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Personal Details
Name – Mr Kay
Position – 1st Place
Percentage Gain – 273.77%
Age – 50 years
Country – Brunei
Occupation – Fulltime Trader and Freelancing.
Bio – I am currently retired with a background in the Engineering industry. I am married with five children. I've been trading since the early 1990's and trading on a full time basis since early 2000. Over the years I have developed numerous custom indicators and expert advisors so I'm always looking to learn more and improve my trading.
System Overview
Markets Traded – Forex only, but mostly EURUSD and occasionally USDCHF,
GBPUSD, USDJPY, AUDUSD, GBPJPY
Charts – All time frames
Charting Software – MT4
Indicators – My custom KAY-Envelops indicator, Stochastic, MACD, Bollinger
Bands, Weekly Pivot, Fibonacci Retracements and Projections/Expansions, Trendlines
Lot Size – Risk dependent (as a guideline and a safe entry, I keep my Margin level around 1500% to 2000% or 150:1 to 200:1 and if my confidence level is high, I go as low as 1000% on entry and if the trend is clear to go further and my Margin level increases (i.e if I am in profit), I then add more lots to keep me within the margin level percentage with some profits locked in on the earlier trade).
Description
Instead of describing the Strategy as 1 + 1 = 2, I provide herein the thinking or logic behind using the indicators in order to give you a good mindset when using this method as the possibilities are enormous coupled with good discipline and good money management.
The trading strategy is centered around the KAY-Envelops custom indicator which I have created as shown below. There are four lines which represent the most outer (thick lines) and most inner (thin lines). The basic equation (which was discovered a long time ago, following various trials) is summarized as:
Close +/- Sine (Phi * Fibonacci Level x (Differences of High to Low)). Then smoothed out with 55 period as the default value.
The outermost line is the 1.382 Fibonacci level and innermost line is 0.618 level. (See image below). I developed this equation in many forms and found that if I use these numbers, the price actions are always within the stated trading strategy and with quite a high success rate as well.
The top lines are calculated by adding the Sine equation to the Close while the bottom lines are by subtraction. Hence, four lines. Take note on how the price reacts when it touches the lines especially the outermost lines.
Generally speaking, it only reacts in three ways (as per how the market normally reacts). That is, either it bounces back, goes through it or it consolidates within the lines.
The recommended Period setting for most currency-pairs is 55 (which is the default setting) and for Yen (i.e JPY) related pairs (e.g. USDJPY, GBPJPY) is either 21 or 34. The idea is to contain at least 95 to 98% of the market prices within both of the outermost lines.
If the period setting is too small, then the market prices tend to be 100% within the KAY Envelops whilst if it is too big, then the market prices contain within the KAY Envelops will be less than 95%. This is not the idea at all.
You have to examine the historical containment of the market prices within the KAY Envelops, just by eye-balling it. No need to accurately measure them.
Just make sure that the historical market prices are contained within 95-98% of the KAY Envelops' outermost lines. Then this strategy is valid to to be used.
Now, in order to aid us to understand where the market is likely to go, the very first thing to look at is where are the current Support and Resistance levels are. Here, I use Weekly standard Supports and Resistances as shown below by the dashed lines on the chart.
The Yellow line is the Pivot Point while the Reddish colored lines are
Resistances and Greenish colored lines are the Supports. These lines are drawn by the KAY_Supp_Resist_Weekly custom indicator.
If you are trading a smaller time like 5 or 15 minute chart then you can change the TimeFrame option on the indicator from 10080 mins to 1440 mins so that it will display Daily Pivot, Support & Resistance levels instead of Weekly levels.
Take note on how the market reacts when the price hits both the outermost lines as well as the Weekly Support/Resistance lines.
It either consolidates (circled green) or goes through it (circled blue). When it goes through, it normally follows the outermost line.
Now, when we add Bollinger Bands, the picture starts to get a little clearer as shown below.
