A Free Forex Trading System - How To Trade Forex Using Flag Patterns

In this article you will find an outline of a profitable and free forex trading system. The article shows how to trade forex with flag patterns

So what are Forex Flag Patterns?

Forex flags are a pattern that has a distinct resemblance to a normal flag that can see flying on any standard flagpole. A flag pattern is a continuation pattern that indicates that the market will continue in the direction of the flagpole.

Flag patterns are attractive to trade because:

    * Flags occur in both bull and bear markets so you get bullish and bearish flags.
    * They generally move very fast to their price target once they are activated.
    * They are simple to recognise on a chart and don't need complicated indicators.
    * Forex flag patterns is that they occur in all timeframes and therefore you will find regular and frequent set-ups.
    * Flag patterns is that they give very good risk return profiles.

Using my SERTN approach to forex trading, this free forex trading system has trade planning elements for:

    * The Setup.
    * The Entry.
    * Risk and money management elements
    * Trade administration taking into account initial stop loss, trading stop loss and profit taking
    * Note taking.

In summary what we are trying to find is a great setup. This requires a well formed flagpole which breaks a support / resistance zone or a trend line. The flagpole must form in two to five bars. We are also seeking a classic flag pattern itself. In a bull flag we are searching for a downward sloping trading band. We wish to notice price action remaining inside the trading range..

And then you're looking for the price to break out upwards. If it is possible to see the volume you have to be expecting volume to be falling as the flag develops and you should expect to notice volume expand as the price action breaks out of the trading band.

For the trade entry you could either:

    * Wait for the price to finish over the upper at level of the trading range and enter on the open of the following bar.
    * Or you can set a stop to buy order two to 5 points over the higher point of the trading range and be entered into your investment when any price action moves higher than the upper trend band.

When opening the trade, you are recommend to structure your purchase into two units. The reason for this is explained in detail in the risk management video.

For a bullish flag, you put in your initial stop loss right under the lowest low of the flag pattern subsequent to the forex rate has moved from the dealing range. For a bearish flag you set the first stop just above the highest high from the trading band.

You then would proceed to move your stop loss as promptly as possible to a no loss situation after the price has moved from the trading band. And then you run your trailing exit by using the lowest low of the previous 3 bars as your stop loss point.

You set the trade objective for this forex trading strategy by calculating the length of the flagpole by assessing the distance from the source for this flagpole to the top for the flagpole and then adding the measured amount on to forex rate where it moved out from the flag trading band. As soon as the fx rate meets your target you close half of your trade at the price objective.

You will likely find this free forex trading strategy is quite profitable. However it is always recommend you test any forex trading system yourself because there needs to be an excellent fit between the trading strategy and the trader.

After that appraise the system via demonstration account with a broker you can begin dealing with real cash and small quantities of risk. When you have shown the forex trading system and how you utilize it is worthwhile for you personally, you could genuinely earn some money.

Automated Forex Trading System – several tips to choose the best one

Currency trading enables many people around the world to earn good money working just several hours a day. Foreign currencies market is very profitable, but at the same time it is very risky. Every day we can hear the sad stories from the people, who lost their last money because they wasn`t enough careful working with foreign exchange rate market.

So the only way to succeed in foreign currency trading is to use the Automated forex trading robot. You should already know that the Automated Forex Trading System is the sophisticated software based on the complicated mathematical algorithms, optimized for analyzing the dynamics of the rate exchange trend.

Automatic Forex Trading is much more simple than manual trading. You just need to install and setup you trading system. After that it will handle the entire trading process by itself. This automation level is fascinating, but on the other hand you need to have really highly reliable software to let it trade with your real forex account (where you have you REAL money).

Automated Forex Trading SystemThere are several main rules you must follow to choose the right FX robot. For example let us check EA Sigma Automated Forex Trading System. Firstly we should pay attention at the Testing period. For EA Sigma it is about 10 YEARS!!! I guess you understand how important this parameter is. And what is still more important – the Profit Trades % through these 10 years is about 82%. If you compare this combination of 10 years and 82% with the other available Automated Forex Trading Systems, you will find out that EA Sigma has really awesome results.

On the example of EA Sigma you can also see the significance of complex auto adaptive algorithms, which are used by the system. You must understand that the foreign exchange rates dynamics is constantly altering and we can do nothing about that. But EA Sigma is able to adopt the changes and so you may be sure that in several years it will gain you the same profits as at the moment.

Why Use Multiple Exits?

A recent message from one of our members questioned our use of multiple exits and the fact that the exits in a particular system were very complex and would sometimes move closer to the prices and then suddenly move farther away. The member questioned whether the exits were working properly and wondered about the logic of having so many different exit strategies operating within one system. I sent the member a brief reply and promised to write a Bulletin that explained our philosophy and procedures about the use of multiple exits in more detail.

