMentorProAnalysisforpotentialtradeareas.

Ifpricegetsbacktoorintothetradingzone,thenyouwillpay
attentiontotheMACDwhereisthehistogram?Whatisit
doing?Stochasticisitcrossinginanoverboughtoroversold
area?IstheRSIinanoverboughtoroversoldarea?What
candlepatternscanyousee?Whatishappeningonthe1hour

46

chartgoingthrutheaboveindicatorsagainaskingyourself
whataretheydoing?

4HourChartwithweeklyFibsandthetradingzone

Afteryoumoveddowntoasmallertimeframelikea30or60
minchart.Placeacurrenttrendlineandwaitforthebreak
beforeyouplaceanorder.Ifyouareabletowaitforthetrend
linebreak,thenyouwillbeabletoseewheretoplaceyour
stopthatwillmeanyoucanhaveabiggerlotsizethanifyou

47

wereonlytotradewithforwardorderthatrequiresingenerala
biggerstop.Thisisthesamecurrencypair,sametradingzone
butona1hourchartsotheverticallinesyouseeonthechart
breakstheweekupnowintodailyintervals.Payattentionto
theMACDwhereisthehistogram?Whatisitdoing?
Stochasticisitcrossinginanoverboughtoroversoldarea?Is
theRSIinanoverboughtoroversoldarea?

1Hourchartwithtrendlinebreak

48

Whatlotsizecanyoutrade?

Beforeyouplaceanorderworkoutthelotsizeyoucantrade.Todo
thisyouneedtoknowhowmuchofyouraccountyouaregoingto
riskandwhatisthestoppipvalue.Thishandycalculatorwillhelp
you.Neverriskmorethan2/3%ofyouraccountpertrade.
MiniAccountwith<$5,000

LetssayyouarelookingtotakeatradeontheGBPUSDandyou
haveastopof50pipsandyouarerisking3%ofyouraccount.The
calculatorwilltellyouthatyourlotsizewillbe3.0forthistrade.If
youhadastandardaccountitwouldhavebeen.3forthistrade.

StandardAccountwith$5,000+

49

StopsandExits:
Stopshavetobe@the75or100%Fiblevelsifyoutrade
forwardorders.YouwilllookforEMAs,Bollingerbandsand
pivotlines,trendlinesthatcanbeuseasabarrierbetween
yourentryandyourstop.Soletssayyouplaceaforward
orderatthe50%Fibpullbackarea,youwillhavetoplaceyour
stopatthe75%Fibpullbackarea.Thisisanexampleona4
hourchartwitha200EMAthatgivesyouthebarrierbetween
yourentryandstop.

Ifyouhavethetimeandtradethecurrenttrendlinebreakin
thetradingzoneareaonthesmallertimeframes,thenyoucan
haveyourstopsabovetheprevioushighorlowpricemade
beforethetrendlinebreakoryoucanlooktotheleftofthe
charttoidentifysupportandresistancelevelsthatcanbeused
forstopareas.LookforEMAs,Bollingerbandsandpivotlines,
anythingthatcanbeuseasabarrierbetweenyourentryand
yourstop.Thisisanexampleofatrendlinebreakforthesame
currencypair,sametime,andsametradingzoneastheabove
chartbutona1hourchart.Stopscanbeplacedafterthetrend

50

linebreakacoupleofpipsabovethehighpricemadebefore
thetrendlinebreak.

Profittake:IfyouFibtheareainbetweentheoriginal0%to
50%Fibarea,itwillgiveyouyour1st,2ndand3rdprofittake
areas.(Usingthe50%asyour1stetarget,75%asyour2nd
targetandthe100%asyour3detarget).

DontworryifyoudontunderstandIwillshowyouwithan
example.

51


RememberyouwillFibtheareabetweentheoriginal0%and50%Fib
togetthepotential3profittakeareas.
Youneedtohavealookwherethetop/bottomoftheBollinger
bandsareinrelationtothe3rdprofittakeareabecausethiscan
placearoadblockbetweenthepriceandthe3rdtarget.
SomethingIhavenoticeovertimeisifyougetanentryatthe
75%Fiblevel,youwillhavetolooktomakeyour1steprofit
takeareaattheoriginal50%Fiblevel.Entrysat75%Fiblevel
tendstobesmallermovesthanentriesat50%Fiblevelthat
tendstogobackto0%Fibslevel.
WAITFORPRICETOCOMETOYOU!!
(Thisisthehardestpartofthesystem!)

