100% found this document useful (3 votes)
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The Simple Formula

The document describes a trading strategy that uses two indicators, the fair value gap indicator and an EMA cloud, to identify trading opportunities on any timeframe or market. It provides details on how to set up the indicators, take entries both long and short, and offers three options for managing risk. Backtesting results showed over 150 trades with a reward to risk ratio over 2:1 and win rates around 40%.

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mani weber
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100% found this document useful (3 votes)
987 views18 pages

The Simple Formula

The document describes a trading strategy that uses two indicators, the fair value gap indicator and an EMA cloud, to identify trading opportunities on any timeframe or market. It provides details on how to set up the indicators, take entries both long and short, and offers three options for managing risk. Backtesting results showed over 150 trades with a reward to risk ratio over 2:1 and win rates around 40%.

Uploaded by

mani weber
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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TRADEREDGE

ALL IN ONE BACKTESTING &


JOURNAL SOFTWARE

THE
SIMPLE
FORMULA
TraderEdge

"How we get 1000's of pips per month consistently


while trading less than 1 hour per day and focusing
on only 1 proven method!"
TRADEREDGE
ALL IN ONE BACKTESTING &
JOURNAL SOFTWARE

Hey - I'm Alex!

The goal of this strategy was to create a dynamic system using


proven methods...
that could be used on any timeframe, pair, or market!

I’m personally a huge fan of mechanical trading systems.


I believe they solve most of the problems that traders face.
The issue is that mechanical systems aren’t very dynamic.
They involve copious amounts of testing whenever moved from
the specific market or timeframe they were first created for.

My intention in developing this strategy was to make it extremely


dynamic!
TRADEREDGE
ALL IN ONE BACKTESTING &
JOURNAL SOFTWARE

Now you might be wondering...


Why should I listen to this guy?
Well for starters I created the most popular backtesting
software in the industry! --> Link (if you wanna check it out).
It's used by THOUSANDS of traders.
I've also personally coached 400+ traders 1 on 1!
Most of whom became profitable just weeks after working with
me...
TRADEREDGE
ALL IN ONE BACKTESTING &
JOURNAL SOFTWARE

Before we start I do need to say a quick Disclaimer!

All information in this document is for educational purposes only and does not give financial
advice. Any information provided here is only the personal opinion of the author (not advice
or financial advice in any sense, and in the sense of any act, ordinance, or law of any country)
and must not be used for financial activities.

While the author believes that the content provided is accurate, there are no explicit or
implied warranties of accuracy. The information provided is believed to be reliable; the
author does not guarantee the accuracy or completeness of the information provided.

Forex trading is potentially high risk and may not be suitable for all investors. The high level
of leverage can work both for and against merchants. Before each Forex investment, you
should carefully consider your goals, past experience, and risk level. The opinions and data
contained on this site should not be considered as suggestions or advice for the sale or
purchase of currency or other instruments. Past results do not show or guarantee future
results.
TRADEREDGE
ALL IN ONE BACKTESTING &
JOURNAL SOFTWARE

Let's get right into talking about Indicators!


I only used two indicators when making this system…

The first is based on the fair value gap (FVG) concept popularized
by ICT.
The indicator seeks to show you those FVGs without you having
to go out of your way to constantly find them.
TRADEREDGE
ALL IN ONE BACKTESTING &
JOURNAL SOFTWARE

The second indicator is an EMA Cloud. --> Link


This is simply a filter to make sure you’re trading in the right
direction of the trend.
TRADEREDGE
ALL IN ONE BACKTESTING &
JOURNAL SOFTWARE

Setting up your charts is easy!


Grab the EMA Cloud and use it on the following settings:
TRADEREDGE
ALL IN ONE BACKTESTING &
JOURNAL SOFTWARE

Next, grab the FVG indicator and use it on the following settings:
--> Link

… And you’re done!


TRADEREDGE
ALL IN ONE BACKTESTING &
JOURNAL SOFTWARE

Now, we’ll look at how to take entries, then manage risk, and
lastly the backtesting results.

Entries in a nutshell are just this…


Longs: EMA is green, we wait for new green FVGs to form, place
an order in the box, place a stoploss below a swing level, and
target the next important zone.

Shorts are the opposite, EMA is red, we wait for new red FVG to
form, place an order in the box, place a stoploss above a swing
level, and target the next important zone.

We'll go over some entry examples later on!


TRADEREDGE
ALL IN ONE BACKTESTING &
JOURNAL SOFTWARE

You might say this is vague or not as structured as a mechanical


system…
But that’s by design!
You see, the more rules you place on a system the less dynamic
it will be.
TRADEREDGE
ALL IN ONE BACKTESTING &
JOURNAL SOFTWARE

This system intentionally requires you to do some backtesting and


see what works for you.

As we’ll see later I’ve done tons of testing (and live trading) with
this system...
and it’s definitely worked for me!
TRADEREDGE
ALL IN ONE BACKTESTING &
JOURNAL SOFTWARE

Here are some example entries and some explanations as to


whats going on:
TRADEREDGE
ALL IN ONE BACKTESTING &
JOURNAL SOFTWARE

As for risk management, I’ll lay out 3 different options that I think
are valid.

Option 1: the first is to place stops below swing levels or below


the fair value gap, and then target the next important zone.

This zone could be the last swing high (if going long) or last swing
low (if going short).

It could also be a significant support/resistance level that you can


zoom out and mark on the chart.

This option is great if you want a lower winrate but a much higher
reward-to-risk ratio.
TRADEREDGE
ALL IN ONE BACKTESTING &
JOURNAL SOFTWARE

Option 2: Placing stops below a swing level or fair value gap,


and targeting a fixed 1 : 1 reward to risk ratio.

This option is great if you want a higher winrate but a fixed 1:1
RR.

Option 3: Mixing it up.

You could just mix both depending on the trade and the
circumstance.
TRADEREDGE
ALL IN ONE BACKTESTING &
JOURNAL SOFTWARE

There are 2 key important things to keep in mind…

First, whenever applicable, move your stoploss to breakeven.

If a trade has run far from your entry, protect the trade by moving
your stoploss just above your entry level.
Now the trade has no risk. It's effectively a free trade.

The second is to perform a ton of backtesting and demo trading.


I never condone just blindly using someone's strategy.

I’m here to share what works for me… but it doesn’t mean it’ll
work for you.

Do a ton of testing! Test everything!


TRADEREDGE
ALL IN ONE BACKTESTING &
JOURNAL SOFTWARE

Now let’s take a look at the backtesting results…


TRADEREDGE
ALL IN ONE BACKTESTING &
JOURNAL SOFTWARE

I already know what some of you are gonna say...

"The winrate is TOO LOW"

Anyone who says that doesn't know anything about trading and I
wish you the best of luck in life.

Winrate is a false metric...

If you win 10 cents every time you win but lose 1000$ when you
lose but have a 99% winrate we'll you be royally screwed.

The converse however of a 1% winrate at $1K and 10-cent losses


would be wildly profitable...
TRADEREDGE
ALL IN ONE BACKTESTING &
JOURNAL SOFTWARE

The truth is we took over 150 trades...

and had an over 2 : 1 reward to risk ratio on every single


backtest... AND.... we still managed to have winrates in the 40s!

That's wildly profitable!

P.S If you haven’t used TraderEdge yet to backtest your


indicators and strategies... Start your 7-day free trial now!

Yes.. you have to put in a credit card to do the trial. BUT.. you can
cancel the trial at any point! AND… if you STILL don’t find value
with the software even after the trial, we’ll give you a full refund.
Just email us!

If you’re not sure how TraderEdge works, here’s a quick video


explaining it!

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