The Black Dog System
Joined: 10 Nov 2008
Topic: The Black Dog System
Posted: 06 May 2011 at 22:58
For those thinking of joining the Black Dog Program and becoming part of a growing, friendly community this is the place to be. Everyone within our forum is very friendly and helpful, it's the way we like it. You would not be reading this now if your trading was not suffering. Be honest - you have tried all the other systems and they just don't work or they don't make sense. You cannot contact support, your e-mails probably take days to get a response, the system sucks anyway, let's try the next one.... and on it goes.
We have many members (myself included) who have purchased all the rubbish $97 systems, some have paid upwards of $2-3000 for systems that simply don't work - well now, eventually, we at Black Dog Forex are all trading in a professional manner. Trading together - trading profitably.
A big welcome to the Black Dog Trading Program.
This is without doubt the most profitable trading method I have used in over fourteen years of tackling the markets. I trade it almost every day but am known to take a few Fridays off to make a long weekend of it. I cannot remember the last losing week I had! We do have losing trades but the system looks after us in that respect, you must look at your results over a period of time, say a trading week, and aim to be in profit. It doesn't matter by how much in the early days of getting to know the Black Dogs. The better you know the program, the better your trading will be. There are reasons for that good track record. I follow the rules, period. I add nothing to the charts, double period. But above all, I keep it simple.
It will pay you to remember those reasons. Basically - follow the rules and keep it simple.
is, like most things, a learning curve to mastering the system.
'Mastering' is the operative word because there is absolutely no way you
will be able to trade the markets successfully by going at it
'half-cock'. Highly paid professional people are highly paid for a
reason - they have studied and worked at what they do. Often over many
years. Trading is no different. I have not mastered trading but I HAVE
mastered trading the Dogs. That is all I need. Those that do well with
this system not only read the text, they STUDY it. You MUST apply yourself
to applying the system. Those that fall by the wayside are those who do not put in the
effort and this can be seen by their absence from the forum.
Alternatively, those that stay the course are making money - they have
applied the principles and do well. These are the people who I have a lot of time for. At the beginning the main piece of
advice is to TAKE YOUR TIME.
Study the basics, then move onto the MTF2
when ready - don't just read the MTF2 straight after the the basics.
Most do and find that they have to retrace their steps.
We also have this Black Dog forum where you can
post on just about anything you wish, subject to the forum guidelines of course.
This is the place to ask those questions where you would like a variety
of answers from the BD community. Got a question? It may already be
covered in the forum.
The Black Dog program is not a system as such but rather a way
of trading the forex market and requires plenty of input from the
trader. After time this becomes easier as experience grows. For those
who think that work ends on purchasing a trading program I am sorry to
disappoint you. No free lunches I'm afraid.The more work that you put in
during these early stages will pay great dividends later, I assure you.
So, how do you get the best out of the program? First, you must take your time and not rush through the material. There is quite a lot of reading and studying to get through.
Getting the Best out of YOUR Black Dog System....
it or not, the whole program is very simple. It is based on a very
simple premise then added to with various means and applications. There
are a very great many topics on our forum and it does seem daunting
when first entering and seeing all those posts on a great
variety of topics. The place to start is at the beginning, without
doubt. BUT there have been a few who have heard of the later versions
and head straight for them only to find that they have NOT got a clue
what is being discussed because they are unfamiliar with the concepts.
They waste two or three weeks only to find that they had better go back
and start again. PLEASE start at the beginning.
1. The Black Dog System (the basics) - Read this first. Study this system thoroughly as the other systems that follow are based upon the same ideas but the text is not repeated, it is assumed that you are fully conversant with this system. You should spend about one week only in this section to become thoroughly familiar with the concepts. The next section asks you to download the indicators and templates, now you can see the original Black Dog in action on your Metatrader. A time for studying.
2. Download the indicators and template after each section and set up your charts. These indicators and templates are always here so there is no chance of you losing them. These can be found at the end of the section. There is a also a help section on downloading too, if still having problems with your setting up please read at the bottom of this post.
