Disclaimer The content of this e-book is purely intended for informative purposes and I therefore don’t accept responsibility

for the possible consequences of any kind of activities, which are based on or caused by this book. Trading currencies, cfd’s, forex, futures or any other financial product might involve a high risk. Before deciding to invest in stocks and shares you should sufficiently inform yourself in advance and carefully realize the feasibility of your objectives, the extent to which you are ready to take risks and the degree of your knowledge of these products. There’s always the possibility that you could lose part of the assets you invested or in the worst case you could go bankrupt. So don’t invest more assets than you are prepared to lose. Copyright 2011 Nothing in this publication is allowed to be reproduced or to be distributed by means of lending out, printing, copying, automatized data files or in any other way without written approval of the author. When illegally using or distributing this e-book, the violating party will have to pay a fine of at least €1.000 (thousand euro) without prior notice. After the violating party has been informed he/she will be indebted to a daily fine of €50 (fifty euro) during the length of the copyright violation.

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Table of Contents
Disclaimer & Copyright …........................................................................ Welcome at the training of the OFS Trading System Introduction of the OFS Trading System ...................... 1 3 4 5 7 9 12 14 16 19 21 24 28 29 30 33

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Chapter 1: Looking for a healthy trend Looking for a healthy trend …............................................................. Simple Moving Averages as a support ….................................................. Examples of conditions for the benefit of a healthy trend ...................... Chapter 2: How to determine the right entry point Choosing the right entry point ….............................................................. Using Moving Averages to determine the price reaction area …......... Previous swing highs and swing lows …................................................... Summary of a healthy trend, price reaction area and entry …................... Chapter 3: Entry, Stop Loss, Take Profit and Risk/Reward ratio Entry, Stop Loss, Take Profit and Risk/Reward ratio ….............................. Examples of entry, stop loss, take profit and risk/reward …................... Chapter 4: The real foundation of your success as a forex trader The real foundation for your success as a forex trader …................... Handling a good risk management …................................................... The right mind-set to gain results in forex trading ….............................. Conclusion ….............................................................................................

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Welcome at the course of the OFS Trading System!
First of all welcome at the course of the OFS Trading System! After having read this e-book, you’ll have the possibility to trade profitable using the OFS Trading System. This e-book concerns the basic version of the OFS Trading System and has been especially written for the benefit of beginning forex traders. In principle you don’t need any preliminary training to be able to understand the course material from this e-book, but of course it would be easier when you're familiar with the basics of forex trading. For this purpose you can go to the strategy page of Online Forex Strategy. If you should encounter a forex term in this e-book, which doesn’t sound familiar to you, you can look up the meaning of this term in the forex glossary. The OFS Trading System is a trading system, which is suitable for online forex trading as well as for online binary options trading. In this e-book I’m explaining how to use the OFS Trading System on the forex market. In case you want to use the OFS Trading System for online binary options trading you’re advised to also read the article "OFS Trading System for online binary options". In this e-book the basic version of the OFS Trading System is comprehensively discussed, however the OFS Trading System still offers a lot more possibilities! After having examined this e-book, you’ll also be able to read the strategy articles about the extensive version of the OFS Trading System for even more trade setups and a higher win ratio. Read the following articles to take even more advantage of the OFS Trading System. • • • • • • Optimal route and realistic expectations of the OFS Trading System Phase 1: Basic version of the OFS Trading System Phase 2: Gaining more in-depth knowledge of the basic version Phase 3: Choosing currency pairs and timeframes Phase 4: Extensive version of the OFS Trading System Phase 5: The route to perfection

My advice for beginners is to apply the OFS Trading System in the beginning to the 4-hour chart, daily chart and/or week chart. These time frames are the most reliable, because there is less noise and random price action. When you have mastered the basic version, you can also choose to apply the OFS Trading System on other time frames. Finally I’d like to wish you a lot of success with this course and if you should have any questions, you can email me at info@online-forex-strategy.com. Best regards, Paul Verheij (©)-----------------------------------www.online-forex-strategy.com---------------------------------3--

By combining a high success rate with favourable risk/reward ratio’s. the take profit level. Making this choice. as you can enter an order without being compelled to keep on sitting behind your screen all the time. As the OFS Trading System offers you the opportunity to trade only high quality trade setups. you’re ready to determine the stop loss. this condition being the foundation for trade setups of good quality. using the OFS Trading System offers a fair chance to earn a nice return. you’ll have to look for the right moment to get into the trade. You’ll find a survey of the important news publications. Then you can open a position. The OFS Trading System is mainly based on technical analysis and consequently is very suitable for beginning forex traders. Having found a healthy trend. including a detailed clarification. which frequently repeats itself within a trend. Apart from the above mentioned step-by-step plan. you’ll have to go through the same step-by-step plan over and over again as follows: • • • First you need to find a healthy trend and then you’ll have to test whether this trend meets all the important conditions. Once having determined the right entry point. Fundamental analysis is a profession of its own and that’s why I advise you not to open positions right from the start in case of an eventful news publication. on Forex Factory.online-forex-strategy. which is suitable for both beginning and advanced forex traders. It’s very important that a trend is healthy. Besides this system is very suitable for you to use as a set-and-forget system. The purpose of the OFS Trading System aims at having the odds in your favour by trading in the direction of the trend and by having the optimal benefit from a trend. you are also going to learn how a good risk management should function properly and how you ought to approach forex trading in a psychological way to be successful in the long term. you should be able to reach a high success rate. as a result of which your potential profits could be far more substantial. Employing the OFS Trading System. It’s anything but difficult to master the OFS Trading System as you’ll have to repeat the same simple rules all the time and trade the same established patterns.com---------------------------------4-- . you’ll have to use a fixed pattern. but also a potential second target to be able to take optimal advantage of a trend. consequently offering a high success rate. (©)-----------------------------------www. Attention please! It’s very important not to open positions as from the half hour period before an important news publication is being released up to and including two hours after this important news publication has been released. but very effective trend trading system. This way you’ll avoid your stop loss from getting needlessly hit by the short term effect caused by an important news release.Introduction of the OFS Trading System The OFS Trading System is a simple.

