Trade the Curve | Page 7 | Forex Factory

Options

Go to
Permalinks
Print Thread

Related Instruments

EUR/USD

Similar Threads

EA Backtesting and Curve Fitting Concern 2 replies

Trade the Curve 5 replies

Can you "Curve-Fit" six years of data? 7 replies

Learning Curve 2 replies

The Magical Bell Curve of Standard Distribution 23 replies

Attachments: Trade the Curve
Exit Attachments

Trade the Curve

  • #121
  • May 22, 2008 4:15am May 22, 2008 4:15am
Trader Tips (or expensive lessons I have learned over the years)

Learn to Observe First and Trade Second

A good trader must be confident and act decisively. We all have a tendency to feel as though if we don't hit the button immediately, we will lose a perfect opportunity. While this is certainly the case some of the time, it is not the rule. Acting decisively and quickly are two very differnet concepts. When trading price distribution areas or levels, it is better to observe first and trade second in my opinion. As the market builds value near a level, it will often re-visit this area more than once. In other words, the market will give you the opportunity to establish a position. Keep in mind that the levels here are presented on a monthly chart. Although, the levels are computed every 30 minutes they do not change unless price action is extremely violatile and ranges are large. Let the market come to you and then set your position. Now you can observe again.
  • #122
  • May 22, 2008 7:00am May 22, 2008 7:00am
Quoting DownRiverTrader
The sterling trade worked out great today as we set longs at 9627 for a move to 9732 as we are moving toward ADV. Traders should have covered at this level for a 100 point gain.

The next move is a little more difficult to predict. We know now that we will either move up from 9732 to ADV or move back down to balance the area below 9732. If you look closely, you will see an unbalanced area just below this level.

If we move above 9732 area and build value here, look for an opportunity to set up longs for a move on up to ADV at 9837. I would cover here and wait.
If price moves down from 9732, the ledge down at 9665/90 may hold it. So if you set longs, you may want to cover and wait to see if it moves back up. If not then target 9632 where I would set up longs again.


http://www.morrisfunds.com/storage/f...05.22.2008.PNG

Just in case anyone is trading this....


The move up from 9732 has worked out nicely and we are now at ADV. I have covered my trade here and taken profit of 100 ticks. I would now wait and watch to see if the market is going to build value at this level. If not we could move back down to 9732 or leg up to 9956 next.
  • #123
  • May 22, 2008 7:25am May 22, 2008 7:25am
Let's quickly "observe" where we are just a few minutes before US data. We have come very close to testing the 5820 level. (5813) but have not yet. So I did not exit and I did not set shorts even though it appears we are trying to move down. I am still expecting an upward test of this value area at this point. If I am wrong, I will hold my longs until (if) 5517 is broken down. Otherwise I am long and expecting a move up through the 5820 level. Let's see how it goes.


Quoting DownRiverTrader
As you can see the Euro is building value above the ADV level of 1.5717 and is just a few points under the target area of 5820. This is the area we identified as a target early in the month and my long trade is up around 450 points.

Building value above ADV is a bullish sign and should give us some confidence in trading this zone. The next major directional move will come from the 5717 level. If it does not hold we could move down 5566 next.

I continue to hold my longs and am looking for price to test the 5820 area or above. If prices does in fact move up, I will hold here until this level fails. If price does not hold, I will take profit and stand aside and observe before setting up any short trades.

If price moves back down first, I will hold longs until the demand at the ADV level of 5717 gives way. If the market gives this level, traders can look to set new longs here and target 5820.




http://www.morrisfunds.com/storage/f...05.22.2008.PNG

  • #124
  • May 22, 2008 8:37am May 22, 2008 8:37am
As discussed last night, I set up longs at the ADV Level of 102.79. The long is working out nicely and we are now trading at just under the supply line mentioned below around 103.80. If anyone is long, watch this level closely. I am going to exit here for a profit of around 100 points. If we do push through here, I may set back up long if we trade above and pullback to this level. Nothing wrong with holding this onto a target of 104.39. I am exiting because my lot sizes have gotten a little out of whack.


Quoting DownRiverTrader
The USDJPY is once again approaching the key ADV level of 102.79. The plan here is remain bullish until proven wrong. Traders can look to establish longs at this level and target a move back up to supply at 103.80 and then onto 104.39. If the ADV level does not hold and price builds value below, traders can look to set up shorts for an extension lower down to the 101.75 level. I would cover at this level and observe price behavior before setting longs back up to ADV.




http://www.morrisfunds.com/storage/JPY%205.22.2008.PNG


  • #125
  • May 22, 2008 9:08am May 22, 2008 9:08am
The EURO is pushing through ADV around5717. Looking to buy or add at this level.
  • #126
  • May 22, 2008 9:25am May 22, 2008 9:25am
Quoting DownRiverTrader
The EURO is pushing through ADV around5717. Looking to buy or add at this level.
DownRiver:
Can you please explain how you come up with the ADV. I love your method and I have been trying to learn as much as possible.
I am currently reading Markets in Profile by James Dalton to get a better understanding of value areas. I would appreciate any help you can give. Thank you very much.
  • #127
  • May 22, 2008 9:57am May 22, 2008 9:57am
ADV stands for Adaptive Dynamic Value. I named it this because it makes sense to me.

