Exclusive trading system TS4ET.

Market Leader informed

Strange as it may seem, but the famous Pareto rule (also known as the “80/20 rule” or the principle of the “vital few and the trivial many” is applicable anywhere. 20% of the world population uses 80% of all the available recourses (if it was vice versa then 80% of efforts would only be 20% efficient).

Trading is based on statistics, which is a terrible thing. It is impossible to deceive it. Figures reveal everything. Out of 100% of traders only about 5% (professionals) earn. They make 20% efforts to achieve 80% results – profit. If you are one of them, just take a break.

The remaining 95% of the traders do not take the rule into account. They are busy deceiving themselves and losing their deposits, time and effort but getting their own “golden” experience.

Out of all those hordes of “traders” who once came to the market planning to conquer it, only those reached success, who:

·         Lost their deposits within the first 1-1.5 years

·         Stopped trading to reconsider everything and then came back

·         Spent money to study 4 or 5 different trading system but didn’t understand anything and decided to create their own TS

·         Started using timeframes H1 and higher during the trading process

·         Forgot about the super-profitability of 100% a month and higher

·         Do not allow the total risk for all the trades to exceed 2.5-5% of the capital.

·         First place a stop loss order then open a trade.

Why am I writing all this? My fellow traders (and me) who make relatively modest but stable profit have followed the same path. They tried to understand the market and find the logic of its movements through the wave analysis, channels and other tools. They looked for suitable brokers. They understood the math of the market which revealed the right money management and the principle “cut the losses and let the profit grow”. They realized that a professional trader must combine all the mentioned with strict discipline. All of us live in reality, which doesn’t forgive mistakes.

In order to exist in reality one should be able to answer the following 3 questions: Where am I? What is happening around me? What am I doing?

Where am I?

I am at the market of services aimed at providing quotes from various interbank marketplaces and exchanges. If I tell myself that I am at Forex then I deceive myself as nobody let me enter the real Forex market even with $1 million. It is the territory of big-scale enterprises. No individual can get there.

What is happening around me?

There are 3 major types of market participants:

·         Market makers (providing quotes)

·         Traders

·         Investors

To my mind, at the moment there is a situation contradicting safety logic. Numerous ads make common people go to dealing centers and deposit theirs savings as a trader or investor. Whatever they call themselves at such moments they are doomed to lose.

What am I doing?

Let’s say I lost ma savings as soon as I deposited them to the trading account opened at a certain dealing center. I understand it and decide to develop a trading system which will protect my savings and will allow me to gain profit without any considerable risks. In essence it is a simple and global task: to save and to multiply.

In order to solve the task it needs to be resolved into components.

Saving.

Whom do I give my money to? Definitely it should be done in Western Europe (not in the CIS states). For example, traditionally Switzerland and Great Britain have the most developed financial infrastructure in Europe. If such an activity is regulated we should study the regulations. What does the regulating authority pay attention to? Commissions, spreads, swaps (rollover), deposit/withdrawal of funds, deposit insurance. The deposit/withdrawal should be done only through an investment company or bank. The rest is the internal work of the service provider (broker). Just compare and choose the most favorable one. Moreover, a good support team and extra web services are additional strong sides of any broker or dealing center. And I managed to find such brokers.

The account is opened and funds are deposited. How should I trade? What should I be prepared for? What percent of the deposit should I risk?

Risk management.

First of all a trader should be prepared for the losses and strive to restrain them by all means. Honest brokers offer the so-called “Stop Loss Level” function, which allows traders to protect their deposit from the losses caused by technical errors. This function closes all the trades and removes all the pending orders once the account balance reaches a certain level. According to ТS4ЕТ, the Stop Loss Level function is executed once the drawdown exceeds 10% of the deposited capital even when there are some opened trades. Well-thought-out money management (MM) can also help to prevent the deposit from serious losses caused by wrong trading decisions.

