Module 12

Page 1

Intro - BDM1 - A few points first

My Chart set-up

This is my fifth attempt at writing this module and I did actually get to page 3 before I realised that it was getting just a little too complicated, so I scrapped em and started again.... and again... and again. It has taken some time so apologies for that.

Many people have e-mailed and Skyped asking about how I trade and the exact set-up that I use, and if there is any difference from what is laid out in the modules thus far. My usual reply has been that if you cannot wait til I get this module finished please pop into the Trading Room because I show chart after chart of my trades. As do other people, who may not necessarily use the same set-up as me, nor the same time frame.

Once more I must say that the set-up presented below is what I use on the M1 time frame, I have not used or tested it on any other. I have used it on the Dax index, the NASDAQ, and the FTSE. I have also tried it on GBPUSD and EURUSD all on the M1.

Before we move onto my charts there's just a couple of points I'd like to discuss - please take careful note.


Some traders pay a set commission for the entry into a trade, and then again another commission for the exit of a trade. The round-trip as it is often called. It is a long time since I traded with commissions (I spreadbet) so I cannot recall the full details but I would imagine that commissions will differ to whatever market you are trading. As will the margins.

So, if you trade where a spread is in use it makes sense to trade with a broker who offers low spreads. This is because when you are scalping on the M1 time frame you will probably make many trades per day aiming for those small targets we mentioned in the last module. Many trades means paying a lot of spreads (or commissions) and this can bite into your profits.

Now, some brokers offer fixed spreads and some offer variable spreads. Which is better?

It depends on what you want. But fixed spreads means lots of re-quotes when trying to open or close a trade especially if the market is moving fast. You won't get re-quotes with variable spreads but the spread may widen at certain times.

For example, I have traded Dax with my broker for months upon months with their variable spread and it has always been in the region of 0.8 - 1.0 which is great for scalping. Anything around 1.0 is fine.

At this time of writing which is during the Coronavirus pandemic where most indices and some forex pairs have taken a dive and volatility is rife, spreads have widened so much as to drive me away from trading. Dax has a spread nearer 5.0 than 1.0 which is absolutely no good for scalping. I then moved onto NASDAQ which had a spread of 0.8, great. This has since moved up to the same as Dax. Ouch!

My next move was to the FTSE  - normally a spread of 1.0 and today was 3.6. Double ouch!!

No indices trading for me for a while. Gold is currently at 18! Normally 5.

Cable has been under 2.0 all this time, and EURUSD around 1.0 so I may have to look at these two. They don't move as good as an index but trading with wide spreads is a no-no for me. Very difficult to make a profit.

PLEASE keep your eye on the spreads during these difficult times.

Limit up/Limit down (LULD)

I was not aware of this feature until the markets went crazy recently. I was watching the NASDAQ looking for a trade when it suddenly stopped moving, price froze. I thought initially that it was my PC or the broker, but no. Apparently with some US markets if price moves a certain percentage then trading ceases for a certain amount of time. Like a safety valve.

I recall the NASDAQ ceasing trading and opening again 8 hours later and gapping 90 pips lower. Now, call me a wimp but I do not fancy that. No more NAS til things quieten down. This was when I moved to the FTSE.

Just another thing to watch out for, but worth knowing.

My set-up

Please refresh your memory with the previous three modules, it will really help. As always, do your homework and really work at it. By that I mean do your chart time as described in Mod 5 Page 1. Chart time is a must as it will keep you 'in the zone' and ready for the battles ahead.

Simply copying what we have here, then looking for trades and hoping to profit on a regular basis just won't work. It is not the answer. You really have to work at it. Chart time - chart time - chart time. Get everything into your head of what you are looking for, what constitutes a good signal, etc.

As simple as I have tried to make this for me it still takes some getting used to. I don't want to be figuring out til the cows come home if I should be entering or not. NO paralysis of analysis. NO fannying about with all the garbage out there. If you (me) have done the homework then it will be dead simple - and deadly.

So, first off, what are we looking for? It's easy, I look to trade outside the NTZ (No Trade Zone). Let's just have a quick chart to point this out.

Chart #1  Where we should trade?

Black Dog Trader

Chart #2 Where we should be looking to enter?

How much time does that chart cover? It's just over three hours with a possible seven trades. (Just goes to show that you need not trade all day long).

Point #9  How long in a trade?

How long is a piece of string? M1 is a fast-paced activity and there is no real answer. 

At a guess most are 5 minutes or less, and out. Profit asap and close. Losers are quickly closed too because I want to see price go in my intended direction pretty quickly or it's 'cut cut cut'. Giving back profits is a sin!

Likewise, holding on to a loser that you HOPE is going to go back in your favour will destroy your account in no time. There will be plenty of opportunities on M1 so why attach yourself to a loser? Without a second's thought, close it and look for another. Re-entries are ok if it turns back in your intended direction, but all the reasons for entering the trade in the first place should still be valid.

My new theory on inertia is not gaining momentum..!!

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