Wednesday, 10 August 2011

Questions from Peter

Hi Imran

"Well, today I traded the AIMS techniques for the first time. Had 2 trades, and 2 winners. It was very easy. I only traded in the direction of the 5 minute chart, using the 1 minute. Excellent.

Question 1.
I am still a little confused. Setup 1 is where you would take trades off the saddle point, and where you bracket the AIMS high/low. You use the 1 minute chart, with no regard to where the 5 minute is, right?"


Answer:  It depends on the trend on M5. E.g. if M5 just came out of a Saddle Point Setup 1 itself and you either exited earlier you did not trade yet. M5 will retrace at some point. At that point you will use M1 to make an entry using either Setup 1 or 2. You could just take an AIMS Level in the direction of Alligator on m5 but by doing so on m1 you get earlier entry and your risk is minimised. Think about it, M5 required 25pips SL, where as M1 Setup 1 or 2 require 15pip max SL and in the past 8 months my 15pip SL has been hit only 3 times. FACT. 

Ok, when you see that M5 has peaked and now its time for it to come back to ZL you ask yourself do you want to trade into possible 4th wave of M5 by using setup on m1? If No you stay away until m5 is ready again. 

Then, later you see M5 is ready u take a setup on m1. You might take long or short using Setup 1 but since M5 has only peaked once and NOT yet diverged you will biased towards that trend direction but you wont take chances and hence bracket saddle point. Because you never know whether M5 will do tis 5th wave or not. So we Do Not Care Which Way the Market Moves. We want to be in it when it DOES!

Question 2.
Setup 2 is a trade taken on the 1 minute chart but in the direction of the established trend on the 1 minute (ie the alligator is open) and you would enter on a break of the AIMS level. After re-reading your material, which setup considers the 5 minute trend? I'm still confused because after looking at chart examples, I'm still missing this.
I know you mentioned in an earlier response that if I decide to trade only in the direction of the 5 minute chart, then that's good. But what setup takes this into consideration? Sorry for these questions.


Answer: as I said in above it all depends on your understanding of the trend on m5. A guideline is to not take a setup on m1 as long as price on m5 is on the correct side of at least Red Line. 
So you need to know how far has it trended. Which stage of trend is it in etc. Roughly if it has trend only 40-50 pips then chances are that its not yet done. but at the same time if its not moving too much in one direction then there are chances that it does not want to trend in that direction at all. Once  again you are in an unpredictable situation. The fact of the matter is you never know. This is Forex Trading for you Peter. although its is also true that if you make a ground rule that you will not take a setup against m5 you wont regret it. I have friends who respect purple line or alligator direction on m5 more then anything. Forex Trading requires a system that works and a person that can follow the system. 


Question 3.
My last question is this...when trading setup 2, the AO is most likely further away from the 0 line than it would be for setup 1, which makes sense. Is it ok to take trades for setup 2 if the AO is not close to the 0 line (but not excessively far away either). Once the trend establishes itself, it would take a decent pullback to bring the AO close to 0.

Answer:  Setup 2 also requires AO close to ZL. it is true that it might be that bars might be a bit bigger but then it all depends on that day and your feel for the market. If price is moving nicely on m5 u just want entry and if trend is not confirmed yet we remain very conservative.



The notion of "in the direction of m5 (higher time frame" is a guideline. Its not a solid ground rule. the Ground rule is to trade the setup. If you trade a setup against a trend that it is fine but if you trade just like that against a trend even if it makes money on that occasion in reality what you've done is that you dug a big hole for future profits. It is all about following something that gives you a statistical edge. our job is to hit trends right from where they originate and not worry about other time frames too much. Hence we use the M5 as a guideline trend. But how do you know when a trend is over?

The Concept is that we use m1 to get into a trend before its evident its changed on m5. You'd use m1 AO to see 1-5 pattern and then take Setup 1 in Either direction. By doing so it gives an advantage. it lets us trade against the trend on m5 but in line with TREND ON M1. I would not recommend this technique to beginners or people who are new to this style of trading.

I display m5 for 2 purposes. well in reality its one but its two fold.

1. AIMS Levels of M5. I want to know whether price is inside aims on m5 or not. If price is inside aims and I see a setup on m1 I would check how far is the relevant m5 aims level from the entry. If its close lets see 1-5 pips I'd rather wait for m5 break otherwise I'd stay out entries unless there are more than 10pips distance. There is an exception though. Which is

2. If Alligator is clearly open and trend is still strong I'd use a setup on m1 to get into an m5 trend regardless of where AIMS Levels are on m5 as compared to my entry on m1. Because if trend is strong I just want entry. but if M5 was sideways and we are trying to get into a possible trend then we stay conservative.  Or if you knew how and are experienced enough, we trade m1 on its own and do some quick scalping here adn there before it starts trending properly. (not recommended at beginner level)

Purple Line (Beta Stage): It should serve as an easy mechanism to quickly identify trend direction on 5x time frame. At certain point the purple line might stop you from an otherwise perfect setup. But that's OK  because it does this less often than it does to stop you from trading into a fourth wave. (Peter Mentioned Black Dog system which I previously used to trade). It  has only one strong thing, if you trade only when LTMACD is crossing ZL with lines open, but not that its coming after it has peaked on the other side, it would always stop you from trading into the 4th wave. But then since its a very slow MACD, it also stops you from getting into the 5th wave, because 4th wave makes the LTMACD lines cross over and they dont get ready for the 5th wave. If understood properly the MTF2 is a class system. MTF3 is just extra burden. MTF3 with its 3X MACD  = LTMACD  is slower system. Forex is fast and you require responsive systems. Sleeping alligator takes the whole lag things away. anyway, not talking BD here. LOL

Word of Caution: coming from BD background  or other systems (especially the ones heavy on moving averages) could mean you have to unlearn alot of  things before you fully let yourself take advantage of this "Freedom Setup". Unlike others this system is Freedom. You can literally trade it without the help of M5. IN fact if you traded it with 1 or maximum 3 pairs on m5 you wont need to have a look at m15 or m30. Just trade the setup. We call it "Trade the Shit out of it" because "A Setup is a Setup is a Setup"

Setup 2 is a mechanism to get into a proven trend. If tend is not proven you are risking otherwise as long as AO has not peaked and lost moments any fractal is valid. e.g. if a setup started off a Setup 1. then see how far you are from Setup 1 when you're ready for Setup 2. My logic is this, I only trade Setup 1 and add on on Setup 2. So if I miss Setup 1 in MOST cases I wont take setup 2 on its own. usually by the time Setup 2 comes I'm already in profit.



We are very conservative forex traders when the market is not trending, and very aggressive forex traders when its trending.


Please Note: Purple is part of AIMSigator V.1. Its still Beta.