Trend Cycle Entry

So many years away and now returning as a mature trader. I read a couple of my old posts/replies and realize the journey. In my time away, I developed various systems, turned charts into bowls of spaghetti and traded naked charts as well. I developed intricate indicators that use the same data every indicator uses - price and time. I failed, I learned, I failed, I learned. I stopped failing. After a period of success and at the request of friends, I jumped through all the government and financial regulatory hoops and founded an alternative investment firm - A CTA (Commodities Trading Advisor) firm. I used my, now proven method and made some rich people richer. I also hated the business. So I exited and returned to my home office, my sanctuary, and independent trading.

My method is not sophisticated. I use a few standard indicators with no customization. I have a few iron-clad rules and I follow them without fail. With this method, I do not trade everyday (I have others for intraday trading) but the method I will describe is what I used to build an incredible business and it is still my priority method for creating the majority of my income. I call it "Trend Cycle Entry".

The below chart is a Daily.
Indicators:

1. Heikin Ashi Candles
2. 15 period EMA (White)
3. 50 period SMA (Green)
4. Bollinger Bands - 20/2 (Blue)
5. StochasticRSI - Stochastic=10, K=3, D=3, RSI=13 (Lower Pane)

The trade is to wait until the 15 EMA crosses the 50 SMA. Once this happens, you are waiting for a reverse cycle (a retrace) in which the candles move to the opposite Bollinger Band and then disconnect from it. The 15 EMA needs to retain separation from the 50 SMA. The StochasticRSI also needs to be the opposite cycle of the preceding price action (above/below 80/20) - again, first cycle in unison with the price action. The trigger candle is the one that changes color from those of the retrace upon its close. The entry is on the open of the following candle.

Rules:

1. Only the first cycle after the cross is executed - 2nd and 3rd cycles are more risky
2. Price must intersect the BB
3. Price must disengage from the BB
4. Separation maintained by 15 EMA and 50 SMA
5. Candles must change from green to red / red to green
6. StochasticRSI must be in its first cycle above or below 80/20 OR crossing 80/20 in support of the trade direction.

The trade furthest to the Left (White arrow) on the chart is an example of a long trade entry:

1. 15 EMA crossed up over 50 SMA
2. Price retraced and intersected the BB
3. Price disengaged the BB
4. That candle remained green. The next candle closed red
5. Stochastic RSI below 20% and rising
6. Good MA separation

I entered at the open of the candle following the closed red candle. I ran a trailing stop that I tightened as the trade progressed. Closed for 528 pips. The other arrows are shorts.

I couple of the example trades occurred on the 2nd cycle of the StochasticRSI. This goes against the "first cycle" rule and is a slightly riskier trade. But I shown them as examples anyway.

I'm not in this forum every day but I will answer questions as they arise, when I am here. I do not have MT4 files for this. I use Trading View. I also use these standard indicators because, believe it or not, standard indicators are what most institutional professionals use. The simpler, the better. I don't use stops other than a trailing stop once the trade is in profit.

This method can be used on smaller timeframes. It becomes even more important to follow the rules, respect higher timeframe trends, and expect smaller runs that need to be managed more closely.

Enjoy!

Thanks!

What we need is an alert system or even backtesting arrows like you said and we will see how profitable it is.

You didn't say which tf do you trade? But I think its D1 right?

I have an alert set in Trading View that tells me when the 15 has crossed the 50. Sends me a text. I have other alerts that tell me when the candles have disengaged from the BB, HA color change, etc. These allow me to know what is going on without having to be in front of charts.

Profitability is a matter of trade exit. Each trade is unique so I determine the exit based on the conditions at the time. But for what it's worth, I have not had a losing trade with this method since I finalized my rule base and executed it - several years ago. Keep in mind, I don't use stops. Definitely not for everyone.

Daily is my TF of preference. But I have adopted it to shorter TFs for occasional day trading if there is nothing else to do (rare).

Thank you WickedDaddy. Subscribed.

WickedDaddy...Thank You!!!...Subsribed



Regards
Taha

Thank you for the system - subscribed. Always good to know when someone has used a method successfully.

Hi there,

your strategy seems interesting. I like the simplicity of it. I would like to use this on 4H TF, I hope I don't have to change any settings or anything else. I will let you know how everything goes.
Also you said you don't like to use stop loss, when will you like to get out of the trade if it is going against you? I know you said you have not lost a trade yet but I guess you will have a back up plan for a worse case scenario.

Thank you for giving back to the community, definitely helps people like us grinding.
By the way what's up with your name WickedDaddy haha sounds like porn actor's nickname...no offence yeah, just laughs

Thakri,

No changes need to be made for application to any timeframe, so 4HR will work fine. Make sure you pay attention to the higher timeframe trend. It's always best to trade with the wind at your back.

I do have a mental stop that I am comfortable with. It varies based on what is happening in the market. For example; if I have a trade running and some idiot politician says something to manipulate the market, I probably would not care. But if a sudden change to a country's financial position were to occur, I may get out of the trade (if it was going against me) to wait for things to settle down and a possible new direction to be established.

