+250 Pips +12.4% growth 10 Trades 80.0% Wins
Click here for explanation and commentary.

Are you a Geek?

If you have the smallest amount of geek in you, you will find the following information fascinating. If you are the Anti-Geek and could care less about why things are and how they came to be and other such stuff.... if that describes you, may God have mercy on your soul.

However, if you, like me, find background information, the hows and whys, and math, and geometry, and slightly famous Italian Mathemeticians spectacularly interesting; then you will love this post. As an added bonus, I am going to tell you some things you probably have never heard if you have only read about Fibonacci ratios from Forex sites or other such sources.

Who is Fibonacci and why do we Care?

Leonardo Bonacci, aka Leonardo of Pisa, was a 13th century mathematician who introduced the Arabic Numeral system to Europe. His father ran, or more accurately managed, a Pisan trading post in Algiers where the bright young Leo was introduced to the superior arithmetic used in the Arab world. At age 35 he published a book Liber Abaci (Book of Abacus or Book of Calculation) which described counting in Arabic numerals, processes of multiplication, conversions including currency and profit (hence he was involved in Forex!), formulas for arithmetic and geometric series, and other such subjects. Surprisingly, the book was a great hit among the 13th century elite and he won a salaried (sort of a tenure) position with the Roman Emperor Frederick II. He was given the name Fibonacci posthumously which means "little one of Bonacci"

In one chapter of the book, he addressed the very pressing problem of rabbit farmers in medieval Europe expressed as, "How many rabbits can be bred in one year?". The resulting answer was the following series of numbers:

1,1,2,3,5,8,13,21,34,55,..... where each subsequent number F is represented by the formula F_n = F_(n-1) + F_(n-2).

So why is this sequence important? The sequence grows at a rate 0f 61.8% which is the Golden Ratio and designated by the ancient Greeks as 'φ'. (Actually, the growth of the sequences approaches φ and it is only approximate with the early numbers of the sequence.)

It appears that this sequence and the Golden Ratio appear a lot in nature and in the heavens. It also is found in architecture both ancient and modern. It is used in Computer Science theory. More than a few doctoral dissertations have centered on it. And some very successful stock, commodity, and Forex traders have used it to amass fortunes.

Forget Rabbits, what about Honey Bees?

Not everyone believes in the magic of Fibonacci numbers in Forex or market trading in general. Some people even scoff at the notion and say that these ratios only work because everyone is using them. I think such naysayers are nincompoops. But before we discuss the use of the Fibonacci sequence and the Golden Ratio in Forex, I want to share some fun information.

Everyone has heard the story about the rabbits. Fibonacci skeptics will tell you how rabbits don't really reproduce the way Leo described it. Well, then let me introduce you to honey bees. I ripped the following snippet from a Dr. Ron Knott who has a bunch of accreditations following his name: Ph.D, M.Sc, B.Sc (Pure Maths), C.Math, FIMA, C.Eng, MBCS, CITP. I'm sure he's a lot smarter than me.

Honeybees and Family Trees

There are over 30,000 species of bees and in most of them the bees live solitary lives. The one most of us know best is the honeybee and it, unusually, lives in a colony called a hive and they have an unusual Family Tree. In fact, there are many unusual features of honeybees and in this section we will show how the Fibonacci numbers count a honeybee's ancestors (in this section a "bee" will mean a "honeybee").

First, some unusual facts about honeybees such as: not all of them have two parents!
In a colony of honeybees there is one special female called the queen.

There are many worker bees who are female too but unlike the queen bee, they produce no eggs.

There are some drone bees who are male and do no work.

Males are produced by the queen's unfertilised eggs, so male bees only have a mother but no father!

All the females are produced when the queen has mated with a male and so have two parents. Females usually end up as worker bees but some are fed with a special substance called royal jelly which makes them grow into queens ready to go off to start a new colony when the bees form a swarm and leave their home (a hive) in search of a place to build a new nest.

