Fozzy-style trading techniques

Initially it was my intention to only discuss PBs and a Fozzy-style indicator, but I have since decided to show how I use the basic 8 over 8 Fozzy indicator with other PA indicators.

First: this works for me, maybe it will work for you too. If not, I hope this information will help others to use PA, and especially PBs more. Don’t trade this way without a thorough understanding of what I am doing and only after backtesting and demo trading!

A few words about the criteria I like to use and why:

I’m looking for “A” trades; the very best, high quality setups. There are too many good opportunities to waste time with ‘marginal’ trades. I look at Monthly and Weekly charts to get a ‘feel’ for what a pair is doing; I trade off the Daily primarily and occasionally use the 4 Hour for an early entry. (I’ll discuss that in a later post; for now it’s all about the Daily chart).

PBs are well defined and many have their own interpretation of this indicator. I like a small body (I use candles because to me they are more ‘visual’) with a long wick; I don’t have any set rules about size and percentages and so-forth, I just know what I like to see; and certainly a very long ‘nose’ with a small body is ideal; there’s one on the attached chart. Some traders call this discretion.

Fozzy-style trading is about trend reversal, it may be for only a day or two or it may be much longer; again the attached chart shows both (it’s one of my favorites, GBP/USD. Like smjones, GBP/USD has been good to me too!). IMO Pin Bars are also about trend reversal, so when a PB shows up with a Fozzy-style trade signal, I pay attention. But only after I have seen two days of price movement in the same direction (the PB may or may not be included in that two days). I will not trade a reversal after one day of movement in the opposite direction; too risky. I may miss a few good trades, but I will be kept out of more losers. I want some momentum. I have two MAs on the chart for visual effect; helps me ‘see’ the current trend. It’s nice when these close and/or cross, but I don’t NEED that. I DO NEED the RSI/MA (Fozzy indicator) lines to be closing, close and/or crossing; that’s a large part of the trade signal. That’s one of the benefits of trading Daily charts (4 hour too), there’s NO HURRY, we have plenty of time to make a trade decision after carefully examining ALL the factors that go into our decision. One more thing: there will be Fozzy-style crosses as shown on the chart, but if I don’t have some form of PA agreement, I will ignore the cross; again, too many excellent opportunities to take unnecessary risks.

OK the chart:

June 5: possible PB, but RSI/MA not close. Wait!
June 6: spinning top, good!
June 7: Trade signal at the end of the day; Fozzy cross, MA’s cross with a “Bridge”, large bearish candle=momentum (I would have looked at the 4 hour chart during the day for possible early entry, more on that later)
June 8: 150+ pip trade with a small S/L needed

June 8: PB reversal? Wait and see
June 15: Fozzy cross and MA cross
June 18: Buy signal; 400+ pips and small S/L

July 4: PB? Not a trade setup! July 2 candle is UP, 3rd is Down, 4th is UP……No trade!

July 6: PB looks good, Fozzy cross possible, watching 4 hour for confirmation.
July 9: Watch the 4 hour chart and BUY, 350+ pip trade, confirmed on the 10th

July 11: PB? No!
July 16: PB? No!
July 19: False Fozzy, PA does not agree with this RSI/MA cross.
July 20: PB? No!

July 24: PB? Yes, confirmed during the day on the 25th. 350+ pip trade

July 30: PB?
July 31: Fozzy cross not close enough for me; in hindsight I missed a trade, but did NOT break my rules!
Aug 1: Another PB?
Aug 2: Buy signal confirmed with the 4 hour; small payout, about 90+ pips

Aug 3: PB?
Aug 6: PB confirmed on the 4 hour; but at the end of the day we have a Double Top with a lower close, nice PA to stay in the Sell! 130+ pips

Aug 8: PB? No the bosy of this candle is waaaaaay too big.

Aug 8 & 9: Same scenario as Aug 3 & 6 with the Double Top; Aug 9 has a Fozzy cross down
Aug 10: Sell……………but at the end of the day, is that a PB that just formed? Lock in your profit for current trend, then wait and see.
Aug 11: Sell continues………….550+ pips possible

Aug 16: PB? Fozzy indicator not close enough to decide, will wait one more day
Aug 17: Glad I waited………….amazing PB; but it takes three days for a Fozzy cross AND a MA cross AND a price break of the top of the PB
Aug 23: Buy at the price break, good momentum now, 200+ pips

Aug 27: PB?
Aug 28: This is a tough one. No Fozzy cross or even close on the Daily; the 4 hour would put you in the trade OR a break of the bottom of the PB during the day on the 28th.
Aug 29: If you waited, it was a loser.