From here, following hits of the outermost lines and the Support or Resistance lines, I usually keep an eye on the Bollinger Bands. If price hits the top line, I will wait for the Bollinger Bands to contract and if the level of the contraction is inside the Envelops and the price is below the Support and/or Resistance lines, then the market has a high probability of going down.
The Bollinger Bands basically signal my entry point. After price touches the upper or lower Kay Evelops and a Support or Resistance level I wait for the Bollinger Bands to contract. At this point I look for price to close either above or below the Support or Resistance levels. The trade direction and entry is confirmed when there is a breakout of either the upper or lower Bollinger Band. If there is a breakout of the lower band then I will go short and if there is a breakout of the upper band I will go long.
The opposite situation occurs in the next image. The circled areas where the Lower Bollinger Band has contracted and the price is below the Support line, so in this case, the market will continue its previous direction as shown above.
The opposite situation occurs in the next image. The circled areas where the Lower Bollinger Band has contracted and the price is below the Support line, so in this case, the market will continue its previous direction as shown above.
To further increase the probability, I added the Dual TimeFrame MACD indicator.
In this case, since this is a 1 Hour chart, the Dual TimeFrame will indicate the 1 Hour MACD as well as the 4 Hour MACD as shown below:
The Dual TimeFrame MACD shown in the image above is read as follows:
Red colors for the current chart and Blue for the Higher TimeFrame (in this case, the 4 hour time frame). The Histogram is the difference between the MACD Main and its Signal value of the higher time frame only.
NOTE: The RED Lines on the MultiTimeFrame MACD and Stochastics will always be the lower time frame while the BLUE Lines will always be the higher timeframe. When you’re at the right edge of the chart you will see these icons on both indicators which will make it easier to tell them apart:
The ideal case is when both MACD's are aligned as well as the Histogram either showing Bearish (RED) for a DOWNWARD move or Bullish (GREEN) for an UPWARD move.
In the case of the first Blue vertical line, the situation is not quite ideal but is good enough to proceed selling since both uppermost top lines and Resistance lines were already hit and the price is below the Resistance line after Bollinger Bands have contracted. The MACD for the current chart is showing Bearish and the Histogram for the higher time frame is also showing Bearish (even though the higher time frame MACD is still showing an UPWARD move).
Whilst on the second Blue line, all conditions are met to proceed to go SHORT (i.e Sell) as per the previous one. In order to optimize a trade entry, another Dual TimeFrame indicator is used i.e. Stochastic as shown below.
In this case, the Dual TimeFrame Stochastics are also satisfied to go SHORT in both of the Blue vertical line cases. Note: The setup is similar to the MACD as well.
In the image above you can see that both the red and blue lines on both the MultiTimeFrame MACD and Stochastic are close together where both the vertical blue lines appear. Both histograms on these indicators are bearish as well.
In a long trade scenario, both the red and blue lines should be close together, heading upward and the histograms should both be green (bullish). In a short trade scenario, both the red and blue lines should be close together, heading downward and the histograms should both be red (bearish).
Chart Setup
The way I set up the chart, normally, I look at the bigger picture first. In this case, I will open a higher time frame chart e.g. Daily and Weekly chart. This is good enough to provide me a longer term direction of the market. If you prefer to trade the weekly chart, the default higher timeframe is the Monthly chart.
I use the ONE HOUR chart as my trading chart and from time to time, I also look at the 4 hour chart. Most of the time, I have 1 hour, 30 mins, 15 mins, 5 mins and 1 min chart open at the same time and viewable at one glance. This will help me to see if the market is still going in the direction of my ONE HOUR chart and often I exit some of the trade when the 5 or 15 mins chart is going against the ONE HOUR chart. I sometimes use the lower time frame as my optimum trade entry/exit area.
The setting of the charts are all the same as per set for the ONE HOUR as shown below. For the chart, I normally use black color as the background and white as the foreground. What you see here, is not my normal chart background setting. This is only shown this way, in order to make it more readable as a document.
