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The Cableguy Mar 9, 2016 4:12am | Post# 1

Plan the Trade
 
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Someone else has already started a 'Trade the Plan' thread, so i have shortened my preferred title!

I am combining a couple of systems, so i will try to explain as i go along, rather than list all criteria here in the title.

I am basing my trading method on a style i learnt from a brilliant trader with the handle 'Divergence'. He selflessly shares this method on a thread under 'Trading Systems', so whereas, i wanted to start a thread, i thought i would list it under 'Traders Journals' instead.

I will include some Elliott Wave work within my own style.

Two of the main variants that i will be looking for are the following;

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Firstly a Cup & Handle or Head & Shoulders set up, which can be either as trend change or trend continuation (after a pullback). I think it is self explanatory.
The second is a pullback within trend, followed by a 123 or a flagline, (but preferably both). The 123 can be used as entry back into trend. Looking for divergence in both instances will be important. Regular together with the first and Hidden divergence for trend continuation.

1) Determine a trend (HH/HL or LL/LH's)
2) Wait for a pullback
3) Enter back into main trend with a 123
4) Manage trade

The Cableguy Mar 9, 2016 4:34am | Post# 2

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I'm going to run through a few set-up examples to show how it works in practice. Plan the trade - Trade the plan;

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As above, but (obviously) in reverse.
Negative Divergence, followed by the last HL taken out in one direct channel, then a shallow pullback to form a flag off of a 123. Trigger is a break of point 2 by a full pip.


I say 'in one direct channel' (Wave A), because this is important. If it pulls back in a 3 wave sequence it is likely to be merely a pullback within trend already completed.

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The Cableguy Mar 9, 2016 4:39am | Post# 3

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Just a pointer about Divergences. Regular Divergence is always over-ruled by Hidden Divergence and is something that must be looked for. Sometimes (by going peak to peak), it takes 2/3 bouts of Reg Div before it leads to more significant trend change. The point where we get a fresh High/Low is where Hidden Div can no longer form.

Here's an example;

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The Cableguy Mar 9, 2016 5:05am | Post# 4

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I mentioned combining a couple of methods. I use Elliott Wave combined with Fib levels to confirm likely counts. If i can determine my likely preferred plan in advance, on a longer time scale, i can then drop to smaller timeframes to look for set-ups (pullbacks) within the overall plan to make the most of it.

Dow weekly (04-11-15);

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and recent (05-03-16);

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EU50STX 15min (29-02-16), here we have an abc pullback, Wave 'C' is always in 5 subwaves. subwave 'v' of 'C' was extended and was exactly 100% of waves 0-3, in itself an abcde expanding diagonal;

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and later;

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The Cableguy Mar 9, 2016 5:11am | Post# 5

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Looking for common Fib levels between wave counts.

Dax 1min chart (29-02-16), with a corrective abc move - wave 'C' was exactly 161.8% of wave 'A';

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The Cableguy Mar 9, 2016 5:28am | Post# 6

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On the FTSE chart from a month ago, the daily looked like this;

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To me, it looked as though a cycle was complete with an abcde expanding diagonal. Just to confuse things, the market likes to disguise a further reaction off of the top channel line, but it wasn't fooling me. I expected a pullback and subsequent break out (as per chart).

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On the hourly, at the time of the first chart, i identified a possible top of 5w cycle, with wave 5 being exactly 61.8% of prior wave 3, this is 1 of the 3 most popular levels for a 5th wave to end;

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So i indicated a 3w corrective move to follow, but of course, i do not know whether this will be sharp, shallow, irregular, complex, simple etc.

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What we actually got was an irregular move, (with wave 'B' making a fresh high). My evidence was that wave 'C' was exactly 161.8% of wave 'A'

The Cableguy Mar 9, 2016 5:45am | Post# 7

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One of my favourite combinations for a set-up is a simple abc move where we have a zigzag and wave 'c' is 100% of wave 'a, within parallel lines (Flag);

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Look for the 123 to occur. Aggressive stop is above point 3.

The Cableguy Mar 9, 2016 5:51am | Post# 8

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I do not claim to be a hotshot trader. I make mistakes all of the time. This is not a $1k to $10k in a month thread. Simply sharing and recording what works and what doesn't, but imo, the simplest method is too determine a trend by HH/HL (or LL/LH) combo's, look for a pullback and join the trend.

