How I understand the ColtFX

[eandrade]

Dear Dennis,

Below I'll explain how I understand the FXColt system and my doubts about it.
Please review and correct me on the points that I'm wrong.
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At first, the most important thing is the 100-point rule.
When it says ‘moved 100 point today on one direction’ what it means exactly? I’ll guide myself by the date OR by the last 24 hours?
If it’s by date means that at 11pm I’ll have to consider 23 hours, but, at 1am I’ll just consider the last hour (and at midnight this rules does not apply!).

Second, look for a stycky level
If I understood well, a sticky level is when the 3 last candles closes within 5 points or less of a level.
But, with only 1 exception, the bounce-off candles MUST be less than 5 points of a level.
My doubt is on 2 scenarios:
Suppose that the candle that gave me the signal is the second within 5 point of the level, if the next one is 5 point from the level, I entered a sticky level AFTER receiving the signal.
And: If I’m on a sticky level (3 candles in a row within 5 points of the level), I only can consider a signal after 2 hours (because the next candle will be NOT a bounce-off, and if it is I’ll be on a sticky level yet)

Third: Look for a bounce off
Try to identify one of the 6 possible bounce off candles.
If there’s no bounce off, there’s no signal and I’ll wait for the next close.
The level I’ll consider can be lev_1 or lev_2.
I found a bounce-off candle. Let’s suppose that market was going up, so now I expect that it bounces off and goes down.

Fourth: Oscillators
In this case the oscillators must be pointing down and the divergences, if occurs, must indicate a move down.

Fifth: Candles
As I’m looking for a signal do go short, I must look for bearish candles, right?

Sixth: RAVI
Ravi must be pointing down too.

Seventh: Must consider the day of the week and the time, according to the table.
The time on the table is the close time of the candle, so, 01:00 means the candle from 00:00 to 01:00.

After considering all this parameters, and having 15 point or more, I’ll calculate my stop loss (the top of the candle that gave the signal or the candle before –the highest)
If it’s more than 35 pips I’ll not open the position.
If everything agrees, so I open a position, short in this case.
What’s my initial take profit and what strategy you recommend for moving my stop-loss in case of profit?

Sorry for asking so many questions together.
What I’m trying to do is to have a strict method to apply the system.

[Dennis]

Hello Eandrade

At first, the most important thing is the 100-point rule.
When it says ‘moved 100 point today on one direction’ what it means exactly? I’ll guide myself by the date OR by the last 24 hours?
If it’s by date means that at 11pm I’ll have to consider 23 hours, but, at 1am I’ll just consider the last hour (and at midnight this rules does not apply!).

The 100-point rule is the aspect of the system that I'm least satisfied with. As it stands you have to go by the date and that means that the inconsistencies that you point out are all valid. I'd be interested in discussing refinements of this rule.
Second, look for a stycky level
If I understood well, a sticky level is when the 3 last candles closes within 5 points or less of a level.
But, with only 1 exception, the bounce-off candles MUST be less than 5 points of a level.
That's right.
My doubt is on 2 scenarios:
Suppose that the candle that gave me the signal is the second within 5 point of the level, if the next one is 5 point from the level, I entered a sticky level AFTER receiving the signal.
If you get a signal on the second candle you should go with it and set your orders.
And: If I’m on a sticky level (3 candles in a row within 5 points of the level), I only can consider a signal after 2 hours (because the next candle will be NOT a bounce-off, and if it is I’ll be on a sticky level yet)

That's right.
Third: Look for a bounce off
Try to identify one of the 6 possible bounce off candles.
If there’s no bounce off, there’s no signal and I’ll wait for the next close.
The level I’ll consider can be lev_1 or lev_2.
I found a bounce-off candle. Let’s suppose that market was going up, so now I expect that it bounces off and goes down.
Yes, that's right. When price approaches a level from below we are looking for a bounce off down and vice-versa.
Fourth: Oscillators
In this case the oscillators must be pointing down and the divergences, if occurs, must indicate a move down.
One oscillator pointing down gives you a rating of 2, both pointing down gives 4. Simple Divergences to look for would be type 1, 2 and 3. Double divergences would be those listed as happening at the top of the market.

Fifth: Candles
As I’m looking for a signal do go short, I must look for bearish candles, right?

Yes.
Sixth: RAVI
Ravi must be pointing down too.
Ravi need only be showing the absence of an uptrend (and not the presence of a downtrend) to be rated.

Seventh: Must consider the day of the week and the time, according to the table.
The time on the table is the close time of the candle, so, 01:00 means the candle from 00:00 to 01:00.

The time on the table relates to the time you are rating the signal and therefore the time you are looking to open.
After considering all this parameters, and having 15 point or more, I’ll calculate my stop loss (the top of the candle that gave the signal or the candle before –the highest)
That's right.
If it’s more than 35 pips I’ll not open the position.
I'd go with this guideline at first. You may want to adjust your risk oncew you are more familiar with the system.

If everything agrees, so I open a position, short in this case.
What’s my initial take profit and what strategy you recommend for moving my stop-loss in case of profit?
The simplest take profit would be just above the next level (short position). I am currently using the triple order system, I talked about in this newsletter (I'll upload the relevant newsletter into our newsletter archive tomorrow). and this thread. (http://www.traderacademy.biz/forum/showthread.php?t=111)
Sorry for asking so many questions together.

Absolutely no need to apologise.
What I’m trying to do is to have a strict method to apply the system.[
I understand: it's the only way forward.