Triad Trading. Training Manual. System 1: Trend Finder System 2: Squish-Squash System 3: Target Breakout FORMULA. The Forex Trading Formula

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1 Triad Trading FORMULA System 1: Trend Finder System 2: Squish-Squash System 3: Target Breakout Training Manual This manual is property of: Your name here Copyright ForexImpact.com 1

2 Legal notice NO RIGHT TO REDISTRIBUTE MATERIALS. You agree that you will not re-distribute, copy, amend, or commercially exploit any materials found in this document or related Web Sites without Sharptrade Partners, LLC. and/or ForexImpact.com express written permission, which permission may be withheld in Sharptrade Partners, LLC and/or ForexImpact.com sole discretion. NO INVESTMENT ADVICE. The information contained in this product has no regard to the specific investment objective, financial situation or particular needs of any specific recipient. Sharptrade Partners, LLC and/ or ForexImpact.com do not endorse or recommend any particular securities, currencies, or other financial products. The content published in this document is solely for informational purposes and is not to be construed as solicitation or any offer to buy or sell any spot currency transactions, financial instruments or other securities. Sharptrade Partners, LLC and/or ForexImpact.com do not represent or guarantee that any content in this document is accurate, nor that such content is a complete statement or summary of the marketplace. Nothing contained in this document is intended to constitute investment, legal, tax, accounting or other professional advice and you should not rely on the reports, data or other information provided on or accessible through the use of this product for making financial decisions. You should consult with an appropriate professional for specific advice tailored to your situation and/or to verify the accuracy of the information provided herein prior to making any investment decisions. INDEMNITY. You agree to indemnify and hold Sharptrade Partners, LLC and/or ForexImpact.com, its parent, subsidiaries, affiliates, directors, officers and employees, harmless from any claim, demand, or damage, including reasonable attorneys fees, asserted by any third party or arising out of your use of, or conduct on, this product and/or website. COPYRIGHT. The Product, Web Site, and Tools are protected by copyright law and international treaty provisions and may not be copied or imitated in whole or in part. No logo, trademark, graphic or image from the Web Site may be copied or retransmitted without the express written permission of Sharptrade Partners, LLC. and ForexImpact.com. All associated logos are trademarks or registered trademarks of Sharptrade Partners, LLC. and ForexImpact.com and may not be copied or transmitted without the express written permission of Sharptrade Partners, LLC. and ForexImpact.com. Copyright ForexImpact.com 2

3 Table of contents I. welcome to the triad trading formula p. 5 trend finder p. 8 squish-squash p. 10 target breakout p. 12 II. system #1: trend finder p. 14 trend finder explained p. 15 indicators p. 17 trading with all trend finder indicators p. 25 trend finder trade signal p. 26 the setup p. 27 the entry p. 29 the stop loss p. 31 the exit p. 33 trend finder trading rules p. 35 trading trend finder: long example p. 36 trading trend finder: short example p. 40 Final thouhts on trend finder p. 44 III. system #2: squish-squash p. 45 squish-squash explained p. 46 indicators p. 48 the setup p. 55 the entry p. 56 the stop loss p. 58 the exit p. 59 squish-squash trading rules p. 60 trading squish-squash: long example p. 61 trading squish-squash: short example p. 65 best time to trade p. 69 using squish-squash to trade news announcements p. 70 Final thouhts on squish-squash p. 72 Copyright ForexImpact.com 3

4 IV: system #3: target breakout p. 73 target breakout explained p. 74 indicators p. 82 the setup p. 83 the entry p. 85 the stop loss p. 87 the exit p. 89 target breakout trading rules: Long trades p. 91 target breakout trading rules: short trades p. 92 trading target breakout: long example p. 93 trading target breakout: short example p. 97 Final thouhts on target breakout p. 101 v. money management and parting words p. 102 VI: bonus trading systems p. 104 friday special p. 105 gpb/usd trend system p. 126 the carry trade p. 149 Copyright ForexImpact.com 4

5 I The Forex Trading Formula Triad Trading Formula - Training Introduction Manual Introduction Welcome to the triad trading formula Let me be the first to congratulate you on taking your first steps into the profitable world of Triad Trading. Throughout this course you will learn three separate and independently profitable trading systems. You will learn one trend system, one counter-trend system, and one breakout system. You will learn how to trade each system, as well as the theory behind them and why they work. But before we get into all of that, let me explain how all this began Have you ever had an event that was a life-changer? Well, one such event happened to me attending an advanced trading workshop in Houston, TX in 2006 While at the workshop, I was struck by how almost everyone in attendance was approaching their trading business (and yes, it is a business) in completely the wrong way. I ve attended trading seminars like these in the past, but none this advanced, and to my shock even the more advanced traders had MASSIVE HOLES in their trading strategies! It was at that moment when I realized I had something something that 99.9% of the active traders out there didn t have: A strategic formula for consistently pulling massive profits out of almost any market, no matter how that market is moving (up, down or sideways). I knew then that I could no longer sit on the sidelines and allow so many traders to lose so much money due to some basic misunderstandings about the trading business. The result of that life-changing event is the Triad Trading Formula! The Triad Trading Formula is a theory of trading that recognizes that the markets really only move in three ways: Trends Counter-Trends Breakouts So, to make the largest amount of profits you will need to trade a trend system, a countertrend system, and a breakout system. This will allow you to profit no matter what the Copyright ForexImpact.com 5

6 market is doing. For example... What do you see on the chart below? How many possible trades do you see? How would you trade it and what type of system would you use? I ll show you what I see There is one area of the chart where the market was trending down somewhat sharply... This is followed by a period where the market was moving sideways (i.e. in a countertrend direction)... Copyright ForexImpact.com 6

7 Then, there was a breakout from the counter-trend market that seems to be pushing higher... In my experience, most traders would have only traded the trend and missed out on five other trades. In fact, I counted a total of seven trades in all. How many trades did you see? We ll talk more about the theory of Triad Trading before this course ends, but for now let s take a break from that and look at the three systems that make up the Triad Trading Formula. Copyright ForexImpact.com 7

8 System #1: Trend Finder As you may have guessed by the name, Trend Finder is our trend trading system in the Triad Formula. Below is an example of one of the trends that was identified by Trend Finder. If you ll look closely at the chart, you ll see that this particular move (which you can tell was identified by Trend Finder because of the characteristic green arrows) accounted for almost 700 pips of profit! Not too shabby for one move... But this is where the hype stops. The truth is that every system, no matter how good, will be wrong at some point. The beautiful thing about trading the Triad Trading Formula, however, is that when you have a bad trade, most likely there will be in another trade that will hedge your position. For example, when you enter a trend trade that turns out to be wrong, that s usually because the system triggered on a false breakout that was really just a ranging, choppy market. Copyright ForexImpact.com 8

