As a subscriber to Forexearlywarning.com you can make pips two ways. You can make pips trading with the trends of the market, and you can make additional pips over and above the published trading plans with some shorter term trading using The Forex Heatmap®. Shorter term trades using the heatmap to point you towards a trade entry are called supplemental trades. Trades like this can occur daily and weekly on the market on up to 28 pairs in two directions.
What Is A Supplemental Trade?
Supplemental trades may not necessarily be strict trend trades identified in the Second Opinion trading plans. Supplemental trades are strictly based on current market sentiment, central bank news, worldwide equity, debt and commodity markets, expected or unexpected announcements by politicians and central bank figures, unexpected news, or regularly scheduled news on the calendar.
The vast majority of solid sustainable supplemental trade entries occur after the start of the London session in a window of time starting about 4 hours ahead of the US stock market open until about one hour afterward, or about a 5 to 6 hour window of time. These are the best times to trade the forex market.
Why Do Supplemental Trades Occur?
Supplemental trades occur because the chart analysis does not indicate any consistent strength or weakness in one currency group but somehow one pair manages to make a move within one of these non trending pairs. The market is sorting itself out as trends build within pairs and currency groups that may be consolidating or inside of support and resistance clusters.
When preparing the Second Opinion trading plans, remember that these plans are based on the trends of the market. Contrast situation 1 and two below.
Situation Number 1– all of the JPY pairs are trending higher on the D1 time frame, and all of the Second Opinion trading plans indicate buy plans, the alarms hit in the main session and the JPY is weak and the trends follow through with good solid entries.
One conservative way is to be a strict trend trader and follow the Second Opinion trading plans and major trends of the market, this is more conservative and you trade less and generally hold onto trades longer. On these trades you can use The Forex Heatmap® for entry management.
Situation Number 2 – Some of the JPY pairs look like they are trending up, some of the JPY pairs look like they are trending down, and some of the JPY pairs trend indicators are mixed or choppy, but in the main trading session one of the JPY pairs breaks through some small resistance and the JPY is solid green on the heatmap, this is a supplemental trade.
Situation Number 2 was not easy or even advisable to plan a trade for however it is an indication that the JPY pairs may be ready to move as a group tomorrow.
Risk and Reward of Supplemental Trades
If you understand the entire Forexearlywarning trading system, the risk is very low and the upside reward over time is enormous. If you understand multiple time frame analysis and how to read the time frames along with support and resistance you could likely make extra pips about 3 times per week, 50-100 pips per trade with supplemental trades, possibly a lot more.
Risks are having The Forex Heatmap® identify a potential trade but the end user does not understand support or resistance, clusters, position sizing, money management, news calendar, trading in the main session, when to say no, they have no paper trade history or experience, etc. In other words an individual trader understands the heatmap but not anything else and they use the heatmap as a crutch. It can't work.
The Forex Heatmap® is an entry management tool, it tells you what is happening in the market and what to trade but it does not know what currency pairs are trending or how to analyze time frames, support and resistance, or the outcome of news. That is all in your hands. The Second Opinion trading plans alone will assist greatly with understanding our system and are in a very important piece of the puzzle. You need to know what pairs are trending.
If you understand the entire system you should be trading at least half of the indicated supplemental trades and padding your account with pips. On currency pairs which are not clearly trending or oscillating, the risk is slightly higher but the rewards can be an extra 50-100 pips per day or possibly much more.
Regular Trending Pair Entry – Second Opinion trading plans says that the AUD/USD is in a strong uptrend with near term resistance past price X. We set an alarm to monitor price X. When the alarm goes off in the main session if the trend is strong enough you would likely only need AUD strength or USD weakness but not both. Both would be great but only one is likely necessary if the trend is strong enough. You enter the trade and trend and watch it proceed upward.
Supplemental Trade Entry Setup off of the News Calendar - Second Opinion trading plans state that there are (3) strong news drivers from the CAD in the upcoming main session but after analyzing the CAD pairs we see no clear trends or oscillations. If you monitor the heatmap after the CAD news and all of the CAD pairs show CAD strength after the news a supplemental trade could easily develop or even a price breakout could occur. If you look at the JPY group and they are all or mostly green, this could quickly turn into a supplemental trade entry for a buy on the CAD/JPY because the CAD is strong and the JPY is weak. In this case the Second Opinion trading plan process could not determine a clear plan on the CAD pairs but the market was waiting on the news to establish a direction on the CAD.
