144# Profitable Trend Forex Trading System
Retracement System based on the MACD indicator
PTFS Advanced version
By Ricky 20/07/2013
The nature of forex is that it has a lot of noise especially in lower
timeframes. As such, it’s difficult to trade off any timeframes less than
15 minutes. I recommend using the Profitable Trend Forex System in
1-hour, 4-hour, and Daily timeframes.
If you use this system to trade indices such as S&P, you may use
shorter timeframes: 5-minute, 15-minute.
3. Currency pairs
Currency pairs that have a large daily range are more suited for this
system: GBP/USD, USD/CHF, EUR/JPY, GBP/JPY.
In the picture belowProfitable Forex Trading System in action.
When a trend is established (based on our criteria), we look for the
first small retracement (L1 signal) and the first larger retracement (L2
signal). We always take the first L1 signal and the first L2 signal.
However, when price retraces the second time and gives us the second
L1 or L2 signal, we must be cautious. We need to determine if the
trend still has enough momentum to resume its original direction.
In our system we use MACD (3,10,16) as momentum indicator. We
call it short MACD indicator.
When an uptrend makes new highs in price and in momentum
indicator (new high in short MACD indicator), it still has momentum to go up.
When a downtrend makes new lows in price and in momentum
indicator (new low in short MACD indicator), it still has momentum to go down.
Therefore, the second L1 signal is valid as long as the previous L1
signal was successful and resulted in the trend making new high/low in
both price and momentum. Likewise, the second L2 signal is valid as
long as the previous L2 signal was successful and resulted in the trend
making new high/low in both price and momentum.
This method of momentum determination is important. It helps us
filter a lot of false signal.
The following chart illustrates this rule. We observe that the downtrend
is making lower low in both price and momentum after a successful L2
signal. Thus the second L2 signal is valid.
In attach also basic version.
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