Zero Line Reject

Confidence in trading comes from seeing strength on the higher time frames. 30 minute for a M5 trade. Waiting for either an M or W formation. This is just my personal observation. I do not use the daily for any of my analysis. I will not be in a trade that long. If I see a set-up on the H1, yes, I will note the D1.

Humans have this nack of making things ridiculously complicated. Market makers "love it" when you do that. I've been there too!

I do plot a 204 EMA to try to keep things simple. 34 EMA is what I'm basing my decisions off of. It takes (6) M5 candles to make a M30 candle. I use the same approach with my 34 on the M30. 34X6=204, thus a 204 plotted on my M5 tells me where the 34 is on my half hour chart. It takes the heat off, builds confidence and makes execution easy peasy.

Why is the Daily time frame not reliable? There are at least three reasons to consider. First and foremost, when a pro pens a book and says nothing in trading is guaranteed, then why is everyone paying attention to the long wicked Daily candle?
Friends, who created that wick? The market makers. Are the MM counting on you seeing AND putting a trade on with that particular instrument, likely on a smaller time frame? Yes, they are.

Secondly, anyone can show me a daily bearish engulfing candle. I bet you no one can show the H1 hidden divergence trade within that daily candle.

Thirdly, how many H1 candles does it take to create "tomorrow's" daily candle? 24. That, my friends, is objective and you can use that. Trends can turn around now, anytime, or worse yet, go rangebound. H1 candles are a simple and 'completely objective' tool used to create a daily candle. At 5 New York time, the same 24 candles that created the doji ALSO created the engulfing. Studying the daily is to inject hope, hoping the bearish or bullish move continues.

Use objective tools. The MM are using gaps and stop hunts. They do not lose. Retail traders cannot predict price. On the other hand, momentum in the right context can ALERT us to a 'possible' continuation. Put the odds in your favor any way you can. There are many objective tools one can use to do good in the markets.

Zero Line Reject: the following are a list of indicators and moving averages I use as well as my own risk management rules.
Time frame: M5 for Asia (8pm New York), London (0900 GMT) and New York 8 am eastern (the activity gets serious often around 0930).

Step 1: This is what I choose to do... I'm already on the M30 chart not looking at price, but momentum. You want a strongly trending market. If within your chosen basket of instruments, you find nothing trending strongly according to the CCI/s, go get a sandwich, read a book, cut grass, do your dishes, sit on your hands, you get the point. Come back in 30 minutes and look again.
If I'm trading a hidden divergence on the H1, I look at MOMENTUM on the Daily only.

Indicators: CCI 14 and 50, standard default settings... ATR 15 I often use for stops (ATR2)
Moving averages: 14 EMA, 34 EMA and the 204 EMA all set on the close. The 204 gives me an idea of what the 34 is doing on the M30 chart.

Sell setup: Strong momentum on the M30, I wait for 1 of 3 things to happen on the M5 chart. With separation of all 3 moving averages, I wait to see price increase to in between the 34 and the 204. At this point, the 50 CCI will be above the zero line. When price returns lower back down through the 34, the 50 CCI will also cross back down below the zero line. This is called a zero line reject.

The 2nd and 3rd things to happen are when price again creates longs again and returns to either the 14 or the 34. As this happens, the CCI will make it's way back up towards the zero line of the 14 CCI. The CCI does not have to cross the zero line to be a valid setup. I wont trade until I see 3 bullish bars.

I risk 1% on these trades. I often take half of that risk off when I have reached 1:1. I attempt to re-enter the market. If I am able to re-enter, it will be on the M5.

One hour hidden divergence: I check the H4 and the H1 for setups with my 14 CCI, I have used a stochastics 9,5,5 in the past. I use a fibonacci fan to filter these trades, nothing closing beyond the 88% level. I then plot my fib extension for a visual representation of what "could happen". I plot a measured move to help with a profit target. I go to the M15 and sometimes the m5 chart to plot my trend line. Never execute these without a trend line drawn. I take a portion of my profit at 1:1. No one knows if the trade will work out. Take profit of some kind as soon as possible. I risk 1% on these trades and often hold these overnight. Beware of any finance charges for holding them. Often times, .5%.

Hope this helps someone,
Reno

This is what I trade. I did not take this trade. This trade would have bagged in excess of 4R. Just a glance and you will notice even a hidden divergence on the 50 CCI.

Enjoy,
Reno

GBP/USD hidden divergence on the H4, checked the fan, thumbs up. Plotted extension on the H1, trendline on the M15. This will last awhile if I am to bag serious pips. My stop is double the hourly ATR, slight error there. We shall wait and see, likely more than a day. Barely in profit, very little.

Reno

I'm gonna give myself a tiny bit of credit for surviving two big stop hunts. Almost nap time. ZZZZ

Don't ya love waking up and finding that you're still in a trade? Hope everyone is bagging lots of pips!

Reno

3 winners at NYC. My GU closed at exactly the 50% fib level, yay. I'm still in the trade with an adjusted stop for the 5 o'clock rush and the best of all, there's a hidden divergence on the H1. I did add a position earlier, I lost on that one because I was executing 'outside' my personal trading window.

