My favorite and best performing strategy

I am hesitant to share this strategy here, not because I’m worried about giving it away, but because I know most people will underestimate how valuable it is. So, before I explain the strategy, I would encourage you to give it the credit it deserves and treat it as you would if you had paid thousands of dollars for it. How much would you pay for information that will make unlimited, exponential returns, with a small initial investment? Why would I share it for free? I am happy to share my methods because I enjoy explaining how I do what I do. I do it for free because I make far more trading the strategies than I could ever make by selling them. This is my favorite strategy and I can guarantee that it works very well.

The first rule is the only rule I will never break, under any circumstances in any trade. That is, I will only ever place a trade in the direction of the moving averages I have identified for that particular pair. For the purposes of this example I will use a 21 ema and the 89 ema on the 4 Hour chart. If the fast moving average is above the slow moving average, I will look for opportunities to go long.

 I will then look at the 1 Hour chart for two or more swing lows forming a retracement or a pullback. Connect each of the swing lows to create a U shape as the pullback runs out of steam and trend begins to take over again. Once you have projected two or more swing lows you can project the next point. We will be looking to by at the bottom of the bottom swing low.

This flattening out of the swing lows is what I refer to as divergence. Although I don’t use any oscillators to literally diverge against, this is what causes the effect and why it is such an effective tool. The trouble most beginners have when trading MACD, RSI or any other divergence is that they don’t discriminate whether price is reversing or continuing less slowly. There is the same amount of technical divergence in the two examples below, however if you had have sold in the first example you would have made a lost, while, in the second example, you would have made a profit.

Once you have identified a significantly weaker swing high or swing low on the 1 Hour timeframe, move to the 15 minute chart and use the same procedure to fird the bottom of that particular swing low. Finally, move to the 5 minute chart and repeat the process. Once you have done this process, moving from the 4 hour to the 1 hour to 15 minute and 5 minute, it is time to pull the trigger.

I will mention here that it is not as important to see clear swing highs or lows on the 1 hour as it is on the 15 and 5 minutes. Also keep in mind that this is a continuation strategy on the 4 hour chart and not a matter of picking tops or bottoms on the lower timeframes. Another thing to look for is trend line divergence. Trend line divergence means higher highs or lower lows with less separation from a trend line.

While momentum will overrule any technical levels (Round numbers, pivots, trend lines, fib lines, support/ resistance, moving averages), when momentum has worn out these levels can easily influence price. When you have identified that momentum has worn out, it is time to find the closest of these levels and look for any confluence between them. This will not only help you to pinpoint your entry but also your stoploss.

It is important to know that this strategy requires a lot of patience but it will be well rewarded. The reason that it is so profitable is that strike rate and risk reward is extremely high. On average the losses are less than 20 pips and profits are upwards of 200 pips. I’ve personally never seen a strategy with such high win:loss ratio as well as a high risk:reward ratio. The price is a lot of patience and discipline due to the low frequency of trades.

It is tempting to use stop and limit orders to enter and exit trades but I would discourage you from doing so as much as possible. I believe it is important to know your exit conditions before you are involved in a trade but I don’t believe in a conventional stop loss. A breakout is not when price crosses a certain level it is when price closes beyond that level. For this reason, I enter and exit trades at the close/open of 4 hour candles as much as possible. I set a level on my charts before I enter a trade which is my ‘virtual’ stop/limit. Only once there is a close above/below this level will I close the trade. This takes discipline to execute however it will save you from a lot of false breakouts. To take profit you can either follow the same procedure as the entry, target a round number or other significant level or just trail a trend line or moving average until it is broken.  

Try this out, you will be surprised at the results as long as you are patient and disciplined. If you have any questions let me know and I'd also love to see some examples of successful trades.