I also view my account as both my money and the market's money. Let's say I opened an account with $100,000. I will not let the account fall below that amount. That is my money. But a few wins increase the account to $110,000. $10,000 is the market's money and I so I set my mental stop within that range. As the account grows, I raise the amount that I consider "mine" and adjust my expectations, lot sizes, and trade aggressiveness accordingly. I am not a good loser. Many traders accept loss as a part of the business. I respect their ability to do so. But I also accept my inability to deal with losses in a positive way. So my only other alternative is to trade based on a method that I have proven to be effective, trade its rules without fail, and preserve "my" capital as it increases.

One of my kids gave me that name. I like building custom cars and motorcycles. Some years ago I had finished a motorcycle that I had painted with flames that had skulls in the flames, all on fire and laughing. My oldest daughter really liked it and said it was "wicked". My other daughter than said, that's because Dad is wicked... They laughed and said "You're a wicked daddy, Dad."

That's a good way to protect your money, I am a bad looser too and it makes me loose more haha I have to be on the winning side as soon as I can.

About higher time frame trend, how do you identify higher TF trend? Market Structure (HH, LL/HL, LH) or 4H TF Ema cross, go down to 1H TF and look for trading setup there? This is simple but at the same time a bit confusing because sometimes I find it stopping me from taking a trade thinking it might reverse on HTF. Any advice would be helpful.

Your name is a bit meaningful then. I am excited to know you like to build custom cars and bikes, I am guessing choppers. I love riding bikes but don't know anything about building them, it would be great to learn that. May one day when I became a trader like you, I will get into learning how to build bikes.

Thank you for replying WickedDaddy

Interesting combo of indies. Thank you!
SL/TP?

I don't use stops. I do occasionally use a trailing stop once the trade is sufficiently profitable. TP's are unique to each trade. In tight/ranging markets, I'll take small profits and the S/R levels, time of day, trade session, my bedtime, etc., determine my comfort. In well established trends, I'll mostly use a trailing stop but I also will arbitrarily decide "enough is enough" and get out so I can go have fun without thinking about trading.

I don't try to pick tops and bottoms. I'm not greedy. If I feel a trade has made enough money (whatever that is) I'll pull out. Yes, I leave money on the table often. That's fine. Profits are happiness and I don't need that many pips to live the way I want. Sometimes I nail the top and/or bottom and nail the reverse on exit. Those are fun. Sometimes I'll get in something that just refuses to move, I get impatient and pull out while it's profitable, even if by a couple pips. Then wait for a better situation.

I think of trading like a spider. Just sit quietly and let the food come to you.

The higher time frame trend is typically at least 4 times the chart you are focusing on. So, if you are on a 1 HR chart, look at the 4 HR chart for the dominate trend. I don't worry about any indicators on that HTF chart. I'm only interested in the overall direction of the market. If the 4HR chart shows that price is in a downward trend, then I am only looking for selling opportunities on my 1 HR chart. If trading a 4 HR chart, I will look at the 1D chart for trend direction.

The caveat:
I trade 1D timeframes mostly. I don't need to look at the weekly for reference, although I'll check it sometimes just for reference. Compressing the 1D chart will easily reveal the trend. You can always put a 50 or 100 MA on it if you like and trade according to that: if candles are above the MA, look for long trades. If candles are below the MA, look for short trades. I think you will notice that once price moves above or below a trend line, it tends to stay above or below it for at least a few cycles.

Trading longer timeframes also means allowing more room for the trade to breathe. Sure, you can make a a couple hundred pips in a trade on a 1D chart. But you will also need to get comfortable with 30 to 50 pips of movement either direction on it's way. For some, that is a test of their resolve.

Thank you again for a very clear explanation, I will work on this and post in future.
Cheers Mate

Thank you WickedDaddy. Subscribed.

Hello
Could someone who is analyzing this strategy share with me the template for MT4. I can't get the RSI to work, it's never above/below 80/20

There are not many pairs that RSI will break 20 /80. on Daily. Currently AJ shows a past break - haven't looked further yet. However, WD is not showing the RSI at all so ??? Let's wait and see what his response is. Looks like a very easy relaxed trade method though - I am about to look for a BB break alert etc.

A Buy setup ?

I believe he is using a stochrsi indicator, not a stoch + rsi. Search for a stochrsi and attach that.

Thank you for sharing.
But there are a few questions you need to explain in more detail.
1) Indicators
About 50 moving average mode, is it EMA, SMA, or others?
Stochasticrsi indicator, is it a special indicator or a standard indicator? If it is standard, how to set it on the chart?
2) Rules
Price must intersect the BB -- does the highest and lowest price of a candle intersect the boundary of BB? Or the opening price or the closing price?
Price must disengage from the BB -- it means that after the previous candle intersects, the next candle reversely separates from the boundary of BB?
Separation maintained by 15 EMA and 50 MA -- is there a quantitative standard for the distance between two moving averages?
Candles must change from green to red / red to green-- meaning intersecting candles and disengaging candles color change? Can you mark on the chart?
3）The trade furthest to the left (white arrow) on the chart is an example of a long trade entry -- "2.price retracted and intersected the BB.", But it doesn't feel intersected? " 4.That candle remained green. The next candle closed red."， It's not clear which candle you're pointing to.

Thanks。