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The FXKeys Trading Systems & Methods

STRONG TRADE SETUPS


*To Contents*

with GAUGED examples


December 2014

blue underline link to FXKeys article


*blue underline* - link within this doc.

We never know what will happen after a setup forms on the chart. We have no control over a
markets future movements. We can control the amount of risk we take and we limit this risk:
By setting a proper *stop loss* position
By calculating a proper lot size to trade
By then trading only a *high odds trade setup* = a too strong signal
Methodology:
1. Our main trading strategy (1) (2) (3) is based on the price action (price action is defined as the advance and decline in the value of
a currency over a period of time). The fact that we are deeply dependent on the candlestick patterns (1) (2) (3) in this
trading system (1) (2), is because we want to have a tool to follow the price and hear what price is saying. Nothing is
better than price to show us the way and inform us about the next decisions and directions. The reason is that the
decisions of the markets big participants, which is the most important market motivator, can only be reflected
(manifested) on the price chart and only traded by following the signals left by price movement. Candlesticks are the
best informant for following price action and therefore determining the bias of the market. The basic element for any
trading is charting the price action.
2. To be profitable (1) (2) (3) (4) one needs a collection of constructive entry/exit points based on the price action
records and careful buying and selling using pre-tested, high probability strategies. What a trader looks for are simple
trigger points that signal beginning and end of major trend patterns. It is the longer time periods (Daily, Weekly,
Monthly) that offer the most reliable signals.

Contents:

Note:
1.
Underlined blue = link to FXKeys site

*MindSet 1 & 2

3 4*

*Summary .

5*

*General Rules A ..

6*

*General Rules B

7 9*

*Defaults & Settings Indicators FXKeys links 10*

*Trading System 11 12*

*How to Place & Manage Stops .. 13 14*

*Lot Size & Risk:Reward . 15*

*Appendix 1 - Patterns & Examples

2.

*Underlined Blue* = link within this document

Final Pages

*About the Manual*

*About the Author*

16 19*

*A1.1 Exhausted Market Example ............... 17*

*A1.2 High Wave Pattern Example .

*A1.3 Candles not requiring a confirmation candle .. 19*

18*

*Appendix 2 - Other Trading System Options: 20 31*

*A2.1 Trading The 90 Score On A Shorter Time Frame ...

21*

*A2.2 Scaling Up ..

22*

*A2.3 Double Bollinger Bands System .

23 25*

*A2.4 50 Day Moving Average .

26 31*

*A2.5 Inside Day Candle As a Reversal Pattern

32 33*

*Appendix 3 Gauged Examples & selected links to FXKeys sites. 34 107*

*A3.1 100 Score: .

35 45*

*A3.2 95 +Score ..

46 58*

*A3.3 - 90 95 Score .

59 85*

*A3.4 - 80 90 Score .

86 - 98*

*A3.5 Patterns to be IGNORED

99 107*

System Design by Chris Pottorff - Compilation by Peter Wagner

MINDSET 1
Change your mindset, and you will see everything around you change!
How to control Mind Talk

MY JOB as a forex trader is to determine who has taken control over price and then
take the proper positions in the market. FXKeys
A TRADER is someone who follows the price, not someone who tries to go ahead
of the price. FXKeys
Consistency is the foremost key to making a success in everything. Trading FOREX is
no exception. FXKeys
As Michael Jordan, the worlds greatest basketball player says, quote:
I have missed more than 9,000 shots in my career. I have lost almost 300 games. On 26
occasions, I have been entrusted to take the game winning shot and I missed. I have failed
over and over and over again in my life. And thats precisely why I succeed.

And Thomas Edison on What is Genius? Well, about 99 percent of it is a knowledge of


the thing that will not work. The other 1 percent may be genius, but the only way I know to
accomplish anything is everlastingly to keep working with patient observation.

And Henry Ford: Whether you think you can, or you cannot, you are right.
*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

MINDSET 2
Change your mindset, and you will see everything around you change!

My Belief:
1. I believe Forex trading is a business through which I CAN make EXTRA-ORDINARY money EASILY.
2. To do this, I believe I need to spend only a few hours per day. I must be wise, precise and disciplined.
3. I believe I already have everything it takes to become a wealthy forex trader, exactly as those, who have become wealthy,
have the same markets, charts, platforms. I am only required to plan, set my goal and start moving toward it.
4. I believe a wealthy person does not work hard. I take MY steps by actioning the correct RULES.

my job: to distinguish who has taken the control in the market and not to predict who will take the control. I
enter only when I know which party has taken control! I do not enter when the market is in indecision! In
determining who has control, I read the charts and recognise the too-strong candle patterns. Too-strong
patterns show who has control and this indicates the true trend because it has been manifested by the
actions of buyers and sellers. I can then take action. Taking action means that I do this without EMOTION
and with PATIENCE, waiting only for too-strong signals and then taking a position with the trend, safely. It is
then required that I keep my nerve and let my position run knowing it is safeguarded with a stop. I check
the charts once daily, to verify the validity of a current trade, review my stop position and observe for new
opportunities.
Our greatest weakness lies in giving up. The most certain way to succeed is always to try just one more
time. Thomas Edison . Consistency is the biggest key to success in everything including FOREX trading. FXKeys
Affirmation: Many traders make fortunes through forex trading so it is possible to make money through forex trading and I
can do it because others have done it and I have what they have. I have what it takes to make a lot of money through Forex
Trading. It is coming and it is soon here. I can feel it very close. My practice brings me to success. I am becoming very wealthy
and living financially free is upon me. The best trader ever? YES FXKeys

*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

SUMMARY - FX Keys SYSTEM


Link to the path: http://www.fxkeys.com/become-a-profitable-forex-trader-in-5-easy-steps/

First to acquire KNOWLEDGE by learning the BASICS of candlestick formations and too-strong patterns and other required
technical indicators and become familiar with the terms and parameters of the MARKET to be traded including TRADING
PLATFORMS and BROKERS.
Then to determine who has taken control in the market . This requires the formation of a too-strong candlestick pattern with a
too-strong or strong Bollinger Bands breakout while formed on an exhausted market. This means that such a trade will be
trading with the trend in most cases.
Once a too-strong candlestick pattern has formed it is required to determine an adequate stop loss (SL) price position by
answering the question I will know I have got the trend direction wrong if the price advances/falls past this point?
Once I know the SL position I calculate a position size (lot size to trade) using a maximum of 2% to 3% of my trading account
capital as risk capital.
2 (two) positions are opened: Both have the same SL condition; A Take Profit (TP1) target of 5(variable) times the SL is preset for
one position and the other position (TP2) is left open. The 2nd position is closed when a strong-enough chart signal, indicating a
change in trend, forms.
Once decided on, the SL is never adjusted to a worse position. The SL is moved to break even (BE), to protect my account from
loss, when the TP1 position is filled and then again, to protect some profit, when chart events indicate it to be prudential.
Effective, stress free trading requires a no EGO mental state, conditioned with the following (Trading Psychology):
Discipline 1 Discipline 2
Consistency
Patience
Devoid of Emotion especially FEAR (1) (2) (3) (4) and GREED (1) but always with a smile.
A WIN is something to learn from (and just a gain to the business) A LOSS is something to learn from (and just a cost to
the business) THEY are parts of the game.
Performance
The OBJECTIVE is to make TRADING a BUSINESS, manifesting account GROWTH by SLOW-CONSISTENT-GAIN to win the MATCH not just kick the best goal
*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

GENERAL RULES A - FX Keys 1 - 4


1.

I trade the following pairs:


EURUSD, GBPUSD, USDCHF, USDJPY, GBPJPY, EURJPY, USDCAD, AUDUSD, NZDUSD, EURGBP, GBPAUD, GBPCAD, GBPCHF, EURAUD, EURCAD, CHFJPY, AUDJPY, CADJPY, AUDCAD,
Gold. However, based on the FxKeys followers request, now, I also check these: AUD/CHF, CAD/CHF, NZD/CHF - [in alphabetical order - AUDCAD AUD/CHF AUDJPY AUDUSD
CAD/CHF CADJPY CHFJPY EURAUD EURCAD EURGBP EURJPY EURUSD GBPAUD GBPCAD GBPCHF GBPJPY GBPUSD NZD/CHF NZDUSD USDCAD USDCHF
USDJPY Gold]. (key: dark blue = information exists on FXKeys website (about the history and how to trade the pair); Green = no specific information exists on the website; Light
Blue not traded by Chris Pottorff, but analysed.
i.

Frequency: Usually I trade 3 to 5 trade setups every month. I trade the strong and 100 score trade setups only, and forget about the other trade setups that have some
risks. The 90-95 score trade setups can be traded only by special control of positions by managing the risk.

System: A trade setup forms when the candles are closed in the period. It is gauged for strength according to the perceived risk to price movement. However what will happen in
future is always unknown and even with the strongest trade setups, our stop loss will be hit sometimes. However, following the strong trade setups makes us profitable in long term.
To have a strong trade setup there must be (1) a *too-strong-candlestick pattern* with (2) a too-strong or strong Bollinger Bands breakout and (3) it has to form on an *exhausted
market*.
2.

Setups: We take positions when the setup is too strong. We ignore the other setups.
i.
Daily Period: When the forming trade setup is too strong and I see it, I enter immediately after the market closes. Sometimes, if the setup indicates that the market
could be oversold/overbought I wait a little for a better entry price to appear.
ii.
Weekly Period: On Friday afternoon, when I see that the forming trade set up is too strong, I enter at the last hour on Friday, because usually, there is a gap that is
agreeable to the trade setup direction, when the market re-opens, on Sunday afternoon (see item General Rules B 5). Generally, this gap prevents market entry at a
good price. However, sometimes I miss the chance to enter on Friday and the price opens on Sunday afternoon with a gap against the trade setup direction. The gap
can help us enter with a better price.
iii.
Monthly Period: Ditto weekly but on the last day of the month. The Monthly Time Frame is KING.
iv.
When a too strong setup forms on a time frame, we take it without consideration of the other time frames, even longer ones

3.

Positions: I take two positions with the same SL level.


i.
The first has a 5xSL target and
ii.
The second has no target. I move the SL for the 2nd to break even when the first one hits target. I hold the 2nd position until a reversal forms, or until a setup is
negated by a candle pattern. In some rare cases, I move the second positions stop loss again to lock-in some profit. This is all I do.
iii.
If the price hits the stop loss at the beginning and I am confident of the pattern, I enter again at a better price and usually with a better stop loss position. I can do this
because I only take the too strong setups, and even if a price spike hits the stop loss orders at the beginning, the setup is strong and reliable enough to enter again.

4.

Psyche: It is not all a matter of locating the too strong trade setups. Controlling emotion is important when you have identified a strong trade setup whether you are on time,
late or already have a position . Trading rules and strategy must be set in a way that emotions cannot interfere:
i.
Always take the strongest setups only and ignore others.
ii.
Enter the market on time. Do not take positions if you are late (the price has already moved away from the setup entry price).
iii.
Dont overtrade with a big position which is outside the money management rules so that you can be calm even if the price goes against you.
iv.
Set a proper and reasonable stop loss and let it be triggered if the price goes against you, because it may not be triggered.
v.
Trade long time frames only. Emotional stress is higher when trading short time frames.
vi.
Dont check your positions too often. Take your positions, set the stop loss and target orders and come back the next day.
*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

GENERAL RULES - FX Keys B 1 - 12


1.

Market Top/Bottom Setups: When the LONG/SHORT setup is formed at the very bottom/top of a strong bear/bull market I ignore the setup unless the signal
is really too strong. If it is too strong, its strength can neutralise the strength of the bear/bull market . It is possible that I dont enter right away, but wait for
an additional confirmation, then I enter. Of-course it is possible that we miss the opportunity. We can only wait and see what happens.

2.

Trend: As retail traders, we have to distinguish whether the PARTICIPANTS have decided to buy or sell. When we conclude that they have decided to buy,
then we have to buy too and, when we find out that they have decided to sell, then we have to sell. Going against these participants decision is like swimming
against the tide.

3.

Consolidation v Ranging: Consolidation is shorter than a Ranging Market. When a sideways Consolidation becomes too long, then we will have a Ranging
Market, and the Consolidation will not be known as a Trend Continuation, it becomes an each way possibility. If a consolidation/accumulation pattern forms,
followed by a strong buy signal, we can trade that as we would a continuation trade setup

4.

Exhaustion (*1*) (2) : An uptrend/downtrend is exhausted when it stops going up/down consistently strong. If the trend is sharp (angle) and strong (relatively
big candles) it is a bull/bear market. However, eventually it will form some bearish/bullish (mixed) candles, and instead of going up/down directly, it forms
swing highs and lows more quickly, and maybe candlestick patterns like butterfly/bat, head and shoulders, triangles, double tops & bottoms etc. form. It
means bulls/bears are exhausted. If a strong sell/buy signal then forms, we can trade it.. See Appendix A1.1 for an example of exhaustion:

5.

Gaps: (1) (2) (3)


a) SHORT:
i. I prefer not to enter when I want to short and the market opens with a gap down. I will enter if the price goes up and fills the gap.
ii. When I want to go short and the market opens with a gap up, I enter right at the market open.
b) LONG: - The opposite actions to SHORT

6.

If I am late and the price has already moved accordingly, do I enter?


a) The short answer is no. I like to be on time. When a too strong trade setup forms, I enter at the close of the candlestick which has formed the setup, or
while the next candlestick is moving against the trade setup, so that I can enter with a better price. I dont enter when I am late, because I care about
my stop loss level, and if I enter when the market has already moved according to the trade setup, my stop loss has to be wider. This reduces my
position size and I do not like this.
b) I dont sit and lament a missed too strong trade setup. There is always another one on the way. The most important thing is that a good strong set up
will create a smile on your face.

7.

*Scaling UP* / Down: (Adding to positions) -

a) An alternative method to taking 2 positions (details in item A1.2)


b) I generally do not follow this method.
*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

8. Patterns:
i.

W & M: When a W pattern forms following formation of two short setups, the big candle in the pattern, means bears have
taken the control and the price will collapse at least for the same size as the last W leg. Contra condition for M pattern in a bear
market.

ii.

DOJI: One of the most important things we do in our trading is that we determine whether a candlestick is indicating strong bullish
or bearish pressure. Sometimes, a strong Doji with a long upper shadow that has broken out of the Bollinger Upper Band forms.
However, we must wait for the confirmation candlestick to form. If the confirmation candlestick closes with a strong bearish body,
then we know that bears have taken over control, otherwise, even though the Doji has a strong upper shadow, it has to be
ignored. The reason is that we need to know which party, bulls or bears, have taken the control, so we must wait for this signal. A
Doji alone doesnt tell us. A Doji, even with strong shadows, just reflects indecision. A Doji means both bears and bulls have the
same power. The shadows just show the price fluctuation, but the fact that the open and close prices are the same or close, means
that none of the parties have been able to take the control finally. If the next candlestick closes with a strong bearish body on the
same time frame, then it means bears have taken the control, because they have been able to take the price down and keep it
there until the candlestick closes. The conclusion is that:
i. A big Doji with long shadows means nothing but indecision.
ii. However a candlestick with strong bullish or bearish body means one party has taken the control and most probably will
move the price accordingly for some time. It is the candlestick body that shows the price direction, not the Doji
shadows.
iii. A Doji cannot be called confirmation. However, when a Hammer with a long lower shadow forms and then a Doji that also
has a long lower shadow, then most probably the next candlestick will be bullish and the price will go up. It can be known
as a long trade setup somehow.

9. Correlations:
i.

ii.

If we take the strongest setups only, we dont have to be worried about anything else, even correlation in the currency pairs. A too
strong setup on a long time frame shows the trend, no matter how the other pairs are moving. I am not saying this is a 100%
perfect and a no risk trading method, but it has been working better than other methods so far.
Example: GBPCAD and AUDCAD are correlated because of CAD, but they can move differently because of
the commodity currency (GBP and AUD). After Scotlands independence referendum, GBP had bullish
pressure again, because the fear against the value of the GBP had been eliminated. So it made sense to
have a long position with a GBP cross currency pair that had formed a too strong long trade setup some
weeks before. Even if the value of CAD increased, GBPCAD could still be bullish. However, this could not
be true for AUDCAD. Appreciation of the value of CAD could make a strong short setup on AUDCAD at the
same time that GBPCAD was going up.

10. FIRST REACTIONS FOLLOWING A SIGNIFICANT TREND:


i.
ii.

Do not go long at the first advance that follows a down trend bottom. It is likely a CONTINUATION signal
Do not go short at the first retracement that follows an up trend top. It is likely a CONTINUATION signal

Note the difference between Doji A & Doji B! A closes well above BMB & B closes under BMB
Doji A upper shadow made a re-test of BMB as expected
Doji B has a deceptively small upper shadow indicating buyer control it needed 2 more candles for control to finally be handed to bears
*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

11. LE SECRETE:
1.

Taking the too strong setups is my key secret. I am very picky in choosing the setups. These setups usually work and hit the x 5 target.
i.
I use the riskier stop loss, and I re-enter if it is triggered because I trust the setup and I know it will make the price move accordingly.
a.
I risk a little more than what traders should risk.
i.
The first reason is the setups I take. I pick the strongest ones and I avoid the others.
ii.
The second reason is my account size. I start with a relatively small amount of money, and turn it into a big capital, and then
withdraw the whole profit. Even if I lose the whole account (which has never happened so far), I dont lose my shirt because
99% of it is my profit & not my hard earned savings. I have never traded with money I cannot afford to lose.
ii.
I set the first positions TP to 5xSL. I move the stop loss of the second position to breakeven when the first one hits the target. I wait for the
exhaustion or a reversal signal to close the second position and collect my profit.
iii. I dont check the shorter time frames to confirm a strong trade setup on a longer time frame. However, it may be better to check the longer
time frames and see if they agree and confirm the shorter time frames trade setup or not (refer 11 below).
iv. As traders, our job is to distinguish who has taken the control. It is not to predict who will take the control. We should enter when we know that
a party has taken the control. We do not enter when the market is still in indecision.

12. SUPPORT & RESISTANCE LEVELS:


1.

2.

