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The Art of Trading with MTF Stochastics

  • #21
  • Oct 18, 2007 9:13am Oct 18, 2007 9:13am
Quoting k2kv
I entered at 165.37 with stochs 5M/15/30 at 50/50/27, all moving up. Price had crossed the 38.2 fib. Moved up up 4 pips but got stopped quickly at 165.22 for a loss of -15 pips!
If your trade strategy is to wait for price to move through a major fib (like 38.2), and then target 61.8, just be mindful of the major S/R levels in between.

Trading this way is "safer" because you are making an assumption that the daily low/high is in place in order to establish your fib levels. A lot of folks don't like to try and pick daily tops/bottoms.

But on your trade, I see a few things working against you. You entered at 165.37 which was less than 10 pips from a the pivot acting as resistance. Also, the short-term 5M stoch was heavily overbought and due for a short term correction. Either wait for the 5M to make an oscillation, or enter after the pivot and fib50 was broken. Not a criticism, just my view for what it's worth.

Since typing my post, price moved back down to the 165.00 level and turning back up. This is more validation that the 164.85 level will hold for the low of day (LOD)...I see it moving back up to the pivot again
  • #22
  • Oct 18, 2007 9:25am Oct 18, 2007 9:25am
Nitro,

Trust me, I am wide open for criticism! I appreciate your comments and couldn't agree more. I was aware of the pivot, but my stochs were showing good direction and the 38.2 fib had been crossed. The pivot was my mistake -- I should never ignore it!

For some reason, my 5M had not turned as yet, so I felt the trade was going smoothly.

My fibs are drawn automatically from the previous day's H/L based on GMT.

Thanks very much for your input...
Quoting nitrofx
If your trade strategy is to wait for price to move through a major fib (like 38.2), and then target 61.8, just be mindful of the major S/R levels in between.

Trading this way is "safer" because you are making an assumption that the daily low/high is in place in order to establish your fib levels. A lot of folks don't like to try and pick daily tops/bottoms.

But on your trade, I see a few things working against you. You entered at 165.37 which was less than 10 pips from a the pivot acting as resistance. Also, the short-term 5M stoch was heavily overbought and due for a short term correction. Either wait for the 5M to make an oscillation, or enter after the pivot and fib50 was broken. Not a criticism, just my view for what it's worth.

Since typing my post, price moved back down to the 165.00 level and turning back up. This is more validation that the 164.85 level will hold for the low of day (LOD)...I see it moving back up to the pivot again
Jeff Singer, K2KV
  • #23
  • Oct 18, 2007 9:28am Oct 18, 2007 9:28am
hey all , i use the original spuds way of stochastic to trade retracement , i trade gbp/jpy btw , i watch for large gap between 4h 5sma and new bar (retracement sma learned from brilliant auslancos thread) and then wait for 15m n 30m upcrosses the 20 level from bottom , enter my trade at 15m sma and catch a quick 30 - 50 pips , the trade can sometime be risky since its mostly against the trend , so u need to wait good setup on all time frames ... shall post a chart the next time i get such trade ...
To Live is the rarest thing in the world , Most people exist , that is all
  • #24
  • Oct 18, 2007 9:28am Oct 18, 2007 9:28am
Quoting nitrofx
If your trade strategy is to wait for price to move through a major fib (like 38.2), and then target 61.8, just be mindful of the major S/R levels in between.
SCREENSHOT analysis of your trade:

1st RED LINE: Your entry...notice the 5M stoch in the red circle is high.
2nd RED LINE: A more optimal entry level since the 5M stochastic moved to 20 (green circle) and was turning back up. If you would have entered at this level (ex 165.00), now your 15 point stop is below the assumed LOD which is MUCH better support since that would be more difficult to break.

Just my view.
Attached Image
  • #25
  • Oct 18, 2007 10:05am Oct 18, 2007 10:05am
Nitro,

Your view is crystal clear.

Yep, I jumped the gun. My bad. Thanks so much for taking the time to post an easy to read chart. Makes lots of sense.

Much appreciated!

Quoting nitrofx
SCREENSHOT analysis of your trade:

1st RED LINE: Your entry...notice the 5M stoch in the red circle is high.
2nd RED LINE: A more optimal entry level since the 5M stochastic moved to 20 (green circle) and was turning back up. If you would have entered at this level (ex 165.00), now your 15 point stop is below the assumed LOD which is MUCH better support since that would be more difficult to break.

Just my view.
Jeff Singer, K2KV
  • #26
  • Oct 18, 2007 10:08am Oct 18, 2007 10:08am
Welcome maheswara,

I look forward to seeing your charts!
Jeff Singer, K2KV
  • #27
  • Oct 18, 2007 10:23am Oct 18, 2007 10:23am
Quoting k2kv
Hi Charlie,

Thanks for joining us!