52

Stuffyouwillneed
1)
2)
3)
4)

WeeklyPivotindicator:Download
MonthlyPivotindicator:Download
Dailyrangecalculator:Download
Lotcalculator:http://currensys.com/FreeForex.php
Whentotradeandwhennottotradethatsthequestion!

Yes,itistruethattheForexisopen24hoursaday,5daysaweek,
butthatdoesntmeanitsalwaysactivethewholeday.Youcan
makemoneyintheForexwhenthemarketmovesup,andyoucan
evenmakemoneywhenthemarketmovesdown.However,youwill
haveaverydifficulttimetryingtomakemoneyoncertaindays.
Hereisacoupleofsuggestionswhentotradeandwhentositon
yourhandsgofishingorgoshoppingwiththewife.

Whentotradeifyouwanttolosemoney!
Ifyoureallydonotwanttotradeduringthebusiertimesofthe
marketwhentradevolumeandpipmovementishighestandwhere
youwillmakemoneyeasier,thenbyallmeans,feelfreetotradeon
thesetimesmentionedbelow.Iguaranteeyoullhaveamore
difficulttimetrading!
Fridays:Fridaysareveryunpredictableandisagooddayto
tradeifyouwanttolosetheprofitsyoumadeduringtheweek.
Sundays:Thereisverylittlemovementonthesedays.
Holidays:Banksareclosedwhichmeansverylittlevolumefor
whatevercountryishavingtheholiday.Holidaysaregreatto
tradewhenyouwouldratherloseyourmoneythantakeaday
offandenjoytheotherthingsinlife.

53

NewsReports:Noonereallyknowswherethepricewillgo
whenanewsreportcomesout.Youcouldloseafortune
tradingduringnewsreleasesifyoudon'tknowwhatyou're
doing.
Pipranges
Afterabitofresearchlookingatthepiprangeforthe4majorpairs
foreachdayoftheweek,whatdidIlearn?
Wellitlookslikethemiddleoftheweekisthetimetolookforthat4
hourordailyM2entry.ThatwillbeonaTuesdayandWednesday.
Fridaysareusuallybusyuntil12pmESTandthenthemarketpretty
muchdropsdeaduntilitclosesat5pmEST.

54

MyWorkStation
Thebestwillbetohave2monitorssothatyoucanruntwo
correlationpairsnexttoeachotherlikesaythe4hourEURUSDchart
againsta4hourUSDCHFchart.

Incurrencytradingyouneedtoseethingsclearly.Thisisdifficulton
alaptop.Ifyouarenotabletoseeclearly,itmightcostyoumoneyor
youmightloseoutonagoodtrade.

Ihavethreemonitors,oneasmymainworkstationandmysecond
andthirdamallocatedformycharts.

OnmydeskIhavealaminatedcopyofmystressfreetradingplan.
ThishelpsmetokeepfocusedonwhatIwantpricetodobeforea
takeanentry.

OnmywallIhaveablackboardwithaweeklytradingrecord.This
helpsmetoseewhereIamfortheweek/monthandwhatneedto
bedonetoreachmymonthlytarget.

Thelastbutnottheleastisareliablycalculator.Youwillusethis
everydayworkingoutstops,pips,profittakeareasandlotsmore.

55

Nowthatyouhaveseenthesystemhowdoesitwork?
Tradingformeisallaboutlevels.Youhavenoticetraderstalkabout
sellingtheralliesinadowntrendorbuyingthedipsinanuptrend.
Thissystemwillhelpyouwithfourthingsmosttradersstrugglewith:
1)
2)
3)
4)

Thepreferredtrend.
Areastolookforentries.
Areastolookforprofittake.
Areastolookforstops.

Thissystemwillshowyouwherethereisapotentialrallyorpotential
dipforaspecificcurrencypairinthemarket.Theseralliesordipswill
usuallybeinthepreferredtradingzone.
Armedwiththisinformation,youwillbeabletoidentifythebetter
levelsinthemarketforyourpotentialentry.
FirstyouneedtoknowhowtoFibit
Thisisthebackboneofthissystem.Firstyouneedtochangeyour
valuesonyourFibtomysettings.Youonlyneedthe0%,50%,62.5%
andthe100%settings.
Sometimesyouneedtobealittlecreativewiththewayyoudraw
yourFibs.
Remember,wearelookingforatradingzonewherewewilllookfor
possibleentriesnotaspecificvalue.
Thiswillcomewithpracticeandlateryouwillfinditsecondnature
anddoitwithoutanyheadaches.
Tomakemytradingzonemoreobvious,Iwillhighlightitwitha
rectangle.Doitonyourchartsaswellitmakesitsomuchessayerif
yougothruthechartstoseewhichcurrencypairisinthetrading
zone.

