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4 Hour Strategy (MACD)

  • #7,881
  • Nov 1, 2007 2:26am Nov 1, 2007 2:26am
Quoting merrittb
I have a question for some of you more experienced guys. I've been printing out charts and covering up the page with another page and sliding it along and making trading decisions. I've found a problem. Take this chart for example:

Let's say I missed the optimal short entry point with the TC and resistance from the 21-EMA (which i've marked with a green circle)

So I know a good trend is in place and i'm sitting on the sideline being patient and waiting for a high probability trade (like a pullback to the 21-EMA) or a significant TC signal. But it just keeps on going.

Do I just sit this one out and watch the 200+ pip move? Or do you guys know of a good entry for this situation?

Thanks!
Merritt



I'll try to answer that,

Yeah it's suck to miss the 'optimal' trade just like that, it happened

What I'd do is, wait for pullback to 8ema, and then wait for that candle to close, just to confirm the movement, and double check with MACD and lower timeframe (1hr or so), to make sure the price is still in rhythm, and then enter from there.
Usually, there are 2-3 pullbacks to 8ema in sharp up/down move like that.

And again, don't feel down because you missed one trade, there's always plenty of them =) "Just shuck another oyster"

Hope that helps, and any additional comments would help.

ben
  • #7,882
  • Nov 1, 2007 2:46am Nov 1, 2007 2:46am
On my chart G/U looks very tempting now. So I have decided to write all pros and cons for the long trade. Here it goes:

Pros - 1. with the trend; 2. strong resistance line was broken the price went back to it and now is going up; 3. all MA's are separated and lookinf up; 4. there was a tail through the broken resistance, but the price closed above it; 5. there is a nice setup on the 1 hour off the 8 MA.
Cons - 1. no signal; 2. price level 1.2800 ahead and the price didn't close above it; 3. NFP tomorrow, the price may be in cinsolidation.

I think I better do this trade on the paper.
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  • #7,883
  • Nov 1, 2007 3:16am Nov 1, 2007 3:16am
Quoting benniardi
I'll try to answer that,

Yeah it's suck to miss the 'optimal' trade just like that, it happened

What I'd do is, wait for pullback to 8ema, and then wait for that candle to close, just to confirm the movement, and double check with MACD and lower timeframe (1hr or so), to make sure the price is still in rhythm, and then enter from there.
Usually, there are 2-3 pullbacks to 8ema in sharp up/down move like that.

And again, don't feel down because you missed one trade, there's always plenty of them =) "Just shuck another oyster"

Hope that helps, and any additional comments would help.

ben
Ben, you are absolutely right. What I want to add is that on the 4 hour MACD has also given a few TC from the 8MA, it's not very clear from the chart, but I think I saw it. So you could have made at least 3 more entries if you missed the initail entry. Especially good one was a bounce off the 8MA and some other on the 13th, don't know exactly which one was the other MA.
  • #7,884
  • Nov 1, 2007 3:29am Nov 1, 2007 3:29am
As you can see now after my divergence post and chart earlier: The 3rd bearish divergence on Euro worked out fine and the price dropped.
But as ira said: it's not a signal alone... can only be used to confirm an entry or to prevent a bad trade.
"The only successful substitute for brains is silence."
  • #7,885
  • Nov 1, 2007 3:34am Nov 1, 2007 3:34am
Quoting benniardi
I'll try to answer that,

Yeah it's suck to miss the 'optimal' trade just like that, it happened

What I'd do is, wait for pullback to 8ema, and then wait for that candle to close, just to confirm the movement, and double check with MACD and lower timeframe (1hr or so), to make sure the price is still in rhythm, and then enter from there.
Usually, there are 2-3 pullbacks to 8ema in sharp up/down move like that.

