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Welcome to The In this special report you will learn how to trade another one of my most powerful trading systems. This is a system that I developed and traded on a wide variety of accounts and it has proven to be a genuinely profitable trading system capable of delivering spectacular returns. It uses 2 EMAs and 2 RSI indicators, to get very reliable confirmations for entries. This system is easy to use and implement, so it will be suitable for both beginners and experts in Forex trading since it s very reliable and most importantly, consistent. It can be used on any currency pair or timeframe and as long as you follow the rules, you should gain profits. www.elliottwavedna.com 3
System Components The Double Helix system uses just two indicators that every platform already has pre-installed. The first indicator is the Relative Strength Index (RSI), and the second is the Moving Averages indicator (MA). What is RSI? The Relative Strength Index (RSI) is a popular momentum oscillator developed by J. Welles Wilder, Jr. which he describes in his book New Concepts in Technical Trading Systems. RSI is one of the most popular technical indicators among traders, since it can help to determine overbought and oversold price levels as well as generate buy and sell signals. The indicator does this by comparing the price action over a certain period of time usually 14 periods that enables the indicator to show if the price became unusually high or low. Therefore, it can be used to determine when the trend might start reversing. Using the RSI The RSI is useful for traders looking to time their entries and exits from the markets, so they can maximize profits ahead of a rise or fall in price. The RSI is a versatile tool, it can be used to: Generate buy and sell signals Show overbought and oversold conditions Confirm price movement Warn of potential price reversals through divergence www.elliottwavedna.com 4
Using the 30 and 70 levels to see overbought and oversold conditions When the RSI line begins to approach the 30 level, it is likely that the downtrend is ending. When the RSI line begins to approach the 70 level, it is likely that the uptrend is ending. It is only when the RSI begins to approach the 30 or 70 level that traders really pay attention. This marks the points where the asset is becoming overbought or oversold. When the line is above 70, an uptrend is likely to come to an end. This is shown on the chart below: www.elliottwavedna.com 5
When the line is below 30, a downtrend is likely to come to an end. This is shown on the chart below: Please bear in mind that the RSI alone is usually not enough to determine the trend reversal. It indicates a potential reversal. However it s best to pair it with another indicator or strategy for confirmation. That s where for instance, divergence comes into play. www.elliottwavedna.com 6
Double RSI for double precision Although RSI is a fantastic indicator by itself, I ve discovered that pairing two of them together produces much more reliable results. We will be using the following settings: 1 st RSI: 7 Periods 2 nd RSI: 13 periods Important: To get a valid signal, BOTH RSI indicators must show divergence. How to apply RSI onto your chart: 1. From the menu: Go to Insert -> Indicators -> Oscillators -> Relative Strength Index. 2. From the Navigator window (if it s not open, go to View -> Navigator Window or press CRTL + N), expand the Indicators section and either double-click on RSI or click and drag it onto your chart. Once you ve applied the indicator onto your chart, you will be prompted with the Properties window. For the first instance of RSI enter 7 for the RSI Period parameter and for the second instance of RSI enter 13 for the RSI Period parameter. www.elliottwavedna.com 7
RSI 7 Parameters: RSI 13 Parameters: www.elliottwavedna.com 8
Divergence Divergence is simply a disagreement between price and indicator movements. On the chart below we can see that GBP/USD shows a high and a higher high, and on the RSI we have a high and a lower high. This is a basic example of divergence that suggests a potential push lower soon. www.elliottwavedna.com 9
On the AUD/CAD chart image below we see a good example of divergence that appears in a bearish trend. While price moves down and forms a low and a lower low, the RSI formed a low and higher low. www.elliottwavedna.com 10
Moving Averages Moving Averages smooth the collected price data from a given instrument and form a line on the chart. Traders call the MA a trend-following indicator. The most important thing to understand is that MA really does not predict the future price direction. The MA s main purpose is to define the current trend direction with a little bit of a lag. Of course this lag is more than normal because we are using data from history and plotting it on the chart. The two most popular versions of the MA indicators are the EMA (Exponential Moving Average) and the SMA (Simple Moving Average). You can see below what the SMA and EMA would look like on a chart/ In our system we will use 2 EMAs, the first one will be an EMA 13 and the second an EMA 21. On the chart above we can see the 13 EMA as a green line and the 21 EMA as an orange line. We watch for when these two EMAs cross each other (marked with the 5 squares on the chart at places where such a crossover occurred). Further on in this report you ll get to understand why you need to watch these on your chart. www.elliottwavedna.com 11