Usually when the trade setup is too strong, price can break through all support/resistance lines and levels including Bollinger Middle Band which
may have been a strong obstacle for some time. Therefore, when a too strong trade setup forms, I take it, even if it is too close to the middle
band or a strong support/resistance level. The reason is that a too strong trade setup formed by candlesticks along with a strong Bollinger Band
breakout, is indeed an accurate report from the most recent market conditions, however, a strong support/resistance level can be related to
long time ago and it is not clear how the market will react to it.
In spite of this, sometimes a strong support/resistance level or Bollinger Middle Band is able to stop the price even when there is a too strong
trade setup already formed on the chart. Nothing has a guarantee in this world, and forex market is not an exception.

13. HOW LONG TO HOLD A POSITION:


1.

2.

3.
4.

The question is when should I cancel an already formed strong trade setup, and go for a JUST formed
strong trade setup either on the SAME or a DIFFERENT time frame?
Example: We are long, based on a too strong long trade setup on the weekly chart, and all of a sudden a too strong short trade setup forms on
the daily chart. Should we stick to the weekly long trade setup that was formed before and hold our long position, or we should close the long
positions and take the short trade setup on the daily chart?
There is no doubt that when a too strong reversal trade setup forms on any of the time frames, we have to forget about the previous trade
setup, close the positions we had and collect our profit or take our loss. Market conditions can change suddenly and a trader has to be as
accurate as the most recent market movement. A fresh trade setup is what we have to follow, specially when it is too strong.
I hold the 2nd position until a reversal forms, or until a setup is negated by a candle pattern. In some rare cases, I move the second positions
stop loss again to lock-in some profit. That is all I do.
A too strong trade setup is valid only until another too strong trade setup forms. One way to come to the conclusion that you have to close your
position, is that you see a too strong opposite trade setup formed either on the same time frame or any of a longer or shorter time frame (we
follow only the daily, weekly and monthly time frames).

*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

FXKeys Site:
Categories

DEFAULTS & SETTINGS ON INDICATORS MT4 Platform


Which Indicators are recommended: What Indicators Can We Trust and Do We Need the Most?
Bollinger Bands How to Trade Using Doji Candlestick and Bollinger Bands Again Noise Above Bollinger Middle Band
How to Use Bollinger Bands in Forex and Stock Trading What Is Bollinger Bands Squeeze and How to Trade It?
Trading the Spikes, Blow Offs and Breakouts Using Bollinger Bands, RSI and Stochastic
Bollinger Bands As A Great Currency Volatility Indicator How to Trade Using Doji Candlestick and Bollinger Bands
1.
2.

MACD:

MACD (Moving Average Convergence-Divergence) How to Use MACD in Forex Trading


How To Use Slower Settings Of MACD Indicator?
http://www.fxkeys.com/downloads/FxKeys-MACD.ex4
1.
2.

RSI:

Main system settings: Period = 20; Shift = 0; Deviations = 2.0


DBB System settings: Period = 20; Shift = 0; Deviations = 1.0

Main System settings: FastEMA = 24; SlowEMA = 52; SignalEMA = 9


MA50 System settings: FastEMA = 24; SlowEMA = 52 SignalEMA = 0

MACD is too delayed - it


never agrees with strong
reversal candlestick signals.

rsi-support-and-resistance-breakout
Relative Strength Index or RSI Indicator In Forex Trading
RSI Divergence and Convergence The Importance of RSI 50 Level to Confirm the Trade Setups
Intraday Trading System to Trade Forex with RSI and Stochastic Divergence and Candlestick Patterns
RSI As A Great Overbought Oversold Indicator For Forex Trading
Settings: Over Bought Line .. 70% Over Sold Line . 30% Add . 50% Line

MOVING AVERAGE:

SMA Simple Moving Average Moving Average


What Are Moving Averages And How To Use Them In Forex Trading?
200-Day Moving Average and Its Use in Forex Trading
Using Weighted Moving Average In Forex Trade
Follow the Trends with 50-Day Moving Average and Locate the Strong Trade Setups
1.
2.

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MA50 settings: Period = 50; Shift = 0; Method = Simple; Apply to = Close


MA200 settings: Period = 200; Shift = 0; Method = Simple; Apply to = Close

FXKeys TREND & TREND LINE ROBOT: Interpreting Trend Lines In Forex Trading Waiting For the Price to Pullback and Test a Trend Line
Elliott Wave Theory in Forex Trading to Follow Trends Trading the Support and Resistance Levels
How to Trade Using Support, Resistance and Gaps Going Long or Holding Long Positions Above Resistance Line
A Technical Analysis Software to Locate the Forex Market Buy-Sell Signals
Settings for Trend ROBOT:
1.
Support_Resistance _Strength 3 = Major Swings, 1 = Minor Swings & 2 = in between 3 & 1
2.
MACD set to SLOW fast EMA = 24; Slow EMA = 52; MACD SMA = 14

*To Contents*

Follow the FOREX Setups: forming-formed-forex-market-trade-setups


System Design by Chris Pottorff - Compilation by Peter Wagner

10

The FXKeys, 3 point, Trading System


1.

By Chris Pottorff

We have to wait for a strong candlestick pattern to form. A strong candlestick pattern means a pattern like Dark Cloud Cover, Bearish Engulfing,
Piercing Line, and Bullish Engulfing. Many of these patterns can be located on the charts in all time frames. However, we need the strong ones on the
longer time frames of Daily, Weekly & Monthly . Each of the above patterns require two candlesticks to form completely. The second candlestick in the
pattern is the most important and it has to be really strong. For example:

In the Dark Cloud Cover, (2nd candlestick in the pattern opens higher or equal to close of 1 st candlestick & closes above the open price of the 1 st
candlestick). It forms at the top of a bull market
the first candlestick , to be strong, must have a long (relative to the recent previously formed candles) bullish body, and
the second candlestick , to be strong, has to be a bearish candlestick, that has a body which engulfs more than 90% of the body of the first
candlestick and preferably with a long upper shadow and preferably, none or small (a few pips 15) lower shadow.

In the Bearish Engulfing pattern,


the first candlestick , to be strong, must have a long (relative to the previously formed candles) bullish body, and
the second candlestick, to be strong, must be a long bearish candlestick that
a. has a body that engulfs 100% of the body of the first candlestick and preferably with a long upper shadow
b. Has a size (including shadows) that engulfs the total size of the first candlestick BUT
if the first candlestick is not that long, then the second candlestick has to cover the body of a few of the previous candlesticks.

In the Piercing Line pattern: (2nd candlestick in the pattern opens lower or equal to close of 1st candlestick.) [it is the bullish form of Dark Cloud Cover
pattern and forms at the bottom of a bear market].
the first candlestick , to be strong, must have a long (relative to the recent previously formed candles) bearish body, and
the second candlestick , to be strong, has to be a bullish candlestick, that has a body which engulfs more than 90% of the body of the first
candlestick and preferably with a long lower shadow and preferably, none or small (a few pips 15) upper shadow.

In Bullish Engulfing pattern:


the first candlestick , to be strong, must have a long bearish body and preferably short shadows, and
the second candlestick, to be strong, must be a long bullish candlestick that
a. has a body that engulfs 100% of the body of the first candlestick and preferably with a long lower shadow
b. Has a size (including shadows) that engulfs the total size of the first candlestick BUT
if the first candlestick is not that long, then the second candlestick has to cover the body of a few of the previous candlesticks.

Other Forms of candlesticks like Shooting Star, Doji, Hammer, Hanging Man, Spinning Top, Morning Star, Evening Star, and not only have to be strong in
themselves, but must be confirmed strongly by the next candlestick.

So, the first thing we need is a too strong candlestick pattern. If a candle pattern does not fulfil the above
conditions then it must be ignored as a strong trade set-up.
*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

11

2.

The already formed, strong, candlestick pattern must have a strong Bollinger Band Breakout. The first and the second candlestick, that
forms the pattern, must break out of the Bollinger Bands strongly, otherwise the pattern must be ignored as a strong trade set-up.

So, the second thing we need is a too strong Upper or Lower, Bollinger Band breakout.

So the rules 1 and 2 above show a sign which indicates that the price wants to change either to collapse, (in the case of a Bearish signal (formed on
an uptrend)) or advance, (in the case of a Bullish signal (formed on an downtrend)) BUT the sign does not mean nor guarantee that price will do
what the sign indicates it only tells us what it is getting ready to do. It tells us only that one of the parties either buyers (bulls) or sellers (bears), is
getting tired and is giving up or switching sides in the market. The rules also require that:
3.

The strong candlestick pattern with the strong Bollinger Band breakout must be formed where one of the parties, either buyers (bulls) or
sellers (bears) do not have full control over the price movement, and where one of them is becoming exhausted of the struggle for control. This
means:
If any strong candlestick pattern (1) (as described above), forms at the very top of a strong upward price move (one that has only
minor price reactions on the way up), then it must be ignored as a strong trade setup. This is because the buyers still have influence
over the price, more than the sellers, and the price will probably rise further, so it is too risky to trade.
If any strong candlestick pattern (2) (as described above), forms at the very bottom of a strong downward price move (one that has
only minor price reactions on the way down), then it must be ignored as a strong trade setup. This is because the sellers still have
influence over the price, more than the buyers, and the price will probably fall further, so it is too risky to trade.

So the third thing we need is a market showing *signs of exhaustion*, where either the buyers (bulls) or the sellers
(bears), respectively, do not have control of price.

If we do not have all the three points condition above it is too risky to take the trade setup for a long or
short trade.
That is all we need for a trade setup. Any trade setup that doesnt meet these three requirements has to be ignored. Note that:
i.
price may move quickly and strongly even without all the above rules being filled and that
ii.
when the rules are fulfilled as a trade setup, the price may not move strongly.

We never know what will happen after a trade setup forms on the chart. All we know is that a trade setup has formed, and we have to make our
decision based on it. If it looks risky, then we have to ignore it, and wait for another setup. Keep in mind We Are Traders, Not Fortune Tellers.
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System Design by Chris Pottorff - Compilation by Peter Wagner

12

How to Place & Manage the Stop Loss in Forex Trading


Best Place for Stop Loss and Limit Orders
The rule says that you should place the stop loss in a position that becomes triggered only when the chosen
market direction is completely wrong. So when I want to set the stop loss, I ask myself under what condition
is the position I have taken wrong. The answer I give to this question is the position of the stop loss.
Stop loss position is very important. having a tight stop loss may mean that it will be triggered, creating a loss,
even when you choose the right direction.
Stop loss should be placed in a position that will be triggered only when the direction you have chosen is
absolutely wrong. For example the price is going up. You wait for a reversal signal. The price changes its
direction and starts going down and you take a short position. So the high that the price made before it
changed and went down is a resistance.
A stop loss is placed a few pips above/below the pick (resistance/support). In the case of a sell (short) order
the spread must be added into the stop calculation.
Example short , Resistance level is at 212.39 + 5 pips + 8 pips = 212.52
Example Long order Support level is at 213.56 - 5 pips = 213.61.
In the case of patterns eg Triangular - To determine the stop loss position, you have to extend the triangle
broken resistance and then find a suitable position under the broken resistance. In this case it is 1.4588.
There is no special rule for stop loss like your stop loss should be 50 pips under the buy price. Stop loss
position is different from one trade to another even for the same currency pair and time frame. Sometimes
your stop loss will be 20 pips under your buy price and sometimes it has to be as high as 200 pips.
When you work with bigger time frames you use the above stages to determine your stop loss position in the
same manner but, as the bigger time frames have bigger scales, your stop loss value will be much bigger.

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System Design by Chris Pottorff - Compilation by Peter Wagner

13

MANAGING THE STOP:


It is very important how to take a position and enter the market. And, it is also very important to know how to manage the position to keep your
risk as low as possible. One must minimise losses. And learn to protect ones account balance very carefully and religiously. If one limits losses, one
will win.
Fortunately, we can set a stop loss for each position. That helps us limit our losses. AND. We can move our stop losses, which is a great feature.
Learning to locate the best place to set a stop loss for each position is paramount. Moving the stop loss to breakeven when your position is in
profit eliminates the risk to hold the position.
If you dont move your stop loss to breakeven on time, then it is possible that you lose in several positions consecutively. And this will be too hard
to recover, both technically and psychologically. It is not only your money (management) that you have to take care of. It is your mental situation
too. You can easily lose your confidence if you dont limit your losses.
Move the stop loss as soon as the chart allows. If the market moves toward your trade direction for a few candles (1-3 candles), you have to move
your stop loss to breakeven, no matter what time frame you are working with. If you have a x3 or x4 target filled, it is prudent to move the stop
loss to break-even following a x1 price advance. Or you can move the stop loss to breakeven and let your open position run.
Be aware that sometimes your stop loss will be triggered at its original level, before the market gives you the chance to move the stop loss to
breakeven. You have to be ready for such a situation too. Something that helps you a lot is that you set a reasonable stop loss. A reasonable stop
loss is not too wide nor too tight. It is reasonable. Your position size should not be so big that you lose a lot if the price hits the stop loss. A novice
trader should start trading a live account using a risk factor not greater than 2% of the account.
Applying all the above diligently does not prevent losses occuring sometimes but it does minimise them.

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System Design by Chris Pottorff - Compilation by Peter Wagner

14

Lot Size & Risk Reward Ratio , risk/reward ratio


Link to the position size calculator :
1.

Risk is the amount of the money that you may lose in a trade. One should not risk more than 2-3% of our capital in each trade. It means when we
find a trade setup and we find a proper place for the stop loss, we have to choose a position lot size in a way such that if the market hits our stop
loss, we lose a maximum of 2-3% of our capital. For example we have found a trade setup with EUR/USD that must have a 80 pips stop loss. We
have a $5000 account. If EUR/USD hits our stop loss, we should lose $150 which is 3% of our capital (0.03 x $5000 = $150). It means 80 pips equals
$150. This $150 is our risk. But what is the reward?

2.

Reward is the profit that we can make in a trade. In the above example, if we choose a 160 pips target for our trade and EUR/USD hits this target,
we will make $300 (when 80 pips equals $150, so 160 pips equals $300). This $300 profit is the reward.

3.

Risk/reward ratio of this trade? 150:300 = 1:2. The larger the profit (target) against the loss (stop loss), the smaller the risk/reward ratio which
means your risk is smaller than your reward. For example, if your stop loss is 20 pips in a trade and your target is 100 pips, your risk/reward ratio
will be 1:5 in this trade.

4.

1:3 or 1:5 risk/reward ratio is achievable when the market trends after forming a too strong trade setup, and you enter on time. In most cases you
should be able to hit the top and bottom of the trends, no matter on what time frame you trade.

5.

If you enter at the middle of the way, then the trend should be strong enough to give you another big movement and make a profit which is 3 or 5
times bigger than your stop loss. You can do that. But there are a few problems:
1. Markets form a trend in less than 30% of the cases and it ranges 70% of the time
2. If you enter with delay and while they are at the middle of the way some trends are not strong enough to hit your target which is 3 or 5
times bigger than your stop loss.
3. There are many cases in which you miss the trends; you hesitate to enter and so you miss the chance; you think you have found a trend
whereas you are wrong and it returns and hits your stop loss and . So you lose in many trades, because you want to catch a big one.

6.

How is it possible to catch a 1:3 or 1:5 trade without losing so many other trades?
1. One solution is in moving the stop loss. You should not let your stop loss remain at its initial position. To have a 1:3 trade, the distance of
your entry and your final target should be split into 3 parts (150 pip target would have 3 x 50 pip levels). The stop loss is then moved in
three stages like a trailing stop but manually done.
2. Another solution is in taking the too strong trade setups on the long time frames like daily, weekly and monthly. If you wait for the too
strong trade setup, they are usually strong enough to move the price for hundreds of pips, and so you can have wide targets.
3. If price comes close to the final target, you should move the stop loss to 2/3 level (assuming 1:3). Then you have to wait until it hits the
final target or returns and hits the stop loss.

7.

It is the market that determines how your trade should end. One really never knows how many trades will be end as 1:3 and 1:5 trades.

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System Design by Chris Pottorff - Compilation by Peter Wagner

15

APPENDIX 1
Patterns Examples to Recognize
*A1.1 Exhausted Market. 17*
*A1.2 High Wave Pattern. 18*
*A1.3 Candles that do not need Confirmation. 19*

technical analysis , Symmetrical Triangle, Ascending Triangle , Descending Triangle, trend lines , resistance levels , sideways markets ,
How to Trade Using Trendlines, Head and Shoulders, Triangles, Double Tops and Bottoms, Flags, Pennants, Wedges , support & resistance breakout
EUR/GBP Moving Inside A Symmetrical Triangle On The Daily Chart ,

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System design by Chris Pottorff - Compilation by Peter Wagner

16

A1.1 EXHAUSTED MARKET EXAMPLE


EURUSD: Red DOTS -price started going up
from 2014.02.03 (1st) . It formed the first
high on 2014.03.13 (2nd), and it went down
and formed a low on 2014.04.04 (3rd). This
means bulls had become exhausted and
gave the control to bears, and so the price
went down and formed a low. Then it went
up again, but formed a TOO strong short
setup on 2014.05.08 (4th) almost without
breaking above the last high. This is known
as a short setup formed when the bulls
were exhausted and disappointed. And this
is a strong positive point for a trade setup.

AUDJPY: Red ARROWS - Compare the


left side of the below chart which is the
AUDJPY weekly chart, with the right side
(the thick and thin red arrows). At the left,
there is a strong bull market, and at the
right there is an exhausted bull market.

