Forex Trading Lab

Ever since I showed revealed how I use MBFX in my live trading, I’ve been getting some questions.  Today I answered some questions in an email, and since it got pretty long, I decided to post it here so others could benefit…

Start Email………………………………………….

Hey,

I’m not exactly sure when I’m going to get the blog post done… so let me answer some of your questions here.

The MBFX system itself is based on 2 indicators.  One is the red, green and blue lines on your chart, and the other is used for timing.  Basically, if price is on an overbought or oversold area (green or red area), then you use the timing indicator to get into the trade.  Your stop loss is determined by price action… above or below the last swing hi, or swing lo.  Therefore, the stop size depends on the time frame you are trading.

If you use the system as is, you need to practice for a while to see how the indicators act, especially the one on the chart, as it moves with price action.  This also means if you were going to take profit at the blue line, you are going to have to monitor the chart… or place your take profit and check back to see if it needs to be updated.

Now let me tell you exactly how I use it…

I use DDSMM for my money management.  This means I have a set stop (determined by the time frame I trade, which is the H4).  This uses dynamic money management to greatly increase my profit potential.  You can see more about this here: http://www.forextradingsos.com

I don’t have the MBFX indicator on my chart all the time, but sometimes add it for confirmation.  I do use the MBFX timing indicator all the time.  Basically, I use price action to look for potential entries, and use the timing indicator for verification and timing the entry.  I also use price action and the timing indicator for my exits.

EX.  Lets say price is bouncing off the bottom trendline of an upward channel.  I use the timing indicator to time my entry.  Since I am using ddsmm, I use the same stop value for all my trades.  I then look for price action and timing to show me when to get out… for example when price is at the upper trendline of the channel and timing indicator is changing direction.  That of course is just one example of price action.

In my opinion, price action setups are the best.  But I have found the timing indicator is great for getting me into the trades at the right place AND keeping me from taking profits too early.  Like I said, sometimes I pop up the MBFX indicator on my chart to see where price is at the time of entry as well.

If you don’t know a lot about price action, here is what I use:

Learn Forex Live: great course on price action trading

DreamSphere Live Trading Room: the trader uses price action setups and is very good.  Since he looks at more currency pairs than I monitor, when he comes up with a setup, I check out the chart and use the MBFX timing to see if I want to take the trade.  You could do the same… and learn a whole lot about price action trading just by being in the trade room.

I know everyone wants a system where they don’t have to learn anything, but your results are always a result of what you bring to the trading.  I love the price action / MBFX timing combination.  You might use the system just as is.  Or, you might have a different entry system and confirm it with the timing indicator.  There are a lot of options.  But one thing is for sure… you need to practice your trading system until you become comfortable.

Before I wrap this up, I do want to stress the importance of you money management.  For this I use DDSMM.  Think of it this way….

• Most traders are trying to find better systems or become better traders (psychology) just like gamblers look for systems and practice their tactics.  This is the long road to profits.
• DDSMM uses a mathematical formula much the same way as the casinos do… giving you the edge.  It is much easier to profit with this money management system and it puts the odds in your favor.  This is the fastest way to start seeing profits.

This money mangement system is good for manual trading and automated trading, here are some details: http://www.forextradingsos.com
Let me know if you have any other questions.

Edward

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One thing is for sure, I answer my emails.  Hope you learned something from my answers to MBFX trading questions.

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