Ecr 2.0 PDF
Ecr 2.0 PDF
Ecr 2.0 PDF
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So after much wait...hundreds of messages and lots of backtesting later - without further delay,
we have the ECR 2.0
ECR stands for Exponential moving average Crossover and Retest system.
So I need to apologize - in the previous ECR document I said that you need to look for true
support and or true resistance first but then in the same light I turn around and say that I don’t
believe in support or resistance. For this I need to apologize as I realize it was very misleading.
Please keep in mind this is the way I see the market, if you have other views that’s absolutely
fine. What we need to remember about this thing called forex is that it is highly subjective. There
are many different types of traders who see different things, react differently, think differently.
This is simply an accord of how I see and react to the market.
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The amount of backtesting, speculation, trial and error, losses and pain that has occured before
the creation of this document is unreal. Some of you would know of the saying #emastoldme.
It is due to the above actions that #emastoldme was born.
By the Way for those who have never heard about the ECR before - This is not just some
simple crossover strategy that you find on youtube...you will soon find out that this is so much
more than that, when applied correct this setup can be scalped, used intra day or you can even
swing once the right conditions are met.
For those who follow me in any of the Forexia Chats would realize that recently I have stopped
using EMAs on my chart altogether. I will explain this as well and the reason will make you think,
a lot.
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Now before we even get into the system there are few things that I want to cover first.
Those things are -
1. Emas
2. Risk
3. Psychology
4. Market Structure
5. Relationships
6. The Set Up
EMAs
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Now lets deal with the Emas first.
What is an EMA ?
Ema stands for exponential moving average, So now you probably wondering what is a moving
average. In statistics, a moving average is a calculation to analyze data points by creating a
series of averages of different subsets of the full data set. It is also called a moving mean or
rolling mean and is a type of finite impulse response filter. Variations include: simple, and
cumulative, or weighted forms. - This is the wikipedia definition.
I have never found the wikipedia definition to be helpful - my definition in relation to trading is as
each candle closes it leaves a point along a ever continuing line adding to that very same
line...the point is created by the average close over the amount of periods observed.
Example - a 20 period moving is observing 20 candles to make 1 point.
I can even bet money that you either have them on your chart now or had them on your chart.
People have them on their chart and don’t even know what they are for, how they are used or
how powerful they are when used correctly.
In school we learn about averages and it’s usually a spot in the center of the observed factors.
With this knowledge alone we can already figure out that the use moving averages can be really
powerful, think about it - if the moving average is the average of price - it’s basically the middle
of point of price right. What this means is even if price runs away from the moving average - IT
HAS TO COME BACK. This can be called an Moving Average Magnet but don’t worry more on
that later...I did not create that and I’m not sure who did but the person I learned it from was
Waqar from the forex family...I give where respect is due - Waqar much respect to you if you
ever read this man.
Now why use Exponential moving averages and not a simple moving average - Exponential
moving averages react to price faster which is what you want, you want that precision so you
can get your fire entry right.
Now let me address the elephant in the room...I know everyone is going to say but Brandon
moving averages have trouble during times of consolidation how do you deal with this - The
short answer is I don’t have to deal with it...Long answer later.
So now I know you want to know so which period moving average to use. Okay let me tell you
something that I don’t think you really want to hear.
The Periods of the Moving Averages DO NOT matter, relax let me explain.
I can take an entry off a 10 ema to sell and get a sell using a 100 ema...the only thing that will
be different is WHERE I sell. Watch -
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I have extensively tested this theory and every single time I get the same result - I can use any
Ema and get a profitable trade, My father always used to tell me it is not what you do it is how
you do it.
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Now for ease of understanding we will use the 14 and 50 emas. That’s what I use, that’s what
most people use and it works really good by it self but then when you add what I’m about to
show you in this document it becomes god like.
So yes for this we will be using the 14 and the 50 emas. In this case the 14 is the fast moving
average and the 50 is the slow one, well slower anyway.
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I won’t tell you that you should colour them or colour code them or anything it’s entirely up to
you. Like I said the time between the previous ecr document and this one I have learnt alot.
My emas are the same colour on my charts when in use. I like black charts so my emas are
white. K.I.S.S (Keep it stupid simple).
I’m often called the caveman by some of my students because of my primitive view on a chart
set up. I Like it as simple as possible, the less I have to consider the better for me is how I look
at it.
So just like with the last document when the faster moving average crosses the slower one you
have your ema cross. In the previous document I spoke about a bullish and bearish cross and
that you need to look for true support or true resistance before considering the cross. This is
partly true.