Are you saying that if the daily stochastic is at one extreme, the hourly is likely to move to meet it from the other side? And, aside from price action, that's all there is to t?
Yep, that is the basic set-up. If the daily stochastic is stuck at one extreme, it is an indication of a trending market. The set-up is a great way to enter on pullbacks in a trending market.

When the hourly gets to the opposite extreme, and price action indicates exhaustion or rejection, there is a high probability that pullback will end allowing price & the stochastic to revisit the lows (or highs).

Spuds explanantion: http://www.forexfactory.com/showpost...93&postcount=6

I have just modified the timeframes to suit what works for me.

Take a look at the USDCAD chart from 10 Sept onwards, there are lots of set-ups.
  • #28
  • Oct 18, 2007 10:47am Oct 18, 2007 10:47am
Hi Charlie,

Thanks for your explanation.

I do recall reading Spud's description, but had completely forgotten about it! I like it and will give it a try -- looks almost too easy.

I love it when Spud would say that something so good, it was "too boring."

Charts appreciated, as always (I have to work on that myself)...



Quoting charlies
Yep, that is the basic set-up. If the daily stochastic is stuck at one extreme, it is an indication of a trending market. The set-up is a great way to enter on pullbacks in a trending market.

When the hourly gets to the opposite extreme, and price action indicates exhaustion or rejection, there is a high probability that pullback will end allowing price & the stochastic to revisit the lows (or highs).

Spuds explanantion: http://www.forexfactory.com/showpost...93&postcount=6

I have just modified the timeframes to suit what works for me.

Take a look at the USDCAD chart from 10 Sept onwards, there are lots of set-ups.
Jeff Singer, K2KV
  • #29
  • Oct 18, 2007 12:14pm Oct 18, 2007 12:14pm
I mentioned in my earlier post that the EURUSD had tagged R3 and was expecting short term downward pressure for the rest of the day. This happened at the 12:50 GMT 5M candle. At the same time, the GBPUSD hit R2, broke through a by 5-10 pips, and had all the signals of my trading style (including confirmation with the EURUSD corralated pair at R3). The other major important factor GBPUSD had in it's favor was the 2.0500 physcological level (double 00's).

I was in the EURJPY trade so didn't take this, but just wanted to show you that when tops/bottoms happen on one pair, they are almost happening on other correlated pairs.

The move went down from 2.0510, consolidated at the 32.8 fib, broke through and now is finding its resistance at the R1/fib50 cluster. The trade would have been good for target1 (35 pips - 38.2fib) and target 2 (50 pips - R1/fib50 cluster).

Here's the screenshot:
Attached Image
  • #30
  • Oct 18, 2007 12:39pm Oct 18, 2007 12:39pm
I use 30M stoch as the trend signal when it crosses each other or 23.6 76.4

15m stochastic as entry point and exit point
  • #31
  • Oct 18, 2007 2:09pm Oct 18, 2007 2:09pm
Jeff,

Thanks again for starting this thread. We are coming out of the closet! Well, it seems that the original Spud is alive and active eventhough there are slight variations from the core...but each of us has to find what works based on our temperament and personal/financial goals. Here is my way: I look at three charts (vertical aligned), 1min/5min stoch, 15/30/60/240 stoch and 30/60/240/1440 all with 78.4/50.0/23.6 levels. I also have four ema's that follow the Cornflower method by Lever. I use these ma's to help me confirm a trend and its strength.

I usually start looking at my charts at around 4:30 am est. The reason for this is that it keeps me from trading the London news (risky) but allows me to take advantage of the volatility that pound/yen offers until the London close. My target is 10-20 pips or more if possible. I trade basically the Escalator to Pips method. I use the one minute/5min stoch for fine tuning my entries and exits. I am always looking for the faster stoch to take off by itself so that I can enter when it springs back to the higher time frames.

I am realizing as I type this post that so much is left out because trading is as much an art as it is a science. TA provides the palette and brushes but the non-verbal/subjective plays a crucial role before, during and after you complete a trade. The title of this thread is very appropiate... to become intimate with a currency pair is a moment by moment experience and the more you become familiar with a particular pair, the more you feel like you are tuned in. I have a love/hate relationship with the pound/yen....you need an incredible amount of patience regardless of your situation. If you are down, you have to endure the drops in pips and if you are up you have to fight the urge to exit prematurely. Either way the fear/greed factor plays tricks with your mind...where is Yoda? Spud also recommends the Pound/Yen. It lends itself to a harvesting 20-30 pips several times/per day. That fits me very well because my goal is to increase my lots instead of going for hundreds of pips at a time.

