Dean Malone EASY Trading Method.pdf

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Dean Malone www compassfx Trade price price action Channel RSI PL
Dean Malone
4X Los Angeles Group - HotComm
January 2007 
Take it E.A.S.Y.! 
• Partner of Compass Foreign Exchange, LLC.
• Co-Founder of Forex Signal Service.com.
• Previous Senior National for 4X Made Easy & 
Wizetrade.
• Prior co-founder of a Dallas telecommunications 
company.
• 19 years of financial market experience.
• 11 years of trading experience with stocks,    
options, futures, and foreign currency.
Dean Malone
© Dean Malone, 2007
www.compassfx.com
Unique experiences and past performances do not 
guarantee future results.
Trading stocks, options and spot currencies 
involves substantial risk; and there is always the 
potential for loss. Your trading results may vary. 
No representation is being made that any software 
or training will guarantee profits or not result in 
losses from trading. 
Disclaimer
© Dean Malone, 2007
www.compassfx.com
Table of Contents
Description
Slides
Easy Trading Method                            5 – 73
CompassFX  (Trader Friendly Broker)                   74 – 80
Forex Trade Oracle (Managed Account)           81 – 87
© Dean Malone, 2007
www.compassfx.com
Dean Malone’s  
E.A.S.Y. Trading 
Method 
© Dean Malone, 2007
www.compassfx.com
E.A.S.Y. Method
EUR/USD 1-Hour
Clear Entry 
at 1.2823
© Dean Malone, 2007
www.compassfx.com
E.A.S.Y. Method
EUR/USD 1-Hour
Clear Exit 
at 1.2875
© Dean Malone, 2007
www.compassfx.com
Mark Douglas, author of Trading in the Zone, states: 
“The best traders have developed an edge
and more importantly, they trust their edge.”
Why the E.A.S.Y. 
Method?
© Dean Malone, 2007
www.compassfx.com
My “trading edge” rules:
1. A high probability of success.
2. Enter and exit trades without conflict or stress. 
3. Trade decisions dictated by price action, not    
by my preconceived beliefs and opinions.
Why the E.A.S.Y. 
Method?
© Dean Malone, 2007
www.compassfx.com
E  = Effective
Provides me an effective edge in my trading.
What is E.A.S.Y.?
© Dean Malone, 2007
www.compassfx.com
E  = Effective
A  = Accurate
Delivers a high degree of probability and 
predictability. 
What is E.A.S.Y.?
© Dean Malone, 2007
www.compassfx.com
E  = Effective
A  = Accurate
S  = Simple
Keeps my analysis simple in order to get a quick snapshot 
of the market, and make trading decisions with less stress 
and anxiety.
What is E.A.S.Y.?
© Dean Malone, 2007
www.compassfx.com
E  = Effective
A  = Accurate
S  = Simple
Y  = Yield
Yields a higher ratio of winning trades versus losing 
traders. It’s a numbers game!
What is E.A.S.Y.?
© Dean Malone, 2007
www.compassfx.com
1. Price action
2. Momentum 
3. Strength
E.A.S.Y. Method
There are 3 primary market conditions 
I look for in a potential trade:
© Dean Malone, 2007
www.compassfx.com
¾ Average Price Bars
¾ Price Action Channel
¾ Traders Dynamic Index
E.A.S.Y. Chart Setup
© Dean Malone, 2007
www.compassfx.com
Average Price Bars
© Dean Malone, 2007
www.compassfx.com
¾ Provide a better depiction of current market. 
¾ Reveal market strength & consolidation.
¾ Eliminate fluctuations of nominal price action.
¾ Remove the noise of price distortion of the   
underlying trend.
Average Price Bars
© Dean Malone, 2007
www.compassfx.com
¾ Use the Heiken Ashi method.
¾ Heiken = “Average”
¾ Ashi = “Bar”
¾ Heiken Ashi averaging technique
– haClose = (Open + High + Low + Close) / 4 
– haOpen = (haOpen(previous bar) +   
haClose(previous bar))/2
– haHigh = Maximum(High, haOpen) 
– haLow = Minimum(Low,haOpen)
Average Price Bars
© Dean Malone, 2007
www.compassfx.com
Typical Candlesticks
© Dean Malone, 2007
www.compassfx.com
Typical Candlesticks
False exit points!