56

SomethingoneofourmemberspostedregardinghowtodrawFibs:
TheonlytroublewithaFibbeingsubjectiveissometimesitfeelslike
I'mtryingtomaketheFibfitandareaI'minterestedin.Butvery
oftenitiscorrect.

MaybethisisthecorrectapproachforFibbingaswearelookingfor
confluencewhenlookingforareasofinterest.
Intheenditneedstobelikeapuzzlewhereallthepiecesfit
togethertogiveyouthatconfluenceweneedtoidentifythemore
appropriate/bettertradingzone.
Letshavealookatsomeexamples.
1) Normalmarket:4hourchartforweeklyFibs.
Weareinadowntrend;The34EMAisunderthe55EMA.Last
week`sclosingpricewaslowerthantheopeningprice.Sonowyou
needtoFibfromlastweekshightolastweekslowtogetthis
weekstradingzone.Youdonthavetochangecharts.Allthe
informationyouneedisonthe4hourchart.
RememberFibfromlastweekshightolastweekslow.

57

AUDJPY4HourChart

2) FallingMarket:4hourchartforweeklyFibs.
Weareinadowntrend;The34EMAisunderthe55EMA.Last
week`sclosingpricewaslowerthantheopeningprice.Sonowyou
needtoFibfromlastweekshightolastweekslowtogetthis
weekstradingzonebutpricewasfallingpastlastweekslow
withoutapullbackonMondayandTuesday.
NoproblemfollowpricewithyourFibuntilyoucanseepriceis
makingthepullbackweneed.YouwillFibfromlastweekshighto
thisweekscurrentlowtogetthisweekstradingzone.Youdont

58

havetochangecharts.Alltheinformationyouneedisonthe4hour
chart.
RememberFibfromlastweekshighfollowingpriceinthecurrent
weektillyouseethepullback.
EURO/$4HourChart

3) DrawingFibsonaDailychartformonthlyFibs.
SometimestheneedarisestodrawmonthlyFibsonadailychart.
Thiswillbewhenthe4hourEMAsaregoingintheopposite
directionfromtheDaily34/55EMAs.
Remembertheverticallines.Onadailychartitwillgiveyoumonthly
intervals.So,noneedtostress.Youdoexactlythesameasyou
wouldhavedoneona4hourchartnowyouwillhavethemonthly
tradingzoneonadailychart.NoticehowIfollowedpriceinthe
beginningofthemonthwiththeFibuntilthepullback.

59

Weareinanuptrendonthischart34EMAisabovethe55EMA
trendingup.Remember:SkyisaboveEarth.
SowewillhavetoFibfromlastmonthslowtolastmonthshigh
butwehadtofollowpriceuntilpriceturnedforthepullbackwe
needtogetthecurrentmonthstradingzone.
GBPUSDDailyChart:

60

Letshavealookatsomeexamplesusingthissystem:
1) Exampleofasell:USDCHF4hourchart15Augustto22
August2010
Whattolookforandwhattodo:
Mondaymorningyouopenyourchartsandstartdoingyouranalyses
fortheweek.
DailyChart:The34EMAisunderthe55EMA=Maindirectiondown.
Moveto4hourchart:The34EMAisunderthe55EMA=Direction
down(SameastheDailychart)
NowweneedtoFib.Lastweektogetthisweekstradingzone.First
havealookatwhatpricehaddonelastweek.Alltheinformationyou
needisonthe4hourchart,youdonthavetochangetoaweekly
chart.Byusingtheverticallinesonthechart,youwillbeabletosee
lastweekspriceactionwithinlastweeksblockandusethatto
informationtoFibtogetthecurrentweekstradingzone.
Theopeningpriceoflastweekwashigherthantheclosingpricefrom
lastweek,soitwastrendingdownthatmeanswewillhavetoFib
fromlastweekshightolastweekslowtogetourtradingzonefor
thiscurrentweek.
Afterdoingthatwehaveour
1)0%Fibat1.02560
2)50%Fibat1.03941
3)75%Fibat1.04632
4)100%Fibat1.05322

