4 Hour Strategy (MACD)

I have been listening to some of Phillip's past mp3's recently, and I don't believe we have copied this one on the one hour supporting the four hour in trend continuation patterns, so I thought it wouldn't hurt me to type it out for those who might benefit from a written copy, since I'm not taking any trades right now. The attachments include the chart that goes with the copy. They're taken from 4June2007, post 4888. Enjoy!

Hi all. Here is my weekly study update. For those of you just tuning in, I am an experienced but average trader who normally trades the news and other scalp type trades. I have decided that Phillip's 4H method is what I want to use to expand my trading, so I have committed myself to studying the method thoroughly prior to live trading.

By the way, I have chosen this over many other styles, some of which I already have bought and paid for. If there is another place where you can receive this kind of training and support, especially for no cost, I don't know of it.

I have read the entire thread, every post, pdf, and Mp3. I am currently reviewing Phillip's thirteen lessons on pages 289-90. I am also reviewing certain Mp3's and pdf's that I saved from my read through. I do gain knowledge and understanding every day as a result. I know this is all not news, but there's not a lot new to report, except that I have begun backtesting in earnest. I find that it is extremely beneficial if you do it correctly, and that means replicating 'real' trading conditions as much as possible. Writing your trade plan, executing it, journaling it, and keeping track of the results. There is no substitute for face time in front of the market, and this is as close as it gets.

A couple of tips I have to help you out there who are just looking here and deciding you want to give this a go. Yes, you need to read every post. I can't decide if it's better to read them first, then do the thirteen lessons. I'm afraid if I said do the lessons first, you might not read all the posts. It's important to do so, because somewhere in them is someone like you who is asking all the questions and going through all the things you are or will be, and it will help you immensely to 'be there' with them. I've said it before; it's fascinating to watch the development of certain traders as they progress through the thread. It will motivate you to follow them, and with close to 7000 posts you're gonna need motivation.

In the process of your read through, please take notes as you go, note specific posts that 'speak' to you and go back and re read them. When you come across documents or Mp3's that help you, save them and go over them again. I have been over some things four or more times. Repetition helps me a lot. Even if you do all this and you don't wind up trading this method, I can boldy say this:

If you diligently study this thread, you WILL wind up a better trader

No question about it.

So, having said that, I'm off to bed. Ha ha, I know what you're thinking, but I logged a lot of time today just backtesting, and I want to get up early and do it again tomorrow. You know, wax on, wax off.....


God bless,
Richard

I am +3 GMT and my settings are 24 hours: 00:00, 4:00, 8:00, 12:00, 16:00, 20:00. I think I am very lucky as I start with London session and close with USA .
Ira.

Palmer has done very good work with describing situations where there is TC forming. Is it TC or RT that`s indicating opposite direction... nice work ! In addition to Palmer`s great work there`s my 2 cents.

When taking 1h early entry based on 4h analyses and MACD signal, then you have to estimate where price could move to the time when 4h candle closing is taking place. Is there still this MACD signal on 4h chart that you took under consideration and built up your trade plan with. 1h could indicate and confirm the 4h direction, but there could occur retracement on 1h chart (move back a bit to the opposite direction, before going to the expected direction). Does the price continue moving to the estimated direction after retracement on 1h chart? Did retracement on 1h chart occur at the same time when your 4h candle closing is happening? Is there still on 4h this MACD signal that you took your trade on? Would you take now (after 4h candle is closed) the trade on? You have to estimate all this before taking the early entry based on 1h chart and MACD.

viu

Hi everyone, please tell me what do you think about my U/J deal?
Signal: 12:00 RT (GMT +3)
Market rhythm: the price went through the 21ma, retreaced to it, but didn't go to the 89MA, closed below 8MA.
Good: with the trend, closed below 8MA and pivot.
Bad: marginal signal.
Entry 113.93
TP +119 TL 112.74
SL +43 + 3(spread) + 5 (fudge factor) = +51 (114.44)
R:R=OK

Sorry forgot to post the chart, here it is:

First thanks to Phillip, learn a lot from you.

E/U


I think it is bad for MACD trade, because every one waiting for the direction of the price.

What do you think?

Seems good to mee too, the only thing that bothers me its the 61.8 fib line. I took it but i m not really confortable. Its true that market rythm is say yes, but i will move to b-e as soon as posible.

Thanks, I was wondering why the price stopped at 114,34, now I see that it's Fib 50 level.

Hi Ira,

I sent you some thoughts on the short in a PM....Keep your fingers crossed for Dow to start doing very poorly...then U/J will follow it down ...Maybe w/the 10:30 oil supplies #. (currently Dow is down 2.92).

Unfortunately, recent FA supports long for the pair...and it has been bullish all week. Do think the down move will resume...but we need some more bad econ news from US or good Hedge fund blow up again to put fear back in market. Also, Political news out of JPY today is good for USD strength vs. JPY (lastly, the dollar index is bouncing from lows which bodes well for U/J upmove in the short term). So...Dow will drive the pair until about 2 PM PST...then it will usually sell off around 2 or 3 pm PST (that's what the other yen pairs usually do)..then the next mini-trend price move begins w/Asia and then changes again around 11 PM - 1 AM PST....Yen pairs are weird! & yes...toooooo much info and none of it pertains to the 4 hour....

