How I Trade Forex Using the Slope Direction Line

Transcription

1 How I Trade Forex Using the Slope Direction Line by Jeff Glenellis Copyright 2009, Simple4xSystem.net By now, you should already have both the Slope Direction Line (S.D.L.) and the Fibonacci Pivot (FiboPiv) indicators loaded into your MT4 platform. If not, the next few paragraphs are for you. If you already have an MT4 platform set up, and the Slope and FiboPiv indicators loaded, skip down to the good stuff. Setting Up Your MT4 Platform If you need an MT4 platform, there are literally dozens of forex brokers that will allow you to sign up for a Demo account and use their platform for free. You can find a good sized list at: Choose any of the names on the list and fill out their brief application to access the MT4 platform. This is necessary because I can t find a Slope Direction Line for any other type of platform other than MT4. Once you have your MT4 platform installed and operational, you need to download two different indicators that do not come already installed on the platform. The Slope Direction Line indicator is found at: There are 3 different indicators on this page for download. ONLY DOWNLOAD THE ONE IN THE MIDDLE, named Slope_Direction_Line.mq4 The easiest way to download directly into your MT4 platform is this: 1. Click on the link for the Slope Direction Line. This will open up a Dialogue Box, asking you if you want to Open, Save or Cancel. 2. Click on SAVE 3. This will open a new Dialogue Box. At the top, click on the downward facing V in the grey box to open your options for saving.

2 4. Click on Local Disk (C:), then on Program Files, then on the name of the file where your MT4 Platform is located hint most have the word Metatrader in the name of the file then click on experts then click on indicators. 5. Save the S.D.L indicator in the indicators file. Do the same thing (meaning follow the exact same steps) to download the Fibonacci Pivot Indicator into the very same indicator file. You can find the Fibonacci Pivot indicator here: The indicators are listed in alphabetical order, so scroll down to the F s and look for: FiboPiv_v2.mq4 This is the indicator you load into your platform s indicator file, using the steps I outlined just above. Once you have both indicators loaded, open your platform. Now open a chart (which you can do by clicking on File/New Chart and selecting the name of a chart to open). If you want candlesticks instead of a bar chart, right click your mouse, and at the bottom of the dropdown box, choose Properties. This will open a new dialogue box, and you can change from bar to candlesticks or line chart under the Common tab. You can also change your candlestick/bar/line colors by clicking on the Colors tab and making your selections there. Next, click on Insert/Indicators/Custom and scroll through the dropdown box until you find Slope_Direction_Line. Click on this indicator and it will load onto your charts. When it first loads, you will have an Inputs Box open up. If you don t like the colors that are default for the SDL Light Blue for up and Tomato for down you can change them by clicking on the colors and choosing new colors from the options provided. You can also change the size of the Slope Line by clicking on the lines in the Width column and making them larger (I use the #3 because my eyes are getting worse, and the 3 stands out without completely covering up the candles). Next, click on the Inputs tab, and click on the number 80. This will allow you to change that number, using the number keys on your keyboard. Change it to 34. Now click on the next number down (3) and change it to a 2. Click OK. This will install the first SDL on your chart.

3 Now go back, and using the same directions, install a second SDL on your chart. Make the colors the same ones you chose earlier (or leave them as default if that was your choice) and make sure the line width is the same as you chose for the first SDL. Now click on Inputs and change the 80 into a 9. Leave the 3 and the zero as they are. Now click on OK. This will install the second SDL on your charts. Finally, click on Insert/Indicators/Custom and when the dropdown box appears, click on FiboPiv_v2. This will install the Fibonacci pivot lines on your charts. When the Dialogue Box opens, just click OK. No changes are necessary to this indicator. Your charts now look just like mine, assuming you are using candlesticks. Placing Trades Using the S.D.L. While there are many different ways to trade using these lines, here are the 3 I find most profitable. 1. Scalping. If you are looking for a way to make a quick 5-10 pips, with a high probability of success, try this method. Open both a 5 minute and a 1 minute chart (any pair, although I found it works best using either the EUR/JPY or the GBP/USD). Put both SDL s on each chart. (34,2,0 and 9,3,0 input settings). Start with the 34,2,0 line on the 5 minute chart. It will tell you the current overall trend (up or down) Next, look at the 34,2,0 line on the 1 minute chart. It should be the same color as the 34,2,0 on the 5 minute chart. Wait for the 9,3,0 line on the 5 minute chart to change colors to match the 34,2,0 line. When all 3 lines are in agreement, meaning all the same color, turn your attention to the 9,3,0 line on the 1 minute chart. When this line changes colors to match the other three, you enter a trade in that direction. If all four lines are blue, you Buy. If all four lines are red, you Sell. Again, this is a scalp, so do not expect to make pips in a single trade using this method. It will happen once in a great while, just don t expect it all the time. All you are doing is getting in, making a quick 5-10 pips, and getting out.