1 Looking for a healthy trend To find high-quality setups offering a substantial success rate. A swing low is a candlestick with at least two higher lows on the right side as well on the left side. Identifying marks of a downtrend: Lower swing lows and lower swing highs. we’ll first have to look for a healthy trend. we call it a trend. When the price is rising it’s called an uptrend and if the price is falling it’s called a downtrend. The most important condition for a healthy trend: • • Identifying marks of an uptrend: Higher swing highs and higher swing lows. you will be able to see a healthy uptrend with higher swing highs (SH) and higher swing lows (SL): (©)-----------------------------------www. If the price of a currency pair shows a substantial long term rise or fall. On the diagram shown below.1.online-forex-strategy. The OFS Trading System uses a number of simple rules to filter the best trends. Definitions of swing high and swing low: • • A swing high is a candlestick with at least two lower highs on the right side as well on the left side.com---------------------------------5-- .

If the next swing low isn’t lower either. for else a healthy trend is out of the question and you shouldn’t go looking for trade setups! Special situation: It can happen that no higher swing high is being reached. you’re allowed to go looking for trade setups again. So in this situation you’ll have to wait till a new swing high is clearly being reached. this doesn’t count of course. so it’s clear that you’re not allowed to go looking for trade setups in a moment like this. Of course the same goes obviously the other way round for a downswing. but that the new swing high isn’t lower either. Formally the trend doesn’t meet the most important condition anymore.online-forex-strategy.com---------------------------------6-- .A healthy trend has at least to meet this condition. we can speak of a deadlock. the most important condition not being met anymore. From that moment on. On the other hand we neither can speak of a trend reversal because no lower swing highs and swing lows are reached either. If in the meantime lower swing highs and/or swing lows are reached. that is to say it’s equal to the previous swing high. but it is at least equal to the previous swing low. (©)-----------------------------------www.

The OFS Trading System uses three simple moving averages to look for healthy trends and at the same time to determine the right entry moment within a trend. the 30 SMA the 50 SMA respectively. but a crossover is absolutely not allowed no matter how. nor is a 20 SMA which goes in the opposite direction of the trend! 3. • • In case of an uptrend: From below to above. provided that the price rapidly returns to the correct side of the 30 SMA and clearly goes into the original direction of the trend! (©)-----------------------------------www. 30 SMA and 20 SMA In case of a downtrend: From above to below. In accordance with the simple moving averages a healthy trend has to meet the following conditions: 1. 30 SMA and 20 SMA 2. They may not go parallel to each other all the time. All SMA’s have to point to the same direction and preferably also have to go parallel to each other. By means of these simple moving averages we are able to determine whether a trend is really healthy indeed. In case of an uptrend all three SMA’s have to go up and in case of a downtrend all SMA’s have to go down. are graphical lines which represent the average development of a price during a certain period of time. 50 SMA. So these lines indicate the average of 20. After that you will be able to select the number of periods and the types of colour.1. With the OFS Trading System we use the simple moving averages to watch to judge whether a trend is really suitable for us to be allowed to look for good quality trade setups. Sometimes it happens that the price inside a trend moves past the 30 SMA for just a moment and this shouldn’t be a problem.The price has to be on the correct side of the 30 SMA. First you’ll have to select “technical indicators” and then “simple moving averages”. 30 and 50 candlesticks respectively.online-forex-strategy.com---------------------------------7-- .2 Simple moving averages as a support Simple moving averages. also called SMA’s. The simple moving averages are very easy to be adjusted into the trading platform. 50 SMA.All 3 SMA’s have to go in the right order. These are the 20 SMA.

There must be a clear new swing high or swing low. you are not allowed to go looking for trade setups! (©)-----------------------------------www. If a trend does not meet one of these conditions. It often happens that the price suddenly rises or falls and doesn’t come nearby the 20 SMA for a long time. you’ll have to be sure that a trend is healthy and consequently meets all the important conditions specific to the simple moving averages. Conclusion To find good quality setups. 5.com---------------------------------8-- . In case of a healthy trend it so happens that the price will regularly return close to the 20 SMA. Close nearby the 20 SMA is also allowed. The same goes for swings.online-forex-strategy. which are clearly larger compared with the previous swings.It isn’t allowed that the price doesn’t come nearby the 20 SMA for a long period. There must be a clear new swing high or swing low. Even though all the other conditions can be met. the price being bounced off in the price-reaction-area that is situated between the 20 SMA and the 30 SMA.4. these trends are far from healthy.

The second step is to look if the conditions of the moving averages are met likewise. that new lower swing lows and new lower swing highs are being reached. so you will be able to properly understand the difference between a healthy trend. Example 1: On the chart shown above. (©)-----------------------------------www.online-forex-strategy. we’ll have to check all conditions a healthy trend has to meet.3 Examples of conditions for the benefit of a healthy trend First we are going to look at two examples. Consequently in this case we may speak of a healthy trend. it’s not going into the opposite direction of the trend. The price is staying neatly on the proper side of the 30 SMA and it’s clearly visible. you can see a clear downtrend. you can see there is also a matter of lower swing highs. based on the conditions of the OFS Trading System. Although the 20 SMA sometimes goes horizontal during a short time. which is suitable for trading using the OFS Trading System. As you can see regarding to point 1 up to and including point 4. As you can see the moving averages are going smoothly downwards parallel to each other while crossovers are out of the question. The most important hallmark of a healthy trend is the presence appearance of lower swing lows and lower swing highs in case of a downtrend. there is a matter of lower swing lows and regarding A up to and including D. To look whether this trend is healthy.1.com---------------------------------9-- . and trends which are by definition not suitable for trading. Apart from that the price frequently returns to the area between the 20 and 30 SMA.

