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FOREX REBELLION
By Russell Horn
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support@oldtreepublishing.com
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Although every attempt has been made to assure accuracy, we do not give any express or
implied warranty as to its accuracy. We do not accept any liability for error or omission. Examples
are provided for illustrative purposes only and should not be construed as investment advice or
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Hypothetical performance results have many inherent limitations, some of which are mentioned
below. No representation is being made that any account will or is likely to achieve profits or
losses similar to those shown. In fact, there are frequently sharp differences between hypothetical
performance results and actual results subsequently achieved by any particular trading program.
One of the limitations of hypothetical performance results is that they are generally prepared with
the benefit of hindsight. In addition, hypothetical trading does not involve financial risk and no
hypothetical trading record can completely account for the impact of financial risk in actual
trading.
For example, the ability to withstand losses or to adhere to a particular trading program in spite of
the trading losses are material points that can also adversely affect trading results. There are
numerous other factors related to the market in general or to the implementation of any specific
trading program, which cannot be fully accounted for in the preparation of hypothetical
performance results. All of which can adversely affect actual trading results.
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My Story
My “intro into the world of Forex” story is interesting and I will share it with
you. Years ago I fell into a business printing t-shirts. I took it over from the
gentleman I worked for who’d had enough. One day he walked up to me
and asked, “do you want a shirt shop?” He handed me the keys, and I
never saw him again. I stood there dumbfounded, “what do I do from
here?” I wondered. The biggest customer was someone I’d got to know a
little so I called him up and explained the situation. He agreed to keep
using me as his t-shirt printer and it just went from there. To be perfectly
honest, it wasn’t something I really wanted to keep doing, but that was what
I was good at and it was paying the bills. I never really looked at it as my
“business”, rather, just as my way of making an income.
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Feeling down but not out, I looked for another investment opportunity and
found one that offered a lower rate of return, but still invested in the Forex
markets. Again, for almost a year, month after month the returns were
outstanding. Unfortunately, a similar event occurred and the investor’s
money was frozen.
Even though I lost a few thousand bucks, it did get me thinking about
investigating the Forex markets for myself. What I found was literally
overwhelming! I set out to educate myself but quickly found that I didn’t
know where to begin. So much info and weird sounding terminology made
it difficult for me to carry on. It was so complicated!
If this was something that I was really going to consider, I had to find myself
a mentor, or at the very least, a coach.
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This was an exciting time for me, I knew I was going to be a professional
trader at some point, it was an eventuality.
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Trading on a demo account was fine, I had little problem with that. Trading
with real money was different. If I had been trading for jellybeans or shoes,
I'm sure I would have done much better. Trading when money is on the line
really messes with your head. It’s psychological, nothing more. Money
represents all kinds of things, even if it doesn’t occur to you. It can mean
anything from responsibilities at home to status in the community. It can
mean your future comforts or survival. There are many reasons why you
would not want to risk the loss of your money, especially after one or two
losses in the market.
Throughout this time I began to explore new indicators and new systems. I
soon discovered that I had a knack for developing workable trading
systems. I even developed a system that is being used by a large financial
institution. I have personalized trading systems for several struggling
traders and made them profitable. I love the challenge of making a
profitable, workable system that no one has ever seen before.
Now, a few years later, I have quit my job printing t-shirts to trade full time.
Working was getting in the way of what I love to do. I am a professional
trader and I love it. It’s the best job in the world!
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2. A trading system will not make the market move. Because you get a
signal to go long doesn’t mean it will influence the market to move upwards.
A trading system will help determine the direction you should trade, but the
market will pay no attention to your system.
4. You don’t need more than 1 monitor. I trade from my laptop at home or
on my office desktop computer. Neither of them has more than one screen.
It’s impressive to see many screens displaying several confusing charts all
at once, but you don’t need it.
5. It’s dangerous to “predict” the markets. Often, too many traders attempt
to predict the future movements of the markets only to be beaten. Your
trading system is designed to help you go with the flow of the market and
take it for a ride.