So female bees have 2 parents, a male and a female whereas male bees have just one parent, a female.

Here we follow the convention of Family Trees that parents appear above their children, so the latest generations are at the bottom and the higher up we go, the older people are. Such trees show all the ancestors (predecessors, forebears, antecedents) of the person at the bottom of the diagram. ....

Let's look at the family tree of a male drone bee.

1. He had 1 parent, a female.
2. He has 2 grand-parents, since his mother had two parents, a male and a female.
3. He has 3 great-grand-parents: his grand-mother had two parents but his grand-father had only one.
4. He has 5 great-great-grand parents [--edited by me]
5. He has 8 great-great-great grand parents. [--edited by me]
6. He has 13 fourth-generation grand parents. [--edited by me]
7. He has 21 fifth-generation grand parents. [--edited by me]
8. and so on ...

... [thus we see the Fibonacci sequence in the number of grand parents in each increasing generational level --edited by me]

Source: The Fibonacci Sequence as it appears in Nature by S.L.Basin in Fibonacci Quarterly, vol 1 (1963), pages 53 - 57.

Even the bee does Fibonacci!!

Its Easy to Draw Fibonacci

An old trading adage says "Buy on the dip. Sell on the high." Here I will introduce a practical application of that adage using Fibonacci ratios known as extension levels.

If you were to buy on the 'dip', extension levels would define the 'high' where you would sell. Graphically, we can illustrate by using the points A, B, and C.



Price has trended up from point A to point B. The total increase in price is represented as 'B-A'. Price then dips to point C. This is where we would buy. Point C (the Buy point) can be taken from Fibonacci Retracement levels. (ie. 23.6%, 38.2%, 61.8%, or 78.6% retracement.)

Once a buy order is taken, a profit target needs to be determined. This is where extension levels come in. The following chart illustrates various extension levels. I use terminology taught by Joe DiNapoli for the levels. The first is "COP" which stands for Contracted Objective Point. The second is "OP" which stands for "Objective Point". And the third is the "XOP" which stands for "Extended Objective Point".

It is based on the math shown below using the Golden Ratio of 0.681. There are four different columns showing extension levels that depend on the level of retracement.

ABC Extensions	C = 0.618	C = 0.382	C = 0.236	C = 0.786
(B-A) X 0.618 + C = COP	1.236	1.000	0.854	1.404
(B-A) x 1.00 + C = OP	1.618	1.382	1.236	1.786
(B-A) X 2.00 + C = XOP	2.618	2.382	2.236	2.786

Generally, I only use the extension levels based upon a retracement of 61.8%. And my target will always be the COP point (1.236). That is more than enough profit for a single trade.

Here it is

I will explain each trade shortly. but for now here is the results.

Forex Scams are easy to spot.

First, a Scam makes amazing claims like "Make 200 pips a week" Oops, thats me.

However the difference between a Scammer and me is they don't offer any evidence to back their claims. I do. You will see my trade results week after week.

Often scammers will use terms like "my friend/associate/NY trade pimp showed me his results/bank account/list of johns" and it was amazing! Or they will use terms like "no risk" "100% guaranteed" etc.

I on the other hand will freely tell you that I have lost a whole lot more than I have made yet. In fact, as far as I am concerned, risk is the whole ball of wax. It is why I trade. I want the very high return on investment that only comes with high risk.

Second, a Scam will always be selling something. I am selling nothing. I won't even put ads on this blog (unless they come as part of a widget that I like!) Everything I offer here is free. Not every website, blog, or group that is selling something related to Forex is a Scam. Most are not. But every Scam is selling something.

Third, most Scammers are Idiots (with a capital "I"). If they are selling something and the first information you can find on them is 2 months before they started selling their amazing proven system, I am certain that they are dumb and stupid. I have spent 4 years following Forex. I am quite confident that I am smart enough not to sell anything based upon my experience.