3. MTF2 comes next. Please study this very carefully as it is a great way to trade the markets. One or two further concepts are introduced here.
4. Stops & TPs and the Trading Rules - are for your information. Well worth the read.
5. Free Stuff - help yourself.
6. Officer's 50 Club - this is for members who have 50 posts or more. It is the ONLY way to gain access. This section is for regular members to study other systems that are born of the Dogs. It is also where the manual for the MTF3 system can be found, together with the many journals of Black Dog Traders. Different tactics are discussed here and also higher timeframe journals.
7. Trading Room - Access to our Trading Room is also found in the Officer's 50 Club.
If you are unfamiliar with Metatrader and are struggling to download and set up your charts you must contact me immediately.
Getting hold of a new system and not being able to use it is pretty disheartening so don't hang about, it's all part of the deal. I spend quite a bit of time helping traders to get set up, please help me by having Skype with a headset and mic. I can then talk you through the download procedure. Skype is free. My skype name is blackdogdave
You will also need to download from www.mikogo.com - a free screensharing tool that makes life very much easier. With Mikogo I am able to see your screen and click and point in giving my assistance. Please make sure that you have downloaded the latest version - version 4.
Version 3 of Mikogo is NOT compatible with version 4.
Joined: 10 Nov 2008
|Posted: 15 May 2011 at 17:50|
Hello fellow trader - a big welcome to the Black Dog Trading System.
A few thoughts and facts from me first, then we can make a start.
Hopefully you will soon become a Black Dog Trader reaping the regular gains that we, the BD team and other BD owners, are starting to take for granted! I congratulate you on your wise investment and I hope that the Black Dog serves you well for many years to come, forming part of your trading arsenal in the constant battle with the forex market. The Black Dog Trading System (or BD from here on in) is the only strategy that I personally use, but it does no harm to have other big guns on your side enabling you to change tack and attack those markets from a new angle. I am all in favour of extracting profits no matter what it takes. It sure beats losing! But, like I say, the BD is all I need to make a comfortable living, so I'll stay with it.
The strategy is currently performing very well and profits are made consistently, this has been the case since the BDs were originally conceived. There is no reason to suppose that this will not continue indefinitely, but please take the time to study the training material. The Black Dog team trades the strategy on a daily basis very successfully, this is achieved by following the rules of the system rigidly. It cannot be overstressed that diverging from the rules will probably result in failed trades. The rules are not difficult to follow, and there are only a few of them. They will protect you. The system works.
The following list is not a set of rules, but you should be aware of the points mentioned to help you in those first steps in becoming a Black Dog trader:
We, or rather you, have this Black Dog forum:
You have shown your confidence in our system by making the purchase, we will be there for you to get you up and running as soon as is possible, and at any time in the future. It's all part of the deal. This forum is dedicated to the Black Dog and we hope that you will frequent these pages often, free downloads of strategies and forex information are available to Black Dog owners to use as they see fit.
There are days, I'm sure you will agree, when things get a little boring. Trading is not the most exciting pastime there is for much of the time. And it's that boredom that led me to thinking of starting a website, trading together with some local guys (no females as yet!), and ultimately offering the BD to anyone who would care to use its simplicity in making some cash. So, let me start as I mean to go on; we Yorkshiremen tend to get straight to the point so I won't linger on this intro. I am not a writer, I am not a salesman, nor am I a philosopher. I am, believe it or not, a full time trader, a trader who has developed a successful strategy to extract cash from the greatest bank in the world without too much hassle. So why sell it?
What would you do? C'mon, let's be honest!