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10. The markets don’t always cooperate. Because you have taken a trade,
the markets don’t have to oblige you. There will be times of market
consolidation or bouts of tight range-bound movements. This is very
important to understand and accept. No trading system will be profitable
when the markets are acting odd. It’s not your fault or the fault of your
system. That’s simply the way it is... It’s part of trading.
11. We’d be better traders if it weren’t for the fact that we are trading
money. The best traders on the planet have disassociated themselves from
the money they are trading with. It’s not that it’s not important to them, it is.
It’s just that they can allow the market to take some of it away from time to
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time and never, EVER take it personally. There is no doubt that the lost
money will be returned to them if they trade their system rules.
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13. There is ALWAYS another trade. If you miss this trade, so what?
There is always another trade just around the corner. You do not have to
take every trade and you do not have to get in on every up and down the
market makes. You can relax and cherry-pick your trades.
14. Tops and bottoms are for fashion designers. You will never get in at
the very bottom of a movement and ride it out to the very top and know
when to get out. Catching 25-30% of any movement is awesome and you
should be very happy with that. I never expect to get more than 35% of any
movement and I don’t even try to anymore.
15. Losses will happen. This bears repeating over and over again. Losses
will happen. In the Forex Rebellion system, I outline a manner in which you
can minimize your losses, but they will certainly not disappear. Losses are
the price you pay for trading. Making money in the markets is directly
related to how you manage your losses and your wins. Having a great
trading system will do nothing for you if you can’t control your emotional
state. Remember, the market doesn’t know you are alive, so it has no
interest in whether you win or lose.
I can go on and on, but I think you are getting the idea. Trading is not for
everyone, but I know you will do great!
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I very rarely use multiple time frames, that is, I don’t generally refer to the 4
hour chart to make a decision on the 1 hour chart and then on the 15
minute chart.
I will trade the 15 minute chart during the London session into the New York
session. I will trade the 1 hour chart if I don’t want to sit in front of my
computer as much as the 15 minute charts. Sometimes I trade the 4 hour
charts too. I never trade the 1 or 5 minute charts.
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Now, I think that’s enough talk, let’s move onto the Forex Rebellion system
itself.
We’ll start with setting up the charts, implementing the indicators and finally
learning how to trade the system!
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It’s important to note that I use Meta Trader 4 charts and the indicators that
are supplied to you for the Forex Rebellion trading system are also for the
MT4 charting platform.
MetaTrader charts are very widely used and they’re also FREE! I download
my charts from here:
http://www.metaquotes.net/downloads/
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Simply run through the installation clicking “next” as you go. You will get to
the end and you will be asked if you want to launch MT4. Click “YES”. You
will then be presented with open charts and an “Open An Account” box.
This is a one time registration form. Fill out the info and then be sure to
check the box at the bottom right that says “I agree to subscribe to your
newsletters”. Click “Next”, and now you will be presented with a Trading
Servers window. Click “Next”. A registration window pops up, charts load
and you hear a nifty sound effect. You are then presented with
Login/Password/Investor info. Click “Finish” and you are all set up with a
fully functional MT4 Platform. I close all the charts and open windows so I
can start from a totally naked platform.
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When you open a new chart in MetaTrader 4, you will get the default
settings. Your chart will be a green bar chart on a black background which
is set to the 1 hour timeframe.
Of course, you can choose any colors you want, but what I will do here is
show you what I do to get a chart to look like the ones I use in the examples
throughout this manual. They will be white charts with red and blue candles
instead of the bars.
I will magnify the bars by clicking the magnifying glass with the plus sign on
it a couple of times.
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I will then click on the icon of a candlestick to change the chart from a bar
chart to a candlestick chart.
Next, I will click on the “Charts” tab and then select “Properties”
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A chart Properties box will pop up, this is what it looks like. You will be
clicking on the arrows next to the colors to bring up a color menu.
The menu will look like the image below. I will use these colors to create
my charts.
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I’ve changed the colors in the boxed portion (see below) of the properties
box. There’s no need to alter the remaining colors
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Next, I click on the “Common” tab in the top left corner and I uncheck the
“Chart autoscroll” box and the “Show grid” box.
The only thing checked will be the “Candlesticks” radio button and the
“Show OHLC” box.
