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4 Hour Strategy (MACD)

  • #4,761
  • May 28, 2007 2:56pm May 28, 2007 2:56pm
Well, I'm determined to make this system work for me, and I'm having moderate success with my back-paper-trading, but there just seems to be so much subjective analysis required... so many different ways to interpret the data - I'm far from sure what to do at any given potential opportunity.

Here's an example of something that just bugs me... Look at the chart of EU ca. 7/2004... I've indicated the signal (lower low after lower low) and the bar that created it. Since it's a counter-trend move, caution seems indicated. The SL needs to be above the dashed red SR line, which has been very well respected by price lately, so I have an SL of about 47 pips. For a target, I'm looking right at a confluence of 1. a price level, 2. a recent SR (solid red) which is ripe to turn from resistance to support, and 3. a longer term SR (dashed red) which has given consisten support for weeks. There's no reason I can think of why I should expect the price to break through this clog of roadblocks (yellow rectangle), so the TP sits at about 22 pips. 22/47 is an RR of < .5, so clearly I should sit this one out.

Then.... the price plummets nearly 200 pips!!

So what gives?? Is there something I missed which would have told me to take this trade? Or do we H4 MACD traders simply have to sit impotently while the best move in nearly 3 months slides past us untouched?

I'd appreciate any perspectives on this that would help me better understand how to make a good decision in a case like this...
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  • #4,762
  • May 28, 2007 4:56pm May 28, 2007 4:56pm
Quoting Phillip Nel
That is what everyone should do. Go to history and look at the MACD till you see the motion and the setups.

A pretty good effort. Worth trying, though new in the field.
.....catch the pips man.
bahala63
  • #4,763
  • May 28, 2007 5:00pm May 28, 2007 5:00pm
Quoting Phillip Nel
That is what everyone should do. Go to history and look at the MACD till you see the motion and the setups.

A pretty good effort. Worth trying, though new in the field.
.....catch the pips man.
bahala63
  • #4,764
  • May 28, 2007 8:42pm May 28, 2007 8:42pm
4hr EURO$ approaching the 365...will it hold...
  • #4,765
  • May 28, 2007 8:49pm May 28, 2007 8:49pm
DGC:

Based on your chart you 'should have' already been short in mid July with the Rt..
  • #4,766
  • May 28, 2007 9:45pm May 28, 2007 9:45pm
Quoting DGC
Then.... the price plummets nearly 200 pips!!

So what gives?? Is there something I missed which would have told me to take this trade? Or do we H4 MACD traders simply have to sit impotently while the best move in nearly 3 months slides past us untouched?

I'd appreciate any perspectives on this that would help me better understand how to make a good decision in a case like this...
First of all--the system didn't give you a losing trade, which is a good thing. Not entering a winning trade is nothing to cry about (just an expression, no harm intended), compared to entering a big losing trade.

Also, as someone else mentioned, you should have already been in the trade from the previous signal.

On top of that, even if you didn't catch the first signal, you have to look at more than the macd signal, as you have mentioned in your post. To me, the signal to enter would have been the two upper candle shadows that tested the same area twice.

When it comes to trendlines, s/r lines, and so forth, remember that they are all broken at some time. If not, our job would be easy! Also, have you considered that you may have too many lines drawn? Too many can convince us that they are barriers and that price must yield to them! On the contrary, the market sees no such lines, and will do as it pleases. With all the lines you had drawn, it would seem that price could have no choice to go but up, but the market just doesn't work that way.

Lastly, it could be a case of an irregular market move. They happen and are a part of our lives. Remember that this MACD signal is not designed to catch huge waves. It's designed to catch more like 50 pips at a time, and do this several times a month. Nowhere did Phil claim that this is a breakout system that would catch those moves. (but when applied properly it tends to)
  • #4,767
  • May 28, 2007 10:09pm May 28, 2007 10:09pm
Quoting DGC
I'd appreciate any perspectives on this that would help me better understand how to make a good decision in a case like this...
I went back and looked at price here DGC. While I'm no expert in PA, I've attached my chart as I would have likely marked it up on the date you specified. I see an up channel zone, between the two long yellow lines. Notice the pivot line in between. For the most part, it provides good s/r zones. On a break below that, it's a pretty good bet that price will continue to the next line, so you could have entered on the macd with the long drop below the pivot line, which was a macd break through zero signal. Then, you would have taken partial profit at the bottom yellow channel line, and hopefully you would have let that ride after seeing the long upper shadow on the candle that briefly breaks through the bottom line, after which price drops more, all the way down to the MA lines. That's my though process on this, though live trades are always played out differently than hypothetical trades.
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  • #4,768
  • Edited 10:48pm May 28, 2007 10:42pm | Edited 10:48pm
Quoting DGC
Well, I'm determined to make this system work for me, and I'm having moderate success with my back-paper-trading, but there just seems to be so much subjective analysis required... so many different ways to interpret the data - I'm far from sure what to do at any given potential opportunity.