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System Design by Chris Pottorff - Compilation by Peter Wagner

17

A1.2 HIGH WAVE PATTERN:


Chart example description: The market was strongly bullish and the price was going up. You can tell this from the strong bullish
candlesticks that have strong bullish bodies. Suddenly, some candlesticks with small bodies and long shadows appear. They are
Doji candlesticks and together in pattern are called High-Wave candlesticks. And after these candlesticks, some huge bearish
candlesticks form.
i.
Candlestick #1 also closed as a strong bullish candlestick while most of the previous candlesticks were strongly bullish
too. So the market was strongly bullish before the candlestick #1 formed and also when candlestick #1 closed.
ii.
Candlestick #2 is completely different from #1. It doesnt have the strong bullish body. It is much smaller. It has a
longer upper shadow which means the price went up and the candlestick was closed when the price was up. Before the
candlestick close, the price went down and formed a long upper shadow, and the candlestick closed with a small body
and long upper shadow. This is a sign that
a.
Most of those who were buying (bulls,) stopped buying. It means that the bulls are getting tired of buying,
they are becoming exhausted.
b. Many of those who had already bought, started selling, so that the price went down and could not advance as
strongly as it had been.
c.
Some participants who had not already bought, now decide to sell (which is stupid), because they think the
price will go down soon.
So candlestick #2 gives us a lot of information. It tells us that probably some changes are on the way, but we cannot do
anything based on what candlestick #2 says. It gives us some information, but that is not enough for us to make any decision.
We have to wait for stronger information to be given to us by the following candlesticks.
iii.
Candlesticks #2, #3, #4, #5 and
#6 are called High-Wave
candlesticks.
It is a reversal signal/pattern.
Some traders go short when
these candlesticks form on a
bull market, and they would be
right in the above example
because this long story finally
ended to a complete bears
victory. They took control from
the bulls and sold the price
down, and candlestick #7 closed
as a HUGE bearish candlestick.
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*To Contents*

Candlestick #3 is even smaller than #2. It also has a long upper shadow which has the same meaning as the upper
shadow of candlestick #2, but the significant difference is that it closed with a bearish body. Although the body is too
small, the fact that the price closed below the open, means that the bears are getting stronger and taking control from
the bulls.
a.
Candlestick #3 is a Shooting Star which is a special form of candlestick.
b. On the other hand, candlestick #3 is also a Inside Day Candlestick which is a kind of reversal pattern.
This is more news telling us that strong changes may be on the way. Some traders go short as soon as they see the Inside
Day candlestick (see inside day pattern). However, I prefer to wait for more confirmation.
The information given by candlestick #3 is that price is still under buying pressure, but the number of sellers increased and
took the price lower before the candlestick close and candlestick #3 closed below its open. It means the bears are getting
stronger.
iv. Candlestick #4 opened with a gap up. Some bulls bought and tried to take the price up. Some bears sold and took the
price down. Bulls and bears fight closely and the price went up and down and formed the upper and lower shadows.
Finally candlestick #4 closed a little above the open price which can be seen as a small victory for bulls. However,
neither the bulls or bears have been able to take control. They are almost even, and so the market is in an indecision
situation. It doesnt know whether to go up or down. And this means no action for us too.
v.
Candlesticks #5 and #6 are almost the same, and they send the same message as candlestick #4: Indecision Indecision

For High Waves, we do not have to wait for a confirmation candle . If the Doji candles have long upper and lower shadows, then most probably the price will reverse very
strongly soon. Waiting for a confirmation candle, can cause us to miss a big movement.

System Design by Chris Pottorff - Compilation by Peter Wagner

18

A1.3 Candles not requiring a confirmation candle


A big and strong
bullish/bearish
engulfing with a
strong Bollinger Band
breakout. When it
forms on the chart,
you can take the
position at the close
of the engulfing
candle, and without
having to wait for
any confirmation.
Please note that
Piercing Line and
Dark Cloud cover are
both different kinds
of engulfing patterns.
So they have to be
treated the same. I
mean when they are
strong with strong
BB breakout, they
dont need
confirmation

Another case that does not need any


confirmation candle is when there is a very
strong Bollinger Band breakout. Like in the
example below where almost 95% of the candle
is formed out of the Bollinger Lower Band.
Additionally, the candle is a big and long candle.
The bigger the candle and its shadows and the
stronger the BB breakout, the stronger the
reversal movement:
When 100% of a candle forms out of the
Bollinger Bands; Do you think that we had to
wait for a confirmation candle? Definitely not.
This Dragonfly Doji was too strong, and so it did not need any
confirmation. I went long while the next candlestick (2014.08.11)
was forming. However, some traders may criticise that these kinds
of candlestick patterns have to be confirmed by the next candlestick.
They can be right, but when the candlestick is too strong (the way
that it was explained above), I dont wait for the confirmation
candlestick, and I take the position.
There are a few things that you have to note if you want to
pick the strong Dragonfly Doji reversal setups that will make
money for you:
1.

The longer the lower shadow, the stronger the reversal


pressure. The lower shadow of the candlestick has to be
too long when compared with the length of the other
candlesticks formed before the Dragonfly Doji. It has to
be an exceptionally big candlestick, otherwise it cannot
make the price reverse, and it has to be ignored.

2.

Bollinger Bands have a very important role in picking the


strong Dragonfly Doji reversal signals. The lower shadow
MUST form a very strong breakout with the Bollinger
Lower Band, otherwise you have to ignore the signal.

This confirmation
candlestick doesnt
necessarily have to be the
next candlestick. It can be
done by one of the next
few candlesticks too.
All the other cases of candlestick signals and patterns need confirmation.
Please note that even when there is a very strong signal like the above examples, having a
reasonable stop loss is a must. Nothing is guaranteed in the forex market. Therefore, even
when the strongest signal/pattern forms, you have to enter with a reasonable and proper
stop loss. That is not all. You have to move your stop loss to breakeven when it is time.
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*To Header*

System Design by Chris Pottorff - Compilation by Peter Wagner

19

APPENDIX 2
OTHER TRADING SYSTEM OPTIONS:

*A2.1 TRADING THE 90 SCORE ON A SHORTER TIME FRAME . 21*

*A2.2 SCALING UP 22*

*A2.3 DOUBLE BOLLINGER BANDS SYSTEM BB1 23-25*

*A2.4 50 DAY MOVING AVERAGE 26-31*

*A2.5 Inside Day Candlestick Pattern 32 - 33*

Double Bollinger Band System Links - System Design by Kamel A.


1. DBB Trading System Rules For Long And Short Trade Setups
2. Forming Trade Setups Based on the DBB trading system
3. When a DBB Trade Setup Is Supported by another Agreeable Trade Setup
4. How to Follow a Missed Trade Setup Using DBB System
Link to download : robot for locating links developed by SINGH
https://drive.google.com/file/d/0ByXdZtKd6FhaeWo0Q3cweTVVU1k/view?usp=sharing
How it works :
https://drive.google.com/file/d/0ByXdZtKd6FhaQUVSVU41ZEZGVlU/view?usp=sharing

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System Design by Chris Pottorff - Compilation by Peter Wagner

20

A2.1 - TRADING THE 90 SCORE ON A SHORTER TIME FRAME


This strategy is not difficult at all. However you must apply discipline to follow it and trade it properly. To trade this strategy you have to:
1. Wait for a *trade setup* on the daily, weekly or monthly time frames to form, or a candlestick on any of these time frames that points to a special
direction clearly and sharply, and
2. Refer to a shorter time frame like 4hrs or 1hr, locate a valid support/resistance line, and wait for its breakout to enter the market.

The 90 score trading system strategy:


1. We have to wait for one of the below events to occur on one of the daily, weekly or monthly charts:
i.

A strong 100 score trade setup by a candlestick pattern and Bollinger Bands, the way it is explained in the FXKeys
trading system above.
ii. A weak trade setup that doesnt get a 100 score, and has some negative points and looks riskier than a 100 score trade
setup.
iii. A candlestick form or pattern that closes in a way that points to a special price direction.
One of the above three events has to occur on one of the daily, weekly or monthly time frames.
2. When one of the above events has occurred on a daily, weekly or monthly time frame, then you have to refer to a shorter
time frame, first 4hrs and then 1hr, and try to locate a support or resistance line on one of these time frames. If you cannot
locate any line on the 4hrs chart, then you have to refer to the 1hr chart and try to locate a line on that time frame.

i.

If a short trade setup forms on one of the longer time frames, then you have to locate a support line either on 4hrs or
1hr chart and wait for its breakout, to go short. resistance breakout (1) (2) (3) (4)
ii. If a long trade setup forms on one of the longer time frames, then you have to locate a resistance line either on 4hrs or
1hr chart and wait for its breakout, to go long.
iii. If a candlestick strongly points to the upward direction on one of the long time frames, then you have to locate a
resistance line either on 4hrs or 1hr chart and wait for its breakout to go long. If a candlestick strongly points to the
downward direction on one of the long time frames, then you have to locate a support line either on 4hrs or 1hr chart
and wait for its breakout to go short.

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System Design by Chris Pottorff - Compilation by Peter Wagner

21

A2.2 SCALING UP OR ADDING SYSTEM


maximising profit strategy - Links (1) (2)

Maximising Profit:
1.

In order to trade and maximize the profit , we have to know how to


i.
take the strong trade setups,
ii.
have an optimum entry,
iii. a reasonably tight stop loss, and also
iv. the ability of taking the continuation trade setups,

otherwise it is impossible to Scale Up properly and maximize the profit.


2.

Enter the market when a strong trade setup forms.


1. Take only one 2.5% risk position, with a proper and reasonable
stop loss, but no target.
2. Allow the price to run accordingly. When a continuation trade
setup forms, move the initial positions stop loss to breakeven,
and take another 2.5% risk position.
3. When the stop loss is moved to breakeven, there is no risk
anymore, and the first 2.5% risk is zeroed. It means your capital
is safe even if the price turns around and goes against you.
Therefore, you can take another position with peace of mind, as
if you have no open position at all.

3.

Repeat as long as continuation signals form

2014/06/05

As the position is in profit, and equity is increased, there is more equity


room for the second position. However, it is prudent to keep the 2.5% risk
for the second position based on the account initial balance, not equity.
Therefore, one only holds a 2.5% risk from the initial balance, while the
previously taken positions are safe and only the last position has a 2.5% stop
loss.
An example of a strategy from a friend:
On 2014.05.08 he took a EURUSD short position when the 2014.05.08 candlestick closed on EUR/USD daily chart (candlestick #1 on the above chart). This is what I did too.
However, the difference was that my first position hit the target and made 250 pips, and I closed the second position when 2014.06.05 candlestick closed. But my friend, moved
his first positions stop loss to breakeven when 2014.06.05 candlestick formed, and took the second position when a continuation setup formed by candlestick #2. Later on, when
another continuation setup formed (candlestick #3), he moved his second positions stop loss to breakeven and took another position.
All of his three positions are still open. Lets calculate how much profit he has made so far with a lets say $10,000 account.
Risking 2% of the balance and having a 50 pips stop loss, he had to take a 0.4 lots position each time. A 0.4 lots EUR/USD position has a $4.00 pip value. His first position is in 930
pips profit ($3,720), and his second and third positions are in 700 ($2,800) and 500 ($2,000) pips profit respectively, which is $8,520 in total. It means he would have almost
doubled his $10,000 account taking a 2% risk only.
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System Design by Chris Pottorff - Compilation by Peter Wagner

22

A2.2 DOUBLE BOLLINGER BANDS SYSTEM LONG SETUP

Links to FYKeys DBB System: (1) (2) (3) (4) (5) (6)
Long Trade Setups:
To go long (to buy), you have to wait for one of the candlesticks to close above the BB1
upper band. Then you should check the previous two candlesticks to see whether their
close prices are below the BB1 upper band or not. If all three points comply, you have a
long trade setup (buy signal). Please see the opposite chart. It is USD/JPY daily chart. As
you see, candlestick #3 is closed above BB1 upper band, and at the same time the two
previous candlesticks (#1 and #2) are closed right below BB1 upper band. This is a long
trade setup. It means you should buy at close of candlestick #3:
Stop loss has to be set at the low price of the candlestick which has pierced the BB1

3 more DBB
Entry
Long
Examples

upper band (I mean candlestick #3), and the target can be at least twice of the stop loss
size (2 x SL). You can move the stop loss to breakeven if the price moves according to the
trade setup for 1 x SL. For example, when your stop loss is 60 pips, then you can move
the stop loss to breakeven if the price goes up for 60 pips. Of course I will tell you how to
trail the price to maximize the profit in case you dont want to get out with a 2 x SL

BB1 Bands
A

target.
Note: When candlestick #3 is too long, you can set the stop loss higher than its low price,
not to have a too wide stop loss.
Note: The DBB system can be used on an uptrend when we are not already long or to
add to an existing trade.

However, there is another thing that we have to care about. It is the position of candlestick #1 and #2 with Bollinger Middle Band. Experience shows that:
1.
in long trade setups, the trade setup works better and makes the price go up stronger if candlesticks #1 and #2 close above Bollinger Middle Band and below BB1 Upper Band. It means they close
between Bollinger Middle Band and BB1 Upper Band.
2. the closer candlesticks #1 and #2 close prices are to BB1 Upper Band, the stronger is the trade setup.
NOTE:
1. Sometimes, candlesticks #1 and #2 close as bearish candlesticks either below Bollinger Middle Band or a little above it. Or one of them closes below Bollinger Middle Band and the other one
above it. Suddenly candlestick #3 goes up and closes above BB1 Upper Band, and so a long trade setup forms.
2. This cannot be a strong long trade setup, because when the last 3 candlesticks close like that, it means the market is choppy and unstable. It means bulls have not taken the full control yet, and so
it is possible that the next candlestick goes down and hits the stop loss.
On image A above I am showing you two long trade setups that are formed under the conditions I explained above (specially the left one). As you see in the left trade setup, candlesticks #1 and #2 are
closed above Bollinger Middle Band and so close to BB1 Upper Band. This is the example of a good and typical long trade setup.
The second one (the one at right) is also good. The problem is that candlestick #1 is bearish. In spite of this, its lower shadow reflects the bullish pressure which is good. It is still a good long trade setup,
but the left one is much better.
Whenever you locate a long trade setup, compare it to the left trade setup on the below screenshot and take it if they look similar. (see example of a not-valid setup next slide)
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System Design by Chris Pottorff - Compilation by Peter Wagner

23

At right is what I call a bad DBB long trade setup. It is still a trade
setup, but it is not a good one.
1. Candlesticks #1 and #2 are closed almost below Bollinger
Middle Band which means bears are still strong. As you see,
the price doesnt go up strongly when candlestick #3 closes. It
goes up only for 2 small candlesticks and then it goes down
strongly.
2. The other thing is that candlestick #3 closed not only above
BB1 Upper Band, but also above BB2 Upper Band. It means
this candlestick has made the market a little overbought and
so a bearish counter-attack is possible:

A2.2 DOUBLE BOLLINGER BANDS SYSTEM SHORT SETUP

Here is two other bad DBB long trade setups.

Bad DBB long set-up examples

Short Trade Setups:


To go short (to sell), you have to wait for one of the candlesticks to close below the
BB1 lower band. Then you should check the previous two candlesticks to see whether
their close prices are above the BB1 lower band or not. If all three points comply, you
have a short trade setup (sell signal), and you can go short (sell) at close of the
candlestick which has broken below the BB1 lower band.

Candlestick #3 on the below chart has closed below BB1 lower band while
BB1 Bands

candlesticks #1 and #2 have closed above it. This is a short trade setup.

Stop loss has to be set at the high price of candlestick #3, and target can be at least
twice of the stop loss size (2 x SL). You can move the stop loss to breakeven if the
Almost perfect DBB
short setup
Negative - C2 is bullish

price goes down for 1 x SL.


With short trade setups it is better to have candlesticks #1 and #2 formed below Bollinger
Middle Band and above BB1 Lower Band when a short position forms. Also the closer
the candlesticks #1 and #2 close prices to the BB1 Lower Band, the stronger the setup.
Everything I explained above long trade setups has to be considered for short trade setups
too, but from the opposite direction.

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System Design by Chris Pottorff - Compilation by Peter Wagner

24

A2.2 DOUBLE BOLLINGER BANDS SYSTEM


Strategy & Profit Maximising

This trading system is great in catching the trends.


Therefore it is better to take advantage of the strong
movements and maximize your profit. Here is one way:
When there is a strong DBB trade setup, you can take two
positions with the same stop loss. Set a 2 x SL target for the
first position, and no target for the second one. If the first
position hits the target, move the seconds position stop
loss to breakeven and hold it.
In case of a long position, hold the second position as long
as the candlesticks form between the BB1 and BB2 upper
bands, or above the Bollinger Middle Band. Close the
second position when candlesticks start crossing the BB1
and BB2 upper bands, or when one of the candlesticks
breaks below the Bollinger Middle Band:
In case of a short position, hold the second position as long
as the candlesticks form between the BB1 and BB2
lower bands, or below the Bollinger Middle Band. Close the
second position when candlesticks start crossing the BB1
and BB2 lower bands, or when one of the candlesticks
breaks above the Bollinger Middle Band:
Of course, markets dont trend all the time. Indeed they
trend 30% of the time. It means you should not expect to
make hundreds of pips from each trade setup.
You can trail the stop loss if you like. For example when
your initial stop loss is 80 pips, then you can move your stop
loss further for every 80 pips that it moves toward the
favoured direction.

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Double Bollinger Bands Trading Strategy works on all time


frames, but I use it on the daily and longer time frames,
because it is easier, safer and more profitable. Never think
that you will make more profit if you apply this trading
system on 5min or 15min charts. Trading short time frames
give nothing but a headache, and you will not make more
profit for the effort.
System Design by Chris Pottorff - Compilation by Peter Wagner

25

A2.4 50 DAY MOVING AVERAGE TRADING SYSTEM

Links to FXKeys site:


(MAs) (SMA) (200MA) (weighted ave) (50MA(1)) (50MA(2)

Defining The 50-Day Moving Average


In simple terms we can define this as a technical indicator that is used to identify price trends based on the average rate at which at an entity closed over the past
50 days. Thus inherently it is a trailing index based on past price trends. These points (of average rates) often work as support or resistance zones for a variety of
other (extra) trades with the same currency pair.
Peculiar aspects of this moving average are:
1. when prices rise, the 50-day Moving Average will always be below the price
2. when prices fall, the 50-day Moving Average will always be above the price
At best it is an indicator of the immediate term with implications over the longer term if studied in perspective with the 200-day Moving Average.
Why do we need the 50-Day Moving Average?
1. It is because on the CHART it is a crucial dividing line between the healthy and not so healthy zones in the market.
2. The percentage of the total currencies trading above their 50-Day Moving Average is also indicative of the overall health of the market. Higher the
number, the better it is.
3. It can be either the point from which the currency goes on to make higher highs or the point from where it starts the downward reversal
4. It signals key entry and exit points to enter and exit the market. It gives indications of the price range that can form a good place to enter the market
or the exit point where losses are minimized or profit protected.
5. It is a good measure of the support and the resistance points
METHOD:
We have to monitor the charts on a daily basis until they form a trade setup, or we come to the conclusion that they have to be ignored.
To have a long trade setup based on the 50-Day SMA:
1. First the price has to break above the 50-Day SMA and keep on going up strongly to start an uptrend, so that the 50-Day SMA also points to the upward
direction.
2. Then the price has to go down to retest the 50-Day MA while this moving average is ascending strongly. If the price hits the 50-Day SMA and
3. Forms a buy signal above or on it by the candlesticks, then we will have a long trade setup. For example, it forms a Piercing Line or Bullish Engulfing pattern
above or on the 50-Day MA.