9 Fortunately, your counter-trend system will also detect this choppy market, and any profitable trades it generates should more than offset the one bad trade your trend system got you into. That s the beauty of Triad Trading! Example of a Trend Trade Gone Bad As you can see on the chart below, there is a trend trade that was triggered by Trend Finder that would have resulted in a loss of about 100 pips. However, since the market started moving in a counter-trend direction, this triggered two profitable counter-trend trades that combined totaled a profit of 445 pips. So, even with the 100 pip loss, you re still 345 pips up! Is the power of Triad Trading starting to sink in yet? This brings us to the 2 nd trading system in the Triad Trading Formula... Squish-Squash. Copyright ForexImpact.com 9

10 System #2: Squish Squash The counter-trend system that is used in the Triad Trading Formula is called the Squish Squash Trading Method. As you ve already seen, this system is designed to trade in counter-trending or ranging markets. It does this by identifying when the market is moving sideways and then finds the extremes of the range which, historically, is the best time to buy or sell. In the example below, there are five trades. Four of the trades are profitable, making a total of 708 pips. As with the Trend Finder system, with Squish-Squash you buy at the first green arrow, sell at the first red arrow and so forth. However, as we have seen previously not every trade is a winning trade. The last countertrend trade in this example was a 103 pip loss which occured when the market broke out to the downside. Copyright ForexImpact.com 10

11 If you were only trading a counter-trend system, then you would have lost 103 pips on the last counter-trend trade when the breakout occurred. You d still be well up, but why give back money when you don t have to? And when you re Triad Trading, you don t have to... By trading with the Triad Trading Formula, when the market broke out you would have made 58 pips from our breakout system, which is the third and final system in the Triad Formula. Copyright ForexImpact.com 11

12 System #3: Target Breakout The Target Breakout System uses a proprietary price-action-based algorithm to determine areas of support, resistance and consolidation in the market. These market conditions are, historically, some of the best predictors of an impending breakout, making Target an incredibly accurate and profitable system. Below is an example of when the market is ranging and then breaks out to the down side. (Notice the long and short breakout lines created by the Target Breakout indicator as well as the red down arrow which signals it s time to enter a trade.) This particular trade was taken on the hour time frame and resulted in a profit of 18 pips... The Cycle Continues Typically breakouts like the one above turn into new trends (which would then signal a Copyright ForexImpact.com 12

13 Trend Finder trade) and the cycle of profiting from different market movements would continue over and over again. And at each point in the cycle, you ll be able to pull profits out of the market while all the other traders are sitting on the sidelines half the time. Alright, now that you have a good grasp on the theory of Triad Trading and how it functions in real-world trading, let s get into the nitty-gritty and start learning the systems themselves... Copyright ForexImpact.com 13

14 Triad Trading FORMULA System 1: Trend Finder System 2: Squish-Squash System 3: Target Breakout Trend Finder Trading System

15 I The Forex Trading Formula Triad Trading Formula - Training Introduction Manual Trend Finder Trend finder explained Good trend systems are without a doubt the most difficult type of trading system to develop. The typical trend system dives into a lot of trades in an effort to catch as many new trends as early as possible. The downside to this strategy, however, is that most of these trades are not profitable. Fortunately, the gains in a good trend system far outweigh the losses, so overall it s possible to be profitable even with an accuracy that s well below 50%. Still, I knew I could do better... There are two issues that make developing trend system difficult: Trends don t occur all that often - only about 35% of the time. It s difficult to filter out trades when a market is ranging or moving sideways, so as I ve already discussed you have to make the choice to jump into as many potential trends as possible, or sit on the sidelines and risk missing the trend completely. It s this 2nd challenge that ultimately determines the success or failure of a trend system, and it s also the area that I spent the most time testing and researching when developing Trend Finder. As with most trend systems, the development on Trend Finder started with moving averages. I chose to use moving averages because historically they have proven to be effective at locating potential new trends. The only issue with using moving averages alone, however, is that they get you into a lot of trades...many unprofitable. Still, it s a good base to start from. Once you have a base indicator that will find the trends, the next step is to start filtering out the negative trades. And trust me, this sounds much easier than it really is... The key is you must be able to strike a balance between filtering the bad trades and filtering too many good trades. Some filters, for example, did a great job of cutting out all Copyright ForexImpact.com 15

16 but a few unprofitable trades. Unfortunately, they also cut out a fair bit of profitable trades so that the system became more or less worthless. As with most things, an ideal balance must be reached. During the research I conducted to build Trend Finder, I tested over 120 different filter combinations. Ultimately, I settled on a combination of 5 indicators that, based on extensive back-testing and forward-testing, performed the best. But this just gets us the ENTRY to our trade... I haven t even begun discussing EXITS and the research that was conducted to locate the ideal exit-point for this system. But I ll save that discussion for a later point in this course. For now, let s look at the indicators that make up the Trend Finder system... Copyright ForexImpact.com 16

17 Indicators Trend Finder Indicator (FXI_Trend Finder) The original Trend Finder indicator was built as a histogram that represented two moving average crosses, the 2-period and the 10-period moving averages. As you can see from the chart below, the trend finder indictor does find the trend. (The green bars on the histogram indicate a buy and the red bars indicate a sell.) With the correct trading rules and money management, this indicator can be profitable all by itself. I wanted to improve the accuracy of the system, however, so that s when I began adding other filters to the base indictor. Copyright ForexImpact.com 17

18 Trend Finder Linea Planus (FXI_Trend Finder LP) The following chart is the basic trend finder histogram with the Linea Planus indicator (LPI) added to it. LPI locates markets that are moving sideways by taking the median price of the last 4 bars and averaging them. If this median price is within a certain range (10 pips for this particular system), you know the markets are in fact moving sideways and therefore this is NOT a good time to put on a trade. If you refer to the chart below you will notice that there are times when the bars on the histogram turn into dots. This is when the LPI has flat lined and the market is moving sideways. Copyright ForexImpact.com 18

19 Pivot Indicator (FXI_Pivot) The pivot indicator locates pivot points: pivot highs and pivot lows. Pivot highs are bars that have a higher high than the bar before it and after it. Pivot lows are bars that have a lower low than the bar before it and after it. The pivot points are adjusted up and down if the market is moving in only one direction. The histogram indicates which pivot point you are closest to: green for the pivot high and red for the pivot low. The idea is that if you are closer to the pivot high then you should have a better chance of making money by going long. If you are closer to the pivot low then you are more likely to make money by selling short. In this way we are able to determine the direction of our trend and stay out of ranging markets. Copyright ForexImpact.com 19

