I have not finished watching all of the instructional videos yet. However, I watched a video so amazing that I want to start trading now and watch the rest of the videos later. The video is about CashTrap.
CashTrap is a strategy found within Hourglass. It is used for increasing the probability of having lots of successes trading currency pairs. There are 8 indicators that are used simultaneously to see how good a trade is. Most indicators are given points to show how much someone should trade. Some indicators say that you should not even consider trading.
Note that the candlesticks in CashTrap change every 5 minutes. When a candle changes, the Alert Panel changes. Therefore there will be a new Call or Put arrow every 5 minutes. Also note how one of the educators sometimes draws these horizontal support & resistance lines in Hourglass.
In the animation above you will notice the letter S isolated within the chart. When you see an S, it is likely time to sell. When you see a B, it is likely time to buy.
Watch the video below to see a simplified version of Cash Trap.
CashTrap can be a very lucrative strategy. However, there are some very important principles that I will follow:
- NEVER invest more than 3% of my account in any one trade.
- If I have increased my account by 8% in one day, I stop trading until tomorrow
- If my account has decreased by 5% in one day, I stop trading until tomorrow.
- Do not trade more than 2 hours in a day. Break it up into two hour-long sessions with an hour-long break in between. Each trade I make will be only 3 minutes long. That’s lots of candles & indicators to examine. So, after so much concentration, the probability of making mistakes is too high.
- Start each trade shortly after a new candle forms. Never wait more than 2 minutes. You want to finish your trade before a new candle is formed.
- NEVER trade on weekends (2 pm Friday – 2 pm Sunday Pacific time).
- The best times to trade in the Pacific time zone are 9 am – noon and 6 pm – 9 pm.
- If you lose 2 trades in a row, stop trading that currency pair for the rest of the day. It may be having a major breakout.
- There are various very good trading strategies. Find a good one that suits you. Stick to it. If you are not consistent, you will lose too much money.
- Have lots of patience & discipline. Take good notes of what you are doing and record your system. Never trade for emotional reasons. Use good logic.
Before you even start looking for trades, set up your brokerage account. Otherwise you lose valuable time after you have found that ideal trade. Worse than that, you may forget to set it up properly.
There are 3 things you must do:
- Set your time to 3 minutes. (If that’s the time you want, make sure you use 5 minute candles while you are looking for good trades.)
- Set you time for fixed or unfixed time. Be consistent. I prefer fixed time.
- Set the amount for exactly 1% of the amount in your brokerage account. Don’t forget the decimal point.
As I am considering making a trade, I think about this: Two of the attributes of a successful currency trader are patience & discipline.
Add up the appropriate points in red below. The numbers here represent what percentage of my account I should trade.
Consolidation: Whenever it looks like things are consolidating, make the 1 hour, 15 minute & 5 minute support & resistance lines. Jot down the support & resistance numbers on paper. Note when the price is close to one of those numbers. If it is consolidating in the right direction, I may want to trade even though there are not enough points.
5 points — 1%
6 points — 2%
7 or more points — 3%
- As of this writing, the 19 currency pairs to the right are the only pairs available on CashTrap. ( (The computer programmers used the strategies of Matty Pips to develop this bit of software. Matty Pips says that, when trading, he has had the greatest success with USDJPY & EURUSD.) Go to forexfactory.com for latest financial news. If any of the currencies in that list have a red folder beside them, I will NOT trade that currency in the next 2 hours.
- 1 point. Go to the Currency Strength Meter. This can be found in the Cash Trap on the right-hand side. In the Alert Panel here you see EUR 33 and JPY 53. If the stronger is the first one, this would indicate a call (buy). If the stronger is the second one, this would indicate a put (sell). In this example, JPY is stronger. So, we would get one point if the word after Type was Put. It is, so we get one point.
- 1 point. Look at the Alert Panel image above. If the first number is smaller than the second, a put got you one point in #2 above. A down arrow will get another point. If the numbers are really close, you are in a consolidation and there could be either a call or a put.
- I MUST enter the trade when there are more than 3 minutes left in a 5-minute candle. See Timing of a Trade.
- 1 point. Read the Bollinger Band section. You get a point when price of a currency pair is within bottom Bollinger band for a call (buy). You get a point when price of currency pair is within top band for a put (sell). In the image to the right, we would have got a point because the put arrow is within the upper Bollinger band.
- +1 or -1 points. Read the Trend Line section. If trend line (also called the 200 EMA or exponential moving average) and direction of the call or put arrow are favourable, you get +1 point. If unfavourable, you get -1 point.
