Mark McDonnell's 4XME Big Lights Strategy

Big Lights Strategy

(This was originally presented as post number 4353 and 6435.  Based on questions received it has been slightly rewritten with some clarifications.)

I have found that sometimes forex traders struggle with the short term minute lights and the volatility of the forex market trying to scalp 10-20 pips. Many times they are not even cognizant of the long term trend or they are not able to even diagnose where the currency pair is in the overall longer term cycles. They are often trading against the trend but don't even know it. This method focuses on the attempting to trade the largest lights possible or largest lights available for individual pairs and largest momentum cycles available for any point in the market. The potential for larger movements is here using this method, and more than likely less frequent trading.

But even if you don't use this method you will be cognizant of the larger trends and you will knowwhether or not you are trading with the larger trends, or against the bigger trends (consolidation cycles within a larger trend). If you strictly use this method you would probably trade a little less but get potentially larger movements, based on the current market condition and what was available. Forex traders using this method consistently report actual profits that are generally are higher up to the hundreds of pips range of magnitude since you are attempting to use much larger lights and momentum cycles. As with any method you would papertrade until confident and use good money management. Always enter on a fresh minute light cross with angle and separation.

The starting light setup is 720 minutes , short mid and long (custom light setting not preset lights). Subsequent lights to check are the 660, 600, 540, etc. and decreasing from there in 60 min increments until you find the correct trading window. You can set up a 660, 600, 540, 480 in the presets and then 420, 360, 300, 240 in the presets. Then look at swing light settings, or create a custom set of swing lights.

This is called drilling down all of the lights. If you follow the 6 major currency pairs this exercise takes 20 minutes and you can do it 3 times per day on 8 hour intervals or ahead of the major trading sessions (European, American and Asian). If nothing is out there go
live your life and spend time with your family and throw the trading emotion out the window.

Using this approach you evaluate ALL the lights in each currency pair and approach each analysis like a super long term position trader but still maintain the flexibility to enter or exit on a particular trading window that you determine by analyzing multiple lights and looking for bullish waves, bearish waves, or channels up and down that are identifiable and readable.

Just remember that starting with the long term light and moving to the left all you are doing is magnifying the curve you just looked at. The midterm magnifies the right side of the long term, the short term magnifies the right side of the midterm, etc, etc all the way down to a 30 minute light. Embedded trends and channels.

Procedure: Check any or all of the currency pairs you are interested in systematically and check to make sure the long term and midterm is fully separated with no convergence. This is the first filter.

If the mid and long are not fully separated you go no further with this pair and the pair does not qualify for this method and you are essentially done with the major trend indicators.

If no pairs qualify for the method you have to then move to the short term chart and larger minutes lights and start looking for shorter momentum cycles or channels. Sometimes you will locate a midterm and/or short term chart with angle and separation and this becomes your foundation light/anchor light. It's the "biggest available" for that point in time. Even if this method is not applicable to a pair you will at least have looked at the longer trends to see where you are at in the longer cycles and be cognizant of this, which has value all by itself.

If you find pairs with fully separated midterm and longterm (strong
double foundation) move then to the to the second screening. Look at
short term light and 720, 660, 600, etc very large minute lights all
the way down till you find a light with a nice easy to read bullish
or bearish wave where the movement and consolidation cycles are
visually apparent. Any light will do. If you find one with good
readability this is your main trading window, lets say you find the
a 480 minute light has good look. Then optimize with lights around
it like  460 470 490 500 looking to refine your trading window
further,
optimize to the best one. Inspect the momentum and consolidation
cycles and estimate your next entry or exit. Drill down further the
lights to the left of your identified foundation/trading window and
try to identify a trigger light and WRITE IT DOWN. Enter on fresh
cross with angle and separation. Trail up or down from there with a
stop. Estimate potential profit based on previous cycles of movement.
At this point you should have your lights setup with the main
windows or foundation lights on the right and entry/confirmation
lights on the left.

Each currency pair is either trending up, trending down, channeling
or indeterminate (messy curves). Don't overcomplicate the approach.

Since you have already verified that the pairs of interest are pairs
are trending strongly or channeling look for the obvious patterns
bullish or bearish on short term light or large minute lights. The
cycles and patterns should be visually obvious. Don't force a trade
into any light, just evaluate the lights find the right one. Then
decide up front what your entry window is. Potential trading
channels  and entry window must be visually obvious and make sense.

Contingencies - In the event that no separation is on the mid and
long (skewed, pacman, or braided) you are now aware that the pair is
not trending on a longer term basis but may be channeling on the
lights to the left. This is powerful information because very large
up and down channels may be available to trade. Start looking at up
and down channels for the short term chart and large minute lights
and drill down the lights again until you find a nice smooth easy to
read rolling trading pattern.

