Elmar’s Technical Approach towards the Forex Market 9





Hello dear friends! Hope everyone is feeling good this week and ready to trade.

Early in the week instead of a trade plan, I’d like to share with you my method of trading that I´m using for around 4 months now with satisfactory results. Firstly, Sundays and Mondays are made to observe the market only. I barely made money on these days. Of course I don’t want you to draw these lines in the chart and start to trade real money on it but rather use demo accounts for some months. After some practice and feeling comfortable with the technique, should you decide start trading live, do so with small amounts of your portfolio and then increase it slowly until you reach a maximum 3 % of your total capital on a single trade. Never ever risk more than this. This technique of trade is a mix of a course that I did where I learned Daily Probability Trade Opportunity and some observation of my own that I’m using on my real trading account with relative success.

Ok, let’s start drawing the lines that I use in the chart. I have a template to my charts that I use only on Weekly and Daily timeframe nothing more than:

Ema Envelope 21 Periods – ( Behaves similar to Ema but with an upper and a lower band)
Ema 21 Periods
Stochastic 9 6 6 – (I don’t use it in the chart always. I use it eventually just to track down a divergence or convergence.)

Ema Envelope 21 Periods: The theory behind envelopes is on its core similar to Bollinger Bands with a peculiar and slight difference! Bollinger Bands contracts and expands depending on the price action behavior. Envelopes don’t. If you wish and you know how to read the data provided by BB you can use it. I do prefer Envelope for forex. Price tends to react and move inside a moving average channel that you can see on upper and lower envelope bands. The idea here is to look for selling opportunities on Envelope upper band and buying opportunities on the lower band. Buying in the upper band or selling in the lower band is like paying an expensive price for an instrument. While you can do it, I barely do this. I only do this in case of a big volume and volatility towards the main trend. Again, I tell you that it is better wait to buy cheaper prices on the lower band or sell at the top in the upper band.

Ema 21 Periods: Configure the Ema 21 Periods the same way you do in Ema Envelopes until you see it in the middle of the Ema Envelopes.

Configuration: I use for my trades a deviation that clearly shows me a channel. For each instrument, you’ll have to adjust the deviation accordingly. In a Bullish main trend, I use Ema Envelopes 21 Periods set to High Price and so adjust the deviation to see the channel. On a Bearish main trend, I use Ema Envelope 21 Periods set to Lower Price and adjust the deviation accordingly. On a sideway trend, set Ema Envelope 21 Periods to Median Price and adjust the channel accordingly. This is not a rule but often shows the channel if configured this way. So be flexible to eventual changes if needed. If you do not see a clear channel, don’t mess with it. Search for another and clear instrument to trade.

If you clearly see a Bullish main trend on weekly and daily timeframe, just look to buy Envelope lower band for better risk/reward ratio. If you clearly see a Bearish main trend on weekly and daily timeframe just look to sell Envelope upper band for better risk/reward ratio. It means a wait of days until a good opportunity arises. So, have patience because it is worthwhile.

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Take profit Method 1: There are two methods I use to take profits on this technique. The example on “Figure AA” shows the first point to take profit. On this example we have a sell opportunity on AUDNZD August 25, 2013. The pattern of a doji appears right bounded to upper Ema21Envelope. In the opening of the next day we sold AUDNZD at 1.1576 with stop loss above previous day doji candlestick pattern with 60 pips at 1.1636. Three days ahead, we can take our profit when the price touches the Ema 21 in the middle of the Envelopes for a reward of 2x our initial risk. This isn’t a big trade but is a good trade. I use Daily Chart to trade this technique but I often give a good look on weekly chart. Opportunities happen on weekly chart too but not with such a frequency.
A couple days ahead you can see 04 September 2013, another good opportunity similar to that appears and again you could take profit on the Ema 21 periods.

20131022-214434.jpg

Take profit Method 2: In a clear trend, for this example we use CADCHF. This instrument is inside a bearish equidistant channel and we can use it as shown in “Figure AB”. In this case, a short opportunity appeared, we sold it and when the price reaches 21 Ema we can:
a) Ignore it! Let it run for a big profit. Just trail your stop loss each time you reach 1x your initial risk until you reach the lower Envelope band area or your trail stop is hit and then take profit.
b) Take a portion of your trade in profit than let the rest run until it reaches the lower Envelope band area. Then take the remaining portion of your trade on profit.

Bullish and Bearish trades can be handled like the example on “Figure AB”.

Note: You can use this technique on any financial instrument you desire as long as you never trade more than 3% of your capital on a single trade. Never do this on smaller timeframes other than daily and weekly. Remember that this is a medium and long term trade technique so give the proper space on your stop losses for the market to breath and not to kick you too soon of a good trade before the big deal happen.

Train this on a demo account until you feel comfortable with it. Take notes! Every forex strategy have strength and also their weakness as well. Use it extensively in a demo account until you are very aware of its straights and weakness characteristics. This way you can master any technique adapting it to your own profile of trading.

I hope you enjoy this article as I did while writing it. I did it with a lot of passion and love!
Anything folks just ask and if possible TheGeekKnows team is here to help!

Nice week friends!

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  • Thanks Elmar for your kind sharing. I am glad to have you on the team 🙂

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    • Coala1

      I did. It helps a lot since I don’t need to come every now and then. Thanks.

      • Elmar Silveira Votri

        Thank you too Coala1. 🙂

  • Sandy

    Elmar oh Elmar. I am officially a fan of yours 🙂

    • Elmar Silveira Votri

      Glad you like it Sandy! is good see friends like you often here.
      Thank you too.

  • pete w

    Hi Elma great article,on your envelope could you tell me what deviation you set it at ? default is .10 ,which seems too narrow to me compared with yours which is much better,thanks a lot mate.

    • Elmar Silveira Votri

      Hello pete!
      For each instrument you have to adjust the deviation accordingly. For the instrument in the example above figure AB, CADCHF I used 1.80 %like in the pic attached. Each instrument have his different scale. For other instruments you have to adjust it until you clearly sees the moving average channel. Each instrument have his different scale. Remember, the idea is sell in the upper band and buy in the lower band. In a bearish trend look to sell at upper band. In a Bullish trend look to buy lower band. Anything else, just ask friend! 🙂

      • pete Willis

        thanks for your explanation and time Elmar