Nonetheless, I have learned quite a bit. I am sharing that for free. I am also inviting all forex traders whether newbie or old hat to join me in this real time growing experience. I will use my Guerrilla Trading tactics to make 200 pips a week.

The Scammers p--- me off. I hope you appreciate my honesty.

Update: The results you see are from a real dollar account. I could show you my demo accounts where I have had long stretches of over 400 pips a week but the live account is real. There is no better proof of a system or the trader than real results with real money.

I use a demo account to trade after I have reached my target for the week. I dink around with it, take risker trades, hold positions longer and generally have fun with it.

+216 Pips +10.6% growth 7 Trades 100.0% Wins
Click here for explanation and commentary.

Glad that I made 40 pips on the initial surge. Price never made it down to the target of S2. With a true to from Flag pattern the breakout movement should be the same length as the flag post.

Noticed a flag pattern shown in following chart.



The key to this pattern is the consolidation range that is bounded and ranging counter to the preceeding trend. In this case the red arrow down shows the bearish price trend. The consolidation is illustrated with the green arrow. The trend lines are drawn by first drawing the bottom trend line from Point A to Point B. Then a parallel line is matched to Point C. The upper trend line only needs to roughly match the high points. The trade is triggered when price breaks out of the consolidation range in the same direction of the preceding trend (the flag pole if you will as represented by the red down arrow)

No sooner than I had drawn the trend lines, price broke down below the bottom trend line. At the close of the candle, I entered a short trade with the take profit at the pivot point S1. I returned to my graphics program to notate the saved chart. Also "Lost" was just starting so I didn't want to worry about the trade. (it was on my Demo account anyway so I never sweat a demo trade)

Heres the chart a couple of hours later (about 11:00 PM PDT April 15th)



My trade made its target of +40 pips. Price pulled back a little and then was dropping. If I were in a trade still my target would be S2. I expect price to go even lower still.

As I have my 216 pips this week, I am just looking at charts for the heck of it. I looked at a 4 hour chart, which I never use for active trading, and I saw a well formed channel. I want to ananlyse that channel and to say how it could be traded and then also what the dangers are.

First the chart:

The channel is drawn by recognizing high point A and high point B. A trend line is drawn on those two points. Then a parallel trend line is drawn starting at Point C. This can be done in real time if you are looking for it. The Bottom trend line is the ultimate target.

Unfortunately, price does not move in a straight line. Before price reaches the bottom of the channel 730 pips lower, it will drop and pullback and drop and pull back in moves of several hundred pips in each direction. An intermediate target is needed or even several targets. Rob Booker teaches (and developed I believe) targets inside the channel based on Fibonacci Retracement levels of 38.2%, 50.0%, and 61.8%. These are drawn as pink dashed lines on the chart. Rob's term for these lines is Fibbles.

Of particular note is the 50% Fibble which is the center line. Notice how price reacts at that line. When I draw channels in real time, I will look to see how precise the reaction is at the 50% Fibble between price at Point C to price at Point B. If there is clear reaction I will assume the channel is valid.

I can then take my trade going short sometime after Point B with my target being the 38.2% Fibble or the 50.0% Fibble. Note that the earliest entry for a short trade is after Point B is confirmed as a high point by a bearish close of the candle. I labeled this as "1" with the take profit point as "2".

Once inside the range bounded by the 38.2 and 61.8 Fibbles, price can go either direction unpredictably. It is not wise to enter a trade in that no mans land. Except when.....

Price drops dramatically and then pulls back. Once price has gone down far enough, then I will go short again after a significant pull back.

How do I know what "far enough" is? It is a candle closing well below the 62 EMA and in the range of the 61.8 retracement level (not the 61.8 Fibble but rather a standard horizontal retracement.)

How do I know what a "significant pullback" is? It is reaching the 50% Fibble. At the touch of the 50% Fibble I will have a trade short trade set up (a Sell Limit).

