Comprehensive Trading System/Methodology

[bbmac]

Nice 1min Re-entry into 5min trend @ 5min potential rbs, as shown in screenshots below; price is up some 30pips +from entry, and has just made a new HH in the 5min trend. Both 5min and 30min macd hists were above axis at time of entry, and the set-up came at a HL on both the 1min and 5min ie the chart it set-up on and the chart into whose trend a re-entry was sought, thus having the statistically highest probability of achieving a with trend follow thru (in this uptrend to a new HH.) and this has been borne out on this occassion with the HH.

G/L

 

[bbmac]

There follows an example of a Re-entry set-up that failed (after an intial 10+ pips gain) and the point of this post is to explain what I have already explained in the docs attached to post 1 (page 1) and the re-written (for purposes of clarity) docs attached to post 74 (page 10) of this thread, that outline the system/methodology discussed throughout the thread.

The 1min Re-entry set-up is posted below and the potential rbs on the next t/f (5min) is shown too, a previous swing hi [=previous resistance=potential rbs.]

The set-up came at a HL on both the chart it set-up on (1min) and the next t/f chart (5min) into whose uptrend + it was indicating a re-entry into after a pullback. it was within the average daily pip ranges of the instrument, and the macd histograms on 5min (intermediate t/f) and 30min (trend t/f) were above the axis...so why did it not go on to see a with uptrend follow thru to a new HH?

Before I outline in the next post why this was not a highest probability set-up when it appeared to have everything going for it, replicated below is an extract from the documents referred to above;

'..When a 1min (trigger) Re-entry set-up presents itself at a 5min (intermediate) SBR/RBS area but is opposed by a clear 5min and 30min Reversal set-ups that gave rise to the pullback, ….this may threaten the chances of success of this 1min (trigger) Re-entry set-up, …….the opposing 5min and 30min Reversal set-ups indicating that a deeper pullback may be more probable.

Any subsequent with trend trading opportunity following such a deeper pullback may present itself as a 1min (trigger) Reversal set-up with a 5min (intermediate) Re-entry set-up confirmation at an area of potential SBR/RBS identified on the trend t/f....'

 

[bbmac]

Following on from post above, now look at the clear 30min and 1hr reversal set-ups at the effective double top on 1hr.

Per the point made in post above there were clear reversal set-ups opposing the re-entry set-up, that extended to the 1hr chart above the 1min chart the Re-entry set-up appeared on...It did make an attempt to push back up after the retrace as you will see from the 1min set-up screenshopt above but ultimately failed to make a new HH.

Whilst the general rule of thuumb is to favour re-entry set-ups to trend, sometimes you have to be a little wary. the advantage though is that you can limit your risk as these set-ups can pinpoint accurately the absolote hi/lo of the swings that are being traded.

G/L

 

[bbmac]

The rest of the passage lifted from the docs contained in this thread and begun in post 242 above is repliacted below;

.....Similarly if a 5min (intermediate) Re-entry set-up co-existing as a 1min (trigger) Reversal set-up, is opposed by a clear 30min + (trend time frame) Reversal set-up...it may indicate an even deeper pullback/reversal in trend is probable. In this situation it is often better to await 1min (trigger) and 5min (intermediate) Reversal set-ups coexisting with a 30min Re-entry set-up to confirm, at any RBS/SBR zone that is most likely to exist on the next higher t/f up from the trend t/f.

The rule of thumb is be wary of a 1min (trigger) Re-entry set-up against a clear 5min+ Reversal set-up that gives rise to the pullback, and similarly be wary of an intermediate 5min Re-entry set-up (co-existing as a trigger 1min Reversal) against a 30min (trend time frame) + Reversal set-up that gave rise to the deeper pull back.
The old adage A trend is your friend till the end when it bends, applies. Of course if the trend really is your friend, you need to get out more often.'

 

[bbmac]

triple divergence eg

The screenshot below shows the potential rbs/supp zone that the 0923am gmt 1min Reversal type A with 5min Reversal type C presented at. You will also see from the chart that the 1hr t/f was effectively ranging at point of set-ups, similarly the 30min.

The second screenshot shows the 5min Rev C set-up, ...note the triple regular immediate [seperate valley] bullish osma divergence (first oscillator)

Double or triple regular immediate divergence is potentially stronger divergence. Remember that Dr. Alexander Elder (Come into my Trading Room, Trading for a Living etc..) reckons that the strongest signal in technical analysis is oscillator divergence, principly he says macd divergence.

 

[bbmac]

characteristics of a trend

Some time ago a poster on another board was bigging up the 62ema on the 1hr chart, look what happens everytime price touches it he said excitedly. Pulling up a 1hr chart on the instrument he was trading, price did indeed reverse there or thereabouts, after a pullback in the prevailing trend at the 62ema. Some time later on the same thread another poster bemoaned that he had tried this 'technique' and it had utterly failed him, and he had lost more pips than Gladys Knight.

