Natural logarithm

I was reading my math book (applied calculus) when I got the idea that what if Natural logarithm works in the financial markets. We all know that currency pairs and all other financial instruments at least have some supply and demand where fibo levels are.

Well then I started to study the natural logarithm(e=2.272) and also added e^2 which is 7.389, but because it it so large number I moved the point by one to the left(0.739). Because I tried to find some information about it related to trading but found nothing I just had to brainstorm and test whatever came to my mind. I found out quite quickly that if fibo retrace drawn from last swing before turning point, it can predict the swing length pretty accurate. Of course if it is in a powerful trend, price can brake the 2.272 zone and continue lower, but it usually finds some balance before it does, so one is able to draw a new retracement to indicate the length.

I've only traded it with low timeframes and mostly with DAX and EUR/USD. I've had some real success with this and hope that some of you could share your take on natural logarithm and maybe have some ideas come up from my trading strategy.

https://www.tradingview.com/x/jRnvSDT7/
Here was the most recent trade from DAX. I use 0.272 line to get a confirmed entry signal and keep my hard SL under the last swing low. This provides a nice RR with pretty high win rate.

The thing here is to find the last completed "cycle" and try to find a move where to draw the retracement from. One need to take price action into account here. If the price rallies or drops to the 2.272 line its maybe better to wait for weakness or try to trade with the latest swing. Those other lines between 0.272 and 2.272 is just to help me move my SL when the trade moves towards the 2.272 area.

https://www.tradingview.com/x/ScyFyvAY/
Here is one example from EU 1D. I've developed a 'feel' where to drawn the fibo from, but the basic line is that it needs to be the last swing before turning and if there's pullbacks in the swing it is probably safer to use the pullback high/low as one point in the retracement.

https://www.tradingview.com/x/JjNfY4QC/
Here are some trades I ended up taking today. The last retracement drawn wasn't too clear so I ended up closing my position before price reached the 2.272 area. When price came to 1.739 area it formed a small head and shoulder and I decided to close the position when price came to test that 1.739 zone.


I hope you even understand something I'm trying to say here!
Please ask anything and I try to post more trades here and explain my thinking behind the trades.
Also, I really would like to hear if someone else is using natural logarithm in their trading.

I try to post them as pictures so you can see them without having to use the link when I get back home.

Math is powerful.
when you find logic behind the move... rest is easy.

like yours approach not using "standard" indicator, you are IMHO on the right track.

good luck

pro7

keep up the good work, you have very interested follower's

Thanks prozor and lambo for your replies, appreciate it!

Yep math definitely is! I also think that price action is a crucial element in trading using the TA. When you listen to any successful trades on podcasts or anywhere they always have the same thing to say about trading which is price action. They always talk about how they might have indicators on their chart, but they still always take the trades because of the price action and not the indicators. The indicator is only to confirm the entry and for me the fibo retrace has worked really well.

And there's so much more behind my trading than just the fibo retrace. It is only on the chart to inform me of possible turning points but really I look at the price action to confirm those moves and never enter a trade blindly just using the retracement.

Jumped straight out of the subject, lol, but anyway here's just some thoughts on trading that I have.

https://www.forexfactory.com/thread/...5-701db94008c1
Here's to most recent retracement drawn from EU. I tried to illustrate with trendlines why I drew the retracement at just that point. Here price took a big bounce up from the 1.739 area and even broke 1.272 area before returning to the zone. If I would have been on a trade here I would have been definitely looking for an exit on the 1.739 area.

Also I circled the entry on the 0.272 line. It is important to wait for the price to show some kind of reaction to that zone. Sometimes it will get you in to the trade closer to the middle of .272 and .739 but still have a great RR.

Here's a good example of a 2.272 area that didn't hold which was easily predicted because of the swing drop from .272 to 2.272 without any relatively big pullbacks. One could have drawn a retracement to anticipate a turning point at the 2.272 area but wouldn't have been valid trade because price didn't respect the .272 area at all from the upside(second chart). But even tho the second retracement also had swing down without any big pullbacks it was relatively short the the previous swing and that would have been a valid place to draw a new retracement and anticipate a move in the other direction.

Right know DAX is untradeable. It came all the way down to the 2.272 area but didn't give any pullback to draw a new retracement from(1st. pic). I had to zoom out to H4 chart to find a more clear direction of the price. Let's see if the price will reach the 2.272 area.