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This indicator is located right in your MetaTrader 4 charts. First, click the
“Indicators” tab, then click “Trend”, and from there you select “Moving
Average”.
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A Moving Average properties window will pop up. Here you place your
parameters:
Period: 5
Shift: 5
MA Method: Exponential
Apply To: Close
Once you have filled out the fields so it looks like the one above, click the
"OK” button and you will have your 5 EMA on your charts
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This indicator is located in the “Custom” section of your indicator list. Click
your Indicators tab, then click on “Custom” and select “EMA Crossover”.
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An EMA Crossover properties window will pop up. The parameters will
already be set to the appropriate settings, but if they are not, set them to:
Faster EMA: 4
Slower EMA: 5
Once you have filled out the fields under the “Inputs” tab so it looks like the
one above, click the “OK” button and you will have your EMA crossover
arrows on your chart.
You can change the color of your arrows by clicking on the “Colors” tab in
your EMA Crossover properties box.
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This indicator is located in the “Custom” section of your indicator list. Click
your Indicators tab, then click on “Custom” and select “Donchian Channel”.
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The Donchian Channel properties window will pop up. The parameters will
already be set to the appropriate setting, but if they are not, set it to:
Channel Period: 21
Once you have filled out the fields under the “Inputs” tab so it looks like the
one above, click the “OK” button and you will have your Donchian Channel
on your chart.
You can change the color of your channel walls by clicking on the “Colors”
tab in your Donchian Channels properties box.
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Again, this indicator is located in the “Custom” section of your indicator list.
Click your Indicators tab, then click on “Custom” and select “QQE ADV”.
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The QQE ADV properties window will pop up. The parameters will already
be set to the appropriate settings, but if they are not, set them to:
SF: 1
RSI_Period: 8
WP: 3
Once you have filled out the fields under the “Inputs” tab so it looks like the
one above, click the “OK” button and you will have your QQE ADV on your
chart.
You can change the color of your indicator lines by clicking on the “Colors”
tab in your QQE ADV properties box.
The next thing to do, now that you have your chart set up with all the
indicators, is to save it as a template. You will be able to apply this
template to the new charts that you open, saving you the tedious work of
having to apply all the indicators individually every time.
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Now that I have my chart the way I like it, I will save these settings as a
template so that I can apply these settings to other charts with a click of the
mouse. Click the Template icon in the upper right corner of the MT4
platform and then select “Save Template”.
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To apply the template to a new chart, click the Templates icon in the upper
right corner and you’ll find it in the drop down menu that appears. Click on
“Forex Rebellion” and your chart will magically be altered to the Forex
Rebellion settings.
Now that we’ve got all that out of the way, time for the Forex Rebellion
system RULES!
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System Rules
In this section we will cover the rules for the Forex Rebellion trading
system.
We will cover the entry requirements and the three different exit strategies
that this system encompasses. You already have your charts with the
proper indicators set to their correct settings so you’re ready to start trading.
2. Identifying entries
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The 5 EMA
The 5 EMA shifted 5 periods is in buy or sell mode depending on which side
the price is on.
We look for the price to close above the 5 EMA from below to consider a
long trade. We would look for opportunities to buy.
We look for the price to close below the 5 EMA from above to consider a
short trade. We would look for opportunities to sell.
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When the 4 EMA crosses above the 5 EMA, a blue arrow is shown below
the candle that caused the crossover and this indicates a long direction.
We would be looking for buy trades.
When the 4 EMA crosses below the 5 EMA, a red arrow is shown above the
candle that caused the crossover and this indicates a short direction. We
would be looking for sell trades.
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This indicator is fairly simple to use but does require some explanation.
The QQE is essentially a smoothed RSI indicator with a signal line. The
signal line is a smoothing average known as a Wilder’s Period. Together,
the two lines work like that of a Stochastic Oscillator or a 2 line MACD. The
lines have to be in the right order in order for a trade signal to be valid.
There is a line drawn through the middle of the indicator window and this is
called the 50 line. A trade signal is given when the RSI line crosses the 50
line and the 2 lines are in the right order.