© Dean Malone, 2007
www.compassfx.com
Average Price Bars
© Dean Malone, 2007
www.compassfx.com
Average Price Bars
© Dean Malone, 2007
www.compassfx.com
Average Price Bars
Positive bars 
mean “BUY”
Negative bars 
mean “SELL”
© Dean Malone, 2007
www.compassfx.com
Average Price Bars
Positive bar with 
long upper wick 
means    
“Strong BUY”
Negative bar with 
long lower wick 
means “Strong 
SELL”
© Dean Malone, 2007
www.compassfx.com
Average Price Bars
A negative bar with 
upper wick means 
“Weak SELL”
A positive bar with  
lower wick means           
“Weak BUY”
© Dean Malone, 2007
www.compassfx.com
Average Price Bars
Shorter bar than 
previous bar is an    
“indication of Change”
A very short bar        
means           
“Change of Trend”
© Dean Malone, 2007
www.compassfx.com
Price Action Channel
© Dean Malone, 2007
www.compassfx.com
Traditional Price Channel has two formats:
1. A pair of trend lines above and below price
like the Linear Regression Channel.
2. An envelope of bands around price with set 
deviation limits such as Keltner Channel.
Traditional Price Channel
© Dean Malone, 2007
www.compassfx.com
Used to determine upper and lower  
boundaries and signal potential 
reversal or breakout. 
Traditional price channels can cause 
“reactive” trading!
Traditional Price Channel
© Dean Malone, 2007
www.compassfx.com
Price Action Channel
Sets inside of price movement…instead of  
outside of price wait for the market.
Used by institutional traders and 
sophisticated trading programs.
Promotes “responsive” trading!
© Dean Malone, 2007
www.compassfx.com
¾ Use Smoothed Moving Average
¾ Top of Channel = 5 period, High
¾ Bottom of Channel = 5 period, Low
Alternatively, use an 8 period EMA, High & Low.
Price Action Channel
© Dean Malone, 2007
www.compassfx.com
Price Action Channel
5 period Smoothed 
MA = High price. 
5 period Smooth 
MA = Low price. 
© Dean Malone, 2007
www.compassfx.com
Price Action Channel
¾ Provides overall trend direction.
¾ Reveals periods of consolidation.
¾ Used primarily as an Entry target.
¾ BUY Trend – Average Price Bars tend to run 
on top of channel.
¾ SELL Trend – Average Price Bars tend to run 
on bottom of channel.
© Dean Malone, 2007
www.compassfx.com
Price Action Channel
Positive bars 
riding the top of 
the Price Action 
Channel
“Good BUY (Long) Trend”
Nice upward trend of 
the Price Action 
Channel.
© Dean Malone, 2007
www.compassfx.com
Price Action Channel
Negative bars riding the 
bottom of the Price 
Action Channel
“Good SELL (Short) Trend”
Nice downward trend of 
the Price Action 
Channel.
© Dean Malone, 2007
www.compassfx.com
Price Action Channel
“Range-Bound, No Trend”
Price Action Channel   
is flat with no clear 
direction.
© Dean Malone, 2007
www.compassfx.com
Price Action Channel
haClose > PAC 
High
haClose < PAC 
Low
“Entry Condition using PAC”
© Dean Malone, 2007
www.compassfx.com
Traders Dynamic Index
© Dean Malone, 2007
www.compassfx.com
A hybrid indicator developed to 
indicate market conditions related to                
trend direction, momentum, and    
market volatility.
An “all-in-one” indicator!
Traders Dynamic Index
© Dean Malone, 2007
www.compassfx.com
Traders Dynamic Index
Step 1: RSI Price (Green) Line
Rules: Trade Long when RSI PL > 50.
Trade Short when RSI PL < 50.
Consider exit when RSI PL is > 68 or < 32.
© Dean Malone, 2007
www.compassfx.com
RSI Price Line compared to Price Action
Traders Dynamic Index
© Dean Malone, 2007
www.compassfx.com
Step 2: Trade Signal (Red) Line
Rules: Trade Long when RSI PL > TSL. 
Trade Short when RSI PL < TSL. 
