Hello everyone. My name is Alfredo. You can call me Al.
At the request of many of you, I am starting today what I hope will become a thriving laboratory of ideas that will make each of us, each day, a little better trader than we were. Firstly, I must say that I have never done something like this and I will rely on the help and contribution of you to make it a success.
The history of a trader, like my own, is a tough road full of failure, despair and loneliness, as well as fulfillment, excitement and triumph. It is a hard road full of obstacles and temptations to lead you astray from the path and in the end, only a determined few will succeed in conquering the many mines and potholes in the way and acquiring the discipline and knowledge necessary to succeed.
My own history is a good example of what most of us go through. Luckily, because I had a successful company, I was able to draw funds to pay my “tuition” in the University of Trading. Over the first few years I suffered very heavy losses. Read many books, talked to everyone that I met that knew something about the field. Over and over again, I stumbled over the same obstacles. I couldn´t figure out why if I had been successful in other areas of my life, I was having such hard time with this. I quit several times, only to give it “one more try” and continue on my quest. As I look back on these years now, I truly believe they were necessary to forge the discipline and determination necessary to succeed. Yes, there are traders that have never experienced the “Valley of Despair”, but they are few and far between. For the rest of us the way is hard but full of promise and a daily constant battle to control ones ego and remember the lessons learned. After 30 years, I can say I have learned a bit, but there is more to learn every day. The finish line is never reached and that is the wonder and thrill of this profession.
Up front I ask for your help and contribution. Let us be constructive and share our knowledge. If we do, this will have been worth while.
The System: Extreme TMA.
The market, like a pendulum, is a never ending sequence of extremes. It forever tries to reach the mean but never succeeds, constantly overshooting it´s mark, reversing and trying it again but always failing to reach balance. This system attempts to capture those extremes. It is a compendium of my understanding of the market, brought to it´s simplest expression.
The principles are not complicated. The first indicator, the TMA shows us the average of the path that the price action in the market is following. As such, it is a backward looking indicator and attempts to determine the future from the recent history. It corrects itself by repainting itself. It has two outer bands that show us the outer boundaries of price movement that we are searching for. Our second indicator, the TMA Slope indicator will show us the relative change in the slope of TMA as compared to previous candles. It determines in which direction a trade must be placed and also shows divergences to price. For example, if price is rising but the slope indicator is dropping, it is announcing a high probability of a drop in price in the near future. The steeper the drop in the indicator the higher the probability of a drop in price. The same concept applies in reverse in the case of a dropping price and a rising slope indicator. A third use of the slope indicator is for divergence detection. If you see 2 or 3 green mounds, each smaller than the one before it, there is a strong likelihood that price is about to drop. 2 or 3 Red mounds, each smaller than the one before it, indicates a high probability of a price rise. On the right side of the Slope indicator you will see the value (grey) of the current chart time frame. Above it the slope value of the D1 time frame and below the trade status (Ranging, Buy Only or Sell Only) of the current chart TF. The third indicator is TMA Slope MTF which gives us the slopes of all 3 time frames. The final indicator gives us the D1 slope values of all currency pairs. A great tool to determine which pairs are possible trades.
MTF TMA: Included in the templates are 3 TMA indicators. The H4 TMA (dotted magenta lines), the D1 TMA (dashed blue lines) and the W1 TMA (dashed green lines). All 3 will be visible on a M15, H1 or H4 chart. The H4 time frame are for trades of 1 to 5 days and potential gain of 170 to 250 pips. The D1 time frame are for trades of 5 to 30 days and potential gain of 200 to 400 pips. If you set the chart to D1, you will only see the D1 and W1 TMAs. If you set the chart to W1, you will only see the W1 TMA. If you are a short term trader, a good alternative option is to add the H1 TMA and use the other 3 ( H4, D1, W1) for trend direction. Having several TMAs on one chart is extremely helpful for determining longer time frame trends and combined, they have high predictive value of future market moves.
Stop Loss Use: There are various options in this department and I won´t recommend any particular one. A natural level to place your SL would be above a previous high for a short and below a previous low for a long. I myself use only an emergency SL very far away from the PA (100 Pips). If a trade goes against me, I will use Recovery Trades to exit the trade at breakeven. I have included detailed instructions describing the Recovery system in the Documents folder contained in the Packet.zip file. The extreme TMA system works much better when you leave price plenty of room to move.