The area above the 50 line is referred to as the “Buy Zone” and the area
below the 50 line is known as the “Sell Zone”
A trade to the long side happens when the RSI line crosses above the 50
line from below and the signal line is below the RSI line.
A trade to the short side happens when the RSI line crosses below the 50
line from above and the signal line is above the RSI line.
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A SELL signal:
We look for the RSI line to cross beneath the signal line and to then cross
below the 50 line at the close of a candle. These two requirements often
happen at the same time
A BUY signal:
We look for the RSI line to cross above the signal line and to then cross
above the 50 line at the close of a candle. These 2 requirements often
happen at the same time
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For example, when you get the proper signal to go long, (the RSI line is
above the signal line and then crosses over the 50 line) very often the RSI
line will drop back down below the 50 line. The secondary signal is given
when the RSI line crosses back of the 50 line for a second time. It makes
for a nice re-entry or an addition to a position, or an entry if you missed the
first one.
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A Stale Buy signal occurs when the RSI line is above the 50 line but under
the Signal line and then the RSI line crosses up over the Signal line. This
signal can sometimes work out very nicely, but often it will not. Chances
are, the price action was missed and what you get is the tail end of the
movement. I will very rarely enter a trade based on a Stale signal. There
would have to be other very convincing factors involved.
A Stale Sell signal happens when the RSI line is below the 50 Line but over
the Signal line and then those lines cross. The RSI line crosses below the
Signal line generating a Stale signal.
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Entering A Trade
Identifying Entries
We’ve covered the entry criteria for each of the three indicators. We went
in deeper with the QQE and now you know what to look for with each one.
It’s now time to use all three indicators together to trigger entries into the
market.
All three indicators will filter one another in an attempt to limit the losing
trades.
In this section we look at all three indicators working together to filter, and
ultimately identify, entries into the market. Indicator signals should be
unmistakable. A close of a candle right on the 5 EMA is questionable, so is
a QQE close right on the 50 line. If these signals are not 100% clear, the
entry is not valid.
Once an entry has been determined, we place an entry order a few pips
above the candle that made the buy entry signal and a few pips below the
candle that made the sell entry signal. This method will save us from the
occasional sudden reversal.
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1 - Trade taken
a) There is a cross and a close of the price below the 5 EMA
b) There is a 4/5 EMA cross signaled by the red arrow
c) The blue RSI portion is below the red signal line and has crossed the 50
line.
4 - Trade taken
h) We got the cross of the QQE confirming the signals in example 3.
5 - Trade Taken
All the signals for a short trade are present. The previous candle was close
but the close below the 5 EMA and the cross of the 50 line were in doubt (i).
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1 - Trade taken
a) There is a cross and a close of the price above the 5 EMA
b) There is a 4/5 EMA cross signaled by the blue arrow
c) The blue RSI portion is above the red signal line and has crossed the 50
line.
2 - Trade taken
All the requirements have been met for a short trade. The close below the
5 EMA (d), the red arrow (e) and a cross of the 50 line by the QQE (f).
3 - Trade taken
All the signals were in order, however this trade was triggered at the end of
the trading day on Friday. This is not usually a recommended trade. If we
took this one, it would have been a loser.
4 - Trade taken
All the signals were present for a short trade. A Close below the 5 EMA (g),
the red arrow (h) and the cross of the 50 line by the RSI portion of the QQE
(i).
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have merit. Following strict entry rules, we would have entered on the next
candle.
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1 - Trade taken
A good entry after the QQE was in buy and the candle closed well above
the 5 EMA. There was a blue arrow telling us the short term trend was up.
2 - Trade taken
All the requirements have been met for a short trade. The close below the
5 EMA, the red arrow and a cross of the 50 line by the QQE. Unfortunately
this trade was a loser.
3 - Trade taken
All the signals were in order, however, the close of the candle was not
clearly above the 5 EMA. The trade was entered on the next candle.
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7 - Trade taken
Finally all the signals lined up for an entry to the short side.
The price closed below the 5 EMA, the red arrow was in place and the QQE
gave the sell signal.
This last chart has several great examples of how all the different indicators
work together to filter out several of the losers. Combined with the entry
order strategy, we saved ourselves from a handful of lost pips.