61

Youhaveidentifiedthepreferredareatolookforyourweeklyentry;
thetradingzonewillbebetween1.03941and1.04632.
Nowyouwaitbutstaywiththe4hourchartforpricetocometo
you.
Pricecameintoourtradingzonewhatnow?
Askyourself:
1) WhatistheBollingerbanddoingispriceoutsideitisitaonein
amillionyearsBollingerband?Isittrendingdown?
2) Isthe34/55EMAstillopenandstilltrendingdown?
3) Whereisthe200EMAinrelationtoprice?
4) WhatismyStochasticdoingisitcrossingisitinthe
overboughtarea?
5) WhatistheRSIdoingisitintheoverboughtarea?IstheRSIline
crossingthe50middleline?
6) WhatistheMACDdoingisthehistogramcrossingoraboutto
cross?Whatarethe2movingaveragelinesdoing?Isitopenor
abouttocross?
7) IsMarc`spotentialentrypointnearthisarea?
8) Isthereawholenumberinthetradingzone?

62

4HourUSDCHFchartwithweeklyFibs

Afteryouhadalookatalltheabovequestionsmovedown
toa30ora1hourchart.
Placeyourcurrenttrendlineandwaitforthetrendlinebreak.This
trendlinewillalwaysbeintheoppositedirectionofthepreferred
trendinthiscaseitwillbeabulltrendlinethatneedstobebroken.
Whileyouarewaitingforthebreak,gothruallthequestionsagain
asyoudidonthe4hourchartbutthistimeusingthe1houror30
minchart`sindicators.

63

Whileyouarewaitingforthetrendlinebreak,identifyareaswhere
youwillplaceyourstoplookforprevioushighstotheleftofyour
chart,pivotpoints,Bollingerbands,EMAs.Lookforsomethingyou
canplacebetweenyourentrypriceandyourstopthatwillreactasa
barrier.
Okpricebrokethetrendlinewaitforthatcandletocloseunder
thetrendlinebeforeyouplaceyourtrade.
Beforeyouplaceyourtradequicklygototheriskcalculatorand
workoutthelotsizeyoucantrade.Remembernotmorethan2/3%
ofyouraccountpertradeandknowthestopinpipvaluebeforethe
calculatorcanbeused.
Youplacethetradeyouidentifiedanareatoplaceyourstopnow
(inthiscaseabovethehighpointpricemadebeforethetrendline
break)weneedtoidentifyareasforprofittake.
Fibtheareabetweenyourprimary0%and50%areafromthe
bottomtothetop.
Yourpotentialprofittakeareaswillbe
1) 50%Fibat1.03262
2) 75%Fibat1.02921
3) 100%Fibat1.02560
(This100%Fibareawillalsobetheoriginal0%ontheprimaryFib)
Pricecamedownpastourfirstprofittakeare.Wedecidetotake
profitatoursecondprofittakeareabecausewehadaBollingerband
thewayonthe4hourchartthatcouldactasabarrierbeforeprice
willgettothe3deprofittakearea.(Havealookatthe4hourchart
andseeifyoucannoticethebottomBollingerband.)

64

USDCHF30Minchartwithtrendlinebreak
Fibtheoriginal0%to50%Fibareatogettheprofittakeareas.

65

2) Exampleofabuy:
Whattolookforandwhattodo:
Mondaymorningyouopenyourchartsandstartdoingyouranalyses
fortheweek.
DailyChart:The34EMAisabovethe55EMA=Maindirectionup.
Moveto4hourchart:The34EMAisabovethe55EMA=Direction
up.(SameastheDailychart)
NowweneedtoFib.Lastweektogetthisweekstradingzone.First
havealookatwhatpricehaddonelastweek.Alltheinformationyou
needisonthe4hourchart,youdonthavetochangetoaweekly
chart.Byusingtheverticallinesonthechart,youwillbeabletosee
lastweekspriceactionwithinlastweeksblockandusethatto
informationtoFibtogetthecurrentweekstradingzone.
Theopeningpriceoflastweekwaslowerthantheclosingpriceof
lastweek,soitwastrendingupthatmeanswewillhavetoFib.
fromlastweekslowtolastweekshightogetourtradingzonefor
thiscurrentweek.ThemarketopenedonMondaywithagapsowe
followedpricewithourFib.WewillFibfrompoint1topoint2.
Afterdoingthatwehaveour
1)0%Fibat0.9386
2)50%Fibat0.9275
3)75%Fibat0.9220
4)100%Fibat0.9160
Youhaveidentifiedthepreferredareatolookforyourweeklyentry;
thetradingzonewillbebetween.9275and.9220