To observe whether this trend is healthy. as result of which from that moment on a healthy trend is out of the question! (©)-----------------------------------www.online-forex-strategy.com--------------------------------10- . that first a new swing high has to be reached. From number 1 up to and including number 3 higher swing highs are being reached and from A up to and including C higher swing lows are being reached as well. because it is obvious.Example 2: On the chart shown above you can see an uptrend. From point 4 it’s a question of temporarily being in a deadlock and you’ll have to wait and see how the situation is going to develop further on. At number 4 however no higher swing high is reached. we again have to go through all conditions which a healthy trend should meet. The most important identifying hallmark of a healthy trend is that an uptrend is characterized by higher swing highs and lower swing lows. To begin with we speak of a sound uptrend when it is this conditions that matters. From that moment on you are not allowed to look for a trade setup any more. It so happens that the number 3 swing high isn’t being broken through. However the swing low at letter D is subsequently lower than the previous swing low at letter C.

The second step is to check if the conditions regarding the moving averages are met as well. First of all the price comparatively still needs a long way to return to the 20 SMA level. that the trend isn’t healthy any more. as a result of which the possibility of a trend reversal could be getting too big. In the second place the price at point D is getting underneath the 30 SMA during a period which is too long and moreover the 20 SMA goes into the opposite direction of the trend. resulting in a crossover with the 30 SMA. In the next chapter we shall take a close look at the ideal moment of getting in. also based on the moving averages. it’s very important for you to judge a trend based on all these conditions.online-forex-strategy. Conclusion: If you are going to look for the trend.com--------------------------------11- . Up to and including point B all important conditions regarding the moving averages are met. (©)-----------------------------------www. as a healthy trend is THE foundation for a high success rate. but after that we can tell.

the time eventually has come to determine the right moment of entering the market. In this chapter you will learn to determine the price reaction area based on the moving averages and on the previous high or low. (©)-----------------------------------www. After a temporary retracement.1 Determining the right entry point Now having obtained all the knowledge you need to go looking for a healthy trend. At that moment the retracement is meeting it’s end and the price is returning into the direction of the initial trend. The price of a currency pair never goes upwards or downwards in one single straight line. you’re already laying a very important foundation for a high-quality setup and a high success rate. the price will return to the initial direction of the trend. The ideal moment of entering the trend and to be able to take maximum advantage of it. It so happens that inside a trend several small corrections (also called retracements) are frequently taking place. one part of the traders is closing its profitable positions.online-forex-strategy. By verifying whether a trend is really healthy. so you can enter the trend at the right moment on account of this information. The second step is aimed at finding the right moment to enter into the trend.com--------------------------------12- . while another part of them is closing its loss-making positions.2. is at the peak of a retracement (see point 1 and 2 on the chart). When a retracement occurs.

(©)-----------------------------------www.com--------------------------------13- . the question is to what extent the price will be going to retrace. but of course you don’t know beforehand to what extent the price will be going to retrace exactly. that is to say at the end of the retracement. what will be the size of the correction? You gladly would prefer to enter the trend at the peak of the retracement. The price reaction area is the area of which we can reasonably expect that the price will return in the direction of the trend. in other words. In the next sections of this chapter we are going to examine how to determine the price reaction area using the moving averages and the preceding swing high or swing low.However. It’s for sure that we are going to try to determine the price reaction domain the best as possible using the OFS Trading System.online-forex-strategy.

2. you can clearly see how the area between the 20 SMA and the 30 SMA serves as a price reaction area.com--------------------------------14- . but moving averages are also perfect to determine the price reaction area. or at least close to the 20 SMA. it’s obvious that the ideal moment of entering into the trend is also located in this area. For that reason we call this area the price reaction area. As the price in a healthy trend regularly retraces to the price reaction area of the moving averages.2 Using moving averages to determine the price reaction area We have already seen that moving averages are very suitable to determine whether a trend is healthy. It so happens that the target is to enter into the trend at the peak of a retracement and this peak often corresponds with the price reaction area of the moving averages.online-forex-strategy. On the chart shown below. (©)-----------------------------------www. We are now going to examine how you can use the moving averages to determine the price reaction field. A condition for a healthy trend is that the price should regularly return to the area between the 20 SMA and the 30 SMA. then returning in the direction of the trend.

also causing too little space to gain a considerable profit. This rule needs to be used as a precaution to prevent you from entering into a trend too early.Important: In accordance with the OFS Trading System. we take care of minimizing our losses and maximizing our profits. it’s only allowed to take a position when the price is getting close to the 20 SMA or when the price is in the area between the 20 SMA and the 30 SMA. at the same time we are creating a favourable risk/reward ratio.online-forex-strategy. Doing so. (©)-----------------------------------www. Entering too early involves the disadvantage that your stop loss will be hit too frequently.com--------------------------------15- . Conclusion By waiting to take a position until the price is close to the 20 SMA or between the 20 SMA and the 30 SMA.