The ADV is a computer calc that I developed to project targets using price distribution. If you were able to combine the monthly charts to look to look at more data than just a week, it would be clearer. Unfortunately, my platform does not do this. Most market profile vendors allow you to combine the previous time frames to look at larger curves. I know CQG does anyway.

I am not willing to share my code. I have worked several years developing it. It is easy to do manually as you look back at longest lines, POC,etc. If you refrer back to some of the post I made early in this thread, I discuss how to calculate targets based on range extensions from the 1% and 2% levels. This is the core of the program.

I am glad you are studying MP. The book by Dalton is a good one and a little more down to earth. MP is easy to understand, but hard to develop a methodolgy around. My purpose here is to show you "how I trade". I am hoping it helps those interested in applying MP to their trading. I have never really spent a great deal of time studying MP. If you just understand where the buyers and sellers lie and where value lies than that is enough as far as I am concerned.

Quoting dctrader
DownRiver:
Can you please explain how you come up with the ADV. I love your method and I have been trying to learn as much as possible.
I am currently reading Markets in Profile by James Dalton to get a better understanding of value areas. I would appreciate any help you can give. Thank you very much.
  • #128
  • May 22, 2008 10:00am May 22, 2008 10:00am
For instance based on todays daily distribution, I expect the Euro to make a high of 1.5857 by the end of the week.

I know the bottom of the 2% value is 5741 - the low (so far) of 5697 = 44 points

Now I go to the top of the 2% value which is 5813 and add 44 points to it and I get 5857.


This would balance the distribution. Of course a bigger drop will effect my thoughts, etc. but this is the logic.
  • #129
  • May 22, 2008 10:15am May 22, 2008 10:15am
Maybe we will zoom up today. It looks bleak though, might be heading south.
  • #130
  • Edited 4:21pm May 22, 2008 4:11pm | Edited 4:21pm
Mr. DRT,

Is ADV working just like the Longest Line - 1.5462 we had at the beginning of this month or not? My guessing, it is, correct me if I were wrong.


Thanks and bless,
Trader8686
  • #131
  • May 22, 2008 5:23pm May 22, 2008 5:23pm
Quoting trader8686
Mr. DRT,

Is ADV working just like the Longest Line - 1.5462 we had at the beginning of this month or not? My guessing, it is, correct me if I were wrong.


Thanks and bless,
Trader8686
Yes. Except that it is a projected longest line based on my calculation. Think of it as a longest line based on serveral weeks of data instead of just the current month.

And please call me DRT. Unless you are younger than 21 and then I could be your grandfather in which ase it is okay.
  • #132
  • May 22, 2008 6:02pm May 22, 2008 6:02pm
The Euro came just a few points shy of the 1.5820 level early in the European session and was met with some heavy supply which sent it all the way back down to the ADV level of 5717. We finished the day just above this level. It is important to understand the significance of this level. The next major move will come from here. Either up or down and if you are position trader like me then now is an ideal time to position for the next leg. We may spend some more time building value at this level so be patient and stay on the correct side of the move.

I continue to hold longs until proven wrong. New long positions can be established now as the market is giving you the 5717 level. Target 5820. If this level breaks, target 5923.

If we begin to build value under the ADV level of 5717, I would exit my long positions and wait for the market to give me 5717 and set up shorts down to 5566.

http://www.morrisfunds.com/storage/f...05.23.2008.PNG

  • #133
  • May 23, 2008 1:58am May 23, 2008 1:58am
DRT, you are the man!!!!!

you missed by 1 pip the jpy. it has settled back around 104. are we building for a move up???
  • #134
  • May 23, 2008 4:02am May 23, 2008 4:02am
Quoting tenantro
Ok, I just did another test in Excel and I'm not getting the same value as you are for the Longest Line.

I exported 60 minute interval data from Metatrader to csv, opened the file in excel, selected from 2008.05.01 to 2008.05.12 including, applied the mode function on the interval and got 1.5403

Again, "the mode is the value that occurs the most frequently in a data set".

So in my test, 1.5403 is the most common value at which eurousd traded throughout this month, with 6 occurrences, the first 4 on the 8th of the month, and the rest of 2 on the 9th of the month.

I applied the mode function on the close prices for each 60 minute interval.

What gives? What am I interpreting wrong?

1.5462 only has 2 occurrences so far, on the 9th of the month.