20 Strength Oscillator (FXI_SOI) The Strength Oscillator indicator (SOI) distinguishes between trending and sideways markets. In a trending market, one would expect the price on Wednesday to be substantially higher (or lower) than the closing price on Monday. (Otherwise the market is moving sideways and not trending.) SOI helps determine these trending points by taking the median average price for the past two days and comparing it to the price today. This works by setting the median average price for the past two days to zero, and then watching for deviations from this value. A deviation of 1 (regardless of direction) is an indication of a breakout and beginning of a new trend. Copyright ForexImpact.com 20

21 Linea Planus (FXI_LP) We ve already talked about LPI in this section, but for this 2nd version we re using it in a slightly different way. The first version of LPI that you learned about (FXI_Trend Finder LP) was used to determine whether we re in a sideways market or not. With this version of LPI, however, we re simply looking at the difference between the previous bar s LP value and the current bar s LP value to determine directionality. If the current LP value is higher than the previous bar then the trend is up and the histogram will show a green bar. Conversely if the previous LP value is higher, the trend is down and the histogram will show a red bar instead. The length of the bar indicates the size of the LP value difference, but this is largely ignored because we re only trying to confirm if the market trend is moving up or moving down. Copyright ForexImpact.com 21

22 Price Action Channel (FXI_PAC) The famous Turtle Traders used the price action channel indicator (PAC) to determine breakouts in the commodities markets. Since breakouts often signal the start of a new trend, I decided to incorporate this proven concept into Trend Finder. Price action channels are determined by taking the highest high and the highest low of the past X bars. For the Turtle Traders they looked at the past 20 and 55 bars. For this system, we re just looking at the past 5 bars. The previous closing price has to be above the PAC line for a buy entry and below the PAC line for a sell short entry. Copyright ForexImpact.com 22

23 Super Stop Loss (FXI_SSL) The super stop loss (SSL) is represented by the purple dashed line below. The dashed line is a combination of two moving averages using the same length (in our case 5 periods). SSL is one of the stop losses that we use to lock in profits and get out of the market. The other stop losses and how they are used will be discussed later in this course. NOTE: The SSL line actually switches from displaying the high moving average line to the low moving average line when the price closes above the high moving average. Conversely, when the price closes below the low moving average line, the indicator then displays the high moving average line on the chart. This is why you ll occasionally see sharp jumps in the line as it moves from one side of the bars to the other. Copyright ForexImpact.com 23

24 Candle Stop (FXI_CS) The candle stop is the other stop loss that we use to lock in profits and get us out of the market. This particular stop loss takes the highest high and lowest low of the past three bars then averages them with the current open and previous close. When the price touches or crosses the value of the CS line, that is our indication to exit the trade. Copyright ForexImpact.com 24

25 Trading with all Trend Finder Indicators Below are all of the indicators on one chart. As you can see, it s a bit overwhelming which is why I ve created a simple, arrow-based trade signal that does all the work for you. If you prefer using all the indicators together though, the rules are simple: Buy when the histograms are all green and sell when they are all red. The SOI has to be either above for buy entries or below for sell short entries. The exit is equally as simply to determine: If two or more of the indicators change to a different color other than the entry color, exit the position. But again, you don t have to trade with all these indicators unless you want to Copyright ForexImpact.com 25

26 Trend Finder Trade Signal Below is an example of the Trend Finder Trade Signal (FXI_TrendFinder-TS). The trade signal takes all the indicators and puts them into one easy to read arrow-based indicator. The green arrows mean buy and the red arrows mean sell short...it s as simple as that! If there are no arrows, then either exit if you are in a trade or stay on the sidelines. Copyright ForexImpact.com 26

27 The Setup For the setup, we are looking for all the Trend Finder indicators to turn green at the same time (or for a green or red arrow to appear if you are using the FXI_Trend Finder Trade Signal). When this occurs we have a setup for entry. Example of a Long Setup: The long setup has been highlighted. If you notice, the previous close was above the blue PAC line and the two stop loses, SSL and CS, are both below the price. The SOI is higher than and all the other indicators are green, so we have our setup. Copyright ForexImpact.com 27

28 Example of a Short Setup: In the example below, the short setup occurs when the previous close is lower than the PAC line, the SOI is below , price is above the stop loses, and the other indicators are all red. Copyright ForexImpact.com 28

29 The Entry Long Entry We are looking for all the indicators to turn green, SOI above 0.341, the stop loses to be below the price, and the previous close needs to be above the PAC signal for a buy entry. Example of a Long Entry: The entry for this long trade is at the open when we have a setup, as indicated on the chart below by the highlighted area. Copyright ForexImpact.com 29

30 Short Entry We are looking for all the indicators to turn red, SOI below , the stop loses to be above the price, and the previous close needs to be below the PAC signal for a sell short entry. Example of a Short Entry: As indicated below, sell short on the open when you have a sell short setup. Copyright ForexImpact.com 30

31 The Stop Loss The stop losses we will be using are the Super Stop Loss (FXI_SSL) and the candle stop (FXI_CS). Example Long Stop Loss: The super stop loss (FXI_SSL) and the candle stop loss (FXI_CS) have been indicated on the chart. Use the lower of the two stop losses for the initial stop loss. The SSL and the CS can be used as trailing stops. A trailing stop loss moves in the direction of the trade to lock in profits, moving with the position. If price moves against the position then the trailing stop loss does not move, hopefully getting you out of the market with a small loss. Copyright ForexImpact.com 31

32 Example Short Stop Loss: The super stop loss (FXI_SSL) and the candle stop loss (FXI_CS) have been indicated on the chart. The initial stop loss should be the furthest from the entry price. In the example below, this would be the SSL. Copyright ForexImpact.com 32

33 The Exit Long Exit The long exit occurs when one of the stop losses is hit or when two or more of the indicators turn red. Example of a Long Exit: As you can see from the chart below, this trade was exited because both of the stop losses was hit and one of the indicators turned red. The arrows require that we have two exit conditions, which is why you do not see an arrow at the exit bar. Copyright ForexImpact.com 33

34 Short Exit The short exit occurs when one of the stop losses is hit or when two or more of the indicators turn red. Example of a Short Exit: As you can see from the chart below, this trade was exited because both of the stop losses were hit and one of the indicators turned green. Note also that a red arrow does not appear over this bar which further indicates we need to exit the position. Copyright ForexImpact.com 34