we need another tool to be able to determine the right moment of entering the trend more precisely. it served as resistance. To determine the right moment of entering the trend. Quite frequently it occurs. The other way around the same counts. The advantage of using a previous swing high or swing low lies in the fact. The same principle applies to a downtrend. With regard to a trend. we will be able to determine the price reaction area. prior to this. the OFS Trading System is using the swing high or the swing low of the previous complete swing. namely: Support is often turning into resistance and resistance is often turning into support! Support levels are price levels to which the price will not easily yield and resistance levels are price levels to which the price will not easily know to surpass.com--------------------------------16- . When a price level has served as resistance.online-forex-strategy. For this purpose we use the swing high or the swing low of the previous complete swing. we are often seeing this principle again. that the price will be retracing towards the same level as which. When it is a matter of a swing within a downtrend. it will be often going to serve as support after it has been broken.. at first a new high is reached and then a retracement is taking place. In this situation this price level will then serve as support. (©)-----------------------------------www. When it is a matter of a swing inside an uptrend. which preceding to this has been serving as support. When a price level has served as support. but as we don’t know exactly where the moving averages will be located if the price is going to retrace. first a new low is reached and then a retracement will be taking place. It happens quite frequently that the price will retrace to the same level. that we apply a universal rule within the forex trading business. it will be often going to serve as resistance after it has been broken.3 Previous swing highs and swing lows With the help of the moving averages. You could compare it with the floor (support) and with the ceiling (resistance) in a house.2. In this situation this price level will then serve as resistance.

after which the price is retracing again. has now become support. which used to serve as resistance. this should be a very reliable pattern to trade. The swing high at point 2 is then broken through and a new high is reached at point 3.On the above shown chart this principle is very clearly reproduced. On the chart you can also observe that the same lines of the preceding swing highs are coming very near to the 20 SMA and the 30 SMA. This price level. which a short while ago served as resistance. As you can see the price is retracing exactly in the direction of the preceding swing high at point 1. as a result of which the chance of a price reaction to occur is being confirmed once again. You will see the principle of support becoming resistance and resistance becoming support frequently recurring within a healthy trend.online-forex-strategy. At point 2 a new high is reached in an uptrend. that is: the price reaction domain.com--------------------------------17- . (©)-----------------------------------www. Especially in combination with the conditions of a healthy trend. Even now the price is retracing exactly towards the preceding swing high at point 2. has now become support. as has been described at great length before. This price level.

Using the preceding swing high or swing low as a moment to enter the trend In accordance with the OFS Trading System. Entry in case of a downtrend When it’s a matter of a healthy downtrend and it’s clear that a new low is being reached. we will draw a horizontal line at the preceding swing high of the most recent complete swing. When this is about to come together with the price reaction area according to the moving averages.online-forex-strategy. then we will use this price level as entry.com--------------------------------18- . At least the main condition is that this entry ought to correspond with the price reaction area between the 20 and the 30 SMA or at least nearby the 20 SMA. we will draw a horizontal line at the preceding swing low of the most recent complete swing. (©)-----------------------------------www. then we will use this price level as entry. Entry in case of an uptrend When it’s a matter of a healthy uptrend and it’s clear that a new high is being reached. When this is about to come together with the price reaction domain according to the moving averages. we are using the preceding swing high or low as a starting point for our actual entry.

that the price could fall through around the 20 SMA and sometimes around the 30 SMA. The price reaction area between the 20 SMA and the 30 SMA serves in similar situations as a kind of safety net. it would be sensible to summarize all this once again. In any case it needs to be emphasized that higher swing highs and higher swing lows are indispensable for an uptrend and that lower swing lows and lower swing highs are likewise indispensable for a downtrend. however they do shape the foundation for good quality setups.2. If the SMA’s are going neatly parallel. price reaction area and entry Now you have learned to go looking for healthy trends. which is the basis to obtain a nice return. This is the most important condition for a healthy trend and if a trend does not meet this condition. is very important.com--------------------------------19- . which are necessary to be able to guarantee a healthy trend and furthermore I’m going to explain the extent of influence these conditions have on the quality of your entry. because the chance of a deeper retracement will become too big. The other conditions are meant to filter setups of the highest quality and consequently to be able to achieve the highest possible success rate. So once more I’m going to go through a number of important conditions. the chance. Using the preceding swing high or low as the right entry moment. you should better not trade at all! It goes without saying that the SMA’s need to be going in the right order and into the right direction and that the price needs to be situated on the proper side of the 30 SMA. Even the condition that a new high or low has clearly to be reached. will be considerably more likely. the chance of a deeper retracement is much more likely. to determine the price reaction area with the help of the moving averages and you can use the preceding swing high or swing low to determine the moment of entry. into which the price is being catched in order to be able to resume its course into the direction of the trend. using the OFS Trading System. is extremely important. is consequently becoming less reliable.4 Summary of a healthy trend. Even in this case the preceding swing high or swing low will consequently become less reliable as a proper entry moment. In case the SMA’s are not going neatly parallel. It happens to be that the entry is based on the preceding swing high or swing low of the most recent complete swing. The conditions for a healthy trend may seem rather extensive. so that all pieces of the puzzle will fit together. looking for trade setups is totally out of the question. the space between the new high or low and the preceding swing high or swing low will be too small for a normal retracement. If a new high or low is not clearly reached. Especially the condition that the SMA’s need to go as parallel to each other as possible. Important: Instead of trading moderate setups. (©)-----------------------------------www.online-forex-strategy.

