Trading the Cable swings via averages

Choppy trading today on the 1 minute because on the 1-hour price is aiming to make the average lower low and has done so now.

Notice on the 1 hour how price has travelled from D to D1. (Red line)

5 days into this set of 20 and we have had two signals formed and executed on the hour.

6 Days in and a third ABCD completes. Still keeping up the average of about 1 every two days.

It doesn't matter what time frame chart we use; the trades all contain the same elements.

Below is the 1-hour chart with my favorite trade... Trading between the averages!

I can do exactly the same on the 5-min chart the difference being it would execute quicker travelling a shorter distance and my lot size would increase accordingly. however, the risk and reward remain the same. Thus, short-term traders make far more money than the long-term traders albeit they pay far more in spreads also.

The 1-hour chart is telling us where price is likely to go so at the 5-min level we will have more success if we trade the direction accordingly. Keep an eye on the 1-hour chart and try to identify where the A point is likely to be relative to the C point. If we get the entry wrong, we can close far earlier than losing the 1% because our trading structure has change somewhat. Small losses like these are easily made up over time.


Some people speak of trading psychology but to me that is sighchology since I am only interested in the mathematical advantages forming my trading structure with the math on my side. Nor do I THINK trades, all the trades have a structure containing the key elements requiring nothing more than patience and observation before any action on my part is taken.

The trade on this 1-hour chart did run to the swing high average but it also contained an ABCD we could work with.

Now when we look at the 5-min chart we can see the reasons for the turning points.

By looking at this 5-min chart we can usually tell which average the market is generally working with. For example, the large run down was conforming to the green average which is the 15-min, but this run up was conforming more to the 1-hour average. This tells us where the ZOO points are likely to be and the trades that follow quite quickly.

ENuff said for today hey!

Well, these last two panned out OK but look at the previous two!

The first almost made the D! then turned and shot up to D,
The second almost hit the D and turned to shoot down to D1.

Was this some form of payback or some weird conspiracy?


This makes 8 signals form and execute in 12 days

As we are discussing the last 2 ABCD I expect some of us went long on the second to last ABCD before waiting on confirmation from bull suppport. I find it tough to wait sometimes and just jump in, this time I had more patience. Look for reasons not to take the trade.

I don't know why people take trades in particular directions simply because they don't tell me. However here we have a case where someone has bothered to do so and thus it deserves an explanation.

Now I didn't actually take this short trade because I was finished well before it happened with a long, short and long trades. Not withstanding that let's look at the ABCD 40PipsAlan is referring to above.
Below I have both the 1H and the 5M charts side by side with a lot of detail on the 5M to work through.




First off, we should be trying to identify where the A point is relative to where the average is currently at so we can guess where the C point is likely to be. We know what the target distance is because it is always the distance A to B. This gives us plenty of time (several hours) to work out our risk/reward. be that 1%/:2%, or 2%/4% or even as much as 3%/6%. It is for each of us to work out what we are prepared to risk independently.

OK let's begin the analysis from here. C is formed on the 1H so we mark this level on the 5M chart (Magenta Line) On the 5 min we see a bear divergence has formed above the line and this was followed by a bear HD soon afterwards. Either of these would do as a short entry for my favourite trade to take price down to the average swing low (Green Arrow) let alone the D1 Target much lower.

You can decide which you wish to tackle, the Average Swing Low (ASL) or the ABCD1. It doesn't matter which the risk reward is going to be the same no matter what, i.e. 1 to 2. I would prefer my favorite trade because it is quicker to execute but at the same time I don't get much opportunity to load up the trade with additional lots.

OK if we enter short on the 5M our stop is some 30 pips away because the D1 target is some 60 pips away. 1:2 risk reward.

If we were just aiming for the ASL it was some 40 pips away so our stop would have been 20 pips. Still maintaining that all important 1:2 risk reward.

Once in the trade and it is moving our way, we can move our stop to just above the high always bearing in mind the trade can fail so we are actually now risking far less than 1% Etc and have the opportunity to change our position to long should we get stopped out.

We can easily keep an eye on the C position on the 5M chart.

Reading on a little further we can see the price is responding to the 15M EMA (Green) and looking at the hour chart we there is an ASL aswell as the D1. This took about six hours whereas my favorite took 3 hours.

This is how I go about reading and plotting the chart.

Love to here how you guys do it.

Well, it has been cold, wet and windy all day, so I have been playing around with stats for the ABCD and they are quite interesting at least to me.

So far, I have 34 examples to work with and saved the image of each and every one of them Phew!

I have been looking at the C position either above or below the EMA to determine how often this indicates the correct direction.

It turns out 22 went the correct way and 12 went the opposite way. (Interesting huh!)
.
The longest run of corrects was 9 whereas the longest run of opposites was just 3.

This means if we always go for the correct side with a 50% stop we would be well in profit without doing any analysis at all.

In other words, if C forms above the EMA we take the long, if it forms below the EMA we take the short each with an initial 50% stop.

We can always close the trade if we are wrong and save the loss somewhat.

Hi Alan, could you kindly confirm if I have plotted the ABCD correctly on the 4hour chart. Is the point C located at the first bar that crosses the ema or the bar after which the subsequent bar changes to either bull or bear (as is the case in the uploaded chart)?

C is the candle close over the EMA. B is the lowest point before that. Still trying to fathom out the theory behind the A point and searching post posts for an explanation. last Swing high but below the EMA maybe.

Please CYLON, is the indicator on the indicator window of the chart you posted, is it CCI OR RSI, and please what are the settings, thanks

You have the wrong locations...

My 4H looks like this...

It is a regular 14 period RSI with a much faster 5 period overlaid on top with its data applied to the previous indicator.

Hoping this hour is forming the C level. We haven't had one for a couple of days so we are due.

Whoops my mistake I missed one yesterday. GRRRRR

We got an ABCD!!!!

Yep, I went long by looking at the 5M chart it was way down on the RSI and then formed an ABCD on this 5M also.

Dang I went short.

Now is this the 1H finding support?

Price has almost hit the 5M target, but I have now closed with my 40

And there we go...