Exit trade when RSI PL & TSL crossover.
Traders Dynamic Index
© Dean Malone, 2007
www.compassfx.com
Step 3: Market Base (Yellow) Line
Rules: Market Base Line (MBL) is the Overall Trend.
Trade Long when RSI PL is > MBL. 
Trade Short when RSI PL is < MBL.            
Traders Dynamic Index
© Dean Malone, 2007
www.compassfx.com
Market Base Line compared to Price Action
Traders Dynamic Index
© Dean Malone, 2007
www.compassfx.com
Market Base Line forecasts Market Reversals
Traders Dynamic Index
© Dean Malone, 2007
www.compassfx.com
Step 4: Volatility Band (Blue) Lines
Rules: Possible to add to a Long when RSI PL is > VB. 
Possible to add to a Short when RSI PL is < VB.    
Consider exit when RSI PL crosses back over VB.
© Dean Malone, 2007
www.compassfx.com
Traders Dynamic Index
Volatility Bands compared to Daily Price Action
Traders Dynamic Index
© Dean Malone, 2007
www.compassfx.com
Volatility Bands compared to Intraday Price Action
Traders Dynamic Index
Tight Volatility Band
Tight Price Range
© Dean Malone, 2007
www.compassfx.com
¾ Average Price Bars
- Heiken Ashi indicator
¾ Price Action Channel
- 2 Smoothed Moving Averages
- 5 period, High
- 5 period, Low 
¾ Traders Dynamic Index
- RSI = 13 period, Close 
- Volatility Band = 34 period, Close
- RSI Price Line = 2 period, Close, SMA
- Trade Signal Line = 7 period, Close, SMA
E.A.S.Y. Method
Putting it all together!
© Dean Malone, 2007
www.compassfx.com
E.A.S.Y. Method 
Entry Rules
© Dean Malone, 2007
www.compassfx.com
Average Price Bars (APB)
• Look for Positive or Negative bars trending.
• Monitor the current haClose.
• Long entry = haClose > PAC High Moving Average
• Short entry = haClose < PAC Low Moving Average
E.A.S.Y. Method
All systems GO!
© Dean Malone, 2007
www.compassfx.com
Price Action Channel (PAC)
• Monitor the direction of the Channel.
• Monitor the High & Low Channel values in relation    
to the current haClose.
• Long entry = haClose > PAC High & PAC uptrend
• Short entry = haClose < PAC Low & PAC downtrend
All systems GO!
E.A.S.Y. Method
© Dean Malone, 2007
www.compassfx.com
Traders Dynamic Index (TDI)
• Long entry = RSI PL > 50, TSL, and MBL.
(Long entry = Green line > 50, Red line, & Yellow line)
• Consider adding to Long if RSI PL > the 
upper Volatility Band and > 50, but < 68. 
• Avoid entering a Long when RSI PL > the 
upper Volatility Band, > 50, and > 68.  
E.A.S.Y. Method
All systems GO!
© Dean Malone, 2007
www.compassfx.com
Traders Dynamic Index (TDI)
• Short entry = RSI PL < 50, TSL, and MBL.
(Short entry = Green line < 50, Red line, & Yellow line)
• Consider adding to Short if RSI PL < the lower 
Volatility Band and < 50, but > 32. 
• Avoid entering a Short when RSI PL < the 
lower Volatility Band, < 50, and < 32.  
E.A.S.Y. Method
All systems GO!
© Dean Malone, 2007
www.compassfx.com
Long Entry: (All conditions are satisfied.)
1. APB haClose > PAC High Moving Average.
2. PAC trending up.
3. TDI = RSI PL > 50, TSL, and MBL.
Short Entry: (All conditions are satisfied.)
1. APB haClose < PAC Low Moving Average.
2. PAC trending down.
3. TDI = RSI PL < 50, TSL, and MBL.
E.A.S.Y. Method
Entry Setups
© Dean Malone, 2007
www.compassfx.com
E.A.S.Y. Method 
Exit Rules
© Dean Malone, 2007
www.compassfx.com
¾APB Long exit
Positive bar is much shorter than the previous bar or
changes to a negative bar at close.
¾ PAC Long exit
APB closes inside the channel.
