Hello Everyone,
The Institutional SystemThis system is very simple and rather popular and it comes in different names and some of us might have met it before and if you have and swept it under the carpet i suggest you go get it out and take another look at it maybe possibly you will find it profitable this time because its very powerful.
This system uses only one indicator and that is Slow Stochastic which comes as a default indicator with most charting programmes eg metatrader. The rules of entry are based on Candle stick patterns and this helps you get into the trend ahead of other indicators we already said lag. Really their's a lot to be learnt from price actions as depicted in candle stick patterns. You can learn about candles sticks here:
http://www.fxwords.com/j/japanese-candlesticks.htmlNow you can trade this system on anytime frame and any any pair, I use 30 min candle chart the higher the time frame the less the noise.
As i said earlier the Indicator you need is Slow Stochastic with setting 8.3.3 on metatrader. Please note some platforms will only allow 8.3 and thats equally ok.
Next the key element of the system contained in all trades.
The
INSIDE BAR. Is simply when the current bar is less than or equal to the bar to the left of it. The inside bar can also be the same size as the previous bar.
NOTE: The Inside Bar is a standard technical analysis pattern, however most people over look it and underestimate it. you can also use an
Outside Bar which is the opposite and shown in the chart below.
Why the
INSIDE BAR Is a very Powerful Setup!
Whenever you have an IB, the market is consolidating into a tight range of low volatility. A market will always explode out of a tight range.
How to trade First look for an IB / OB to form then check if its a valid IB with the stochastic's indicator
When stochastic are below or around the 20 and oversold and starting to hook round look for an IB to go long, When stochastic are upto 80 and above and starting to hook round in overbought look for an IB to go short you will find them the best in trending markets also range bound markets but if the price action is choppy stay out.
The Stochastic's don't have to be exactly 80-20 but it is stronger signal if they are.
To enter a trade wait for the next bar after the IB to go up 1-2 pips higher than the IB for a buy signal or 1-2 pips lower for a sell signal. Use stochastic as a set up of when to trade the IB, also the shadow of the IB must be inside the prior bar as well in the overall size.
If after your IB you get another bar the same size as the IB and it doesn’t go 1-2 pips either way then you may look at up to 3 more bars after the IB bar to confirm a signal. If you don’t get one stand a side and wait for a new IB to form.
You can exit when Stochastic begins to curve downwards away from 80 in a long position or begins to curve upwards away from 20 in a sell position.
Also you can exit when target profit is hit.
I usually set my profit target to be 20 - 30 pips since i use it intraday and on 30mins chart. You can equally use a trailing stop.
Now when you load this up on your chart try and backtest it by flipping backwards to maybe last 2 months you will notice how profitable it would have been if you've been using it.
I have attached a chart to explain the entry positions ie the IB and OB (Inside Bar and Outside Bar).
Also those of you using Metatrader i have equally attached a template so all you need to do is save it at your templates folder in metatrader then call it up on your chart.
Pls anybody that has a question or needs better clarifications should be free to ask me as we proceed to the other systems. Happy Pipping!!!
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