Once you have set up a chart with the relevant indicators, you can then save it as a template and just simply load the template for other timeframe. List of indicators used in this strategy are shown below:
Open a 1 Hour chart and then add the following indicators to your chart:
• KAY_Envelops
• KAY_Supp_Resist_Weekly
• Bollinger Bands
• KAY_DualTimeFrameMACD
• KAY_DualTimeFrameStoch
The settings used for each indicator are shown below. It's fairly self explanatory but I've also listed the settings below each image for your convenience: KAY_Envelops
• Period: 55
• xEnvelops: 5
• yEnvelops: 20
KAY_Supp_Resist_Weekly
• TimeFrame: 10080
• xwkly: 5
• ywkly: 35
• ywkly: 35
Bollinger Bands
• Period: 20
• Deviations: 2
• Shift: 0
• Apply to: Close
KAY_DualTimeFrameMACD
• fastMA: 12
• SlowMA: 26
• SignalPeriod: 9
• Text Dist: 12
KAY_DualTimeFrameStoch
• STO_period: 8
• STO_K: 3
• STO_D: 3
System Rules
The generic system rules are as follows:
Short Trades
1. Open a higher time frame chart to provide us the longer term picture of the market direction i.e. if you are trading the 1 hour chart open the 4 hour chart at least. Alternatively open the Daily and/or Weekly chart if you prefer.
2. Use the ONE HOUR chart to examine where the market is in relation to the KAY Envelops and Weekly Support/Resistance lines.
3. If price hits both of the outermost lines as well as the Weekly Support/Resistance lines, wait for the market reaction by observing the Bollinger Bands contraction.
4. If during/after Bollinger Bands contraction, the market is below the Weekly Support/Resistance, then there is an opportunity is to go SHORT (SELL).
5. Check the KAY Dual TimeFrame MACD if the direction is in agreement, if it is then standby to enter the market when the KAY Dual TimeFrame Stochastic is also in agreement with the MACD indicator.
6. If all above are aligned, then use the ONE HOUR Stochastic for entry. Alternatively, you can also use the lower time frame to time your optimum trade entry. Normally I open four SELL orders with four different target levels. My target levels are as follows:
6. If all above are aligned, then use the ONE HOUR Stochastic for entry. Alternatively, you can also use the lower time frame to time your optimum trade entry. Normally I open four SELL orders with four different target levels. My target levels are as follows:
Sell Order 1 Target at the 61.8 Fibonacci Expansion level.
Sell Order 2 Target at the 100.0 Fibonacci Expansion level.
Sell Order 3 Target at the 161.8 Fibonacci Expansion level. Sell Order 4 Target at the next Resistance line (point 9).
7. Draw a Fibonacci Expansion to determine the 61.8, 100.0 and 1.618 Expansion levels that we will use for our targets.
8. For my exit strategy I normally move my stop loss up as new bars are formed. If I am SHORT, then I use the highest high of the bars within the price range as my Stop Loss. You can also use both the outermost KAY Envelops and Weekly Support/Resistance lines as your STOP LOSS.
9. Set the ultimate profit target on the next higher Weekly Support/Resistance for SHORT positions.
10. There are a number of different partial trade exits I use. They are (in any order of preference):
a. ONE HOUR stochastic reverse signal.
b. Break of Trendline.
c. Fibonacci projection levels @ 0.618, 1.00 and 1.618.
d. Stochastic histogram reverse signal.
e. MACD histogram reverse signal.
f. Lower than ONE HOUR timeframe reverse signal especially if the MACD are all against the trade.
g. Hitting the opposite side of the Most Outer Envelops lines (Or Most inner for higher time frame or for an early win).
h. Hitting a trailing Stop when Pivot line is hit, based upon the three previous bars lowest low for LONG trades.
Long Trades
1. Open a higher time frame chart to provide us the longer term picture of the market direction i.e. if you are trading the 1 hour chart open the 4 hour chart at least. Alternatively open the Daily and/or Weekly chart if you prefer.
2. Use the ONE HOUR chart to examine where the market is in relation to the KAY Envelops and Weekly Support/Resistance lines.