How do you deduce what is a valid true support or resistance, fear not..we will get there.
I don’t think I need to explain how to put emas on the chart but I will do it anyway.
Period - 14
Shift - 0
MA Method - Exponential
Apply to - Close
You can choose whatever colour and line size you like.
Click ok.
These are the settings for the 50 ema -
Period - 50
Shift - 0
MA Method - Exponential
Apply to - Close
Again you can select whatever colour and line size you want.
Click ok.
You should see two lines drawn right across your screen after you hit ok.
That’s it...congrats you have emas on your chart..easy.
Risk
So you probably wondering what does risk have to do with emas.
Risk has everything to do with emas - the whole reason you have emas on your chart is to make
your entries sharper so your risk to reward can be better not so ?
Let me be the first to tell you if you haven’t heard this before - a tight stop loss is nothing to be
afraid of, in fact you will find that after a few tries with using a tighter stop loss you’d begin to
love it and when we get to the psychological aspect of things you’d understand why.
I am known to run Forexia Unity where I focus on trader’s directly and within that team I have a
saying that I recently began using which is - “10 pips or die”
What this is is, I am using a 10 pip stop loss or i’m not entering the trade….this 10 pip stop loss
affords me the ability to be really aggressive with my lot sizing.
Also obviously with higher accuracy, using higher lots is easier as well but majority of it is due to
that tight stop loss.
Example -
10 pips = 100 micro pips
Likewise
Let’s say I’m using the same 500 usd account
If I decide to use a 0.50 lot on a trade with a 10 pip (100 micro pip) stop loss
This equals to 100 x 0.50 - 50 usd
I risked 10% of the account
I do not recommend the latter if you are just learning how to trade but if you are a more accurate
trader and you understand the ecr in depth, you understand everything in this document and
you want to be a bit more risky then nothing is wrong with that.
A wise man once said over leveraging your account is okay so long as you no what you’re
doing.
The account can be grown both ways - one is just more aggressive than the other.
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Disclaimer: I am not a financial advisor and I refuse to take responsibility for ill use of this
information...I suggest practicing this heavily on a demo or sim and making sure you get it
properly before taking it live.
As you keep practicing and your accuracy gets higher and higher you find that it’s easier to use
that tighter stop loss.
Keep in mind not because some uses bigger lots means they don’t have a risk management
strategy. Using bigger lots just means you win or lose more...you are just a more aggressive
trader. Keep it in line with your account however. Be smart.
Using that 10 pip stop loss means all you need is for the trade to go 10 pips in your favor for you
to have a 1:1 Risk to reward ratio - This is what a lot of scalpers use.
If the trade goes 20 pips in your favor and you have a 10 pip stop loss you have a 1:2 risk to
reward ratio.
If the trade goes 50 pips in your favor and you have a 10 pip stop loss you have a 1:5 risk to
reward ratio.
With a 1:5 Risk to reward ratio it simply means everytime you risk 1 you have the chance yo be
rewarded by 5. Simple stuff
The next thing you need to consider when it comes to risk is your win to loss ratio. Out of every
10 trades you take - how many do you win ?
This will give you an average as to your accuracy. If you have a high win to loss ratio using a 10
pip stop loss honestly not much is stopping you from making money, it simply means that you
don’t lose many trades and the ones you do lose the losses are small, next to nothing.
FOMO
FOGI
Overtrading
Drawdown
Revenge Trading
Timing
Losses
Trading Plan
Expectations
Market Psychology
So now you probably wondering - What does all of this have to do with the ECR.
If you never considered any or all of these things, that’s probably why you’ve been losing
money...regardless of the set up you are using.
Because I’ll tell you a secret...simply understanding a set up will NOT make you a profitable
trader, Trust me on that.
These topics that I am going to touch on now will help open your eyes just a bit to what is really
necessary to make money in the industry and even then you STILL have to put in the work
yourself...This is where I step in to help.
This is a very bad thing. I want to meet a trader who doesn’t lose any trades at all. Losing is a
part of the industry. It comes with the territory...there is absolutely nothing we can do about
it….you can have the best analysis, the best risk management...the best strategy...it will lose at
some point. With this knowledge we cannot be afraid to take the risk.
NO Risk NO Reward.
Now I’m not telling you to risk your money foolishly, but you need to take the risk.
So how do you solve the problem of FOGI - We first need to figure out where FOGI stems from.
FOGI stems from a lack of confidence in the setup...if you don’t have confidence in your setup
you will fill fear to get in. So why would you have a lack of confidence in the setup, simple...you
haven’t been practicing it (backtesting it).
