Crosses, bounces and curve fitted indicators

Heard it said that "there's no right and wrong way to trade only results" so, with that I'd like to add my contribution to the endless tally of "Trading Systems" that abound on this forum.
I've been around several threads tried different approaches of mine and have settled for this particular one.
You may recognize some concepts from some other threads but like a sponge I've taken as much with me as I possibly can and I'm squeezing the sponge to let out what I've learnt. (I'm still learning).

Pardon that lengthy preamble, now the intro....

The most commonly used indicator yes, that word that virtually all newbies love and some seasoned veterans hate which we all none the less can't do without -talking about indicators.
IMHO is the Moving Average(MA), moving averages mainly used to determine the TREND are mostly traded with crosses that is price cross or dual or triple MA cross, so we will incorporate MA's in this our approach.

Most seasoned traders will tell you to aspire to trade pure PRICE ACTION (PA) and by and by that is attainable, but at this level, my view of PA is where has price gotten to, is price being rejected at which levels and where is S&R?

A great concept in trading is confluence and where you have a confluence of parameters or entry criteria there is "high probability" so Ilike to combine my crosses with bounces for high probability trades.

Now let's talk about the trend, we won't flog HH & HL for uptrend and LL & LH for down trend, that is just babypips stuff, instead, we will look at some of the tools for measuring the trend and I prefer the MA and The Bollinger Bands (BB)

I had to pause my trading approach when I came across this piece and have been tweaking and tweaking (cant say when the tweaking will end).
http://www.forexfactory.com/showthre...25#post3418325

Let me catch my breath.
Cya soon!


You may want to skip the commentaries and dig right into the action, the by-pass is here.

http://www.forexfactory.com/showthre...07#post6423907

CURVE FITTING THE MA

After reading that piece by crucial point, I was like "why didn't someone tell me that was the right approach?"

So I did the maths ad came up with these figures.



The results are in the attached Excel sheet

For those who cannot download the excel file I'd repeat the info here.

INTRADAY

Basic MA Long Term S&R 3 Day MA 1/8 MA 1/4 MA 1/3 MA

Time Frame (Basic x 3) (Basic/8) (Basic/4) (Basic/3)

H1 24 200 72 3 6 8
M30 48 400 144 6 12 16
M15 96 800 288 12 24 32
M5 288 2400 864 36 72 96
M1 1440 12000 4320 180 360 480
H4 * 200
D1 * 200
W1 52 200
MN 12 200

* Count the number of bars on your MT4 chart because they vary between brokers depending on whether the close at NY close or 12pm GMT

Sorry about the mumbo jumbo just download the excel sheet and print, ny typing was perfect but web publishing is another kettle of fish

IT'S ABOUT THAT TIME

In my newbie days I'd have been screaming at this guy "show me some visuals"

Here goes

And some more

If you use values according to the principles CP wrote, how did you come up with a 200MA on H1?

THE BEAUTY OF CURVE FITTED MA'S


Moving averages have a basic draw back -they are lagging like all indicators they only report what price has done not tell you what price will do, your job is to speculate what price will do next after seeing what it has done in the past.

When you curve fit MA's you create the effect of unison across time frames, by this I mean all your time frames align.

For instance when price closes above 288EMA in M5 and that move is sustained, price will also close above 96EMA in M15 in the same price bar or candle same for M30 and H1.

There you have it you could trade off of Curve fitted MA's as shown in the previous screenshots without any other indicators just following the trend and respecting the Long Term S&R.

All you'd do is just trade the bounces off the Basic MA's in the direction of the Long Term S&R.

Howdy Ralome

My sincere apologies, the excel sheet made a better showing of the message I tried to pass across.

Time Frame Basic MA Long Term S&R 3Day MA


H1 24 200 72


200 MA means 200 period moving average, and it is calculated by taking the price of the past 200 bars on the current chart and finding the average.

I've not yet unraveled how the sages chose and stuck with 200 as Long term Support and Resistance but the convention is that it is well respected.

So for M30 you simply double all you have in H1 and same for M15 but for M5, you triple M15 values to give you M5 values.

For M1, multiply M5 values by 5 and you will have the proper figures.

If you can download and print or save the excel file it would save you that effort.

Let me know if you have any further questions.

[quote=Intrepidpips;6346211]Howdy Ralome

My sincere apologies, the excel sheet made a better showing of the message I tried to pass across.