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Exiting A Trade
Placing Your Stops
Before you enter any trade, it’s important to know where you will be getting
out if things go horribly wrong and the trade goes against you. There are
several reasons why a trade could go against your wishes. There are so
many things going on in the world at the exact same time, all of them
weighing in on market direction and sentiment. There may be monster
sized players that take a huge position in the market, there could be some
crisis in the world that investors just discovered, the head of the Federal
Reserve Bank might have uttered something or some enormous company
makes a currency conversion... I could go on and on.
Being the responsible traders that I know we all are, guarding against any
sizable loss is uppermost in our minds. Losses happen to all of us, that’s
part of trading. The idea is to minimize those losses and protect our
accounts so we can live to trade another day.
Before we go any further, I would like to show you a picture of a graph, it’s
something we’ve all seen in a bank or on some investment ad somewhere.
This graph seems perfectly reasonable too, but I'm going to dissect it just a
little bit.
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If your account growth were to look similar to the graph, you would be a
happy trader. It started at point 1 and rose up to point 2... Very nice.
Looking closer at the graph you see the jogs in the middle, a zig-zag type of
pattern. Those areas are where your growth took a bit of a hit. These
areas are from losses, losses that every trader experiences. Overall, your
growth is good, but you will occasionally experience a loss or two, maybe
even many. Placing stop losses will ensure that your losses are kept small
and manageable. A friend of mine once told me that every big loss starts
out as a small loss, he was right!
Ok, now that my little spiel is out of the way, let’s move on to implementing
a stop loss. We will be looking at how to place an initial stop loss (the stop
you place when you enter a trade) and then how to properly move it to
reduce your risk, then to break even (moving your stop to the same place
that you entered that trade)
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The first option is the safest way to place a stop. Once you have entered
the trade, you place your stop above or below the most recent swing high or
swing low.
If you are entering a long trade, your stop will go a few pips (2-10) under the
most recent swing low. On a 15 minute chart you could place your stop 3
pips below and on a 4 hour chart, you could go 10 pips below.
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As you’ll notice, as the price zig-zags its way upward, the swing lows are
safe from getting hit by the price. This makes the swing lows in an uptrend
a safe place to put your stops.
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The opposite is true in a down trend. The swing highs are the safest place
to put your stops.
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You’ll notice, as the price zig-zags its way downward, the swing highs are
safe from getting hit by the price. This makes the swing highs in a
downtrend a safe place to put your stops.
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The second way to place your stops is by using the 5 EMA as a guide.
Instead of placing your stop over/below the recent swing high/low, use the
high or low of the 5 EMA.
As long as the 5 EMA isn’t too close to the price action, it is a good place to
put your stops. This will shorten the distance between your stop and your
entry, making your profit targets much more likely to be hit.
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The chart below is the same trade a few hours later. As you can see, the
trade is in profit and the price never got close to taking out the stop.
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Take a look at the chart example below. Every time you could have taken a
trade and placed your stop above or below the 5 EMA, there were no times
where your stop was at risk. In the examples, the red line is the stop loss,
the green line is the entry and the arrow points to the entry candle and
indicates the trade direction.
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Here you will learn how to go about taking a 100 pip initial stop to a 50 pip
stop and then to break even. This will reduce your risk from 2% to 1% and
then to 0% giving you a free trade. (I trade with a 2% risk on any given
trade so I will use this 2% risk in my examples).
First, we start out with our initial stop loss. From there we make an
imaginary target of the same amount in profit. If our stop is 100 pips, then
we draw an imaginary target at 100 pips in profit and then another at 50
pips in profit (this is half of our stop loss).
Once we get a close at (or very near) the 50 pip level, we will move our stop
loss to 50 pips (instead of the original 100). Then, as the trade progresses
and we get a close at (or very near) the 100 pip level, we move the stop
loss to break even. At this point we have a free trade... We are risking
nothing but have a profitable trade in the works.
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The example below is a live trade of the USDJPY 1 hour chart. An entry
was given and I placed an entry order at 97.80 (the black line). The stop
loss went below the 5EMA at 97.60 (the red line). The distance between
the two is 20 pips.