And again, don't feel down because you missed one trade, there's always plenty of them =) "Just shuck another oyster"

Hope that helps, and any additional comments would help.

ben
Both you and Ira have nice answers to this question! Remember the MA's give us the "speed" of the trend, so if price is only pulling back to the 8 it is in fast mode and entries can be made w/price bounces from there. Another idea is to look at a smaller time frame, such as the 1 hour and see if price is bouncing from the 21 on that timeframe. If it is, you could enter w/price bounce from that level.
  • #7,886
  • Nov 1, 2007 3:38am Nov 1, 2007 3:38am
Quoting DXTrade
As you can see now after my divergence post and chart earlier: The 3rd bearish divergence on Euro worked out fine and the price dropped.
But as ira said: it's not a signal alone... can only be used to confirm an entry or to prevent a bad trade.
Hi DXTrade,

Divergence is a heads up that the trend may be taking a breather or getting ready for a retracement. It can be very powerful but you should always remember to confirm w/price action or use a very tight stop w/BE level identified. Ira gives good info on divergence -- with the most important point being -- divegence can last a very long time in a trending environment. Wait for it to confirm before trading. I'll try to post some examples over the next few days (maybe over the weekend) to give you an idea how to start seeing it better. Once you get it, it'll just pop out at you.

Happy trading,
Pips
  • #7,887
  • Nov 1, 2007 3:53am Nov 1, 2007 3:53am
Quoting pips4uandme
Hi DXTrade,

Divergence is a heads up that the trend may be taking a breather or getting ready for a retracement. It can be very powerful but you should always remember to confirm w/price action or use a very tight stop w/BE level identified. Ira gives good info on divergence -- with the most important point being -- divegence can last a very long time in a trending environment. Wait for it to confirm before trading. I'll try to post some examples over the next few days (maybe over the weekend) to give you an idea how to start seeing it better. Once you get it, it'll just pop out at you.

Happy trading,
Pips
Thanks for this... always willing to learn.
But I know how it works as I have my MACD divergence indicator and my stoch divergence indicator on nearl all my charts.
I was just answering a question about divergence from unlv_tj and JimDandy
Thats why I posted the euro chart earlier.
"The only successful substitute for brains is silence."
  • #7,888
  • Nov 1, 2007 3:59am Nov 1, 2007 3:59am
Quoting JimDandy
This is the trade i made today in the audusd. I took the trend continuance signal on the Macd. (When the red turned to green). At the close of the 4 hr candle I got in the next candle at .9216. I set my profit target a little below at the previous high but as time went by I lowered it some as fed news got closer. I wanted to be out by the time the craziness hit. I took profit at .9258. Then as you see on the next candle it went all the way down to .9212. before up........crazy. Glad I was out of the trade by then. I initially set my stop just below signal candle at .9178 about 38 pips below. And initially my target profit area was 50 pips up at .9266. So risk to reward ratio was good. Now the hard part. The wait..........as you can see for 12 hours it made small candles. I moved my stop up a little but still kept it below the yellow 8ema. At the end of the 4th candle almost 16 hours later. I reached my target area and took profit at .9258. I was trading live mini account so each pip was a dollar. 42 bucks in my account. Thanks Phillip. Not for the money but once again for having the heart of a teacher. You are truly a friend to us all. pipip ...........JimDandy........
p.s. Notice the divergence now forming..........
Hi JimDandy! Really nice trade on AUD today!

One thing we need to remember w/trading a 4 hour chart is trades may take awhile to develop how we perceive them. In my testing, 8-12 hours is not uncommon -- in my live trades, 4-8 is very common when entry is made off the 4 hour. In my own experience, I remember thinking a trade should immediately give me pips and was very impatient waiting for it to develop (and sometimes still am) -- in reality the market can take awhile to move and hit our profit levels. The best thing to do is sit tight if nothing significant has changed. If you are comfortable with the amount risked, there is no good reason to close your trade because it is taking too long as long as the parameters are the same as when you entered and your plan is still valid. (I did close a cable short tonight early at a 20 pip loss because I realized the risk I had taken on was way beyond my comfort zone today (my mood is a bit mixed and thought that it was a bad idea to be in the market tonight -- especially with a pair that has taken out close resistance levels).

