Spud's Predictive MTF Stochastics

The question was asked, how do we use H4? The chart below illustrates the answer.
If one is a trend trader and looks at the long trends to be their guide then this would be a tempting short trade entry. Even our M5 trigger is indicating a short entry point. The H1 can pull you by the nose and say "follow me" because we look at that H4 way down there and expect everything to fall down before H4 can climb up.
In Predictive MTF Stochastics we are a little smarter. The M15 right now is flat and has risen with price since M5 has been building upwards. M30 is starting to curl over but it too is still up. H1 is a lagger...we are not following H1, we want H1 to follow us. H4..now there is a story.
The ideal position for H4 is up higher...we want M5 to lead the way. If M5 is going to start falling then where does H4 have to go? It is true that H4 could fall below 20%K and we could enjoy a nice down trend...but that is a risk. In Predictive MTS Stochastics we don't want any risks...we just want to make easy, reliable PIPS.
The H4 way down there is a warning, we know H4 will climb...it is a matter of when...not if. True, it might, may, possibly stick in the oversold and price might, may, possibly fall 500 pips...BUT it may also not.
Given where the other stochastics are we know they will fall, but they could also linger in the overbought area and pull the H4 up....that would kill us if we went short.
In otherwords, why guess? Let's wait and see and use our predictive skills to know what is going to happen.
How high do we want H4? There's no definitive number. It acts a bit like a guage but we have to use it in relationship to everything else.
What we always want to keep in mind is that we want to be building the H4 and not following where it has been.
So, in this position, I would not want to enter short here at this moment in time.

Here's your short entry at 11:05 (close of 11:00). Do you see the difference?
M5 has built a downward move in M15 and M30, H1 continues down. Here H4 is still our enemy in the sense we don't like where it is. However, now we have the support cast all in line.
The question here, is this a worthwhile entry with M5 so low? Remember M5 is a trigger, not what we follow. We only concern ourselves with M5 if it hits a trigger point. What it does in between the triggers is meaningless....as long as it is building our M15 and M30 in the right direction. If a change is going to happen (in a big way), our M5 will hit a trigger point.
Again, now we can play the game where we expect M15, M30 and H1 to fall down to pick H4 up. So long as we are BUILDING downward momentum in this trade we are safe trading this short.
The biggest factor here is waiting for M30. You may have jumped in when M15 headed down, but because H4 is so low we want to be sure.
The price rise in M5 can be a concern, but remember it is the M5 trigger that leads to significant direction change. If M5 hits the long trigger below 10% K, our price will probably drop and we'll still gain some pips, breakeven or lose a little, but we won't get killed. If M5 climbs to a short trigger above 90%K then we have to view what our M15 and M30 did in response.
This is a very safe short entry with little loss risk.

Here is where H4 can really throw you off it you let it lead and don't use triggers. See H4 rise. Remember that is the past 4 hours...but look where everything else is...even though price is flat they are still building a downward move.
Most important is we have no trigger. Exiting here will gain you a few PIPS but it is too early. Nothing here says a move upwards is building yet.

You wouldn't enter a long here so why exit a short?
Again, nothing here pointing up (except H4) so let's keep our eye on M15 and M30 and keep in our trade.

Here at 13:15 reinforces waiting for the M5 trigger. That M5 loop would put panic into us, but what did M15 and M30 do? Down and flat.
It's a difference of 20 PIPS, and do you notice how safe our trade has been since we entered it. We went into the negative 20 PIP range on a high but never did M15 and M30 tell us we were in trouble. Nor did we hit any M5 trigger point to exit the trade when we were in the red.
Now look at M15, H1 and H4. M15 and H1 are all the way down near 20%K. M30 is flat and we have a long trigger.
There is no way you want to go in the opposite direction of M15, H1 and H4 when we know and expect they will climb.
Do we have a long trade? No, we don't have proof for that either. It is time to exit and take our 40 PIPS or so.
We just wait until it all sets up again.
I should add the H4 up move is a legacy of the past 4 hours, just a portion of our trade window. This is something we need to keep in mind when watching the H4. We have a hard time saying that our recent moves are building H4 upwards given that everything else has moved down. Just remember we started this trade with H4 down near 20 %K, and it has done what we expected it to do...climb. We also expected the remaing stochastics to fall before H4 climbs..they have done that. This is the expected scenerio and exactly what we feared from the start when we looked at the first chart.

I apologize for the RSI line at the bottom of the M15 charts on the previous chart posts. That is not relevant to what is being explained here. Please ignore it.

Here's a completely different perspective. The chart below shows all our stochastics low. Unlike the previous entry of charts where we had our H4 at the opposite end of our trade, this time we want to ride the escalator.
We look for M5 and M15 to lead the way and then we enter when we have proof price is building M15.
We don't have to wait for M30 here. Why?
A bad fall in M5 will issue a long trigger. M5 and M15 are not high enough to drastically hurt us if price does fall. If we get another long trigger where will M15 and M30 be?
Safer and less risks....wait for M15 to rise above 20% K. Wait for M30 to turn up.
This is purely positioning of our guages. With everything low like this, and an M5 long trigger it is all in our favour.

