What is (3 Quadrants)3q method?

[forexintel]

BUY LOW|SELL HIGH – A simple strategy indeed. But it is often confused with LOWEST and HIGHEST. There are simply no LOWEST or HIGHEST as they are breached every time. With the right combination of Zigzag, Fibonacci retracements, Moving averages and Cycle lines, it is possible to identify the HIGH and LOW of the main trends and its sub trends. 3q method attempts to do the same.

INTRODUCTION
A trading strategy inspired by the principle of a Japanese Candlestick. A typical candlestick consists of a body and wick on either side of the body forming 3 distinct quadrants. (Fig1.) Here white candle is a BULL candle, where the closing price is above the opening price and the black candle is a BEAR candle, where the closing price is below the opening price.

FIG 1
The sameH4 candle when looked in a H1 chart looks like this. (Fig2.) We see that the white H4 candle consists of 2 black H1 candles and 2 white H1 candles. When we see the same candle from the M5

FIG 2
Chart, which is shown in fig3, we realize that, a single white H4 candle is made up of a combination of up and down M5 candles and are highly volatile. So, lower time frames are volatile but can give early entry.

FIG 3

BUY LOW|SELL HIGH
The principal trading strategy of 3q method is to BUY LOW and SELL HIGH. In other words, we should ideally buy when the prices are below the opening prices of a WHITE candle and sell when the prices are above the opening prices of a BLACK candle. How we do know if the current candle will be BLACK or WHITE?
We need to know 3 critical points to execute a profitable trade.
1. The HIGH for a SELL and the LOW for a BUY.
2. The start and end of a Price trend.
3. If possible, the right time of entry and exit.
1. ZIGZAG and FIBO:
Each candle is a cocktail of trends in itself in its lower time frames. The main trend also has many sub trends. But each candle has a HIGH and a LOW. To make it visually clear, Zigzag indicator is very useful (Fig 4.)

FIG 4
The right zigzag number would filter the small sub trends and capture only the relevant main trends depending on the time frame. In fig 4, you can see the HIGH and LOW of the H4 candle represented by a LOW and HIGH zigzag. Candles or trends of different time frames would require different zigzag numbers. But the zigzag can keep getting updated even after forming a LOW zigzag or a HIGH zigzag. Hence we need to use zigzag in combination with Fibonacci retracements to identify the potential support and resistance levels (Fig5.)

FIG 5
Each and every candle and hence, every trend has a mathematical proportion to its previous trend. Here you see that the prices are obeying those mathematical proportions based on the modified Fibonacci retracements. You can see how the prices obeyed the 3 quadrants of the Fibonacci retracements. But we still need to know the start of a trend.

2. MOVING AVERAGES:
Moving averages can be used to identify the start and end of a trend direction. (Fig6)

FIG 6
When the red moving average is above the black moving average it is a BUY and when the red moving average is below the black moving average, it is a SELL. It has to be observed on multiple timeframes to filter out sub trends.
For example, we have added the M15 equivalent of the moving averages in M5 chart (Fig7)

FIG 7
As we already know, we get an early entry when we look at the M5 moving averages. But when we look at the M15 equivalents, we realize that it is still a BUY trend.
Prices keep touching the moving averages once every few minutes or hours or days or months or years, depending on the timeframe. You can see from fig 7, how the prices keep touching, not only the M5 moving averages, but also the M15 equivalents. So looking at higher time frames, you can differentiate a retracement from a reversal. When the prices are away from the moving averages, the prices either move side wards to wait for the moving average or retrace back to meet the moving averages. (Fig8)

FIG 8

3. CYCLE LINES:
Let us use this tool to divide the H4 candle into 3 equal parts: (Fig9)

FIG 9
We see that the prices were moving side wards in the 1st quadrant of the vertical cycle line and in the 1st quadrant of the horizontal fibo retracement.
In the 2nd quadrant of the cycle line we get a clear signal for BUY when the red moving average locks above the black moving average. It is ideal for a BUY as the prices reversed in 1st quadrant of the Fibonacci retracement with the combination of a LOW zigzag, confirming BUY LOW.
The prices retrace to touch the moving averages and close above the HIGH of 2nd quadrant. The BUY order can be closed at end of this H4 candle or kept open if higher time frames indicate a continuation of the trend.
The reverse of this would be applicable for a SELL, a price movement from 3rd quadrant to 2nd and 1st quadrants, confirmed by the locking of the red moving average below the black moving average. But most importantly the HIGH should be confirmed by a combination of HIGH zigzag and a strong resistance level from the 3rd quadrant of Fibo retracements.

