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This site is currently inactive as I have decided to move away from exclusively trading Forex in 2010 and as such will not be taking on new coaching clients in this area.

 



I have resumed my focus on coaching as a stock market mentor where I run a success guaranteed stock trading mentorship program

 



Additionally, you can now get access to what I consider to be the best stock options daily trade alert service.

 



Of course, I am biased and with a success rate fluctuating between 68.2% and 72.4% it is hard not to be biased.

 



If you do want to follow along with what I am doing every day you can get access to my daily stock market report 

 

 

You can read the step-by-step Bollinger Band Trading Strategy Guide - this is my main active trading strategy



Until next time


happy trading 


Mr Phil Newton or on LinkedIn Phil Newton trader

How to reduce risk using MACD while applying RNB strategy

AlexSjr's picture

Hi guys! My name is Alex.

I would like to discuss what possibilities the alternative strategies (RNB, IB) give to us and what we can do to use them more effectively.

I am a great supporter of the Main strategy because it’s based on absolutely correct and clear rules. But in January I had a couple of issues, which made me looking for alternative steps to avoid risking too much on FIB retracements. I didn’t like FIBS those days because I lost hundred pips of my real account. Tick charts appeared to be noisy while I was persistently trying to apply bias change rule. Sure I made mistakes too… 

Why it was so difficult to apply FIBS? Market conditions were so tough and downside moves caused risk aversion exceeded any possible levels. At the same time we were applying FIBS to every new move down, trying to go up as far as 240 bias wasup. Two questions I was asking myself these days – 1) where was the signal which would tell me that down move was over and I could go up? 2) whyI was trying to go up while I could stay hundred pips down?

No, don’t think that I was considering the Main strategy was wrong because it was telling me that I should stay up. I was thinking that while opposite move (retracement)was too strong why I was unable to earn on it? It was clear that I was lacking an additional rule to trade such moves.

Exactly this possibility is given to us now by the strategies RNB and IB. Market gives us a signal – reversal bar after prequalifier, so we change the direction of our trades. Sure you all read the articles on the site and there is no need to repeat what those systems are about. I would like to speak about risk reduction taking into account the fact that market often gives us false signals.

Personally I like to trigger the market when I am somehow convinced that there is at least a small move to the direction of my trade. Reversal bar is a good signal but not a move yet. It rather predicts the move. What can I suggest? After Bollinger Band has been reached and RB has been formed on 30 min chart, I go to15 min graph and apply MACD. I am using MACD histogram with quite small periods(2 and 5, with no signal line). It enables me to see the direction change when it occurs. After MACD has reached positive levels (first positive bar – I call price bar making first positive MACD bar a Direction Bar (DB)) I start looking for a bar to make HH and HL (Setup bar SB) with the previous one (in case of uptrend). If such combination occurs buy order placed above SB (+2+the spread),stop loss goes below the SB (-2 pips). 

 

 Note!MACD as any other indicator performs slower than we all expect from them. That is why I apply so small periods. Besides it’s better to look for setups right after MACD DB has been formed. I prefer to take particular attention to SB. Ideally it should have body not more than 50% of total bar size. If such rule is not applied, take attention to bar size. It’s better if SB is a small one, smaller than the preceding bars, and preceding bars are the ordinary ones. In other words, market conditions should be normal and SB should be a result of fight of bulls and bears.

Happy trading,

Alex

 

 

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