Well, I apologize for this long post.... I'll leave the more technical contribution to our very qualified members of this forum.

Spud... we miss you.
Unus pro omnibus, omnes pro uno
  • #32
  • Oct 18, 2007 4:04pm Oct 18, 2007 4:04pm
Hi Moneda,

Welcome, and many thanks for your very kind words. And no need to apologize -- your wisdom and participation is always welcome! We've been extremely fortunate to have some very articulate members join us here (yourself included), and I've already experienced a great rush of knowledge, in just this first day!

Personally, I suffer from all the flaws you mentioned: little tolerance for drawdowns, and always take my profits too soon. And, far too few winners!

I'm a fair newbie to forex and, not unlike the experience of learning to play a musical instrument, it is taking me a while to learn the rudiments (much more time than I had anticipated, though), and it will take a while longer before I begin to develop my own personal style. But I'm workin' on it!

Thanks for sharing your method with us. You watch a lot of charts, more than me. I keep 10/21/50 MA's on several charts, which I got from Phil Nel, for the same reason you watch Cornflower. Unfortunately, I played with CF for awhile but was not successful. However, the concept of retracement to the 8 or 10 ema seems universal, so the MA's definitely help clarify price action of the moment.

Thanks again!
Jeff Singer, K2KV
  • #33
  • Oct 18, 2007 4:49pm Oct 18, 2007 4:49pm
I very much enjoyed reading, and now using, Spud's escalator theory. I have only used it on the GBP/JPY, mostly because Spud did it that way, but now because of the volatility that always seems to be there, even when the other pairs are flat. I hate the large spread, 8 pips, but if things line up correctly, it becomes a non issue. I have found the s/r on the 1 hr and day charts to be very helpful in predicting a range of movement. I am unable to just enter a trade and then come back in 4 hrs or so and see how it is going. I have not yet been able to stay in a trade for the 1 hr stoch to go from 80 to 20 or vice versa. That means I always leave pips on the table. So the good news is that I have always pocketed at least 30 pips, usually 50 to 70, and on some occasions I have broken 100. I use the 5 min to time the entries/exits and I often exit and enter 2 or 3 times in 1 ride. I will watch the 5 and 15 for retraces and I will get out with my 20 or 25 on the initial move. I will then re-enter and ride down to the next "floor" when I see the retrace ending. I enter again for 15-25 and wait for the retrace to develop again. Usually 3 rides or floors is enough for me and will have me between 50-100 pips. I don't scalp on the retrace either. I just take a break and let my heart rate re-stabilize for the next ride, if it develops. So besides not riding things from top to bottom, I also burn some pips on the multiple trades. Still not an issue, when you look at the big picture. The 5,3,3 on any chart is a very good indicator of nearing a top or bottom and for me, an exit. The s/r on the 1 hr and the day will give you a very predictable range, which can be right on target or get smashed. If the range looks to be 100, then I am happy with my 50 or 60. Larger the range the better, obviously. For some reason, I only seem to be able to catch the down rides. Only 2 trades moving up and they were in the 30 pip range. Don't really know why that is. I do reference the mac-d for strength and duration of a move and the rsi in conjunction with the 5,3,3 stoch for a bottom or top. I look forward to learning from each of you.
  • #34
  • Oct 18, 2007 5:24pm Oct 18, 2007 5:24pm
Quoting PipAV8tor
I very much enjoyed reading, and now using, Spud's escalator theory. I have only used it on the GBP/JPY, mostly because Spud did it that way, but now because of the volatility that always seems to be there, even when the other pairs are flat. I hate the large spread, 8 pips, but if things line up correctly, it becomes a non issue. I have found the s/r on the 1 hr and day charts to be very helpful in predicting a range of movement. I am unable to just enter a trade and then come back in 4 hrs or so and see how it is going. I have not yet been able to stay in a trade for the 1 hr stoch to go from 80 to 20 or vice versa. That means I always leave pips on the table. So the good news is that I have always pocketed at least 30 pips, usually 50 to 70, and on some occasions I have broken 100. I use the 5 min to time the entries/exits and I often exit and enter 2 or 3 times in 1 ride. I will watch the 5 and 15 for retraces and I will get out with my 20 or 25 on the initial move. I will then re-enter and ride down to the next "floor" when I see the retrace ending. I enter again for 15-25 and wait for the retrace to develop again. Usually 3 rides or floors is enough for me and will have me between 50-100 pips. I don't scalp on the retrace either. I just take a break and let my heart rate re-stabilize for the next ride, if it develops. So besides not riding things from top to bottom, I also burn some pips on the multiple trades. Still not an issue, when you look at the big picture. The 5,3,3 on any chart is a very good indicator of nearing a top or bottom and for me, an exit. The s/r on the 1 hr and the day will give you a very predictable range, which can be right on target or get smashed. If the range looks to be 100, then I am happy with my 50 or 60. Larger the range the better, obviously. For some reason, I only seem to be able to catch the down rides. Only 2 trades moving up and they were in the 30 pip range. Don't really know why that is. I do reference the mac-d for strength and duration of a move and the rsi in conjunction with the 5,3,3 stoch for a bottom or top. I look forward to learning from each of you.