This method is only one method and we all know there is more than
one way of trading 4x. But using this method and canvassing all of
the lights you can ferret out the best and most obvious trading
channels and cycles  and always be on the right side of the trade.

If no currency pairs meet the mid and long term full separation
initial screening criteria you can quickly move to another group of
lights to trade with shorter term anchor (foundation) windows or up
and down channel. My personal choice for a contingency would be a
fully separated short term chart (position light settings) or short
and mid full separation. I prefer the "position" style as a backup
plan for trend trades using the short term curve as an anchor,
knowing I will be in for a shorter ride and possibly trading against
a longer term trend. This is fine as long as you are aware this.
Always better to trade with the trend or have full knowledge of the
fact when you are trading against it for overall risk assessment.

Dealing with convergences and consolidations………….
I have no problem with someone trading against the trend but not on
teeny tiny minute lights. Use bigger lights for bigger
consolidations and bigger potential profit. Look for short term
charts that have moved up for several days and wait for convergence
on the green line, then set up 30, 60, 90, 180 minute lights (swing)
or possibly a little larger and trade in the opposite direction of
the previous short term cycle and always use a fresh cross to enter.
Pick the light that's easiest to read. If a midterm chart goes
through a long cycle and the midterm chart green line convergeges,
these consolidation cycles can produce 300 pip retracements. After a
long movement on a short or midterm term curve and a convergence on
the green line, this is one of the few scenarios that I might enter
on something as small as a 30 or 60 minute light going in the
opposite direction of the previous cycle
cycle.

If you do not or are unable to write down your light setup
foundation light, main trading channels, and fresh cross entry
lights, and whether or not the pair is trending or channeling, which
direction you want to go and the spread, you have no plan and cannot
even papertrade……really why would you?

Money management is a little simpler with this method. I use the
peaks and valleys of the curves within the trends and embedded
trends  to visually set stops slightly below the recent previous
support or above the recent current resistance if I am shorting.
Using the proper optimized minute light to read the peaks and
valleys. Keep it simple and very systematic.

List of I don't cares:
I don't care what currency pair I trade, but tend to stick with ones
that have a 3-5 pip spread.
I don't care if I go short or long
I don't care why its going up or down.
I don't care if a certain pair doesn't meet my criteria on the mid
and long, I can trade another set of lights if I want, that's my
choice.
I don't care what my foundation and trading window are as long as I
can identify it clearly.
I really don't care about small minute lights, because I know that
larger lights can give me a bigger movement.
I don't care if I trade against the trend as long as I am fully
aware of the risk.

When I introduced this approach in January 2004 in the afternoon 4x
talk live support chat sessions many software users confessed they
were struggling with the smaller lights and I turned many of them
around as they were ready to give up. Since then the overall
response has been tremendously positive as 4xme traders are able to
now see all of the charts and are able to be on the right side of
the trade/trend or say no to trades more often.

Traders have consistently reported profits in 50 to the 100 and even
to to 1000 pip range (no kidding), traders doubled their accounts
and many made over $10,000 the first week it was introduced, based
on the
emails sent in from 4x users. Since then I can confirm that
consistently, over time, this method produces the largest potential
profits for any pair. I told the traders that  if you trade bigger
lights you expect to get bigger profits. Simple simple. I cannot or
will not imply a profit for anyone, but the potential is there and
can be fully supported by the daily high profit testimonials
received.

Although my forex experience is limited, I have more experience than
any 4xmadeeasy trader reading the 4X curves due to my Wizetrade
experience of over 4 years. Owning Wizetrade I understand the
mathematical algorithm and how it affects the charts. The bottom
line is that if you understand these charts well and know how and
when to better to set a market and and stop order and understand the
basic concept of money management but understand little about the
forex market you actually need little else, this is why its called
4x made easy. I am a died in the wool Wizetrader who doesn't know
any better, and I don't trade any stock without a fully separated
mid and long term so I just did the same thing on forex looking for
the bigger trends first. You don't have to be a long term trader to
have a long term perspective on any currency pair, stock, commodity
or anything, its just awareness. The long term lights are the bus
drivers the minute
lights are passengers.

As a rule I don't hold over the weekend but repeat initial screening
on Sunday afternoon/evening about one hour into the opening of
trading to get ready for the first Asian session. I understand the
impact of news events and their effect on currency pair movements,
but this method is still essential to making sure you always trade
with the trend. Trends can be interrupted, but generally trends
always resume after the interruption.

Although I will not answer any questions on this method here on
yahoo or by email I am in the afternoon 4x chats almost every day
for 1 hour to field questions if your homework assignment I give out
daily has been completed.

Good 4x trading to everyone
Mark Mc Donnell