The Forex Code-System 2

2. Cracking the Forex Code – System 2 (CFC2)

• Indicators used in CFC1: Exponential Moving Average 5-period (EMA5, Blue color in the illustrations).
• Exponential Moving Average 12-period (EMA60, Green color in the illustrations) : Parabolic SAR.

These are standard, common indicators and are included in every charting program. You can use any charting software program you like: E-signal,MetaStock, TradeStation, MetaTrader….

This system is used for 1-hour timeframe. You can also use it for 4-hour and daily timeframes. But in that case, you have to tweak the stop loss, profit target, trailing stop appropriately.

• Rules for Sell Signals (Short Trades).

We enter a short (sell) trade when these two conditions happen:

1. EMA5 crosses below EMA12.
2. Parabolic SAR dot appears above the price candlestick.

Stop loss: We place a protective stop loss at -50 pips.

Profit Target : We exit the trade when the Parabolic SAR dot appears below the price candlestick.
Alternatively, we can also use a trailing stop of 50 pips to follow the trend.

• Rules for Buy Signals (Long Trades).

We enter a long (buy) trade when these two conditions happen:

1. EMA5 crosses above EMA12.
2. Parabolic SAR dot appears below the price candlestick.

Stop loss : We place a protective stop loss at -50 pips.

Profit Target : We exit the trade when the Parabolic SAR dot appears above the price candlestick.

Alternatively, we can also use a trailing stop of 50 pips to follow the trend.

• Recommended Timeframes, I recommend using CFC2 in 1-hour, 4-hour, and daily timeframes.
• Recommended Currency Pairs , I recommend using the CFC2 for the following currency pairs: EUR/USD, GBP/USD, GBP/JPY, USD/CHF, EUR/JPY.
• Money management, Never risk more than 1% of your account on any single trade.
  

You may use variable posing sizing with this system and vary your position size depending on your stop loss such that you risk only 1% of your account.

Source : Kevin Adams www.TrendForexSystem.com

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