3. If price hits both of the outermost lines as well as the Weekly Support/Resistance lines, wait for the market reaction by observing the Bollinger Bands contraction.
4. If during/after Bollinger Bands contraction, the market is above the Weekly Support/Resistance, then there is an opportunity is to go LONG (BUY).
5. Check the KAY Dual TimeFrame MACD if the direction is in agreement, if it is then standby to enter the market when the KAY Dual TimeFrame Stochastic is also in agreement with the MACD indicator.
6. If all above are aligned, then use the ONE HOUR Stochastic for entry. Alternatively, you can also use the lower time frame to time your optimum trade entry. Normally I open four BUY orders with four different target levels. My target levels are as follows:
Buy Order 1 Target at the 61.8 Fibonacci Expansion level.
Buy Order 2 Target at the 100.0 Fibonacci Expansion level.
Buy Order 3 Target at the 161.8 Fibonacci Expansion level. Buy Order 4 Target at the next Resistance line (point 9).
7. Draw a Fibonacci Expansion to determine the 61.8, 100.0 and 1.618 Expansion levels that we will use for our targets.
8. For my exit strategy I normally move my stop loss up as new bars are formed. If I am LONG, then I use the lowest low of the bars within the price range as my Stop Loss. You can also use both the outermost KAY Envelops and Weekly Support/Resistance lines as your STOP LOSS.
9. Set the ultimate profit target on the next higher Weekly Support/Resistance for LONG positions.
10. There are a number of different partial trade exits I use. They are (in any order of preference):
a. ONE HOUR stochastic reverse signal.
b. Break of Trendline.
c. Fibonacci projection levels @ 0.618, 1.00 and 1.618.
d. Stochastic histogram reverse signal.
e. MACD histogram reverse signal.
f. Lower than ONE HOUR timeframe reverse signal especially if the MACD are all against the trade.
g. Hitting the opposite side of the Most Outer Envelops lines (Or Most inner for higher time frame or for an early win).
h. Hitting a trailing Stop when Pivot line is hit, based upon the three previous bars lowest low for LONG trades.
[ NOTE: The Pivot line is generally a place for the market to rest before continuing the journey in the same trend as previous move, though sometime it reverses the direction]
On exit strategy, the very first two things to do are to set the initial STOPLOSS [1] and the ULTIMATE PROFIT TARGET [2].
If you are LONG, then use the lowest low of the bars as your STOP
LOSS[1] and set your ULTIMATE PROFIT TARGET [2] at the next higher Weekly Support/Resistance for LONG positions (see image below)
NOTE: In the example above price hit the lower Kay Envelop and the support
line (green horizontal dashed line). Price ranges with several closes above and below the support line so we wait for confirmation from the Bollinger Bands for our entry. The conservative entry occurs when there is a breakout of either the upper or lower Bollinger Bands. The aggressive entry occurs when there is a breakout of the price range i.e. the highest high or lowest low after price hit the upper/lower Kay Envelop line and Support/Resistance level.
In the example above, price broke out of the price range shown by the grey box to the up side so we enter a Buy order. If price had broken the grey box to the down side we would have entered a Sell order. If we were going to use the conservative entry we would have waited until price broke out of the upper Bollinger Band to Buy and below the lower Bollinger Band to Sell.
Now, let’s assume that price had hit the upper Kay Envelop and a support/resistance line. We would wait until the Bollinger Bands contract. There will be closes above and below the support/resistance line so we need to wait for a breakout of either the upper or lower Bollinger Bands after they contract for a conservative entry. For an aggressive entry we can enter after the breakout of the price range i.e. the highest high or lowest low after price hit the upper/lower Kay Envelop line and Support/Resistance level. If there is a breakout above the price range (aggressive entry) or Bollinger Bands (conservative entry) we will Buy. If there is a breakout below the price range (aggressive entry) or Bollinger Bands (conservative entry) we will Sell.