¾ TDI Long exit = 
1. RSI PL crosses back below the TSL to the  downside. 
2. RSI PL > 68.
3. RSI PL crosses back below the upper Volatility  
Band to the upside.
E.A.S.Y. Method
Time to Exit the money train!
© Dean Malone, 2007
www.compassfx.com
¾ APB Short exit
Negative bar is much shorter than the previous bar or 
changes to a positive bar at close.
¾ PAC Short exit
APB closes inside the channel. 
¾ TDI Short exit
1. RSI PL crosses back over the TSL to the upside. 
2. RSI PL < 32.
3. RSI PL crosses back up over the lower Volatility Band.
E.A.S.Y. Method
Time to Exit the money train!
© Dean Malone, 2007
www.compassfx.com
E.A.S.Y. Trades
© Dean Malone, 2007
www.compassfx.com
E.A.S.Y. Method
GBP/USD 5-minute
Entry at 
1.8864
© Dean Malone, 2007
www.compassfx.com
E.A.S.Y. Method
GBP/USD 5-minute
High at 
1.8876
© Dean Malone, 2007
www.compassfx.com
E.A.S.Y. Method
GBP/USD 5-minute
Traders Dynamic Index > 68. 
Possible exit at 1.8871
© Dean Malone, 2007
www.compassfx.com
E.A.S.Y. Method
GBP/USD 5-minute
Exit at 
1.8868
© Dean Malone, 2007
www.compassfx.com
E.A.S.Y. Method
GBP/USD Daily – 7/27
Entry at 1.8588.   
Set Stop Loss at 
1.8403 at the   
Low PAC.
© Dean Malone, 2007
www.compassfx.com
E.A.S.Y. Method
GBP/USD Daily – 7/28
Not much 
movement today. 
Stop Loss set at 
1.8403 at the Low 
PAC.
© Dean Malone, 2007
www.compassfx.com
E.A.S.Y. Method
GBP/USD Daily – 7/31
Trade at 1.8676. 
Move Stop Loss 
to 1.8474 at the   
Low PAC.
© Dean Malone, 2007
www.compassfx.com
E.A.S.Y. Method
GBP/USD Daily – 8/1
Trade at 1.8763. 
Move Stop Loss 
to 1.8610 which is 
Low of the Day.
© Dean Malone, 2007
www.compassfx.com
E.A.S.Y. Method
GBP/USD Daily – 8/2
Trade at 1.8767. 
Move Stop Loss 
to 1.8659 which is 
Low of the Day.
© Dean Malone, 2007
www.compassfx.com
E.A.S.Y. Method
GBP/USD Daily – 8/3
Trade at 1.8877. 
Move Stop Loss 
to 1.8702 which is 
Low of the Day.
© Dean Malone, 2007
www.compassfx.com
E.A.S.Y. Method
GBP/USD Daily – 8/4
Trade at 1.9082. 
Move Stop Loss 
to 1.8763 which is 
Low of the Day.
© Dean Malone, 2007
www.compassfx.com
E.A.S.Y. Method
GBP/USD Daily – 8/7
Trade at 1.9066. 
Move Stop Loss 
to 1.8874 which is 
Low of the Day.
© Dean Malone, 2007
www.compassfx.com
E.A.S.Y. Method
GBP/USD Daily – 8/8
Trade at 1.9048. 
Move Stop Loss 
to 1.8974 which is 
Low of the Day.
© Dean Malone, 2007
www.compassfx.com
E.A.S.Y. Method
GBP/USD Daily – 8/9
Stopped out at 
1.8974.
386 pip trade
© Dean Malone, 2007
www.compassfx.com
© Dean Malone, 2007
www.compassfx.com
Kim Pingleton
Experienced Forex IB & 
Fund Manager 
Dean Malone
Experienced Trainer & 
Private Trader
Scott Maddin
Registered Futures Broker & 
Founder of Compass Financial
Who is CompassFX?
Including a Staff of Series 3 Brokers
© Dean Malone, 2007
www.compassfx.com
History of CompassFX 
1991 – Compass Financial, NFA registered futures firm, started.
2003 – Compass Foreign Exchange LLC (CompassFX) founded.