Again, Really nice trade plan on AUD! Happy trading.

Pips
  • #7,889
  • Edited 4:14am Nov 1, 2007 4:01am | Edited 4:14am
Quoting DXTrade
Thanks for this... always willing to learn.
But I know how it works as I have my MACD divergence indicator and my stoch divergence indicator on nearl all my charts.
I was just answering a question about divergence from unlv_tj and JimDandy
Thats why I posted the euro chart earlier.
OK...Great My comment on divergence examples was really for people who don't understand how to spot it -- just meshed it in w/the reply to you. Must remember not to be so general when answering specific. OK..I need sleep! Happy trading.

Pips

PS. I was actually quoting your post because it was a good point and I wanted to emphasize it and add to it...sorry for the confusion
  • #7,890
  • Nov 1, 2007 4:07am Nov 1, 2007 4:07am
Would this be a good example of a 4H bounce of the 8 EMA confirmed by a bounce of the 21EMA on the 1H?
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Phil419
  • #7,891
  • Nov 1, 2007 4:10am Nov 1, 2007 4:10am
Quoting JimDandy
Wish i could give you a definitive answer but maybe one of the others can tell you how to best utilize this "divergence" info. I've been wondering the best way to "play" divergence. Howboutit pips or ryan or palmer can you shed some light???......pipip Jimdandy.........

I will do some searching on FF and see what
i find.........
This was the post for divergence play....will try to post some examples later in week...

Also, in another post JimDandy made an amazing statement that I really admired! He referenced how he is trading a small account to get the feel for trading. This is great info...once you have good results on paper and demo, switch to a small account and trade live. Money has the tendency to change how we view trades. A friend once told me, you are only sane when your money isn't on the line in the market .....

Thanks for the wisdom JimDandy...

Goodnight all!
Pips
  • #7,892
  • Nov 1, 2007 4:28am Nov 1, 2007 4:28am
Quoting wernbrenk
Would this be a good example of a 4H bounce of the 8 EMA confirmed by a bounce of the 21EMA on the 1H?
Ohhhh...You picked a great example! This trade is so complicated on the 4 hour, you sneaky fish! I really do need sleep, but can't resist!!!

Yes, the 1 hour shows great bounces. The 4 hour shows a move through the 21 then a pullback and move away w/TC...this is a strict 4 hour signal for long w/market motion. The tricky part was the resistance lines, so a 1 hour entry could have been used to confirm that price was really moving away from the 21 and heading back up to the 89 region.

Remember too, this would be considered (in my opinion) countertrend b/c of the strong downward move, so you would def. want to confirm that price was going up. For me, I would have wanted to see a break and close above resistance along w/market motion setting up. Once my level was breached I would have taken on the odds that price was heading home to the 89/200 area. Again, super example! The two bounces from the 1 hour chart's 21 today def. could have been areas to enter trade long provided your r:r was in line. (last time, promise)...Great example...hey, for some fun, when you have time, look back at the 1 hour charts on pairs that are trending really nicely already...Much easier to see the "high probabilty of entering w/MA bounce)...Look for trades too where the price is going through the 89, with the 21/8 nearby and 200 not in the way (one of my favorite setups, but haven't seen it in awhile). But..Your 1 hour chart shows nice market motion w/the break through MA's pullback to MA, Move Away, etc.

K....I'm just rambling...Happy Trading,
Pips
  • #7,893
  • Nov 1, 2007 4:51am Nov 1, 2007 4:51am
Quoting pips4uandme
Ohhhh...You picked a great example! This trade is so complicated on the 4 hour, you sneaky fish! I really do need sleep, but can't resist!!!