ТS4ЕТ implies a conservative approach to managing risks: no more than 1.5% for a single trade and no more than 6% for all the simultaneously opened trades. The MM of ТS4ЕТ doesn’t allow a trader to open 2 simultaneous trades for a single trading instrument. The MM of the trading system is based on the principle of fraction. The essence is that every single trade implies a pre-determined fixed % of the capital. So, before opening a trade it is necessary to do the following:

1.       Calculate a definite sum ($) you are determined to risk. Let’s suppose we have $12500 and the fixed percent is 1.5%. Consequently we can open a trade that requires no more than $188.

2.       The given sum (in this case $188) should be divided by the value of the supposed loss per minimal lot (i.e. 0.1). For GBPUSD with 0.1 lots the price of 1 point is equal to $1. According to ТS4ЕТ the stop-loss order is placed 50pts away from the point of entering the market. In this case the max potential loss cannot exceed $50 for a single trade. By dividing $180 by $50 we get 3.75. It means that we can open a position with a volume of 3.75 mini-lots or 0.375 standard lots. In this case the cost of 1 point will equal $3.75. If the stop loss is executed we will lose no more than 1.5% of the capital or $188.

As you can see this is a fairly easy-to-use system. The volume of a trade is changed in proportion to the “size” of the trading capital. The profit is automatically reinvested while during a series of losses the size of the trading lot is reduced. Consequently you risk the same percent of the capital all the time.

Multiplying.

The signal system of ТS4ЕТ is calculated from H1 and bigger-scale timeframes. It should be noted that ТS4ЕТ is not a universal strategy and is optimized for trading Forex.

The signal system is based on the simplest indicators and their correlation, which give stable and simple-to-understand signals when tech analysis is applied.

1.       Price is the best indicator as long as the tech analysis is wise. ТS4ЕТ includes a set of techniques for profit-taking which are based on price values.

2.       Moving Averages. (MAs). ТS4ЕТ uses a set of Exponential Moving Average (EMAs). A “fantail” of EMAs serves in TA as a set of support/resistance levels. EMA 8 is used as one of the main indicators in cooperation with price. The intersection of a price bar and EMA 8 is the 1^st signal in ТS4ЕТ.

3.       MACD - Moving Average Convergence/Divergence. ТS4ЕТ includes a custom modification of the indicator, providing signals in the form of price bars of different colors. The color of the bars, their location relative to the zero line (or axis line) and their combination (color and location) are used to define the signal bar.

4.       Fibonacci levels are used as horizontal target levels. Once the price reaches a certain level of the Fibo grid, according to ТS4ЕТ, the trade (or a certain part of it) should be closed. The grid is built basing on 2 points: 1) the level of stop loss order defined by TA 2) the level at which the trade was opened according to ТS4ЕТ.

5.       Extra filters: Statistical checkup of the ТS4ЕТ system on historical data gave a positive expected value (+ EV). In order to improve the value and increase the profitability a set of extra filters were introduced to the trading system: Divergence of MACD, a fantail of MAs, intersection of MAs, elements of the exclusive signal system called AO_Z.

All these elements of ТS4ЕТ provide visually distinctive signals. The main indicators are unambiguous, which makes it possible to create an expert advisor or a trading “robot” based on the trading system. At the moment a team of programmers is developing software aimed at eliminating the psychological factor. Here are the results of testing ТS4ЕТ on historical data without applying extra filters:

At the moment the testing of major components of ТS4ЕТ is completed. The results make it possible to conclude that the strategy is quite stable during various stages of the market (flat/trend). The testing was performed in real time on demo accounts and lasted for a year. Over the last 6 months ТS4ЕТ has been actively tested on real-money accounts. As any trading system, ТS4ЕТ needs to be checked and optimized (if needed) every 6-12 months in order to take into account all the market changes. For more details visit the forum of Masterforex-V Academy.

 

 

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Text: Oleg Grib