Think about this - you and your buddies are hanging out by a river...everyone is diving in and
having a fun time..but you can’t swim..you don’t have experience with water past a certain
depth...that lack of experience will result in a lack of confidence in your ability to get in the water
which equals what ? you guessed it - FEAR OF GETTING IN. In this case your fear was of the
river but it can be brought back to trading in the same way...people have fears of getting into
trades because they don’t trust their own analysis’
The solution is to backtest like crazy - This is actually where the hard work in trading is...putting
in the hours and hours of chart time to find a pattern that you can exploit.
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Overtrading
This one is self explanatory yet it isn’t.
You ever had a really good start to the trading day...one maybe two trades and both in the
blue...you close them both in some nice profit and you just feel like nothing can stop you.
Then you “See” another “Setup” and your FOMO acts up and you’re thinking well I win two so
far lets go for a next one...you enter this third trade and it immediately goes against you...so
now you’re 2/3 which is still good you know. You still in profit but you feel like you’ve been
wronged by the market.. “The market stole from me” so now you need to get back that win. You
need to finish the day with those two wins that you had earlier. So what do you do, yup you go
“searching” now for another trade, where before you were waiting for the setup to come to you,
now you going to hunt for the setup and I can tell you this almost always works against you.
Guess what you lost that hunted trade two now you back to break even and you just switch from
your good mood to a bad mood because everything you made, you gave it back...so you go
again looking, hunting for this setup that going to throw you back into that sweet sweet profit
that you had in your grasp a few hours ago. And you lose that one as well because you aren’t
thinking with a cool calm head.
A bird in the hand is worth 2 in the bush - meaning you have your bird.. The two in the bush can
easily evade you...you have your bird..goooo jeez…
I know this hit home for a lot of you and you probably smiling now because you feel a bit silly for
doing exactly this...it’s okay..we’ve all been there.
What is important is to learn from your mistakes.
Best way to deal with this is to set a certain amount of trades to take per day and after that you
hang up your hat...I am a high proficiency trader so the amount of trades I like to take is up to 6
trades per day...I don’t recommend so high of a number however, at least not right away. I’d say
2 trades per day and as time goes by you can try for 3 trades per day.
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Drawdown
Drawdown under psychology? That’s correct...I am of the belief that drawdown is a mindset
and not a physical thing at all.
The point I’m trying to make is its down to perception...you need to train yourself to know that
you won’t always get that perfect entry where price automatically goes in your intended
direction.
Another way to deal with drawdown is use a tighter stop loss - I spoke about this in the risk area
of this document.
With a tight enough stop loss sometimes if you a wrong the trade hits your stop loss almost
immediately, not giving you time to even “feel” drawdown...you’ve already lost the trade you
can’t feel anything at this point. What you can do now is go back and learn from the trade, what
you can do different.
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Revenge Trading
This is very similar to over trading but it stems from different intent.
So you’ve lost a trade today….first trade you took for the day - you lost. Automatically you feel
as tho the market is against you. Think of a snake in the wild, most snakes don’t want to bite
you, they won’t waste their time biting something they can’t eat; however if you back it into a
corner and or provoke it enough it will lash out at you. You are just like this in relation to the
market...you didn’t do the market anything and immediately it provoked you by taking your
money first thing in the morning.
You now feel inclined to retaliate by taking another trade…”give me back my money” “that’s my
money” “first trade market? Really ?” let me tell you. I’ve been here.
Let’s go back to the cure for over trading - have a certain amount of trades you will take per day
- you know to yourself you are allow two trades per day - so you lost the first one, you have one
more...if you lose this one you’re done for the day...simple.
Timing
This is a short aspect of psychology but it’s tedious - remember I said I wait for the close of
candles...now imagine you’re time frame of choice is on the m30. On the m30 every candle
takes 30 minutes to close. You need to monitor this chart every time frame, sometimes
switching to other time frames just to make sure everything is in line with what you want to see.
You go back into the chart @ 9:26 am because you want to monitor how the candle is going to
close and if it’s going to do what you want it to do. A lot of the time you might find yourself sitting
and watching the chart for 4 minutes sometimes even more. If you happen to take your eyes off
the chart for just a minute you might miss your setup, now you need to go look for another. This
can even trigger your FOMO and make you literally enter before the candle closes. Be still, wait
for your confirms.
This is your job if you think sitting and watching a candle for 4 minutes to make sure it closes
how you want it to close is tedious. Maybe this is the wrong job for you.