66

Nowyouwaitbutstaywiththe4hourchartforpricetocometo
you.
Pricecameintoourtradingzonewhatnow?
Askyourself:
1) WhatistheBollingerbanddoingispriceoutsideitisitaonein
amillionyearsBollingerband?Isittrendingup?
2) Isthe34/55EMAstillopenandstilltrendingup?
3) Whereisthe200EMAinrelationtoprice?
4) Whatismystochasticdoingisitcrossingisitintheoversold
area?
5) WhatistheRSIdoingisitintheoversoldarea?IstheRSIline
crossingthe50middleline?
6) WhatistheMACDdoingisthehistogramcrossingoraboutto
cross?Whatarethe2movingaveragelinesdoing?Isitopenor
abouttocross.
7) IsMarc`spotentialentrynearthisarea?
8) Isthereawholenumberinthetradingzone?

67

4HourAUDUSDchartwithaweeklyFib

68

Afteryouhadalookatalltheabovequestionsmovedown
toa30ora1hourchart.
Placeyourcurrenttrendlineandwaitforthetrendlinebreak.This
trendlinewillalwaysbeintheoppositedirectionofthepreferred
trendinhiscaseitwillbeabeartrendlinethatneedstobebroken.
Whileyouarewaitingforthebreak,gothruallthequestionsagain
asyoudidonthe4hourchartbutthistimeusingthe1houror30
minchart`sindicators.
Whileyouarewaitingforthetrendlinebreak,identifyareaswhere
youwillplaceyourstoplookforprevioushighstotheleftofyour
chart,pivotpoints,Bollingerbands,EMAs.Lookforsomethingyou
canplacebetweenyourentrypriceandyourstopthatwillreactasa
barrier.
Okpricebrokethetrendlinewaitforthatcandletocloseunder
thetrendlinebeforeyouplaceyourtrade.
Beforeyouplaceyourtradequicklygototheriskcalculatorand
workoutthelotsizeyoucantrade.Remembernotmorethan2/3%
ofyouraccountpertradeandknowthestopinpipvaluebeforethe
calculatorcanbeused.
Youplacethetradeyouidentifiedanareatoplaceyourstopnow
weneedtoidentifyareasforprofittake.
Fibtheareabetweenyourprimary0%and50%areafromthe
bottomtothetop.

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Yourpotentialprofittakeareaswillbe
1) 50%Fibat0.9331
2) 75%Fibat0.9358
3) 100%Fibat0.9386
(The100%Fibwillalsobetheoriginaltop0%ontheprimaryFib)
Pricecameuppastourfirstprofittakeare.Wedecidetotakeprofit
atoursecondprofittakeareabecausewehadaBollingerbandin
thewayonthe4hourchartthatcouldactasabarrierbeforeprice
willgettothe3rdprofittakearea.Havealookatthe1hourchartand
seeifyoucannoticethetopBollingerbandactingasresistanceplus
thedoubletoppriceformedatourprofittakeareabeforeprice
startedtotrenddown.

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AUDUSD1hourchartwithtrendlinebreak
Fibthe0%to50%Fibareatogettheprofittakeareas.

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3) ExampleofaforwardorderyoufollowedpricewithyourFib
intothenewweek:
AUDUSD4Hourchart

Youwentawayfortheweekendandonlymanagetolookatyour
chartsonTuesday/Wednesdaymorningtodoyouranalysesforthe
restoftheweek.
DailyChart:The34EMAisunderthe55EMA=Maindirectiondown.
Moveto4hourchart:The34EMAisunderthe55EMA=Direction
down.(SameastheDailychart)
NowweneedtoFiblastweektogetthisweekstradingzone.First
havealookatwhatpricehaddonelastweek.Alltheinformationyou