4 If you can catch the beginning of a trend (meaning the 5 minute 34 line is just changing color, and the others follow along behind soon thereafter), you can find yourself with numerous chances to jump in when the 1 minute 9,3,0 line changes color/direction back towards the trend repeatedly. So you jump in, grab a few pips, jump out. The 1 minute 9 line changes colors and goes against the trend for a couple of minutes. When it changes back and joins the trend, you can jump in again and see if you can get 5-10 more pips, and keep doing that for as long as the other three lines remain the same color. Since you are scalping, if the trade runs against you more than 3-4 pips (not counting the spread) GET OUT!!!! You are scalping, and if you take a 20 pip loss, you are going to need to win 3-4 trades in a row just to get back to break even. So keep a very tight stop loss when you are using this method. 2. Trending Scalp This is a harder trade to describe, because you normally don t stay in it all that long, and you are still looking to grab only a handful of pips (5-20 or so) but it technically isn t a scalp, and it isn t really a trend trade either. It s a little bit of both. On a 5 minute chart, put up both your SDL s. You are only going to trade the color changes on the 9,3,0, but you want to trade only in the same direction as the 34,2,0 line. So if the 34,2,0 is red (meaning sell) you enter your Sell trades as soon as the 9,3,0 line locks in red (meaning the current candle closes and the SDL line is now red as well. You can either trade this for a set amount of pips (and since you are on the 5 minute charts, pips is a reasonable target) or you can trade it until the 9,3,0 slope direction line changes colors and indicates a Buy. You don t necessarily buy (you buy only if the 34,2,0 line has also changed colors) but you exit the trade. Much like the scalp trades, you don t want this one to get away from you too far, but if your goal is 20 pips, you can give yourself a 15 pip stop loss (+ your spread cost) making your overall stop loss about pips, depending on the spread you pay. If you are shooting for a 10 pip profit, keep your stop loss around pips as well. This way, if you lose a trade, you only need to win one in order to get back to break even. 3. Trending. This is the easiest of the three methods to trade, and is probably the most profitable, assuming you have the patience to let each trade play all the way out.

5 Use only the 5 minute chart and the 34,2,0 SDL. Trade only between 11 p.m. and noon eastern (13 hours total). When the 34,2,0 line changes color, enter a trade in that direction (Blue = Buy, Red = Sell). To exit a trade, either wait for the color to change again, and get out of the first trade (and get back in going the other way, if you are so inclined) or set a reasonable daily pip goal ( is reasonable with this method) and get out once your goal is reached. If you can trade between 11 p.m. and noon, eastern time, in most of the major pairs you are going to get anywhere from 3-10 trades using this method. In truth, the fewer trades, the better, since when you get a lot of color changes on the 34,2,0 line, it means price is ranging a little too tightly. If you get 3-4 changes, you are going to make anywhere from 100 to 300 pips on just that one pair. The great thing about this method is that you can trade multiple pairs at the same time. It moves so slowly you can afford to watch 2-4 pairs at one time (and if you are just shooting for pips a day, you can reach that goal quickly most nights by trading 3-4 pairs) How The Fibonacci Pivots Figure Into All The Trades After you install the FiboPiv indicator, on the right side of your charts you ll notice that certain prices are highlighted in different colors. The Blue color in the middle of the numbers is your Fibonacci Pivot Point. The three green numbers are all Resistance levels, while the three red numbers are all Support levels. The idea behind these seven numbers is that when price reaches them, we expect the momentum to cease, and price to reverse and head in the opposite direction. It doesn t always happen this way, but it happens often enough that I keep a close eye on these different price levels when I am trading. If I get a Buy signal, and the current price is only pips away from one of the colored lines in the direction of the potential trade, I will usually pass on taking the trade unless I see clear evidence of a very strong move that is likely to break through the colored line the first time. If I am less than 10 pips away, I will almost always pass on the trade, for the same reason. No sense getting into a trade where the odds are good that price will barely move enough to cover your spread, much less make enough pips to be considered profitable. Along those same lines, if I have been in a trade for a while, and I am up 25 pips (just as an example) and price is approaching one of the colored lines, I will use that as a reason to exit the trade and bank the pips. The same reasoning applies. If the momentum seems

6 strong, I will stay in the trade until I see the first sign of a price reversal. If the trade has been slow in developing, I will get out right before the price reaches the colored line. If it turns out I was wrong, I can always get back in the trade after price breaks through that line, assuming all other indicators favor the trade. Just keep an eye out for the next colored line, and make sure you have enough room between your entry and the next level of Support or Resistance to make the trade profitable.