The moral of the story is this; just because that instrument reversed at that moving average in that trend at that time doesn't mean to say that that same technique will produce a positive result when applied to another instrument, or another trend, or even the same instrument at a different time. The secondary lesson is that looking to get with trend at a moving average pullback is hardly the highest possible confluence of technical reasons to enter the market.

Trends have their own particular characteristics and it is useful to spot them on the trend sin the time frames you trade. Using the Re-entry set-ups of this trading system/methodology you maty notice that it is the Re-entry type 1 that is prevailing, first on the trigger chart (at intermediate potential sbr/rbs) then on the intermediate chart (with a trigger chart Reversal set-up,) at trend t/f potential sbr/rbs areas.

Each trend is different and this observation can be useful in anticipating a set-up. This said, whatever the characteristics of a particular trend, it is the confluence of the pre-identification of potential sbr/rbs on the time frame above the Re-entry set-up, and into whose trend (+) an entry is sought, that provides high probability trading opportunities to get 'with trend' after a pullback.

Speaking of trends, - On another thread on this board someone was asking how do we know when a retrace is not a complete reversal? my reply is replicated below;

In respect of tech analysis being useful in determining whether a retrace/pullback may turn into an absolute reversal, what may be useful is the following

1. How many time frames does the trend extend on?
2. What is the character of the trend in terms of it's pullback's are they historically deep or shallow?
3. What do you think was the strength of the support / resistance that gave rise to the puullback, what happened when/if price was last at this level?
4. Are there any technical conditions at the top/bottom of the trend prior to the pullback that may suggest a reversal or at least a deeper pullback, like oscillator extremes or divergence for eg?
5. Where is the broken support/resistance that may act as potential resistance/support now in a pullback, and is there any confluence there with fibs etc..?
6. Are there any technical conditions like hidden (reverse) divergence that suggest a re-entry to the trend at such a pre-identifies sbr/rbs area might be a good play?
7. What is price's relationship to to intraday/intraweek/intramonth pip range averages at the point of pullback?

and finally

8. Are there any specific fundamental factors driving the trend?

 

[bbmac]

Trend Re-entry after a pullback

Highest probability:

a. 1min Re-entry set-up ..... @ a 5min potential sbr/rbs zone into the 5min trend (+) [better when trend extends beyond] with macd hist above axis 5/30min- uptrend, below-downtrend.
b. 5min Re-entry set-up .....@ a 1hr (proxy for 30min trend t/f in respect of potential supp/res/sbr/rbs) potential sbr/rbs zone into the 5min trend (+) [better when trend extends beyond] with macd hist above axis 30m/1hr uptrend, below-downtrend. [1min Reversal set-up pinpointing entry]
c. 15min Re-entry set-up .....@ a 1hr potential sbr/rbs zone into the 1hr trend (+) [better when trend extends beyond] with macd hist above axis 1hr/4hr - uptrend, below-downtrend. [1 and 5min Reversal set-ups to help pinpoint entry.]

etc etc...

* Remember to read the guidance notes for Re-entering a trend after a pullback in Part III doc downloadable from post 74 (page 10) of this thread

 

[bbmac]

Decent example today of a trigger chart Re-entry (to trend) set-up (after a pullback) into an intermediate and trend time frame downtrend. The screenshots show the 1min Re-entry type 4 at the 5min potential sbr zone, that saw a with trend follow thru (to a slightly LL as I write this, +30pips.)

Note the Re-entry set-up set-up was at an immediate LH on both the 1min [trigger, on which it set-up] 5min [intermediate] and 30min [trend] time frames, thus posessing the greatest statistical probability over any sample of a successful outcome of this set-up. Note too that the macd histograms were below the axis at set-up on both 5min and 30min, the next 2 time frames up from the set-up time frame, [the 5min horixontal -pulled up by the retrace/pullback, but the 30min pointing down.]

and the potential sbr zone at which it set-up is shown below;

 

[bbmac]

The set-up above was succeeded by a very clear Reversal set-up on the 1min trigger chart, see screenshot below; There was no real 5min main chart supporting set-up but 1 and 5min small charts offered some confirming conditions...as for potential Support, some bids touted and an already breeched fib (61.8% 4465-5725) are the only factors I could identify.

I post it because it's a good example of it's set-up type, in terms of the indicator set-up/pattern;

 

[bbmac]

central components of this trading system/methodology

This trading system/methodology is based around 2 essential central components in technical analysis...Trend and Price Action.

Using a triple time frame approach in analysing price and identifying the conditions (range or trend) using overall price action (classic peak/valley analysis) on both the intermediate and trend time frames, enables us to make informed decisions about when best to seek to get 'with trend' after a pullback (ie when one exists!)

Identifying the potential Support/Resistance/Resistance becomes Support/Support becomes Resistance zones on both the intermediate and trend time frames by only looking at the main factors that are known can result in Supp/Res (centered around previous price swing hi/Lo's,) enables us to identify where;

a. price may retrace/pullback and potentially reverse a trend
b. price may continue 'with trend' following a pullback.