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needisonthe4hourchart,youdonthavetochangetoaweekly
chart.Byusingtheverticallinesonthechart,youwillbeabletosee
lastweekspriceactionwithinlastweeksblockandusethatto
informationtoFibtogetthecurrentweekstradingzone.
Theopeningpriceoflastweekwashigherthantheclosingpricefrom
lastweek,soitwastrendingdownthatmeanswewillhavetoFib.
Fromlastweekshightolastweekslowtogetourtradingzonefor
thiscurrentweek,butyouwentawayandnoticepricealreadymade
anewlowthisweekbutisstartingtotrendbackup.Sowhatnow?
YouFibfromlastweekshightothiscurrentweekslowtogeta
potentialtradingzone.
Afterdoingthatwehaveour
1)0%Fibat1.02560
2)50%Fibat1.03941
3)75%Fibat1.04632
4)100%Fibat1.05322
Youhaveidentifiedthepreferredareatolookforyourweeklyentry;
thetradingzonewillbebetween1.03941and1.04632.
Younoticepriceistrendinguptoyourtradingzone;justunderthe
tradingzonewehavethe200EMAandthe55EMAonthe4hour
chart.Youneedtogooutandcantwaitforthetrendlinebreakon
thesmallertimeframes.
Youplaceyourforwardorderatthe50%Fiblevel1.03941
Youplaceyourstopatthe75%Fiblevelwiththe200and55EMAs
andtheBollingerbandasresistancebetweenyourentrypriceand
stop.Rememberforwardordersrequirebiggerstopsthanwhereyou

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havewaitedforatrendlinebreakthatmeansyourlotsizeforthis
tradewillhavetobesmaller.
YouFibtheoriginal50/75%Fibareatogetyourprofittakeareasand
noticethattherewillbeaBollingerbandbeforepricewillgettothe
3deprofittakearea.
Yousetyourprofittakeatthe75%Fib2ndeprofittakeareaand
walkaway.
Acoupleofhourslateryoucamebacknoticeyouareinprofitand
manageyourtradefromtheretillthepreferredprofittakeareais
reached.
Remembercurrencytradingisaddictive.

Mykidsalwaystellmewhentheyareupsetwithme
`Youarenotthebossofme!`
Thisisthewayhowyouneedtofeelaboutcurrencytrading.Trading
isnotyourbossbutifyouarenotcarefulwithitvery
addictive.

WhenIstarttofeellikeitistakingovermylifethenIknowitstime
totakeabreakfromit.Themarketwillstillbetherenextweek.
Whatismyadvicetoyouasanewtrader?
Sticktoatradingplan.Thatisyourcurrencybible.Itwillgiveyouthe
guidelinestobecomeaprofitablecurrencytrader.Withoutityouwill
belost.Withityoustandabetterchangeatthebattlefield.Withit,
tradingdoesnthavetobestressful.Youwillhavearoadmapforthe
weeksoyoucanbefocusedonwhatneedstohappenbeforeyou
takeatrade.

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AttachedyouwillfindashorterStressfreetradingplananda
probabilitystudyInorderforyoutokeeptradingthesystem,
makeacopy,laminateitandkeepitonyourdeskfordailyreference.
Usethechecklisttoassistyoubeforeyouplaceatrade.
Remembertoliveasimplelifeandgivebacktothecommunity.
Dontbebigmouthaboutyoutradesyouareonlyasgoodasyour
lasttradeinthisbusiness.
Regards

Pierre.
PierreDuPlessis
Manissomadethatwheneveranythingfireshissoul,
impossibilitiesvanish.
JeandelaFontaine.

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TradingCheatSheet
Currency
1)Euro/DollaragainsttheDollar/CHF.(Moveinoppositedirection).
109pips
2)Euro/JPYagainsttheGBP/Dollar.(Moveinsamedirection).
112pips
3)Aussie/DollaragainsttheAussie/JPY.(Movesamedirection).
72pips
4)Euro/GBPandtheDollar/JPY.(Leftover.)62pips
Iwillonlytake1groupentryatatimeIdonttradetheCADpairs.
(IfyoutradetheCADPairsincludedithere.)
Whythesepairs?ThesearethepairsMarctradessoIwillgethis
weekly/dailyupdatesandIwillgetbackupfromMarcandtheblog
membersifIneedit.
TradingTimes:MondaytoThursday
ManageopentradesonFridays.
NonewentriesonFridays.
DonttradeNFP.(NoproblemIdonttradeFridays)
Donttradeinterestrateannouncements.

FIBSetting:0,50,62.5,75,100.(Mytradingzonewillbebetween
the50%and75%Fiblevel).