Aug 31: PB? I need two consecutive days of price movement in the same direction; no here! 29th was UP, 30th was DOWN, 31st was UP; no trade!

Sept 12: PB? OK, time to “adjust the rules”. 7th was UP, 10th was DOWN, 11th was UP. But wait, the candle on the 10th was a 2 pip Doji; it doesn’t count, I will “ignore” it. Plus there was a Fozzy SELL on the 12th. When there is a Fozzy signal and a nice PB, I will trade that. I’m still in that trade!

Hopefully this explanation is helpful and I haven't left anything out or made too many errors. There will be some questions; I’ll do my best to answer them as time permits. And I will post something later about using the same indicators and criteria on a 4 hour chart. In the meantime, if that interests you, why not spend some time researching that on your own. Cheers!

Almost forgot: I do use S & R levels as appropriate; that's why I have the red and blue dot indicator to remind me of past levels of significance AND I will use Fib levels and retracements; but I don't see a need to explain that, everyone has their own method of applying these.

Many thanx to both Jarhead and BeachBum for your wonderful insights, guys. Its really nice to learn something new from Pros

Jarhead, I like your advice about zooming into small TFs for GY before taking a Fozzy trade. This is what Im working on right now, trying to use 5sma as an entry on the 4 H chart in the direction of the daily Fozzy cross, something like BB is doing as well. I noticed that the price will almost certainly move against me for some time, so I wait for it to retrace to the 4H 5 sma, look if this level is the same with an important Fib, and then wait for a 4 H Fozzy cross in the direction of the Daily Fozzy cross. In my backtesting, I noticed that if all these rules are accomplished, the trade is almost always a winner, at least for my first TP, which would be 70*ATR(20). Besides, doing this instead of blindly entering at day open minimizes my risk and extends my possible profit.

About taking trades against the main trend, I also take them, but I would usually enter with fewer lots, with final TP at ema 28, which seems to be a really good S/R at least for yen pairs.

I like very much my current technical setup for trading, I stopped trying to tweak it as I used to do before with every system I learned, because I know the only thing left to change in order to become really successful is my trading personality and style. Before Fozzy, I used to scalp on possible intra-day setups, but the mix of lack of experience and patience and eagerness to trade anything wiped me an account and half of another.

Im really grateful to Fozzy for offering me more than just a simple trading setup, it helped me develop a trading style.

Beachbum, I like your successful mix of Fozzy and pinbars. I had in my mind for a quite sometime now to read James thread, it would probably be my last input into my trading strategy. My final goal regarding my technical setup would be to trade only based on price action (this would mean candle setups, S/R, TL and Fibs) and using Fozzy as the solely indicator on the daily and even on smaller TFs, like I see you are doing already.

Im going to post a few charts as well, if its ok with you, as the starter of the thread, it would be nice to take some real time examples of setups, as they develop in the coming week.

For the coming week, I consider taking the GY short signal. My reason is that the upward move faded away at 28 EMA (last Thursday) and even if the pair is ranging, it has still room until the support at 229. Only 2 lots, but I wont enter at day open; I will instead wait, see if it retraces at 5 sma on 4H and enter at a better price than the current 231.30.

The funny thing is that EY didnt give a sell signal, and besides, it broke above the ranging zone, so I will be very careful, and also looking at what UY is doing at that downward TL. If the TL rejects UY, then I think the downtrend will resume for the yen pairs.

Hi,

I'm studying Fozzy method and really thank BeachBum for all the work he made.
I didn't finished reading the main thread and this may have been already seen.
I really like the Vegas Tunnel method and in particular its TP levels defined with Fib numbers (89, 144, 233, ...).

I enter trade according to the Fozzy rules and
1) I set SL to breakeven at 40 pips profit
2) I close half position at 89 level and let the other half running
3) As soon as price has passed 89 level by 40 pips, I move SL to 89 level
4) As soon as price has passed 144 level by 40 pips, I move SL to 144 level
and so on ... as long there is no inverse entry signal or I feel that price is going to reverse (PA or S/R).

I joined indicator I use. I use a MA12 for setting instead of 24 and 28.

Thierry

Hi BB, I´m new to the fozzy system, as far I know this works good with the daily and the 4 hr charts, right? this template you posted is for scalping on 15 min charts? if so, how good works for you. thanks in advance for your answer. keep your good work!

..

I just started reading about Fozzy over the weekend officially in search of a daily method (first read about its existence in Sept when I found this site). I didn't know where to post for the latest Fozzy attention so I did a thread search and saw this thread's been active.

I've read up to around page 60 of the 173 or so pages in the original Fozzy-initiated thread and I've read several of BB's bookmarked threads on the subject so I think I'll summarize where I'm at with it.