35 Trend Finder Trading Rules Long Trades Long Setup: We are looking for all the indicators to turn green, SOI above 0.341, the stop losses to be below the price, and the previous close to be above the PAC signal for a buy entry. Long Entry: Buy at the open if setup occurs. When using the Trend Finder Trade Signal, buy when a green arrow appears. Long Stop Loss: The stop losses we will be using are the super stop loss (FXI_SSL) and the candle stop (FXI_ CS). Use the lower of the two. Long Exit: Exit a long trade when you are stopped out or two or more of the indicators have turned red. When using the Trend Finder Trade Signal, exit when a green arrow fails to appear. Short Trades Short Setup: We are looking for all the indicators to turn red, SOI below , the stop losses to be above the price, and the previous close needs to be below the PAC signal for a buy entry. Short Entry: Sell short at the open if setup occurs. When using the Trend Finder Trade Signal, sell short when a red arrow appears. Short Stop Loss: As with the long trades, exit at the higher of the two stop losses. Short Exit: Exit a short trade when you are stopped out or two or more of the indicators have turned green. When using the Trend Finder Trade Signal, exit when a red arrow fails to appear. Copyright ForexImpact.com 35

36 Trading Trend Finder: Long Example Long Setup We are looking for all the indicators to turn green, SOI above 0.341, the stop losses to be below the price, and the previous close needs to be above the PAC signal for a buy entry. The arrow appeared at the open of the bar showing that all of the setup conditions are there. Copyright ForexImpact.com 36

37 Long Entry The entry for this long trade is at the open when we have a setup, as indicated on the chart below by the green arrow. Copyright ForexImpact.com 37

38 Long Stop Loss The super stop loss (FXI_SSL) and the candle stop loss (FXI_CS) have been indicated on the chart below by a black line. Use the lower of the two stop losses. Use the FXI_SSL and the FXI_CS to trail your stop loss up with the position to lock in profits. Copyright ForexImpact.com 38

39 Long Exit As you can see from the chart below, the exit occurred when there were no more arrows at the open of the new bar. Copyright ForexImpact.com 39

40 Trading Trend Finder: Short Example Short Setup We are looking for all the indicators to turn red, SOI below , the stop losses to be above the price, and the previous close needs to be below the PAC signal for a sell short entry. The red arrow indicates that all the criteria have been met for a short setup. Copyright ForexImpact.com 40

41 Short Entry The entry for this short trade is at the open when we have a setup, as indicated on the chart below by the red arrow. Copyright ForexImpact.com 41

42 Short Stop Loss The super stop loss (FXI_SSL) and the candle stop loss (FXI_CS) have been indicated on the chart by a black line. Use the higher of the two stop losses. The FXI_SSL and the FXI_CS will be used to trail your stop loss down with the position to lock in profits. Copyright ForexImpact.com 42

43 Short Exit As you can see from the chart below, when the arrows no longer appear at the beginning of a bar, that is yor signal to exit. Copyright ForexImpact.com 43

44 Final Thoughts on trend finder The Trend Finder System uses several indicators for the setup and exit of the trade. There are several different ways that these indicators look at the market. This has been done, so that when we are getting a buy or sell short from all of them, we should have the best opportunity to profit. Trend Finder allows you to trade on different time frames. However, I would recommend if you are trading on the hour or four hour time frame that you trade during the more volatile times. For example, trade from the open into about four hours of the three major sessions. This will allow you to have the best odds of catching a trend. You should not be trading when the markets are quiet or closed. As far as money management goes, I would recommend that you use only 2% of your account per trade. Take the amount of your account and multiply it by two percent. Then, divide your answer by the stop loss amount. This will give you the number of lots/mini-lots that you can buy/sell per trade. I m confident that if you take the time to trade this system, you will be able to profit from this trend system. Copyright ForexImpact.com 44

45 Triad Trading FORMULA System 1: Trend Finder System 2: Squish-Squash System 3: Target Breakout Squish-Squash Trading System

46 I The Forex Trading Formula Squish-Squash Triad Trading Formula - Training Introduction Manual Squish-squash explained Here s a little piece of trivia that you may find interesting. (I know I did the first time I heard it ) Did you know that the markets trend only about 35% of the time? That s right, nearly 2/3 of the time the market moves sideways, which has always been a huge frustration to trend and breakout traders who only know how to make money when the markets move. Now don t get me wrong I love massive moves as much as the next guy, and few things on this earth can match the feeling you get when you jump in at the bottom of a trend and then ride that baby all the way to the top! But let s be honest, how often does that happen? Well, if my research is correct, the answer is only 35% of the time. And even if you catch every single opportunity that comes your way (which is highly unlikely even with a rocksolid trend system like Trend Finder ), that still leaves a whopping 65% of the time where you re left on the sidelines. I don t know about you, but that doesn t sit too well with me So that s why I began work on a counter-trend system that would capitalize on the 65% that almost every other trader was ignoring! Out of this concept was born the Squish-Squash Trading Method The Squish-Squash Trading Method has been in development for the past three years. The first two years were spent creating the Squish-Squash indicator and the additional year was spent creating filters to complete the system. When it was finished, I had a system that could adapt to the ever changing Forex market, including the quick moves during news announcements as well as the different personalities of the major pairs. Copyright ForexImpact.com 46

47 In the pages that follow, you will learn about the indicators that make up the Squish- Squash Trading Method: Squish-Squash indicator Linea Planus indicator, and the Strength Oscillator indicator You will learn what they do and how they function together to signal trades. In addition to learning the Squish-Squash trading method, I have also included market research that will help you determine the best times to trade for the maximum profit. (This one page alone is probably worth the investment you made in this training.) I m confident that the Squish-Squash Trading Method will give you the skills and confidence you need to trade when most people don t know what to do. And let me tell you that s an incredibly powerful feeling. Let s get started Copyright ForexImpact.com 47

48 Indicators The Squish-Squash indicator is the foundation and trigger of this trading method. It identifies and filters the extreme conditions within a market so you are able to recognize and profit during counter-trend conditions. The Linea Planus indicator identifies the mode and direction of the market. The Strength Oscillator indicator distinguishes between trending and sideways markets. Now, let s go through each of them one-by-one Squish-Squash Indicator (FXI_SquishSquash) Unlike other envelope indicators, the Squish-Squash indicator uses the median price of the Open to the High, for the upper band, and the Open to the Low, for the lower band (along with a few other proprietary calculations) to obtain the upper and lower bands. This seemingly minor tweak of using the MEDIAN rather than the open/close or high/low is the key that makes the entire system run. This is because the median filters the outliers, thereby giving you a smoother, more predicable result over the long-term. The Open to the High and Open to the Low was also used to limit the whipsaw effects that are normally displayed when averaging over a smaller time frame during sideways markets. By combining the two I was able to get less lag with less whipsaw. This was a huge leap in creating a working counter-trend system, but it still wasn t perfect. You see, while the bands worked great during a sideways market, during a trend or news announcement there were too many false signals. For this reason, I added momentum as a filter when it is beyond the normal range. This momentum variable is labeled Momentum Threshold within the Inputs of the indicator. This allows for the indicator to track normally under regular conditions, but change if a large amount of momentum is added to the market suddenly. In other words, as volume increases, the momentum filter kicks into gear, widens the Squish-Squash bands and eliminates the vast majority of the false signals. Copyright ForexImpact.com 48