ThisistheonlyareawhereIwillstartlookingformyweeklyentries.
Ifpricegetstomyzone,Iwilllookatmyindicatorstogivememore
confirmationregardingoverbought/oversoldareas.IfIhavethe
time,Iwillmovedowntothesmallertimeframeslikethe60minor
30minchartandwaitforacurrenttrendlinebreak.IfIwaitforthe
trendlinebreak,pricewillshowmewheretoplacemystop.This

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willbeabovetheprevioushighorlowbeforethetrendlinebreak
happenedorIcanlookatthecandlestotheleftofthechartafter
thetrendlinebreakthatwillgiveyousupportorresistancelevels
thatcanbeusedforstops.

Opentradingwindows

DailychartwithmonthlyFibssetwith......200,55,and34
EMAs,BollingerBandssetat20.The34/55EMAsetsthemain
tradingdirection.
4HourchartwithweeklyFibs,setwith......200,55,34EMAs,
BollingerBandsetat20.
MACDwithsettings:12,26,9.
Stochasticwithsettings:Kperiod12,slow6andDperiod3
(8020).
RSIwithsettings:9withamiddlelineat50(7525).

Setupforentry
Calculatelotsizeusinglotcalculatorsetat2/3%pertrade.
Iwillonlytradethe4hourchartwhenthedirectionofthe4
hourandtheDaily34/55EMAsarepointinginthesame
direction.
Ifthedirectiononthe4hourchartEMAsaredifferentfrom
theDailychartEMAs,thenIwillmoveawayfromthe4hour
chartandlookforentriesonaDailychartwiththemonthly
tradingzone.Onlyoncethedirectionofthe4hourEMAsis
thesameastheDailyEMAswillImovebacktoa4hourchart
asmymaintradingchart.
34EMABlue(Sky)55EMABrown(Earth)Ifblueisabove
brown,Iwilllookforlongs,ifblueisunderbrown,Iwilllookfor
shortsinthemarket.
OnaDailyChart:betweenthe50%75%=tradingzonearea=
monthlyFibs.

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Ona4HourChart:betweenthe50%75%=tradingzonearea
=weeklyFibs.
NowIhaveidentifiedapossibletradingzoneareawithmyFib
wherepricemightreact.
Ifpricegetstoorintothetradingzone,thenIwillpayattention
totheMACDwhereisthehistogram?Whatisitdoing?
Stochasticisitcrossinginanoverboughtoroversoldarea?Is
theRSIinanoverboughtoroversoldarea?
NowIwillmovedowntoasmallertimeframelikea30or60
minchart.Iwillplaceacurrenttrendlineandwaitforthe
breakbeforeIplaceanorder.IfIamabletowaitforthetrend
linebreak,thenIwillbeabletoseewheretoplacemystop
thatwillmeanIcanhaveabiggerlotsizethanifIonlytrade
withaforwardorder.

StopsandExits
Stopshavetobe@the75/100%FiblevelsifItradeforward
orders.IwilllookforsomethinglikeaBollingerband,pivot
point,EMA......thatIcanusebetweenmyentryandmystop.
IfIhavethetimeandtradethecurrenttrendlinebreakinthe
tradingzoneareaonthesmallertimeframes,thenIcanhave
mystopsabovetheprevioushighorlowpricemadebeforethe
trendlinebreakorIcanlooktotheleftofthecharttoidentify
supportandresistancelevelsthatcanbeusedforstopareas.
IfIFibtheareainbetweentheoriginal0%to50%Fibarea,I
willgetmy1ste,2ndeand3deprofittakeareas.Iwillhavea
lookwherethetop/bottomoftheBollingerbandsarein
relationtomy3deprofittakeareabecausethiscanbearoad
blockbetweenthepriceandthe3detarget.
IfIgetanentryatthe75%Fib,thenIwilltakemy1steprofitat
the50%Fiblevel.Entrysat75%Fibareatendstobesmaller
movesthanentriesat50%thattendstogobackto0%Fibs
area.
WAITFORPRICETOCOMETOYOU!!

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ProbabilityStudy
OnMondays
1) Whatisthedirectionofthedaily34/55EMA?UP/DOWN
2) Isthe4hour34/55EMAthesameastheDaily?YES/NO
3) IftheanswerisnotradefromtheDailychart.
4) DrawtheFibonyourpreferredtimeframe.
Questionsyouneedtoaskwhenpricegetsintothetradingzone
Lookingonthechart:

1) Whereisthe200EMAinrelationtoprice?
Answer:..........................................................................................