This is applicable in every time frame, every financial market!

We will see some examples of price movements on a weekly chart, which represents a year’s price movements. Some examples below, but with additional details.:

GOLD

DOW JONES INDEX

GBPJPY

S&P 500

SILVER

 

[trendie]

I would certainly give you much credit for putting a lot of thought into this methodology.
Have you had a chance to trade real-time, even if it's demo?

 

[forexintel]

I would certainly give you much credit for putting a lot of thought into this methodology.
Have you had a chance to trade real-time, even if it's demo?

Thank you. I've been trying different systems from 2008, but finally had to come up with my own system, as i was comfortable with buy low and sell high. Did back testing and demo and little bit of live trading with this. $300 to $4640 in 4months in demo account with 83% profit trades, displayed in webpage. Lots of confusion on legality of spot forex trading in India.

 

[forexintel]

Some of the set ups for the 1st quadrant of the week, which happens to be the 2nd quadrant of the month as you can see in the gbpjpy chart.

 

[forexintel]

Some of the set up for the 2nd quadrant of this week.

 

[forexintel]

Prices at the beginning of the 3rd quadrant of the week.

 

[forexintel]

Prices at the end of the 3rd quadrant. Read the method for more clarity. People have been attributing all kinds of news like greece, eurozone etc. Wonder what triggered a rise in euro? Is it the news or the prices themselves?

Watch GBPJPY range in this level and reverse.

 

[trendie]

The obvious next step is using these techniques to show which trades you took, and their outcome.
Nice charts. It takes me back to the days I too used MAs.

 

[forexintel]

The obvious next step is using these techniques to show which trades you took, and their outcome.
Nice charts. It takes me back to the days I too used MAs.

I am surprised how people get stuck on to MAs. No indicator can help on its own. Only a combination of indicators can help. For me it is the combination of MA, fibs, zz and time frames.

Can't open a live account. Will start a demo account for showing the trades. Thanks for the idea.

You can see my old demo account results

 

[forexintel]

I have posted my trade results in my webpage, i have explained in detail about order entry and exit strategies in week 2 preview video. In spite of that there were "popular" requests for showing trades.
So here i am posting trades from my demo account of $500 with the disclaimer that there is no guarantee that others will also get similar profit and loss levels. They can do worse than my P/L or even better than my P/L. Any one who practices with discipline, honesty and loyalty consistently, will surely learn the profitable ways. There are no shortcuts.
Fig 1 shows the SELL order entry price of 1571.61 at 15:15 on 24th May, marked by the white lines. The high ZZ started reversing after touching a fibo level. Used M15 instead of H1 for early entry.

FIG1​

Fig 2 shows order entry no.2 for SELL at 20:07 after a retracement. Neither M15 nor M5 had a SELL confirmation with yellow line below black line, but there was a reversal from the fibo level near a high ZZ.

FIG 2​

Retracements are normal, especially when MAs cross over. The thick white MA in H4 crossed below the black MA and the prices retraced. Since the prices are below the black and white MAs, i am looking for high ZZ for entering SELL. I'll enter BUY once the prices move above the black and white moving averages and if there is a low ZZ bouncing off a fibo level.
Remember, BUY LOW|SELL HIGH.

FIG 3​

Leverage, lot size and timely entry and exit are essential for maximizing profits. You can see from fig 3 that if the exit was not made at the right time, profits would have been seriously eroded.

 

[forexintel]

Order no.3 opening price and time shown in white line cross and closing price and time shown in red line cross (FIG1). When it crossed the high of 24th, was worried that it might go to the top fibo level of 1613 in H4, so took a loss of $36.

FIG 1

Order no.4 opening price and time shown in white line cross in FIG 2. Bit volatile, but ranging at fibo level confirmed potential sell and the prices were near a HIGH ZZ, as shown in H4. Believe that the prices will range at this level, rather than retrace up to meet the moving averages. Journey towards $1100!

FIG 2