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The Cableguy Mar 9, 2016 6:10am | Post# 9

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EurGbp weekly;

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Complex move with Y = 123.6% of wave W and reaction at lower trendline.

The Cableguy Mar 9, 2016 6:20am | Post# 10

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Now the move up from the low on the daily, (inc abcde ending diagonal);

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The Cableguy Mar 9, 2016 6:21am | Post# 11

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and now the current plan on the 4hr;

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The Cableguy Mar 9, 2016 6:49am | Post# 12

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Last night charts of Dax 1hr and S&P 2hr;

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The Cableguy Mar 9, 2016 12:17pm | Post# 13

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It's been a funny ole day. I committed the cardinal sin of going out and leaving a position, with only a stop in place. I did not have a set limit in mind. It was slightly underwater when i had to go out and i figured i would be back in time to deal with it... i wasn't, it was a winner, but i was delayed and came back to see it stopped out.

Anyway, i caught the Dow earlier. I will not attempt to label it's recent hourly moves, but the chop suggests naturally a complex move and thus i switch for looking at series of 3w moves. If an obvious fib relationship occurs between waves 'A' & 'C', it is likely to reverse;

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Here the two waves are equal to each other and PA reversed hard, once the last HL was taken out it was good to go.

The Cableguy Mar 9, 2016 12:24pm | Post# 14

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The UsdCad has provided some nice trending action recently, here i traded the simplest plan, pullback, 123, back to trend;

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The second set-up in the chart was most likely going to lead to Pos divergence, thus R:R only 1:1

The Cableguy Mar 9, 2016 12:46pm | Post# 15

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Earlier i posted a previous set-up on the EU50STX;

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an abc pullback where within 'c' wave (v) was equal to waves '0'-'iii'

Now compare to the Dow a little earlier;

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The 'C' wave was a 5w move with crossover, thus an ending diagonal and again the final move (wave 'v') was exactly 100% of 'a-c'

The Cableguy Mar 9, 2016 1:12pm | Post# 16

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I find that 123's are best used when you are expecting them to occur, thus they become the excuse to take the trade and provide the stop placement.
Another place to expect them is at double tops or bottom's. This is from the FTSE earlier, although i missed it at the time;

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The Cableguy Mar 9, 2016 1:25pm | Post# 17

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So basically we are talking about patterns that repeat themselves time and time again on all charts. It's simply a case of deciphering them.
The 123 gives you the chance to do any EW counts and prove/disprove the prior corrective move. The 123 should also preferably break out of any channel line created by either the entire corrective move, or at least the final wave (C);

Here are a couple of charts from the 15sec Dax. See the similarity to the above DOW&EU50 charts;

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HH/HL combo, abc corrective wave, then 123 and back to trend.

Same index and timescale a little later, see what happens again;

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The Cableguy Mar 9, 2016 1:52pm | Post# 18

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Dow, wave 5 was equal to wave 3 (within 'C')

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Stoploss at +1

The Cableguy Mar 9, 2016 2:15pm | Post# 19

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Closed +50;

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The Cableguy Mar 10, 2016 6:59am | Post# 20

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UsdCad; easiest to spot 5th waves - ending diagonals (contracting);

3 common targets for end of 5th wave;

a) 61.8% of waves 0-3
b) 61.8% of wave 3
c) 100% of wave 1 (usually if wave 3 was extended);

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Update;

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The Cableguy Mar 10, 2016 7:40am | Post# 21

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Here's a couple variations of the C&H set-up that i have observed;

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If PA extends before a pullback when the LL (or HH for longs) is created, expect the prior peak to become resistance (or support for longs)
If the bowl or cup has a spike within it, this often becomes the S/R level itself (as in RHS lower illustration).

I missed this earlier on the EurJpy;

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It appears quite common that the handle of the larger bowl, is a smaller replica of what came before.

In all honesty, i am certain that if i had traded the first larger set-up, i would have been stopped out on the second retest.

The Cableguy Mar 10, 2016 7:48am | Post# 22

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5min UsdCad;

An expanding (leading) diagonal? Being 5-3-5-3-5, it is the most likely. If so could we be close to risk off again on the markets? This conflicts with my original thoughts.

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The Cableguy Mar 10, 2016 8:09am | Post# 23

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Update from yesterday, Dax plan 1hr;

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current;

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Personally, i now think it is most likely to be the ABC route.