2) Isthe34/55EMAstillopenandstilltrendinginthepreferred
direction?
Answer:..........................................................................................

3) DoIhaveanyweekly/monthlypivotpointsinthetradingzone?
Answer:..........................................................................................

4) DoIhaveanywholenumbersinthetradingzone?
Answer:..........................................................................................

5) DoIhaveanyreversalcandlepatternsformingattheselevelsin
thetradingzone?
Answer:...........................................................................................

6) DoIhaveanytrendlinescomingfromolderareasinthetrading
zonethatcangiveresistanceorsupport?
Answer:.........................................................................................

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7) IsMarc`spotentialentrypointneartheseareas?
Answer:............................................................................................

8) WhatistheBollingerbanddoingispriceoutsideitisitaonein
amillionyearsBollingerband?Isittrendingdownorup?Isit
curlingupordown?
Answer:............................................................................................

9) WhatistheMACDdoingisthehistogramcrossingoraboutto
cross?Whatarethe2movingaveragelinesdoing?Isitopenor
abouttocross?
Answer:..............................................................................................

10) WhatismyStochasticdoingisitcrossingisitinthe
overboughtoversoldarea?
Answer:.............................................................................................

11) WhatismyRSIdoingisitcrossingthe50middlelineisitin
theoverbought/oversoldarea?
Answer:............................................................................................

Iftheprobabilitystudyshowsmethatpricewillmostlikelyreactin
thetradingzonewaitforconfirmationbyaskingmyself...

Didpricebreakthecurrenttrendline?

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ExampleofaProbabilitystudy
ProbabilitystudyfortheAUDUSDonthe4hourchart:
Direction:
1) Ispriceisabove/underthe200EMA:UNDER
2) Whatisthedirectionofthe34/55EMAsonthe4hourchart:
SHORT
PotentialTradingzone:
3) HowdoweFib:Lastweek`shightothecurrentlow
4) TradingZone:1.5821to1.5952(5075%Fib)
5) SweetSpot:1.5886(62.5%Fib)
Whatishappeninginthetradingzone?
6) DowehaveanyEMAsinthetradingzone:200,55EMAONTHE4
hourchartplusthe34/55EMAonDailychart.
7) Dowehaveaweeklypivotinthetradingzone:Yes,butitison
theothersideofthe200EMAonthe4hourchart.
8) DowehaveaBollingerbandinthetradingzone:No
9) Dowehaveapsychologicallevel`sinthetradingzone:Yes,15900
atthecurrent200EMAonthe4hourchart.
10) Dowehaveatrendlineinthetradingzone:Yes,beartrend
linefrom4week`sback.
11) Rule:ThetrendisyourfriendSelltheralliesinadowntrend
Whatwillmytradingplanbeusingtheprobabilitystudy?
Priceisunderthe4hour200EMA.Wehavegoodseparation
betweenthe34/55EMAanditisstilltrendingdown.
IfIFibfromlastweekshightothecurrentweekslowtogetthis
weekstradingzone.Wehavethe55and200EMAonthe4hour

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chartplusthe34/55EMAontheDailychartinthepreferredtrading
zone.
WehaveaweeklyR1pivotontheothersideofthe200EMAbutit
stillfallsinmytradingzoneat1.5924.
Wehavetheweeklymainpivotandthe38.3Fibareainthesame
areaat1.5759.
Wehaveatrendlineonthe4hourchartthatisinthezone,itson
theothersideofthe200EMA.Ihaveloadsofreasonstobelievethat
oncepricepastthe1.5759areathatIwillstarttoseesome
resistanceandthatpricewillturn.
Mytradingplanforthispairistowaitforpricetocometome.Iset
analarmtogooffoncepricecloseabovethe1.5759area.Onlythen
willIstarttolookforreasonstoshortthispair.Thecloserpricecan
gettomypreferredtradingzonestartingat1.5821areathebetter.

AboutForexMentorPro
AsImentionedintheintroduction,IamamemberofForexMentor
Pro,the5StarratedtrainingandmentoringservicebyMarcWalton
andDeanSaunders.IuseMarcsanalysisasavitalconfirmationfor
mysystem,asIhavementionedinthiseBook.
IalsoruntheForexMentorProMembersForum,andamonhand
everytradingdaytoprovidesupport,tipsandadvicetoallMembers.
Ifyouwouldliketogeta7daytrialofForexMentorProforjust
$4.95,pleaseclicktheimagebelow:

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