So our decision to go either long or short does not matter on whether we hit the upper or lower Kay Envelop lines. You can still trade in both directions because what determines the direction in which we trade is actually the breakout of the price range for an aggressive entry or the Bollinger Bands for a conservative entry.
For SHORT position, use the highest high for your STOP LOSS[1] and the next lower Weekly Support/Resistance lines as your ULTIMATE PROFIT TARGET[2] (see image below)
For SHORT position, use the highest high for your STOP LOSS[1] and the next lower Weekly Support/Resistance lines as your ULTIMATE PROFIT TARGET[2] (see image below)
Partial trade exits are at (in any order of preference):
a. 1 Hour Stochastic reverse signal.
b. Break of Trendline.
c. Price reaches Fibonacci projection levels @ 0.618, 1.00 and 1.618
d. Stochastic histogram reversal signal.
e. MACD histogram reversal signal.
f. Since we are using ONE HOUR as our Trading Time Frame, we can also use any of the Lower than ONE HOUR Time Frames
15 mins) as our partial exit strategy if it exhibits a reversal signal especially if its Dual TimeFrame MACD is already against our trade direction.
g. Hitting the opposite side of the outermost Envelops lines (Or innermost lines for higher timeframe or for an early win/exit).
h. Hitting a trailing Stop when the Pivot line is hit, based upon three previous bars highest high for SHORT or lowest low for LONG (see image below for detail in the case of LONG trade). Basically, the initial StopLoss is only initiated to be moved when the Weekly Pivot line is hit. In this case, when the first bar [1] hits the Pivot line, the initial StopLoss is moved to level A since this level is the lowest low
of the last three bars from the first bar[1] which hit the Pivot line. Subsequent to that, at Bar 2, StopLoss is moved to level B, Bar 3 with level C, Bar 4 & 5 with level D, Bar 6 with level E, Bar 7 & 8 with level F until Stopped Out.
NOTE: The Pivot line is generally a place for the market to rest before continuing the journey in the same trend direction as the previous move, although sometimes it reverses direction.
Short Trade Examples
Example 1:
In this example, we start by observing the chart when it was first hit the Most outer TOP line as shown below on EURUSD ONE HOUR Chart on 12th March 2010 at 10:00 hours using FX-PRO MT4 platform as shown with the Blue vertical line.
Here, the market has just hit the Most Outer line and also the Weekly Resistance line. As the market unfolded itself, the Bollinger Bands started to contract into the KAY Envelops on the 15th March 2010 @ 02:00 hours (shown with Maroon arrow on the chart).
At that time as well, the ONE HOUR candle is showing BEARISH BAR, ONE HOUR MACD is BEARISH and 4 HOUR Histogram is BEARISH (even though the 4 hour MACD is BULLISH, it is still acceptable to consider this as BEARISH as a minimum requirement), Both Stochastic i.e. ONE HOUR and 4 HOUR are BEARISH and in addition the Stochastic Histogram is also BEARISH. Then we have a strong indication to go SHORT (SELL) EURUSD at ONE HOUR Chart Trading.
On the image above, the candles after the blue vertical line hit a resistance line and the upper Kay Envelop. The Bollinger Bands do not need to be hit at this stage. After this occurs I start to pay attention to identify the highest high and the lowest low that will form the trading range and if I get further confirmation from the MACD and/or Stochastic I may choose to enter on a breakout of the price range. If the MACD and/or Stochastic are not in my favor I may only enter a trade when there is a breakout of the upper or lower Bollinger Bands.
Further confirmation is to check on the Fibonacci retracement as shown below by the two maroon arrows (see image below). In this case, the market retraced to 0.618 Fibonacci level. So, SELL entry is set at/below 1.37477. That is, as soon as the next candle hit the low of this bar.
[Note: you can enter four trades at the same time if your capital permits with the intention of using Fibonacci level as profit target for the first three and ultimate profit with trailing stop for the fourth trade. The Fibonacci retracement is taken by measuring from the Highest high above the Weekly Resistance line to the lowest low below the Weekly Resistance line].