We don't have a short entry so why leave our long.
M15 just cleared the 20%K and rising. M30 is a bit disappointing but stay on the escalator and ride M15 up.
Unless we see that price dip downwards, we stay long.

Here's our first true exit indication. After about 210 PIPS up. Notice how M15 and the price are both headed down. I admit the price is hardly moving downwards, but we've also exhausted our up escalator with M30 rising above 80%K, I'm pretty content to exit this one.
We could certainly wait until we see a much more definite downward price move with M15 headed down and the M5 short trigger, we certainly have lots of PIP room to play with....but when you see that price move and M15 go down...do exit.

Interesting thread Spud. Glad to see you're back on the scene!

thanks for your spot on analsys Spud. Here is something I wanted to toss at you guys which has become a help to me. The only indicators I have on my charts are MTF stochs, RSI and Wms.

The thing that has intrigued me in Forex is learning not just what direction price will go next, but the degree of price's current intensity or momentum. I have been using a variation of Stochastics along with your MTF stuff that is a help. The below is to gauge current intensity of direction.

As you know Wms %R is basically the same as the %K stochastic only on a negative scale. The chart below shows two settings of Wms%R (actually %K on my chart).

bold blue line: stoch 99,1,1 (same as Wms %R 99)
dotted blue line: stoch 49,1,1 (same as Wms %R 49)
yellow line on left shows the beginning of that trend
yellow line on right shows the end of that trend

KEY USE: where these lines converge >10 upward and <90 downward it shows strong potential for immediate or pending trend reversal. This line synthesis does not show up on every trend reversal, but when the lines do converge in the hot area there is most often positive pips waiting.

I do not use the lines for finding the set up for the next trade, but to guage momentum or intensitive of direction.

I should mention also that there are other nuances which these Wms line indicate, but for now I thot I would mention their usefulness helping to gauge momentum of price direction.

here is the same chart now with the %K line layered on the intensity lines

(note: K line is 14,1,3)

here is a view with price showing what actually happened in relation to these lines.

btw, i have an explanation for what I believe is going on in the middle of the chart. To some traders this will look like false signals to go north or noise as some call it. Yet, there is also info in those lines for possible continuance of that trend. I can explain my thots on that later.

thanks

KudzuFX , your approach to Stoch trading is very interesting but I guess this could create confusion mostly on newbie (like me) that are trying to understand Spud's approach.
It would be great if you could start a new thread where you teach how you trade the Stoch using the Wms

I took first trade with Spud`s Predictive MTF Stochastics Method.
Like to hear some advice about I`ve done right or not, and about my exit point.



Enter : 28/10/2008 9:42 GMT
1) 5m triggered Short (over 90) and headed down almost reaching 20 line
2) 15m was just closed under 80
3) 30m was above 80 but was heading down

Exit :
1) 30m was closed flat after 5m ranging around 50 line
2) 15m was almost reached 20 line (but still was heading down)
3) 5m was heading up (this was not considered as exit reason)

Exit with 25pips Profit

etc.
Maximum drawdown was -5pips
Maximum Profit was 58pips
Entry Price was Never touched after drawdown

At the moment I`m writing,
30m was turned down again
5m is turining down near 90 line (couldn`t passed 90line)
15m is heading up
1H down 4H up
Price was turning down and already passed my exit point

Should I wait for next long signal in this situation?
or better to exit and re-enter when 5m and 30m is turning down again?

Anyway, this system looks very reliable

hi skyline

KudzuFX information produce no confusion at all.

It relates compleatly to the theme

thanks for sharing Kudzufx.

But can you explain where you can read the continuation of the trend in the middle. i didn´t see?

thanks to spud and Kudzufx

[quote=deepermind;2308923]I took first trade with Spud`s Predictive MTF Stochastics Method.
Like to hear some advice about I`ve done right or not, and about my exit point.


Your entry point was fine. You exited a little early. I could only grab 33 PIPS max from this trade.
Remember the M5 trigger. Looks like you may have gotten a little nervous when the M5 stochastic headed north. We only use the M5 trigger points and price trend, don't follow the M5 stochastic line.
Look at what M15 and M30 are doing...they were building down. When M15 went flat we had no trigger on M5, and M30 was building down.
I can see on your chart the upward twitch on M15/M30. This is where that trigger is important on M5. Your exit was safe and you saw the stochastics move up. That's a good call.

Great explanation !
Thank you Spud!

I will try more on coming month and post my trades here.

Hi Spud.

Wonderful to see your analysis forecast H4 turnings with precision. I was wondering if we could device a methodolgy on your concept by 'always being in a trade', a sort of 'stop-and-reverse'. Turning of H4 in no small phenomena, and a strategy to extricate all those pips would be truly worthwhile. Best of luck.

Warm regards.

Zaffar.

Hi again,

Just a quick question Spud, at what times do you find the most productive with this system.

Thanks,

J