Before the Forex markets opened up today, I did a quick (and incomplete) run-through of more indicators than just the MACD. Included was also the ADX (Average Directional Index) and the ATR (Average True Range) and they were sort of covered a little quickly and with some wave stuff in there, too. Here’s the video (it’s about 9 minutes 29 seconds)…

So some quick stuff that was gone over in the video, however incomplete it is in the vid…

I’m changing gears here on this training. The Forex Challenge on Facebook, which ends October 31, 2008 for this match, and me being challenged, and starting off over $85K behind the leader, calls for a time efficiency step. Hence, this change.

What I’ll be doing is going over charts at least 3X per week for you. Maybe not in the same currency pair, but with the same indicators: MACD, ADX and ATR.

The MACD is there for spotting divergence patterns. The ADX is another strength/weakness tool, though not used like the MACD because it’s not an oscillating indicator. The ATR, which I’ll have to cover separately down the line, is not used at all in reading the charts, but for trade sizing.

The odd thing is here I won’t be using much trade sizing until I overtake the leader, assuming that I can.

ADX Basics

The Average Directional Index, ADX, shows strength in a move or trend, or weakness in the move or trend. When the market makes a move and the ADX decreases, that’s a weak move in that market on that chart.

When the market makes a move and ADX increases, that’s a strong move in that market on that chart. It’s a sign of strength on that chart only, and is basically useless unless accompanied by other signals.

It gets better later down the line, but really start understanding that little bit now. Ask your questions and I’ll answer those questions, or respond to comments, as I can.

ATR Basics

The Average True Range, or ATR, is only used by me to determine trade size. In other words, I divide my account, under actual trading circumstances with real money, into “units”. The “unit” represents, say, 1% of my trading account.

In the EUR/USD or the GBP/USD one pip is $10, so that makes it pretty easy. The ATR acts as a “volatility normalization” tool. The more volatile a market is, or the bigger the chart is, the higher the ATR will be. The smaller the volatility in the market, or the smaller the chart, the lower will be the ATR, developed by Wells Wilder, by the way.

So I basically divide my max risk for the trade by 10 and that gives me how many pips I can risk. I MUST risk that number of pips or less to be able to enter. There’s a lot more to it, but that’s the basics.

AND of course, the MACD (and histogram) give me divergence patterns that I want to see so I know the market is talking to me.

In Summary…

So, quickly here, we have the GBP/USD appearing before the markets opened for the night (yes, this is Sunday) as if there was still strength in upward moves. While there was one divergence pattern saying the market could come down, that one pattern was poisoned by a very strong ADX (the double-high, to be covered another time) in the wrong place.

A little bit was covered on the waves, but those will really have to be covered over the course of a week or two down the road. The ATR did not show that the market wanted to relax much because the volatility was decreasing, rather than increasing on the chart discussed. And I’ve got to get this posted…

If you have any questions or comments or criticisms, I’m open. I’ll answer, respond, or belittle you as required. LOL

And don’t try using this stuff in your own forex trading until you have successfully managed a paper trading account with it over sufficient time to know if you CAN use it profitably. Got it? If you try, and you have not successfully managed your own paper trading account with the info on this site, guess what? Yep, I guarantee that you will lose money. (Okay, I could make that guarantee and be right for like 97% of Forex traders, right?)

Anyway, have a phenomenally fantastic week in trading. More tomorrow! See you then.

I’ve been watching the EUR/USD and thought there might be a real time example of a bigger chart strength plus the (multiple) smaller chart weakness. Luckily I was right. The video below shows the possible trade as it’s setting up. It’s not a trade - yet, but it’s here now.

If you have any questions, please ask and I’ll answer as quickly as I can. Any comments - great! Tell me what you want to learn about here, and if I can immediately fit it in, I will. If not, I’ll let you know when it will be scheduled.