Once the price closes at or very near to the 10 pips into profit line (97.90), I
will move my stop loss from -20 pips (97.60) to -10 pips (97.70)
Next, once the price closes at or very near to the 20 pips into profit line
(98.00), I will move my stop to break even (97.80).
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The chart now looks cluttered and messy because of all the lines. This is a
procedure that I generally do in my head. I’ll place the green target line on
my chart, but the orange 50% lines I will simply visualize.
As the trade progressed, we have a close within 1 pip of our 50% line. At
this point, I move my stop loss up to 97.70, half way to my entry level,
cutting my risk in half.
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At this point, there was a close right at the 100% level, the same distance of
20 pips that I had originally risked. It is now that I move my Stop to break
even.
From here on out I am in a risk free trade. If my target doesn’t get hit and I
hang on to the trade, the worst thing that will happen is I get stopped out at
break even, I won’t have lost anything on the trade but the spread.
If your stop loss is a little wider than 20 pips, feel free to move your
breakeven level into profit by whatever your spread is. If your spread on
the trade was 3 pips, move your breakeven into profit by 3 pips, ensuring
that you truly do not lose any money on the trade.
Now I get rid of all my profit level lines and move my stop loss up to follow
the 5 EMA or take profit at the upper Donchian Channel.
If I was trading the 100 as a target, I would be out of the trade now, but if I
was using the 1 point 5 exit strategy, my target will very likely get hit.
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This trade then went on to hit the upper Donchian Channel and I was happy
to take my profit there.
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System Rules
Exiting the Trade
Some would argue that knowing when to get out of a trade is more
important than knowing how to get in to one. Most of the systems out there
are bent on showing you how to get in, but without knowing how to get out,
you could lose all you have gained and then some.
This section will give you three different exit strategies. All are good. In the
current time of chaotic sideways movement, there are two ways built to help
you bank your profit before the market takes it back. The other exit strategy
will help you stay in a trade if you believe the market will trend.
This is where you decide if you are a trend riding trader or a profit target
trader. Either way, here are the different ways to exit the market.
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The 100: Once you have determined where your entry is going to be and
where your stop will be, your target will be the same distance as your risk.
If you are risking 100 pips on a trade, your target will also be 100 pips.
Generally I will add in the spread, so in a 100 pip risk trade where the
spread is 3 pips, I will aim for a 103 pip target. This exit strategy works well
in a choppy sideways market, but it’s not one that I use very often. With the
100, one loss cancels out one win.
The 1 Point 5: This is the exit strategy that I use the most often. Similar to
the 100 strategy, the 1 Point 5 is one and a half times your stop loss. If
your stop loss is 100 pips, your target will be 150 pips. This method works
well and because of the ratio, you can lose 3 trades, win 2 and break even.
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The 5 EMA
Not only is the 5 EMA a good indicator to help us get into a trade, it can
also be used to help us get out of a trending trade.
In a long position, follow the 5 EMA up by moving your stop a few pips
under the 5 EMA every candle or 2. As the price rises further, the 5 EMA
will rise further, pulling your stop further into profit.
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The chart below is of a live trade. I’m short the YEN and my stop is
following along the 5 EMA. I put my stop 5 pips on top of the EMA and I
move it as every new candle closes.
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When considering your exit strategy, keep in mind the recent market
conditions. If the market is very choppy and is going sideways, following
the 5 EMA may not be your best bet. Possibly the 100 or a shot at the
Donchian Channel will work better for you.
Depending on the time frame you are trading, the last half of the New York
session through to the start of the next London session can be very slow
and choppy or consolidated. Stay away from trading the 15 minute or
smaller charts or during this time, approximately 5:00 - 12:00 EST. Shortly
after this time, the London and Euro sessions begin and the market picks
up momentum.
You have three different ways to make an exit, each of them will serve you
well if you take in to consideration what has been going on.
In all your trades, being aware of the 5 EMA will serve you well. If price
crosses back over the 5 EMA before your target gets hit, you may be
looking at the possible end of your trade. Consider closing your trade with
a profit or a small loss rather than allowing your stop loss to be hit with the
full amount you are risking.
