I want to deliver ahead as a method for buying and selling commodities, FOREX, shares, or any markt pushed buying and selling car.
That is known as The SAFT Technique which stands for Strength Analysis Forex Trading. It is a technique that appears to comply with the energy of a worth motion motion and decide primarily based on techincal break factors of pattern and momentum to find out the turning factors of a worth motion. This technique is designed to be counter pattern and is in search of ranges the place the prevailing worth motion pattern is damaged and a directional change happens.
To raised perceive this technique it is very important first perceive your entire system in totality utilizing a ratio primarily based system by which one grows their account steadiness primarily based on proportion of account steadiness as danger, progress plan, win-loss ratios, and take revenue or exit technique.
Earlier than I transfer into the precise components of the tactic it’s essential to setup the technique the place the account progress schedule, order dimension, account safety and stoploss, indikators – order entry, cash managment, and exit technique are all created to maximise ones earnings and decrease ones losses.
Half 1: Account Development Schedule
The SAFT Technique is setup on a fundamental 2 wins per 1 loss ratio. Due to this fact as one locations an order one look to make twice the quantity as one dangers in every commerce. this in statistical phrases SAFT is designs on the next fundamental ratios. If we take a look at a 50% win and 50% loss ratio we are able to see that at a 2 to 1 win ratios one nonetheless makes revenue.
(100 Trades 0.10 lotsize)
2 to 1
Wins….50%….50 trades………. 100$
Losses..50%…50 trades………. 50$
Now, I’m not saying that SAFT will win solely 50% of the time. In exams and trial ”reside” accounts SAFT averages a 76% wins to 24% loss ratio. However as you’ll be able to see by the above ratio even at a 50% success charge one does earn a living.
Additionally, let me make clear even additional, I qualify a loosing commerce as a commerce the place the stoploss is hit and a profitable commerce the place the take revenue is hit. As a result of I observe a dynamic stoploss system most of my loss trades are literally in-profit trades as a result of the stoploss strikes rapidly to guard the order.(mentioned partially 3)
Now making use of this fundamental system right into a progress technique of 5% weekly one appears to be like to at all times develop ones account by 5% weekly. This slower progress schedule primarily based out over a 104 week interval (2 years) can present one with tremendious outcomes on the finish of that interval if one follows all of the elements of the SAFT technique. (hooked up spreadsheet)
Half 2: Order Entry Measurement (lotsize)
You will need to keep a correct Account Stability Ratio System (ABRS) primarily based on the scale of ones complete account steadiness. That is to make sure that ones account doesn’t get overextended and one suffers vital account losses or perhaps a margin name on account inflicting one to lose all tradable capital in account. Moreover, it’s equally essential to keep up an order sizing scheme by which of them account has massive sufficient returns to make the commerce reward well worth the danger of coming into the markt within the first place. Due to this fact, a correct Account Stability Ratio System (ABRS) was essential to be developed to fulfill these wants. To correctly do that one want to determine a ratio system primarily based on the 1000 foundation ratio rule.
ABRS principally states that for each 1000 in an account shall be equal to at least one commerce lot allowance of 0.10 lot. Due to this fact the utmost complete trades for a 1000 account could be 0.10 lot(s). Based mostly on this method you’d keep the next ratios.
ABRS Ratio System
1000 equals 0.10 lot(s)
2000 equals 0.20 lot(s)
3000 equals 0.30 lot(s)
4000 equals 0.40 lot(s)
5000 equals 0.50 lot(s)
6000 equals 0.60 lot(s)
7000 equals 0.70 lot(s)
8000 equals 0.80 lot(s)
9000 equals 0.90 lot(s)
10000 equals 1.00 lot(s)
and so on….
Half 3: Stoploss and Account Stability Safety (ABP)
Earlier than I talk about the entry of a commerce I wish to begin backwards and discuss stoplosses for a commerce and Account Stability Safety (ABP). Within the SAFT Technique the fundamental stoploss could be very easy. When inserting an order all stoplosses start on the final main swing low or swing excessive of the recient worth motion motion. Due to this fact, the precise worth or pips loss will differ primarily based on the diploma of worth motion motion. Some orders might have a Stoploss of 80 pips and different could also be as small as 15 pips however on common the stoploss within the 15 min timeframe is usually 32pips behind the order.