Here's an example of something that just bugs me... Look at the chart of EU ca. 7/2004... I've indicated the signal (lower low after lower low) and the bar that created it. Since it's a counter-trend move, caution seems indicated. The SL needs to be above the dashed red SR line, which has been very well respected by price lately, so I have an SL of about 47 pips. For a target, I'm looking right at a confluence of 1. a price level, 2. a recent SR (solid red) which is ripe to turn from resistance to support, and 3. a longer term SR (dashed red) which has given consisten support for weeks. There's no reason I can think of why I should expect the price to break through this clog of roadblocks (yellow rectangle), so the TP sits at about 22 pips. 22/47 is an RR of < .5, so clearly I should sit this one out.

Then.... the price plummets nearly 200 pips!!

So what gives?? Is there something I missed which would have told me to take this trade? Or do we H4 MACD traders simply have to sit impotently while the best move in nearly 3 months slides past us untouched?

I'd appreciate any perspectives on this that would help me better understand how to make a good decision in a case like this...
Hi DGC:

You would have a few options w/the example you provided:

1) Palmer is correct, most would have entered earlier, with the small spinner....but from what I've seen on the forum, they would have been out of the trade w/profit at the MA....some would have set any riding lots to BE and shot for the support line (and been stopped).

So, let's look at the candle you have highlighted...if your r:r was only .5 you absolutely did the right thing to pass on the trade (I'm assuming you base your r:r on your TP2 level?). I usually have 3 TP's and use TP # 2 to figure my r:r (just how I do it b/c TP # 1 is usually between 17 - 20 pips).....back to your chart....so you pass on the trade b/c r:r is not good and price moves to the 21 w/MACD less than .0015. You have 2 scenarios now to anticipate:

1) Bounce at Zero where price goes back up (Which should give you a strong up move) or,
2) MACD Cross at Zero line (I like these set-ups b/c they usually produce good moves as well).

The question is how do you know what will happen? You again have 2 choices:

1) switch to the 1 hour chart and look for price to move away from the 89 and see what the 1 hour MACD is doing; or:
2) wait for the 4 hour candle to close and see what the 4 hr MACD does as far as it's signal.

In your example the MACD crossed the zero line indicating a downward move was on. (I can't see your chart while typing, so I think price is beyond your 8 & 21 and near support)...you enter the market and target the next MA, take partial profit there and move remainder to BE so you could have the opportunity to catch the majority of the move you highlight (remember earlier in the thread how Phillip talks about positioning yourself for the opportunity to catch a breakout move....this is a prime example of that positioning). The MACD gives a clear directional move from the zero line cross.....

Now, lets assume you were sleeping and missed the zero line cross...do you still have to sit idly by? Again, the answer is NO. You could have caught 80 -100 pips by entering the market when the candle retraced back to the 8 before moving down (that's how I would have played this move in real life...if I had missed the entry from the 1 hour...but your not testing the 1 hour so the bounce from the 8 w/MACD giving downward move confirmation would have been enough for me (if my support areas were far enough away to make sense of this entry).

So, DCG, you would have at least 3 opportunities to catch this move. Hope this helps you make sense of the system. Remember the rhythm of the market (after your support line break, you could have placed an entry order for a sell at the retrace price too w/in the 4 hour zero line cross candle.

Also, this system is great for catching large moves; but you have to position yourself to take advantage of the opportunity. How? it goes back to multi lots w/ multi TP's. When price pushed through the 8/21 confluence the probability that it would travel to the next MA was great. Move your stop on remaining lots and let them run. When the next MA is hit and MACD is still signaling down move, protect profit and trail your stop.

Good luck and happy trading!

Pips
  • #4,769
  • May 28, 2007 11:13pm May 28, 2007 11:13pm
Hey DCG

I totally forgot....