Never feel bad about capturing a profit and then finding out that the market
continued in your direction. If you knew that kind of information ahead of
time, you wouldn’t need to trade the markets at all, just buy a lotto ticket.
The Forex markets are unpredictable, that’s why we use systems to help us
determine the market’s next likely move. Nothing is written in stone and
there is absolutely no “sure thing”.
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System Rules
Putting It All Together
By this point, you have learned how to use the indicators and what to look
for. You have learned how to place your stops and you have learned how to
exit a trade. In this section we’ll go through some examples of how
everything works together.
When all conditions are met, the entry goes a few pips above the high of
the candle that fulfills the last requirement.
When all conditions are met, the entry goes a few pips below the low of the
candle that fulfills the last requirement.
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This example below took place June 10, 2009. Here we have a good signal
to go short. There is a close below the 5 EMA, there is a red arrow pointing
down, there is a cross of the 50 line on the QQE with the signal line in the
right position. We know our entry, a few pips below the red candle.
Now, where do we place our stop? The high of the 5 EMA looks good, it’s
not too close to the entry that a little bit of movement will stop us out, but it’s
closer than the most recent swing high.
What kind of target do we look for? Judging by the recent market activity, I
think a target of 1 point 5 would be a good option. The market has been
moving quite nicely and is not stuck going sideways. The Donchian
Channel may be a little closer than we’d like but it’s a good idea to keep a
close eye once we get to the channel.
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Since our stop loss is 60 pips, we will want to move our stop to 30 pips after
we get a close at or around 30 pips in profit. After that we will move our
stop to break even once we get a close very close to 60 pips.
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The price closed below our 30 pip target, so now we move our stop loss to
30 pips instead of 60 pips.
And then our profit target was hit closing our short position.
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Later the same day, June 10, the next trade signal is to go long. There was
some good movement earlier in the market so I'm like a 100 target for this
one. I would love for it to reach for the Donchian Channel, but given the
time of day, (very late in the NY session) I don’t believe the market has the
steam for any real kind of distance. Right now the candles are small, which
gives us a tighter stop loss, meaning a shot at the 100 is the most likely.
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Since our stop loss is 40 pips, we will want to move our stop to 20 pips after
we get a close at or around 20 pips in profit. After that, the target will be hit
and we’ll be out of the trade.
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We have a close very near the half way mark, so now we move the stop
from 40 pips to 20 pips.
The target was hit. The market was moving nicely and there is a very good
likely-hood that even a 1 point 5 target may have been hit. Regardless,
considering the time of day, I was very happy with this trade.
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This trade takes place on June 23, 2009. The price has been testing a low
and formed a kind of double bottom. The signal to go long was given,
however, the close above the 5 EMA is questionable. I’ll place an order to
buy and see how it turns out. I’m not going to set a target for this one,
instead, I will ride the 5 EMA as far as I can. Recent market conditions
make me believe that it will move upwards a fair way.
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The price never triggered our entry, instead it dropped and in doing so it
took the RSI portion of the QQE back below the 50 line. Shortly after, it
came back again and so did the RSI line. Now that the QQE is back above
the 50 line, we have a secondary signal to go long. We can re-evaluate the
entry criteria or simply leave it where it is. The initial entry/stop/move stop
loss lines were plotted and entered into my trading platform so I think they
will be ok to leave as they are.
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The price very quickly closed above our 14 pip mark. At this point we
moved our stop to 14 pips from the initial 28 pips. The next candle after
that closed above the 28 pip mark allowing us to move our stop to break
even. We are now in a risk free trade. What we do now is sit back and wait
for the 5 EMA to rise above our entry level. As it rises, we will follow our
stop under it a few pips until we get stopped out. Remember, the 5 EMA is
shifted 5 periods forward, so as we move our stop what we focus on is the
level of the 5 EMA DIRECTLY UNDER the candles as they close.
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The price has moved in such a way that the 5 EMA has moved into profit.
We see the most recent closed candle and move our stop loss a few pips
under the 5 EMA directly under the closed candle.
We are still in the trade! The stop has been moved a few pips under the 5
EMA line under the most recent close
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It’s important to note that this kind of trade doesn’t happen all the time. It
does happen often but don’t expect every trade to pan out this way.
