TRADE EXAMPLE
The first example took place in the Euro currency-dollar (EUR/USD) currency pair during the fourth week of June 2002.
First, compare the hourly and 10 minute EUR/USD charts. Look for a time when price is above the 200-period moving averages on both charts. On the hourly chart (Figure 1), the fact that price is almost exclusively
above the 200-hour moving average indicates a persistent uptrend. On the 10-minute chart (Figure 2), price moves (and remains above) the moving
average in the last third of the chart. The next step is to pinpoint the entry zone — when the market is within 20 points of the moving average on the 10-minute chart and the stochastic lines cross.
The range between 1 p.m. and midnight on June 27 meets these requirements. The entry point occurs when the fast stochastic crosses above the slow stochastic when the indicator is below 20. A long position is entered at .9883 around 8 p.m., with an accompanying stop-loss at .9858 (10 points below the 200-bar moving average value of .9868). The stop is then trailed upward as the market makes new peaks. The EUR/USD tops out at .9992, so the stop scaled up to .9967, where the position was closed for an 84-point ($840) gain.
The trade was protected with a stop-loss order at 119.86. In this case, the stop remained intact until the following day, when USD/JPY began to decline. After trailing the stop down as the market continued to decline, profits were taken at 118.58 (25 points off the 118.33 low), for a gain of 99 points.SEARCH AND EXPLOIT
This short-term trading method works well in the Forex market, but it is also applicable to others. Each step of the system helps identify areas where effective trades can be made. If at any point one of the criteria is not met, you’ll instantly know not to make a trade. This model also gives youthe freedom to experiment with different chart intervals. When you’re equipped with a system that can help you catch the trend early, you can wait for the rest of the market to follow.
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