Real Major Key PDF

The Major Key
Introduction
The major key is a breakout strategy that signals a buy or sell trade based on trends. For every
current up trend, you would analyse (with the use of a trend line) for a sell signal and for every
down trend, you would analyse for a buy signal. This is because we trade trends. So, you would
wait for a trend to change direction, then ride that trade either up or down as your way of gaining
pips (that paper). If you are wondering how we do this, well, you see the graph moves up and down
every split second (that is the price change, price action). So, depending on what is happening in the
market, the price will go up and for a long period. As a result, we have the graph going up and down
in trends, forming patterns like the letters “M” and “W”, the head & shoulders, and so on. The trick
of this strategy is to buy low and sell high. But how do you know when to sell/buy?
This strategy works for all the time frames. However, it is highly recommended on THE H1, H4 and
D1 time frames.
The strategy tells you whether to buy or sell and it gives you take profits and stop losses.
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Trend line
Below is an illustration of a down trend and an analysis of a buy signal.
So, to analyse a down trend for the buy signal, you start drawing your trend line from the top of
your down trend all the way to the bottom. The correct way to do this is to keep your trend line
where price action takes place. That means that you will keep your line on the edges of the candle
sticks as much as possible. The trend line is not allowed to cut through candle sticks unless the
trend breaks the trend line.
For a valid trend line, the trend line must touch two or more candle sticks' price action (the edges of
the candle stick where price opens and closes) and/or the candle stick tails. If the trend line does not
touch two or more candle sticks, then the trend line is considered invalid. With an invalid trend,
there isn't a valid breakout. That means there is NO signal.
After the breakout, there must be a confirmation candle stick. A confirmation candle stick is a
candle stick of similar direction to the breakout candle stick. This particular candle stick confirms
the change in direction of the trend. Now that is your buy/sell signal.
Basically, a candle stick from the trend (either down or up) suddenly breaks (crosses) the trend line.
That is a sign that the direction of the trend might change, so you wait for the next candle stick to
confirm the change in direction. If the confirmation candle stick is in the same direction and colour
as the breakout candle stick, you are ready to take a trade. However, if the confirmation candle stick
is not in the same direction as the breakout candle stick, that means that the breakout was a false
breakout. So, you would then move your trend line away from the body of the candle stick and
place it on the edge of the candle stick or tail. You would then wait for the next breakout.
Rules:
-The trend line touches the graph two or more times.
-The confirmation candle stick must be of the same direction as the breakout candle stick.
-The trend line is not allowed to cross candle stick bodies unless there is a valid breakout.
-Only place your trade after the confirmation candle stick has confirmed and CLOSED.
Above, there is an illustration of how the Major Key works. The trend line touches the graph three
times, breaks out and confirms. So, a trader would take a buy trade in this scenario. On this
example, the trade was taken a perfect timing. Had the trade been taken as soon as the confirmation
candle stick closed, more pips would've been gained.
Take Profit and Stop Loss