Immediately after entry, we also set profit target at 0.618 (1.37343), 1.00 (1.37081) and 1.618 (1.36656) and with ultimate profit target of 1.36031 i,e at the next Weekly Support line in this case.
[Note also that at the Weekly Pivot line (@1.36997), I normally keep an eye on this level and often move my stoploss (for all opened positions) to the highest high of the last three bars once the bar has hit this level as a trailing stop (in the case of SHORTING, otherwise lowest Low of the last three bars for LONG trade)].
And initial STOPLOSS at the highest High of the bars within the range when Most outer and Weekly Resistance lines were hit [Often I add 5 pips {plus spread for SHORT only} to provide cushion for the STOPLOSS level].
To monitor the trade that it is still in good shape, I then draw a trendline, just to increase confidence that the trade is still in my favour as shown below.
In this particular case, all the three Short trades were closed at each profit
Fibonacci levels and the fourth SHORT trade was closed at the break of the inner Trendline. Further confirmation to exit is that the Dual Timeframe Stochastic is already giving me a reverse signal i.e BULLISH - i.e. ONE HOUR Stochastic and Stochastic Histogram are both BULLISH, though the higher timeframe Stochastic is still bearish. Take note also that the market has been reacted away from the Most Outer Bottom line.
Example 2:
Here's an example of a short trade taken on the EURUSD pair 1 Hour time frame:
At point 1 price hits the lower KAY Envelop and Support level so at this point I started to look for the Bollinger Bands to contract. At point 2 the Bollinger Bands are beginning to contract. At point 3 you see that a candle closes below the Support level while the Bollinger Bands are contracting.
At this point I am looking to enter the market to the short side but I first need to check the MACD and Stochastic indicators for confirmation. At point 4 you can see that the MACD Histogram and the Red and Blue Lines are in an ideal Bearish position. At point 5 you can see that the Stochastic is giving us a Bearish reading as well.
I placed 4 short orders at the level shown by the Blue horizontal line (point 6) after the candle at point 3 had closed. I immediately placed my stop loss shown by the Red horizontal line at point 7 and drew a Fibonacci Expansion (check out my video to see how I draw the Expansion levels) in order to determine the target levels for 3 out of the 4 orders I have placed. I am going to set the targets for my orders as follows:
Sell Order 1 Target at the 61.8 Fibonacci Expansion level.
Sell Order 2 Target at the 100.0 Fibonacci Expansion level.
Sell Order 3 Target at the 161.8 Fibonacci Expansion level. Sell Order 4 Target at the next Support line (point 9).
As you can see in this example, all 4 targets were hit but remember that the partial exits would also come in to play and in a real world situation we may have exited the 4th trade prior to the target being hit depending on which of the partial exit criteria you choose to apply.
Example 3
Here's an example of a short trade taken on the EURUSD pair 1 Hour time frame:
At point 1 price hits the upper KAY Envelop and Pivot level so at this point I started to look for the Bollinger Bands to contract.
NOTE: Remember that we do not require the Bollinger Bands to be hit when the upper/lower KAY Envelop and Support/Resistance lines are hit. We only look at the Bollinger Bands after the upper/lower Kay Envelop and Support/Resistance lines are hit.
At point 2 the Bollinger Bands are beginning to contract. At point 3 you see that a candle closes below the Pivot level and lower Bollinger Band while the Bollinger Bands are contracting. Just remember…
At this point I am looking to enter the market to the short side but I first need to check the MACD and Stochastic indicators for confirmation. At point 4 you can see that the MACD Histogram and the Red and Blue Lines are in a Bearish position. At point 5 you can see that the Stochastic is giving us a Bearish reading as well.
I placed 4 short orders at the level shown by the Blue horizontal line (point 6) after the candle at point 3 had closed. I immediately placed my stop loss shown by the Red horizontal line at point 7 and drew a Fibonacci Expansion (check out my video to see how I draw the Expansion levels) in order to determine the target levels for 3 out of the 4 orders I have placed. I am going to set the targets for my orders as follows:
Sell Order 1 Target at the 61.8 Fibonacci Expansion level.
