ALPHA FX TRADING SYSTEM #1

Introduction

The Alpha FX trading methodology is simple, objective, goal-oriented, and at the same time a powerful one. The simplicity and powerful dynamics allow the methodology to swell and contract with market conditions making it a very pro active trading system. The system allows for taking advantage of the short term moves in the FX market and maximising the move itself through a 6 hours chart where the system undertakes to profit from the larger moves in the FX market.

Philosophy

Given the difficulties experienced by all types of traders in the FX markets our philosophy is to provide experienced and newcomers to the FX markets an easy understandable and non complex methodology of trading whereby eliminating the pitfalls of typical discretionary trading.  Highlighting consistency, execution and following a set of rules of engagement which are paramount to the success of our trading system regardless of market opinion.

Methodology

The methodology allows us to greatly increase the probabilities and consistency of applying the proprietary rules based system to generate profits. As you might be aware trading can be highly profitable when sound trading rules and principles are applied with consistency.

Most Traders fail because they attempt to pick tops and bottoms. Alpha FX system weighs the probabilities based on risk tolerance and uses the Alpha model to keep you on the right side of the market based on tested trading methodologies. We recommend that the best way to trade is to quit trying to pick tops and bottoms, and “settle” for taking a bigger piece out of the middle of a move.

System

All signals have been filtered for best risk to reward and the highest probability possible through years of development, filtering and back testing using a market adaptive model.

The System is adaptive to market conditions and allows us to trade based on market structures and uses proprietary robust trading strategies to qualify the trades.

As previously mentioned the system is an objective and dynamic trading system that allows us to trade in various time frames and takes into account the volatility of the current market environment. 

Trading Signals

Trade signals rely on various proprietary indicators and rules of engagement. For example in a long/short entry position, specific rules of engagement must occur in sequential order to qualify the trade. The system is a trend/momentum trading system and uses a combination of proprietary moving averages in combination with several dynamic momentum indicators. Only when these rules are satisfied then the position is entered into the market with corresponding limit order for profit taking determined by an average volatility function of the product traded and  simultaneously a  stop loss order based on  market structure. Once the position is on the market it’s up to market forces to achieve our desired result rather than personal opinion which we know from experience can be detrimental to our trading results.

An example of the trading process:

30 minute time frame:

The proprietary system gives a LONG signal on EURUSD on a 30min chart. The rules of engagement process is as follow

1. Price is trading above the proprietary moving average.
2. Proprietary momentum indicators confirm LONG signal.

When the signal is confirmed then the following takes place;

1. RISK: We evaluate risk in the position. We clarify what the worst case scenario will be for the trade using market structure.
2. VOLATILITY: We evaluate the market volatility at the time of the trade signal and determine the profit target for the trade.
3. MONEY MANAGEMNT: Trade sizes are a function of client funds.
4. ORDER MANAGEMENT: The trade is placed on the market and simultaneously profit and stop-loss orders are placed.

360 min (6 hours) time frame:

The proprietary system gives a LONG signal on EURUSD on a 360min chart. The rules of engagement process are as follow

a. Proprietary moving average crossover, either long/short.

When the signal is confirmed then the following takes place;

1. RISK: We evaluate risk in the position. We clarify what the worst case scenario will be for the trade using market volatility over predetermined period.
2. VOLATILITY: We evaluate the market volatility at the time of the trade signal and determine the profit target for the trade using a proprietary method of Average True range (ATR) and a 10 period trading range.
3. MONEY MANAGEMNT: Trade sizes are a function of client funds.
4. ORDER MANAGEMENT: The trade is placed on the market and simultaneously profit and stop-loss orders are placed

TRADE EXAMPLES

View the charts below for specific executed trades:

Example 1: Long EURUSD 30 min chart.  

Proprietary moving average confirmation with pricing confirmation. Entered long multiple units.

Example 2: EURUSD Stop and Reverse (SAR) 30min chart: First target achieved in the Short EURUSD position, the balance was stopped out by a reversal signal. A loss of 100 pips. A Buy trade was initiated on the reversal BUY signal with multiple units.  First and second targets achieved and balance unit exposure is reduced by moving stoploss to breakeven allowing the market to run its course and maximise profit.

Example 3: Long EURUSD 360(6hrs) min chart, Proprietary moving average crossover confirmation with pricing range confirmation. Enter long.

 Example 4: EURUSD SELL position 360min chart: Proprietary moving average crossover signals SELL signal with first and second targets achieved and third contract stopped out on MA crossover.

Example 5: EURUSD, STOP and REVERSE 360min chart (SAR): Initial BUY trade targets not hit and received a reversal signal. BUY trade closed for a loss of 99pips and NEW SELL trade executed achieving all targets, profit of 268 pips on three units.

Money Management

The proprietary system allows for position and risk management and allocates trades sizes dependent on available client funds, therefore eliminating unnecessary exposure.

The system is an objective and dynamic trading system that allows us to trade in various time frames and takes into account the volatility of the current market environment and therefore allowing trading in several major currency pairs at any one time with an individual exposure per trade anywhere between 5- 15% of the portfolio depending on account size as minimum trade rules apply and further trade risk with overall portfolio exposure approx around 30-40% at any one time.

Types of Service

Alpha offer two types of services under the above proprietary trading model:

1. Signal providers:  the client receives the trade signal, by way of email, phone or text and the client is accountable of placing and managing the trade on Alpha’s online FX trading platform.
2. Execution service: clients can instruct Alpha on a weekly basis to execute trades on their behalf should the client not be able to do so. The client will be able to view all transaction executed on the behalf of the client via Alpha’s online FX platform at any time. This is a strictly NON- DISCRETIONARY service.

Performance

An independent review was conducted by Anning and Associates Chartered Accountants on a trading account using the above methodologies from the period 27 Oct 2009 to 17 June 2010 generating a return of 173% for that period. The review of the trading account was conducted in accordance with Auditing Standards on Review Engagements ASRE 2410 Review of Interim and Other Financial Reports Performed by the independent Auditor of the Entity, and that the auditing standard required Anning and Associates to comply with ethical requirements relevant to the review of the trading account.

Assurance: In reviewing the trading account for the period 27^th Oct 2009 to 17 June 2010 nothing has come to Anning and Associates attention, based on the review that causes the auditor to believe that the trading account is not presented fairly to meet the needs of potential users of the report.

Disclaimer

This publication has been prepared on behalf of and issued by Alpha Equities & Futures Limited (ACN 131 376 415) (AFSL 327075) (referred to as Alpha). This is not an offer to deal in any financial product.  This information might contain unsolicited general information only, without regard to any investor’s individual objectives, financial situation or needs.  It is not specific advice for any particular investor.  Before making any decision about the information provided, you must consider the appropriateness of the information in this document, having regard to your objectives, financial situation and needs and consult your adviser.  This may not be passed on to anyone but the addressee. Past performance of financial products is no assurance of future performance.  Alpha, its directors, employees and their associates may, from time to time, deal in any financial products mentioned in this document (or derivatives of them), as principal or as agent for clients and may earn brokerage, fees or other benefits for those dealings.

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