Answer: to generate extra income to place into a trading account which would enable playing for higher lots. Simple. Don't ever listen to all the bull about: 'the markets are big enough for all of us....'; 'I like to help less experienced traders just starting on their careers....'; 'many traders using this strategy won't affect the market....'; 'by making this affordable to new traders, blah blah blah'. Honesty please. Money makes the world go round, so I'll not labour the point. There never was any intention to sell the BDogs, I originally asked a well-known trader to check it over for me as I was getting some amazing results and I was asked if I would like to make it available to the trading public. Things have rolled on apace since then.
Talking about honesty, the reason this page is staring at you is because you want to make money, and lots of it. True? With this system you WILL be profitable, if - you - follow - the - rules. This is very important and I suppose its the same with any system but more so with the BD. The information in the following pages present a very simple and uncomplicated means of trading the forex markets so please follow the rules. Simplicity is the key, a key I found after almost eleven years of trading. Simplicity. I've traded 'complicated', and I've traded 'very complicated', but it's the simple ways of trading that produced the consistent gains. Bear that in mind. Simplicity. Wins every time.
The well-known acronym used in trading is KISS ? Keep It Simple Sir. I prefer KIBS....... Keep it Bloody Simple..!!
I agree with that statement 100% and if you stray from that principle I can almost guarantee that it will cost you. Will there be regular, high-probability trades? Who knows? But it all depends on your choice of time frame and what your goals are. I trade the 15 minute TF but my profit targets are not too large, so almost every day there are quite a few. It's managing them that poses the problem. I can cope with four open trades, not more. But that's me, you may be a very capable trade manager, so..... go for it!
Please read the chapters in correct order to obtain the full benefit. Its easy to jump back and forth to fully understand the gist of a particular point.
What is a pip? What do brokers do? What are probabilities? What are fundamentals? Not my job. You're going to have to find out elsewhere because explaining these is not part of my remit. You won't find the answers on these pages. There's no fluff here, no padding on page after page to justify the often very high cost of an e-book. What you will get is some of my (experienced?) thoughts along the way as they relate to the subject in hand using an orange font. Once or twice, I may rant on for a little so I apologise in advance. Don't take everything I say at face value, check it out for yourself. These pages tell the story of how I trade, and of how I trade this system. Plus there will be a few words on how I developed the system. I am now profitable after a long forex journey. Let me shorten that journey for you.
I wish you all the good fortune in your trading endeavours and long may it last.
Joined: 10 Nov 2008
|Posted: 15 May 2011 at 18:27|
1. In the Beginning, Darkness.
I know that you want to get straight to the meaty, juicy bits of the system but please take things slowly, get the ideas and concepts of one section into your trading brain before moving on to the next. I won't dwell too long here I promise but it's worth maybe knowing a little of how the system came into being. Those cheap little systems that we've all bought simply say ''Do this'' and ''Do that'' without any explanation at all, then promptly forget about you. You also forget about it. $97 wasted. So....
I have the same background as the majority of traders. Bought all the rubbish out there, the courses, the newsletters, subscription sevices, and even flirted with EAs for a short time until I realised what they actually are. By traders, I mean trading for oneself, not as a job of work, but for personal gain. Yes, I have blown accounts in the past worth x000's of pounds and this was painful, very much so. This was in the early years of course, whereby I did have the presence of mind to stop trading, take stock of what I was doing, analyse my mistakes, and then study, study, study. So you could say that those lessons had been well and truly paid for, and well and truly learnt.
In those early days, I had a scant trading plan which I rarely followed anyway, discipline was lax, fear and greed were part of my trading, I often went fishing for tops and bottoms, money management was zero, I was playing a host of different markets, and to top it all off, overtrading. A recipe for disaster, and that is exactly what followed. If the market was topping out and starting to turn, I would enter long and get stopped out in no time at all. The same story at the bottoms.
But, in spite of those early disasters, I could see that there were ample opportunities for making excellent returns on ones' investment if only I could find that elusive plan, scheme, method, call it what you will. I'm pretty sure that millions of traders have gone through the same procedure. Well, I was determined.
So, to cut a long story short, and after many days, nights and weeks of study, searching the web for good systems, then working on my 'inner game', my head, I came to the question, 'where next??'