My ultimate target is the bottom of the channel. But in the first touch on the 50% Fibble I am running out of day and week as it occurs on the Thursday before Good Friday. I would close the trade. I never suggest a carry trade. (Though I carry trades on a Demo Account as part of my "What IF..." experimentation/dinking around).

On the week open, price again reaches up to touch the 50% Fibble from the bottom. Go short Baby go short!

There are problems with this analysis from hindsight though. The next chart will illustrate.


Point B1 is the high of a bearish candle. If I were watching the chart in real time, it is near the close of that candle that I can venture to draw the upper trend line and then the lower parallel trend line begins at Point C. The candle closes. I say to myself "Hey SELF!!! Look what we've got here! Its a 750 pip channel and we are near the top. SELL, SELL, SELL!!"

So I go short while simultaneously wetting my pants in excitement and anticipation.

[Now begins the alternate scenario] But then price doesn't go down. It goes up. And Up. And Up. Finally, it hits point B2. I am down 200 pips. What went wrong?

I went against the trend. Or more accurately, Point B1 wasn't the high point in the channel. Point B2 was the real high. A new channel is illustrated by the Khaki-colored dashed lines. Notice that the reaction at the 50% Fibble is still valid between Point C and Point B2. Everything that was valid in the first chart is still valid in the alternate scenario. I just chose point B prematurely.

This is a real danger in trying to spot channels in real time. What is the peak (or bottom if the trend is down) marked by point B. If I choose B correctly, then I will make a whole lot of pips. In hindsight, Point B is obvious. But often too much time has passed to take that first trade. In real time it is very, very difficult to know when a peak has just occurred.

Another problem with trading on the 4 hr chart, is that the moves good and bad can be huge. A swing of 100-150 pips against your position does not invalidate the analysis. To endure the swings of price when based upon 4 hr indicators, a stop of 200-300 pips is necessary. If you tried a stop of 50 pips, I can assure you that 90% of your trades will stop out.

A rule of thumb is, indicators in higher time frames (4 hr and higher) will be more accurate but the stops will need to be 4X greater than required in lower time frames (1 hr or less).

I don't trade based upon higher time frames. I am happy to take a trade for 17 pips. My most frequent target is 40 pips and my best trades are made in much less than 4 hours.

I have a nearly constant itch to trade. Once i have made 200 or more pips on my live account, I switch to the demo account to continue trading.

Right now I am down 97 pips on a demo trade. I don't even know why I entered the trade. But it makes me very happy to have all of my bad trades on the demo. That is the best and the right way to use a demo account.

A New System

I have put forth a new system I call Guerrilla Trading. I will try to describe the characteristics.

It is fast and aggressive. Trades are made quickly by attempting to enter at a turn of price, or just before a breakout. While trading is most often done with the trend, it is marked by entering on a pullback. Often one trade will close and another will be opened very shortly afterward in the opposite direction. Guerrilla Trading tries to move with the market. It does not wait for a trend to be established.

Guerrilla Trading is done on a 15 minute chart. Hourly charts and 4 hr charts will be looked at frequently and particularly to confirm or check longer term trends and indicators at the higher time frames. But trading decisions are made on indicators, support/resistance levels, and other factors charted in a 15 minute time frame.

Those Nasty Stops
Stop free trading has become the norm in Guerrilla Trading. Now before you dismiss me as a raving lunatic, hear me out on this one. I was putting a 20 pip stop on every trade, only to get stopped out prematurely on otherwise successful trades. I then changed to 30 pip stops and then 40 pip stops. The results were a drop in my win percentage towards 50%. The only safe stop seemed to be 100 pips. But, I was taking all my gains at around 30-40 pips. I was usually happy with 17-20 pips. It seemed unwieldy to have such a large stop for such smaller gains.