The Cableguy Mar 10, 2016 8:51am | Post# 24

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Yesterday i posted a favored H&S outcome for the EurGbp.

The 4hr;

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What i didn't show was that on the 1hr chart we can break down our B wave into simple abc move where 'c' = 'a';

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Well, that ended a lot sooner than i expected, no damage done, but no real gain to speak of either.

Have to put that one down to 'the Draghi effect'

The Cableguy Mar 10, 2016 10:45am | Post# 25

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Knowing where to run your fibs from is key. The Dow has been rather obliging again this afternoon;

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5w down, pullback in abc, C always in 5w.
B was a wedge, thus C starts further up then the lowest point of pullback.
C = 161.8% of A

The Cableguy Mar 10, 2016 11:01am | Post# 26

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EurGbp 1min

After this afternoons debacle with Mr.Draghi dragging the euro northbound, the EurGbp behaved well according to EW & fib rules;

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Wave 4 retracing 38.2% of wave 3 is standard procedure. Knowing this we can trade accordingly to the longside expecting a fresh HH

The Cableguy Mar 10, 2016 11:38am | Post# 27

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GbpJpy 1hr

This one had me a little unsure the last two days. I had already noted that we had a great fib relationship between the prior waves, but i did not know if it was ABC against the current downtrend or whether we have printed waves 12&3 of a 5w cycle, (the fib relationships are the same for both sets).

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Wave 2 retraced 61.8% of wave 1
Wave 3 was exactly 161.8% of wave 1

Unfortunately wave 4 did not retrace the standard 38.2% of wave 3. It went deeper. This meant i really couldn't call it. Now we have a fresh high we can look at some possible reversal levels for end of cycle. The obvious ones are in the chart and all point to 16,336.

Well, it is only a guide, but whenever the fibs line up all the same, it should act like a magnet. Lets see. Current action isn't too clear on smaller timescales and a break of 16,100 (ish) would have me thinking the top is already in. Likewise we might still be in a more complex WXY move, so we might have a lot higher to go yet. That's why we don't just take a trade off of a line, we look for a 123 to occur at a reaction point first...

The Cableguy Mar 10, 2016 11:47am | Post# 28

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You know? I was writing the above and thinking to myself, CG, why haven't you checked the pullback of your supposed 4th wave against the overall rise?!

Ok so here it is;

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The pullback was exactly 38.2% of the entire rise, thus i expect it to be in sets of 3 (a WXY complex) move (as per chart). Nothing set in stone, but will now look to get long if possibility presents itself with low risk

The Cableguy Mar 10, 2016 12:48pm | Post# 29

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Dow again, once we get a pullback that is an exact fib relationship of prior 5w, we are good to go again. As i stated previously, knowing where to work your fibs from is key;

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The Cableguy Mar 10, 2016 3:24pm | Post# 30

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This reminds me;

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It's time for a brew!

(missed this, but can't be everywhere all the time!)

The Cableguy Mar 11, 2016 4:08am | Post# 31

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I can not help but to view the huge falls on all indice's yesterday as abc corrective (as opposed to 5w impulse) moves.

Here is the French PXI as a great example;

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Looks like C was 150% of A. We might be in an X wave though with another set down to follow. I haven't got into study mode yet today!

Story so far;

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The Cableguy Mar 11, 2016 5:06am | Post# 32

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Determined this move last night, but i'm GMT+2, thus it was time to turn charts off. Shame though cos it was again pip perfect to the turn with wave 'v' ('c'of'A') being 61.8% of waves 0-'iii' in an abcde ending expanding diagonal;

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I posted a longer term chart yesterday, stating i want to get long for the big C wave (of Y) to follow. The PA here suggests to me that this is abc of 'b' of 'B' as opposed to a 5w 'C' (of 'Y'), thus maybe this scenario;

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A HH will prob have me thinking otherwise, but would be nice if it continues it's nice conformity, as we can max out longs if the above presents itself.

The Cableguy Mar 11, 2016 7:40am | Post# 33

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Watching a couple of things presently.

The EurGbp appears to have completed an ABC retrace at 50% of previous 5w move. If so, here's a couple of charts, suggesting we head back north;

The 5min;

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This shows, the retrace of 50% and a possible count, but it is a little vague to be fair.