2004 – CompassFX establishes IB relationship with IFX Markets and
offers the ActForex platform with one-click multiple account   
trading designed for traders and fund managers.
2005 – CompassFX offers access to Forex Trade Oracle managed   
account program.
2006 – CompassFX establishes IB relationship with FXDD and
offers the MetaTrader 4.0 platform to clients.
© Dean Malone, 2007
www.compassfx.com
Forex broker with a trader’s perspective 
• Access to ActForex & MetaTrader 4.0 trading platforms
• Trade over 20 Currency Pairs 
• 2 pip spread - EUR/USD & USD/JPY 
• 3 pip spread - GBP/USD & USD/CHF 
• Leverage - 100:1 & 200:1 
• Mini Lot Accounts  
• One-click trading for multiple accounts 
• Trailing Stops, Hedging and Scaling-out 
• $500 minimum deposit 
© Dean Malone, 2007
www.compassfx.com
Forex broker with a trader’s perspective 
Free access to proprietary trading tools
• FXTradeTrend™ forecast  (Week, Day, Intraday)
• Daily Support/Resistance
• Daily Pivot Points 
• Trading Ratios 
• Weekly Analysis 
• Average Daily & Weekly Ranges
• Trend Continuation / Reversal Analysis
• Leverage & Stop-Loss Principles 
© Dean Malone, 2007
www.compassfx.com
Forex broker with a trader’s perspective 
• Online educational videos
• Basic & Advance trading strategies
• Forex pivot point calculator
• MetaTrader 4.0 Custom indicators
© Dean Malone, 2007
www.compassfx.com
Inside the Forex
¾ Money Management
• Margin
“Margin is only how much it costs you to place the trade.”
• Leverage
“Leverage is the equity in your account divided by the volume 
of the positions traded.”
• Consistency
“Stay in the game with Consistency, Discipline and Low Leverage.”
© Dean Malone, 2007
www.compassfx.com
Forex Managed 
Account
© Dean Malone, 2007
www.compassfx.com
Forex Trade Oracle
www.forextradeoracle.com
A Forex Managed Account program.
Provides investors who seek above average 
returns the ability to participate in the largest 
financial market in the world and increase 
portfolio diversification.
© Dean Malone, 2007
www.compassfx.com
Managed account program:
¾ Uses low leverage. 
¾ Trades market cycles.
¾ Follows a proprietary formula.
¾ No management fees. 
¾ Only an incentive fee on new profits!
Forex Trade Oracle
www.forextradeoracle.com
© Dean Malone, 2007
www.compassfx.com
Trade Results
¾ CompassFX 50K account
¾ CompassFX 10K account
Forex Trade Oracle
www.forextradeoracle.com
© Dean Malone, 2007
www.compassfx.com
¾ CompassFX 50K account
Forex Trade Oracle
www.forextradeoracle.com
Month $
Value
Monthly %
YTD %
August '06
$117,711
12.31%
135.42%
July '06
$104,976
35.41%
109.95%
June '06
$77,527
4.60%
55.05%
May '06
$74,118
13.03%
48.24%
April '06
$65,576
18.29%
31.15%
March '06
$55,436
-9.41%
10.87%
February '06
$61,192
-14.98%
22.38%
January '06
$71,975
36.52%
43.95%
December '05
$52,721
-18.56%
5.44%
November '05
$64,733
9.00%
29.47%
October '05
$59,388
13.44%
18.78%
September '05
$52,354
4.71%
4.71%
Monthly Average = 8.36%
© Dean Malone, 2007
www.compassfx.com
Forex Trade Oracle
www.forextradeoracle.com
CompassFX 50K Account*
* Results as of December 2006 
with no incentive fees taken out.
* Account opened 9/01/2005.
© Dean Malone, 2007
www.compassfx.com
CompassFX 10K Account*
Forex Trade Oracle
www.forextradeoracle.com
* Results as of December 2006 
with incentive fees taken out.
* Account opened 11/02/2005.
© Dean Malone, 2007
www.compassfx.com
Dean Malone
4X Los Angeles Group - HotComm
January 2007 
Thank you…
4X Los Angeles!
http://www.compassfx.com/comp/MT4_4XLA_110506.htm
© Dean Malone, 2007
www.compassfx.com