Precision, low-risk entries for discretionary systems.

haha yes dialist, i meant those three pairs

sorry for the slang scepter!

oh yeah, dialist, i am using dialy pivots. the start time for the pivots is the close of NY market at 5pm.

A small study I conducted on pullback entries suggests the following:

While the currency pair is trending, for example, let's take the minor EUR/USD recent downtrend, entries in the same direction of the trend, ie Shorting EUR/USD are most reliable during the following situations:

1- While monitoring the pair, you monitor 2 or more medium term charts, let's say the 30 minutes and the 1 hour

2- Putting 3 or 4 EMA on every chart. (I used the 10, 25, 50 and 65)

3- Looking at the 4 hour chart is essential to determine if you are moving against the main trend or with it and plotting the averages on it is also essential

4- Now, the currency is downtrending and making new lows, but there are always pullbacks. Note that the averages must be showing the trend, i.e, when you look at them from down to up, you see, the 10, then the 25, then the 50 and then the 65. This applies to the 30 min and the 1 hour charts. If this is not the case in the 4 hour charts, then the trend is just developing and is not strong yet, specially that the 1 day chart will show this trend as a correction

5- Now, the most reliable entry is when the price touches a moving average on the 30 min and the 1 hour chart at the same time. In other words, when you are watching the 30 min and the 1 hour chart, you will sometimes notice that the currency is pulling back on the 30 min chart and touching the 25 EMA and at the same time it is touching the 10 EMA at the 1 hour chart. This is a perfect entry point in which the pair is extremely exhausted and finding tough resistance on 2 different types of charts

6- A stronger and better entry point occurs when the pair pulls back to the 25 EMA on the 30 min chart and at the same time to the 25 EMA on the 1 hour chart and at the same time, pulls back to the 10 EMA on the 4 hour chart

7- It doesn't matter a lot where the pullback went, most important that it faces resistance on the EMAs on 2 or more different time frames at the same time. The more charts you see the pair facing resistance on, the more reasons it has to end the pullback and resume the trend, and the more the probability that the trade won't go against you except for a few pips, not more than 8 or 10, if it moved against you. So mainly if it moved against you, then you picked the wrong entry and the pullback is not over yet

8- Now, the long term study is essential to master this thing. In other words, you must study the 1 day chart very well before diving inside the shorter term charts for the mentioned signals

Let's apply this on the EUR/USD pair for the most recent action.

The study of the 1 day chart suggested that the EUR/USD is in a main downtrend since the 21st of April 2005. Starting the 5th of July 2005, the EUR/USD entered a correction phase and reached the 50 % retracement on August 12. The down-up move was preceeded by another down-up move which ended by the 50% retracement also. So, a higher probability suggests that the recent correction which sent the EUR/USD to 1.2484 will end at this level.

By all means, it was impossible to know that the 1.2484 was the exact top of the correction move, but there were signs since this high was reached that a downtrend was starting to develope.

Now, let's go down to the smaller charts and see what happens since the pair reached this high.

At August 15, 7:00 AM EST, the downtrend was confirmed on both the 30 min and the 1 hour charts after a series of new lows for the pair. However, the trend was not yet conirmed on the 4 hour or the 1 day charts. This suggests that short trades here are going to be more risky and more rewarding as well.

On August 16, at 8:00 PM EST, the price touched the 65 EMA on the 1 hour chart at 1.2368 and at the same time almost touching the 25 EMA on the 4 hour chart,while breaching the 4 moving averages on the 30 min charts but never making a new high above the 1.2372 which was reached during the previous day of trading which experienced a sell-off and then a sharp pullback, but closed lower.

This pullback was a very safe entry point, and even if it proved to be wrong, the drawdown would have been very very low. Think of it from the market point of view. Starting August 12, the pair started a slow drift downward and kept making new lows everyday. Many people were still questioning the emergence of the new downtrend and still sticking to the most recent trend, which was upward since the 5th of July 2005. So there is still huge resistance to pushing the pair lower. But day after another, 15, then 16 and the pair is going down everyday, so setiment is changing slowly. That's why 17 and 18 showed a sever decline in the pair.

So let's say that the entry on August 17 at 8:00 PM was a little bit risky. On August 18, yesterday, and between 12:30 AM and 1:00 AM EST, the pair pulled back up and reached 1.2294 and then retreated. This level was extremely important because it represented the 10 EMA on the 4 hour chart and the 10 EMA on the 1 day chart. Later on and between 3:30 AM and 4:00 AM EST, the pair pulled back up again and reached 1.2284. This was the real entry signal because this point represented the 25 EMA on the 1 hour chart as well as the 50 EMA on the 30 min chart as well. At the time this signal occurred, the downtrend was truely confirmed on the 30 min, the 1 hour charts and partially confirmed on the 4 hour charts, while it still looked like a correction on the 1 day chart.

Looking deeply to this signal, the pair never moved against the trade. The downtrend is still intact on both the 1 hour and the 30 min charts, and is strengthening on the 4 hour chart. And finally the trade now around a +120 pips trade.

Now, you are in the trade, where or when to close assuming that the trade goes in your direction.

Back to the market phsycology, we open the 1 day chart once again or the 4 hour, both will yield the same results, although the 4 hour chart will be better.

The market phsycology suggests that this downtrend will now be treated as a pullback to the most recent uptrend, so people will start looking at the fib levels to measure and see when will this downtrend end.