Going down to the 1min;

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It's also possible that the 5th wave of C had it's own 5 subwave count with wave 'v' being 100% of wave 'i'

friska Mar 11, 2016 7:54am | Post# 34

wow nice stuff here!
awesome analysis..
keep it up.
subscribed!

The Cableguy Mar 11, 2016 8:00am | Post# 35

wow nice stuff here! awesome analysis.. keep it up. subscribed!
Hi Friska & welcome!

ozziedave Mar 11, 2016 8:06am | Post# 36

Hi Cableguy

Very nice thread as you have combined Elliott wave with the 123 entries.

I am a novice at Elliott wave and like the way you apply Elliot wave to your trading. Are you self taught and who, if anyone, would you recommend taking a look at to learn more about Elliott wave.

The Cableguy Mar 11, 2016 8:18am | Post# 37

Hi Cableguy Very nice thread as you have combined Elliott wave with the 123 entries. I am a novice at Elliott wave and like the way you apply Elliot wave to your trading. Are you self taught and who, if anyone, would you recommend taking a look at to learn more about Elliott wave.

Hi ozziedave & welcome.

I can recommend Ramki's 'Five waves to financial freedom', not sure if there is a hardback copy, but it's worth the few $'s off of Amazon. That will open the door to adding fib's.

Beyond that i am mostly self taught, with basically thousands of hours of study. I went through a long period of time, being able to identify and label cycles or moves, but without being profitable, as there are also lots of psychological and mental aspects of trading to overcome too.

Combining the twin aspects of EW for overall plan and then switching to pullback within trend (123 & C&H/H&S with divergence) on smaller timescales has been the key. I also spent many thousands of hours learning a flag trading (pullback) system (as mentioned in header).

Everyone must find what works for them. I have developed into a short term trader. I can not stand seeing profit disappear back in a corrective wave, even if the overall target is far beyond where PA is within a trade, thus i like to find a 123 on a small timescale after a pullback and jump in hopefully with quick results.

Unfortunately with this approach, i often find trades or predicted plans that work out overall, but give no easy to identify trades in between! It's frustrating, but part of the discipline req'd to make money!

The Cableguy Mar 11, 2016 8:43am | Post# 38

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I mentioned a couple things that i was watching this afternoon. Both have a common theme - Gbp weakness.

Above i have charts of long bias to EurGbp and this from earlier, the GbpJpy (obviously short bias);

Reminder of the the 1hr;

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Now here lies the problem with EW. If it is correct then all well and good, but we might be in the middle of a fresh 5w move long instead.
Personally, i like the look and labelling of todays action as this;

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It creates a double top coinciding with an ending diagonal wave 5 being 100% of wave 1 (common when wave 3 is extended), (within 'C')- thus waves A&B overall in a flat 3-3-5 corrective with 'C' to come short. Therefore i have a rather large red arrow in my chart... however, we must be mindful, that if wrong, we may have just laballed ABC instead of 123 and could be in a 4th wave right now, thus the downside will be short lived. This is why i like to switch to short time scales and try to trade pullbacks instead.

Too often i used to do the overall plan, watch it go into profit, only for it to morph into something else!

Sorry, if that all sounded too complex with 'c' this and 'b' that, but happy to break it down further if asked!

The Cableguy Mar 11, 2016 8:47am | Post# 39

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Incidentally, current chart of above;

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The Cableguy Mar 11, 2016 9:57am | Post# 40

And so, my fears were well founded! That didn't go very well. Despite all that i wrote above, about discipline, i was determined to hold the short trade. I found that i couldn't and banked an initial 30 pips on the GbpJpy, only to give back 20 of those in a couple of bad trades.

I also oversaw a 23 pip gain on the EurGbp turn into a +1 stop out. That's pretty poor going to be fair. My daily total was available only for me to waste it away.
There is an ongoing discussion elsewhere about daily targets being a good or bad thing. Some traders like to hold for the big wins and will forego a similar situation to mine this afternoon, taking several +1's or even small losses to hit the few +30's/40's etc. I tried that today and it didn't go to plan.

I do not think that is the answer for me. Again, it brings me back to my desire to trade trends and be in and out. Although, the problem with the GbpJpy set-up was indeed that it risked being merely a pullback itself (probable 4th wave) ,rather than a much bigger move.

Annoyed with myself, but hey ho, still +11 for the day, at least not a loss and the day isn't over, plenty of time to give those back yet! )


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