I find it interesting ...hopefully others do to ...if not, Yikes...forgive my post...Palmer will be back soon w/the nuts and bolts...

Specifically w/your trade....You have used a good stop to give the trade any chance of success! (above the highs of the consolidation pattern...which if violated is a good signal that the trade was not correct...I like that kind of stop!!! ).

Info

Hi guys! This is a message I got re: the post on E/J a few pages back...Mike asked that I reply on forum for the other members who may have been confused by the post. This was the question:

Dear Pips,
I was reading your post and it was so complicated to me.Sorry ,I am still learning
So would you please tell me what do you mean by "...I have my own trendline on indicator method to determine levels for retrace/consolidation used in conjunction w/shorter TF charts and support/resistance break/bounce/reject scenarios & market motion/rhythm...."

This is my answer:

First, never be sorry for asking questions! We all are continually learning from others and questions are a sign of taking trading seriously!

OK...anyone following the thread for awhile who has seen my charts knows I hand draw lines on the MACD that correspond w/significant moves in price. For example, in an upmove, I will find a swing low in price and connect the bottoms of the MACD which results in a support line on the current pattern forming on MACD (connect previous to give line in range of current pattern). Sometimes I'll draw lines on the current pattern where valleys have formed. I have found that these lines are good predictors for TC signals. I can't explain exactly how they are done, because I don't have "hard" rules. What I recommend is for you to draw lines on your indicator and see how price reacts. Play around with it on historical charts until you can "eyeball" where your lines should go, if you choose to use the method (I think I'm the only one who draws the lines to help me gauge market sentiment). Combining this method w/price action has worked very well for me (provides secondary confirmation on RT or RB), but I don't know how well it will work for others. I don't trade the indicator exclusively because I wouldn't be able to determine stop levels for the trade and would have to let them run w/out protection (YIKES!). If you choose to draw lines, remember bottoms for uptrend and tops for downtrend -- and always have them coincide with uptrends/downtrends in price action.

Now that you are probably really confused ...The trendlines on the indicator help me decide if price is going to consolidate rather than retrace. If a round top is forming, but the levels are above my trendline drawn on the indicator, I will not short the pair. I will wait for the MACD bar to close below my line. When the MACD closes below my "indicator trendline" and if price has broken support, I take the odds on and short the pair.

The next part of the trade deals with market rhythm -- what "phase" are we in...what do the MA's look like? Where is price in relation to the MA's? How do I expect price to behave? I identify areas of support and resistance, wait for a break of support w/confirmation from MACD then decide what price I want to short the pair at (sometimes I'll enter at market, sometimes I'll wait for a better price...depends on the market motion and trend speed -- as well as exceptable r:r levels). With E/J and G/J the stops can be too large w/4 hour candles. This is where I "cheat extensively." I also "scalp" these pairs when they are moving alot. That's what I meant by the shorter time frame charts. I use the 4 hour, 1hour, 15 min & 5 min charts to trade E/J. All time frames have to be in harmony w/strong market motion showing on the 15 & 5 min charts (that is for a day trade play). Longer term trades are planned w/4 hour and 1 hour charts. G/J is same as above except the charts for trade planning are 4 hour, 1 hour, & 30 min chart. ALWAYS IDENTIFY THE SUPPORT AND RESISTANCE LEVELS APPROPRIATE TO THE TRADE PLAN! ESPECIALLY W/G/J!!! (Honestly, unless you like feeling sick while trading, I wouldn't trade G/J -- there's a reason why I call it heroin -- and I have been detoxing off it lately and sleeping much better -- and I will never ever post a trade idea or comment on someone elses' G/J trade b/c it is so risky to trade).

Back to the question re: break/bounce/reject -- all of these terms I use in connection w/support and resistance. I plan my trades based on a break w/close above resistance or below support. Bounce = price hits support and moves back up. Reject = price hits resistance and moves back down. I want to see one of these actions occur w/a MACD signal that supports the direction of the planned trade.

I'm sure this post has confused you more...and I appologize...read it a few times, and look at the charts...with time it may start to make a little sense... ...

Wishing you all the best in your trading career!
Pips

PS...Funny...I think O'Zeeke is the only trader who has ever asked about the lines on my MACD before!! Hi O'Zeeke! Hope you are trading super well!!!

Thank you again Phillip for helping us to be better traders. I had problems with my computer with virtual memory and i could only run the program for a minute or so. its problem was a badly coded indicator that i downloaded that ran as an endless loop, hogging all the memory. I deleted all indicators but the MACD and the problem was solved. I found i didnt need those indicators anyway, they were just confused the situation for me anyway. it was getting to where they were making all the decisions and the trade results were worse

Technicals is the science of how indicators think-- who needs all that, im just using Phillip's Macd and looking at the rhythem .