Nonetheless, that is solely a short lived part of the lifetime of a commerce order utilizing the SAFT technique as a result of in SAFT one must study and religiously observe a DYNAMIC STOPLOSS SYSTEM.
The secret is to defend your orders as a lot and as quickly as potential in effort to attenuate losses and maximize good points. Due to this fact, as soon as the pip rely exceeds 30pips constructive (market strikes 30pips in your favor) or 1X ones stoploss, transfer the stoploss to 3pips in entrance of the order to guard from having any loss on the commerce. This can guarantee you’ve atleast a 3 pip revenue if there’s a sudden change in market situations.
For instance, say the swing low/excessive was 15 pips which is your stoploss on an order. On this occasion the value motion strikes 16 pips and never the fastened 30 pips. As a result of the value motion has moved the stoploss dimension you’d once more transfer your stoploss to +3 pips versus ready for a 30 pips transfer as a result of your order has already reached the 50% degree of the lifetime of that order and ones objektive is at all times to guard the general account steadiness.
Sure, in whipsaw motion one might get stopped out extra typically however in these circumstances it normally means the market just isn’t prepared to maneuver within the path of your order and you’ll wait on new pricing motion that usually means a second entry order is quickly to return at a greater worth than the primary as a result of the market was merely not prepared.
Half 4: Indikators – Order Entry
SAFT is a really fundamental system setup on the premise of worth motion pattern, divergence, and momentum. SAFT makes use of just one fundamental indikator, the merchants potential to attract trendlines, and one other addon indikator as a sign to inform one it’s time to draw trendlines and start in search of worth motion directional change.
The indikator the SAFT Technique makes use of is essentially the most fundamental of indikators and is included in the usual Metatrader. The indikator is the On Stability Quantity indikator.
On Stability Quantity (OBV) measures shopping for and promoting stress as a cumulative indicator that provides quantity on up days and subtracts quantity on down days. OBV was developed by Joe Granville and launched in his 1963 e-book, Granville’s New Key to Inventory Market Earnings. It was one of many first indicators to measure constructive and unfavourable quantity stream. Chartists can search for divergences between OBV and worth to foretell worth actions or use OBV to verify worth tendencies.
The On Stability Quantity (OBV) line is just a working complete of constructive and unfavourable quantity. A interval’s quantity is constructive when the shut is above the prior shut. A interval’s quantity is unfavourable when the shut is under the prior shut.
If the closing worth is above the prior shut worth then:
Present OBV = Earlier OBV + Present Quantity
If the closing worth is under the prior shut worth then:
Present OBV = Earlier OBV – Present Quantity
If the closing costs equals the prior shut worth then:
Present OBV = Earlier OBV (no change)
This indikator determines the value motion momentum of a worth motion motion. One know can see the energy of whether or not the BULLS or the BEARS management the markt worth motion.