You chose this life
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Losses
Handling a loss is never easy - I will admit that, as experienced as I am, If I have a loss it affects
me a little mentally. It would affect anyone. The best advice I can give in this area is you need to
build up some tough skin, make your back hard because the losses will come and sometimes
they come by the truckload.
You need to do what you can to control them as best as you can however - set a certain amount
of trades to take. Look for a particular type of set up, etc.
Trading Plan
Probably the single most important document in relation to your tenure as a trader. I know many
trader who have never even considered writing one far less for even knowing what this is.
Trading should never be treat as a hobby, treat it like a hobby and you get hobby like results.
Trading should always be treat as a business and NO business survives without a business
plan.
Your trading plan is your corner, this document usually has important things such as your
schedule, your risk management plan, the pairs you will trade and other key things in relation to
your trades.
By the way, there is NO right or wrong way to create a trading plan - Whatever you think is
necessary to control your decisions when it comes to trading I believe you should include it in
your plan.
Now it’s one thing to write a trading plan, it’s another thing to stick to the plan. This is the hard
part as we as humans usually don’t really like follow rules. What makes it even harder is you
don’t have a boss or supervisor hovering over you telling you what to do, so you have to take
full responsibility for your actions. This destroys a lot of traders as most people lack that self
discipline in the interim and their account suffers because of that.
The best advice I can give on this topic is to try to emulate another trader who follows their
trading plan strictly.
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Expectations
A really interesting area of psychology is managing your expectations. You may see some
“traders” sporting big houses, endless jewellery and the most expensive cars...while I’m not
saying this things are not unattainable this is the wrong image of the industry. It is entirely
possible to make a living from forex IF you learn to become consistent but that does not come
easily.
You definitely need to work harder than you think to reach to a level of understanding.
I know a lot of people come into forex thinking that it’s just as easy as choosing a direction.
Nothing further from the truth. So so much more is involved with trading far less becoming
consistent enough to make this your full time bread and butter.
What can you expect - expect a lot of chart time, lots of losses in the beginning, expect a lot of
people trying to feed you b.s, expect some days when you feel like you’ve got it and then other
days when you want to send your phone/computer flying as far from you as possible, expect
with perseverance and the right information - some kind of headway after some time.
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Market Psychology
This is probably the most amusing part of psychology. The market maker\dealer loves stepping
on people’s emotions. He loves to give people this false sense of hope. Almost immediately
after coming into the industry we learn of this idea - “support and resistance” the dealer does
NOT care about your chart with 7 support and resistance lines drawn across it.
The dealer does not care about your fibonacci level, or rather he does sometimes he will
validate it just to make you believe that it does work, in my experience it doesn’t work
consistently enough for me to make a setup out of it. I’m not saying it does not work, I am
saying that I don’t waste my time with it as it has never worked for me.
The majority of the information regarding forex and how to trade it is a ruse and the dealer
knows about this information that is out there. His job is to make the most amount of money off
of retail traders as possible, what better way to do so than go against what the majority of
traders are doing.
This is why 90% of traders lose money. Because they are sheep just waiting to be herded by
the shepherd (dealer).
The best advice I can advise in this area is to learn the right thing and try your best to trade in
line with what the dealer is doing.
There is a saying - “if you can’t beat them, join them” - This is what forexia does.
Understand the market psychology and I can tell you that you are already in a better position
than 90% of traders out there.
There are still other things to consider with regards to psychology but I feel like if I add anything
else this document will become long winded and might lose its essence.
For the ECR to be effective you need to have these things in order.
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Market Structure
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So remember I said that I will explain how I always knew which is the valid “true support and or
resistance”?
If you don’t know what I mean by market structure, Dylan has a free course on this on
forexia.net. I will however touch on it. That way you will get my sentiments on the matter.
The market has a daily cycle and a weekly cycle. I will discuss both.
We can see here at the start of the new day and actually even before the new trading day the
market is usually in a tight range - this is due to the market maker throwing the market into
consolidation for the last 4-5 hours before the trading closes and for the first 4-5 hours after the
new trading day opens. Asian session is right around this time as well. Asian session
sometimes has a false break out (break out to the wrong direction) just before london open to
fake out people before going in the real direction. London Session is known as the real move -
most of the time during the day that the market is trending its during london session. Then we
have new york session which is known as the reversal session - this is the session when you
often see pairs decide to just go the other way for “seemingly” no reason. Rest assured there is
a reason. Then just before the trading day closes the market is thrown back into a tight
consolidation to reset and prep for the new day. This consolidation almost always happens - the
consolidation is necessary for the market to capture orders and trap people the wrong way.