The point here is that I want to teach you a basic model of trading, something that is simple, so you can practice managing the system quickly. Paper trading the forex markets is good if you treat the “paper trading” as THE time to learn how to manage the trading system that you’re using. More on that another day.

So the basic concept here is that when you have the bigger chart strength divergence (to go down in the video example) combined with multiple smaller chart weakness (the weakness is in moving higher, so the market looks like it wants to move down, lower) is a great place to use the previous peak take out basic trading model.

The two combine beautifully. The purpose of indicators is to increase the probabilities of your basic trading model in your favor. The divergences do that very well in forex markets - especially combined with the previous peak takeout model.

Any questions? Ask. I’ll answer. Stay great and have a truly phenomenal trading day!

In trading the Forex markets, things can get crazy, even chaotic. A basic trading model helps you be able to think during times of chaos. Now I’m about to give you the basic model for the complete and profitable trading system you’re starting to learn here. If you’re new, I highly suggest starting at the first post and moving forward. That way you can get it step by step and understand everything as it is being presented.

The purpose of having a basic model as the foundation for a trading system is to give you a piece of information that never changes. The Forex markets change crazy fast sometimes.

The basic trading model is NOT how to trade - it is merely a herculean foundation that can be built upon. Everything else ties directly to this model, and how to enhance it so your trading is more profitable.

There are several things that the basic model does:

1. Says when to enter.
2. Says when to exit.
3. Says when to move your stops.
4. Says when to take profits.
5. Says when to take a loss. (Even more.)

The previous peak takeout basic model says, “when a previous peak in the market’s price action is exceeded, take some action.”

You’ll really enjoy putting together the basic model with the divergences you learned earlier because they really go hand in hand nicely. Know the basic model well because it can help save you a lot of money when things start going crazy and you’re in a position.

Remember that this is just a very small part of a MUCH larger trading system. Chances are great that you have never actually seen a complete trading system to trade Forex, futures, stocks, anything.

If you want to be a truly successful trader over the long haul, you should manage your complete trading system. Not “be a trader”. Big difference between “being a trader” and “being a trading system manager”. Traders lose money. Trading system managers profit consistently year after year.

Again, I welcome all comments and questions that you have about anything I’ve covered here. While I try to make the information complete, I forget that you don’t already know this, and I don’t know what you don’t know. So please leave me questions.

Oh, and if you want to be notified of updates to this blog (pretty much daily), sign up to get notified by email when the updates are posted. Plus, I will be making a really cool membership area for everyone who signs up to be notified - as long as you’re still subscribing, that is. In the membership area we’ll take everything to a whole new level, introduce a lot more profit-enhancing info, form trading groups and on and on.

And you can tell me what you want. Right down there below, just leave me a comment. I’ll read it as soon as I recieve it and take action to better serve you. Have a truly phenomenal day (night, whatever), and the best of trading to you - or the best of learning.

Welcome to Domination Trading! This site will not only teach you about being a great currency trader, but if you’re bright enough, pretty much how to dominate the Forex market of your choice.

What is planned for this site is nothing short of ground-breaking, and could change the face of Forex trading for a long time to come. The principles that will be taught by me (and hopefully others will contribute, too) are the foundation of all successful trading, and will be built upon into anything you want for yourself.

With all of the so-called “trading systems” out there, and I’ve personally bought, studied and tested over 250 of them in the past 14 years, only two were actually complete trading systems. Two out of over 250 - which is less than 1%. Well, that isn’t right.

The basic philosophy, the foundational philosophy, to the forex trading systems coming, all start with basic risk, money and profit management. That IS the foundation of all great trading. And the discipline to take the required actions when told to by the system that you’re using.

That boils down to trading system management. A lot more of that is forthcoming. I beg you to ask me questions so I can make you videos, write more content that you want to read, and direct you to becoming the best trader you can possibly become. There’s a lot involved. There’s a lot to learn. There’s a lot to know about currency trading in the Forex markets.

Let’s get a good start tomorrow. So register, comment, and tell people about this site… More is on the way.