49 This addition of momentum was the second big leap in creating a counter-trend system that actually works. The example below shows how the indicator tracks a sideways market. I have circled the extremes where the prices touched or broke through the Squish-Squash bands. Note that in a high-volume market, the addition of the momentum filter would eliminate many of these signals Inputs The Squish-Squash indicator has several settings so you can tweak it based on your own trading style. On the following page is a screen shot of the Squish-Squash inputs with my default settings in place... Copyright ForexImpact.com 49

50 What follows is a brief explanation for each input in case you want to test your own combinations: Basic Bars High: This input determines how far back the Open to High range will be referenced. The larger the number the smoother the line will be. This input makes small changes in the overall calculation. The default is set to 100. Basic Bars Low: This input determines how far back the Open to Low range will be referenced. The larger the number the smoother the line will be. This input makes small changes in the overall calculation. The default is set to 100. Bars Back SS High: This input determines how many overall bars you want to reference. The larger the number the more lag that will be introduced into the calculation. This input makes large changes in the overall calculation. The default setting is 2. Bars Back SS Low: This input determines how many over all bars you want to reference. The larger the number the more lag that will be introduced into the calculation. This input makes large changes in the overall calculation. The default setting is 2. U: This input determines the vertical distance that the bands are from the price. This input makes large changes in the overall calculation. The default setting is one. There are the settings I use on the four major pairs: GBP/USD = 1, EUR/USD =.5, USD/JPY =.5, and USD/ CHF =.5. Copyright ForexImpact.com 50

51 Momentum Threshold: The momentum threshold input allows you to add the current momentum into the calculations. By adding momentum to the calculation, we are adding the current rate-of-change. This effectively eliminates any lag that has been introduced into the equation. If the momentum threshold is set to 0 then momentum is added from the start. If you set the momentum threshold to 100, then there should be no momentum added to the equation. The default settings for the momentum threshold change depending on the time frame that you are trading on. Below are the default settings for the different time frames: 5 Minute: Minute: Minute: Hour: Hours: 10 1 Day: 25 1 Week: 50 Remember, that if you do not want the momentum added into the calculation then the input has to be set to 100. This will generate the most possible trades. If you always want momentum added to the calculation then the input has to be set to 0. Setting the momentum to 0 will generate the fewest trades, but increase the accuracy of each trade. Linea Planus Indicator (FXI_LPI) The Linea Planus indicator (LPI) filters out the noise produced in a sideways market so that we have a nice flat line. During trending markets the Linea Planus indicator follows the market, but does have about a four period lag. The Linea Planus indicator s default setting for length is 20. I use the LPI on a setting of 4 with this system, but feel free to do your own testing and adjust the length as you see fit. The screenshot on the next page shows the Linea Planus indicator in relation to the Squish- Squash lines. Note how it moves above, below and in-between the bands Copyright ForexImpact.com 51

52 You will use this indicator to identify when the market is moving sideways. We do this in two different ways: 1. The first way to use the Linea Planus indicator to identify sideways markets is by comparing the current bar s Linea Planus indicator value with the previous bar s Linea Planus value. If the current bar s value and the previous bar s value are within the predefined range, then the market is moving sideways. The default predefined range for trading on a one hour bar chart or less is 2 points; this refers to the furthest decimal point to the right. Example: EUR/USD or USD/JPY If you are trading on the day time frame or greater then the predefined range is 4 points; example or If you want the most conservative entry parameters for Linea Planus use the predefined range of zero. If the current bars value and the previous bars value are outside of the Copyright ForexImpact.com 52

53 predefined range then the market is in a trending mode. 2. The second way that we use the LPI is to compare where it is in relation to the Squish-Squash lines. If the LPI is in-between the Squish-Squash lines then there is a greater chance that the market is moving sideways. If the LPI indicator is above the upper Squish-Squash line then the market is trending down. If the LPI is below the lower Squish-Squash line, then the market is trending upward. Strength Oscillator (FXI_SOI) The Strength Oscillator indicator (SOI) also helps to distinguish between trending and sideways markets. If you recall from the section on Trend Finder, SOI was used to filter out sideways markets. Well for Squish Squash we re actually using it to seek out these kinds of markets! The theory that drives this indicator is that the trending component is stronger when prices are farther from fair value and the noise of sideways movement is greater when the price is near value (the near value being zero). SOI helps determine these counter-trend points by taking the median average price for the past two days and comparing it to the price today. This works by setting the median average price for the past two days to zero, and then watching for deviations from this value. If the price breaks out of the one standard deviation area, whether it be to the upside or the downside, then the pair is in a trending mode. The Strength Oscillator (SOI) helps counteract the lag that we see in the Linea Planus Indicator (LPI). It also gives us another way of filtering out the extremes of the market. On the next page you ll see a close-up screenshot of SOI... Copyright ForexImpact.com 53

54 Copyright ForexImpact.com 54

55 The Setup To have the setup for the a Squish-Squash trade, the Linea Planus Indicator line (LPI) has to be within the SSHigh and SSLow lines, the previous LPI value has to be within 3 points of the current LPI value, and the Strength Oscillator Indicator (SOI) has to be within one standard deviation from fair value (again, with fair value being zero). Example of the Setup: Copyright ForexImpact.com 55

56 The Entry Long Entry Example of a Long Entry: The Linea Planus indicator (LPI) is between the SSHigh and SSLow lines. The previous bars LPI value is within 3 points of the current bar s LPI value. (Remember: Point value refers to the smallest decimal point to the right.) The Strength Oscillator is within the one standard deviation lines, and The Price broke below the SSLow line signaling a buy order. Copyright ForexImpact.com 56

57 Short Entry Example of a Short Entry: The Linea Planus indicator (LPI) is between the Squish-Squash High (SSH) and Squish- Squash Low (SSL). The previous bar s Linea Planus indicator (LPI) value is within 3 points of the current bar s Linea Planus indicator (LPI) value. For this example, the previous bar s LPI value was and the current bar s LPI value was also When the values are the same, as in this example, it creates the ideal setup. Remember, point value refers to the smallest decimal point to the right. The Strength Oscillator (SOI) is within the one standard deviation lines, therefore we are in a sideways market. When the price touches or breaks through the SSHigh, we sell short. Copyright ForexImpact.com 57

58 The Stop Loss The stop loss that I use is the range of the SSHigh and SSLow. For a long entry stop loss, take the SSRange (SSHigh-SSLow) and then subtract it from the SSLow. For a sell short stop loss, take the SSRange (SSHigh-SSLow) and add it to the SSHigh. Example of Both a Long and Short Stop Loss: In the chart below, there are two possible exits marked. If the Strength Oscillator (SOI) breaks above and you re in a short trade or below and you re in a long trade, then exit. The other possible exit occurs if the Linea Planus (LPI) breaks out of the SSHigh and SSLow range. Copyright ForexImpact.com 58