GREAT JOB!!!!! Great to see you looking back and testing!!!!! The excericse will help you immensely!!

Once again, Great job on taking the time to look back and study the market!!

Pips
  • #4,770
  • May 28, 2007 11:15pm May 28, 2007 11:15pm
Quoting Palmer
4hr EURO$ approaching the 365...will it hold...

Hi Palmer,

Great job on your eur trades!!! You've been rocking on that pair lately!!!

Now, on a serious note....

Did you clean your room?

Pips
  • #4,771
  • May 29, 2007 12:47am May 29, 2007 12:47am
I went short on friday following that RT on USD/JPY, the price went down to the 21 EMA, as expected and I made my first 20 pips today.

Cool.........
  • #4,772
  • May 29, 2007 6:18am May 29, 2007 6:18am
Lets talk about how I say the emotion of the price cnverging and told myself that there was a breakout coming because tyhere wa a lot of emoition built up right close to the 365EMA of the EUR/USD, All we needed was a MACD signal to enter the trade. Now lets talk about how when my alarm was supposed to wake me up and it didn't and I woke up 15 minutes late and BAM!!!! It was a breakout just as I had called it!!! I missed it again and all because I slept throught it.
  • #4,773
  • May 29, 2007 6:46am May 29, 2007 6:46am
Quoting tamkras
Trading this pattern suits my style and it works for me. It is really an individual call if anyone wants to incorporate the pattern into their arsenal of setups.
P.S. btw, still short eur/chf and usd/chf. We had new reversal candles which bounced off the inside top and it confirmed to keep my shorts. Eur/chf is definitely the best which is my developing story and it will have a happy ending.
well, well, well. My swissie short is now outpacing eur/chf. Looks like there is a market competition for the best bid on swiss frank. As I pointed out somewhere swiss banks have been buying tons of their national currency for the last 2 weeks. All trades were confimed by MACD.
  • #4,774
  • May 29, 2007 6:55am May 29, 2007 6:55am
Pips: Still haven't cleaned my room because I'm still riding the bounce from the 365! Looks like we may pull back a tad here...to the 21 aye

Hope everyone had a safe holiday...
  • #4,775
  • May 29, 2007 11:33am May 29, 2007 11:33am
I need some eekonomik help here...With last weeks durable good orders up along with new home sales up, that tells me that there are more people in the workplace...aye? Tomorrow's jobs number is only 115K, or something like that. That seems a little too 'low' to me. I know this is not a news/eco thread...just lookin' for some 'non-spin' info...

Ridin' the pullback...you there Donna???
  • #4,776
  • May 29, 2007 11:39am May 29, 2007 11:39am
Thanks, folks, for all the great answers. I really appreciate you taking the time to give your perspectives about this system and this situation. Like I said, Phil's system seems fraught with complexity and subjectivity, as there are so many different factors to consider and each is subject to an individual interpretation. Unfortunately the comments I received seemed not to clear up the issue so much as to cloud it.. The one comment which really seems to give a clearer perspective is to say that sometimes you miss the big ones, but it's nothing to worry about. That's very true, and something I always try to keep in mind.

Let me address some of the others individually:

1. Should have entered earlier, on the Round Top.
This RT was not well-formed (I've seen Phil comment on not liking poorly formed RTs) as the down move was hard and sharp. Moreover, the same situation existed here as with the one I indicated; the signal candle was long and the distance to the next likely support (21EMA, price level, SR line all come together there) was small, so the RR didn't warrant entry. Phil beats constantly on the drum of RR, so I can't see how I could have ignored it here either..

2. There was a tweezer top / two shadows testing resistance.
It's a good observation, and perhaps should have made the difference for me, but it seemed like a small sign compared to the confluence of three important support levels. This may be where I went wrong, though...

3. SR can be broken / too many lines.
This is a curious comment, since it seems to imply that we shouldn't pay much attention to SR lines because 'they can be broken'. If the fact that they don't always guarantee support or resistance means we shouldn't respect them, then there would be no reason to draw them. I've found that most of my problems have come from not respecting SR lines, and since Phil obviously weighs them heavily, I'm inclined to consider them important, even knowing that they can be broken. As for drawing too many, that's always a concern and I do try to discard old lines and those that are not well-respected by price action. The ones I used for this example, though, had been proven a number of times, so they would have to have been given credence, in my view. We can't be afraid of every line we draw, it's true, but it seems to me that we must pay reasonable respect to the proven ones, or they become pointless.