1- We will first determine trend in the 3 TMAs by using the TMA Slope indicator values.
Ranging TMA (-0.40 to 0.40): Trades can be placed in both directions.
Buy Only TMA (Above 0.40): Place ONLY Long trades.
Sell Only TMA (Below -0.40): Place ONLY Short trades.
Super Range: Above 0.80: Hold longs till slope value drops under 0.80, at which point you should close all longs.
Below -0.80: Hold shorts till slope value climbs above -0.80, at which point you should close all shorts.
H4, D1, W1 slope values must be either Ranging or higher for Longs or Ranging or lower for shorts.
2- Once trade direction is determined, we will look at the D1 and W1 TMA and determine that there is enough room for the trade to move in your direction before reaching the outer band of both. Example: If you decide to go short, there must be enough room between the current price and the lower D1 band (At least 150 pips) and the lower W1 band (At least 250 pips).
3- We will now wait for price to climb above the top band of the H4 and D1 TMAs at the same time, before placing a Short trade or below the bottom band ofthe H4 and D1 TMAs at the same time, before placing a Long trade.
4- The Trigger: Once Rule 3 is complied with, the trade will be entered once price turns around and touches the H4 Upper TMA band for Shorts or the H4 Lower TMA band for Longs. Refer to Rule one again before entering trade to make sure that the 3 TMA slope values are still Ranging or in the direction of your trade. If they are not, wait until they return to the correct slope values for your trade and enter then.
Even though not explicitly mentioned in the rules, it is always a good idea to sell from under tested resistance and buy from above tested support. This is always a good rule to follow. It will prevent getting into a trade too early and will increase your percentage of winners. Valid support and resistance areas are: 50 or 200 MAs, TMA centerlines, daily, weekly and monthly pivot lines, etc.
Exit Rules for each type of trade:
Short Term Trade (If used): Close the trade when price reaches the opposite H1 TMA band. Reenter trade when price retraces to the centerline of the H1 TMA. Make sure all slope values continue to be either ranging or in the direction of your trade before reentering. You can do this several times during a strong trending move.
Medium Term Trade (Standard trade): Close the trade when price reaches the opposite H4 TMA band. Reenter trade when price retraces to the centerline of the H4 TMA. Make sure all slope values continue to be either ranging or in the direction of your trade before reentering. You can do this several times during a strong trending move.
Position Trade: Close the trade when price reaches the opposite D1 TMA band. Reenter trade when price retraces to the centerline of the D1 TMA. Make sure all slope values continue to be either ranging or in the direction of your trade before reentering. You can do this several times during a strong trending move.
(7-18-2013) Important Update !! During the many months of development of the Extreme TMA system a lot of evolution took place. Indicators that we started with were later substituted with others we developed especially for the system. The rules changed also several times. When you begin reading the thread, there will be posts that refer to items that are no longer relevant. Just skip those and keep reading. There is a lot of information that will help you in your everyday trading. It certainly helped me a lot to listen to what these many intelligent members brought to the table. As you progress through the many pages, it will all make sense and you will be witness to the making of a system, that today is still a very important part of my trading methodology.
Attachments: I am enclosing a Template and Indicators compressed as a Packet.zip file. Extract it and as usual, place the indicators (.mq4 and .ex4 files) in the Experts/Indicators folder of your MT4 installation. Place the Template (.tpl file) in the Templates folder (not in the Experts/Templates folder). The Extreme TMA – New Version template is designed to follow one currency pair on one screen. Also included is the new Dashboard (!ExtremeTMA v37) which informs us of what pairs are complying with the rules in real time.
That´s it ! The system is simple in concept and easy to trade. I recommend that you handle it with care. Use demo accounts or small lots until it shows itself to be consistently profitable and you acquire confidence in it. A trading system will only work consistently if you truly believe in it. As we move forward, I´m sure we will improve it and make it ever more reliable.
Good luck and welcome to our New Adventure !
Hall of Fame: The following members have collaborated or have made a positive impact on making this system a better one. The underlined names have made extraordinary contributions:
Crodzilla , shahrooz67, Paradox, lologo, NanningBob, Zznbrm, X-Man, Favorite, EasyRyder, mladen, Argonod, Olarion1975, Ever E. Man, Faxxion, flaw, Riddermark, slowpokeyjoe, beto21 cwb, Trainman, Baluda, bassramy.