How to apply an EMA onto your chart: From the menu, go to Insert -> Indicators -> Trend -> Moving Average. Once you ve applied the Moving Average onto your chart, you will be prompted with the Properties window. Settings for the EMA 13: Period: 13 Shift: 0 MA Method: Exponential Apply to: Close Style: Green Settings for the EMA 21: Period: 21 Shift: 0 MA Method: Exponential Apply to: Close Style: Orange www.elliottwavedna.com 12
Buy and Sell Trade Rules Here are the rules for identifying and entering Buy trades using the Double Helix system, followed by a few examples to help you grasp the rules. All conditions must be met before any trades may be considered. Buy Trade Rules 1. The current trend of the instrument you want to trade needs to be bearish. 2. Wait to spot divergence on BOTH RSI indicators. 3. Wait for the 13 EMA indicator to cross above the 21 EMA indicator. 4. If all of the above conditions have been met, proceed to enter the market with a Buy trade right after the EMA crosses. 5. Place your Stop Loss at the most recent Swing Low. 6. Place your Take Profit the same number of pips away from your entry as your Stop Loss (1:1 Risk/Reward Ratio). The rules for identifying and entering Sell trades using the Double Helix system are simply the reverse of those for Buy trades. Sell Trade Rules 1. The current trend of the instrument you want to trade needs to be bullish. 2. Wait to spot divergence on BOTH RSI indicators. 3. Wait for the 13 EMA indicator to cross below the 21 EMA indicator. 4. If all of the above conditions have been met, proceed to enter the market with a Sell trade right after EMA crosses. 5. Place your Stop Loss at the most recent Swing High. 6. Place your Take Profit the same number of pips away from your entry as your Stop Loss (1:1 Risk/Reward Ratio). www.elliottwavedna.com 13
Buy Trade Example The first example that we can look at is the EUR/USD which you can see on the image below. The price was moving lower in the first half of the session and after that we spotted divergence (I marked divergence with points 1, 2 and 3). After that, we needed to wait for the 13 and 21 EMAs to cross each other so we could start buying this pair. At the cross we entered a long position. This point is marked as 4 on chart. For our Stop Loss we use the most recent swing low, so we place the stop loss at the lowest point of divergence (marked 5 on chart), and we use a measurement of the same amount of pips for our Target point (marked 6). www.elliottwavedna.com 14
Sell Trade Example For the Sell example we are going to look at the CHF/JPY pair on the 1H time frame. We can see that for a few days this JPY cross has been trading upwards, and we finally see divergence (I marked divergence with points 1, 2 and 3 on the chart below). The next stage is to wait for the EMA crossover before selling this pair. After 3 candles we got that crossover and then took a short position (this entry is marked 4 on chart). For the Stop Loss we use the most recent swing high, so we place the stop loss at the highest point of divergence (marked 5 on chart) and we use the same amount of pips for our Target point (marked 6). www.elliottwavedna.com 15
Buy Trade Example On the image below you can see that at points 1, 2 and 3 we have divergence on both RSI indicators. So we wait for a potential long position. A crossover happened quite rapidly. I marked this point with a 4 on the chart above. This is the point at which we would enter a long position. For the Stop Loss we use the most recent swing low, so we place the stop loss at the lowest point of divergence (marked 5 on the chart) and we are use the same amount of pips for our Target point (marked 6). We managed to get a nice profit before the end of the week. www.elliottwavedna.com 16
Sell Trade Example Let s take a look at another Sell trade. On the chart below you can see that the EURO has been moving higher and we notice divergence and that is a sign that we can start looking for sell positions (divergence showed at points 1, 2 and 3). Again we would wait for a crossover of the two EMA s, and we enter a short position at point 4. For the Stop Loss we use the most recent swing high, so we place the stop loss at the highest point of divergence (marked 5 on chart) and we use the same amount of pips for our Target point (marked 6). www.elliottwavedna.com 17
Conclusion I would like to share a few powerful tips that will help you get the most out of trading the Elliott Wave DNA system and give you the very best results. The system can be applied to all timeframes and currency pairs with equal success but I personally prefer to trade it on the following pairs as they tend to perform the best for me. It might be different for you and that s all right, but I m sure you re curious to know the pairs that I trade, so here they are: EUR/USD, GBP/USD, USD/CHF, USD/JPY, AUD/USD, USD/CAD, EUR/JPY and GBP/JPY. Tighten your Stop Losses around High Impact News Releases or avoid trading at least 15 minutes before and after these events. I have also found that the best results can be achieved on the 15 minute timeframe for day trading and the 1 hour timeframe for swing traders. This system has served me very well and I know that you will enjoy trading it too. If you can follow the rules and these simple guidelines you are well on your way to success as a trader. I wish you the very best in all your trading endeavors. www.elliottwavedna.com 18