LMT Forex Formula Trade Plan 7th June 2009

Welcome again. The lmt forex formula results for the last few weeks have in some ways been too good. I know I keep saying this but you you must not get carried away. Stick to the rules and the risk paramenters (2.5%) max per trade.

The beauty of the LMT is that it is a trend following system. we only buy when the price is going up and sell when it is going down. This is conservative trading and if you stick to it your % wins will be much higher than those traders who are selling when we are buying.

However one thing that we have to take account of with any trend following system is that from time to time the direction will hesitate and become unclear or even change. Just accept it.

The really disciplined, professional traders simply walk away from their screens and don't come back until things have settled down.

At the moment we are at a criticial point with a lot of pairs. The gbp for example powered upwards for the last month and the gains have been incredible with the lmt. My demo trade (taken when i had only been trying the system out, gained 1200 pips before falling away last week) I got out of the demo trade at +1000).

Had you waited for it to close below Deans ema it would have only been + 700 pips.

Tip: Although I entered the gbp trade off a LMT daily chart I started to look to get out when the price closed below the ema on the 4 hour chart. This saved me the extra 500 pips. It may not work every time but I can not just sit there and watch 500 pips profit disappear.

Where is the market going next ?

At the moment I, like every other trader, am not sure if the gbp and many similar pairs is just taking a breather and pulling back before steaming upwards again or if it is now changing direction and turning back down. This is actually great news for us. We make money if the price is going up or down, All forex systems become unpredictable when price is going sideways.

One of the members (alex) likened this change of direction as similar to a cruise ship turning round. it needs a very wide turning area and the move is painfully slow.

Tomorrows possible daily trades

I have no daily possible trades showing for tomorrow (monday 8th june) on my forex meta charts. New candle opens 22.00 bst, which is probably as well. There are potentially quite a few for tuesday though. I recommend that you "wait and see" for the next few days on most of the pairs.

The only ones on the 4 hour and daily that still appear to be in a firm trend are gbp/yen, euro/yen (especially this one), aud/yen.

The safest option is to do nothing with pairs where there is any doubt. 

A further thing to take into account is that a pair may give a sell signal on a 4 hourly chart and a buy on a daily. This is actually quite normal. the daily chart trend direction is based on the chart above it (the weekly) - which is very slow to change direction.

The 4 hour chart is based on the daily information. Often a pair can be in a daily up trend but has a few down days. On the daily chart they just show as slight blips in the movement. There are numerous ways to try estimate whether we are seeing a pullback or a reversal (change of direction).

I sent you an email during the last week to say that you should be very careful trading the jap yen as the $/yen looked to me to be turning in the opposite direction. The system was still saying short,but i thought it was going long (up). - I turned out to right. For my reasoning/thought process read the following whilst looking at the diagram below,

1. Fibonacci numbers. Often price will pull back to 50% or 61.8% fib, react there and then resume its original direction ie jpy down. Many analysts, myself included feel that if a pullback goes beyond the next fib point 78,6/21.4 and closes past there then it is a reversal. See Arrow 1.
2. Another way to try and work out what is going on is to use emas like I do in my main system. My philosophy is that if price is above the 34/55 on the 4 hour we are in an up trend. If any of the emas are pointing down or horizontal it is best to wait and see where they are headed next before rejoining the market. This was what alerted me last week to the possible changes with the jpy, see Arrow 2. At arrow 2 price has closed above a 34/55 ema cross up on a 4 hour chart. Price has further closed above the all important 200ema. All the emas are now rolling over and are starting to point up.  

Ironically I did have a really good trade on the jpy last week. This was not an LMT trade, but just a simple triangle break out on the 4 hour chart that I mentioned in my email update.The theory with a triangle break is that price gets squeezed towards the point (the nearer the better) and when it breaks it explodes.

As you can see in the chart price was contained perfectly within the lines. I put the lines on approximately 10 candles back from the tip and was waiting for a break out. If price had broken back down again, then I would have gone back to the lmt and looked for signals to short. So What Happened Next ? Perfect break out. If the LMT is quiet for the next few days go back to the free lessons on here to study my other methods.

Until next time. Thanks for all the friends that you have recommended me to. So far Matt from Australia is winning the andy x dvd collection (cost $3300). Matt has encouraged 4 friends to join me.

If you do recommend a friend for the LMT formula, send me an email with his or her details,

Perfect Triangle Break Out