DAX tends to form bottoms with W shaped price action where the right v is lower and this could end up being one on a higher time frame.

@dkrock

I don't know where your reply went, but I totally agree with you that trading blindly using fibonacci or anything else is BS and it is impossible to predict any kind of move in the markets because they are totally random. But just like pivot points MAY indicate possible turning points, so does the natural logarithm 2.272 value. One should never enter a trade only based on that, but it can be used as a helping tool in determining TP and SL. But the most important thing here is to wait for the price action to show some kind of weakness in the current swing, be it because the price broke a new high and needs to retrace to attract new buyers/sellers or something else.

Like all the other strategies here, it all comes down to risk and money management. I never risk more than 1% on a trade. Because my trading style enable so high RR, I can lose 3-5 trades in a row to wipe only 1 win.

One of the reasons why I like this style of trading is because you can take trades in the both ways without having to have huge risks.

I usually move SL to BE when price closes second candle above .739 area. (here I missed the entry on EU short but wouldn't have taken the first short signal in the beginning of the retrenchment but rather waited for retest of the .272 area.)

So in the ss of EU m5 I would have taken long at the first retracement and opened a short on the retest of the .272 area. The long position would be risk free with SL in BE and only be risking 1% on the short trade. Even if the short failed, long trade would have possibly covered the losses from the short trade.

hi lemppari,
I disagree with above statement. "think outside the box"
you will see from this post where I explain how powerful math is and it is possible to predict market move.
I explain all fibo lines from MN to H1 from this post EURUSD - PA @ 1.18251

Sep 17, 2020 20:06
"from this chart it is clear that PA stop @ 50% and accumulate there pointing down (PA below 50%) to 1.15261."

you should pay attention to next 3 important things in trading:
1. time
2. correlation
3. where is the money

good luck

"in trading you defending yours believes with money"

pro7

Hi,

What time frame do you trade this strategy.

Rajandaas

Thanks pro7 for the reply!

I said maybe badly, but I meant that taking trades alone using fibo or any other kind of technical tool is really risky in my opinion. Sure fibonacci can give you nice entry points , but at least I'm not confident enough to take a trade alone using that. But why not if it works for you.

I've tested all the different tools like fibo and Median Lines, but at the end of the day I think the most important thing is to develop a feel of the markets. I know it sounds a bit stupid, but after spending a lot of time watching DAX move, I think I could use any technical tool and still be profitable.

I don't say that fibos don't work because they definitely does, just like the natural logarithm(2.272), but at the end of the day personally I don't think it is enough to be profitable.

I mainly use 1 min TF on DAX and 1 or 5min on currency pairs. When I trade EU I like to draw the retracement from 5 min and then switch to 1 min to enter the trade.
When I'm using 1min I can get 1-3 trades per day while using 5 min chart it can take even one day to touch the 2.272 area. But basically whatever the TF works the same way. Best thing is to test different timeframes and see what works for you. It's easy to forwardtest the 1 min chart because it prints so many candles.

Thank you sir

Hi,

I think you are on to something great. Don't give up. Hope you keep posting here. I am your disciple.

Rajandaas

@drock

Hey man, once again your reply disappeared, but I was able to read it. Tho, can't remember much of it anymore.

If I remember correctly you said something about me guessing and that I need money management because I know my trading style isn't reliable.

Sure, my trading style may seem random for you. But the main reason behind this strategy is just to follow it with discipline. This allows the probability to take care of my profits.

And when it comes to money management and risk management, it's just stupid to not take them into account. No one can predict the markets perfectly, because they really are random. Please enlighten me, why would that mean I wouldn’t trust my strategy?

Thank you rajandaas, really appreciate it!

and please, feel free to ask or post anything here!

Here's the most recent trade I did take. It's not pretty, but luckily I got into the trade before it continued up. Price action is showing some strength in buying so pretty confident, at least for now.

When price makes new highs I'm going to move stop to BE.

EUs move up is also supporting my long trade on DAX.

Reason behind the trade was that the pullback from last nights swing up touched the 2.272 area. Because the price never came to test the .272 area this isn't an ideal trade to take but let's see how it plays out.

A very interesting analysis. I'll keep an eye on it. Good work.

Thanks landorra!

I'll post here as much as I can.