If the initial upward movement starts after or is followed by a resistance breakout (1) (2) (3) (4), then the trend will be stronger and the trade setup more
reliable.
Sometimes, when the price hits the 50-Day SMA it breaks below it and then turns around and breaks above the 50-Day SMA again which happens in noisy markets:
Sometimes , after breaking below the 50-Day SMA, the price continues up again strongly.
Sometimes, after breaking below the 50-Day SMA, the market is about to move sideways.
Therefore, if you like to have a higher success rate and a higher number of winning positions, it is better to avoid these kinds of setups, and only take
the ones where price precisely touches (re-tests) the 50-Day SMA after going up and forming a buy signal (strong candle pattern) above it.
It is the same with the short trade setups, but from the opposite direction
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System Design by Chris Pottorff - Compilation by Peter Wagner

26

A2.4 50 DAY MOVING AVERAGE TRADING SYSTEM - NOTES


1. Usually, during an uptrend in the market, prices tend to remain above the 50-day Moving Average:
i. Two or more market closes above this crucial mark is an indicator of the beginning of an uptrend.
ii. A pullback, when coupled with strong volumes with increasing prices and lower volumes with lower prices,
indicates a healthy uptrend in the market.
2. As investors, you need to take a cautious approach and time your entry or exit well during such a pullback. These are
additional entry and exit points.
3. When the 50Day MA is at high levels it is actually a warning that a reversal is in the making and a downward trend
might soon follow. It is also a signal of euphoria in the market place and also shows the presence of very few new
buyers
4. Similarly, extremely low readings are indicators of a turnaround in the forex market and show that bears are
gradually in losing control. These low readings also show that the market is close to forming a base and a new
upside might be looming up in near future.
5. When two key moving averages cross, such as the 50-day Moving Average with the 200-Day Moving Average (called
the Golden Cross):
i. When this short-term measure breaches (crosses to higher) the long-term indicator, it is generally seen as a
sign of good times and a reign of the bulls is expected. This fact is generally supported by the very high
trading volumes seen at such a crossroad in the market.
ii. The opposite or the inverse of this situation is called the Death Cross in the market.
6.

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At the end of the day, one must remember a tool is just a tool, how effective it is depends upon the ability of the
user. If one is alert, aware and engages earnestly in forex market trading, the 50-day Moving Average will continue
to be a weapon of choice to overcome short-term roadblocks that may arise. Due to widespread use its
effectiveness as a predictive tool is diminishing but it is still currently effective.
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System Design by Chris Pottorff - Compilation by Peter Wagner

27

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System Design by Chris Pottorff - Compilation by Peter Wagner

28

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System Design by Chris Pottorff - Compilation by Peter Wagner

29

A2.3 50 DAY MOVING AVERAGE TRADING SYSTEM - LONG


To go long:
1. Wait for the price to break above the 50SMA and
stay above it.
2. Wait for the price to go down and retest the 50SMA and
start going up again while the 50SMA is ascending.
3. Go long and set the stop loss below the last low the
price made while retesting the 50SMA. Set a 2x SL target
at least. Or you can hold the position as long as the price
is moving above the 50SMA.
4. A resistance break-out confirms and supports the 50MA
break

In order to have a long trade setup,


50SMA must be ascending already

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System Design by Chris Pottorff - Compilation by Peter Wagner

30

In order to have a
short trade setup,
50SMA must be
descending already

A2.3 50 DAY MOVING AVERAGE TRADING SYSTEM - SHORT

To go short:
1. Wait for the price to break below the 50SMA and stay below it.
2. Wait for the price to go up and retest the 50SMA and start going
down again while the 50SMA is descending.
3. Go short and set the stop loss above the last high price made while
retesting the 50SMA. Set a 2xSL target at least. Or you can hold the
position as long as the price is moving below the 50SMA.
4. A support break-out confirms and supports the 50MA break

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System Design by Chris Pottorff - Compilation by Peter Wagner

31

A2.5 INSIDE DAY CANDLESTICK PATTERN TRADING SYSTEM - NOTES

1.

The Inside Day is the second candlestick (the baby) in the Harami pattern. It is engulfed by the previous
candlestick (the mother). So it is entirely formed inside the previous candlestick.
Like all the other patterns we need two candlesticks to have the pattern completely formed.
Bollinger Bands indicator has an important role in this pattern too. even the most professional stock traders also
use the Bollinger Bands to locate and trade the Inside Day Candlestick. According to Jamie Saettele, Inside Day
works as a good reversal signal when there is a visible Bollinger Upper or Lower band breakout either by the first
candlestick (the mother), or the second candlestick (the baby), or preferably both.
When the price hits the Bollinger Upper or Lower Band on the daily chart, then we can wait for an Inside Day
candlestick to form.

2.
3.

4.

5.

According to Jamie Saettele, (refer the opposite chart)


i.
only the candlestick #1 and #3 should be considered and taken as a
reversal signal.
ii.
Candlestick #2 formed on Bollinger Middle Band. It reversed the
price strongly but it did not follow our Bollinger Bands breakout.
iii. Candlestick #4 and its previous candlestick did not hit the Bollinger
Upper Band, and so they have to be ignored (the trade setup is not
complete).

6.

The opposite chart shows two strong Inside Day candlesticks formed
consecutively at the bottom of a bear market.
i.
It is an interesting screenshot, because it shows one inside day
candlestick formed (#1) and then another one formed inside the first
inside day candlestick (#2). There is a nice and strong Bollinger Lower
Band breakout, both by the first candlestick (the mother), and the first
inside day (#1).
ii.
There is another inside day candlestick which is marked with ~ on the
below chart. Although it is engulfed by the previous candlestick, it has
to be ignored because neither the previous nor the inside day
candlestick have not hit the Bollinger Lower Band:

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System Design by Chris Pottorff - Compilation by Peter Wagner

! Jamie Saettele!
Specifically, the inside candle
represents a period of
contracted volatility. If, in an
uptrend, volatility begins to
slow and the market fails to
make a new high (as illustrated
by the inside candle), then we
can deduce that strength is
waning and that the chance for
a reversal exists. When
combined with a Bollinger
Band, we ensure that we are
trading a reversal only by either
selling high prices (higher
Bollinger Band) or buying low
prices (lower Bollinger Band).
In this way, we trade for the big
move; not necessarily selling
the low tick or buying the
bottom tick but definitely
buying near the relative bottom
and selling near the relative
top. The key is confirmation.

32

7.

Why Does the Price Change Its Direction When the Inside Day Candlestick Forms?
Candlesticks reflect the psychology of the markets (buyers and sellers). When the price is going up strongly and several bullish candlesticks
have formed, it means traders are buying and money is being injected to the market. All of a sudden, when a candlestick forms inside
the high/low range of another candlestick, it means traders have stopped buying as strongly as they had been previously and the money
that is being injected into the market is now not enough to take the price up to and higher than the previous days high. It means buyers
have started changing their minds, and now they are thinking about selling what they had bought. And some of them have already started
to sell. So the price will go down the next day after the inside day is formed. This reasoning applies for the case when an inside day forms
on a bear market.

8.

How to Trade the Inside Day Candlestick?


i.
When you locate an inside day candlestick on the daily chart, and there is a good and visible Bollinger Band breakout too (the way
you learned above), you enter at the close of the inside day candlestick (which is the open of the next candlestick).
ii.
If formed on a bull market while hitting the Bollinger Upper Band, then you go short, set the stop loss several pips above the high
price of the inside day candlestick (riskier), or preferably above the high price (safer) of the previous candlestick (the mother).
iii. If formed on a bear market while hitting the Bollinger Lower Band, then you go long, set the stop loss several pips below the low
price of the inside day candlestick (riskier), or preferably below the low price of the previous candlestick (safer).
iv. The target can be at least x2 or x3 of the initial stop loss size. If the inside day candlestick you locate is the beginning of a strong
trend, then you can make up to x10 of your stop loss size.

9.

The inside day Bollinger Band setup can also be used to identify major turns on weekly or even monthly charts for the longer-term position trader.

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System Design by Chris Pottorff - Compilation by Peter Wagner

33

APPENDIX 3
GAUGED EXAMPLES
*A3.1

STRONG 100 score PATTERNS .. 33*

*Why we are Traders not Fortune Tellers ..43*


*A3.2

STRONG 95+ score PATTERNS .. 44 56*

*A3.3

STRONG 90-95 score PATTERNS .. 57 83*

*A3.4

STRONG 80-90 score PATTERNS .. 84 96*

*A3.5

STRONG SETUPS TO BE IGNORED .. 97 105*


The Gauge (1) (2)

General 1 - Candlesticks Shadow versus Candlesticks Body


Setups 1 - What do I mean by a strong trade setup
Setups 2 - Forex trading couldnt be easier
Setups 3 When a Butterfly pattern suppoprts a Candlestick Pattern
Setups 4 To trade or not to trade, that is the question
Setups 5 Strong and Scary Trade setups
Setups 6 September 14 trade setups review
Setups 7 When a trade st confirms another trade setup

General 2 How Candlesticks Approve The Validity Of A Resistance Line


Setups 8 Are we overconfident about our trading system
Setups 9 The power of strong trade setups
Setups 10 The Trade Setups that Form at the Right Place Right Time
Setups 11 - The Trade Setups that Form at the Wrong Place Wrong Time
Setups 12 Trade setups that have to be ignored
Setups 13 The importance of negative points for a trade setup
Setups 14 - How Long Is A Strong Trade Setup Valid?

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System Design by Chris Pottorff - Compilation by Peter Wagner

34

APPENDIX 3.1
GAUGED EXAMPLES
STRONG 100 score PATTERNS
It is only price reaction to a support or resistance level [(1) (2) (3) (4)], that
tells whether it will go up above the level or not. It is less risky to wait for the
price to tell you what the market has decided and then trade with the trend. If
you trade just because the price has reached a line or level, you are leaving
yourself open to fate (the markets whim) which can be opposite to what you
desire. What we call trading is something different. A trader is someone who
follows the price, not someone who goes ahead of the price. FXKeys

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System Design by Chris Pottorff - Compilation by Peter Wagner

35

GBP/CAD Daily Chart 5/08/14

100PTS Setup & Result

100PTS

GBPCAD 06/08/14 confirmation candle:


1. The previous candle is a too strong bull candle
2. Confirmation candle is a too strong dark cloud cover taking
almost all of previous body and with a small lower shadow
3. Both candles have a good BUB breakout
4. 4th lower top on long ranging market at highs not making
resistance
5. Confirmation candle also broke BUB
6. Negative point is support line but far enough away

The strong Dark Cloud Cover was formed by the candlestick #1.
I took two short positions when candlestick #2 was forming.
Candlestick #3 hit my stop loss and I lost 32 pips in each of my
positions. As I was confident about the trade setup, I took two
other short positions immediately, and set a 30 pips stop loss for
each, and a 150 pips (x5) target for one of them. The first
position hit the target, and so I recovered my loss and made a
x3 profit. The second position has no target and is still open.
Candlestick #6 went down strongly and closed below a local
support line. That gave me more confidence to hold my
position. Later, some bullish reactions formed (the green
arrows) but none of them got confirmed by their next
candlestick (see The Importance of the Confirmation
Candlestick) which means most probably the price will keep on
going down.
Candlestick #7 was trying to close as a strong bullish
candlestick, but because the bearish pressure was too strong,
initially started by a strong Dark Cloud Cover, bulls could not
resist and gave the control to bears again, so that candlestick #7
closed with a long upper shadow. I expect GBP/CAD to go
lower than this, unless something extra-ordinary occurs.
Swing fell 900pts possible 700 tradable

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System Design by Chris Pottorff - Compilation by Peter Wagner

36

Strong Dragonfly Doji or Pin Bar Candlestick on AUD/JPY Daily Chart

100PTS

There are a few things that you have to note if you want to pick the
strong Dragonfly Doji reversal setups that will make money for you:

1.

The longer the lower shadow, the stronger the reversal pressure.
The lower shadow of the candlestick has to be too long
in comparison with the length of the other candlesticks formed
before the Dragonfly Doji. It has to be an exceptionally big
candlestick, otherwise it cannot make the price reverse, and it has
to be ignored.

2.

Bollinger Bands has a very important role in picking the strong


Dragonfly Doji reversal signals. The lower shadow MUST form a
very strong breakout with the Bollinger Lower Band, otherwise you
have to ignore the signal.

The Dragonfly Doji formed on AUD/JPY daily chart, on 2014.08.08, has


everything that a strong Dragonfly Doji reversal signal needs. The
AUD/JPY 2014.08.08 Dragonfly Doji candlestick

1.

has a very long lower shadow.

2.

It has also broken out of the Bollinger Lower Band very strongly:

This Dragonfly Doji was too strong, so that it did not need any
confirmation. I went long while the next candlestick (2014.08.11) was
forming. However, some traders may criticise that these kinds of
candlestick patterns have to be confirmed by the next candlestick. They
can be right, but when the candlestick is too strong (the way that it
was explained above), I dont wait (candlesticks not needing
confirmation) for the confirmation candlestick, and I take the position.
To be at the safe side, we could go long after the close of the 2014.08.12
candlestick which closed as a small bullish candlestick, however, if this
candle was closed as a big bullish candlestick, I would not go long
anymore, because I believed that it was too late.

close signal

100PTS
475.1 PIPS
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System Design by Chris Pottorff - Compilation by Peter Wagner

37

EURUSD: Daily - 100PTS


Chart 1

The 2014.05.08 candlestick has formed


1.

a too strong Bearish Engulfing Pattern.

2.

It has a very strong upper shadow and a bearish body.

3.

The Bollinger Upper Band breakout is also too strong.

4.

Above all, the trade setup is formed at the top of a too


exhausted bull market, so that, it can be considered as
a good reversal trade setup.

This trade setup is prefect and I give it a 100 score.


I dont see any negative point in it.
b

1.

c
2.
3.
z
c

4.
5.

Probable close point at a which is not a 100


signal due to very bottom of Bear Market 1493 pips move H to L
Close point b not a strong set up - 1635 pips
Close point z too much upper shadow but
market still bearish but showing signs of
exhaustion 1714 pips
c points are possible continuation trades
Red dash line is meaningless

Candle not
finished

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System Design by Chris Pottorff - Compilation by Peter Wagner

100PTS
38

USDCHF : Daily 100 PTS

Chart 2

There are two trade setups marked in this chart. There are
other trade setups that are not that strong and important.
The first trade setup (the arrow at the left)
1. is formed by 2014.04.04 and the next candlestick
(2014.04.11). The 2014.04.04 candlestick is a strong
Shooting Star with a long upper shadow and
2. a strong Bollinger Upper Band breakout.
3. The previous candlestick (2014.04.03) Bollinger Upper
Band breakout is also good.
4. The Shooting Star is strongly confirmed by the next
candlestick (2014.04.11) which is a strong bearish
candlestick:
5. If we look at the bigger picture, we will see that the
short trade setup is formed in a bear market. This can be
known as another positive point for a short trade setup.

D
I give a 100 score to this trade setup.
D
cont

Close signal
250 pips

100PTS
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System Design by Chris Pottorff - Compilation by Peter Wagner

39

USDCHF Daily 100 PTS

Chart 2

The second trade setup on Chart #2 is formed by 2014.05.08 candlestick and two
previous candlesticks (2014.05.06 and 2014.05.07).
1. The 2014.05.06 and the next candlestick have formed a small Piercing Line.
2. At the same time, the 2014.05.07 candlestick is a good and typical example
of an Inside Day candlestick.
So a good long trade setup is formed by 2014.05.06 and 2014.05.07 candlesticks
so far.
1. Then, 2014.05.08 candlestick appears with such a
1. long lower shadow,
2. strong Bollinger Lower Band breakout, and
3. a strong bullish body that forms a strong Bullish Engulfing Pattern.
Above all, these nice events have not occurred right at the bottom of a bear
market. Instead, they are formed when the bears were exhausted and the
Bollinger Upper and Lower Bands were not pointing down.
This is a 100 score trade setup without any doubt.

Close signal not received at 2014-12-05


1096 pips so far

100PTS

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System Design by Chris Pottorff - Compilation by Peter Wagner

40

AUDCAD(1) (2) : Daily100 pts

Candlestick 2014.10.16 formed strong Dark Cloud


Cover or Bearish Engulfing pattern on the daily chart.
It was a strong candlestick pattern. I did not give it a
100 score (see prev. slide) , because there was a few
too strong bullish candlesticks formed right before
the 2014.10.16 candlestick.
The next two candlesticks after the 2014.10.16
candlestick did not follow the short trade setup. They
went up to test the 0.9936 resistance level. In spite of
this, the trade setup and the resistance level were
strong enough to prevent the price from going up,
and they made the todays candlestick that will be
closed after about an hour, have a big bearish body.

If this candlestick closes with such a strong bearish


body, then we will have a 100 score short trade setup
on AUD/CAD daily chart:

100pts
M

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System Design by Chris Pottorff - Compilation by Peter Wagner

41

AUDJPY(1) (2): Weekly 100 pts

W
M

This is a too strong long


trade setup, and a typical
example of a Doji with its
confirmation that is formed
right after:
1. 2014.10.12 candlestick
is a strong Doji with a
too strong Bollinger
Lower Band breakout.
2. The next candlestick
(2014.10.19) has
confirmed the Doji very
strongly.