Time Frame Basic MA Long Term S&R 3Day MA


H1 24 200 72


The mumbo jumbo again.

Time Frame HI Basic MA 24MA Long term S&R 200MA 3Day MA 72MA

"WHAT IS THIS GUY REALLY SAYING?"


Just hang on in there, I'm trying to lay a foundation so we can have confidence in this approach. we've only just looked at moving averages, we'd talk more about the trend and the other tool of choice for following the trend.

I talked about trading off the bounces off the Basic MA's in the direction of the LT S&R

let's examine some other bounces.

BOUNCE BOUNCE BOUNCE


Looking through price charts all you'd see is a story of bounce, bounce, bounce, price is always bouncing off some level or the other like a ping pong game or some computer game.

As a speculator your job is to note those levels that price most often moves to like the ball leaving the bat to the table and bouncing off towards the opponent.

Why does price behave like that? why do some levels attract and alternately repel price?

Some have said Supply and Demand backed by underlying factor of VALUE.

The more value you perceive in an asset the higher the price you are willing to pay for it but the lower the supply the higher the price is pushed up through competition. As your resources gets exhausted the less you buy and the price ultimately recedes.

I'm not an economics major just my understanding of the interplay of dd and ss

BOUNCES AND LEVELS

These levels create what we call SUPPORT AND RESISTANCE (S&R)

Where price has been rising and rising and finds exhaustion, it meets resistance, on the other hand when price falls and falls and bases it finds support.

There are several indicators out there that draw S&R lines but the best is the MOVING AVERAGE and it measures dynamic S&R.

When price bounces off a MA upward price has found Support and vice verse.

We observe support becoming Resistance and the same same for MA's

That's my point. I guess it comes from stock trading, where it made/makes more sense on the daily chart. 200 days = 40 weeks = (sort of) 10 months. But 200 hours? Although it is very close to 24 x 8 = 192 hours. But why 8 days then?

PRICE LEVELS BOUNCES

Price bounces off certain levels that we refer to as ROUND NUMBERS and MID FIGURES or Round Numbers and Big Round Numbers. (Whatever suits you)

The most recent BIG ROUND NUMBER (BRN) for the EURUSD pair is 1.31000 and the previous one was 1.30000.

You can see that price found support at 1.30000 and bounced up.

The most recent MID FIGURE or ROUND NUMBER (RN) is 1.30500 yesterday 7th January 2013 it acted as both S&R until it finally became Support for a bounce up during the NY session.

The attached screenshot shows areas where MA's and RN & BRN's have acted as support and resistance and price bounced or changed direction.

Thanks for the insight, I'd chew on it a while.

MORE BOUNCES

AVERAGE DAILY, WEEKLY AND MID WEEKLY RANGE BOUNCES

Quite frequently price rotates in ranges (a bit) like it's doing now in the EURUSD pair.

The range is just the difference between the High and low of the period.

More on this.

MORE ON AVERAGE RANGES


Price moves in cycles, upwards, downwards and sideways as dictated by the forces of demand and supply and within these cycles you find ranges between -Hours, 4 Hours, Days, Week, Mid week and monthly.

Within these highs and lows you'd find mid points and price bounces off these mid points and highs and lows.

MORE BOUNCES

One other tool for measuring the trend are PRICE CHANNELS and ENVELOPES/BANDS.

I've come to love the BOLLINGER BANDS and the added advantage of using BB is apart from the Simple Moving Average (SMA) the envelopes contracting give an early warning of trend change allowing you to take counter trend trades you also find quick opportunities to profit from bounces off the bands.


See below.

FAST FORWARD

By now we've covered all the bounces (are there pivot point bounces? I've not checked that out but I'm content with these few).

We will talk about Curve fitting because i introduced the BB but didn't say which settings i chose then later we will talk about crosses then dig in to attack the markets.

For this approach I prefer a combination of the Long Term S&R, 3Day and 1/3MA settings for curve fitting on the Intraday time frames

The 1/3MA is set to Exponential MA and Shift 2 with BB of the same value except that classic BB is set to SMA

I do have a modified BB from Trading it .com which has options of different MA's but by and by I'd evaluate the deference and critical advantages.

My choice comes as a result of tweaking and tweaking, try some combinations yourself and let's share your findings.

Here goes.