By Alan Benefield for Forexmentor Team

2007, Currex Investment Services Inc.

February 7, 2007

We are going to wrap this system up with rules to be applied on the daily charts.

Trending market (red GMMAs are showing good angle and separation):

1. Use 100 pip stop loss.

2. Price action must not be heading for 89, 144, or 200 EMAs or red GMMAs.

3. Buy or sell using the 8, 3, 3 Stochastic oscillator moving away from being oversold or overbought.

4. Only buy or sell going with the trend, buy the dips in an uptrend or sell the rallies in a downtrend. Never enter a position in a counter trend market — trying to row upstream.

5. Buy or sell using the Stochastic Momentum Index when the daily SMI is the same color as the weekly SMI (or SMI weekly window plot).

6. Move stop loss up to entry point as soon as possible and continue to step it up and let price action take you out of the trade.

Non-trending market (red GMMAs together not showing angle and separation):

1. Use 100 to 150 pip stop loss.

2. Price action must not be heading for 89, 144, or 200 EMAs or red GMMAs, or must have room to move before hitting them. In such case set a limit at that level and use a 75 pip stop loss.

3. Buy using the Stochastic Momentum Index (SMI) daily signal (red and green) and the weekly SMI signal (black and baby blue). When Daily SMI is green and not at or above the +60 (extreme overbought) and the weekly SMI signal is baby blue.

4. Sell using the Stochastic Momentum Index (SMI) daily signal (red and green) and the weekly SMI signal (black and baby blue). When Daily SMI is red and not at or below the -60 (extreme oversold) and the weekly SMI signal is black.

5. Move stop loss up to entry point as soon as possible and continue to step it up and let price action take you out of the trade.

*Note you may have the weekly Stochastic Momentum Index (SMI) plotted in another window as a red and green line.

Daily 3 Stochastic System Complete

This will show you how I use my system with all the charts, indicators and checklist.

Step 1: The first thing I do is go through all 20 pairs and mark any possible trades by putting a checkmark on my list. I always have 20 to 30 of these copied and ready to go before I get ready to trade.

Illustration I

Step 2: The next thing I do is go back and look at the marked charts of any currency pairs that I checked off as a possible trade.

Illustration 2

Here I plot 3 charts on one screen — the 4 hour chart, daily and weekly chart. You can also see all 5 of our indicators plotted with the two optional confirming indicators compressed down.

Stochastic Oscillator (STO)

Relative Strength Index (RSI)

Moving Average Convergence Divergence (MACD)

Stochastic Momentum Index (SMI)

Guppy Multiple Moving Average (GMMA)

Step 3: Check your trades every day and move your stop up to lock in profits. Keep an eye on the daily SMI for color change or the extreme 60% levels (dotted line at +60 and -60 on the daily and weekly charts).

You can use this setup on the daily and weekly charts.

Guppy EMAs (GMMA) applied to Close of price

6 fast blue Thin Solid EMA lines 3, 5, 8, 10, 12, 15.

6 slow red Thin Solid EMA lines 30, 35, 40, 45, 50, and 60.

I like to plot these in another price window by themselves to expand them over the whole chart.

Indicators

Stochastic STO make settings 8, 3, 3 Nbr periods 8, %K3, %D3

Up movement blue for both lines and down movement red for both lines, make them thick so its easy to see. Horizontal Line at 50 mark dotted line.

Stochastic Momentum Index (SMI) 10,3,5,3

Make SMI 1 color up green and color down red and #3 thickness solid line. Make Signal 1 invisible. Signal method simple and apply to close.

Note this indicator is hard to find, its at the IT-Finance charts, and you will need to see if its at any other charts. Add line at +60 and -60 a dotted line.

Stochastic Momentum Index (SMI) 50,15,5,3

Plot this on the same window as the 10,3,5,3 above. Make SMI color up baby blue and color down black #2 thickness solid line. Make Signal #2 invisible. Signal method simple and apply to close.

Optional Confirming indicators

Relative Strength Index (RSI) RSI 14 make up green and down red, make line very thick so easy to see. Horizontal Line at 50 mark dotted line.

MACD Moving Average Convergence/Divergence 12, 26, 9short term MA 12, Long term MA 26, Signal nbr periods 9. Make Signal line red solid line #3 and MACD line blue solid thickness # 3. MACD Histogram light green going up and light orange going down.

I hope you find this information helpful in your trading. Feel free to send me any comments or suggestions. I would like to know how you are doing.

Alan Benefield

I feel totally empowered and humble all at the same time. If everyone learned from you guys, it might get a lot more difficult to make money in the Forex. Last week, using Chris’s basic guidance I captured 300+ pips

FOREXMENTOR PRO TRADER ADVANCED FX COURSE