This is a 100 score trade


setup formed on AUD/JPY
weekly chart

*To Contents*

I dont see any negative


points with this trade
setup. The only thing is the
Bollinger Middle Band
which is about 70 pips
above the last weekly
candlestick close price, but
I am not too worried about
it.

100pts
System Design by Chris Pottorff - Compilation by Peter Wagner

42

GBPCAD: Daily 100 pts

W
2014-10-21

100pts

The last closed candlestick on the daily chart formed a too strong Bearish
Engulfing Pattern. It seems the Bollinger Middle Band on the weekly chart
worked as a too strong resistance and made the price go down strongly.
What we have on the daily chart now looks like a too strong 100 score
short trade setup. As the Bearish Engulfing Pattern formed by the last
closed daily candlestick (2014.10.21) is too strong, it is highly possible
that the price breaks below the broken resistance line too. If you already
have a long position based on the weekly long trade setup formed by
the 2014.09.07 candlestick on the weekly chart, you may want to close
your position and collect your profit or move your SL to breakeven if you
still want to hold the position.
The newly formed Bearish Engulfing Pattern is so similar to the Dark Cloud
Cover that formed by the 2014-08-06 candle (left side of the daily chart).
Since that time, we have used the short trade setup that was formed by
the 2014.09.07 candlestick as the typical example of a too strong 100
score short trade setup to compare the other short trade setups with.
The market condition is changed now. I consider the 2014.10.21 Bearish
Engulfing Pattern as a 100 score short trade setup
Positive Points:
1. The Bearish Engulfing Pattern is too strong by itself.
2. The Bollinger Upper Band breakout is strong enough.
3. The pattern is formed where there is no strong uptrend and bulls are
not strong.
4. The price is below the Bollinger Middle Band on the weekly chart,
which is good (although we dont check the longer time frames when
a too strong trade setup forms on a time frame like daily).
Negative Points:
1. There is no negative point on the daily chart.
This is a too strong 100 score trade setup. However, please note that
some bullish movements and bullish candlesticks above the Bollinger
Middle Band are possible on the daily chart, before the price goes down
seriously. This is what we also had when the 2014.09.07 Dark Cloud Cover
formed (left side of the above chart), and one of the candlesticks that
formed above the middle band hit my riskier stop loss, but I entered again.

D
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System Design by Chris Pottorff - Compilation by Peter Wagner

43

*return gbpaud*

GBPCAD weekly chart is the typical sample of a strong Piercing Line Pattern.

100PTS

Also
100

GBPCAD:
What we currently have on GBP/CAD weekly
chart is the typical sample of a strong Piercing
Line Pattern. This pattern is the bullish form of
Dark Cloud Cover pattern. The Piercing Line
which is formed on GBP/CAD weekly chart
by 2014.09.07 candlestick, is indeed the
strongest Piercing Line ever. One of the reasons
of its strength is the huge gap down we had on
GBP cross currency pairs last week: Weekend
Gaps and Your Pending, Stop Loss and Target
Orders
The GBP/CAD long trade setup has
several positive points:
1. The 2014.09.07 candlestick is a too strong
bullish candlestick that has covered almost
the whole body of the previous candlestick.
2. The 2014.09.07 and its previous candlestick
have broken out of the Bollinger Lower
Band very strongly.
3. The long trade setup is formed on small
bearish market (the red arrow on the
below image) which is formed after a
strong uptrend (the big green arrow on the
below image)
4. and bull market on the weekly and monthly
charts.
Therefore, this long trade setup can be known
as the continuation(1) (2) of the uptrend,
which is better than a long trade setup that
forms at the bottom of a strong bear market.

Please note that this trade setup is formed on


the weekly time frame, which means you will
have to hold your position for several weeks.

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System Design by Chris Pottorff - Compilation by Peter Wagner

100PTS

44

Why we are *Traders* and not Fortune Tellers!

AUDCAD(1) (2) (3) Daily - 100 pts

100PTS
AUDCAD :100 pts

the current candlestick has moved up very


strongly, maybe because of the Bollinger Middle
Band on the daily chart. Such a huge candlestick
that goes against the trade setup makes it
invalid. The current daily candlestick still has
several hours to close. It can go down and close
with a long upper shadow. We have to wait and
see:

Turned back by BMB?


9:58am

In general, the Bearish Engulfing Pattern formed on the daily chart is


strong and can be known as a strong short trade setup. I give it a 95100 score. I cannot give it a 100 score with confidence because
the 2014.10.13 candlestick is a too strong and bullish candlestick and
has broken above the Bollinger Middle Band on the daily chart
strongly.

95-100PTS

*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

45

APPENDIX 3.2
GAUGED EXAMPLES
STRONG 95+ score PATTERNS

*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

46

GBPUSD Daily: 98-100 PTS

This trade setup


1. is formed by 2009.08.06 candlestick, a strong
bearish candlestick which has engulfed the body
of two previous candlesticks completely, and also
most of the body of the third candlestick.
2. The 2009.08.03, which is the third candlestick
before the 2009.08.06 candlestick has broken
out of the Bollinger Upper Band very strongly.
3. The next two candlesticks, 2009.08.04
and 2009.08.05, have formed out of the Bollinger
Upper Band completely.
4. The 2009.08.06 candlestick itself doesnt have a
too strong Bollinger Upper Band breakout, but its
breakout still is not too bad. Besides, the strong
Bollinger Upper Band breakout of the previous
three candlesticks is more than enough, and so
we can ignore that the 2009.08.06 candlestick
Bollinger Upper Band breakout is not too
impressive.
5. The other positive point of this trade setup is
that, it is not formed right at the top of the bull
market. It is formed when the bullish trend was
exhausted and
6. a too strong reversal pattern, the big Butterfly
Pattern[ (1) (2) (3) ], is formed.
7. Of course, I would be worried about the big
bullish body of the 2009.08.03 candlestick, and
its previous candlestick (2009.07.31), however,
1. the strong Bollinger Upper band
breakout formed by 2009.08.03
candlestick, and
2. the too strong Butterfly pattern would
make me go for the trade setup.
I give a 98-100 score to this trade setup:

Chart 4

*To Contents*

Result : 929 pips

98-100PTS

System Design by Chris Pottorff - Compilation by Peter Wagner

47

GOLD : Daily 98 PTS B


Chart 6

98 PTS

The bulls attack above the Bollinger Middle Band was continued till
the 2010.06.28 candlestick formed.
1. This candlestick formed another strong Bearish Engulfing Pattern with a
relatively good Bollinger Upper Band breakout.
2. The other good thing about this trade setup is that it formed below the
high price that the 2010.06.18 and 2010.06.21 candlesticks (the first trade
setup) had formed.
I mean this trade setup formed while there was a lower high on the chart.
The lower high means although bulls were still strong and tried to take the
price up, but they were not strong enough to break above the last high, and
make a higher high. It means they had become more exhausted compared to
the time that the 2010.06.21 setup was formed. And this is a positive point for
the second trade setup.
A small Butterfly Pattern was formed between the first trade setup and the
second one (below). Having another Butterfly pattern formed before the
second trade setup, was another reason indicating that bulls were getting
exhausted enough to leave the control to bears.
The second trade setup (2010.06.28) confirmed the first trade setup
(2010.06.21) like when a strong bearish candlestick confirms a Hanging Man
or Shooting Star candlestick.
The second trade setup can be known as a 98 score trade setup because it is
just a little weaker compared to our GBP/CAD trade setup. However, I would
take it because it formed right after another strong trade setup, and while
having the Butterfly patterns, the lower high, and that were explained
above.
This is a good example that showed you how trade setups that form
consecutively, can confirm each other. A strong trade setup is strong by itself,
but it becomes stronger when it is confirmed by another strong trade setup
that forms right after.

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System Design by Chris Pottorff - Compilation by Peter Wagner

48

USDCHF : Daily 95-100 PTS

Chart 1

The last trade setup of chart #1 is related to another strong


short trade setup formed by 2013.09.06 candlestick.
1. It is such a strong Dark Cloud Cover, formed in a ranging
market that was slightly going down too (look at the big
red arrow). Having a short trade setup under such a
condition is a good chance to go short:
The only negative point of this trade setup is the 2013.09.06
candlestick lower shadow that reflects some bullish pressure.
All the other factors, like
1. the candlesticks sizes,
2. Bollinger Upper Band breakout, and above all,
3. the market ranging condition that was explained above,
are all good.
So this is a 95-100 trade setup. I would take this short trade
setup. It is a nice one.

95-100PTS
Chart 1

*To Contents*

Result: 565 pips H to L


System Design by Chris Pottorff - Compilation by Peter Wagner

49

AUDCAD(1) (2) (3) : Daily 95-100pts

AUD/CAD has formed a


1. strong Dark Cloud Cover or Bearish
Engulfing Pattern on the daily chart
below the 0.9936 resistance level.
2. both of the participant candles in this
pattern have broken out the Bollinger
Upper Band very strongly
3. The pattern is formed on a bearish
market on the daily chart and
It is strong by itself

The weekly chart is also bearish and has


reacted to the resistance level

In general, the Bearish Engulfing Pattern


formed on the daily chart is strong and can
be known as a strong short trade setup. I
give it a 95-100 score. I cannot give it a 100
score with confidence because
the 2014.10.13 candlestick is a too strong
and bullish candlestick and has broken
above the Bollinger Middle Band on the
daily chart strongly.

95-100pts
*To Contents*

On the monthly chart, the second shoulder


of a head and shoulders pattern is formed,
and most probably the price is going to go
down to test the head and shoulders
neckline. It is about 450 pips above the
neckline now.
After hitting the neckline, it is possible that
it bounces up (#1 on the below chart),
breaks below the neckline (#2) and keeps
on going down. The last monthly candlestick
has broken below the Bollinger Middle Band
and the current candlestick has been
retesting the middle band so far.

System Design by Chris Pottorff - Compilation by Peter Wagner

50

GOLD Daily 95-98 PTS A


Chart 6

The chart trade setup is formed by 2010.06.21 candlestick.


1. It is a strong Bearish Engulfing Pattern with a good Bollinger Upper Band
breakout. and also
2. its previous candlestick (2010.06.18) has broken above the Bollinger Band
strongly.
we compare all the short trade setups we locate with our GBP/CAD short
trade setup, because it was a nice and strong trade setup that had no negative
points. Above all, it really made the price go down strongly. So it is a good
short trade setup to be used to gauge the other trade setups.
Lets compare the 2010.06.21 short trade setup on gold daily chart with our
GBP/CAD trade setup.
1. the 2010.06.21 trade setup has a stronger bearish engulfing and also
Bollinger Upper Band breakout compared to our GBP/CAD trade setup.

Chart 5 & 6

95-98 PTS
*To Contents*

2. The only weak point of this trade setup is that it is formed while the
uptrend was still strong. It did not form RIGHT at the top of the bull
market, and it formed when some strong bearish movements were
already formed (red arrow on the below chart), which meant that bulls
were getting exhausted while the GBP/CAD trade setup, was formed on a
long ranging market that was formed after a strong uptrend. This is the
biggest weak point the 2010.06.21 trade setup has, in comparison to
GBP/CAD trade setup. However it seems the 2010.06.21 trade setup, has
a stronger bearish engulfing power, and also stronger Bollinger Upper
Band breakout.
There is a W or Butterfly Pattern formed before the 2010.06.21 trade setup.
This is another positive point for this trade setup, because W or Butterfly
Pattern[ (1) (2) (3) ], is a strong reversal pattern.
In general, the 2010.06.21 trade setup is a strong trade setup, but because of
the weak point not 100. It is a 95 to 98 score, as its bearish engulfing and
Bollinger Upper Band breakout power are too strong and the strong W or
Butterfly Pattern formed before the trade setup.
The weak point is not insignificant, the Bollinger Middle Band worked as a
strong support that did not allow the price to go down for several candlesticks.
This is because of nothing, but the residual of the uptrend strength that was
not too exhausted. This movement could hit all the stop loss orders .

System Design by Chris Pottorff - Compilation by Peter Wagner

51

USDCAD (1) (2) : Daily 90-98 PTS


USD/CAD
While the 2014.12.01 candlestick was forming on the daily chart yesterday, I
made an analysis on this currency pair and informed you that a strong setup
was forming. Many of you asked about the score and strength of this setup.
Today, I am going to analyze it more and outline the negative and positive
points it has.

Positive Points:
1. The candlestick pattern is too strong.
2. Some strong exhaustion signs are already formed on USD/CAD daily
chart. I mean the bearish movement from 2014.10.15 to 2014.10.29,
and from 2014.11.05 to 2014.11.21. It means that although the uptrend
is still in uptrend, the bulls look exhausted now and it is easier for the
bears to take the control.

Negative Points:
1. There is a Bollinger Upper Band breakout formed by yesterdays daily
candlestick(2014.12.01) and also the previous candlestick. However, it is
not that strong.
2. The 2014.12.01 candlestick that has formed the trade setup and the
Bearish Engulfing Pattern, has touched the Bollinger Middle Band and
has closed right above it. In case the middle band works as a support, it
can prevent the price from going down.
3. Although some exhaustionsigns have already formed on the chart, the
uptrend has not yet turned to an exhausted sideways market.
Therefore, this is a 95 score trade setup and because the candlestick pattern
is too strong, I can give it a 98 score, but it is not 100.
Now, about the support line that I talked about yesterday, it is almost 60 pips
below the close price of 2014.12.01 candlestick

Failed Pattern

*To Contents*

90-98PTS

System Design by Chris Pottorff - Compilation by Peter Wagner

52

GBPCHF : Daily 95 PTS


GBP/CHF now has formed a long
trade setup above the uptrend
support line on the weekly chart.
This long trade setup formed by the
last closed weekly candlestick (#2
on the below chart) is a
1. relatively weak Bullish Engulfing
Pattern with a
2. not too strong Bollinger Lower
Band breakout.
3. The previous candlestick (#1) is
a too long bearish candlestick
and unfortunately candlestick
#2 is not long enough to make a
too strong Bullish Engulfing
Pattern.

Result to wk 2014-11-30

95PTS

However, as this long trade setup


is formed on an uptrend, it has
more power. I give it a 95 score,
because candlestick #2 has not
engulfed the candlestick #1, and
has not broken out of the Bollinger
Lower Band strongly:

*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

53

AUDJPY Weekly: 95 PTS


Such a beautiful Bearish Engulfing Pattern is formed on
AUD/JPY weekly chart by the 2014.09.07 candlestick.
Positive Points:
1. The 2014.09.07 candlestick has a strong bearish body
which has covered the body of two previous
candlesticks.
2. The Bollinger Upper Band breakout in
this AUD/JPY Bearish Engulfing Pattern is even stronger
than the above AUD/CHF short trade setup.
3. Although the AUD/JPY Bearish Engulfing Pattern is
formed at the top of a bull market, the uptrend looks
too weak and exhausted and it is ready to collapse at
any time.
4. The monthly time frame is bullish, but there is another
strong Bearish Engulfing Pattern formed by
the 2013.05.01 candlestick, and so the market went
down strongly, but was stopped by the Bollinger
Middle Band. Since that time, AUD/JPY has tested the
Bollinger Middle Band as a support several times,
however it has not been able to go up and make a
higher high. Now, it looks exhausted, and so it is highly
possible that it collapses sooner than later. Therefore,
not only there is nothing serious on the AUD/JPY
monthly chart, against the Bearish Engulfing Pattern on
the weekly chart, but also the Bearish Engulfing Pattern
formed by the 2013.05.01 candlestick on the monthly
chart is a big support for the weekly chart.
I give a 95 score to this AUD/JPY short trade setup, because
the AUD/JPY short trade setup is formed on a relatively
weak bullish market, not a ranging market formed after a
strong uptrend.

Result: 691 pips H to L


*To Contents*

95PTS

System Design by Chris Pottorff - Compilation by Peter Wagner

54

The above chart shows three trade setups. The first


one (left side of the chart) is formed on GBP/USD daily
chart by 2013.11.13 candlestick. If you locate this
candlestick on your platform, you will see that

GBPUSD Daily: 95 PTS

Chart 1

1.

2013.11.13 candlestick is formed almost at the


support of a consolidation that was formed after a
strong bullish market (see the below chart).

2.

Therefore, the long trade setup formed


by 2013.11.13 candlestick, which is a Bullish
Engulfing Pattern, is indeed a continuation trade
setup indicating that the uptrend wants to be
continued after the consolidation. This is a great
advantage, because it is much safer and better to
go long on a bull market. Continuation trade
setups on the strong bull or bear markets are
much safer, better and more profitable to
take. 2013.11.13 candlestick is a strong bullish
candlestick formed at the bottom of a
consolidation on a strong bull market.

3.

The previous candlestick (2013.11.12) lower


shadow has broken out of the Bollinger Lower
Band strongly,

4.

but the Bollinger Lower Band breakout


of 2013.11.13 candlestick itself is not impressive.
This is the only negative point that this trade setup
has.

Result 748 pips H to L

I give a 95 score to this trade setup just because its


Bollinger Band breakout is not strong. However, it is
such a strong and good trade setup, because of the
strong uptrend that is formed before:

95PTS
*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

55

USDCHF Daily: 95 PTS


This trade setup is formed by 2012.03.15 candlestick.
Positive Points:
Chart 3

1.
2.
3.

The candlesticks sizes are good.


The short trade setup is formed almost at the bottom of
bear market, and
while the Bollinger Upper and Lower Bands were almost
horizontal.

Negative Points:
1.

The Bollinger Upper Band breakout is not too impressive.

If a 100 score trade setup is the one with so many positive


points, and no negative point, then
this trade setups score should be about 95.