The TP and SL are important factors of every trade you take. It is highly recommended that you
have a stop loss on every single trade. Also, your take profit must profit you a lot more than the stop
loss would take from you. At least a ratio of 1:2 (SL:TP) for every trade, to protect your capital.
Protecting your capital is a very important factor of Risk Management.
According to the Major Key, your stop loss is placed at the point where your trend changes its
direction (at the turning point), either right at the top or right at the bottom of that trend. Normally,
that will be the highest or lowest point that the graph has been for that trend. We place the stop loss
there because the graph is unlikely to reach that point again when changing direction. This is in
case the graph changes direction and moves against you. When the graph moves towards your stop
loss, it is expected to play around the space between your entry point and your stop loss, before it
moves towards your take profit. If the graph hits your stop loss, it means that you had a false
breakout and the graph is not changing direction. With proper risk management, your capital is safe.
The take profit is placed at the point where your trend line starts, either at the top or bottom. We
place the take profit there, because the graph is most likely to reach that point again. The take profit
must have at least twice as much the pips of your stop loss to make sure you don't break even or
make a loss.
On the above screen shot, the stop loss was placed at the lowest point that the trend has reached
and the take profit was placed at the point where the trend line starts. Your entry point, for the buy
trade, was at level 1.27264 and the money that could be made out of this trade is a lot more than the
money that could be lost. This is why early entries are vital and late entries are not recommended.
The graph above is a perfect demonstration of how the major key signals trades. Trend line was
properly drawn, stop loss & take profit was identified, the buy trade was taken.
The Second Breakout
Very often, the graph will signal a downwards direction, then move up a bit before it moves down.
This is generally known as “The Last Kiss”. The Last Kiss is, basically, when a graph that is meant
to go down, goes up a bit, before going down. When the graph moves down for the second time, it
normally moves aggressively and a lot faster than initially. With the use of The Major Key, you can
identify the change in direction, by using a trend line and having a Second Breakout. A second sell
trade can be taken at this point. Here is an example of a second beakout:
When you look at the shorter trend line, you can tell that an analysis was made and the trade was
taken (stop loss and take profit already set). Also, you can tell that the shorter line was drawn first.
After the sell trade has been initiated, the trade goes into profit, until the graph decides to change
direction and take the trade into a loss. That's when you draw your second line, analysing for a
second sell. You're advised to not be tempted to place a buy trade while a sell trade is on, just
because you seeing the graph go up. So, you will have to wait for the graph to hit your stop loss
before you can place a buy trade. This is because the graph might be going for The Last Kiss, that's
where your second trend line comes in. Your second trend line will signal change of direction,
again. You will place your second sell trade at this point. Below is another example of a second
breakout.
Multiple Breakouts
During a trend, there are a lot of breakouts that take place. So, depending on the time that you
analyse the graph, you might find that you just missed a trade or you still have to wait for a trade to
confirm. A trend signals a trade more than once. It's like a train, it is going to one final destination,
but stops at a lot of other stations picking up people. Just like the trade is headed to take profit, you
can jump into the trade on different breakouts. Multiple breakouts can help maximize profits,
provided your risk management is played well. The best way to do this is to look out for small
breakouts. Small breakouts signal early change of direction in a trade. That small breakout will earn
a lot more pips at the end of the day, compared to any later trade or big breakout (provided the small
breakout trade is active at the same time as the big breakout trade, or both trades have the same tape
profit). Below is an example of what multiple breakouts look like.
The solid blue trend line represents the big breakout. When you look at the gap between the turning
point and the big breakout, you will notice that you have missed out on a lot of pips. So, this is
where the small breakouts come in.
Notice that the smaller breakouts occur way before the big breakout and there is a lot of them. That
is a chance for you to make money while waiting for the big breakout. By the time the big breakout
takes place, you will have more than one winning trade open. This is the case in which you will
have multiple trades of the same pair running at the same time, but with different entry points and
different profits. Below is zoomed in version of the same screen shot to show the technique.
PS: Drawing a trend line to analyse the graphs can be very challenging at first. Even at times when
it looks right, but is actually wrong. It is strongly recommended that you practice the skill regularly
and constantly read the rules and the explanation, to make sure you don't get lost. Another thing,
having this strategy and using it doesn't mean that you should neglect factors like risk management
and psychology. Having a winning strategy is less than half the job done. Proper risk management is
key. With proper risk management, you wont stress too much. After placing a trade, let that trade
run. Do not make decisions like moving your stop loss further or your take profit closer while the
trade is already running. Allow your trade to run, let it hit the stop loss if it wants to and the take
profit if it wants to. What I strongly recommend with the stop loss is that you move it into profits
when the trade has over 100 pips in profit. You would then place your trade between 30-50 pips in
profit, depending on your instinct.
Mangaliso Sereo, 20-01-2018
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The Major Key

Take Profit and Stop Loss

Mangaliso Sereo, 20-01-2018

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