Yes, the 1 hour shows great bounces. The 4 hour shows a move through the 21 then a pullback and move away w/TC...this is a strict 4 hour signal for long w/market motion. The tricky part was the resistance lines, so a 1 hour entry could have been used to confirm that price was really moving away from the 21 and heading back up to the 89 region.

Remember too, this would be considered (in my opinion) countertrend b/c of the strong downward move, so you would def. want to confirm that price was going up. For me, I would have wanted to see a break and close above resistance along w/market motion setting up. Once my level was breached I would have taken on the odds that price was heading home to the 89/200 area. Again, super example! The two bounces from the 1 hour chart's 21 today def. could have been areas to enter trade long provided your r:r was in line. (last time, promise)...Great example...hey, for some fun, when you have time, look back at the 1 hour charts on pairs that are trending really nicely already...Much easier to see the "high probabilty of entering w/MA bounce)...Look for trades too where the price is going through the 89, with the 21/8 nearby and 200 not in the way (one of my favorite setups, but haven't seen it in awhile). But..Your 1 hour chart shows nice market motion w/the break through MA's pullback to MA, Move Away, etc.

K....I'm just rambling...Happy Trading,
Pips
Wow pips! Good stuff! I have actually been backtesting this week, exclusively looking at market motion. AND I THINK I HAVE FOUND THE 8TH WONDER OF THE WORLD!!!!!!!

This thread should actually be the 4H Market Motion Method and not MACD!!!! I'll publish some charts later to show some of my findings, but I am truly excited. There is (almost) no way that one can NOT make money on this thread. It's there, just be patient!

Regards
Phil419
  • #7,894
  • Nov 1, 2007 7:20am Nov 1, 2007 7:20am
Quoting merrittb
I have a question for some of you more experienced guys. I've been printing out charts and covering up the page with another page and sliding it along and making trading decisions. I've found a problem. Take this chart for example:

Let's say I missed the optimal short entry point with the TC and resistance from the 21-EMA (which i've marked with a green circle)

So I know a good trend is in place and i'm sitting on the sideline being patient and waiting for a high probability trade (like a pullback to the 21-EMA) or a significant TC signal. But it just keeps on going.

Do I just sit this one out and watch the 200+ pip move? Or do you guys know of a good entry for this situation?

Thanks!
Merritt
Merritt:

Excellent question! This is where the 1hr charts come into play. Go back and look at the 1hr charts for the entire time the 4hr was 'riding the 8ema'. Now, go back a few posts and looks at wern and pips posts.

Wern: as long as you recognize the Rhythm on the 4hr charts and have the method down, the 1hr can be very profitable.

BUT: For the new folks, please get the 4hr method down first. Understand what the Rhythm is and be able to see it. The 1hr chart is a very aggressive approach. Smaller timeframe = more trades = more potential...LOSSES. Don't start with the 1hr charts and skip anything. Start with the 4hr...patience.
  • #7,895
  • Nov 1, 2007 7:36am Nov 1, 2007 7:36am
Quoting pips4uandme
Hi DXTrade,

Divergence is a heads up that the trend may be taking a breather or getting ready for a retracement. It can be very powerful but you should always remember to confirm w/price action or use a very tight stop w/BE level identified. Ira gives good info on divergence -- with the most important point being -- divegence can last a very long time in a trending environment. Wait for it to confirm before trading. I'll try to post some examples over the next few days (maybe over the weekend) to give you an idea how to start seeing it better. Once you get it, it'll just pop out at you.

Happy trading,
Pips

Pip's has a great point, I used to play all CT trades for several years off the 3min and made good money doing it, the problem here is on the longer times it shows a better trend and when you could of lost 6 in a row going for CT trades if you went TC trades you would of made money. Remember when doing CT trades you are right at the top and bottom. When doing TC trades you are right the whole movement but the top and bottom. I would say if you big on CT trades use a filter such as BB to trade the extremes, what happens a lot when people do CT trades is they get in on a small pullback only to get a few points or get stopped out. It's hard for me also to do the TC stuff because I never have done it.
Keep taking CT trades, I need more money
  • #7,896
  • Nov 1, 2007 7:48am Nov 1, 2007 7:48am
Quoting Palmer
Merritt:

Excellent question! This is where the 1hr charts come into play. Go back and look at the 1hr charts for the entire time the 4hr was 'riding the 8ema'. Now, go back a few posts and looks at wern and pips posts.