Result: 333 pips H to L

95 PTS
*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

56

USDJPY: Weekly 95pts

USD/JPY has formed a


1. too strong Bearish Engulfing Pattern on the weekly chart.
The 2014.10.05 candlestick is closed with a long bearish
body that almost has engulfed the body of three previously
closed candlesticks.
2. It is a short trade setup, but there is one negative point with
it. It is formed when the bulls are still too strong. Therefore, I
can not give it a 100 score, however, as the candlestick
pattern is too strong by itself,
I give it a 95 score. It is as simple as that.
Although the formed candlestick pattern is too strong, and it has
formed a strong short trade setup, but when we give it a 95
score because of the negative point it has, you know that it is
riskier than a 100 score trade setup. Therefore, you either ignore
it, or if you take it you do it when you are aware of the risk and
you enter with caution and with a smaller than usual lot size.
On the monthly chart, USD/JPY is strongly bullish, and the bad
news is that currently the market is not below a strong
resistance level that can support the short trade setup formed
on the weekly chart. It means this short trade setup is formed
right at the middle of nowhere without any clear reason. The
two yellow rectangles on the monthly chart look like the places
that the USD/JPY price has reacted to them, but they are not
that strong:

95pts

*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

57

USDCAD: Daily 95 pts


USD/CAD.
1. The 2014.11.07 candlestick (#3 on the below chart)
closed with a long bearish body that engulfed the
body of three previous candlesticks and also about
40% of the body of 2014.11.03 candlesticks. It has
formed a too strong Bearish Engulfing Pattern.
2. The Bollinger Upper Band breakout formed by all the
involving candlesticks is also too strong. Candlestick
#1 has almost formed out of the Bollinger Bands
completely.

The only negative point is that the pattern is formed on an


uptrend which is still strong. Therefore, although the
candlestick pattern and its Bollinger Band breakout are
too strong, it has formed a +95 score trade setup.

95pts

What Do I Expect From This Setup?


This strong Bearish EngulfingPattern can take the price
down to test the support lines I have plotted on USD/CAD
daily chart. The upper one is plotted based on the close
price (line chart) and the lower one is plotted based on
the low price. USD/CAD can react to both of these lines
strongly, because as I mentioned above bulls are still
strong. Of course, it can break below both of the support
lines very strongly too, but this is less probable, because
of the bulls strength. I expect to see one more high
formed above these line. I am explaining this to make you
aware of the risks that the formed short trade setup has.
Weekly is strongly bullish. The only bearish signal is the
long upper shadow of the last closed weekly candlestick
(#4 on the below chart) that has to be confirmed by any of
the next a few of few candlesticks to be known as a short
trade setup. It is not a short trade setup by itself.
Additionally, the 1.1277 resistance level is broken too
Monthly chart is strongly bullish too:

*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

58

APPENDIX 3.3
GAUGED EXAMPLES
STRONG 90-95 score PATTERNS

*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

59

GBPCAD: Weekly 90-95 PTS

Result to wk 2014-12-21

90-95PTS
D

*To Contents*

Since the 2014.10.21 GBP/CAD candle that formed a short


trade setup on the daily chart we have been waiting for a
long trade setup on the weekly or daily chart, or both,
because the GBP/CAD uptrend is still strong on the weekly
chart and the last long trade setup formed by 2014.09.07
weekly candlestick formed a support level at 1.7534 that has
made the price bounce up.
GBP/CAD went down and hit the support level last week and
bounced up. It has formed a long trade setup on the weekly
chart.
Positive Points:
1. This long trade setup is formed while the market is still
bullish on the weekly and monthly time frames.
2. 2014.11.23 candlestick (#3 on the below chart) is a big
and strong candlestick that has engulfed the previous
candlestick (#2) as well as over 50% of candlestick #1.
So, it has formed a strong Bullish Engulfing Pattern.
3. The 1.7534 support level is one of the other positive
points for this trade setup.
Negative Points:
1. The 2014.11.23 and its previous candlestick have not
broken out of the Bollinger Lower Band strongly.
However, they both have a breakout, so it is not that
bad. So, this cannot be known as a strong negative
point.
2. The upper shadow of candlestick #3 which is the main
candlestick in this pattern and long trade setup, signals a
bullish pressure that can be related to a resistance
3. The last closed daily candlestick has reacted to the
Bollinger Middle Band on the daily chart, and has closed
with a long upper shadow. This is the reason behind the
weekly candlestick upper shadow. This is a strong
negative point and those who want to go long have to
be aware that it is strongly possible that some bearish
candlesticks form, and GBP/CAD goes down before it
follows the weekly long trade setup seriously
It cannot be a 100 score trade setup, because of the
negative points it has. I give it a 90 score if I want to be too
strict, but it can have a 95 score because of the strong
uptrend on the weekly and monthly time frames

System Design by Chris Pottorff - Compilation by Peter Wagner

60

The 2014.09.10 daily candlestick closed with a big bullish


body.

GBPCHF : Daily - 90-95PTS

1.

Its body and shadows have covered the body of


several previous candlesticks, and so this candlestick
has formed a very strong bullish engulfing pattern.

2.

Its long lower shadow and a small portion of its body


have broken out of the Bollinger Lower Band.

3.

The previous two candlesticks, specially


the 2014.09.08, have broken out of the Bollinger Lower
Band too. Although we prefer to have a strong
Bollinger Band breakout, but this one is not too bad. So
this Bullish Engulfing Pattern has also an acceptable
Bollinger Lower Band breakout.

4.

The other thing is that the 2014.09.10 candlestick has


already broken above the Bollinger Middle Band, which
is another positive point for this long trade setup.

5.

The only negative point that this trade setup has is that
the 2014.09.10 candlestick is too big. Its body is 157
pips long. This makes the market already overbought,
which means it is possible that we see some bearish
candlesticks that probably try to retest the broken
Bollinger Middle Band strongly. They can even close
below the Bollinger Middle Band. This is something
that you have to be aware of. The probable bearish
movements can threaten our stop loss orders.

Result: 561 pips L to H

If we give a 100 score to our GBP/CAD and AUD/JPY trade


setups strength and accuracy, the above trade setups
score is 90 to 95, just because of the negative point I
mentioned above.

Stopped & re-entry

90-95PTS
*To Contents*

The other thing I have to let you know about this trade
setup is that there is a resistance line on the way. It seems
the bulls are strong enough to break above the resistance
line, however it can cause some bearish reactions:

System Design by Chris Pottorff - Compilation by Peter Wagner

61

AUDCHF weekly pt1:. 90-95PTS

1. A strong Bearish Engulfing Pattern is formed by the last closed weekly


candlestick (2014.09.07) on AUD/CHF weekly chart. which covered the body of
three previous candlesticks.
2. Above all, this candlestick and the previous one have broken out of the
Bollinger Upper Band strongly

90-95PTS
Weekly Chart:
The green arrow shows the bullish movement I talked about above. The (1) red
arrow shows the first probable movement after the 2014.09.07 bearish engulfing
pattern. The (2) arrow shows the possible bullish movement we may see, before
AUD/CHF goes down seriously.
Monthly Chart:
As you see the current monthly candlestick has already retested the Bollinger Middle
Band and is going down now.

M
*To Contents*

Daily Chart:
The green arrow shows the possible movement that can occur above the support
line. Please note that it is possible that the support line is invalid and the AUD/CHF
market shows no reaction to it.
System Design by Chris Pottorff - Compilation by Peter Wagner

62

AUD/CHF Weekly pt2:. 90-95PTS

AUD/CHF: SEE PREVIOUS SLIDE = A strong Bearish Engulfing Pattern is formed by the last closed weekly
candlestick (2014.09.07) on AUD/CHF weekly chart. This candlestick has covered the body of three previous
candlesticks. Above all, this candlestick and the previous one have broken out of the Bollinger Upper Band
strongly. 90-95PTS

AUD/CHF
Positive Points:
1. The 2014.09.07 candlestick has such a strong bearish body which has covered the body of
three previous candlesticks.
2. The 2014.09.07 and its previous candlestick have broken out of the Bollinger Upper Band
strongly.
3. The current monthly candlestick (2014.09.01) has already tried to test the Bollinger Middle
Band strongly, but this moving average worked as a strong resistance, and so bulls got
disappointed and gave the control to bears.
4. There is a strong downtrend on the monthly chart.

Result Wk: not complete

Result D: 538 pips H to L

Negative points:
1. The 2014.09.07 candlestick has formed at the top of a newly started uptrend on the weekly
chart. The bullish movement that was started almost from the beginning of the current year
(the 2014.01.26 candlestick on the weekly chart) is too sharp.
2. The 2014.09.07 candlestick is really too big. Under such a condition, sometimes the next
candlestick becomes a bullish candlestick, because the market is already oversold on the
shorter time frames.
3. The 2014.09.07 candlestick has closed a little above the Bollinger Middle Band. It is possible
that the Bollinger Middle Band doesnt allow the price to go down easily and some bullish
movements and ups and downs forms around the middle band.
4. The last daily candlestick is closed right above a resistance line which can be strong. It is
possible that AUD/CHF goes up above this resistance line, and forms another high, before it
follows the weekly chart short trade setup formed by the 2014.09.07 candlestick.
5. Most probably AUD/CHF will go down very strongly, but it can be mixed with some bullish
movements too. The strength of the candlestick pattern and the positive points it has, can
overcome the negative points to some extent. So this AUD/CHF trade setup score is 90-95.
Please note that this trade setup is formed on the weekly chart, and each candlestick takes one
week to mature. If you take this trade setup, you may have to hold your position for several
weeks.
The other thing is that AUD/CHF short position will have a negative swap.

*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

90-95PTS
63

GBPUSD: Daily 90-95 PTS


Chart 4

The trade setup formed by 2010.01.20 candlestick:


1. a shooting star which is not too strong. For a strong setup we
need a strong upper shadow with a stronger BUB breakout.
2. The confirmation candlestick is bearish which is good, but it is a
relatively long lower shadow. However, it is not a bad
confirmation candlestick.
3. The trade setup is formed where the Bollinger Bands were
almost horizontal with a tendency to go down, and while the
market was not bullish and we already had a strong short trade
setup formed by 2009.08.06 candlestick. These are all positive
points.
4. So a 90 score.
Q) How important in points is the first reaction after an exhausted bull market?
A) It depends on the reaction. If it is strong enough, then we can
consider it as a strong positive point. It can be different. We have to
analyse it in each individual setup.

Q) it looks like the Shooting Star is the final shoulder of a Head & Shoulders
pattern any points for this? A) The second shoulder will form when the
price goes down for several candles after the shooting star and its
confirmation candlestick. However, sooner than the second shoulder, we
could see the big W which is important and can even make us give a
95 score to this setup.
*To Contents*

Continuation trade MA50 note MA50 not yet decending but


BMB favouring & strengthening short trade decision

90-95PTS
System Design by Chris Pottorff - Compilation by Peter Wagner

64

GOLD Daily 90-95 PTS B


Chart 10

The trade setup of this chart is formed by


the 2014.03.17 candlestick.
1. It is a perfect trading setup regarding the
size of the 2014.03.17 candlestick and its
previous candlestick. The 2014.03.17
candlestick is a strong bearish candlestick
with a long upper shadow that reflects
the strong bearish pressure.
2. It has broken out of the Bollinger Upper
Band strongly. The previous candlestick
(2014.03.14) also has formed a too
strong Bollinger Upper Band Breakout.
The only negative point of this trade setup is
that it is formed on a strong bull market,
while the uptrend was strong and there was
no sign of bulls exhaustion.

Continuation trade BMB

So I give it a 90 score. It can take a 95 score


too because the candlestick pattern and BB
breakout is too strong by itself.

Continuation trade MA50


continuation trade DBB

90-95 PTS

*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

65

EURGBP: Daily - 90-95 PTS

90-95PTS

Results: 299 pips H to L

At the same time that a long trade setup was formed on GBP/CHF daily chart, a
short trade setup formed on EUR/GBP daily chart. The EUR/GBP short trade
setup is formed by the 2014.09.10 candlestick. This 2014.09.10 candlestick is a
big bearish candlestick which has covered several previous candlestick bodies
and shadows. So the pattern is a strong Bearish Engulfing Pattern.
1. The Bollinger Upper Band breakout is not that strong, but is not bad. The
very strong bearish body and upper shadow that the 2014.09.10
candlestick has, reflects the bears strength. It has also broken below the
Bollinger Middle Band which is another good sign. It seems the current
forming candlestick (2014.09.11) has tried once to retest the broken
Bollinger Middle Band, but so far the middle band has worked as a strong
resistance.
2. A negative point is the very strong bearish body of the 2014.09.10
candlestick. This can make the market oversold, which can end in some
bullish attacks that can be strong enough to threaten our stop loss orders.
3. Another negative point is the strong downtrend. Although it is wise to go
short based on a strong short trade setup on a strong bear market, we have
to consider that the market is extremely oversold and can reverse at any
time. Therefore, a reasonable stop loss is strictly recommended.
This strong short trade setup is related to GBP up movement during the past
two days, and also the excessive fundamental weakness of Euro.
If we give a 100 score to our GBP/CAD and AUD/JPY, and a 90 to 95 score to our
GBP/CHF trade setups strength and accuracy, the current EUR/GBP trade
setups score is 90 to 95 too. Although it has more negative points than
GBP/CHF, I give it the same score, because bears are usually stronger than bulls
and they move the price much faster and stronger. The reason is that fear is
behind a bear market, whereas the price goes up because of greed. Fear is
stronger than greed.
Also please note like the GBP/CHF long trade setup that had a resistance on the
way, there is a support line here too: The strong and long bearish body
of 2014.09.10 candlestick is a negative point for this trade setup, and it showed
its effect and caused the next candlesticks to retest the Bollinger Middle Band
strongly.
All of the candlesticks that opened after 2014.09.10 candlestick, tested the
Middle Band strongly.
The good thing is that 2014.09.16 candlestick closed with a too-long upper
shadow, below the Bollinger Middle Band. This reflects the strong bearish
pressure that hopefully will be end with a strong down movement.

*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

66

CADCHF (1) (2) : 90-95 PTS

CAD/CHF:

1. a Bearish Engulfing Pattern, is formed by the last closed


weekly candlestick (2014.09.07). The difference is that
2014.09.07 candlestick is much stronger in AUD/CHF.

Negative points :
1. The 2014.09.07 candlestick has formed at the top of an
uptrend on the weekly chart which was started in
March 2014 is quite sharp.
2. The last daily candlestick is closed right below BMB
(red arrow). It is good to close below but it may be
testing the BMB as support which has happened
So this CADCHF trade setup score is 90-95.
D

Please note that this trade setup is formed on the weekly


chart, and each candlestick takes one week to mature. If
you take this trade setup, you may have to hold your
position for several weeks.

90-95PTS
*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

67

EURAUD (1) (2) : weekly 90PTS


The long trade setup, formed by the
2014-09-07 candlestick:
1. Although the Bullish Engulfing
Pattern is too strong The bearish
movement on which it is formed is
quite strong
Therefore, this trade set-up should be
about 90PTS
Result: +1344 pips L to H still going

90PTS

*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

68

EURUSD daily 90 PTS


This is a relatively strong Dark Cloud Cover formed by
the 2009.11.26 candlestick on EUR/USD daily chart.
1. The Bollinger Upper Band breakout is not bad,
2. and the 2009.11.26 candlestick size is good.
3. The only problem is the lower shadow of 2009.11.26
candlestick. It is longer than usual in a Dark Cloud Cover
pattern, and it reflects the bullish pressure in the
market.
4. The next candlestick (2009.11.27) long lower shadow
formed above the Bollinger Middle Band confirms that
bulls are still strong. This is the most important
negative point of this trade setup that doesnt allow us
to scale it as a 100 trade setup.
5. The trade setup is formed at the top of a strong
uptrend, but at the time, the uptrend was exhausted
and was not too sharp, and

6. the Bollinger Upper and Lower Bands were getting close


to each other, and had become almost horizontal. So
this cannot be known as an important negative point.

Continuation trade MA50

Continuation trade BMB

Continuation trade DBB

Result: + 3268 pips H to L

90PTS

*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

69

EURUSD Daily - 90PTS


Chart 2

The trade setup is formed by 2013.12.27 candlestick


on EUR/USD daily chart. The 2013.12.27 candlestick is:
1. a Shooting Star with a too long upper shadow,
Result: + 385 pips H to L (1.35071)
2. formed almost at the equal top of bull market.
3. The Bollinger Upper Band breakout is not too bad.
It is formed while the Bollinger Upper and Lower
Bands were still too far from each other which
means bulls were still strong.
This makes me not to give it more than a 90 score.
*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

90PTS
70

EURUSD Daily - 90PTS


Chart 3

This trade setup is formed by 2013.02.04 candlestick

1. The previous candlestick (2013.02.01) has a


relatively strong Bollinger Upper Band Breakout,

Continuation trade BMB

2. the 2013.02.04 candlestick itself is a strong bearish


candlestick which has formed a strong Engulfing
pattern.

3. The most important negative point is the uptrend


and Bollinger Bands direction and distance.
*To Contents*

Continuation trade MA50

Continuation trade DBB

Result: 966 pips H to L

So this one will also have a 90 score.


System Design by Chris Pottorff - Compilation by Peter Wagner

90PTS
71

EURUSD Daily - 90PTS


Chart 4

The red arrow shows the 2012.02.29 candlestick which is


the candle that has formed the strong trade setup.
1. The 2012.02.27 candlestick which is two candles
before the 2012.02.29 candlestick has also formed a
trade setup (Dark Cloud Cover), however it is too
weak because of the candlestick size which is too
small.
2. The 2012.02.29 candlestick has formed a strong
Bearish Engulfing Pattern.
3. The Bollinger Upper Band breakout is not impressive,
and the previous candlesticks are too bullish.
4. It has formed almost at the top of a strong bull
market.
So this trade setup is a 90 score.

Continuation trade BMB

Continuation trade MA50


Continuation trade DBB

Result: 1443 pips H to L

*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

90PTS
72

GBPUSD: Daily 90 PTS


The trade setup is formed by 2014.01.24 candlestick.

Chart 1

1. It is a strong Bearish Engulfing Pattern.


2. The Bollinger Upper Band breakout formed by 2014.01.24 candlestick
and also its previous candlestick is good.
3. There are two negative points with this trade setup.

The first one is that the trade setup is formed when the market is
still a little bullish. Bulls look exhausted, but they are still strong.

The second negative point is the 2014.01.24 candlestick size. It is a


too big bearish candlestick that has already made the market a little
oversold on the shorter time frames, and so, some bullish
movements above the Bollinger Middle Band was possible.