I do plan to add with the HD opportunity unless the market gets stupid.

Happy Trading
Reno

Hi Melloyello, thank you for sharing.

the original rules were quite simple and easy to digest. This was probably the appeal. You’ve since altered the parameters to include more moving averages, divergence, etc.

what was the catalyst for this? Was the original rules not working any more? Did you notice a pattern? Thanks in advance

Thank you for the comment Silky, the 14 and 34 are the main averages. The 204 simply keeps my eyes on the M5 or the H1, those are the TF I usually trade.

I believe all traders evolve in a positive fashion if they put 'work' into it. I love the H1 chart, but failed to understand the MM communicate and move price according to their needs, not mine. Half of my trades are pure price action. I don't often post those.

Second thing I had to realize that I didn't make a connection on was there is such a big difference between a CCI showing +105 compared to one that shows +255. Huge difference.

Finally, hidden divergence has worked for me over 50% of the time. Divergence is the only leading indicator. My best trades have come from trading it when I employ one or two filters.

Again, thank you for the comment,
Reno p.s. I want to clarify.... the 204 on the M5 chart reflects the 34EMA on the M30. I peek at the M30 for momentum.

How many trading gurus have told you to buy into a pair when your 14 CCI goes to 100 or beyond? If you still do that, consider stopping. Look at the chart above this post and count how many times the CCI hit one extreme and then the opposite extreme. My friends that's how you identify a range. Traders can "often" avoid a range if they do ONE THING..... sit. Wait until that extreme returns to 'within' the 100 levels and then hits 100 a second time "without" exceeding the -100 level. You can thank me later. By the way, I did this for years. No more.

You are welcome,
Reno

Hi Melloyello,

Thank you for coming back to me, much appreciated. you are definitely right, systems can evolve with experience and new insight.
Can you please let me know what post has the new set of rules or even rewrite them again?

I wanted to do a pine script and python back test on the system. Of course I will share my results here for transparency.

I have been looking for a scalping system and I do like the look of this, even though you've mentioned this scan be used on HTF.

Thanks

Post 164, just above is what I'm currently efforting. You did mention scalping, I spent a couple of hours today checking the M1 with the 50 CCI crossover. I remember trying it about a year ago. I got my 'lunch' handed to me then. However, I was not checking momentum on the higher TF correctly. It would take a lot of practice I think "for me" to get good at the M1. M5 would likely be my go too.

The observation I was making this morning was whether the 50 needed to exceed the extreme a second time instead of coming directly from the 100 and just a few bars later tanking to the -100. The 14 can be all over the place, whereas the 50 would be a slower mover.

Let me know how your testing goes, I'd be delighted to know how that turns out.

Thanks Reno

I created an algorthm a few years back and found an indicator that detected a range when it happened. I think I was trading the H1 back then. I was mightily impressed with how it worked.

I think one of the best things I did was take a year off from trading. This morning has been wonderful. I rolled up my sleeves and got dirty with the charts. I learned a bit more about trading the news. I learned a lot about trading the M1. I never dreamed I'd make money with such a messy time frame.

I'm grateful for the hours I've spent studying and reading trading material. I believe everyone has their own grail. I have taken portions of everyone's teaching and applied it to my own activities. Some of what I've studied has been lousy, some have been lies (I made $7000.00 a few years ago on a demo trading Thanksgiving weekend).

A trader has to make his own way. I sure have by combining bits of pieces of information from many good traders.

i also believe if a person is gonna sell an idea or strategy, they need to be willing to show their P/L and communicate. Most do not.

Happy Trading,
Reno

GBPJPY is one of our most volatile pairs. Is this one of many reasons so many are heading to gold? Remember, this is a weekly chart.

Reno

1800 is my cutoff window for executing. When the 14 does a zero line reject, I look for daylight. This one had good daylight. I love simplicity. I am not a rocket scientist. When a trader replies on too many complexities, getting stopped out makes the effort demoralizing.

Stop hunts.... the MM do 2 things, look for net long traders in a bearish market and go range bound.

Here's one huge clue for all of you, look at the chart, you WILL see an "M" pattern. Those patterns are "completely" objective. If you can't see it, head to the M1.... Ahhhhhhhhhh- (Patience traders)

Reno

WOULD YOU TRADE THIS? Sometimes you just gotta trash the indicators and hope for the best. Indictors indicate and nothing more. I use a few. These days I trade the H1 and the m1. One the candle has painted, the MM have the orders they seek, or so one would think.

New rules for '24. I wait a minimum of 30 minutes at session open to do anything. I give myself 2.5 hours to find an opportunity. I still trade Hidden Divergence. Moving Averages lag. Indicators lag. There are indicators that will predict continuation trades. Hidden Divergence is the only way I can make money.

If I happen to spot something on the H1, I wait a minimum of 15 minutes and then set a PO. If the market wants my money, they have to come to me to get it. This has served me well and taught me even more patience! Will I miss a move? Oh well. There will be other trades! It is NOT necessary to be a slave to the screen.