Conclusion It’s very important to clearly understand all the rules and to recognize the interest of their significance. This assignment is very useful to learn to understand why these conditions are so important and it also helps you in gaining a lot of insight into the progress of a trend.If the price is far from coming near or against the 20 SMA. A big pitfall could be caused by the fact that you’re not so strict when it comes to complying with following these rules.com--------------------------------20- . You will then discover. Under these circumstances the size of the retracement can hardly be estimated and the chance of a possible trend reversal is also far too big. that the conditions for a healthy trend in accordance with the OFS Trading System will frequently be not fully met. Especially also look at the moments in which a preceding swing high or swing low was not serving as a valid price reaction level. Before you continue with studying the next chapter. Please do so by focussing on the conditions for a healthy trend and by thoroughly studying the situation in which a preceding swing high or swing low of the most recent complete swing was valid as a price reaction level. (©)-----------------------------------www. I’d like to recommend you to start examining the charts of the different currency pairs as well as studying the trends from the past.online-forex-strategy. it’s important that you should not go looking for trade setups. In this case the chance of a deeper retracement or trend reversal is also a lot bigger. which could have an enormous influence on the quality of your trade setups and therefore also on your winning ratio. The same applies to swings that are clearly bigger in comparison with the preceding swings.

The entry Regarding the entry we take the previous swing high for granted in case of an uptrend and in case of a downtrend we take the previous swing low of the most recent complete swing for granted.3. before returning in the direction of the trend. It also happens regularly. We divide the result by two and that represents the number of pips to risk. the take profit level and obviously also to the risk/reward ratio.com--------------------------------21- . that the price is indeed approaching the previous swing high or swing low. Important: In this case it’s rather important that a trade has enough moving space and the stop loss isn’t too close to the entry. So the price should at least be able to touch the 20 SMA or at least it should come very nearby. (©)-----------------------------------www. Stop Loss. If a tiny little spike is concerned. The stop loss The risk per trade can always be calculated quite easily.1 Entry. On the whole it is safer to start from the body of a candlestick. If these conditions are not met. Our starting point is the entry and in case of an uptrend we measure the distance to the previous swing low while in case of a downtrend we measure the distance to the previous swing high. then you shall have to forget about the setup! If it concerns the previous swing high or swing low. you’d better check the situation once again to conclude if all the required conditions are fully met. you could take this as a benchmark. Take Profit and Risk/Reward Ratio The time has come to turn our groundwork into a concrete trade plan. If this isn’t the case. because normally you’ll see that you’ve got quite a lot of space with this stop loss. which have been testing the same price level. For that reason it’s permitted to take the entry a bit above the preceding swing high or a bit below the preceding swing low. We will then going to look at the stop loss. Important: The previous swing high or swing low at least ought to correspond with the price reaction area of the 20 SMA and the 30 SMA. Actually we already have shaped a good view concerning the entry as a result of the previous swing high or swing low. then it so happens that there will be a big chance that the price is going to retrace to the previous swing high or swing low. you can choose whether your starting point will be the body of a candlestick or the longest spike of a candlestick. If the conditions for a healthy trend are favourable. especially while frequently a single big spike is less reliable.online-forex-strategy. unless you see that there are several spikes. but doesn’t exactly touch it.

As soon as the price returns to the 20 SMA. The disadvantage of this method is you will be obliged to keep an eye on the development of the price and consequently you will not be able to enter your second target in advance. which is still open. but a single big spike will be frequently less reliable. In case of an uptrend you measure the number of pips from the swing low up to the swing high of the most recent complete swing. In case of a downtrend you measure the number of pips from the swing high up to the swing low of the most recent complete swing. Then you move the stop loss of your position. When adding up this number of pips to your entry. In this case you will be given the opportunity to choose whether you assume start from the body of a candlestick or you assume start from the longest spike of a candlestick. Second target as a result of the previous complete swing You can determine the second take profit level in different ways. you’re going to be able to get a second target. It also regularly happens that it’s true that the price approaches the most recent high or low. (©)-----------------------------------www. even if the trend consolidates or if a trend reversal still takes place.com--------------------------------22- .online-forex-strategy. which is still open. to break even. At this.Take Profit The take profit level can also be determined quite easily. unless you see. you close the remaining part of your position. You then can close for instance half of your position at the most recent low or high. you can safely use this as a standard of measurement. An easy method is measuring the previous swing. that there are more spikes which have been testing the same price level. Second target as a result of the 20 SMA You can also use the 20 SMA for a second take profit level. If it is a matter of a very tiny spike. Splitting up your position and working with two take profit levels It’s also possible to use a flexible second target to be able to take full advantage of a trend. For that reason it’s allowed to place your take profit level a bit below the most recent high or a bit above the recent low. but it not quite succeeds to touch them precisely in case of a consolidation. our starting point is the most recent high in case of an uptrend and the most recent low in case of a downtrend. Generally speaking it will be safer to assume the body of a candlestick. that this price level is going to be tested once again. Important: It will frequently happen.

That means. compared with the risk. the stop loss. the take profit level and the risk/reward ratio are quite simple.Taking optimal advantage of a trend Using the advantage of a second take profit level.com--------------------------------23- . that the potential profit would be 1.online-forex-strategy. you’ll always have to start from the most recent high or low instead of an eventual second target. you’ll have to drop the setup. because then you can take more advantage of these extra options. that the potential profit would be twice as big. Important: While determining the potential profit. the stop loss and the take profit level. it will be quite easy to calculate the risk/reward ratio. you will be able to start working on a second target. If for example your potential profit would be 100 pips and your stop loss would be 50 pips. your risk/reward ratio would be 75 : 50 = 1. Important: Your risk/reward ratio should never be less than 1. That means. As soon as you have gained some more experience or you have studied the trends comprehensively. Because of this a profitable position cannot turn anymore into a loss-making position. It’s not intended that you’re going to screw around with your stop loss or take profit level to make the risk/reward ratio suitable. Consequently risk/reward ratio = potential return : potential risk.5 times as large. Risk/Reward ratio If you are aware of the entry. However it’s highly recommendable to have a thorough command of these rules before you’re going to start working on a second target. The risk/reward ratio is the relation between the risk you are taking and the possible return. If your potential profit would be 75 pips and your risk would be 50 pips. then your risk/reward ratio would be 100 : 50 = 2. To get an easy view of the risk/reward ratio. compared with the risk. Just in case this happens anyhow.5.0! So the risk should never exceed the potential profit. you should divide the expected profit resulting from the number of pips by the risk. (©)-----------------------------------www. In addition to this you already you have been securing part of the return and the stop loss of the open position has already moved to breakeven. Conclusion The rules with regard to the entry. means that your potential return will still be increasing on account of the fact that you will be able to take full advantage of a trend.