Wern: as long as you recognize the Rhythm on the 4hr charts and have the method down, the 1hr can be very profitable.

BUT: For the new folks, please get the 4hr method down first. Understand what the Rhythm is and be able to see it. The 1hr chart is a very aggressive approach. Smaller timeframe = more trades = more potential...LOSSES. Don't start with the 1hr charts and skip anything. Start with the 4hr...patience.
Thanks Palmer.

Am I right in saying that this strategy is only useful in a +2/-2 rhythm strength?

Wern
Phil419
  • #7,897
  • Nov 1, 2007 8:07am Nov 1, 2007 8:07am
wern:

Yes and No. Think about it...If we're at a +1 price is still above the 89, below the 8 and can still be above the 21..other way for a -1. So if the 4hr is at +1 there may may be a Tc setting up. Price can still be +1 if we're above the 89 and below the 21. Positive = bullish, Negative = bearish.
  • #7,898
  • Nov 1, 2007 8:22am Nov 1, 2007 8:22am
This question is open to everyone

As a rough guide how long should you have been actively trading the 4 hour system before you start trying to add in the 1 hour variations?

Also how many trades do people make a week on the EURUSD and GBPUSD?

I realise these may be difficult to answer accurately but it is really to give me an idea of how many signals I could/should be looking at each week. I have been looking at the thread for several months and have really just decided that I need to do some in depth analysis to get to grips with things. I have tried to take the easy options before and it has not paid off. I guess it just has to come down to hard work.

The one thing I have learnt is that price action is very, very important. Personally I find support/resistance a bit more difficult to assess and then to interpret. This system really semms to incorporate the majority of the components that are important in trading the forex market.

Looking forward to one day being able to post a trade with some form of logic behind it.

Mister ED
  • #7,899
  • Nov 1, 2007 9:31am Nov 1, 2007 9:31am
Quoting wernbrenk
Wow pips! Good stuff! I have actually been backtesting this week, exclusively looking at market motion. AND I THINK I HAVE FOUND THE 8TH WONDER OF THE WORLD!!!!!!!

This thread should actually be the 4H Market Motion Method and not MACD!!!! I'll publish some charts later to show some of my findings, but I am truly excited. There is (almost) no way that one can NOT make money on this thread. It's there, just be patient!

Regards
Its the patience, thats the killer.

Anyway, I noticed a few posts ago that a small discussion began regarding adding to positions and profit targets etc.

I was just wondering if anyone is using the 8 EMA itself as an exit tool?
For example only closing a profitable trade when a 4hr candle closes against the 8EMA.
The reason I am asking this is that it seems logically congruent, or "in harmony" one might say, with the entry criteria of the method.
What I mean is when we are above the 8EMA we are bullish, correct? Therefore why would we close a profitable trade which is still above this threshold? Logically (with regards to our entry) we would not?

This leads me to believe then that the only reason to close early, at a predetermined target, is a psychological crutch, a tonic for the ego as it were. (BTW please don't think I'm criticizing anyones trading, far from it, as I am not yet a good trader, I'm also not a very bad one either).

Furthermore, if we were able to squeeze more profit from each trade we would be adhering to the "trade less, make more" paradigm. This is something which 99%(?) of the senior (read old) traders on the forum espouse.

