Tools and rules

You might want to look at one of the tools and rules of certain instruments. This is very helpful if you want be successful in your trading experience. Before you can actually master this rules, you have to work by certain steps to help you find your way through the whole process.

Step 1 - Identify a trend. You should also make a comparation between the moving averages on the 10-minutes and hourly charts. You can identify a trend when you notice that the price is persistently above/below the moving average as seen on the two charts.


Step 2 - Determine your point of entry. As soon as you identify a trend, you should look for these conditions on a 10-minute chart at the same time.

First, look for when the market is 20 points above or below the moving average (to buy and to sell respectively).

Second, look for when the fast stochastic line crosses over the slow stochastic line below 20, which is a buy signal, or below the slow stochastic line above 80, which means to sell.

The conditions you look for means you are about to see a shrt-term downtrend, or uptrend, and again it means that the currency is pulling back or stopped.


Step 3 - Ride with the trend, but set trailing stop immediately you enter. If you buy, set a stop loss order about 10 points below the 200-period moving average on the 10-minute chart, and if you sell do the same thing above. As profits begin to come in, raise your stop loss order higher or lower to save some profits.

* Stochastics refresher
As we know, there are two lines which are the %K, and the %D. The general and main stochastics calculation gives a comparation of the most recent close to the range of the price, over a time period (the high of the range - the low of the range). A five-bar stochastic calculation gives the difference between the most recent bar's close and the lowest low of the last five days divided by the difference between the highest high and the lowest low of the last five days. After all these calculations, you then multiply the result by 100.

Below is the formula for this calculation, that is the %K.

%K = 100*{(Ct-Ln)/(Hn-Ln)} , where
Ct = the most recent bar's closing price
Ln = the lowest price of the most recent n bars
Hn = the highest price of the most recent n bars
(for a stochastic calculated on daily bars, the default is five days).
The second line, %D, is simply a three-period moving average of %K: average(%K,3)