So I dropped the stops. If I was in a trade wrong it was generally very obvious. If all the factors that caused me to enter the trade in the first place remained true, I would hold the trade to a successful conclusion. Now this is truly trading insanity. I do not recommend stop-free trading for anyone. But it works for me. Follow my trades and see how I pull it off. (or just comment and call me nuts)

The Indicators Used

Guerrilla Trading uses the following indicators:

3x3 EMA-- a 3 period Exponential moving average shifted forward 3 periods. This indicator originated from Joe DiNapoli. It is colored a red solid thin line on my charts.
62 EMA-- a 62 period Exponential Moving Average. It is used as for dynamic support and resistance. It is also a short term trend line. This average is taught by Rob Booker, my first and foremost trading hero. It is colored a blue solid thick lined on my charts.
248 EMA-- a 248 period Exponential Moving Average. This is nearly equivalent to a 62 EMA on a chart four time frames higher (15 min x 4 = 1 hour). This also is taught by Rob Booker. It is colored a gold solid thick lined on my charts.
800 SMA-- an 800 period Simple Moving Average. This is used to see longer term trends. It is also taught by Rob Booker.
Pivot Points-- These are a sets of levels (points) that pivot around the pivot point which is the average of the open price, close price, and high price from the previous day. I use the 24 hour period ending at 5 PM Eastern Standard/Daylight Time. The Pivot Point is a magenta dashed line. R1,R2, and R3 are aqua-colored short dashed lines. S1, S2, and S3 are chartreuse short dashed lines.
MACD Histogram-- A chart of the spread between the signal line and the trigger line in a MACD indicator. When the value is 0, the signal line is equal to the trigger line meaning the two are crossing. I don't trade on the MACD, but a system of trading after a peak or trough on the histogram was followed for a long time. When trading with a trend, it can give a very good signal. Such a system is the McGrew Dots.
Slow Stochastic-- I use the values put forth by Joe Dinapoli. This serves as an overbought/oversold indicator. I don't base any trades on it but I do use it in a perverse way that requires its own post and explanation.

Other Indicators and Trading Aids

Trend Lines-- These are drawn from high points in downward moving trends, and from low points on upward trends. Trendlines are drawn as they develop by looking for two distinct points. A trade can be executed when price touches (0r approaches) the trend line for a third point. Also a short stop can be placed on the other side of the trend line or a position can be taken when a price candle has closed on the counter-side of the trend line such as in a breakout trade. I draw trend lines as a red solid line. My trend lines are rays (going to the right as far as the chart extends).
Parallel Trend Lines-- These lines will contain a price range between the parallel lines and are often called channels. Rob Booker teaches a channel system that is very good in which Fibonacci levels are employed. I generally do not trade in channels so I don't draw them very often. Certain very reliable patterns, such as a flag pattern, uses parallel lines to illustrate the pattern. These are colored the same as trend lines.
Horizontal Price Level-- A line is drawn, usually dashed, to show a recent or long standing high or low. The purpose is to look for a double top or other such pattern. Also it can be used to show a breakout or continuation movement.
Fibonacci Retracement--This is perhaps the greatest single indicator to show why price movement stops and moves (the up and down undulation) at distinct levels. This requires many posts to even partially explain. Simply put, when price has made sustained and lengthy movement in one direction (the length of the trend if you will), price will retrace (retract) to the levels 23.6%, then 38.2%, then 50%, and then 61.8%. Whole books have been written concerning Fibonacci levels. Mathematically, the levels are based on geometric extrapolations of the golden ratio. [for fun: 38.2 + 61.8 = 100; .618 squared equals 38.2; .682 cubed equals 23.6] Click the links for more information.