take profit and risk/reward Example 1: Entry: First of all we’ll have to determine our entry. stop loss. using a measure crosshair. Stop Loss: To be able to calculate the stop loss in case of an uptrend. In this case our stop loss has been set at 1. (©)-----------------------------------www.This black horizontal line corresponds with the price reaction area of the 20 SMA and the 30 SMA. Measuring the number of pips is quite simple. In this case our entry lies at 1. When you know the number of pips from the entry up to the most recent low. like it has been done on the above shown chart (by means of the black line).4032. just like the thick red line on the chart. as a result of which we can speak of the right entry moment.online-forex-strategy. You ought to keep this button pushed down while measuring the distance to the most recent low. we ought to measure the distance from our entry (reproduced by means of the black line) up to and including the swing low of the most recent complete swing.3. You can select this one very easily in your trading platform. You will then automatically see the number of pips appear on the screen. levels the swing high of the most recent complete swing. You therefore need to position yourself on the entry. while pushing down the left button of the mouse. At this point you can just draw a horizontal line. You can see the most recent swing low at point 2 (the red dotted line).3887. which. This red line represents the stop loss of this setup. as you can see at point 1.com--------------------------------24- .2 Examples of entry. then you divide this number by 2. in case of an uptrend. Next you subtract the outcome of this sum from the entry and on that spot you once more draw a horizontal line.

that is: your potential return is exceeding the risk. In this case the take profit level has been set at 1. Risk/Reward ratio To be able to calculate the risk/reward ratio.31 As this result is above 1. which you can see on the chart at point 3.Take profit: The take profit level in case of an uptrend is always at least equal to the most recent high. we use the following formula: risk/reward ratio = potential return : risk. that is: 145 pips The return amounts to: 1.4032 .0191.4223 – 1. You can again draw a horizontal line to reproduce the take profit level. it’s a matter of a good trade.3887 Target: 1.4223 The risk amounts to: 1.3887 = 0.com--------------------------------25- . that is: 191pips To calculate the risk/reward.4032 Stop loss: 1.4223. as has been explained in the previous chapter. Of course it’s also possible to handle a second take profit level. that is: 191 : 145 = 1. (©)-----------------------------------www. we’ll first have to determine the risk and the potential return profit.1.4032 = 0. like it is shown on the chart with a green horizontal line. The data: Entry: 1.0.online-forex-strategy.0145.

If you know the number of pips from the entry up to the most recent swing high. as a result of which we are entitled to speak of entering the trend at the very right moment. This red line represents the stop loss of this setup. In this case our entry lies on 83. Stop loss: To be able to calculate the stop loss in case of a downtrend we ought to measure the distance from our entry (the black line) up to and including the swing high of the most recent complete swing. you ought to divide this number by 2. You can see the previous swing high at point 2 on the chart (the red dotted line). just like the thick red line as shown on the chart.38.com--------------------------------26- .online-forex-strategy. In this case you just can draw a horizontal line like it has been drawn on the chart shown above (the black line). as you can see on the chart at point 1. Then you have to subtract the result of this sum from the entry and there you have to draw a horizontal line once again. (©)-----------------------------------www.00. In this case our stop loss lies on 83.Example 2: Entry: First of all we’ll have to determine our entry. which in case of a downtrend happens to be equal to the previous swing low of the most recent complete swing. This black horizontal line is coming together with the price reaction area of the 20 SMA and the 30 SMA.

as has been explained in the previous chapter.com--------------------------------27- . as well as the matching risk/reward ratio.online-forex-strategy. As soon as an uptrend is indicating that clearly a new high has been reached and the price is starting to retrace. Risk/Reward ratio To be able to calculate the risk/reward ratio. because at that very moment you are already able to determine the entry. first of all we need to determine the risk and the potential return.0. it’s a matter of a good trade. we use the following formula: Risk/reward ratio = potential return : risk. like it has been realized on the chart by means of a green coloured horizontal line. which means that your potential return is larger than the risk.00 = 0. Of course the same applies to a downtrend when clearly a new low is being reached and the price is starting to retrace. meanwhile you can already give the order.38 = 1. that is: 60.00 – 82.38 Target: 82.Take Profit: In case of a downtrend the take profit level always happen to be the most recent low. A big advantage of the OFS Trading System is. Of course it’s also possible to handle a second take profit level. In this case the take profit level lies on 82. which you can see on the chart at point 3. So there’s no need for you to keep sitting behind your display till the time has actually come for the situation to be in practice. the stop loss and the take profit level.38. that is: 60 pips To calculate the risk/reward. that you will be able to use it as a set-andforget system.57 As this exceeds 1. (©)-----------------------------------www.38 – 83.00 Stop loss: 83.40 The risk amounts to 83.40.60.40 = 0. the stop loss and the take profit levels. Set-and-Forget So far you have learned how to be able to determine the entry. that is: 38 pips The return amounts to 83. Once again you can draw a horizontal line to reproduce the take profit level. The data: • • • Entry: 83.