Although I had traded another persons' system(s) and ideas for quite some time, and good though they were, I was never fully satisfied and was hankering after my own, one that suited me, and one that was better. It would be nice to be successful with my own system, a system that was all my own work. But what was I looking for? What characteristics should it have? What qualities? What features did I want my own system to possess? I had some idea of what I wanted it to do.
Basically, it should eliminate all of the minuses mentioned above and hopefully keep me on the straight and narrow. Like everyone else I bought all the usual books, courses, systems, T-shirts etc., and ended up using one of the first methods I had come across. No progress was being made. This was no good, I was back to square one. So, I spent a great deal of time just thinking about what my system should incorporate before attempting anything. The usual tenets sprung to mind, 'the trend is your friend', 'let your profits run' etc.
Ok, the market moves in waves, this is an indisputable fact; you only have to look at any chart of any time frame to see this. Now I'm not saying let's use some form of Elliot wave system, that's all been done and anyway I am not an advocate of Elliot wave theory and place it in the same file as Fibonacci and Gann, which is marked ''Voodoo'', but the waves are there for all to see nonetheless. What I wanted to do was to ride those waves. I then made a list of how I hopefully would achieve it. Let's do the same.
These are the points that I came up with that I wanted my new system to address and find answers for. It should enable me to trade in a much less riskier fashion, and importantly, to trade with the trend. After all, that's what everyone says, is it not? So, here's my list:
Wow, that's a lot to ask. Did you say that you wanted to keep it simple?
The darkness was beginning to lift, at least I now had something to work with. I knew what I wanted and roughly how to achieve it at the back of my mind. Only through days and weeks of testing and analysing could I hope to arrive at the final result. You would not believe how many hours went into the development of the Black Dog System, but that is a very long story and you have paid for the end result, you will not be disappointed when you see your account beginning to grow.
I believe that it has all been worth it because of the benefits I now reap. As a Black Dog user you will now also reap those benefits. Before we go any further, I'm going to assume every one can read a chart and has a basic understanding of technical analysis, if not then call or e-mail me, I'm pretty sure we can get you sorted out regarding this; details at the end. In fact, any problems or questions whatsoever regarding the system and you'll find that I'm available, usually most of the time. I do have another life so please be patient. Also think; sleep.
There's going to be no fluff on how the markets work, or what makes a good broker. Not my problem. It's my task to present to you what I think is a very good system (my words) that will lead you to some very good profits (ditto). In the last three weeks of trading (as I write), this system has generated almost seven hundred pips! Not bad at all. As with every system there will be losses, but here, we keep them to a minimum and take them in our stride.
So what's the story so far?
I was a newbie trader who lost big time. Fact.
I stopped trading to study, study, then study some more. Fact.
I used systems purchased from the web and did ok-ish. Fact.
I still hadn't made a fortune. Fact.
I decided to build my own system from the list. Fact.
After many months, the BD had definitely arrived. Fact.
And finally, my earlier losses have now returned to their rightful owner! Glorious fact.
The Black Dogs are traded every day, especially in our Trading Room, and we do very well. As an owner you are entitled to the full member benefits, those that all BD traders enjoy. Use of the forum, use of the chat room (after 50 posts), you are invited to contact us at any time (UK trading times please), and to receive any updates to the system. Everything. Please join us.
Joined: 10 Nov 2008
|Posted: 15 May 2011 at 20:08|
First and foremost, this chart set-up was devised on the MetaTrader charting package, and is the one we use. The beauty of this is because it is free real-time charting which is available from many brokers eg, Interbank, Alpari, etc. Totally free. Just register and then download. You do not need to hold an account with a MetaTrader broker, only register for a demo account. You may use the charts, but trade with your own broker if you wish. You can open a demo account first to get to grips with this system and then when you feel comfortable enough to 'go for it' you can open an account with real money or 'go live'. My brokers, Alpari UK, have a minimum amount of $200 to open an account. You can also trade microlots with them making the learning process less painful if you should suffer a few losses during your learning curve.