Putting Everything Together

Guerrilla Trading uses all of the indicators described and looks for trades based upon several trading systems and signals. In its simplest form, it tries to catch movements at their start based upon support and resistance as illustrated by the charted indicators. The most common line of demarcation is the 62 EMA, and that is followed by Pivot Points and then Fibonacci Levels. Pivot Points are the most common profit target followed by Fibonacci Levels. Of course, because it is guerrilla trading, all generalities are only good as long as they are useful. The priority of the indicator or signal is dictated by the conditions of the market at the time of the trade. (Now I need to wash my mouth out after spewing such verbal gobbledygook).

Look for more later

I have made 7 trades this week for a gain of 216 pips. I have gone 7 for 7. Once I exceed 200 pips I stop trading on the live account and switch over to a demo account.

Previously, my thought was to post my trades as they were occurring but I tend to focus on the trade charts while a trade is open and active. Therefore all you get is a recount.

At the open of this week, I was a little pensive as it was coming on the heels of a narrow market due to Good Friday and the Easter holiday. I was looking for an upward bias in the Eur/Jpy.

By way of explanation, I am trading only the Eur/Jpy. Interbank FX is the broker that I use. The trading platform is MetaTrader. Click on the following 15 min. chart to enlarge.



The market opened with a big push down. 45 min later (3 candles) price closed above the 62 EMA (the blue moving average). I entered my first trade of the week as it was testing the previous closing price level. The trade entry point is illustrate with a green arrow. The trade soon turned south. The next candle closed above the 62 EMA, so I stayed with the trade. Had it closed below the 62 EMA I would have considered closing the trade at a loss. Notice that at one point I was down 32 pips. My target was a few pips shy of the Pivot Point (shown as the magenta dashed line in the above chart). I really like using pivot points--including Resistance and Support Points-- for my profit targets. This currency pairs seems to respect them consistently. The 1st Trade was successful for 40 pips.

I followed the charts off and on while the family watched The Ten Commandments on DVD. A bearish divergence pattern developed. This is shown on the chart with the khaki-colored trend lines. The trend line is measured on the price chart covering three successively higher points. The divergent trend line is shown on the MACD Histogram where each associated point is progressively lower. As price had been gone up for over 200 pips in 5+ hours, I was of the opinion that a reversal was in order. So my 2nd trade was to go short once two candles had closed down after the peak.

I was almost immediately in the hole and the prospects did not look well. Yet I held on because I was convinced that a reversal was imminent. I had no stop placed and I was willing to go down 80 pips or so. I was in fact tested at -79 pips, yet I chose to hang on. The Tokyo market was about to open and I wanted to see what happened. When price pulled back five minutes or so before the Tokyo open, I entered my 3rd trade going short.

Price fell dramatically at Tokyo open and I set profit targets on both trades to a level I felt would safely be reached which was near the 62 EMA. The trades soon hit their targets. The 2nd trade resulted in a gain of +10 pips and the 3rd trade yielded +60 pips.

The next set of trades is illustrated in the following chart.


Note that Fibonacci Retracement levels have been drawn (the thistle-colored lines with labels 23.6, 38.2, 50.0, 61.8 and 78.6 Deep). Fibo levels help show where price will pause or react. Note that at the 23.6, 38.2 and 50.0 levels price held before continueing downward. Also at the 50.0% level it reacted and pulled back up beyond the 38.2% level.

The fourth trade was entered gong long when price had hit the 248 EMA (gold colored moving average) and held at the 50% retracement level. I entered the trade when a candle closed above the 248 EMA. The 4th trade hits its target of +30 pips fairly handily.

Waking up at about 11:30, I checked the charts to see what was happening. I was a little annoyed that I had not set a trade to go short when price hit the 62 EMA from the bottom. That is the sort of trade that has a high percent of success and can be done with a fairly tight stop loss (say 20-25 pips). Nevertheless, it was apparant that price would continue to go down. I entered the fifth trade on a inner candle pullback (my own term for price action within the candle where price has gone to a high or low extreme and then pulls back before returning in the same direction of the extreme). I set a stop of 27 pips (10 or so pips above the 248 EMA) and a target of 60 pips to the support level S1 (the chartreuse colored short-dashed line). The 5th trade made its target of +60 pips while I slept.