HI PIPS, !! its good to hear from you!

Thank you so much Pips.Helpfull as usuall

Regards
Mike

looks like gbp may be setting up for a bounce off the 21 ema. it looks like the 21 has been the speed of the movement for a while now. Any thoughts?

Hi O'Zeeke!

Yesterday, I thought for sure Cable was back on track for an uptrend. Today I'm not so sure. Did you see the close of the daily? Havent liked a few things (boy, I'm sure trade negative these days, eh? )...

If you don't mind, I'm going to list out what I like and don't like right now, do you mind?

Pros for Long:

1. MA's in perfect order indicating uptrend on 4 hour and 1 hour time frames (daily too). & we are supposed to trade with the trend...

2. Price is still above (barely) a longterm trendline (think it is at 2.0275) -- but a bit below the 21 (above the 8 on daily)


Cons For Long:

1.MACD has def. turned -- could still see a TC up w/ BOZ...which would be great for a long...but right now -- But now, I am confused.
Also, price is divergent from MACD (normally I would love this sell signal..but price held above support until today instead of clinging right below resistance.

2. Last 5 candles are dojis or bearish candles (I posted earlier on Palmer's blog that if price retested the 2.0370 area and failed, I was going to go short w/tight stop-- didn't have the opportunity today).

3. Last inside top low has not held and on daily charts the previous inside top pattern has not been closed above (those are the wicks we are seeing).

4. It looks like a sideways head and shoulder pattern has formed on 4 hour chart & the neckline has just been breached w/this current candle (3 big sisters? ahh..you caught me...I made that pattern up ).

5. I didn't like the way price action diverged from E/U today...why didn't Cable climb too? especially when news out of UK was sterling positive?

6. Price is moving through hourly 89 w/this candle...and it is down, not up.


So, I guess we wait for a better price to buy or see a def. TC up signal? I don't know....maybe price is retracing back to the 8 on daily? The last bounce occurred 20 pips below the 21...

OK...Don't listen to me...I have no clue! Did notice the last bounce occurred about 20 pips below 21 -- and current price is only about 13 below....keep an eye on and monitor?

Aren't you glad I had such a solid concrete plan?

Trade well!!!

Pips

nice trade plan pips!! haaa.. Let's all glue to see what happens.. Currently, macd has break the zero line, neckline has been breech.. However, there is still a support line under the price, so will be a little cautious before going short..

Trade well!!
Pip many!!

Hello Everyone i know i have not posted all this week. Trying out somehting new, No Not a new system. but something to keep me from being glued to the monitor. i entered euro Long on tuesday sept 11 close of 0800 candle at 1.3819 and have been holding it since. I did scalp 23 pips on another small lot on euro long yesterday . So whats new here is that i want to work on riding a trend as long as it holds above the 21 MA. I was glad when Phillip mention it today on his Wrap up. It is a challenge for me not to panic on a retrace since i have closed my lots early in the near past just to see it climb up after that. I have moved my stop loss up to 1.3849 (+30 pips) which is still below the 8 ma which has been the speed of this move, Because i dont want to be out of the trade empty handed.

Cable on the other hand has been acting strangely. I was long at 2.0300 and 2.0311.same time when i enter euro long. I should have taken profit today at 2.0360 . BUt SHould have could have ,have no place in forex dictionary. i am still in the trade . stop loss at 2.0252. the way price is finding resistance at 21 MA i very well might wake up to my stops taken out. But this is result of poor planning. should have set a reasonable take profit . Just thought it would have a nice run up like Euro.Oh well another lesson learned. I can actually print a book by that title now.
ANOTHER LESSON LEARNED .
Thanks for listening,
Trade well and pip plenty.
Nadia.

Glad you like my trade plan ....I'm not touching anything at the moment...the trend is up...but signal is down...but bounce is happening...Watch what happens at London Open..the RICs was bad and this often affects Cable when London comes on line...I'm out of the market tonight...going to sleep...so far the week has been great, so I'm not looking for any trades.


Hey Bil!

I love your post!!!!

Also, don't kick yourself on Cable...you did absolutely the right thing! (Last week I was struggling emotionally w/what you are now...what to do when you are up +90....let it run? Cash out? (I had 3 trades turn from +60 - +90 close at BE....It was psychologically aweful!). Thats why multi lots are nice...close one and let the rest ride (yeah, I try to let them go b/c of "let your profits ride."...& find it doesn't work that well. I love how you held the E/U trade!! NICE!!!!!!! Lastly...again...don't be bugged by Cable...I think you could have opportunity still for pips! It also isn't acting the way it should & I don't get it! G/J too is acting funny in comparison to E/J and U/J...hmmmmm

See y'all in the a.m. Trade well and make lots of safe pips ( my pips are sleeping happily in their little account, nestled safely away for the night...LOL! Def. time to sleep!! Yikes!!).

Here is a written copy of daily wrapup for the 12th of September.