So the overall score of this trade setup is 90.


Continuation trade MA50

continuation trade DBB

Result: 416 pips H to L

*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

90PTS
73

GBPUSD: Daily 90 PTS


Chart 2

90PTS
The trade setup (left) is formed by 2011.04.28
and 2011.05.02 candlesticks.
1. 2011.04.28 candlestick is closed as a strong Shooting
Star that needed to be confirmed by the next
candlestick.
2. The next candlestick did not confirm the Shooting Star,
however, the 2011.05.02 candlestick did it.
The 2011.04.28 candlestick Bollinger Upper Band
Breakout is great.
3. The big negative point of this trade setup is that it is
formed at the top of a strong bullish market while the
bullish candlesticks were too strong and Bollinger Upper
and Lower Bands were pointing up strongly.
I give a 90 score to this trade setup:
*To Contents*

Continuation trade DBB

Result: 965 pips H to L

System Design by Chris Pottorff - Compilation by Peter Wagner

74

GBPUSD : Daily 90 PTS

The trade setup is formed


by 2011.07.12 candlestick.

Chart 2

1. It is a Hammer or Dragonfly
Doji with a too long lower
shadow which has broken out
of the Bollinger Lower Band
strongly.
2. The confirmation candlestick is
a too big bullish candlestick
which is closed above the
Bollinger Middle Band.
3. The biggest negative point of
this trade setup is that it is
formed at the bottom of a
relatively strong bear market.
I give a 90 score to this trade
setup, because although
the 2011.07.12 candlestick lower
shadow and its Bollinger Lower
Band breakout is too strong it is
formed at the bottom of a bear
market

Continuation trade MA50


continuation trade DBB

*To Contents*

90PTS
System Design by Chris Pottorff - Compilation by Peter Wagner

75

GBPUSD : Daily 90 PTS


Inside-day candle

The trade setup on is formed


by 2011.08.19 candlestick.
1. It has a relatively long
upper shadow which has
broken out of the Bollinger
Upper Band not strongly.
2. The previous candlesticks
size, shadows and Bollinger
Upper Band breakout is
not impressive.

Chart 2

3. The trade setup is formed


at the top of a relatively
strong bull market.
4. The only important thing
about this trade setup is
that the 2011.08.18
candlestick has formed an
Inside Day pattern which is
also a reversal signal.
So in total I give a 90 score to
this trade setup:
continuation trade DBB

90PTS
*To Contents*

90PTS
System Design by Chris Pottorff - Compilation by Peter Wagner

76

USDCHF Daily 90 PTS


Chart 3

90 PTS
The trade setup formed by the 2012.01.09 candlestick:
1.
2.

is a Bearish Engulfing Pattern formed by 2012.01.09 and


its previous candlesticks.

Positive Points:
1. Both candlesticks Bollinger Upper Band breakout is strong.
2. There is a Butterfly Pattern formed before the 2012.01.09 candlestick
trade setup. As you know, Butterfly is strong reversal pattern.
Negative Points:
1. The candlesticks sizes is not impressive.
2. Although there is a Butterfly pattern there, bulls and uptrend are still
strong.
I give a 90 score to this trade setup.
*To Contents*

Result: 664 pips H to L

System Design by Chris Pottorff - Compilation by Peter Wagner

77

GBPAUD: Weekly

90 PTS

90 PTS
Similar to *GBPCAD* (2014-09-07),

A long trade setup is formed on


GBP/AUD weekly time frame. The
difference is that
the 2014.09.07 candlestick on
GBPAUD weekly chart, is almost
touching the Bollinger Middle
Band, which means there is a
higher probability for a bearish
reaction to occur. There is a
resistance line very close too:

current date

*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

78

GOLD: Daily 90 PTS


Continuation trade MA50

90 PTS

Chart 1

continuation trade DBB

The trade setup is formed by 2007.08.16 and 2007.08.17 candlesticks.


1. It is formed while the Bollinger Bands were almost horizontal which is
good.
2. The candlesticks Bollinger Lower Band breakout is good.
3. The only negative point is the upper shadow and small body of 2007.08.17
candlestick, otherwise it would be a 100 score trade setup.
I give it a 90 score.
*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

79

GOLD: Daily 90 PTS but tradeable due to too strong signal candle

Chart 2

the above trade setup is formed by 2008.03.17


candlestick:
1. a strong and huge Doji. This Doji has a strong
upper shadow that has
2. broken out of the Bollinger Upper band strongly.
As you know, Doji candlesticks have to be
confirmed by the next candlestick.
3. The next candlestick (2008.03.18) is closed as a
relatively strong bearish candlestick which is a
strong confirmation for the 2008.03.17 Doji.
There is no doubt that this is a strong short trade
setup. But how strong?
Positive Points:
1. 2008.03.17 Doji and its upper shadow is strong
enough.
2. Confirmation candlestick is strong enough too.
3. Bollinger Upper Band breakout formed by the
Doji upper shadow is strong enough.
Negative Points:
1. The only negative point is that 2008.03.17 Doji is
formed at the stop of a strong bull market.

continuation trade DBB

If this Doji and its confirmation had not been as


strong as they are formed now, then we would have
to ignore the short trade setup, just because of this
negative point.
However, although the 2008.03.17 Doji is formed on
a strong bull market, the Doji and its confirmation are
strong enough to take the control from bulls.

90 PTS tradeable

The conclusion is that this is not a 100 score trade


setup, but it can be taken after considering the risks.
It is a 90 score trade setup.

*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

80

GOLD Daily 90 PTS


Chart 4

90 PTS

The chart shows a trade setup formed by candlestick 2009.02.20 and the next two
candlesticks.
1. The candlestick (2009.02.20) is a relatively strong bullish candlestick with a not
too big upper shadow which has completely broken out of the Bollinger Upper
Band.
2. However, it is not a trade setup by itself. It could be known as part of a trade
setup when the next candlestick (2009.02.23) and the candlestick after
(2009.02.24) were formed.
3. The 2009.02.23 candlestick is a Hanging Man with a small upper shadow
that should not be seen in typical Hanging Man candlesticks. Its lower shadow
reflects the bearish pressure, because it shows that bears took the price down,
but then left the control to bulls and allowed the price to go up again. It is a
strong uptrend after all, and bulls are still strong.
4. Finally the 2009.02.24 candlestick proved that bears succeeded to take the
control, and most probably the price would go down.
This is a 90 score trade setup because it is formed at the top of a strong uptrend. The
strength of this trade setup has come from the strong bearish body and Bearish
Engulfing that 2009.02.24 candlestick has, otherwise the trade setup had to be
totally ignored.

*To Contents*

the 2009.02.20 candlestick


upper shadow that has
broken out of the Bollinger
Band means almost nothing,
as long as the next
candlestick(s) doesnt
confirm that bears have
taken the control. This is
what the next candlestick
(2009.02.23) didnt do,
because it closed as a
Hanging Man that also
reflects some levels of
indecision. However,
the 2009.02.24 candlestick
proved by its strong bearish
body that bears succeeded to
take the control.

One of the most important things we do in our trading is that we determine whether
a candlestick indicates a strong bullish or bearish pressure. Sometimes, a strong Doji
with a long upper shadow that has broken out of the Bollinger Upper Band strongly
forms. However, still we have to wait for the confirmation candlestick to form. If the
confirmation candlestick closes with a strong bearish body like the 2009.02.24
candlestick on the above chart, then we know that bears have taken the control,
otherwise although the Doji has a strong upper shadow, but it has to be ignored.
Why?
The reason is that we want to know which party, bulls or bears, have taken the
control. This is what a Doji doesnt tell us. A Doji, even with strong shadows, just
reflects the market indecision. A Doji means both bears and bulls have the same
power, because the price is closed almost where it was opened. The shadows just
show the price fluctuation, but the fact that the open and close prices are the same
means that none of the parties have been able to take the control finally.
Now, if the next candlestick closes with a strong bearish body on the same time
frame, then it means bears have taken the control, because they have been able to
take the price down and keep it there until the candlestick closes. Like the below
example. Look at the strong bearish candlestick that formed after the Doji:
System Design by Chris Pottorff - Compilation by Peter Wagner

81

GOLD Daily 90 PTS


The trade setup is formed by 2010.01.11 and 2010.01.12
candlesticks.

Chart 5

1. The first candlestick is not something exceptional. It


has a bullish body and a not too big upper shadow
that has broken out of the Bollinger Upper Band.
However,
2. 2010.01.12 candlestick has formed a strong bearish
engulfing pattern. It is the candlestick that has
formed the trade setup.
3. This trade setup is formed after a strong uptrend,
when bulls give the control to bears (see the red
arrow on opposite chart), then this is a positive point.
If it was formed right at the stop of the uptrend
(where the green arrow is pointed to), then it had to
be ignored definitely.
4. The only negative point is that 2010.01.11
and 2010.01.12 candlesticks have not broken out of
the Bollinger Upper Band strongly.
Therefore, it is a 90 score trade setup.

90 PTS
continuation trade DBB
*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

82

GBPUSD: Daily 90pts

90pts

a Hammer formed on GBP/USD weekly chart, last week. The next


candlestick which was supposed to be the confirmation candlestick,
has a lot of ups and downs and finally closed as a Doji with a small
body and long shadows that are related to the past week Great
Britain events. there is no trade setup on GBP/USD weekly chart.
In spite of this, a continuation short trade setup is formed on
GBP/USD daily chart. There is a strong downtrend on GBP/USD daily
chart, and the last closed daily candlestick (2014.09.19) is closed as a
big bearish candlestick with a long upper shadow, below the
Bollinger Middle Band. This is a strong continuation trade setup
formed below the Bollinger Middle Band on a downtrend: Daily
Candlesticks and Bollinger Middle Band
Positive Points:
The downtrend is too strong and there is a huge bearish pressure.
2014.09.19 candlestick is a big bearish candlestick with a long bearish
body, and a strong upper shadow that both reflect the bearish
pressure.
Bollinger Middle Band is tested, but it has worked as a strong
resistance and has not allowed the price to go up.
Negative Points:
Bollinger Middle Band is a tricky area, and in spite of having a strong
trade setup formed there, the price can behave unexpectedly.
The current monthly candlestick is testing the Bollinger Middle Band,
and it seems this moving average is working as a strong support,
because the monthly candlestick has formed a long lower shadow in
reaction to Bollinger Middle Band. Of course, the monthly
candlestick has not closed yet, and it sill has 9 days to go. But, there
is no doubt that Bollinger Middle Band is working as a strong support
on the monthly chart, and this has to be known as a negative point.
Having the negative points into consideration, I give a 90 score to this
trade setup. It would be an 80 trade setup, if 2014.09.19 candlestick
was not such a strong candlestick formed below the Bollinger Middle
Band on the daily chart. I mean the biggest positive point of this
trade setup is the 2014.09.19 candlestick size and the strong role of
Bollinger Middle Band as a resistance on the daily chart.

*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

83

GBPJPY: Daily 90pts

A too strong Bullish Engulfing Candlestick pattern has formed on


GBP/JPY daily chart (2014.10.15 ).
1. There is one important negative point with this pattern. It is
formed while bears are too strong and the Bollinger Upper and
2. Lower Bands are too far from each other.
The positive point is that
1. the candlestick pattern is too strong by itself. Additionally,
2. both the bullish candlestick and the previous candlestick have
formed a strong Bollinger Lower Band breakout.
3. The other positive point is that this Bullish Engulfing pattern has
formed while the market is still bullish on the weekly and monthly
charts:
Therefore, this is a strong trade setup, but there are some risks with
it. It is not a 100 score trade setup definitely.
I give it a 90 score because bears are still too strong.
*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

90pts
84

USDCHF: Daily 90 pts


USDCHF
1. formed a Dark Cloud Cover on the daily
chart.
2. weekly is strongly bullish but monthly is
almost ranging and below a resistance
level, but
3. the problem is the Dark Cloud Cover
formed on the daily chart is not that
strong itself.
1. Its Bollinger Upper Band breakout
is not that strong, but is not too
bad. Also
2. the uptrend is still strong on the
daily chart.

D
D

This is a 90 score short trade setup. If


the 2014.11.07 candlestick (#2 on the below
chart) was longer and had engulfed the body
of its previous candlestick (#1) completely, I
would take this setup. But it is risky now. I
am not saying that USD/CHF will not go
down. No, it is possible that it goes down for
as low as where the Bollinger Middle Band is
right now (which is a ~120 pips downward
movement), or even lower, but we never
know. To be at the safe side, I prefer to take
ONLY too strong setups

90pts
*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

85

APPENDIX 3.4
GAUGED EXAMPLES
STRONG 80-90 score PATTERNS

*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

86

GOLD Daily: 85 90 PTS


The first trade setup is formed by 2007.07.24 candlestick on
gold daily chart.
Chart 1

1.

It is a Shooting Star with a not too strong upper


shadow and Bollinger Upper Band breakout.

2.

The previous two candlestick have a relatively


stronger Bollinger Upper Band breakout.

3.

The Shooting Star is confirmed by the next candlestick


(2007.07.25) strongly, however the confirmation
candlestick has a relatively long lower shadow that
could be known as a negative point.

If you look at the bigger picture (below), you will see that
the trade setup is formed below a resistance level on a
ranging and sideways market. Therefore, those several
bullish candlesticks that are formed before the trade setup,
can not be known as a negative point, because the market
was a ranging market and was not a strong bullish market.
In general, it is an 85 to 90 trade setup.
Result : 459 pips H to L

85-90 PTS

*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

87

EURUSD: Daily - 85 90 PTS

That is a Hammer that had to be confirmed by the next candlestick. So it


is not a formed trade setup yet, and it can not be gauged. However, the
confirmation candlestick formed as a strong bullish candlestick, and so
the long trade setup became completed. Now the question is how this
completed trade setup can be gauged?
I give an 85 to 90 score to this long trade setup because:
1.

2.

3.
4.

A relatively big hammer (2007.06.13) has formed completely out of


the Bollinger Band and the Hammer (2007.06.14) also has a strong
Bollinger Lower Band Breakout.
This trade setup is formed in a consolidation that was formed after
a strong uptrend. Therefore, it can be known as the continuation of
the uptrend.
The confirmation candlestick is a big and strong bullish candlestick.
The consolidation is bearish, but it is not a too strong bearish
market.

Why I dont give it a 95 or 100 score then?


1.

The 2007.06.13 candlestick is relatively big, but for a too strong


100 score trade setup, the candlesticks that form the trade setup
have to be bigger than this (look at the lower shadow of our
AUD/JPY Dragonfly Doji).

2.

The Bollinger Bands are pointing down, where the trade setup is
formed. Although the down movement is not too steep, some of
the bearish candlesticks look strong.

That is why this trade setup is not a 95 or 100 trade setup.


continuation trade DBB
Continuation trade BMB

Result: 588 pips L to H

*To Contents*

85-90PTS

System Design by Chris Pottorff - Compilation by Peter Wagner

88

EURUSD: Daily - 80-90PTS

Chart 6

This trade setup is a High-Wave set of candlesticks


formed around 2011.05.04.
1. They are formed right at the top of a strong bull
market, and
2. their Bollinger Upper Band breakout is not strong
at all.
I give this one an 80-90 score.

NOTE: For High Waves,


we do not have to wait for
a confirmation candle . If
the Doji candles have long
upper and lower shadows,
then most probably the
price will reverse very
strongly soon. Waiting for
a confirmation candle, can
cause us to miss a big
movement.

Continuation trade MA50

Result: 970 pips H to L

80-90PTS

*To Contents*

System Design by Chris Pottorff - Compilation by Peter Wagner

89

USDCHF: Daily 80-90 PTS

There are three trade setups in this chart. The first one is
formed >
1. by 2013.05.23 candlestick. It is a strong bearish
engulfing pattern. The size of the engulfing
candlestick (2013.05.23) is great.

80-90PTS

There are two negative points with this trade setup:


1. It is formed right at the top of a strong bull market.
2. There is no strong Bollinger Upper Band breakout.

Chart 1

Therefore, this trade setup can not be known as a 100


score trade setup.
I give it a 80-90 score. I do not enter the market when
such a trade setup forms, because of the negative points
I mentioned above.
There is another trade setup formed by 2013.05.15
candlestick which is a strong Shooting Star with a strong
upper shadow that is broken out of the Bollinger Upper
Band strongly. I would not take this trade setup either,
even if the confirmation candlestick would close as a
strong bearish candlestick (you know that Shooting Star
has to be confirmed by the next candlestick). The reason
is that this trade setup is also formed right at the top of a
strong bull market.

Result: 708 pips H to L


Continuation trade MA50
continuation trade DBB

*To Contents*

After the 2013.05.23 trade setup, which is an 80-90


score trade setup, another strong bearish candlestick
formed (2013.05.29). I would go short after the close of
this candlestick, because it confirms that although
the 2013.05.23 trade setup was not strong enough,
bears have taken the control now, and so the price will
go down. I know that there is no Bollinger Upper Band
breakout with this candlestick, but as it is formed right
after the 2013.05.23 trade setup, it could be known as a
strong confirmation to go short.

System Design by Chris Pottorff - Compilation by Peter Wagner

90

USD:CHF Daily 80-90 PTS


Chart 1

Another trade setup is formed


by 2013.07.10 candlestick.
1.

The bearish candlestick size is


great. It has engulfed the body of
2.5 previous candlesticks.

2.

The Bollinger Upper Band


breakout is not impressive, but is
not too bad.

3.

The other negative point is that


this trade setup has also formed
at the top of a strong bull market.

Based on these negative points, this


trade setup can not be a 100 score
trade setup also, however, I would
go short after its formation. Do
you know why?
The reason is that if you look at the
bigger picture, you will see that .
this trade setup is formed in a ranging
market, and below the resistance
level(s), or Id better to say
resistance band (yellow) of the
previous highs that were made by
the three previous trade setups.
Formation of such a strong Bearish
Engulfing Pattern below a resistance
area is a good sign indicating a strong
bearish attack

Continuation trade MA50


continuation trade DBB
Continuation trade BMB

80-90PTS

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GBPUSD: Daily 85 PTS

Chart 1

The trade setup is formed by 2014.01.02 candlesticks.


