Disclaimer:

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1 AM Disclaimer: The following system was created by FX trader Larry Cole. The content provided below is put forward in good faith and believed to be accurate, however there are no implicit guarantees of accuracy. The material contained herein is for information purposes only and is not to be construed as an offer for the sale or purchase of securities, options and/or Futures or Exchange contracts. Any historical data provided below is for information purposes only and must not be construed as an indication or guarantee of any kind of what will be the future performance of the concerned markets or of the financial instruments described. Actual trading results may vary. The reader accepts that by using this information, he or she will not hold its author Larry Cole responsible for decisions based on the information below. Currency trading is risky, it involves substantial risks of loss, it is not appropriate for everyone, and therefore only risk capital should be used for trading. Risk capital: money that a person can afford to lose. Th

2 The Typical Setup

3 FX Method Basic Concept During any trend, up or down, the market forms little peaks and valleys

4 FX Rules Uptrend 1. Works best as a (trend) reversal pattern so identify a previous downtrend 2. Wait for MACD to signal a buy (crossing) and for the setup 3. As the market pulls back to #3, MACD should remain in buy mode (or slightly dip into sell) 4. (As a way of testing the system) Place buy entry 1 pip above #2 5. Place a stop loss 1 pip below #3 6. Measure the distance between #2 and #3 to project your exit 7. #3 should not be lower than #1 *** The reverse is true for a downtrend *** Let s look at some examples!

5 Daily GBP/USD

6 5 Min USD/CHF For shorter term testing of system

7 4 Hour EUR/USD

8 A ship in harbor is safe, but that is not what ships are built for John Shedd

9 Defining the A top is formed at the end of an uptrend Discuss in forum what is meant by 1, 2, 3, top or bottom

10 Getting a Free Trade Covering costs and taking a profit as quickly as possible The rest of the trade is free Be paid for the risk that you take A timely entry is important

11 Trading the Formations Get in ahead of the actual breakout When prices begin to move counter-trend, we want to know it immediately To do so, we use a filter for the top There are 2 entry filters: Stochastics and MACD

12 TRADING AS A TEA Filter #1 MACD Standard default settings 12,26,9 Gives you early confirmation on trend change and #2 range

13 TRADING AS A T Filter #1 MACD Delete the histogram

14 EUR/USD (1 day 6 mo.) Filter #1 MACD See next slide for settings on stochastic

15 Filter #2 Stochastic on Short-Term Parameters 5,1,3 Setting 5 is the number of bars Setting 1 is for %K = moving average of stochastic values (purple dashed line) Setting 3 is for %D = 3 bar moving average of the 1 bar moving average (solid yellow line) Two Valid Signals: Buy signals are based on the crossing of D plot by the K plot Divergence indicates that a violation of the #2 should not be taken because the trend may not be ready to end Discuss in forum what is meant by K and D

16 Filter #2 Stochastic on Short-Term Question: Should we buy or sell ahead of a violation of the #2? Let s take a look at an example.

17 EUR/USD (1 day 6 mo.)

18 Filter #2 Stochastic on Short-Term Stochastic is based on observation As price increases, daily closes tend to accumulate closer to the highs and the opposite is true for decreasing prices Divergence acts as a warning that the trend is almost over We simply want to know where %K and %D are relative to one another

19 How to Manage This Trade? Use the multiples of 3 (3 one lots, 3 five lots, etc) Cash one contract as soon as you can cover costs and take a profit Move your stops closer for the remaining 2/3 of your position Example: With 10 lots, you may liquidate them at 6, 3, and 1 allowing the last lot to trail The key is to minimize risk at maximum exposure

20 Inspiring Quotes Time changes everything, but with patience we can keep our desires relatively constant. If we can just hang on long enough, time will eventually create for us the conditions in which we succeed. - Denis Waitley You cannot play symphonies until you have first mastered the notes. - Dr. Edward L. Kramer To fight fear, act. To increase fear wait, put off, postpone. - Abraham Lincoln

21 Practice Advanced OLT Your 4 Hour Skill Chart Let s have some fun and see how you do!

22 Do you see any opportunities?

23 Advanced OLT 4 Hour Chart Do you see opportunities now?

24 Monthly Chart Advanced OLT Zooming 4 Hour in shows Chart the opportunities since January 1 st, 2005

25 Advanced OLT 4 Hour Chart

26 Advanced OLT 4 Hour Chart Wait nearly the exact same potential in 2004 duplicates in 2005, going the other way.

27 Advanced OLT 4 Hour Chart

28 Advanced OLT 4 Hour Chart

29 Advanced OLT 4 Hour Chart

30 Advanced OLT 4 Hour Chart 1 Month 10 Year shows crossings of the WMA and SMA

31 What can we normally expect to do during the course of the year? Advanced OLT 4 Hour Chart

32 Advanced OLT 4 Hour Chart What was the currency doing 10 years ago?

33 Advanced OLT 4 Hour Chart

34 Advanced OLT 4 Hour Chart

35 Advanced OLT 4 Hour Chart Overview of 2006 Jan 24 Feb 27 Jan 24 Jan 30 Jan 31 Feb 1 Feb 27 Feb 27 Feb 28 Mar 1 Mar 1 Mar 2 Total range of 502 pips #1 established #2 established #3 established #2 broken Total gain of 240 pips with one lot Trend Change #1 established #2 established #3 established #2 broken Total gain of 100 pips with one lot to date

36 Advanced Summary OLT 4 Hour Chart In 22 active chart days, this technique yielded 340 raw pips with 1 lot. 1 Standard Lot = $3,400 1 Mini Lot = $340 5 Standard Lots = $17,000 5 Mini Lots = $1,700 Want to talk about 5 separate entries? Can you say $85,000 in 22 days?!?! Take the stress out of your trading and stick with me on the 1,2,3!

37 Advanced OLT 4 Hour Chart Day chart shows the comparison from previous monthly charts

38 Advanced OLT 4 Hour Chart Shorter-term charts show the crossing for current day trading. But remember what the monthly chart is showing. It is projecting a fall. #3 is on the 50% level

39 Advanced OLT 4 Hour Chart The display data box shows the time, high, and low when the MACD is pushing from #3 towards #2. Notice the red line heading for the cross for the #2 entry.

40 Weekly chart shows #1 was broken by #3. This cancels #1 and makes #2 the new #1 and #3 becomes the new #2. Advanced OLT 4 Hour Chart There are 2 different #2 possibilities. Let the currency tell us what to do next.

41 Advanced OLT 4 Hour Chart Zoom in to the currency setting between the two #2 s. We re waiting for an entry.

42 Advanced OLT 4 Hour Chart

43 Advanced OLT 4 Hour Chart

44 Advanced OLT 4 Hour Chart

45 Advanced OLT 4 Hour Chart

46

47 What s position trading?

48 Practice on 5 minute charts

49 Congratulations! You now know where and how to get in!!!

50 92 pips in total!

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52 226 pips in total!

53 Conclusions All receive advice. Only the wise profit from it. -Syrus Always trade safe with a good ratio Don t gamble! The twin killers of success are impatience and greed. - Jim Rohn

54 Conclusions "Come to the edge." "We can't. We're afraid." "Come to the edge." "We can't. We will fall!" "Come to the edge." And they came. And he pushed them. And they flew. - Guillaume Apolinaire Remove the rock from your shoe rather than learning to limp comfortably. - W. Clement Stone Ladies and Gentlemen, the rock has been removed, consider this your official PUSH!