When we develop trading systems the entry is usually just a few lines of code but the exit strategies and coding are often very complex. We may have a system with only one very simple entry method and that system may have a dozen or more exit strategies. The reason for devoting so much effort and attention to achieving accurate exits is that over our many years of trading we have come to appreciate both the importance and the difficulty of accurate exits.

Entries are easy. Before we enter any trade we know exactly what has occurred up to that point and if those conditions and events are satisfactory according to the rules of our system we can generate a valid entry signal. Entries are easy because we are able to set all the conditions and the market must conform to our rules or nothing happens. However, once we have entered a trade anything can happen. Now that we are in the market the possible scenarios for what might happen to our open position are endless. It would be extremely naïve to expect to hope to efficiently deal with all possible trading events with only one or two simple exit strategies. However, that seems to be the common practice and, in fact, many popular trading systems simply reverse the entry rules to generate their exits.
      We believe that good exits require a great deal of planning and foresight and that simple exits will not be nearly as efficient as a series of well planned exits that allow for a multitude of possibilities. Our exit strategies need to accomplish a series of critical tasks. We want to protect our capital against any catastrophic losses so we need a dependable money management exit that limits the size of our loss without getting whipsawed. Then if the trade is working in our favor we would like to move the exit closer so that the risk to our capital is reduced or eliminated. As soon as possible we need to have a "breakeven" exit in place that prevents our profitable trade from turning into a loss.          


In most of our systems, our goal is to maximize the size of our profit on each trade so we do not simply take a small profit once we see it. This goal means that we need to implement an exit strategy that protects a portion of our small profit while allowing the trade to have the opportunity to become a much bigger profit. If the trade went in our favor every day the exits could be greatly simplified but unfortunately that is not the way markets typically trade. We have to allow room for some minor fluctuations on a day to day basis. In order to facilitate our objective of maximizing the profit of each trade, in some cases we may decide to move our exit point farther away to avoid getting stopped out prematurely. For example, lets look at our Yo Yo exit that is based on the theory that we never want to stay in a position after a severe one-day move against us. (See Bulletin number 14 for an explanation of the Yo Yo exit.)

This highly efficient exit is based on measuring the amount of price movement from the previous day's close. For example we may want to exit immediately if the adverse price movement reaches one and a half Average True Ranges from the previous close. This volatility-based exit will move away indefinitely as the result of a series of adverse closing prices caused by days where the price moved against us but our volatility trigger was never quite reached. Obviously an exit that can move away from prices indefinitely is no use at all in limiting the size of our losses so the Yo Yo exit must always be used in conjunction with other exit strategies that do not move away. Now that we have implemented the Yo Yo exit to protect our trade from a severe one-day reversal in direction, we have still not addressed the question of taking profits. So far, we have exits in place to protect from large losses, to lock in a break-even point and to get us out on a sudden trend reversal but we still have not addressed the important issue of taking some profits on the trade.

We like to shoot for big profits and the bigger the profits become the closer we like to protect them. This strategy calls for multiple profit-taking exits. If we have a $1,000 profit we might want to protect 50% of it and be willing to give back $500 of our open profit. We can place an exit at $500 above our entry price. This will allow us to hold the position in the hope that the profit will grow. However if we have a $10,000 open profit I'm sure we wouldn't want to give back 50% of that. Also, let's hope that our exit stop is not still sitting back there at $500 above our entry price. For best results our exits need to adjust at various levels of profitability.

Many traders have asked us about the robustness of a system that has a many exit rules. The general perception is that a system with fewer rules is likely to be more robust. However I would disagree with applying that common belief without careful thought. Look at the exits in these two over-simplified systems:

System A:
Use a $1500 money management stop. (Limits loss to $1500.)
When profit reaches $5,000, exit with a stop at entry plus $4500.


System B:
Use a $1500 money management stop. (Limits loss to $1500.00)
When profit reaches $1,000, exit with a stop at entry price.
When profit reaches $2,000, exit with a stop at entry plus $1,250.
When profit reaches $3,500, exit with a stop at entry plus $2,500.
When profit reaches $5,000, exit with a stop at entry plus $4500.
When profit is greater than $7,500 exit with a stop at the previous day's low.

Some system traders might argue that since system A has fewer rules it should be more robust (most likely to work in the future.) We would suggest that system B is much more likely to work in the future even though it has more rules. System A is not going to make any money at all if the open profit never reaches $5,000. Once the profit exceeds $5,000 the only exit is at the $4,500 level. System A is very limited in what it is prepared for. It either makes $4,500 or it loses $1500.

As you can see, system B is obviously prepared for many more possibilities. It is conceivable (but not likely) that system A may somehow produce better test results on a historical basis because of an accidental (or intentional) curve fit. However, we would much rather trade our real money with system B. Simpler is not always better when it comes to exit planning.