com--------------------------------28- . (©)-----------------------------------www. Not following the trading system rules or putting too much money at stake to try to make up losses. If you want to become a successful forex trader. This is very important. but the truth is that profitable forex trading consists for about 90% of psychology and risk management and only 10% is dependable on a trading system. So it is of vital importance that you are strongly convinced of these conditions! To begin with we shall take a close look at a good risk management and after that we shall discuss a psychologically well-considered approach of forex trading. Of course you ought to have a lucrative trading system.Chapter 4: The real foundation of your success as a forex trader By now you have learned all the ins and outs of the OFS Trading System and if you stick to the rules of this system consistently. are just a few examples of pitfalls into which many forex traders use to get in with both feet. However a starting point has now been laid down. these subjects are frequently overlapping each other. So far the good news. The bad news involves that the whole trading system isn’t worth a penny if the user is handling risk management the wrong way and/or is approaching forex trading from a wrong psychological point of view……. The information that you are now about to read. Fortunately that’s not the case. Nevertheless you will notice. however applies to any forex trader. This does not mean that I insist that the OFS Trading System happens to be the one and only perfect trading system.online-forex-strategy. regardless of the trading system which you are using right now. Nevertheless the OFS Trading System does consist of the right elements to be able to also approach forex trading in a psychologically well-considered way. you should be able to achieve a nice return. that in daily practice. but in actual practice this often appears to be the easiest part. because as soon as a forex trader has to judge every situation again and again by himself. leaving you little space for your own interpretation. the dangerous influence of emotions may appear and this could cause negative consequences much more often than should be expected. you’ll mainly have to pay special attention to subject matters like risk management en psychological approach. This may sound a bit depressing. You are in possession of a profitable trading system with simple and particularly clear rules.

there’s always the possibility that you could lose a number of trades in a row. as it happens to be that without money you’ll not be able to trade whatsoever. there is a fair chance that you’ll be going broke when having the slightest bit of bad luck. If a trader takes a 1% risk each time he’s making a trade. if each time you play for high stakes to such an extent that you’re risking 50% of your account. Handling a risk percentage of 2% per trade still reduces the possibility of going broke to a considerable minimum.online-forex-strategy. an opposite reaction could also be possible. but an increasing potential growth is not entirely out of the question anymore. Guidelines regarding maximum risk percentages per trade In general forex traders risk about 1% up to 5% of their account per trade. Regardless of the potential of your trading system. but on the other hand the balance on his forex account sure isn’t likely going to increase too fast. while at the same time the comfort zone as well as the growth potential of a forex trader needs to be thoroughly observed. (©)-----------------------------------www.com--------------------------------29- . Without money you’ll not be able to trade.2 Handling a good risk management A good risk management has to take care to avoid a forex trader going bankrupt and at the same time it has to take care the balance of the forex account having the opportunity to expand. Handling a good risk management is crucial. However. the smaller the chance he’s going bankrupt. consequently the possibility of him/her going broke is very near to zero. Minimizing the possibility to go broke For instance. Growth potential On the other hand of course a forex account has to get the opportunity to grow.4. If a trader is convinced that 1% is not sufficient. there is a chance that he might become too casual and as a consequence will deviate from the rules. Nevertheless a good risk management also depends on the comfort zone of a forex trader. With these percentages the chance to go broke should be negligible. so it’s important that you handle your resources with great care. The smaller the risk percentage a trader is used to handle per trade. as it happens to be especially dependable on the individual interpretation of the comfort zone. Comfort zone A good risk management however differs from one person to another. That way it’s possible that a trader might get too nervous by staking 4% per trade and by doing so makes wrong decisions based on emotional motives. The risk percentage per trade is based on the possibility to go broke in a less favourable period. The probability theory plays an important role in handling an adequate risk management.

Using the OFS Trading System. Having the right mind-set is crucial if you want to become successful in the long term.com--------------------------------30- . but in addition to this you need to have the right mind-set to be able to optimally handle this trading system. (©)-----------------------------------www. giving you the opportunity to approach everything in a more abstract way and to develop a clear vision for the long term.3 The right mind-set for forex trading You may have a very good trading system at your disposal and indeed in that case you have taken a very important step into the right direction. Especially during a less profitable period your attitude will be put to the test. at least amounting to 1:1 and your success rate being more than 50%. Unfortunately this often results in even bigger losses……. simplicity and the handling of a good risk management. Lacking the right mind-set happens to be the underlying problem causing the failure of many forex traders. By mentioning the right mind-set. This principle seems and in fact actually is quite simple. but that does not mean that you are never going to experience loss-making trades along the way. among other things I’d like to emphasize a long term vision and the discipline to comply with follow up your own rules. In actual practice it frequently happens that a forex trader start to doubt when a lossmaking trade appears and this could easily be deteriorating when a number of loss-making trades happens in a row (one after another within a rather short period). To become successful you ought to have a long term vision. but nevertheless you might experience that in actual practice the result could occasionally be the opposite. It so happens that it could be prevented quite easily when your mind-set is in good order. The emotions could take the upper hand and consequently big mistakes could be made like not following the rules anymore or increasing the stakes to try to make up the losses.4. I’ll be glad to provide you with a number of tools. However the right mind-set is a broad concept. you will achieve a profitable success rate. Long term vision Probability is an important issue with regard to a trading system. Consequently you know. It’s a pity that the above-mentioned scenario happens much too often and that could be qualified as a bloody shame.online-forex-strategy. that you’ll have a fair chance to make a profit by handling a risk/reward-ratio. which is also related to aspects like probability.

