Phase 4: Extensive version of the OFS Trading System

If all went well, up till now you should have particularly been emphasizing bringing the basic version of the OFS Trading System to perfection as well as studying the forex charts from the past. The result of this is that you also have been building up more experience and consequently you’re ready to take the next step: to go looking for more trading setups! In this article I’m going to show to you how to employ also other important support and resistance levels as entry point while practicing the OFS Trading System.

If you have followed my advice and if you actually have taken the time to study the trends from the past, then you should have repeatedly noticed that other logical support and resistance levels have frequently served as a very appropriate entry moment. Sometimes other price levels are even more logical compared with the standard entry moment according to the basic version of the OFS Trading System, namely the preceding high or low.

As I already indicated earlier, in case of the basic version it’s very important to trade in accordance with well-defined rules and it’s therefore equally important to avoid a trader’s own interpretation as much as possible. Since by now you have acquired sufficient knowledge and experience through practicing the basic version of the OFS Trading System, the time has eventually come to also start using other important support and resistance levels in their capacity as entry moments. By applying these other levels you’ll notice that the number of trading setups is going to increase substantially!

The renewed step-by-step plan

Though you’ll be able to start working with the extensive version of the OFS Trading System in a substantially more flexible way, it still is quite important to keep the basis soundly at the back of your mind. In this case the foundation of this forex trading system is the SMA area, in which the three SMA lines have to be situated parallel to each other. From this point of departure you then can go looking for trading setups while practicing the extensive version of the OFS Trading System.

1. Price reaction area in accordance with the SMA lines.

Not until the SMA lines are neatly situated parallel to each other, you’re allowed to go looking for trading setups. Of course first of all you’ll still have to examine the big picture. If, for example, the lines are situated parallel to each other, but the price is in a range, it’s obvious that first you want to see that this range is going to be broken through before you’re going to look for a trade setup. An exception to this condition could occur when there is still enough space to be able to gain profit within the range.

So try to filter by also watching the big picture to which extent there is a chance that there is a matter of a healthy trend. Also consider the presence of enough space to ensure a favorable first take profit level without risking to encounter important interim resistance.

2. Additional tools to determine the entry moment

Instead of merely looking at the preceding high or low, in case of the extensive version of the OFS Trading System you also apply other straight and oblique support and resistance levels as well as Fibonacci retracement levels by way of support to determine what the most logical price reaction ought to be.

Important: Even in case of the extensive version it’s not allowed to take a position without the price being nearby or inside the price action area of the SMA lines!

So you’ve got the SMA area as a starting point and then you can use other tools to try to determine your entry as accurate as possible. Characteristic of the extensive version of the OFS Trading System is the fact that frequently several tools are coming together inside the SMA price reaction area at the very same time, as a result of which the possibility of a price action will even be bigger.

However you should realize that not all tools have to be applicable by definition. This way the preceding high or low isn’t always employable when other straight and oblique support levels are more suitable as entry moment, but of course the other way around is also possible.

Apart from the fact that these tools are appropriate to determine the right entry moment, these very same tools are also useful to determine good stop loss and take profit levels! By drawing all important support and resistance levels as well as the Fibonacci retracement levels, you’ll get a pretty clear view of a good stop loss level and of logical take profit levels.

previous high or low

To get more explanation how to use the previous high or low as an entry moment, you’re advised to read the free e-book about the basic version of the OFS Trading System. In this e-book this subject is being comprehensively described.

Be aware in case of the preceding high or low if the price level based on which the price action is going to take place, is a realistic one. If this isn’t the case, you should better focus on other support and resistance levels when it’s about determining an appropriate entry moment.

Straight and oblique support lines

In the article “Support and Resistance levels” you can read what straight and oblique resistant lines represent and how to draw these lines on your forex chart.

You ought to realize that drawing oblique lines especially requires some exercise if you’re not a naturally talented person at this. However, if you’re going to look for oblique support and resistance lines as part of a well-defined step-by-step plan, you’ll notice that these lines frequently will be visible.

Fibonacci Retracement levels

In the article “Fibonacci retracement levels” you can read what these retracement levels mean and how you can draw these lines on your forex chart.

You ought to realize that the Fibonacci retracement levels 38,2%, 50% and 61,8% themselves are frequently serving as support or resistance levels, but above all it’s important that the price should be retracing somewhere near or inside the area between the 38,2% and 61,8% Fibonacci retracement levels.

Trading setup of the extensive version of the OFS Trading System:

OFS trade setup

On the above shown chart you can see that the price at first was in a channel and then went breaking through the former support line. At this moment the SMA lines are neatly going parallel, but according to the theory of the basis version of the OFS Trading System a trading setup should be out of the question, because at the start there is no preceding low.

Preceding low

So in this situation there is no preceding low, which you could have used as an entry moment, so we’ll consequently have to go looking for other important price levels.

Straight support and resistance levels

However there are other important support and resistance levels, like the ones belonging to the channel itself. If you extend the line of the support level, you’ll see that this line will be coming together with the price reaction area in accordance with the SMA’s. So potentially this is a price level which possibly could serve as resistance. Another advantage is lying in the fact that support frequently will be turning into resistance once a support level has been broken through, as a result of which the chance that on this level price reaction will take place, will even be increasing.

Oblique support and resistance levels

By connecting point 1 with point 2, you can also draw an oblique support and resistance line, which will be coming together in approximately the same area. Depending on this additional confirmation, the chance that on this level price reaction could be going to take place, will be increasingly getting bigger and bigger.

Fibonacci Retracement Levels

Finally we’re also applying the Fibonacci retracement levels in order to get additional confirmation. As you can see on the above shown chart the 38,2% Fibonacci retracement level is joining the straight resistance lines as well as the oblique resistance lines, thus confirming once again the imminent chance of price reaction on this price level.

Entry:

Based on this analysis the most logical entry is on the same price level like the straight resistance line, which at first served as support. This is also being supported by the oblique resistance line and by the 38,2% Fibonacci retracement level.

Stop Loss:

The red line on the above shown chart represents the most logical stop loss for this trading setup. The stop loss is now situated above the 30 SMA and en also above the 50% Fibonacci retracement level. The trade also has enough space applying this stop loss.

Take profit level 1:

Just like in case of the basic version of the OFS Trading System it’s rational to equate the first take profit level with the most recent low. This price level is being reproduced through the green line on the chart.

You can manage a second take profit level in several ways, like is being described in the article “Phase 2: Gaining more in-depth knowledge about the OFS Trading System“.

Conclusion:

By employing the extensive version of the OFS Trading System, you’ll be able to find a lot more good trade setups. The win ratio will still be situated between 50% and 80%, dependent on your ability to interpret the big picture, taking the market sentiment as well as your experience to be able to ignore dubious setups, into account.

Because of the fact that the number of trade setups is drastically increasing, you’ll rather be able to earn more money in comparison with practicing the basic version of the OFS Trading System.

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Related Posts:

  1. Phase 2: Deepening the basic version of the OFS Trading System
  2. Phase 1: Basic version OFS Trading System
  3. Fibonacci Retracement levels
  4. Support and Resistance Levels
  5. Optimal route and realistic expectations of the OFS Trading System

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