4. MACD Zero Cross.
I must have missed the mention of this is an MACD signal. I looked all through the info Phil has posted and I see a turn back from zero and a move through zero then back, but nothing about a straight zero crossing. In fact, I seem to remember Phil saying he did not consider a move through zero to be a valid signal. Obviously it would have been a good one to take in this case, but it represents a break from the system, and therefore a violation of the rule of consistency, doesn't it?

5. Channel-based pivot crossing.
Again, this is not a signal as defined by Phil. Not that he is God and knows everything, but the drumbeat mantra of successful traders is to trust the system and not try to make up new rules as you go. Entering on non-system signals (pivot crossing) or chasing market motion (zero crossing) seem to me to be the sort of thing that Phil constantly rails against.

6. Check the H1 chart.
I suppose I should learn more about this technique, but I don't have the luxury of checking between 4 hour candle closings, so looking at the 1 hour chart at the same time I look at the newly-closed 4 hour candle just seems to show me the same thing - ie, I see that the market made a fairly strong down move, but that it's dangerously close to a clog of likely support, so why would this make me more likely to take the trade?

-----------------------------

I don't want to put anyone off here - I'm not saying that you guys are wrong, just that I don't really understand how these comments will help me in the context of the system as Phil has defined it. I want to stay as close as I can to the original system he is so carefully laying out for us, and I don't want to complicate my thoughts with additions, modifications or variations - at least until I get more confident with what I'm doing.

I guess what I'm saying is that I'd like to have more information to help me fit these additional concepts into my growing understanding of trading this system. Every comment is greatly appreciated, so please feel free to share more views and ideas with me.

And thanks for the encouragement, pips... I believe that the time I spend play-trading past data will be invaluable to me down the line!

  • #4,777
  • May 29, 2007 11:42am May 29, 2007 11:42am
Quoting DGC
Well, I'm determined to make this system work for me, and I'm having moderate success with my back-paper-trading, but there just seems to be so much subjective analysis required... so many different ways to interpret the data - I'm far from sure what to do at any given potential opportunity.

Here's an example of something that just bugs me... Look at the chart of EU ca. 7/2004... I've indicated the signal (lower low after lower low) and the bar that created it. Since it's a counter-trend move, caution seems indicated. The SL needs to be above the dashed red SR line, which has been very well respected by price lately, so I have an SL of about 47 pips. For a target, I'm looking right at a confluence of 1. a price level, 2. a recent SR (solid red) which is ripe to turn from resistance to support, and 3. a longer term SR (dashed red) which has given consisten support for weeks. There's no reason I can think of why I should expect the price to break through this clog of roadblocks (yellow rectangle), so the TP sits at about 22 pips. 22/47 is an RR of < .5, so clearly I should sit this one out.

Then.... the price plummets nearly 200 pips!!

So what gives?? Is there something I missed which would have told me to take this trade? Or do we H4 MACD traders simply have to sit impotently while the best move in nearly 3 months slides past us untouched?

I'd appreciate any perspectives on this that would help me better understand how to make a good decision in a case like this...
Info
Attached File(s)
File Type: pdf EurUsd Jul2004.pdf   301 KB | 1,408 downloads
File Type: zip EurUsd Jul2004.zip   844 KB | 1,530 downloads
  • #4,778
  • May 29, 2007 12:20pm May 29, 2007 12:20pm
Quoting hard1head1
For FX hermit,

I tried to load the Hull and when I try to attach it o a chart it locks up my platform. Any ideas.

Jim
I don't know, I tried attaching and re-attaching it to my charts and don't seem to have any trouble. I am not very knowledgeable about coding and such. If I remember correctly someone once posted that on occassion some indicators when saved in the indicators folder can conflict with each other, other than that I have no idea, sorry.
Stay calm, be brave, wait for the signs - Jasper Friendly Bear
  • #4,779
  • May 29, 2007 12:38pm May 29, 2007 12:38pm
Thanks Phillip!

Here's my pullback trade back to the 21. Last few times price tested the 89 it failed. Got 50 on this one so far....uh, thanks again Phillip!
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  • #4,780
  • May 29, 2007 2:13pm May 29, 2007 2:13pm
Info
Attached File(s)
File Type: zip Daily Wrapup 29May2007.zip   833 KB | 1,416 downloads
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