59 The Exit Long and Short Exit In the example below you would sell short when the price touched the SSHigh. Then, when the price touched the SSLow, you would close out your short order with a buy to cover order and immediately open a buy order. Next, when the price touched or broke the SSHigh you would close your buy order with a sell order and reverse again with a sell short order. Then, as in our example, you would close your short order by buying to cover. Finally, you would have reversed by buying, but this trade would have been closed out because the Strength Oscillator indicator broke above the level and the LPI was beyond the SS lines, signaling it s time to exit. The four trades below netted 470 pips in 9 days. Copyright ForexImpact.com 59

60 Squish-squash Trading Rules Long Trades Long Setup: The Linea Planus indicator (LPI) is between the SSHigh and SSLow lines. The previous bar s LPI value is within 3 points of the current bar s LPI value. [Point value is smallest decimal on right.] The Strength Oscillator is within the one standard deviation lines: and Long Entry: Price touched/broke below the SSLow line signaling a buy order. Long Stops: Long entry stop loss, take the SSRange (SSHigh-SSLow) and subtract it from the SSLow. Long Exit: Price touched/broke the SSHigh line. Possible Exits: If the SOI breaks out of the one standard deviation lines, or if the LPI breaks out of the SSH or SSL lines. Short Trades Short Setup: The Linea Planus indicator (LPI) is between the SSHigh and SSLow lines. The previous bar s LPI value is within 3 points of the current bar s LPI value. The Strength Oscillator is within the one standard deviation lines: and Short Entry: Price touched/broke above SSHigh line signaling a short order. Short Stops: Short entry stop loss, take the SSRange (SSHigh-SSLow) and then add it to the SSHigh. Short Exit: Price touched/broke the SSLow line. Possible Exits: If the SOI breaks out of the one standard deviation lines, or if the LPI breaks out of the SSH or SSL lines. Copyright ForexImpact.com 60

61 Trading squish-squash: Long Example Long Setup The Linea Planus line moved between the Squish-Squash High and Squish-Squash Low lines. The Strength Oscillator moves into the one standard deviation area. At this point we are looking for the price to touch or break through the SSLow to trigger a buy order. Copyright ForexImpact.com 61

62 Long Entry The chart below shows that the LPI was between the SSHigh and the SSLow and the SOI is between the one standard deviation lines; so we have our setup. The long entry occurs when the price breaks below the SSLow line as indicated on the chart. Copyright ForexImpact.com 62

63 Long Stop Loss The LPI is between the SSH and SSL. The SOI is within one standard deviation from fair value. The price broke below the SSLow line, so we bought. The long stop loss was calculated by subtracting the SSLow from the SSHigh and then subtracting the answer from the SSLow. Stop Loss = SSLow - (SSHigh SSLow) Stop Loss = ( ) Stop Loss = Copyright ForexImpact.com 63

64 Long Exit The Linea Planus (LPI) was between the Squish-Squash High (SSH) and Squish-Squash Low (SSL) lines and the Strength Oscillator Indicator (SOI) was within one standard deviation from fair value; for our setup. The price broke below the SSLow line forming our entry. The stop loss was placed at the SSLow minus the SSRange (SSH-SSL) at The long exit occurred when the price broke above the SSHigh line. Copyright ForexImpact.com 64

65 Trading squish-squash: Short Example Short Setup The Linea Planus line is between the Squish-Squash High and Squish-Squash Low lines. The Strength Oscillator is within the one standard deviation from fair value. In the example below, the setup is present. Now we are look for the price to touch or break the SSHigh to trigger a sell short order. Copyright ForexImpact.com 65

66 Short Entry The Linea Planus line is between the Squish-Squash lines and the Strength Oscillator is within one standard deviation of fair value for our setup. The price touched the Squish-Squash High line resulting in a sell short order to enter the market. Copyright ForexImpact.com 66

67 Short Stop Loss The LPI is between the SSH and SSL. The SOI is within one standard deviation from fair value. The price touched the SSHigh line, so we sold short. The short stop loss was calculated by subtracting the SSLow from the SSHigh and then adding the answer to the SSHigh. Stop Loss = SSHigh - (SSHigh SSLow) Stop Loss = ( ) Stop Loss = Copyright ForexImpact.com 67

68 Short Exit The Linea Planus (LPI) was between the Squish-Squash High (SSH) and Squish-Squash Low (SSL) lines and the Strength Oscillator Indicator (SOI) was within one standard deviation from fair value; for our setup. The price touched the SSHigh line forming our entry. The stop loss was placed at the SSHigh plus the SSRange (SSH-SSL) at The short exit occurred when the price broke below the SSLow line. This trade resulted in a 123 pip profit. Copyright ForexImpact.com 68

69 Best Time to Trade The best time to trade using the Squish-Squash Trading Method is when market volatility is low. So, I conducted research to find out when the market volatility is the lowest for the four major pairs. This information has been included for you. Note: All time is in Eastern Standard Time. EUR/USD = 5:00 pm to 2:00 am USD/JPY = 12:00 pm to 7:00 am GBP/USD = 5:00 pm to 2:00 am USD/CHF = 5:00 pm to 2:00 am The times listed above are conservative. If you want to trade a little bit more aggressively, you can start trading at 12:00 pm instead of 5:00 pm. I would not recommend trading Squish-Squash intraday between 8:00 am and 12:00 pm EST, as this is when the markets are most volatile. If you are going to trade during this time, either trade it in conjunction with a trend and breakout system such as Trend Finder and Target Breakout or make sure the momentum threshold is set to zero. Copyright ForexImpact.com 69

70 Using Squish-Squash To Trade News Announcements If you are thinking I m going to tell you to avoid trading Squish-Squash during news announcements you re right! Remember, Squish-Squash is a counter-trend system, so the hard moves that occur during news announcements are absolute poison. But, that doesn t mean that you can t use this system to trade the news BEFORE the announcements are officially released. Let me explain Before the five large U.S. news announcements: FOMC Interest Rate Decisions, Non-Farm Payrolls, Trade Balance, CPI, and Retail Sales; the markets go quiet in anticipation. In other words, the markets move into a range and begin a sideways progression until the news announcement actually occurs. During this time (prior to the actual announcement) you can capitalize the low volatility and ranging markets by trading a counter-trend system! Below are the results of tests conducted on the EUR/USD and the USD/JPY of the price ranges prier to a news announcement: EUR/USD Average Range: 5:00 pm EST 8:29 pm EST, prior to a US news announcement. FOMC Average Range = pips Unemployment Average Range = pips Trade Balance Average Range = pips Retail Sales Average Range = pips CPI Average Range = pips USD/JPY Average Range: 5:00 pm EST 8:29 pm EST, prior to a US news announcement. FOMC Average Range = pips Unemployment Average Range = 63.6 pips Trade Balance Average Range = pips Retail Sales Average Range = pips CPI Average Range = 68.8 pips Copyright ForexImpact.com 70