Wanna try that again? The market is on fire, I think we can do well to follow
the 5 EMA for a second time. Here’s the setup.....
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Here we have a close at the level where we move our stop to break even.
This trade also worked out very nicely. Again, I must say that this type of
trade doesn’t happen all the time, so be careful when you decide to go for it.
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BONUS TACTICS
We will go over a few bonus tactics that will help you filter the trades further
and even help you determine which trades to stay in longer.
75 period EMA
I use the 75 EMA to determine a longer term trend direction. Trades
against the trend can be very short and unprofitable. Trades with the trend
can be very long and rake in a lot of pips. Of course, every trend must end,
so be aware that there may be missed trades against the trend as the trend
direction changes.
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More examples of trades that work out well in the direction of the longer
term trend.
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The first option is to switch to a lower time frame, the smaller trends will be
more defined and you can capitalize on those.
The third option is to stay out of the market until it proves itself to be in
some kind of a trend. This generally happens when the price breaks
though the 75 and then comes back to test the 75 and bounces off.
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5 EMA 3 Period
When using the 5 EMA set to 5 periods, although it’s a terrific entry tool,
there are times that using it as an exit strategy means you give back more
of your gains than you would like, especially on the shorter runs when the
market is really moving up and down. To compensate, I use the same 5
EMA, but in this case, I shift it 3 periods.
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What is Divergence?
Divergence is when the market is doing one thing and an indicator is doing
the opposite. In this system, we will be watching a rising market make a
higher high, however, the QQE is making a lower high.
In the chart below, the higher high on the price is shown by the red line
sloping upwards, while the corresponding highs made by the indicator are
sloping downwards
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What happens next is a signal to go short and the price drops like a rock
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Divergence is a little difficult to see as it forms until you get an eye for it. It
takes a little practice but it will come soon enough. Divergence is also a
good indication of when to get out of a trade. If you are long and bearish
divergence shows up, I would be thinking about getting out of the trade.
The best way to look for it, especially when you are starting out, is to simply
look for it after you get an entry signal. You would have a better idea then if
you are looking at divergence, and it gives you a good indication of your
potential exit strategy. You may want to aim for a Donchian channel or
follow your stop along the 5 EMA.
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Stale entries can work out, but often, we get the signal way too late to make
a profitable trade. We can get an earlier entry by shortening the WP period
in the QQE indicator settings from 3 to 2.
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The chart below is an example of how a stale entry didn’t work out the way
we would like. There was a signal to go short. The price closed below the
5 EMA, the red arrow was present and the RSI line was under the 50 line.
However, the QQE signal is not valid because the signal line is in the wrong
place, it needs to be over the RSI line. If we wait for the sell signal to
appear on the QQE, the movement of the trade was essentially over and
we would be getting in to a losing trade.
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Below is the same chart with both QQE settings, it helps us get into a stale
trade early enough to make a profit on the trade. The top QQE is the 1,8,3
setting and the bottom is the 1,8,2 setting.
It’s important to note that this little tweak works well for stale trade signals,
but not so well for initial trade entries. Using the “2” setting for full time
signal finding will chop you up and give you a whole host of false signals.
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FINAL THOUGHTS
I want to thank you again for putting your confidence in me and
allowing me to share my trading system with you. I sincerely
hope that you can utilize the tactics in the Forex Rebellion
system and make yourself an amazing living from trading the
Forex markets. There is money to be had and there are many
ways to do it, Forex Rebellion is a good way to go.
Before I say goodbye, I want to say that trading the markets and
making money from them really comes down to making more
than you lose. It sounds overly simple, but it’s a challenge that
most traders cannot overcome. Managing your losses and
banking your gains is what the challenge really is, not beating
the markets or getting revenge for your losses. No trader on the
planet wins all the time. The best traders, the millionaire traders,
just manage to cut their losses short and never take it personally.
A loss is the price you pay for doing business, and trading Forex
is indeed a business, or at the very least, should be treated as
one.
I wish you the best of luck in your trading career, I hope you rise
to the upper circles, and I hope that I can help.
Russ Horn
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