To speed up all the calculations, I wrote a program to help with my trading. It gives me all the numbers we saw being used in the last chapter in just a fraction of the time it would take by longhand.
I originally wrote the program using qBasic language. Then I had some help from one of my students who was gracious enough to distill it into a simple download.
Simply click or copy this URL to your browser and save the zip file to the root directory of your PC (usually the c:\ drive). If you have a 32 bit PC use this URL:
http://www.forex-trading-made-ez.com/FOREX.zip
If you have a 64 bit PC use this URL:
http://www.forex-trading-made-ez.com/fxcalc.html
After the download is complete, click on Open and unzip the file. You will see two files. The file you will use is Forex.exe. You can move it to your desktop if you like.
Page 56
To open the program double click Forex.exe. To exit, simply press CTRL + C. Do the same with this file labeled AVG.zip
http://www.forex-trading-made-ez.com/AVG.zip
You will use this program to help you with the calculations used in Chapter 13. Once again, you can move this file to your desktop as a shortcut
If you would rather not go to the trouble of downloading the Forex.exe, you can also use my online calculator here: http://www.forex-trading-made-ez.com/forexcalculator.htm
The online calculator allows you to adjust for whatever spread is being used. The Forex.exe program is fixed at 1.2 pip spread. This is not that important since you can adjust for it yourself when you make the trade.
Now, while we’re on the subject of using the Forex calculator, I want to answer a question that always comes up: “How do we know when our third turning point (P3) is reached?”
I've struggled with the problem of identifying this third point (P3) ever since I started trading Forex. Many times I've prematurely selected P3, only to be stopped out. It's as if the Forex gods were dropping a Coke bottle on me, if you remember the 1980 cult
movie, "The Gods must be crazy."
I don't want to make this overly complicated, but here’s what I’ve come up with that seems to work for me.
First, I want to be sure we are in a "long roll" type of day, as described on page 46. This usually occurs during active trading sessions, although there are exceptions. I don't use the Forex calculator during choppy sessions.
Second, I generally use a 5 minute chart to trade with. I will check longer term charts, 15, 30, and sometimes the 60 minute chart to see the overall direction, but I will usually use just the 5 min. P1, P2, P3 numbers to enter into the Forex calculator. Nevertheless, if prices are really volatile I'll use a 15 min. chart.
Page 57
Third, I want to see the EMA's in my favor (rising or declining, red or green on top, etc.) and generally not going sideways as that would indicate a more choppy situation. Fourth, if I can draw channels, like you’ll see in some of my videos, that can often show us P3 touching the sides of the channel.
Fifth, it helps if the trading line is reaching a top or bottom, but this doesn't always happen. Instead, it may simply change direction, often right in the middle of the move. Sixth, (and we’ll get into this in a later chapter), I use a timeless strategy called point and figure (P&F) to help me get a visual idea of how far prices have moved.
Seventh, as Charles Lindsay points out in his book "Trident, A trading Strategy" a valid turning point must have a lower low on each side of a peak, and a higher high on each side of a bottom. I think that goes without saying.
Eighth, and the one I've found to be most effective, is the use of a trading tool I call, “Oscar.” You are going to learn all about it in Chapter 15.
Ninth, for some unknown reason, it seems every time I think I have P3 nailed, if I just wait for a bit, a new P3 will form that WILL be the valid turning point. I tend to think that's how the markets (label that "brokers") take advantage of us. They know we are often short on patience, and can't wait to get into a trade.
Tenth, If I have a pretty good log going of price swings (as shown in the next chapter) it will often help me confirm that a P3 has been made.
Finally, and I think this is important. When we're successful we'll only make 75% of the total move. (Remember, we're not in the first 25% of the move.)
So, let's say we get stopped out, start over and ARE successful. Now we make 50% of the move. That's usually more than enough to offset our loss and make our five percent. Along the same line of reasoning, if we happen to miss the entry point (EP) we can often get in at a higher or lower figure and still make our 5%.
Page 58