When one side of the pair is strong and the other is weak we call this a “slingshot”. In the CAD/JPY example above the CAD news would cause the CAD/JPY to move at least 75 pips or possibly much more upward if the sentiment and signals hold, which they normally will after several CAD news items. On the CAD/JPY you would just navigate to the free trend indicators and you can quickly check the condition of the CAD/JPY trends and support and resistance in probably under 2 minutes. This is how supplemental trades work and extra 75 pips or more is not bad considering it was not even a planned trade with Second Opinion.
Unexpected News Supplemental Trades - Other supplemental trades can occur when politicians, Fed Chairman, interventions, ratings agencies, etc, issue press releases or unexpected news like tsunamis or military actions occur, worldwide. Currency pairs can fly up and down quickly on something unexpected. This can happen at any time and this is why you trade with a stop, it can work in your favor tremendously if you get a new entry and make a lot of pips or against you if you get stopped out of a current trade. The Forex Heatmap® will identify the trade in real time even before you can find the unexpected news driving the move from a real time forex news website.
Supplemental Trades Against the Trend - If the Second Opinion trading plans say that the GBP/USD is in a downtrend and we set a sell plan with a potential news driver coming from GBP. After the news the GBP/USD could rise against the trend and then eventually come back down into the trend a couple of days later after it stalls. If the heatmap gives a solid buy entry against the trend on the GBP/USD experienced traders can consider trading these, in all cases they should be paper traded.
Conservatively, you know you must exit quicker or scale out lots on these trades against the trend. Then the GBP/USD pair moves up against the downtrend and stalls you can turn around and plan to sell it again, and we usually do in the Second Opinion trading plans, and this occurs occasionally in a trending market. All of this should be considered routine but can provide you with additional pips.
Straddle Alarms on Non Trending Pairs – After we put the heatmap on our website in April 2009 we decided to start putting straddle alarms in some the trading plans. A straddle alarm is two price alarms on the same pair that is trading in a narrow range or sideways. In this case we are looking for a price breakout in either direction, then checking the heatmap to see if it indicates an entry on the pair that is breaking out or another pair in the same individual currency group. Then you check the heatmap to see if you have a valid buy or sell signal. Setting straddle alarms is very effective at identifying supplemental trades and is just another way to make pips. A straddle alarm in a Second Opinion trading plan means the market analysis indicates the pair could move in either direction.
Monitor The Main Trading Session Efficiently
Most of the sustainable strong entries on the forex occur from the start of the London session through the USD session. The daily window is about 5 hours or possibly 6 hours and starts about 4 hours ahead of the US stock market open.
Here is a great way to monitor the market and stay productive. Always review your Second Opinion trading plans and have your alarms set, mark time against the strong news drivers, and be aware of the existing trends on the market. Keep notes on a pad next to your computer. If you check the heatmap and not much is happening then come back every 20 minutes or so or after the next news item to inspect the market.
In between market checks you can work on your computer, check email, clean out the garage or read a book. Being near the computer is not the same as sitting in front of it for 5 hours. The Forex Heatmap® is a lifestyle tool, so if nothing is happening come back at time intervals or after the next news item. Trade and monitor the forex market efficiently.
If you are trading the forex for the long haul you have to learn to spend less time in front of the computer not more. This will keep you fresh and ready for some rock solid trades that could come later in the main session or tomorrow. If you miss a trade or sleep in today that’s fine, because tomorrow there will likely be more pips across 28 pairs that we track. Supplemental trades with over 100 pip moves can occur up to 3 times per week.
Become A Proficient Trader
If you are a beginner, paper trade five days a week in the main session right or wrong. Unless you are a veteran making a lot of real money pips you should be doing this anyway.
It is not possible for anyone at Forexearlywarning or anyone else for that matter to help someone who will not help themselves by demo trading daily. If you demo trade daily you will likely wind up with hundreds of pips of paper trades per month and be on your way to total success trading the forex, along with building your experience base.