Fundamental Order entry criterea:
One can draw then draw the correct trendline connecting the tops in a downtrend or bottoms in an uptrend on each the value motion and OBV indikators. As soon as the trendlines in each components are damaged that’s the level an entry order is made. (see screenshot)
Moreover, the stoploss shall be assigned on the final swing low/excessive of the value motion. The goal take revenue degree is 2X the scale of the stoploss initially set. (see screenshot)
(EDIT July 2012 addon indikator)
Addon indikator; as well as divergence in worth motion is a key signal that worth motion is within the technique of directional change. Due to this fact an add on indikator I’ve discovered to be helpful is the FX5 MACD Divergence indikator. This indikator will start to attract divergence traces as criterea is met by the indikator that present potential divergence. Nonetheless, I solely use this indikator as an early warning that it’s time for one to start trying on the charts to attract ones personal trendlines and start in search of entry factors. Additionally, typically the trendline path for a commerce that I’m trying to place an order could also be reverse what the indikator reveals. In any case I’ve discovered this indikator is a wonderful early warning software to alert one on when one ought to start trying on the charts to assemble trendlines and in search of breaks as worth motion and momentum change path. (attachment in submit #1)
(EDIT 15 Aug 2012 potential addon indikator)
To addon to the discussions on indikator to assist in drawing trendlines one might use one of many following..zigzag, semafor, fractals, or excessive/low. Nonetheless, I’ve been testing and a indikator that I do like to assist with trendlines is a indikator known as DeMark Trendline Dealer. I feel it does a reasonably good job however the drawback is that it immediatly removes the previous traces when it attracts new one. I like having a number of of the previous traces in drawing trendlines so for my guide is my most well-liked. Nonetheless, this indikator does job and supplies one each a upside and draw back trendline to select from. For my OBV is at all times going to be the decider on markt direktion.
(see attachments in submit #1 for this indikator)
(EDIT 19 Aug 2012 SAFT utilizing MA traces versus drawing trendlines)
It has been mentioned and found that utilizing MA line crosses utilized to cost motion and the OBV indikator does a really shut illustration to drawing the trendlines manually after which in search of the breaks to set off an order. I’ve therfore hooked up to this submit the ”strengthanalysisforextrading template.tpl” that does an important job at acquiring the identical conclusions as utilizing guide drawn trendlines and search for crosses. HOWEVER, because of lack of liquidity through the asian classes I like to recommend NOT utilizing this throughout asian markt occasions.
Half 5: Cash Managment, and Exit Technique
Correct Cash Administration abilities are important to turning into a profitable dealer. Cash Administration is by far an important ability to grasp. Cash administration is just a administration ability incorporate that may successfully protect capital whilst you improve your earnings. In different phrases system will assist maintain you from shedding all your cash and assist you to earn a living.
Probably the most tough duties a dealer has is when to take revenue. Realizing when and the place to take ones revenue could make all of the distinction as a result of know when to take that revenue can flip a really worthwhile order in to a no revenue or lossing order. Due to this fact it is vitally essential to know WHEN TO EXIT A TRADE. Listed below are three exit methods that I exploit with SAFT to find out which degree of danger one is keen to tolerate whereas on the identical time growing ones account steadiness to fulfill the objectives of the expansion schedule.
Exit Technique 1 (most conservative)
As soon as an order has been initiated and the goal of 2X stoploss has been recognized one units a take revenue within the MetaTrader and takes the total revenue of the order because the goal degree is reached.
Exit Technique 2 (average steadiness)
As soon as an order has been initiated and the goal 2X stoploss has been identifies one watches the order and removes 1/2 of the order dimension because the goal ”take revenue” degree is reached. The remaining 2/2 of the order stays and a trailing stoploss is assigned to the order that’s the identical dimension as the unique stoploss of the order. The the order is allowed to run till the value motion reaches a degree the place one has a counter sign or the stoploss is hit.
Exit Technique 3 (most agresssive)
As soon as an order has been initiated and the goal 2X stoploss has been recognized and reached; a trailing stoploss is assigned to the order that’s the identical dimension as the unique stoploss of the order. The the order is allowed to run till the value motion reaches a degree the place one has a counter sign or the stoploss is hit.
SAFT System Utilization:
The SAFT System can be utilized in any forex pair, commodity, futures, or shares buying and selling markts. The SAFT System can be utilized in nearly any timeframe nonetheless, I’ve discovered that timeframes decrease than 15 minutes are liable to extra unpredictable strikes because the decrease timeframes are extra liable to exaggerated strikes with in a bigger timeframe and the bigger timeframes are inclined to have extra steady an predictable worth motion actions.
It’s my perception that if one makes use of the SAFT System with consistancy and self-discipline one can simply start to develop ones account in a consistant method. The extent of success will differ primarily based on ones danger tolerence and ability degree however one ought to be capable to revenue general if all of the components of the SAFT System are utilized equally.