why should you bother? (©)-----------------------------------www. in fact. causing the opportunity to succeed turning to our advantage by trading in the direction of the trend at the right moment. So is it really alarming when you close 1 trade at a loss? Or when you close 3 trades in a row at a loss? No. When we observe the very short term. you are still going to achieve a nice return. All this should be combined with favourable risk/reward-ratio’s.Rely on your trading system and practice the discipline to follow the rules Your trading system is the basis of everything and that’s why you should completely rely on it. What actually is the meaning of this percentage? It means that you will conclude your trades with a profitable average of 60%. you will conclude 6 trades with return and 4 trades at a loss. So. it should be based on price action and it should be bound by well-defined rules. combined with favourable risk/reward-ratio’s. Of course in actual practice the target is often higher. provided you stick to the rules consistently. You’ll have to stand behind your trading system and you’ll have to understand the way it is composed. So it still fits entirely in the line of expectations. You know that your trading results will be profitable using the OFS Trading System. based on an average of 10 trades.com--------------------------------31- .online-forex-strategy. Especially the strict rules are used to being underestimated in actual practice. This purpose is achieved by trading according to fixed patterns. it isn’t. but they are crucial for the trader to be able to create the right mind-set! The OFS Trading System is using very clear rules. this means that. but to be lucrative on the long run in all market-circumstances! The key to obtain the right mind-set is to be able to understand what the success rate of 60% really involves. because you should be well aware of the fact that you will close at an average of 4 trades out of ten at a loss. There will be no space for second guessing nor for your own individual interpretation. using a risk/reward-ratio which varies from 1:1 up to 1:3. Be precisely aware of your goal to be able to create the right mind-set It’s very important to keep your goal clear in mind. Each time you’ll have to be trading according to the same pattern and each time a trade setup has to comply with the same conditions. Important: so the main objective is not to conclude all trades in a profitable way. Let’s take as an example a success rate of at least 60%. but with a success rate of at least 60%. Besides a good trading system should be simple. The purpose of the OFS Trading System is to gain profit in the long term.

nor was there any reason to go panicking.The target is aimed at being profitable in the long term under all market circumstances. The mantra “Everything’s going to pass away” Yet for everything counts. like a neutral spectator. Isn’t this rate exactly the original goal that you had in mind before carrying out the trades? So you’ve let yourself got carried away by giving in to your emotions. which can only lead to negative consequences. It’s true that two of them are profitable.online-forex-strategy. but in the end you’re simply still on schedule when it comes to your original goal. You regard the trading system as being absolutely fantastic and your self-confidence is bigger than ever. (©)-----------------------------------www. In that case one single trade isn’t important at all and the same goes for a few more trades. Not until after having experienced 100 trades you’ll get somewhat of an image of your actual results and even then it could still be a matter of the usual variance. You concluded 12 of the 20 trades in a profitable way and you concluded 8 of the 20 trades at a loss. By using the mantra “Everything’s going to pass away”. So nothing was the matter at all. but the remaining 8 trades are loss-making. disposed of emotional feelings. There’s a big chance that you’re experiencing an euphoric feeling. there was no reason for euphoria. This results in a 60% success rate. To let yourself keep seeing everything in a clear perspective and to prevent yourself from aiming at the short term results. you’ll be able to keep seeing everything in the right perspective and you’re not going to end up in a rollercoaster of emotions. The point is whether you will reach your target in the long term. Try to look at the situation from a certain distance. just as well as to real good times! An illustrative example Imagine you managed to conclude all of your first 10 trades in a profitable way. This applies to less good times. so focus your eyes on that very same term. Now there’s a big chance that your euphoric feeling has completely vanished and it seems quite likely that the same goes for the extent of your self-confidence…… Now let’s try to look at the situation from an objective point of view. the results of the next 10 trades happen to be nearly the opposite of the previous ones. As a matter of fact the earlier mentioned example of 10 trades isn’t in any sense enough representative to measure your results. However.com--------------------------------32- . It makes no sense to become euphoric when things are improving more than expected and it neither makes sense to go panicking when things are not exactly developing the way you was expecting them to be. that results in the long term are more reliable and that goes for forex trading as well. You ought to know that you will not be able to pass a representative judgement until a large number of trades has been taken place and you should not at all be preoccupied with this matter in advance. you should use the mantra “Everything’s going to pass away”.

To gain the maximum return using the OFS Trading System. I hope that the info from this e-book and on the website Online Forex Strategy can contribute to a nice forex career! If you should have any questions. I’ve been writing a couple of additional strategy articles. The OFS Trading System is offering even a lot more possibilities to obtain good quality trade setups and by also taking into account other factors. however. With best regards. This e-book.online-forex-strategy. Read the following articles to take even more advantage of the OFS Trading System. you’ll be able to score an even higher win ratio. such as expanding the number of trade setups. you’ll have a complete and valuable forex trading system at your disposal including strictly defined rules.Conclusion After having studied this ebook.com. is the basic version of the OFS Trading System that is particularly suitable for novice forex traders. • • • • • • Optimal route and realistic expectations of the OFS Trading System Phase 1: Basic version of the OFS Trading System Phase 2: Gaining more in-depth knowledge of the basic version Phase 3: Choosing currency pairs and timeframes Phase 4: Extensive version of the OFS Trading System Phase 5: The route to perfection In case you want to use the OFS Trading System for online binary options trading you’re advised to also read the article "OFS Trading System for online binary options". you can email me at info@online-forex-strategy. but also different factors. Paul Verheij (©)-----------------------------------www.com--------------------------------33- . In these articles I discuss different topics. which can improve your win ratio.

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