1. It is a strong Bearish Engulfing Pattern.
2. The Bollinger Upper Band breakout formed by 2014.01.02
candlestick, and also some of the previous candlesticks
including 2013.12.31, 2013.12.30 and 2013.12.27 is good.
3. The only negative point of this trade setup is that it is formed
almost at the top of a strong bull market and up movement formed
by the 2013.11.13 strong trade setup.

So I give an 85 score to this trade setup:

85PTS

Continuation trade MA50


continuation trade DBB

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EURUSD: Daily 8O-85PTS

Chart 5

This is
1. a strong Bullish Engulfing Pattern with a
continuation trade DBB

2.

strong Bollinger Lower Band breakout

3.

the pattern is formed right at the bottom


of a strong bear market while

4.

the Bollinger Upper and Lower Bands are


still too far from each other and are
strongly pointing down.

If this pattern was formed somewhere like


where you see on Chart #6, then this trade
setup would be a 95-100 score too, but now
that it has formed right when the trend is still
too strong, I give it an 80 to 85 score.
Compared to the above trade setup (Chart #6),
this trade setup has a much higher risk.
You may say, but the Chart #6 trade setup also
moved like the Chart #5, and these two trade
setups both made the price reverse very
strongly. Why are you saying that Chart #5
trade setup has a higher risk?
Yes, they both moved the price very strongly,
but this is what we never know when the trade
setup forms. Nobody knows how the market
will move after a trade setup. All we can do is
that we analyse the setup and determine our
risk. When a trade setup looks too risky, we
have to stay away from it.

Carnival chart #6 point

Remember: We Are Traders, Not Fortune


Tellers
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EURUSD: Daily - 8OPTS

1. The market is strongly bullish when the


trade setup forms by 2007.10.23
candlestick above Bollinger Middle Band.
2. The 2007.10.23 candlestick itself is not a
strong bullish candlestick.
3. Additionally the Bollinger Middle Band is
a tricky area.
Therefore, this trade setup score is 80:

8OPTS
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GBPUSD: Daily 80 PTS


Chart 3

The chart shows two short trade setups.


The first one is formed by 2010.10.15, and the second one
by 2010.11.05 candlesticks.
1. The first one is a Shooting Star with a not too long upper
shadow, &
2. a not very strong Bollinger Upper Band breakout,
3. formed right at the top of a strong bull market. Therefore,
I can not give it more than an 80 score.

80PTS

The second one (2010.11.05),


1. is a weak Dark Cloud Cover, with
2. a not impressive Bollinger Upper Band breakout,
3. formed at the top of a bull market.
This trade setup score is also 80.
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EURCAD : Weekly 80 PTS


EURCAD Bullish Engulfing Pattern is much weaker than GBPCAD,
GBPAUD, and EURAUD, while the bearish market that the EURCAD
Bullish Engulfing Pattern is formed at its bottom, is strong.

current date

80PTS
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GOLD Daily 80 PTS

Chart 5

80 PTS

The trade setup is formed by


1.

2.

3.

a Hammer candlestick on 2010.02.05. As you know, candlestick forms like Hammer,


different kinds of Doji, Hanging Man, Shooting Star, Spinning Top, and have to be
confirmed by the next candlestick
The candlestick next to 2010.02.05, which is 2010.02.08 candlestick doesnt confirm
the 2010.02.05 Hammer, and it closed as an Inverted Hammer. A Hammer and an
Inverted Hammer next to each other, reflect the market indecision, and they both
have to be confirmed by the next candlestick too.
The next candlestick (2010.02.09) closes with a bullish body which is the confirmation
that bulls have taken control. So finally the long trade setup is formed, but do you
think it is a good and strong trade setup?

There are some negative points here that kept me from taking this trade setup.
1.

2010.02.05 candlestick has broken out of the Bollinger Lower Band strongly, but it is
not a big and strong candlestick in general. Its BB breakout is not that strong also.

2.

The previous candlestick (2010.02.05) is a TOO strong bearish candlestick that makes
me scared to go long.

3.

The confirmation candlestick is not that strong.

So this is an 80 score trade setup by itself. However, there are some other factors that
formed on the chart later, and gave some power to this 80 score trade setup.
There was a resistance line that formed before the 2010.02.05 trade setup (resistance #1
on the opposite chart). It didnt look like a valid trade setup, but when it was broken
by 2010.02.16 candlestick, it was retested by the next candlesticks accurately and precisely
(2010.02.25). An accurate and precise retesting is a good confirmation for
a resistance/support line and its breakout validity.
Later on, another resistance was formed (resistance #2 on the below chart) that was also
retested accurately and precisely. It was a chance to go long when 2010.04.19 candlestick
closed.
The other thing that could encourage me to go long after the second resistance breakout,
is the triple bottom or M pattern or Inverted Head and Shoulders:
What I am trying to say is that technical analysis can support the candlestick trade setups.
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CADJPY : Weekly 80 PTS

80 PTS

Continuation trade MA50

continuation trade DBB

1. A strong W pattern is already formed.


2. It seems a resistance line is already broken, and
the CADJPY short trade setup is formed above the
broke resistance line.
As the short trade setup formed by the last closed
weekly candlestick (2014.09.21) is not strong enough,
I consider it as the beginning of a retesting attempt. I
mean, the price just wants to go down and retest the
broken resistance. Although I am not 100% sure about
the validity of the resistance line and its breakout, still
the 2014.09.21 trade setup is not strong enough for
me to go short.
1. The previous candlestick (2014.09.14) is a too
strong bullish candlestick, and
2. the bearish candlestick which has formed the short
trade setup (the bearish engulfing pattern) has not
been able to engulf the 2014.09.14 candlestick
properly.
I am not saying that CADJPY will not go down based on
this trade setup. It is highly possible that it goes down.
However, I need a stronger trade setup to go short.
The way that the W pattern is formed, we can not
say that CADJPY is forming a consolidation like what
EURJPY and CHFJPY are doing. Lets wait and see how
the broken resistance will react to the retesting
attempt (of course if the price goes down to retest).
I give an 80 score to this trade setup.

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APPENDIX A3.5
STRONG SETUPS to be IGNORED

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GBPUSD: Daily IGNORE

Chart 4

The trade setup is formed by 2009.06.03 candlestick.


1.
2.

It is a strong Bearish Engulfing Pattern, but


it is formed right at the top of a TOO strong bullish market.

So it has to be ignored definitely, and I am not going to give it any score,


because I score the trade setups that are either too strong and good and
suitable for taking a position, or even if they are not too strong, but still can
be considered for trading.
The trade setup that is formed by the 2009.06.03 candlestick definitely has
to be ignored, because although the candlestick pattern is strong, it is
formed right at the top of a TOO strong bull market.
Continuation trade MA50

Do you dare to go short at the top of such a strong bull market?


I am sure you dont.

continuation trade DBB

ignore

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GBPUSD: Daily IGNORE


Chart 4

The trade setup is formed by 2009.06.30


candlestick. Unlike the first trade setup,
1. this one is not formed right at the top of bull
market, however,
2. the trade setup is not strong itself.
The 2009.06.30 candlestick and its Bollinger
Upper Band breakout is not that strong.
3. There is a small and deformed Butterfly pattern
before the 2009.06.30 candlestick. Butterfly or
W is a strong reversal pattern, but even with
this pattern
I prefer to ignore the trade setup.
Continuation trade MA50

continuation trade DBB

ignore
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USDCHF: Daily ignore


Chart 3

The trade setup is formed by 2011.12.15 which is


1. a too strong bearish candlestick, with a too strong
Bollinger Upper Band breakout, formed by
the 2011.12.15 candlestick itself, and
2. also the previous two candlesticks.

Continuation trade MA50

3. The trade setup is a too strong trade setup,


however as it is formed RIGHT at the top of a
strong bull market,

continuation trade DBB

ignore

it has to be ignored definitely.


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GOLD: Daily IGNORE


a Doji or Inverted Dragonfly Doji formed
on 2009.09.08. As you see, this Doji is not
strong enough. At the same time, it has
formed right on a relatively strong bull
market, and the confirmation candlestick
is not strong enough also (it doesnt have
a strong bearish body). Finally, the
candlestick formed after the confirmation
candlestick (2009.09.10) closed with a
long lower shadow and a bullish body
which meant the uptrend wanted to be
continued:

IGNORE

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GOLD: Daily IGNORE

This trade setup is formed by 2008.09.11 and 2008.09.12


candlesticks.

Chart 3

1.

It is a Bullish Engulfing Pattern. 2008.09.11 candlestick


is completely formed out of the Bollinger Bands, and

2.

2008.09.12 candlestick has a good Bollinger Lower


Band breakout. However,

3.

there are two important negative points with this trade


setup.
1. The first one is that none of the candlesticks
have a reasonable size. And
2. the second negative point is that the trade
setup is formed almost at the bottom of a
strong bear market.

You may say that in spite of these negative points, the price
has moved up strongly after the trade setup was formed.
Why?
That is right. Sometimes the price moves very strongly
when there is a weak trade setup. Sometimes it moves
strongly even when there is no trade setup at all. However,
this is what we never know. The only option we have is that
we wait for a strong trade setup. Let me show you two
examples on the same screenshot. Two other weak long
trade setups formed on 2008.08.18 and 2008.08.13 (the
black arrows). And as you see the price did not go up
strongly after they formed. It means the cases that the
price moves strongly when there is no trade setup, or when
there is a weak trade setup are rare, and so, we should
never trust weak trade setups if we want to be profitable in
long term.

IGNORE
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GOLD: Daily

IGNORE
Chart 3

The second trade setup is formed


by 2008.09.18.
1. It is a huge candlestick with a long upper
shadow which has broken out of the
Bollinger Upper Band Strongly.
2. It is a Doji (with a bigger than usual body).
Therefore, it had to be confirmed by the
next candlestick.
3. the next candlestick (2008.09.19) did not
confirm the Doji and closed with a big
lower shadow, and also a big bullish body
indicating that bulls were still strong.

IGNORE

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The third trade setup that was shown here is formed by 2008.10.10 candlestick.
However, I am going to show you another trade setup that formed between
the 2008.09.18 and 2008.10.10 candlesticks.

GOLD : Daily IGNORE

Chart 3

1.

It is a strong Bearish Engulfing Pattern formed by 2008.09.30 candlestick.

2.

It is not among the typical trade setups that we follow.

3.

It is a strong Bearish Engulfing Pattern but has no Bollinger Upper Band breakout

4.

However, as it is formed a few candlesticks after the 2008.09.18 Doji, it could be


a signal indicating that bulls were getting exhausted and we would have a
reversal sooner than later.

The third trade setup is formed by 2008.10.10 candlestick


1. which is a huge Bearish Engulfing Pattern. It has some positive points.

IGNORE

2.

The first one is that it is formed right after 2008.09.18 and 2008.09.30 short
trade setups, which can be known as a strong confirmation for those two trade
setups.

3.

The second positive point is that 2008.10.10 candlestick is closed below the
Bollinger Middle Band indicating that bulls were getting exhausted.

4.

If you look carefully, you will see that there is a deformed Butterfly or W pattern
on that area too. This patterns reflects the bulls and bears close competition in
taking the control, that was finally ended to bears victory when 2008.10.10
candlestick formed.

Although the 2008.10.10 trade setup has no Bollinger Upper Band breakout, it is
known as a strong trade setup because of the two previously formed setups and also
the W pattern.
The next candlestick (2008.10.13) first retested the Bollinger Middle Band, and then
went down strongly.
As this trade setup is not among the typical trade setups that we have taught on
FxKeys so far, I am not going to gauge it and give it a score, not to make you
confused. However, it is among the setups that I personally take. For now, I dont
want to overload you by teaching too many things, because if you learn the typical
trade setups that form by candlesticks and Bollinger Bands, and you learn to gauge
and differentiate the strong ones from the weak ones, it would be enough.

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GOLD : Daily IGNORE

IGNORE
Chart 3

continuation trade DBB

The fourth trade setup is formed by 2008.10.24 candlestick.


1. It has a relatively strong lower shadow, with a strong
Bollinger Lower Band breakout formed by 2008.10.24
and
2. its previous candlestick.
3. Because of the special shape of 2008.10.24 candlestick,
it has to be known as a non-typical Hammer that has to
be confirmed by the next candlestick (of course all kinds
of Hammer have to be confirmed by the next
candlestick).
4. It is not confirmed by the next candlestick(s) properly.
On the other hand, as 2008.10.24 candlestick is formed
RIGHT at the bottom of strong downtrend that was
formed after a short trade setup formed by 2008.10.10
candlestick, then it was a risky trade setup, and so, it
had to be ignored.
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ABOUT THE MANUAL - FXKeys TRADING SYSTEM


Collated and produced by Peter Wagner USING INFORMATION DESIGNED BY Chris Pottorff of FXKeys.com - DEC 2014

Why make a Manual? Or a better question Why did I collate some of the FXKeys information into a Manual when all the
information exists on the FYKeys Website and new articles appear every day which can be accessed by a few mouse clicks. Its
because:
My memory is not as good as I think it is:
My state of mind, when I read a new article or the reasons for a new setup, is never the same each time. I have no idea how
much of it, or what aspects of it, I will retain.
I do not always have time to retrieve and re-read the articles or setups when necessary. Chasing links to find a detail creates
stress, which is negative for trading.
Even though I remember seeing a detail somewhere in the broadcast of information, I cannot always remember in which
article it was written.
In making the Manual I had to read and select which information was best to help clarity. This activity helped me to embed
the information into my Psyche and knowledge.
The manual helps to compare quickly a possible setup with similar setups that have been gauged.
When something feels wrong I have quick access to the positive thinking statements that have been offered by FXKeys. To
help change my state.
While being patient waiting for trade setups, producing a Manual helped pass the time constructively and to keep the system
strategies fully in front of me
I use it to tune my understanding of the facts quickly at the time it is needed.

What will the Manual do for you? Why Share it?


Nothing Its you who has to do it. But it can be a starting point. However:
I noticed that some followers were asking about previously posted information that they were uncertain of and did not now
know where to locate it.
And that Chris often re-answered similar questions over time, from new and existing followers.
So I thought that if the manual helped me re-find and keep the knowledge then it may benefit others as well.
Please note that I have included links to the trade carnival setups and the specific setup article analysis where I could please
feel free to find the mistakes I will have made and notify me peterwagner618@gmail.com
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Who am I?
I studied and proved that I could pass exams: I became an Engineer, MBA, Educational Trainer/Assessor.
I am an experienced construction project manager and later ran my own construction business for many years recently ceasing
business to become a trader.
I chose to study the market because I had decided that it was the perfect mobile business - I could go anywhere in the world to live
and earn an income from trading, while being independent from people know as clients, customers, suppliers, tradesmen and
regulators.
However I discovered that the real reason for learning the trading-game, was that I loved technical analysis. I spent thousands of
hours putting pretty coloured lines and details on charts. Finally, I found that I could always reveal why the market turned in
hindsight, but when I had to determine what the future held and make money, I was wrong more often than not. I now realise that
technical analysis is just using another way to represent (present) the same data the price / time action doing more and more
and expecting a different result, is an example of Einsteins definition of madness. So I now take the advise of others on which
indicators to use, because they have proved them.
During some courses in personal development I decided on an affirmation, that the market would reveal itself to me. In following
this I have paid large amounts to many people for information that would uncover the market secrets. I have written many trading
plans and still could only manage losses, including seriously diminishing 2 live accounts. Harbouring lack of success, I handed my
account to my broker to trade for me, which failed. My trading account has stood dormant since then. I finally realised that it was
stupid to think that the market would reveal itself and changed to the idea that the market was just the market it only writes a
storey and I had to learn to read it. After the false exchange of money for knowledge I found that the best information is obtained
free, via the internet, from benevolent individuals who are willing to share their know-how.
I found a successful intraday trader (Peter K) who was on a commercial forum I subscribed to and then by fortune, a trend trader
(Chris P), of the FXKeys site, while I was searching for yet another technical indicator that would help refine my analysis. I am
grateful to these two individuals.

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After some months of immersion in the FXKeys information:


I made my live first trade while on holiday I made no journal record I do not know why I placed this trade now (and because I
could not remember why I made the trade I now keep a journal of trade signals and follow them to conclusion) I placed the
trade with great difficulty psychologically I had checked the analysis and was about to click go, when huge fear & doubt about
being a trader came in my mouse hand shook and I had to create positive head-talk over the negative in order to execute it. The
next day it was fear (of loss of profit) caused me to close this trade prematurely.
Following this success live I became the greatest trader in the world and had another successful trade also closed early due to
the same fear and then proceeded to make a series of losses until I halted live trading and went back to demo trading. I had never
consistently grown a demo account.
Demo trading has taught me to calm down (hand shake has gone), trust the FXKeys system to take the strong signals keep a
journal (I have to have a reason to make a trade because I have to write it down) understand my Brokers trading platform better
be aware of the spread at the time of placement and/or just before market close and after open pay attention to risk rules
and not to watch the action in motion. It taught me to routinely move and manage the stop & take a profit when signals indicated.
It taught me how easy it is to check quickly the daily signals and make a list for a little more study prior to execution. It taught me
to control my emotions I do not freak out or despair when I see a losing positon appear nor claim victory on a winning one I
immediately look for why there was pips+ or pips- and towards the next trade AND it has shown me that patience is a virtue
necessary for trading AND that more trades = more stress not necessarily more money.
Results I am in the process to become a full time trader.
My journal is a scrapbook I write down the reason for the trade and other factual information and then paste in a clipping of the
chart at the time of trade and/or at completion of the move. This is time consuming but I will not always need to do this.
I back-test the systems this is a paramount practice for signal recognition and confidence in the trading system.
And now?
Im almost there! I believe that I will always be almost there because I will never again think that I know what the market will do
next. There are just some possibilities. I can thank my intraday mentor Peter K and trend trader, Chris Pottorff of FXKeys for this
progress. As my intraday trading buddy says, when asked what he thinks the market will do he says Ill tell you when it gets
there.
Is a mentor important yes and probably imperative for most of us.
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