71 To trade the news using the Squish-Squash Trading Method, set the input U to zero and the Momentum Threshold to one hundred. Setting U to zero will move the lines in closer to the price action. Setting the Momentum Threshold to one hundred will insure that no momentum is added into the calculation. This will produce a lot more trades. (See screenshot below ) Start trading at 5:00 pm EST the day before the news announcement up until 8:29 am EST. Trading before a news announcement is best performed on the hourly time frame. You should have several trades making small profits on each. Just remember to stop trading before the news announcement is released. Copyright ForexImpact.com 71

72 Final Thoughts on squish-squash Even though the markets move in a counter-trend ranging motion about 65% of the time, you are still exposing yourself to more risk with counter-trend as opposed to trend trading because you are buying/selling against the current direction. So, to limit your potential losses, make sure you have stop losses in the market. I can t stress this enough If you don t, one massive breakout could blow your entire trading account. (And trust me, this is a mistake you ll only make once.) Also, there are numerous combinations and ways to use the Squish-Squash indicators included with this training, and I encourage you to play with them until you find what works best for you. I ve given you my default setting, but even I deviate from those settings from time to time For example, one conservative trade I enjoy putting on is to place all the indicators at their default settings except Momentum Threshold. Set it to zero so that the current momentum is added into the calculation from the start. I enter the trade if the price touches or breaks the SSHigh or SSLow on the hourly time frame, then I exit at the end of that hour. This trade grabs a few pips a couple of times a week, and doesn t require much thought or effort. In the end, I hope you have fun with it and I hope it makes you a better trader. Just having the ability to capitalize on ranging markets will put you light-years ahead of most traders even the professionals and the Squish-Squash Trading Method allows you to do just that. Copyright ForexImpact.com 72

73 Triad Trading FORMULA System 1: Trend Finder System 2: Squish-Squash System 3: Target Breakout Target Breakout Trading System

74 I The Forex Trading Formula Triad Trading Formula - Training Introduction Manual Target Breakout System target breakout explained Having a breakout system in your portfolio is vital to making the most amount of money you can in the market in the shortest amount of time. For one, breakout systems will help offset the losses from your counter-trend system as the market moves out of consolidation. In the same manner it will help offset the losses from false starts that are indicative of most trend systems. In developing the Target Breakout System, I had to go back to the basics in a matter of speaking and ask myself some questions. Where is the most likely location to find potential breakouts? What indicator is the best to find this location? The answer to these two questions resulted in the development of the Target Breakout System. To answer the first question, the locations that have the best potential for a breakout are where support, resistance, and/or consolidation have come into the market. And the best indicator to identify these periods in the market isn t actually an indicator at all - it s price action! With Price Action we re looking real-time at what the price of a currency pair is right now as compared to the last few bars. So in a sense, we re looking at the chart itself to tell us what is going on. The upside to trading with price action is that (unlike other indicators) it doesn t lag behind the market. The downside, however, is that it requires you to look closely at the chart itself to determine these areas of support, resistance, and/or consolidation without the aid of traditional indicators. But don t worry...i m not going to make you look at a blank chart and guess where the Copyright ForexImpact.com 74

75 breakouts will occur. I have developed a proprietary indicator called the Target Breakout Indicator that will aid you in trading with price action. But before we get into the Target Breakout Indicator and how to use it, I want to delve into what this indicator is looking for in the market and how it works. As I said earlier we are looking for areas of consolidation, support, and resistance. Copyright ForexImpact.com 75

76 Consolidation Consolidation is an area where price moves into a smaller range than normal and stays at or around the same price for a period of time. This typically occurs at support or resistance areas, however, it can occur at any time. Markets generally consolidate for one of two reasons: 1. The market has hit an area of support and resistance and the buyers and sellers are at equilibrium, causing the price to remain within a range as in the example below... Copyright ForexImpact.com 76

77 2. It could also be that a news announcement is being released soon and the trading is thin, as both buyer and sellers wait to see what the market is about to do. Regardless of the reason for consolidation, there is a higher than normal probability that the market will breakout very soon after consolidation has begun, allowing us to profit enormously. The Target Breakout Indicator (TBI) identifies these areas of consolidation by referencing the Average True Range (ATR). The ATR is an indicator that measures volatility (or price movement). It does this by subtracting the Low from the HIGH for that day (including any gaps that may occur when the markets open). If the ATR is moving lower, TBI will use this information to determine if the market is consolidating. Support Support is an area where price has moved low enough that buyers have started coming into the market creating more buyers than sellers. When this occurs, the price will typically reverse and start moving back up. The lowest point during this reversal will create an area or price of support. The opportunity for profit comes when the price breaks through this support line as in the example on the next page... Copyright ForexImpact.com 77

78 Because this price has already been tested, one of two things will occur: 1. The market will move to the support price and buyers looking for a deal will flood the market. This causes the price to reverse back up above the support line once again. 2. If buyers do not come into the market, the price will continue to fall. If the market falls fast enough, this could produce a breakout. Obviously when trading breakouts we re looking for #2 to occur. There is such a thing as a false breakout, however (which occurs with scenario #1), so it s the job of the Target Copyright ForexImpact.com 78

79 Breakout Indicator (TBI) to locate these areas of support while at the same time keeping us out of the false breakouts. TBI locates areas of support by looking for a series of lows within a defined range. If the market is trending up or down, the lows will not be within a range and therefore will not qualify as a support area. If the lows are within a defined range then the Target Breakout Indicator will identify that location as a new area of support. Resistance Resistance is an area where price has moved high enough that sellers start to enter the market and eventually outnumber the buyers, ultimately causing the market to move lower. The area or price where this occurs is the resistance area or price. Note: More often than not there will be an area of support/resistance rather than a defined price. As you may have surmised, just like areas of support, areas of resistance offer a strong potential for breakouts and therefore PROFIT if we have a system that can get us into these breakouts early enough. And just like areas of support, there are two possible scenarios with trading resistance: 1. The market can hit the resistance area and then pull back. If the market moves fast enough and far enough this could signal a breakout in the other direction. 2. The market can continue through the area of resistance to move higher allowing us to make a profit. The Target Breakout Indicator (TBI) locates areas of resistance by looking for a series of highs within a defined range. If the market is trending up or down the highs will not be within a range and therefore will not qualify as a resistance area. If the highs are within a defined range then the Target Breakout Indicator will identify that location as a new area of resistance. Copyright ForexImpact.com 79

