NEW RULES:
Extensive observation makes clear that, generally speaking, foreign currency exchange rates are willing to distance themselves only so far from certain key moving averages before being compelled to return to more typical deviation levels—distances I think of as “maximum degrees of separation” and refer to as “statistical support and resistance.”
If this is true, to maximize the statistical odds or mathematical probability of executing successful trades, all an individual need do is refrain from entering positions until and unless the exchange rate of a given currency pair makes its way to such levels.
It is on this contention that the 5-minute chart setup (not pictured) is based.
As you can see, there are three key moving averages at the heart of the system: SMA (x), SMA (y), and SMA (z).
SMA (z) functions as the day-to-day trend line, whereas SMA (y) tracks the intermediate or intraday direction of price. SMA (x) is less a reflection of the short-term trend as it is a quasi plumb line for gauging abnormally fast rates of acceleration.
The idea is to only enter positions when the exchange rate has deviated from all three of these key moving averages to a statistically significant degree.
To determine when such an event has occurred, check the lower panel indicators, collectively referred to as the Price Anomaly Channel.
The channel’s outermost bands are called the outer walls, so of course, the inner bands are called the inner walls, with the upper walls thought of as ceilings and the lower walls referred to as floors.
As a general rule, the only time it is permissible to enter a new position—the only time that a trade should be executed—is when all three oscillators have, at the very least, made contact with the inner ceiling or the inner floor of the Price Anomaly Channel.
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