If you are conservative, the target will be 1.2160-1.2165, anything below this is extremely oversold. The fact is that the pair reached a low of 1.2124 and then pulled back up quickly to the 1.2180 areas. It's no surprise, the market never give anyone a fair value, but 1.2160-1.2165 is the fair value since the downtrend was confirmed on the 18th of August.

Looking at the big picture, the 1 day, suggests that this level is only a settling level, and then the main downtrend will resume, but not before a correction occurs. When this correction occurs, watch carefully the moving averages which the correction goes to and be ready to place your next short.

Any feedback????

Thanks,

Nader.

Sorry for being too long.

Based on the last post, which I was writing at 6:00 AM EST, I noticed that between 5:00 AM and 5:30 AM EST today, the 19th of August another short signal occured at 1.2186 when the EUR/USD touched the 25 EMA on the 1 hour chart and the 50 EMA on the 30 min chart.

I thought this might be useful for anyone here.

Thanks,

Nader.

First of all, thank you so much for admiring my post. I hope I have been useful to everyone who read it.

Secondly, there must always be feedback man Without feedback we will never discover our mistakes and work to correct them. Without feedback, we will just be a bunch of blind people walking in the dark and making sure that we will never hit any thing down the road

Thanks,

Nader.

Nader,
Thank you for taking time to share your studies with us. I am looking forward to getting home tonight and following your post on the chart, point by point.

Again, a great post Nader. Exactly what I was hoping to see on this thread. Have a great weekend!

Dial

Thanks for sharing your study Naraf! If I am looking at it right, it looks like there should be a sell signal @ 1:44 est. on the eur/usd @1.2177 using the 50 on the 30 min. chart and 25 on the hourly chart.Just want to make sure I'm seeing the way you do. Pipmon

Diallist,

I am not familiar with the Vegas Tunnel but will check it out. Dynamic trend lines ?? what?

Are you talking cop op xop when you mean fib profit targets?

I wonder if anyone has found a successful tactic that uses fib retracements or the cop op xop above?

Hmm just writing this has given me an idea for anyone who uses cms vt charts. There is a Bollinger/Fib tool that might be able to be used on small time frames to measure the extent of a pullback. I will have to check this out. Maybe similar to dynamic trend lines. But not sure precisely what that term means. They are lines, and are dynamic in that they change with price over time.

Lou

This is not really an example of different time compressions confirming each other. If you think about it the 25 EMA on the 1 hr and the 50 on the 30 min will always be quite similar. This kind of confirmation on two charts is not that meaningful. You could add the 100 EMA on the 15 minute, the 6 on the 4 hr and get pretty similar EMA tracks. We could even throw in a 12 EMA on the 2hr. Does that give us six confirmations? Not at all. Don't get drawn into thinking that confirmations from different moving averages are terribly meaningful when they are giving you similar data. In one trading system I used a 4hr 25 MA and a 100 1hr ma so that I didn't have to move from one chart to the other to know pretty much where price was at in relation to those two. Sure there were some small differences but I was trading the same kind of thing as the discussion here. I was just looking for a bounce off of that ema. So when trading bounces if the ma's are roughly multiples of each other they don't confirm each other any more than if you measured a distance to be 10 inches or 25 centimeters and concluded that the length was confirmed by two different measurement standards so the length has a higher probability of being correct.

FT

merlin i have a question. i have seen conflicting info on this and i want your input. when figuring a weekly pivot do you personally include sunday. also when figuring for monday due you use sunday or friday or both. i have seen several variations and i would like to know how you do it. jim

A very interesting point FT. I never noticed this little thing although it's very very important and essential to create a correct trade.

Thanks for this feedback. I will take it into consideration and make some modifications to see what will be the best moving averages periods to use.

Thanks,

Nader.

yeah there are a million ways to do pivot points.

my personal preference for daily pivots is 5pm-5pm EST.

for weekly, i begin at sunday 5pm and end friday 5pm EST.

You accept feedback well. If it's any further use I don't think that using multiple ma's on various time frames to confirm a pullback is necessarily going to help much. I think if you have one ma (which can be adjusted for various timeframes (such as 50/30min and 25/1hr) that the market noticeably respects as a s/r point then that is the only ma that is necessary to identify the retracement. (you may use other ma's for other things like xover or different levels of s/r but I think that once a retracement is made to the pullback the question to enter or not would probably have more to do with larger ma's indicating limitations that could prevent the bounce or other possible conditions indicating a reversal instead of a bounce.

For example: One thing I've noticed is that if you have a slow ma for support and a fast ma to signal a cross... and if you are trading bounces off the slower ma, that once the faster ma has completed it's excursion and is headed back toward equilibrium, that the liklihood of a bounce off the slower ma is reduced substantially. However I've also noticed that a bounce off the slower ma "before" the faster ma has a chance to begin it's return, has a much higher probability of bouncing and taking off for the moon.

FT

Hey Merlin, I've seen three posts (that I know of)vanish on this thread today. What's going on?
Billy

Makes perfect sense and I have not thought or seen that idea before. It can be incorporated into any MA strategy. That is a true gold nugget tip. Thank you.

oh just your everyday spam...they were removed by the spatula.

there were some legitamate posts removed too that were referencing the spam.

Anybody still use this system?

hmmmm.....