The Vegas Tunnel 1 HR Method

The Vegas Tunnel Method:

Step 1.

• Create a 1 hour chart on whatever currency pairs interest you. Barcharts or candlesticks really make no difference. Overlay on this 3 things: 1) a 169 period [1 hour] ema [exponential moving average], 2) a 144 period [1 hour] ema, and finally 3) a 12 period [1hour] ema.
  
• 
  
• The 144 and 169 ema's create what I call the "tunnel". The 12 ema is an extremely valuable filter that you will want to have there all the time. I will talk more about this in the filter section.
  

Step 2.

• Memorize or write down and keep next to your trading screen the following fibonacci number sequence: 1,1,2,3,5,8,13,21,34,55,89,144,233,377. For trading purposes, the numbers of interest are 55, 89, 144, 233, and 377.
  

Step 3.

• Wait for the market to come into the area of the "tunnel". When it breaks ABOVE the upper tunnel boundary, you go long. When it breaks BELOW the lower tunnel boundary, you go short.
  

Step 4.

• Stops and reverse are placed on the other side of the tunnel.
  

Step 5.

• As the market trades in your direction, you take partial profits at the successive fib numbers respectively, with the final portion of your position left on until one of the following conditons occur: 1) market hits the last fib number [377 pips] from the ema's, or 2) the market eventually comes back to the tunnel and violates the other side.
  

Example:

GBP/USD is trading at 1.8500.

• The ema's are as follows: 144- 1.8494, 169- 1.8512.
  
• The market breaks 1.8494, and you sell at 1.8492.
  
• Your stop and reverse is now at 1.8512.
  
• Over the following hours, market starts to go down.
  
• 40 minutes after you put position on, cable is at 1.8440.
  
• You can use for computation purposes either tunnel boundary or the median of the tunnel.
  
• Ema's are still the same, so if you use the median, 55 from 1.8503 is 1.8448.
  
• You should have taken part of the position off at 1.8448.
  
• Market does nothing rest of day.
  
• Stop can be moved down to protect position or left alone at tunnel.
  
• You are now looking for price to be 89 pips away from the ema's.
  
• Since 55 was already passed, it no longer concerns us in this cycle.
  
• A couple of days later, cable is at 1.8300 and the median of ema's is 1.8410 [1.8400 - 1.8420]. You should be out of another portion of the position at 1.8321.
  
• Market bottoms here and in the next 2 hours, cable screams to 1.8535.
  
• Your remaining short position is covered at upper tunnel boundary of 1.8420, and you are now long from this point as well.
  
• Since you are long, you would now take partial profits at 1.8475 and 1.8509.
  

This is a fairly typical example.

If you were to just stick to this basic model, you account would grow very well over time. Las Vegas was built with far fewer percentages in the casino's favor.