406# ATM Trading System

Entry Pattern pullback

 

Submit by Buddy 13/12/2013

 

ATM Trading System,clarity, I personally use blue (BUY) for Bulls and red (SELL) for Bears.

Time Frame 5 minutes

currency pairs: major.

We all know that a blue candle tells us that the Bulls have won those 5 minutes,

and respectively a red candle tells us that the Bears have won.

So now looking back at the above chart, by using the 21 Simple Moving Average (SMA) we can establish that the directional momentum has turned in favor of the Bulls = going UP = inclining blue portion of the 21 SMA.

 

With this in sight, we now just have to wait for

the Bears to try it on (i.e. the closing of a red candle/s) and

then get overpowered by the Bulls

(i.e. the current active candle surpassing the previous closed red candle’s top inclusive of its wick)

to qualify for a BUY Entry; this is what I will now refer to as blue eats red candle

(and vice versa for a SELL set‐up).

Chart above we have our inclining 21 SMA and

then near or at the 21 SMA we get a red candle

which represents the Bears driving price down [x] amount of pips in a 5 minute period.

This is then followed by a candle that eats up ALL of the previous red candle’s achievements.

(i.e. that price has moved above the red candle’s top body & wick inclusive by at least 2 pips).

At this point in time, the Bulls are showing more power.

The following 2 Examples identify 2 common types of Entry Patterns using

the Basic Entry principle that has just been discussed above.

** Keep in mind though that it is often more reliable to base your Entries

on everything else discussed in this document Sections 6 through to 11.

 

Entry Pattern #1:

A 3 to 5 bar/candle Pullback or

a 3 to 5 bar/candle Sideways Movement

are the best setups for Entry

with a candle eats candle arrangement and

the closer to the 21 SMA that this happens the better.

ATM Trading System
ATM Trading System

 

Entry Pattern #2:

A Lengthier Sideways Movement creating:

a Small Range/Channel or

a Triangle/Flag Formation

are also good setups for Entry

with a candle eats candle arrangement and

the closer to the 21 SMA that this happens the better.

ATM Trading System
ATM Trading System

 

It is very IMPORTANT to note that

you DO NOT have to wait for the current active candle to close in order to Enter the trade!!

When trading LIVE:

For a BUY set‐up,

Enter as soon as the blue candle has eaten up ALL of the red candle plus 2 or more pips.

 For a SELL set‐up,

Enter as soon as the red candle has eaten up ALL of the blue candle plus 2 or more pips.

Also take note, for instance, in the case of a BUY set‐up,

that although the current active candle is blue upon entering the trade

it may close red in some situations (something to keep in mind while back testing);

this however DOES NOT matter. It is not optimum but it does not rule out your trade either.

(The reverse of course applies to a SELL set‐up.)

Now going back to the 21 SMA, you have noticed that it is colored

hence visually making it easier to see if it is inclining, declining or flat.

It’s as simple as that;

 

when the SMA is inclining it turns blue,

when declining it turns red and

when flat black it is black.

 Therefore, to further increase your chances of success,

I advise that you ONLY take the first 2 trades after the SMA line has changed color (this also correlates with

the CCI34 Indicator at the bottom changing to the same color). This does not mean that if there is a 3rd, 4th and

5th Entry signal that it will not work‐out, many times they do, it is just what I have decided is best for me and whoever else wants to follow.

 We then further increase the odds in our favor by

ONLY taking the first 2 trades after 08 GMT and then again after 14 GMT. Once again you can take trades all

day but over trading is another mistake I made early on, there is SIMPLY NO POINT.

You can make:

25‐50pips after 08 GMT and

25‐50pips after 14 GMT

with ease and I am being very conservative!!

And, remember that Patience and Discipline is required as with any strategy,

so wait as long as you have to and only take the prime setups at the correct times!!

My theory behind trading is that if we are aware of most key aspects that affect probability,

we can keep the scales tipped as best we can in our favor as much as possible.

Sometimes this will keep you waiting a bit longer for that nice setup and sometimes not, the fact is;

ONLY 1 or 2 TRADES are needed per trading session in order to achieve a 50 pip Target.

If you work like me, twice per day, then that gets you a nice 100 pips per day which is much more than most professionals have as their day target. But I always say that anything over 30 pips is a good day. So if you have already secured 30 pips and no trades are showing up the way you want them to, you have nothing to worry about; even 30 pips per day adds up nicely in the long term especially when you start increasing your lot size per trade.

 

Stop Loss and Take Profit

I will now go over the Stop Loss (SL) and Take Profit (TP). For purposes of clarity,

The Simple SL rule, as shown in the close‐up image below,

places the SL 2 pips below the lowest of the wicks of

either the previous red candle (that was just eaten) or

the blue candle you just entered on (regardless of what color it ended up closing as – useful to remember when back testing).

Generally though,

I use and highly recommend a Script which I have hotkeys for to Enter trades

with a 25 pip SL and a 50 pip TP already in place.

Once in the position,

I alter my SL to the correct place (this is covered shortly) and

for the most part remove my TP or

place it somewhere else that I have judged to be a better target for that particular trade.

I use the Script because I have had to deal with server errors, internet failures and power outages

that have screwed me in the past,

so we either live and learn or keep making the same mistakes!!

I have found that:

50 pips tends to be a good average TP and

25 pips tends to be a good average SL

which means that if you do have a connection failure you are covered either way.

As for placing the SL in the correct place, the guidelines are as follows:

The Simple SL rule as described previously is the simplest and most straight forward approach to follow.

 However, if a recent Swing High/Low is not much further from the Simple SL

it is recommended to put your SL a few pips (at your discretion) past the peak/valley of this swing.

ATM Trading System (Template and Indicators
ATM Trading System.rar
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