Then the cycle starts again.
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Obviously there are variations of this but understanding the sessions in particular will help you
better visualize what is going on and make better decisions.
The new week starts sometimes from an already existing trend, sometimes it starts a completely
new trend. The dealer’s job on Sunday/Monday is to set the mood, so he begins to slowly create
a trend, validating it further and further into the week. He may create a high while sticking to a
“trend”. For Forexia traders we look for this obvious trend because we don’t want to be caught in
the trap that is about to occur… the dealer is creating this trend for retail traders to get in on,
why? The retail trader is always looking for the trend - “the trend is your friend” - we know better.
Further and further into the week the dealer is still validating this “trend” and the high he created
prior he will do something called a “stop hunt” where he is going to break the previous high just
enough to make it appear to retail traders that the previous high was blown out - confirming to
them that this is a continuation. Sellers who sold at the previous high probably had their stop
losses just above that high, their stop losses would be grabbed by the stop hunt - ultimately
stopping them out. So now the sellers are out and the buyers are in...buyers will be dragged the
wrong way because this is the formation of the m pattern.
Sellers nor buyers won this one - the dealer wins. This is why we try to trade in line with the
dealer. This can be seen on all pairs but it is prevalent on the majors.
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Your goal should be to get in anytime AFTER that stop hunt happens.
This can happen from previous weeks as well.
This happens almost every week, why? This is how the dealer makes money - by cleaning the
board. Get both buyers and sellers.
Learn to understand structure and you will be in a better position.
Relationships
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So what does your wife or husband have to do with the ECR? Don’t worry - I Don’t mean that
kind of relationship.
This is the relationship between all of the major topics in this document. You can understand the
setup like if it were you who created it and have a deficiency in the psychological aspect of
things and I’m telling you - Your trading will suffer.
You can have the best psychology in the world and you don’t understand this structure.. You will
be caught in those stop hunts time and time again.
This is why Forexia exists, it is to help with this understanding that it isn’t about just one
thing...you need to see and utilize the bigger picture….this is not a game and as I said a few
topics back..if you treat it as such you will get game like results.
Understanding the ECR by itself is really powerful. Why not try to supplement it with some
psychological fortitude or market structure mastery.
Make sure each and every aspect that I have touched on in this document, your proficiency in
that topic is high because if any of these things suffer it will show in your trading and will bleed
into your account.
That being said I now want to move on to the final piece of the puzzle which is the ECR itself.
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The Setup
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Some of you may have heard me say this, some of you may have not.
The most profitable ECRs happen after an M or W pattern, MWR or Signature Trade.
The ECR is like training wheels...if you miss your entry at the high/low of the day - the ECR is
there to save the day and still give you an entry.
After the emas cross the first candle that goes against the new trending direction but does not
close past the 14 ema is your entry candle - Buy a sell candle and sell a buy candle.
The lower you go in the timeframes the better your entries and the more aggressive you can be
with your stop loss.
After the stop hunt you can get an ECR on even the M1 timeframe.
So what are we looking for - how do we make market structure and the ECR have a
relationship? Look for that obvious trend, wait for the first and second leg to be created, wait for
the stop hunt and then use the different time frames to look for the ECR.
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Let’s look at some examples -
In this example you can see after the stop hunt the emas cross and the white horizontal line is
our entry but it is really low (109.463)...the move already happened...let’s go to the lower time
frames to see if we can get a better entry using the ECR.
This is on the M5, you can see the entry is a bit better (109.674)..we still caught a piece of the
move almost 20 pips more than the M15...we got in after the stop hunt, we had literally nothing
to lose and we could have got our 10 pip stop loss easily here..but lets see how the M1 looks.
This is on the M1 after the stop hunt, perfect ECR...another 20 pips bagged and we are in the
clear.
The M5 was just about the same thing let’s check out the M1.
Check out the entry on the M1 - Where the cursor is is where my entry could have been - easy.
Price would have retraced and went into about 1 pip of drawdown and we know we don’t
experience drawdown then ultimately went in our favor over 40 pips.
Let’s see if we could have got a better entry on the lower time frame -
This is the M5 after the stop hunt - Emas crossed first opposing candle that does not break the
14 ema is my entry - Price did go into a bit of drawdown but my 10 pip stop loss was not hit.
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It’s really easy you have no Idea - you just have to use these different things in unison.
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Disclaimer: I am not a financial advisor and I refuse to take responsibility for ill use of this
information...I suggest practicing this heavily on a demo or sim and making sure you get it
properly before taking it live.
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