Consistent with the 2 central components of this trading system/methodology - the actual trigger for any entry to a market is price action (individual) and in the case of this system/methodology - at some acutely observed repeatable indicator patterns. (the indicator patterns are preferred tp help filter the noisier less reliable individual price action on such a potentially noisy trigger as the 1min time frame.)

Whatever time frames you decide upon, master the identification of trend and price action and you have the essential universal components of technical analysis, upon which you can build your trading edge.

 

[bbmac]

Example now of a Reversal Extreme ii set-up at the 1hr potential support zone shown in screenshot below....was looking for the 5min main chart supporting set-up to confirm at this 1hr potential supp zone- it was nearly a Reversal type A (reg bullish div in macd/cci, none in osma.) Good confirming conditions to 5min small chart.

High Probability Trading: Pre-identify the potential sbr/rbs/supp/res zones on trend and intermexdiate time frames, know what the trend is on those 2 time frames (if one exists) and whether that trend is co-existant or contra the longer time frame trend (s) above your own trend t/f, - then await the individual price action trigger within one of the indicator set-ups.

The set-up has seen a +30+ pip gain at time of writing.

The potential support zone is shown below;

 

[bbmac]

The first chart below shows how the 5min oscillators all gave a hidden divergence reading after a pullback resulting in price continuing with trend to make new LL's, [points a, b and c.] (I have taken all but price off the main chart windown so it is more easily visible)

Note though at point d, there was only hidden divergence in the macd and cci (2nd and 3rd oscillators) not the osma, although there was a 1min Trigger set-up, and if you look at the actual 5min main chart template it was therefore an imperfect Re-entry type 4.

The 1 Rev Extr trigger set-up is shown below, and the question is, What should you do at these situations??

Well the answer (particularly for inexperienced traders) is to stay flat, particularly as there was also no easily identifiable pot sbr on the trend t/f.

For the more experienced trader, you can see that the 1min set-up was a good one and indicating a 'with trend' trading opportunity, also the character of this particular 5min trend was for fairly sharp pullbacks making a LH just short of the last LH, as hasd been the case at points a,b, and c....30min trend t/f was trending down too, and 30min and 1hr macd hists were below axis,....so a potential trading opportunity still existed although at a lower overall probability than had the 5min chart supported with a perfectly formed re-entry set-up at clearly identifiable potential sbr. The set-up has seen +70pips max available at time of writing.

 

[bbmac]

Re post 251 above, another test of the proven 1hr support zone now, giving the set-up below, 5min set-up shown, entry pinpointed by a 1min Reversal Extreme

The 1hr proven support zone is shown again below;

Then a test of the intermediate time frame (5min) potential sbr zone and a 1min (trigger) Re-entry to trend opportunity at point a [Re-ent 3,] into the intermediate and trend time frames' down trend and resulting in a new LL -before- being followed by another Reversal set-up in the support zone, at point b (1min Rev C...also had a 5min Rev Aii seq to support again)

The 5min potential sbr zone at which the 1min re-entry set-up presented at is shown below;

 

[bbmac]

Re Posts above; Although I have pinpointed both with and against trend set-ups, and all have seen fair-excellent pip gains available the London/European session today extending out of the Asian/overnight session has seen a
downtrend 5min-1hr present. You can see the 30min Re-entry to trend set-up that appeared in that asian/overnight session on screenshot below

Other than answering any questions that may arise this is my last posting here for the week, and likely the year. Good Luck to all in their trading for rest of this year, and 2009, I hope you have a great New Year

Merry Xmas!!
YouTube - Dina Carroll - The Perfect Year

 

[babymush]

Hi BB

Is there anywhere you can suggest I can make an alert for OSMA and MACD divergences to alert when it happens?

Anyone interested in sharing the cost?

 

[bbmac]

Hi BB

Is there anywhere you can suggest I can make an alert for OSMA and MACD divergences to alert when it happens?

Anyone interested in sharing the cost?

Hi, I don't have such an alert and all attempts at creating oscillator divergence indicators/alerts I have seen haven't been of any use. Maybe one can be created, I don't really know. I suspect though that there is probably no substitute for just plain old manual identification of the divergence/extreme based set-ups

G/L with your search.

 

[babymush]

Thanks for advising. Still using manual identification but was looking if there are any alternatives But I guess as you said the manual way is still the best way.

 

[jeffsmith]

It is true that manual trading is good.

 

[babymush]

Would like to check as I see in your post #248 that potential SBR is at 1.4975 to 1.5010

Why is it that you did not enter at that area circled?

Thanks

 

[babymush]

BB,still dont really understand on the re entry setup. On the Bols... Should I wait till the 20 flip with the 10 or just when price touches the 10 or not even touching the 10 ... Don't really understand how Bols play a part in this way as it seems it can start a re entry setup at any point of time whether the Bols flip or not