Sell Order 2 Target at the 100.0 Fibonacci Expansion level.
Sell Order 3 Target at the 161.8 Fibonacci Expansion level. Sell Order 4 Target at the next Support line (point 9).
As you can see in this example, all 4 targets were hit but remember that the partial exits would also come in to play and in a real world situation we may have exited the 3rd trade prior to the target being hit depending on which of the partial exit criteria you choose to apply.
Long Trade Examples
For LONG entry, it is basically the reverse mindset of the SHORT entry. I will describe it here briefly using the numbering sequences as it appears on the chart below:
1. Market hits the Weekly Support line. Note: Bigger picture must also be checked using higher timeframe to confirm direction.
2. Market then hit Most Outer Bottom line
3. Bollinger Bands started to contract and it is inside the KAY Envelops. -
[Not visible in this chart but it is the case]
4. Market retraced upto 0.786 fibonacci level
5. MACD ONE HOUR is BULLISH and again, in this case, 4 HOUR MACD histogram is BULLISH though the 4 HOUR MACD is still BEARISH
(minimum requirement)
6. All Stochastics including Histogram are BULLISH
7. Market is above the Weekly Support line, therefore, we go LONG entry at/above 1.34991 on the next candle. Note: No of trades as per described for SHORT entry.
8. STOPLOSS at lower than the 1.34431 by at least 5 pips. That is the lowest low within the ranging price since the first hit of Weekly Support line, in this case.
9. Fibonacci profit target set at 1.00 (1.35215) and 1.618 (1.35610). Note:- 0.618 profit target is skipped due to the market at that time is already above it or too close.
10. Trendlines drawn as shown to build confident for the ongoing trades.
11. Whilst the other LONG trades were closed at Fibonacci profit level, the remaining trade closed out using the lowest low of the last three bars since the Weekly Pivot line is already hit and trailed stop from there on. Take note also that the market is trading between the Top Most inner and Most Outer KAY Envelops lines.
11. Whilst the other LONG trades were closed at Fibonacci profit level, the remaining trade closed out using the lowest low of the last three bars since the Weekly Pivot line is already hit and trailed stop from there on. Take note also that the market is trading between the Top Most inner and Most Outer KAY Envelops lines.
Example 2:
Here's an example of a long trade taken on the EURUSD pair 1 Hour time frame which includes one of the partial exit strategies:
At point 1 price hits the lower KAY Envelop and Support level so at this point I started to look for the Bollinger Bands to contract. At point 2 the Bollinger Bands are beginning to contract. At point 3 you see that a candle closes above the Support level while the Bollinger Bands are contracting.
At this point I am looking to enter the market to the long side but I first need to check the MACD and Stochastic indicators for confirmation. At point 4 you can see that the MACD Histogram and the Red and Blue Lines are in a Bullish position. At point 5 you can see that the Stochastic is giving us a Bullish reading as well.
I placed 4 long orders at the level shown by the Blue horizontal line (point 6) after the candle at point 3 had closed. I immediately placed my stop loss shown by the Red horizontal line at point 7 and drew a Fibonacci Expansion (check out my video to see how I draw the Expansion levels) in order to determine the target levels for 3 out of the 4 orders I have placed. I am going to set the targets for my orders as follows:
Buy Order 1 Target at the 61.8 Fibonacci Expansion level.
Buy Order 2 Target at the 100.0 Fibonacci Expansion level.
Buy Order 3 Target at the 161.8 Fibonacci Expansion level. Buy Order 4 Target at the next Resistance line (point 9).
The difference in this example is that Target 4 was not reached. At the time I had to Red trendline drawn on my chart so as soon as I saw that price had broken this trendline to the short side I had decided to exit the final open position.
Example 3:
Here's an example of a long trade taken on the GBPUSD pair 1 Hour time frame:
At point 1 price hits the upper KAY Envelop and Resistance level so at this point I started to look for the Bollinger Bands to contract. At point 2 the Bollinger Bands are beginning to contract. At point 3 you see that a candle closes above the Support level while the Bollinger Bands are contracting.