If I may just repeat myself here: until you are fully conversant with all the rules, machinations, and workings of the BD system then please, please restrict yourself to trading very small lots. i.e., DON'T RISK THE FAMILY JEWELS!!
In most documents you will find that it is at the end where it is recommended that you demo trade the system for a few weeks or so until you are up to scratch. I'm going to go against the flow and mention this at the beginning! It is my view that demo trading, or paper trading, holds no value to the prospective system user apart from learning how to click certain buttons on the trading platform and becoming proficient in its use. 'No bad thing there', I hear you say. I agree, but I feel that demo trading can lull you into a false sense of 'hey, this system's not bad', when in fact trading with cash is a totally different beast. Pray, use microlots to begin with and forget demo trading. At least you will have some interest if there is cash on the line, albeit pennies.
This is not the place to go into the finer workings and instructions for the use of the MetaTrader charting package. My PC skills are very limited, but if I can learn the refinements of it in a relatively short space of time, anyone can! That being said, it's good to be up and running in the shortest time possible, so should you have any problems whatsoever setting up your charts feel free to contact me immediately. I would be only too pleased to assist you. If you are not familiar with MetaTrader I'm afraid that you will have to do as I did over a period of time, and that is to just play around with it until it becomes embedded into the old brainbox. Don't try to rush things along as it may prove expensive, the markets will be around for a long time to come. We are always here to help.
I have no idea if the BD set-up can be arranged on any other charting package. I haven't tried. The settings are nothing special, just my attempt to address the problems on our famous list. I think it is a successful attempt but we have yet to find out.
Currency trading can be expensive and (if you do not know what you are doing) an excellent method of reducing the contents of your wallet. Now there is an understatement. So it makes sense to utilise the facilities provided by MetaTrader considering that some charting packages with a live data feed can cost anything up to $150 per month. Maybe more. We are only on chapter 2 and saving money already! MetaTrader may lack some of the more complicated algorithms and indicators that the "successful" traders employ, but it has far more than we are likely to need so why pay for things that are not required? Remember simplicity?
In the next chapter we'll look at some charts and start laying the foundations for the Black Dog system, but for now I think it's probably best not to go into the setting up of our charts until we come to the particular indicator in question. So, I'll draw this chapter to a close. In the meantime, feel free to play around with your MetaTrader charts.
People have already contacted me regarding the use of Fibonacci retracements and extension levels and how they can maybe assist with entries and exits. I have no problem with this but I cannot give any advice. I think of myself as not an unintelligent person with a flair for maths, English, history, geography, and the sciences, etc. but for the life of me I cannot see how those idiotic numbers can in any way be remotely connected to the currency markets, or any other market for that matter, numeric or brick. Choose your own numbers and they will work just as well, and in most cases better.
I personally do not use Elliot Wave or Gann for similar reasons. Just the word 'fibonacci' makes me shiver. If it works for you then use it. This, I think, is the best advice. Personally, I think it's the first step in complicating matters that shouldn't be complicated. Just a thought.
How in the hell can the study of procreating rabbits have any bearing on the markets? - beats me.
Joined: 10 Nov 2008
|Posted: 15 May 2011 at 20:13|
(Black Dog System: Page 2)
Please study thoroughly the ideas and concepts put forward within this system and then carry them forward to the MTF series. Most of the trading rules for the Black Dog system are used with the ''Mini'' strategies but the finer details are not repeated within the text. It is assumed that you have fully understood this system before moving on.
It has to be said that the majority of Black Dog traders use the latter systems for their trading, and as such, this original Black Dog system has unintentionally become a ''training'' system. This in no way detracts from its potency as a very tradable system for trading the forex markets. It certainly pulled me 'out of the mire'. There are many still who trade the Black Dog System as described here.
