Forum transfer: Submitted by User on January 26, 2009 - 01:20.
I have developed a forex system that intends to give me an edge of 51% (including spread) winning trades. In order to maximize my chances, I choose a currency and simply chart the MACD on the one minute chart. If the historgram is negative, I buy, if it is positive, I sell.
The reasoning behind this is that the one minute chart is usually just market chatter. Therefore a positive histogram indicates a random upswing without saying anything about a trend. In the long run, positive and negative histogram bars even out and the average positive price is higher than the average negative price (when seen over 1000s of bars).
To avoid having to stare at the screen all day, I simply set a limit and stop and let the position run itself. It is important that stop and limit be large enough to not be hit during normal cycles on the minute chart (if we have non trending markets). In order to turn the "bet" in my favor, I set limits higher than stops. The result is still an even 50% stop hit, 50% limit hit because we start off with our entry price being abnormally high or low (high when selling, low when buying).
Example trade: EURUSD shows negative histogram on 1m chart. We buy EURUSD and set a limit of 50 pips gain, stop of 35 pips loss.
We can increase chances of winning greatly by looking at the larger picture (5m or 1 hour chart), then trading with the main trend. Example: EURUSD has downtrend. We wait for positive histogram to sell and then set our stop and limit.