The sixth trade was a bit risky. I got up Tuesday morning to note the big drop in price overnight of over 100 pips. The 62 EMA had crossed the 248 EMA going down and my belief of a reversal being in effect from the high just before 12:00 AM GMT and also the bearish diviergence pattern noted earlier. As much as anything else though, I have noted that in my time zone PDT, price continues in the established direction during the morning hours most generally. I needed 20 pips more to make 200 pips for the week. So I went short.

Price ranged for 30 pips or so up and down. After observing the range, I entered a seventh trade going short when I was -32 pips on the sixth trade. I changed my targets to be identical on both trades. The 6th trade closed at the target of +4 pips. The 7th trade gained +32 pips.

If you ever see price ranging 30-40 pips on successive candles, you can trade short and long for a couple of cylces. Note the range and close any trades at a loss if a candle closes outside the range. This pattern happens about once a week on the EUR/JPY but there is no advance indication. You know it when you see it and you trade it then. In this instance I started out short at the bottom of the range and I watched until I could grab it at the top of the range.

Bottom line: +216 pips in 2 days of trading. The report of my trades is shown below. Note that I don't like the native reports generated by MetaTrader, so I import the data into a spread sheet so I can add better analytics (such as average gain, average loss, return for the week, etc.). Just click on the expand arrow in the upper-right corner of the Adobe widget to see the document in full. The name is x'd out but all other parts are actual.

Trading Systems Profiled

There a five tradings systems:

1. System Trading -- A trade is entered and closed based upon a set of rules. The rules can be simple such as "Enter a trade when price exceeds yesterday's high and close when gain equals 30 pips or falls 20 pips below yesterday's high" or they can be complex and based upon a multitude of factors and indicators. System trading is the most common type of trading.
2. Program Trading -- A trade is executed automatically by a computer program based upon a defined set of rules. This is System Trading on steroids. In demo scenarios it can be very profitable, under real time and with real money on the line it can be disastrous. Also brokers and trading desks can impose restrictions that will effectively neuter or even undermine an programmed trade. While many have claimed to perfected a Programmed Trade it is highly improbable that it will work. Any one who did succeed, would in short time be the richest person on the planet as such a system would with leverage allow an account to grow exponentially without any risk of loss. Hundreds of well known traders have tried to execute a Programmed Trading System only to fail time and time again. Don't put your hopes in this perpetual machine myth.
3. News Trading -- A trade is executed concurrent with financial news announcements. When a country's central bank announces it is changing its bank lending rate, you can bet there is going to be an immediate and volatile change in currency values. A currency can move several hundred pips in a matter of minutes on some financial news. Many traders have made fortunes trading based upon news releases. Many more traders have lost their shirts on news as they got on the wrong side of a fast moving currency which will often reverse itself and move just as quickly in the opposite direction as it did at the initial response.
4. Tip Trading -- A trade is executed based upon a tip or recommendation of someone else. The person or organization that recommends such trade usually bases the tip on their trading system but the the "Tip Trader" is trading on faith or belief in someone else. Some trading experts have a great and profitable history with their trading advice, most do not.
5. Hunch Trading -- This is also known as Idiotic Trading. A trade is entered at nothing more than a flip of a coin or a "gut feeling" that currency is going to go up or down or both. Poorly designed trading systems can be worse than flipping a coin. Pyschic hunches are even worse and are certain to give you close to a zero percent success ratio.

A 6th Trading System Revealed

I trade using a system I call Guerrilla Trading. It is aggressive, based upon a broad set of rules, hard to define, and requires very quick decision making. I don't recommend Guerrilla Trading unless you are just exactly like me.

I do have a respectable history to validate my system. It has (and will) get me 200 pips a week. There are real rules and principles. I just can't easily identify them. Following this blog will define it however.