Here is an example. Take the recent Sterling rally, using the 4Hr only;

Initially we would be stopped out on the highlighted entry, but another TC gets us right back in there at 527. Then we would manfully (sorry ladies) ride out the small retracement, and lo another TC, so we add at 649. Then an extremely small breather and another TC hoves into view, we add at 720. Now we are at the present and would have added at 820, and be losing on this one.
This means our average position is around 687 ish, so we would be 113 pips up on average, but with a monster position 4 times larger than our original entry. PLUS the rally could continue in our direction, and this really could have been the $64,000 question.(OK, not on my micro account but maybe $640).

Now before everyone starts moaning I realize that this kind of rally does not happen too often, but they are quite common. Just zoom out of the 4HR chart. A further potential benefit is that we could discount the news to a degree, as we would not be so close to the market.

I am aware that this kind of post probably raises more question than answers,(at least it does for me);
1.How do we scale in?(pyramid, same size units etc).
2.How, if at all, do we trail the position?
3.When is too soon/late to add?
4.Should we then begin to scale out?

However, when we find a decent solution to these problems we can ask ourselves $64,000 questions all the time!
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  • #7,900
  • Nov 1, 2007 9:39am Nov 1, 2007 9:39am
Quoting Mister ED
This question is open to everyone

As a rough guide how long should you have been actively trading the 4 hour system before you start trying to add in the 1 hour variations?

Until you understand it. That is to say you know market rythym when you see it. So its all about how quick you "get it" . Demo trade it until you are satisfied with your rate of success over say.........the last 20 trades. So it all depends on you...........

Also how many trades do people make a week on the EURUSD and GBPUSD?

As many as the price action (rythym) says. You can make as many trades as you want. But only the ones that make sense from the price action will make some pips. So it all depends on you..........

I realise these may be difficult to answer accurately but it is really to give me an idea of how many signals I could/should be looking at each week. I have been looking at the thread for several months and have really just decided that I need to do some in depth analysis to get to grips with things.

After several months of looking at this thread you should know these things. You're right it is time to get "in depth". I highly recommend going to the link at the end of Palmer's posts the forextradeblog. Go there and download the 13 lessons. (mp3's and pdf's)and sit back and listen and learn. Study the candlestick patterns. Download the homework charts and work thru them.....thanks again palmer for the site
I have tried to take the easy options before and it has not paid off. I guess it just has to come down to hard work.

You guessed right. This isnt easy but it gets easier with use. And after used successfully a few times, you get more motivated to study it even more.

The one thing I have learnt is that price action is very, very important.

Yes, In fact i would say that price action and the rythym is ALL thats important when it comes to recognizing the mood,speed, and highly probable direction of the next move, and where it is moving to. Even with the big news this week, for the most part the price action still was telling us the truth about what was going where.... However even if you have that down. Your own emotion can get involved and ruin it. But again I say......After you have demo'd it and start to see how well it works, your emotions become more subdued. I recommend taking trend continuation patterns only at first. They are the highest probability trades....and confidence builders. Set your stops correctly and practice good Money Management and Risk to Reward ratio trading....
So it still all depends on you........
Personally I find support/resistance a bit more difficult to assess and then to interpret. This system really semms to incorporate the majority of the components that are important in trading the forex market.

Thats why this works in trending and ranging markets both. Just keep your trendlines updated and note where the even cent levels are ......ie 1.4300 , 1.4400. And the fib levels of recent moves on multiple time frames.......

Looking forward to one day being able to post a trade with some form of logic behind it.

I look forward to seeing you post a trade also, whether it was a winner or a loser......let someone elses eyes have a look at it. It's a good way to get yours trained..........Hope i have motivated you to get off your bum.....(lol)..........All the info is here and available for free!!!! Down load you a demo of mt4 and step thru the charts one candle at a time with the F12 button and see how you would do.........It all depends on you..........Dont "follow" this strategy blindly. That wont work. Learn the strategy, get it into your heart, and then follow your heart.......your trained heart.........pipip........Jimdandy

Mister ED
Good pips to you!!!!
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