3. Time-frames and Intra-day
Me? I have a patience problem. I cannot trade anything higher than a 15 minute TF. This is not to say that there are no trading opportunities on the higher TFs, there are many as we will see shortly. But I must explain to you why I trade the 15m TF as most of the charts shown will be 15m. Now, I usually trade the 15 minute timeframe simply because I can find three or four decent trades in the morning (usually on different currency pairs) and forget about trading for the rest of the day. I can then spend real-time within the Trading Room.
So I'll use 15m charts in my explanations, but all timeframes can be traded using this method, it's pretty flexible as we'll see. I must also add that I am pretty impatient when it comes to taking profits. A throwback to my old 'losing' days I think. We'll have more to say on this aspect of my trading later and how I've turned it to my advantage. Anyway, here's the trading TFs that Metatrader uses that you may wish to consider:
M1 = 1 minute time frame (TF)
M5 = 5 minute time frame
M15 = 15 minute time frame
M30 = 30 minute time frame
H1 = 60 minute time frame
H4 = four hour time frame
D1 = daily time frame
W1 = weekly time frame
M1 = monthly time
With my impatience there is no need to have weekly and monthly time frames on my charts so I have removed them to save on screen space. I keep the other higher time frames simply for reference, and checking longer term trends over the weekend.
Let's have a naked chart and a first look at MetaTrader. Here's the CADJPY M15. It is showing about two days worth of price action, this is why the chart is not very clear. It is showing a lot of information. The vertical dotted lines represent midnight GMT.
CHART #1 CADJPY M15
There are some really good moves here that could have generated lots of pips for the savvy trader. My job here is to get you into those moves with minimal risk and the maximum profit. I look for up to four moves, like those above, per day. They don't happen every day regardless, there are flat days. It's not just the CADJPY that presents moves like this almost on a daily basis, most pairs show similar movement. The GBPCHF on the next chart also exhibits some great intra-day moves.
CHART #2 GBPCHF M15
If I hadn't told you that both the charts above are of the 15m TF, could you have guessed what time frame they were just by looking at them? Probably not, they both appear to be very different.
Do this with some of your own charts on different time frames; try them all from 1 minute up to 1 month. Use a naked chart. Even the 1 minute chart resembles the 1 month in the majority of places.
The point I'm trying to make here is that this method works very well on the 15m time frame, so why not on any other?
I confess to not having the patience to trade the daily time frame (TF), or even the H4 or H1. I do, however, spend all my trading and study time on the 15m TF. You may have a full time job, in which case the 15m TF is not much use to you, the daily charts (D1) would therefore be more suitable or perhaps even the H4.
It's really horses for courses. Whatever TF suits you. Consider the chart below of the GBPCHF again but this time its the Daily TF. In appearance, there really isn't much difference between all three charts. This statement bodes well should we wish to trade any time frame that suits.
CHART #3 GBPCHF D1
Intra-day Trading Times
To avoid confusion I shall quote all times as GMT. Although in the UK we are at present on BST (British Summer Time) we'll stick with GMT.
If we are going to trade intra-day on a TF like the 15m chart then we really need the market to be moving somewhat in order for us to gain our quick profits, we also need to stay out of the market at those times when hardly any movement occurs at all; a trading range. Trading-ranges can be very expensive. Where you live will dictate the times when you are able to trade, obviously, but living in the UK, I find that the best times are from the London open to the New York close. I don't place any new trades after 18:00 GMT but I would be happy to let open trades run beyond this time if they showed promise.
I close all trades before finishing for the day, no matter what time although I have been known to stop up all night nursing a trade to completion. But it must be worthwhile and it is very rare.
Trading the daily charts, and possibly including the higher time frames, does not have this problem of picking and choosing your trading times. The H1 (1 hour) chart also sees some good moves crossing different sessions so the time constraints do not apply.