- There is another way you can get a point for an EMA. When the EMA is between the Bollinger bands, look for one of the 2 scenarios: 1. A put arrow is below the EMA. 2. A call arrow is above the EMA. Either of those situations would give you one point.
- EMA stands for exponential moving average. When the EMA is trending downwards, that means there is a down trend. I.e., prices are dropping. So, you want a put amount to be below the prices from which they are dropping. The opposite is true for the Call arrows.
- 1 point. Read about the Stochastic chart.
- 1 point. Read about the Relative Strength Index. Never compromise on the Stochastic & RSI. Above the red dotted line and then through, look for a put. If is below the green dotted line and through again, look for a call . The RSI (bottom) will get a point because it is through the red dotted line on its way down. The darker line here would not get a point because it has gone over half way between the two dotted lines.
- Never take a trade that has less than a 70% payout from your broker. (E.g., If I would make a $10 trade and won on a 70% trade, I would earn $7.) In the example to the right, GBPJPY is the only one I would consider trading. However, if I was simply working with a demo account, the payout amount would not matter and I would not mind taking a payout of less than 70%.
- 1 point. Wait for the 3 Bollinger bands to be together before making the trade. That would give you one point. Note that if the arrow is in a place where the 3 Bollinger bands are together, it is okay for the other set of 3 Bollinger bands to be apart.
- 1 point. In your Hourglass, just above the Stochastic & RSI trend graphs, you will see an S or a B.If the S (sell/put) or the B (buy/call) line up with your other Put or Call indicators, that’s worth a point.
- 1 point. Resistance & support lines. If a put arrow is just beneath a resistance line or a call arrow is just above a support line, give yourself a point. These resistance & support lines are often drawn into Hourglass like the one in this screenshot. If they are not there, you may have to do it yourself.These support & resistance lines are added to Cash Trap every half hour (every 6 candles). When they are first added, their ends angle like the image on the left.
Hourglass and CashTrap
In order to access the CashTrap, you must have a tool called Hourglass. Go to the Strategies link in the upper left-hand corner to access CashTrap.
Among other things, in CashTrap you will be reading a chart like the one here. You will be looking at 5 different indicators to help you decide whether or not you should trade a particular currency pair.
Each of the different indicators gives either a -1 or a +1. You add them up to decide what percentage of your account you should trade.
The up arrow has the word CALL beneath it. That means that if you do trade, you will be buying. (When you are selling, it is called a PUT.)
To decide upon the opening price, you look at the bottom of the up arrow. It lines up with 0.71205. That is usually abbreviated by using the last 3 numbers (205). You would buy in at 205 or less.
Go to the FAQ page to learn how to buy Hourglass.
Each currency is represented by 3 letters. For example, JPY stands for Japanese yen. USD stands for United States dollar.
The first currency equals one unit. In the image here, you are trading USDJPY. You want to start trading when one USD is worth 103.682 yen or more.
In the CashTrap strategy, you restrict your trading to 5 different pairs of currencies:
- EURJPY and
The percentage amount from the image to the right should be at least 70%.
To open up a particular pair to investigate trading possibilities, you single click on that pair in the Alert Panel. (Note that the Alert Panel changes every time there is a new candle.)
To see the prices of a currency pair, look at the red and green candles (sometimes called candlesticks.) In Hourglass, I adjust the settings so that each candle represents 5 minutes of trading.
In the red candlestick the price is going down. So, the opening price is at the top of the red rectangle and the closing price is at the bottom of the rectangle. If there is a fine line above or below a rectangle, that is called a wick and represents the highest or lowest the price went during the duration of the candle.
Bollinger bands and CashTrap
The wavy lines surrounding the candles are called Bollinger bands. They represent how high or how low the prices can expect to go. There are 3 of the red and 3 of the green Bollinger bands. When the 3 red lines or the 3 green lines are far apart, you are less likely to win a trade.
When the price of a currency pair is within the top Bollinger band, you do not expect it to go any higher. The price will likely drop & you will want to sell. (Put is another word for sell.)
My friend Steve told me about how he uses Bollinger bands to help him make trades. He said that when he sees the market is consolidating, he goes into Cash Trap and starts counting points and taking trades.
What he is looking for is all the red Bollinger bands to be lying almost on top of each other and all the green ones to be lying on top of each other. This indicates that the market is consolidating (very little activity) and gives us a very high chance that price will bounce up and down inside the bands and not break out.
The image to the right begins with an up trend. When it got to S, it would look like a consolidation was starting to happen. By the time it got to P, Steve would put (sell). Somewhere around where the next green candle was forming, he would call.