That's not how profiles are calculated. You have to count every value that bar passes through. This usually done with 30m bars. For example a bar that spans from 1.5000 to 1.5050 would need you add 1.5000, 1.5001, 1.5002 etc all the way to 1.5050 to the mix. THEN you calculate the mode. It's not just closing prices but every pip between the lows and highs. The point is to add a data point for every price the market trades at. The close is just one price in the day. If you just use it you lose all the power of the method.

This is why you've had so much trouble getting the same values.
  • #135
  • Edited 8:31am May 23, 2008 6:47am | Edited 8:31am
DRT,

So far, my observation for EURUSD is that the price (1.5745 now) probably won't go below 5717, and will continue building values above it. A bias of bullish is mine. Correct me or modify my observation, if you can. Thanks.


Trader8686
  • #136
  • May 23, 2008 10:38am May 23, 2008 10:38am
DRT,


Thanks for the great week I will surely enjoy this long weekend thanks to you and your PD Curve. Look forward to hearing from you next week.
  • #137
  • May 23, 2008 9:24pm May 23, 2008 9:24pm
DRT,

Thanks for this thread. you are doing a great job. keep up the good work.

TG
  • #138
  • Edited 12:37pm May 25, 2008 11:42am | Edited 12:37pm
Okay, let's take a look at where we are with this pair. Early in the month, we spent a lot of time building value between Value Area [-2] and Value Area [-1]. Our monthly longest line remains down at 1.5465. Notice what happened here, traders pushed price in both directions until finally it was decided that the EURUSD was undervalued and price began to extend upward. Now the French Finance Manager may think the EURO is overvalued by 20% but the market does not agree (at this point). Once we extended up through the level we call ADV (Adaptive Dynamic Value) we have begun to build value in the Zone between ADV and Value Area [+1]. We have not yet reached the top at 5820 and this tells me their is major supply up at this area. No surprise here so far.

Late last week, traders tried to push the value back below the ADV, but the demand held and Friday we pushed up again trying to make new highs. So now we are right near the top of the Value Area [+1]. We have a US holiday so volume may be extremely light from North America tommorrow.

The question is....will we continue to build value and develop this current zone or push up to test the next zone. The trick here is to prepare yourself for the fact that we may trade back down to 5717. I certainly do not know the answer. I do believe we have not fully tested the top of the value area yet. I know we are above ADV so I remain bullish for a move up.

A Monday, with a US holiday may favor range trading. On the other hand, these times of lighter volume are known for running stop levels and you can bet there are stops above the monthly highs.

Bottom line is that I remain long until proven wrong, if we do test the upside and settle back in Value Area [+1] below 5820 then aggressive traders could set shorts back down to 5717. I am not willing to set shorts just yet until we test the top.

Any move above 5820 (and value building) signals a move on up to 5923 may be in the cards. We will need to get above the 5865 level.

Any move and value build below 5717 and I will cover my longs.

LONG TERM NOTE: If you continue to follow my trading, you will notice that I make comments like "the next major move will come from ADV". These ADV levels are extremely important and as I have said, they are DYNAMIC which means they will change every few weeks as the value dictates. Although this is not important to some of you, it is to me. I see a long term structure of the EURO heading to 1.65 and which point it may begin to weaken. I believe that this particular ADV level of 5717 will set the stage for this to occur. So I am watching it very carefully. Not that important if you are a shorter term trader at this point, but it does tell me that the direction is up and I expect new all time highs if this level holds as we move forward.

http://www.morrisfunds.com/storage/f...05.26.2008.PNG
  • #139
  • May 25, 2008 1:44pm May 25, 2008 1:44pm
Thanks for the eur/usd post. I always look to your analysis. It helps me in my trading. please also keep on posting for the USD/JPY pair.
  • #140
  • May 25, 2008 1:55pm May 25, 2008 1:55pm
Recall that we captured approximately 250 points in this pair by range trading the levels between ADV of 102.79 and the Value Area [+1]. Let's review where we are heading into the end of the month. We are holding above ADV at this point and we should remain bullish until (if) we build value below 102.79. The value area above ADV is fairly well developed at this point. I suspect we may try a push below 102.79 to test the waters but that is yet to be confirmed.

We are still trying to range down to the 102.79 level at ADV and if you are short from 104.39 then stay short and cover at 102.79. Watch this level closely as our next major directional move will come from here. If we move below 102.79 and build value then we will look to set up shorts and target the 101.75 level.

If 102.79 holds, we could have a very strong move up in the sessions ahead. To get a better handle on this pair, we need to see another test of ADV at 102.79 and see if this level holds. Monday's session in North America will be very light so we may want to stand aside until a better direction is indicated before setting up our next trades.


http://www.morrisfunds.com/storage/f...05.26.2008.PNG



Here is the 60M view for reference


http://www.morrisfunds.com/storage/f...05.26.2008.PNG

0 traders viewing now