So, why these particular times for trading? Well, you only have to study any 15m chart to see that activity falls off after about 18:00GMT until the next day at around 07:00GMT. This doesn't happen every day of course, nothing is for certain in forex. What we are looking for are the flat areas to avoid in general. Becoming stuck with an open trade in an intra-day trading range will more than likely result in a losing trade. Look at Chart # 1 & 2 above and notice how level the price bars become around the vertical dotted line areas.
Yes there are some good moves between the times mentioned in the previous paragraph, but more often than not, there isn't. Let's not risk it as this only reduces our chances of enjoying profitable trades.There are plenty of other opportunities when the market is more active.
In my trading I certainly consider fully anything that may be detrimental to my account and that means avoiding the times mentioned above. And so should you. I should add here that I am usually finished trading well before the 18:00 threshold as I have made my profits for the day using the BD system. We'll talk about this later.
It's at this point that I think we should start getting some rules together and reinforce them along the way. We only have two 'written in red' rules and here is the first. So:
Rule # 1
For intra-day trading on time frames under one hour, trade only from the London open until 18:00 GMT. Close all trades for the night.
Our two 'Red' rules are so important for the simple reason that they save you lots of money. Please trust me on this. Let's just reinforce what we have so far. Have another look at both charts above. Please, scroll back as far as you like on any chart of your choice, that's any currency pair, to make sure rule # 1 is understood. Notice how activity is much reduced during this period. There are plenty of other opportunities to trade during the more active periods and the BD system will generate lots of trading signals (even during the non-trading period); let's just make sure that we act on those signals where there is more of a chance of success.
I hope this explains clearly the need to avoid trading this method after 18:00 even if our system should generate a signal to enter. This rule is to try to keep you out of the market when there is low volatility, when the market decides to flat-line. BUT, we can't all trade at the same times. For those traders who live in the US, Australia, Canada, etc., unless you are a night owl and have no job of work to distract you then it may be ok. Most people in those countries like to lead normal lives, sleep normal patterns, or work (heaven forbid)! Violating rule # 1 is more than likely a probability and ways around it is to trade the higher time frames, or trade the currency pairs that are active at that time. For instance, the yen pairs and Australian pairs can have good moves outside of our rule # 1 times. But in general, rule # 1 times shows the greater movement.
That's it for TFs. We know when to trade, now let's figure out how to trade. We can now start to build our charts.
Joined: 10 Nov 2008
|Posted: 15 May 2011 at 20:40|
4. Building our charts
I must state that, in the past, interpretation of indicators at the bottom of my charts has led me to lose a great deal of money, and still does occasionally. They are notoriously difficult to read accurately and usually lag the price action by some way. Personally, I do not trust them (more likely, I do not trust myself to read them correctly)! Nevertheless, we will be using one. We will come to this later. First, I must stress that we will allow price action to dictate our entries and exits. NO crosses of indicators or moving averages although we use both. Let me explain.
In our trading we don't want to be bullish, and we don't want to bearish. We want to be RIGHT with the market, so we need a line in the sand to indicate to us the direction we are likely to trade. Now, I have long had an affinity with the 50 period exponential moving average (50ema) and it has kept me on the straight and narrow for longer than I care to remember.
Moving Averages (MAs), on a chart, are usually set to represent the closing price of X amount of days smoothing out the price action. MAs come in various flavours but the type we will be using is called an Exponential Moving Average (EMA). For our purposes we need to add a 50ema of the highs and a 50ema of the lows onto our chart. This is all pretty basic stuff as far as technical analysis is concerned so I won't dwell on the construction of MAs, but should you have any problems then feel free to contact us. Your CADJPY 15m chart should now look like this:
CHART #4 50ema of the highs, and of the lows, (the 50s channel)
This is our line in the sand. Or two lines in the sand! The 50emas are very good at keeping us out of trouble. The first law of trading is to preserve capital so we can fight another day. The 50's help us to do this perfectly by keeping us on the RIGHT side of the market for our TF.