At this point I am looking to enter the market to the long side but I first need to check the MACD and Stochastic indicators for confirmation.
NOTE: In this example you will notice that price had hit the upper Kay Envelop and we are now looking to go long whereas in our previous 2 long trade examples price had hit the lower Kay Envelopes first.
Remember that our decision to go either long or short does not matter on whether we hit the upper or lower Kay Envelop lines. You can still trade in both directions because what determines the direction in which we trade is actually the breakout of the price range for an aggressive entry or the Bollinger Bands for a conservative entry.
At point 4 you can see that the MACD Histogram and the Red and Blue Lines are in a Bullish position. At point 5 you can see that the Stochastic is giving us a Bullish reading as well.
I placed 4 long orders at the level shown by the Blue horizontal line (point 6) after the candle at point 3 had closed. I immediately placed my stop loss shown by the Red horizontal line at point 7 and drew a Fibonacci Expansion (check out my video to see how I draw the Expansion levels) in order to determine the target levels for 3 out of the 4 orders I have placed. I am going to set the targets for my orders as follows:
Buy Order 1 Target at the 61.8 Fibonacci Expansion level.
Buy Order 2 Target at the 100.0 Fibonacci Expansion level.
Buy Order 3 Target at the 161.8 Fibonacci Expansion level. Buy Order 4 Target at the next Resistance line (point 9).
The difference in this example is that Target 4 is reached before Target 3. This can occur at times based on where the different Fibonacci Expansion levels are so if one is taken out before the other it's no big problem. You will find that this will occur every once in a while.
Comments/Additional Note
This strategy is applicable to Long term, Position Trading, Intra-Day to Day trading. If you wish to trade in a 1 min timeframe, your trend direction needs to be at least based upon 30 mins timeframe with ONE HOUR timeframe as your confirmation of that direction. The best trading set-up will be when all the minimum conditions are aligned from lowest timeframe upwards and exit with at least the 5 min charts setting when it is against the direction and re-enter when all re-align again with the higher timeframe direction.
One final note, the Dual TimeFrame indicators are always defaulted to the current chart for Red lines and the next higher timeframe for Blue lines, such as follows:-
• If current chart is 1 min, the next higher timeframe is 5 mins chart.
Therefore, Red lines for 1 min and Blue lines for 5 mins
• If current chart is 5 mins, the next higher timeframe is 15 mins chart.
Therefore, Red lines for 5 min and Blue lines for 15 mins
• If current chart is 15 mins, the next higher timeframe is 30 mins chart. Therefore, Red lines for 15 min and Blue lines for 30 mins
• If current chart is 30 mins, the next higher timeframe is 60 mins chart.
Therefore, Red lines for 30 min and Blue lines for 60 mins
• If current chart is 60 mins, the next higher timeframe is 240 mins chart.
Therefore, Red lines for 60 min and Blue lines for 240 mins
• If current chart is 240 mins, the next higher timeframe is 1440 mins chart.
Therefore, Red lines for 240 min and Blue lines for 1440 mins
• If current chart is 1440 mins, the next higher timeframe is 10080 mins chart. Therefore, Red lines for 1440 min and Blue lines for 100800 mins
• If current chart is 10080 mins, the next higher timeframe is 43200 mins chart. Therefore, Red lines for 10080 min and Blue lines for 43200 mins
Note : MT4 standard usage are :- 1hr = 60 mins, 4hrs = 240 mins, 1 Day = 1440 mins, 1 Week = 10080 mins and 1 Month = 43200 mins.
Best of luck & happy trading!
Mr KAY (Brunei)
PS: For lower timeframe trading, it is also advisable to add Supp/Resistance for Daily or even to as low as 4 hourly. This can be done by changing the Timeframe in according with the above norms and also changing the line Colors and/or Styles by editing the indicator at the "Inputs and Color Tab".