80 Once the Target Breakout Indicator has determined that we are in an area of support, resistance, or consolidation, the indicator will look at price action for the next step. Price action determines the direction of the breakout. To determine price action we look at the current price and the High/Low range for that bar compared to the support, resistance, and/or consolidation area. Then we confirm this with the next lowest time frame to make sure they match up. This allows us to confirm that the market is at a support, resistance, and/or consolidating area Copyright ForexImpact.com 80

81 and also allows us to pinpoint our entry. If all this sounds complicated, don t worry! The Target Breakout Indicator does all the math for you, so you don t have to track eight screens with two different time frames while at the same time doing calculations with the ATR just to trade the four major pairs on one time frame. Think about it...would you want to have eight screens open at all times that looked like this? I m guessing your answer is No, so let s look at the Target Breakout Indicator and see how we use it to trade breakouts... Copyright ForexImpact.com 81

82 Indicators Target Breakout (FXI_TBI) As you ve already learned, the Target Breakout Indicator identifies areas of potential breakouts by locating support, resistance, and consolidation. After locating these areas the Target Breakout Indicator uses a proprietary algorithm that incorporates the ATR (average true range), price action, and the next lowest time frame to target the ideal price to enter a breakout trade. As you can see from the screenshot below, the indicator itself is very simple and consists of a series of horizontal support and resistance lines... Copyright ForexImpact.com 82

83 The Setup Long Setup For the setup, we are looking for the target breakout indicator to draw a support or resistance line. When this occurs we have a setup for entry. Example of a Long Setup: The long setup is shown as a light green resistance line, as indicated on the chart below. Copyright ForexImpact.com 83

84 Short Setup Example of a Short Setup: In the example below, the short setup is shown as a light red resistance line. Copyright ForexImpact.com 84

85 The Entry Long Entry We are going to look for a break above the resistance line of one pip or more to go long. Example of a Long Entry: The entry for this long trade is one pip above the green resistance line, as indicated on the chart below. Copyright ForexImpact.com 85

86 Short Entry We are going to look for a break below the support line by one pip. Example of a Short Entry: As indicated below, sell short one pip below the red support line. (Note that in this example the price did, in fact, breakout below the line of support.) Copyright ForexImpact.com 86

87 The Stop Loss Long Stop Loss Since the markets move very quickly during a breakout, we will be using a trailing stop loss so we can lock in any gains while still protecting us against the downside. The trailing stop loss amount will vary depending on the time frame that you are trading as indicated in the chart below: Time Frame: Trailing Stop Loss: 30 Minute 15 pips 60 Minute 30 pips 4 Hour 45 pips 1 Day 60 pips 1 Week 150 pips Example Long Stop Loss: The trailing stop loss line on the chart is set at 45 pips below the entry because we are trading on the four hour time frame. Copyright ForexImpact.com 87

88 Short Stop Loss Example Short Stop Loss: In this example we ara trading on the daily time frame, so the trailing stop loss is set at 60 pips above the entry as indicated in the screenshot below: NOTE: The trailing stop is a pip for pip trailing stop, meaning that as the market moves higher or lower by one pip then the trailing stop will move higher or lower by one pip. Copyright ForexImpact.com 88

89 The Exit Long Exit The long exit occurs when the market moves against your trailing stop loss to the point where it is hit. At that point you are taken out of the market. Example of a Long Exit: As you can see from the chart below, the trade was closed out when the market moved against the trailing stop loss to the point where the stop was triggered. Copyright ForexImpact.com 89

90 Short Exit Like the long exit, the short exit occurs when the trailing stop loss is finally hit. Example of a Short Exit: As you can see from the example below, the trade was closed when the market moved higher and hit the trailing stop loss. Copyright ForexImpact.com 90

91 Target breakout Trading Rules Long Trades Long Setup: We are looking for all the indicators to turn green, SOI above 0.341, the stop losses to be below the price, and the previous close to be above the PAC signal for a buy entry. We are looking for the Target Breakout Indicator to create a resistance line. Long Entry: Buy one pip above the resistance line. Long Stop Loss: Place a trailing stop loss below the entry. Long Exit: Time Frame: Trailing Stop Loss: 30 Minute 15 pips 60 Minute 30 pips 4 Hour 45 pips 1 Day 60 pips 1 Week 150 pips The trailing stop loss will exit the trade for you. Copyright ForexImpact.com 91

92 Target breakout Trading Rules Short Trades Short Setup: We are looking for the Target Breakout Indicator to create a support line. Short Entry: Sell short one pip below the support line. Short Stop Loss: Place a trailing stop loss above the entry. Short Exit: Time Frame: Trailing Stop Loss: 30 Minute 15 pips 60 Minute 30 pips 4 Hour 45 pips 1 Day 60 pips 1 Week 150 pips The trailing stop loss will exit the trade for you. Copyright ForexImpact.com 92

93 Trading Target breakout: Long Example Long Setup We are looking for the Target Breakout Indicator to draw a light green resistance line. The resistance line indicates a potential location for a breakout. Copyright ForexImpact.com 93

94 Long Entry Once you have established that a Target Breakout has occurred, buy one pip above the resistance line. Copyright ForexImpact.com 94

95 Long Stop Loss Place a trailing stop loss below the entry. In the example below, we are trading on the day time frame so we would use a 60 pip trailing stop loss. The black line below the entry indicates the placement of our trailing stop loss. Make sure to place your trailing stop loss as soon as you enter the trade. Copyright ForexImpact.com 95

96 Long Exit Sell to close the trade when the trailing stop loss is hit. The chart shows our setup, entry, stop loss, and the exit of the trade. It s very important to use the correct trailing stop loss for the time frame that you are trading on. This will ensure that you exit from the trade in the most efficient manner. Copyright ForexImpact.com 96

97 Trading Target breakout: Short Example Short Setup We are looking for the Target Breakout Indicator to create a light red support line. When the light red support line is created we have a short setup. Copyright ForexImpact.com 97

98 Short Entry The red support line is the setup for a short entry. As the chart below shows, the short entry is one pip below the red support line. Copyright ForexImpact.com 98

99 Short Stop Loss Place a trailing stop loss above the entry: In the example below we are trading on the day time frame, so we would use a 60 pip trailing stop loss. The black line above the entry indicates the placement of our initial trailing stop loss. Make sure to place your trailing stop loss as soon as you enter the trade. Copyright ForexImpact.com 99

100 Short Exit Buy back to close the trade when the trailing stop loss is hit. The chart shows our setup, entry, stop loss, and the exit of the trade. It s very important to use the correct trailing stop loss for the time frame that you are trading on. This will ensure that you exit from the trade in the most efficient manner. Copyright ForexImpact.com 100