Wow PipaV8tor sounds like you have a good thing going here. I would like to hear more and possibly see a chart with your strategy on it.

I too want in... I followed Spud's teachings until he went on vacation, then I tried to find something easier or took less time. EASIER and Forex do not belong in the same sentence. I have tried several different stategies but they all are mostly "Fluff". The orginator tells of his great past and the present never measures up.

So, I am back where I belong and look forward to learning together with you guys.

T4K
  • #35
  • Oct 18, 2007 7:11pm Oct 18, 2007 7:11pm
Hi Guys,

Thanks for joining in!

I think we're all going to learn a lot here, lots of successful traders participating. Great to see!
Jeff Singer, K2KV
  • #36
  • Edited 7:22pm Oct 18, 2007 7:21pm | Edited 7:22pm
Quoting PipAV8tor
I very much enjoyed reading, and now using, Spud's escalator theory. I have only used it on the GBP/JPY, mostly because Spud did it that way, but now because of the volatility that always seems to be there, even when the other pairs are flat. I hate the large spread, 8 pips, but if things line up correctly, it becomes a non issue. I have found the s/r on the 1 hr and day charts to be very helpful in predicting a range of movement. I am unable to just enter a trade and then come back in 4 hrs or so and see how it is going. I have not yet been able to stay in a trade for the 1 hr stoch to go from 80 to 20 or vice versa. That means I always leave pips on the table. So the good news is that I have always pocketed at least 30 pips, usually 50 to 70, and on some occasions I have broken 100. I use the 5 min to time the entries/exits and I often exit and enter 2 or 3 times in 1 ride. I will watch the 5 and 15 for retraces and I will get out with my 20 or 25 on the initial move. I will then re-enter and ride down to the next "floor" when I see the retrace ending. I enter again for 15-25 and wait for the retrace to develop again. Usually 3 rides or floors is enough for me and will have me between 50-100 pips. I don't scalp on the retrace either. I just take a break and let my heart rate re-stabilize for the next ride, if it develops. So besides not riding things from top to bottom, I also burn some pips on the multiple trades. Still not an issue, when you look at the big picture. The 5,3,3 on any chart is a very good indicator of nearing a top or bottom and for me, an exit. The s/r on the 1 hr and the day will give you a very predictable range, which can be right on target or get smashed. If the range looks to be 100, then I am happy with my 50 or 60. Larger the range the better, obviously. For some reason, I only seem to be able to catch the down rides. Only 2 trades moving up and they were in the 30 pip range. Don't really know why that is. I do reference the mac-d for strength and duration of a move and the rsi in conjunction with the 5,3,3 stoch for a bottom or top. I look forward to learning from each of you.
Do you use a higher TF (like the 1 hour or day) to confirm you trend direction on stochastics prior to entering based on the 5 or 15 min. chart?
  • #37
  • Oct 18, 2007 7:23pm Oct 18, 2007 7:23pm
Hi PipAV8tor,

An interesting -- if not heart-thumping -- approach to money management!

Are you using only the 1H stoch for your entry? I realize you are also watching the macd & rsi, but just the one stoch?

Thanks!
Jeff Singer, K2KV
  • #38
  • Oct 18, 2007 7:24pm Oct 18, 2007 7:24pm
Quoting k2kv
Hi Guys,

Thanks for joining in!

I think we're all going to learn a lot here, lots of successful traders participating. Great to see!

Thank you Jeff for starting this new thread. I needed this to get me back on track.

T4K
  • #39
  • Oct 18, 2007 7:25pm Oct 18, 2007 7:25pm
Here's a quick question:

Some of you are using 14,3,3, others 5,3,3. Spud's original concept called for 5,3,3 but then he changed it down the road.

Can you share with us which inputs you prefer, and why?

Thanks!
Jeff Singer, K2KV
  • #40
  • Oct 18, 2007 7:31pm Oct 18, 2007 7:31pm
You're quite welcome -- I was feeling the same!

Quoting tim4kaye
Thank you Jeff for starting this new thread. I needed this to get me back on track.

T4K
Jeff Singer, K2KV
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