I don't know if there's been other recent refinements since the posts in September about using PA as a discretion along with fozzy signals, but I thought I might have my own suggestion on how to help filter out the possibly bad trades on the day following a Fozzy signal.

I haven't back tested too much, just a few months of visual testing with daily and 1 hour charts to confirm where the price went within the daily candle, for example if I saw a fozzy long signal and the next day did go a little long but then reversed and failed, I looked at the 1 hour chart and saw that the spike up probably happened during the Asian session if it was a failure.

So I'm continuing to test this but I wanted to write it before I forget about it myself. My idea was instead of blindly taking a market order on the new daily candle, wait until London starts. Draw a sort of Asian break out channel of the high and low that form before London on the potential Daily Fozzy entry day and if it does break out of that horizontal channel in the Fozzy direction, then take that as a confirmation. If it breaks the wrong way out of the Asian channel when London starts, it's most likely a false Fozzy.

I started testing in August 2007 with GBP/USD so I'll continue on to present and if it looks hopeful I may test further back.

I'm using the 8 RSI/8 EMA and no BB, and that indicator that gives the green spikes for Fozzy crosses without the BB's taken into account. I'm also using PA as a confidence - if i see a down move in progress and then a two bar high with a lower close combined with a short fozzy, I consider that a go, etc. (I read all 500+ pages of J16 public thread in the first month on the site).

Maybe my ultimate intention is to use fozzy as a set of training wheels for pure PA so I can earn enough pips to cover a J16 subscription... Too bad I can't direct my broker to transfer a certain amount of pips from winning trades over to J16 as a royalty payment.

I've looked at more fozzy signals in September 07 while using the 1 hour chart to monitor what happens on entry day and I'm seeing that candles may break either direction of an Asian session channel back and forth, but if it does break the channel in the direction of fozzy, either first or second regardless of the other channel side being broken or not, the trade seems to be possibly safe as long as there either has been a fib retrace of some recent 1 hour chart move, or if no retrace has occurred from a recent move, then allowance for a retrace before the trade continues should make it safe to take.

I think the point is....at least on Cable, if fozzy says go one way the next day but there never is a break that way from an Asian high/low boundary on the 1 hour, then fozzy may fail. If there is a break from an asian channel in the direction of fozzy, either before or after a break in the other direction from the Asian channel, fozzy has a good chance of working out either immediately or after a fib retrace up to 61.8% from some recent 1 hour chart move (subjective artform to judge that)

I still see failed trades that start to take off only to fall back down, but sometimes they are only doing a fib retrace of a recent 1 hour move and then take off again as planned (may take days and there may be a few more up/down fozzy signals in between) so the usual trading discretion can be still used to make it all successful based on tolerances.

I think maybe this might help just prevent some bad trades from ever taking off the ground by only entering them if price goes that way from the Asian session (filtering out false spikes during Asia that would have otherwise given a false confidence to take the fozzy). After the trade is entered, the same original risks apply.

Thexder..............

There are numerous ways to alter the basic Fozzy method; your post IMO discusses a few new ones.

Many people want a method that can be used with only the Daily charts. Some, like myself, work from a 4 hour chart as well. And a few traders have become adept at using smaller time frames like the 15 minute.

Any way you slice it, each trader will modify the basic method to suit their own particular trading style and schedule. Whatever works best for each trader is what will be embraced by that person.

Thanks for sharing some observations with us!

Here's a current live GBP/USD trade I just entered using the method I was attempting to describe. It may sound complicated and I know it's not the most mechanical pure daily method we all seek but it evolved for me based on the fact that I've become proficient with just the 1 hour part of this and I was able to incorporate it for my current skill/experience.

On the left is a Fozzy daily long signal at the close of yesterday's daily. This fits some of the criteria mentioned before - good price action (A pin at several areas of support, a few days of momentum in the target direction as well as a big move already showing strength).

On the right is the current 1 hour chart of the new day's activity. I drew two fibs, the blue across yesterday's range and the brown across the most clear and recent swing move leading up to London. The candles after the small fib were drawn are hovering beyond a 61.8% retrace of that little movement, showing some strength to the long side, and a break out of the Asian high fib has occurred so I am in. I have my stop set around the 61.8% blue fib from the previous day's range, which coincides closely with 70% of ATR(10) so I decided it's a good place. There has already been a 38.2% retracement of yesterday's overall move up but it could still retrace anywhere down to 61.8% area before going up if the daily signal is valid, so I'm ok with it there.

Now I have to figure out how to manage the stop if the move does go long successfully.