Trend line and CashTrap
The trend line in the image to the right is that red line at the very bottom. Because it is below the bottom Bollinger band, the trend is going up.
The trend line actually is a 200-day exponential moving average (EMA). That is an average of the past 200 days with greater weight given to the more recent days.
(The simple moving average or SMA is between the Bollinger bands. The Bollinger bands are 2 standard deviations away from the SMA.)
NEVER trade against the trend.
That means that you should call (buy). That is contrary to that down arrow in the Hourglass here that suggests you should put (sell). So, the indicators are conflicting and you should not trade EURCAD at this time.
BTW, if the trend line were above the top Bollinger bands, the trend would be going down. That would be the time to put. So, in the image to the right, you would wait for a red candle and a red down arrow before considering trading.
When the trend line is between the Bollinger bands, that is called consolidation. That means the market could be going in either direction. You could feel free to either call or put. Some traders think it is too volatile & you should never trade during a consolidation.
Just remember, when the trend line is outside of the Bollinger bands, the call or put arrow must be pointing away from the trend line in order to take the trade.
Currency Strength Meter and CashTrap
You can find the relative current strength of the various currencies by going to the Currency Strength Meter. Part of this meter is reproduced to the right.
As you can see here, the USD is presently stronger than the EURO. Do NOT trade a pair unless one has a strength of at least two bars greater than the other. So, USDEUR would be a good trade to take.
If the first currency is stronger, you would want to call. If the second currency is stronger, you would want to put.
Before placing a trade, make sure the currency strength, the call or put arrow and the trend line are all asking for the same trade.
Simple winning strategy
Study the 2 sections above until you understand them thoroughly. Whenever the up or down arrow, the trend line and the Currency Strength Meter all line up simultaneously, you can expect to win more trades than you lose.
The EUR is 2 bars above the CAD, the arrow indicates a call and and the trend line is below the Bollinger bands.
Note that the arrow is worth 3 points and the trend line is worth 0.5 points. So, unless there are other positive indicators, you would invest only 1% of your account.
The Stochastic chart shows when a currency pair has been overbought or oversold. So, if the black line is above the red dotted line (upper Bollinger band), look for a put. If the black line is below the green dotted line, look for a call. If the black line is beyond the correct dotted line, it is worth 1 point.
It the black line has gone through the dotted line and is on its way to going through again, that is good. If it has gone all the way through, it is best. The same principle applies to the RSI.
RSI (Relative Strength Index)
The RSI is the bottom chart on Hourglass. The dotted lines represent Bollinger bands. When the grey line is beyond the dotted line, it is worth 1 point.
Timing of a trade
Each candle lasts 5 minutes until there is a new one. Your trades will be 3 minutes long. When you enter a trade, it should happen as close to the beginning of a candle as possible.
Do not open a trade unless there are more than 3 minutes left in a candle. To find the amount of time left in a candle, right-click in the left-hand column of the Alert Panel. Make sure Countdown to Bar Close has a check mark beside it.
Forex Factory News
Sometimes certain news events happen that make the forex market very volatile. CashTrap will not work because it is impossible to tell what that news will do to the market.
So, it is always good to start a potential trading day by going to Forex Factory News. There you will find a number of folders representing particular financial news events at what time. Then it tells what currency is affected by that news.
If the folder is red, do not trade any currency pair that has the pertinent currency in it. Wait until at least 2 hours after the given time before trading in that currency. Looking at the above screen shot, you would not trade USDJPY, USDCAD or EURUSD for at least 2 hours after the FOMC press conference.
The Alert Panel is an extremely valuable part of CashTrap. It shows an overview of the condition of each of the 10 currency pairs you see on the left.
Notice the information about the GBPAUD. On the left it is the price at this very moment. (Each USD is worth 1.78174 AUD). Below that is the time left in this 5 minute candle. It looks like at this moment I have 27 seconds to decide whether I will trade or pass. I will pass because the Currency Strength Meter says the AUD is much stronger than the GBP.
However, I was patient and waited until the Hourglass gave me a put.
This is a very good trade. The currency strength & the put arrow line up for 4 points. Trend line points down for 0.5. Either the Stochastic chart or the Relative Strength Index was below the green Bollinger band dotted line for another 0.5 points. That adds up to 5. I would take this trade and I would risk 3% of my account.
* When the Currency Strength Meter numbers within Cash Trap are almost equal, the trade could go either way. In the GBPUSD example here, the word Call would give you a point. The word Put would also have given you a point.
More YouTube videos
Another perspective on CashTrap in a YouTube video.