Laurentiu Damir - 50 Pips A Day Forex Strategy

50 Pips A Day Forex Strategy

HowTo Build A Solid Trading System

By Laurentiu Damir

Copyright 2012 by Laurentiu Damir

All rights reserved. No part of this bookmay be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any informationstorage and retrieval system, without prior written permission of the Author.Your support of authors rights is appreciated.

Books in PDFformat

Trade thePrice Action

FollowPrice Action Trends

DayTrading Forex with Price Patterns

Forex RangeTrading with Price Action

Trade theMomentum

DayTrading Forex with S&R Zones

All inOne PDF

Table of Contents

Before you start to construct your trading system, youmust first think about what is the trading style that suits you better. Do youwant to sit in front of the computer the whole day entering and closing tradeson the 5 minutes time frame or do you think that trading on a higher time framewill suit you better? My advice to you is very simple and clear: always seek totrade on the higher time frames. It is easier to trade this way and it willmake you much more money in the long term. If you are a beginner in trading, itis best for you not to day trade until you gain experience. Trading on smalltime frames carries high risk due to short-term random moves that are almostimpossible to predict. Not to mention that trading this way makes youvulnerable against economic news events that come out multiple times per dayand usually have a big impact on the small time frames. Even after you get moreexperienced by trading successfully on the higher time frames and you think youare ready to day trade, my advice is do not trade on any interval smaller thanthe 30 minutes. Moreover, when you do decide to day trade, consider it as abackup trading style, day trade only when there are no trade setups accordingto your system on the higher time frames. Always seek to trade on the highertime frame. Nevertheless, as I said before, if you are a beginner trader, andyou probably are, I strongly recommend that you develop your trading systemaround a higher time frame like the 4 hours or the daily. Forget about daytrading for a while. Build your trading system and trade on the 4h/daily chartsuntil you start to add to your account consistently.

With the above in mind, the next thing you should decideis what you will include in your trading system from the technical point ofview to help you win as many trades as possible. Decide what will be the coretechnical parts of your trading system. From my experience, I can tell youwhich are the tools that work best in forex trading, that have a great rate ofsuccess and they repeat over and over again with excellent results. These are pricetrends, support and resistance levels, Fibonacci ratios, price patterns and barpatterns/candlestick patterns. These are the things you should considerincluding in your system. They are the most popular things in the forex market thus,they have the highest rate of success.

You surely know what a trend is and you know that you seethem on your charts over and over again. The trend is a core principle of theforex market or any market for that matter and should always be taken intoaccount when constructing your trading system. It is always easier to tradewith the trend than against it. A trend signifies that the majority of tradersdecided to push the price in one direction. You must always know what thatdirection is and trade in line with it. If you want to know everything there isto know about forex trends, how to spot them by reading the price action, howto recognize when the trend is changing without the help of any technicalindicators, you can check out the book Follow Price Action Trends thatexplains this in great detail, with many chart illustrations, and puts ittogether into a complete forex price action trading system that can yieldthousands of pips by trading these changes in trend.

Support and resistance levels are also a key component ofthe forex market; a large number of traders out there emphasizes them on theircharts and base their trading decisions on them. Therefore, it is advisablewhen you decide how to construct your trading system that you take them intoaccount.

Fibonacci ratios are another forex tool that worksextremely well in the forex market. Just pull up any chart and draw yourFibonacci levels from the start to the end of any big move in one direction oranother. You will see how many times these levels act as strong support andresistance zones where price bounces back to resume the previous trend.

Price patterns and candlestick patterns are also verypopular with the vast majority of traders therefore, they too have a great rateof success. Price patterns are used as signals that price is preparing for amove in a direction and candlestick patterns are used mainly as a confirmationwhen entering a trade. If you want to learn in great detail about all of theseabove powerful trading tools and master them, you can take a look at the Trade the Price Action book that explains them very well with many chart illustrations and puts themtogether in the form of an extremely powerful price action trading system. In conclusion,these are the things that you should include in your trading system becausethere are by far the most successful tools to trade the forex market. It iscompletely up to you to decide if you combine them all in your system or justuse some of them. There will be more about these powerful tools in a latersection where you will learn how to avoid making trading mistakes when workingwith them.

Now that you have an idea of what would be best toinclude in your trading system you also must know what not to include in it. Donot use any technical indicators in your trading because they are absolutely worthless,and they will lose you money in the long run. You might win a trade today usingthem but you will surely lose all that money back and more by the end of theweek. You should consider yourself very lucky if in the course of a month youmanage to break even by trading with indicators. All indicators are based onpast price action, the macd, rsi, or stochastic are not leading indicators.They are only leading you to losses. Being constructed of past price actionthey are all lagging behind the price. By design they follow the past priceaction therefore, even if the signals they give would be accurate they are uselessbecause they come too late for you to capitalize on them.

Always remember one thing: price leads the indicator, notthe other way around. Do not be fooled when you do a back test on your chartsand you see that using an indicator or a trading system with indicators wouldhave made you thousands of pips. That is just a trick. Real time trading hasnothing to do with back testing. When you put that indicator to work in real time,you will soon see that you are wasting your time and money. Always rememberthat price tells the indicator what to do not vice versa. The ultimateindicator is and always will be the price action itself. You should focus onlyon reading and interpreting the price action movements and not overcomplicateyour trading system with useless indicators.

From my experience, this moving average is the onlyindicator that is worth incorporating in your trading system. It is the mostimportant moving average of them all, all retail and professional traders keepan eye on it therefore price tends to bounce when it touches it. However, it isbest to use it in your trading system as guidance, as a confirmation of whatprice action tells you and not as a tool to base trading decisions on.

For example, if your system is designed for the 4h chart,you will want to read the price action on that chart to know what the trend is.After you do that and see that the current trend is up or down, you can thenlook at the 200 EMA on the same chart to confirm and enforce your price actionreading. Let us say the price action trend on that chart is up. If thatspecific forex pair trades above the 200 EMA at that time on the same chartthen you have a confirmation of your price action reading.