FxTradingStrategy.pdf

“ Learn how to trade EUR/USD, USD/CAD, GBP/USD or

any other major currency pair by mastering a system

that combines top level mathematics with the

fundamental principles of human behavior - simplified

in such a way that even a high school dropout can

quickly start profiting from it... ”

by Quantum Globe Inc.

A “ crack team ” consisting of a top level PhD

mathematician, a computer wizard and a behavioral

psychologist is put together by a street smart trading

professional to produce...

“ A lethal “ knee to the groin, thumb to the eye ” Forex

Trading Strategy that transforms any average person into

a ruthless money making predator that makes even the

most hardened trading sharks spin their heads in

disbelief... ”

First Edition 2005. ISBN 0-0997773-04

Table Of Contents

Chapter 1 Introduction ________________________________ 3

1.1. Why should you trade forex market? ........................................................ 4

1.2. Which strategy should you use?................................................................ 5

1.3. The ICWR phenomenon............................................................................ 6

1.4. Simplified trading example ....................................................................... 8

Chapter 2 Scientific Research _________________________ 19

2.1. Market signals based on the ICWR phenomenon .................................. 21

2.2. The proper long-term filter ...................................................................... 26

2.3. Consistency checks .................................................................................. 29

2.4. Why is our entry strategy so profitable? ................................................. 34

2.5. Why is our exit strategy so profitable? ................................................... 35

Chapter 3 The Intraday ICWR Trading Rules ___________ 41

3.1. Market signals generated by ICWR ........................................................ 42

3.2. When to enter a trade............................................................................... 55

3.3. When to exit a trade ................................................................................. 56

Chapter 4 Intraday EUR/USD Trading Example _________ 58

Chapter 5 Intraday CAD /USD Trading Example _________ 75

Chapter 6 The Long-Term ICWR Trading Rules _________ 89

6.1. When to enter a trade............................................................................... 90

6.2. When to exit a trade ................................................................................. 90

Chapter 7 Long-Term EUR/USD Trading Example _______ 91

Chapter 8 Long-Term GBP/USD Trading Example ______ 113

Chapter 1

Introduction

Two completely opposite “schools of thought” dominate today’s public opinion when it

comes to financial markets. One school of thought is advocated by academic types,

mostly economics, finance and mathematics professors. They will tell you that “markets

are efficient” and that there is a zero chance for an individual to outperform any liquid

financial market in the long run. Well, of course the guys with cushy university jobs,

without any real world or business experience, will tell you that you don’t stand a chance

to succeed. You should continue to work your little day job so that they have someone to

make their sandwich or to change oil in their cars. People who subscribe to this theory

usually choose to stay out of financial markets and keep their cash stashed in their

mattresses.

Another school of thought is advocated by financial TV and radio stations, investment

firms, brokerages etc… “Surprisingly” they are all trying to portray financial markets as

an idyllic place where happy Moms, Dads and Grandpas use sophisticated software to

place winning trades from their laptops while vacationing on sandy Caribbean beaches…

Countless “talking heads” are enjoying their daily parade on TV channels such as CNBC

or CNN supplying mostly worthless advice to general public. Their “analysts” change

their opinion every day in a fashion that even George Orwell would find hard to

comprehend. And everything they say always seems to “make sense” at the moment when

they are saying it. Next day, when it turns out that they were totally wrong, they are

telling you an entirely different story as if yesterday never happened. And if you noticed,

the hosts never, ever bring that up. Why? Well, “the show must go on”. They have to

show you that every day you are missing on countless trading opportunities; you just need

to watch their shows, subscribe to fancy software that they sell you and you are on your

way to early retirement.

I do agree with the statement that financial markets are efficient. They are very

efficient in one thing - transferring money from bad and naive traders/investors to

the pockets of those that know what are they doing. You are now probably asking

yourself “What am I doing in this field? Do I have any chance to succeed?” The

answer is “Yes, you do.”. The system that we are about to reveal to you is a fail

proof entry and exit strategy that will put you on equal level with big investment

firms and with experienced professional traders.

A question that I hear the most from aspiring traders is “Which market should I trade? -

Stocks, Futures, Commodities...?” Well, with the right attitude and dedication there is

money to be made in every market. However, there is one market that is still largely

neglected by smaller traders even though it offers great profit potential and numerous

trading opportunities. It is Forex or Foreign Exchange market.

1.1. Why should you trade forex market?

Simply said, no other trading instrument comes even closely to forex market when it

comes to liquidity, 24hr market environment and last but not the least, profit potential.

Forex (currency) market is the largest (most liquid) financial market in the world, with an

average daily volume of more than US$ 1.5 trillion, which is more than all of the global

equity markets combined.

Forex trading day starts in Wellington, New Zealand followed by Sydney, Australia,

Hong Kong and Singapore. Three hours later trading day begins in Dubai (UAE) and

other Middle Eastern countries. In couple of hours they are followed by Frankfurt, Zurich,

Paris, Rome… London is the last one to open in Europe and five hours later it is followed

by New York, Chicago and finally the West Coast. The busiest hours are early European

mornings because at that time major Asian exchanges are still open and European

afternoons because at that time major US markets are open at the same time as Europe.

Therefore, wherever you live and whatever your work hours are you can always find

some time to participate in forex trading as opposed to stock market where you are

usually limited to the regular business hours.

Another property of forex market that makes it an excellent trading instrument is use of

leverage. Many beginning traders don’t fully understand the concept of leverage.

Basically, if you have a start up capital of $5,000 and if you trade on a 1:50 margin you

can effectively control a capital of $250,000. However, a two percent move against you

and your capital is completely wiped out. If you are a beginning trader you should not use

more than 1:20 margin until you get comfortable and profitable and then and only then

you can attempt to use higher margins. What does 1:20 margin mean? It means that with

your $5,000 you will control a capital of $100,000. Let’s say you are trading EUR/USD

and by using our entry strategy you have decided to enter the trade on a long side. That

means that you are betting that USD will depreciate against Euro. Let’s say current

EUR/USD rate is 1.305. Again, if your trading capital is $5,000 and you are using 1:20

leverage you will effectively be exchanging $100,000 to Euros. If the current rate is 1.305

you will receive 100,000/1.305 = 76,628 Euros. If the trade goes in your direction the

margin will work in your favour and 1% decline in USD will mean 20% increase in your

start up capital. So if EUR/USD rate moves from 1.305 to 1.318 you will be able to

exchange your 76,628 Euros back to $101,000 for a profit of $1,000. Since your start up

capital was $5,000 it is effectively a 20% increase in your account. However, if the trade

went against you and USD appreciated 1% vs. Euro your account would be reduced to

$4,000. That would not have happened as our strategy has built in hard stops to prevent

such outcome.

And the third and equally important property of forex market is the fact that trends in

forex market last longer and are more clearly defined than in any other trading instrument.

1.2. Which strategy should you use?

Another question that is often asked by aspiring traders is “What kind of trading approach

should I use – day trading, swing trading, position trading? How many indicators should I

use? Should I follow the TV news channels?...”

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