You can see that if you are long the market then price needs to remain above the 50 emaH, (50 ema of the highs). The reverse is true for shorting the market. Price must remain below the 50 emaL. Acting on this statement alone will save us lots of pennies.
You can also see that if we enter a long position and price retraces to close inside the 50 channels, then we may exit with a small loss. This is one way of controlling our risk and keeping losses to a minimum. We'll discuss this in greater detail later. For the moment, we are just setting up our charts.
In the nice up trend on the chart below, notice that there are very few opportunities to go short. Our system is already beginning to keep us on the right side of the tracks and we've only just started! Here's the GBPCHF 15m again.
CHART #5 Few shorting opportunities on the GBPCHF M15
Here again, the 50's keep us on the right side of the market. They do a pretty good job of preventing us making rash half-assed trades. This is a part of the grand plan to stop us overtrading (re: list). Don't worry, should we have cause to exit because of our exit strategy only for the market to continue on its merry way, we can always re-enter on the next signal. We will discuss these signals shortly. In the meantime, let's look at another chart. Check out the moves on this M15 cable, GBPUSD.
CHART #6 Keep to the correct side of the tracks
The chances are very good that we will lose money if we trade the opposite to what the 50's say. Not always, but more often than not. An example being; we enter a long position when price is below the 50's. Believe me, there will be more than enough trading opportunities for you without going against the grain or trend, so we really don't want to risk it. Agreed? Agreed!
For our purposes, and for the TF we are trading:
If price is above the 50's then it is in an up trend.
Similarly, if price is below the 50's then we have a downtrend.
This is only a general observation but it has certainly kept me out of many duff trades and continues to do so. We have other confirming indicators to add later that will tell us the direction we should place our trades but nevertheless, the 50's are a good, quick indication of trend that should not be ignored. The Black Dogs (in the next chapter) together with the 50's, form a much stronger indication of trend direction.
What about when the market is flat and in a trading range? Well, we have a way around that too. The BD system can't beat the trading range every time, no system can. Before very long you will realise how good this is.
The 50's are also instrumental in our entry criteria; the whole system in fact, is built around them. That alone makes it important to understand the concepts in this section. Please read again. We could actually state a rule at this juncture about trading on the correct side of the 50's, but we'll leave it for the moment.
We have just begun the process of building our charts and already they keep us with the mini-trend (one of the items on our list). This concept is doubly reinforced later and selects for us the high-probability trades much sought after.
For those who prefer the four hour TF, here's the GBPJPY H4.
CHART #7 GBPJPY H4
Notice how the 50's keep us on the right side of the market.
Now, it really does depend on where your entry price is but the BD system will not allow losses to become astronomical. We have to accept losses as part of the business of trading; there is just no way to avoid them so the plan is to keep them tolerable. The rules keep us safe in this respect so it is worth repeating that it is folly to ignore the BD trading rules.
If the system says out, it means OUT.
Now we have another little twist that will help us to keep our trades in the right direction. In place of these 50 emas of the highs and lows, we have an indicator that is colour-coded which helps visually in our trade selection - to go long or go short. This indicator makes for very easy potential entry-spotting. There is no difference in the position of the indicator as opposed to the 50 ema, the only difference is the colour-coding.
The whole Black Dog Program is colour-coded to make potential trades stand out. High Probability Trades (HPT's) become easier to spot. This is shown below on the EURJPY 15min. Notice that the areas to go long and the areas to go short are easily spotted. As indeed are the areas where hand-sitting is the better strategy, the areas to avoid.
CHART #7a The Coloured 50's
We have had a single chapter on the 50emas because they are so important, the whole system is built around them so its worth spending a little extra time and maybe reading the chapter again. There is nothing difficult to understand in the entire system but its well worth waiting until all the concepts are ingrained into your trading memory before risking your cash. We will come to the exit rules shortly, let's continue with our charts.
For further reading of the Original Black Dog System, the MTF 'Mini' series, and a whole host of other trading information please visit here
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