Spud's Predictive MTF Stochastics

Spud,

If we can get a handle on the predictive nature of the stochs and the cycles, I think this would help us with the ups and downs and help us not to get so trigger happy to hit the panic button when the trade starts going against us. I experienced something of an epiphany on Friday trading. My stochs said to stay with the trade and I did. At one point, I was down -34 but always came back to the black time and again. But here's where I need help understanding. When do you consider the trade to be going against you? I mean we all use stops, some 50 and some 30. But at what point do you concede that it's a losing trade? The 15m may go against you for one bar and then turn right back around and go your initial direction. Some of us may have closed out at that point. What are your thoughts?

Nice post Spud thanks

This is a great analysis of the situation. The chart below is the same period as POST 226 by jdcompute.

Let's talk about the M5 trigger entry first. On the far right of the chart is the best entry point because we get a valid entry and we start an Escalator to PIPs with the M15 crossing abover the 20%K. The "prediction" would be that price starts to build with the M15 rising and the M30 rising to cross the 20% and keep on going. What actually happens I'll deal with on another post but this is the setup we want to look for to make safest trades.

The M5 trigger is designed to try and keep us out of trouble, notice the invalid triggers near the centre that keep us out o the flat market. We do get a small valid long but but by waiting for an Escalator to Pips to form from this, it is much wiser.

Now, when using the M5 trigger we can use the position of the stochastics and their movement relative to each other to get a better M5 entry. I've already suggested the Escalator to PIPS as one method. However, the crossovers of the different time frames can be used as well. You can see when we get a valid long from the M5 long trigger near the centre of the chart that we also get a crossover of the M15 rising above he M30. We've also had the M5 cross over and above the M15 and M30 a little earlier.

This would certainly be supportive of our long entry and in this chart we never see the M15 drop below the M30 (remember just use candle closes).
The result here is that our entry would be a little early and we drift in flat range for a while but eventually we get a better signal when the M15 starts to rise above the 20% K line.

On the far left of the chart are a few crossover signals. You can trade these with some practice. Notice where the chart begins we have a short crossover, then a long then a short. You have to grab pips on these and not chase long trends unless there is something else to support the trend. See where the M5 peaks at about 80%. This is not a normal M5 short trigger but it could be used as one. Here we are back to our Escalator to PIPS but with a twist...the M5 starts at about 80% and it comes down and crosses (drops below) the M15, this can be a short entry and we just ride the M5 or M15 down to an exit point....the M5 long trigger would be a good exit. Here we want to grab pips...not a perfect set up but certainly one to watch for. Don't forget to validate with M5 price too.

Continuing on from my last chart, we are either already in the trade or patiently waiting for a good trade to set up.

We have already had 2 valid long triggers. The long trigger on this chart is a little bit of a cheat at 10.6667 %K for the M5. However, I call it a trigger because we can see that M5 rose above and crossed both M15 and M30 to signal an entry. M5 price is up. We also had the expectation in the chart before that we were starting an Escalator to Pips ride up...a littlle early for that prediction but we are watching for it. If we enter long now we do so becuase we have had 2 valid long triggers, we have a another "cheated" valid long trigger and a double crossover of M15 and M30 by M5 up.

A stop signal in this trade is now a M5 short trigger, a downward cross of M5 going below either M15 or M30, our stop limit of 50 pips. Everything else, we hold our breath and take the ride.

Our profit exits are set at 20 pips, or the first M5 short trigger. I choose 20 pips here because of the "possibility" of an Escalator To PIPS forming. A conservative (smart and safe) approach would be to grab 5-10 PIPS here...meaning if we see 7 or 8 we grab them.

The conservative exit is reached quite quickly and we can easily nab 8 PIPS in this trade. This is the smart way to trade.

If we stay in we are now committed to our system stop signals. We hit a low period that has you wondering if it isn't time to exit. But when M5 crosses below 20% it is still above M15 and M30 and this is at worst still a long indication. When we hit another long trigger in the middle of the chart, it is appearing invalid and normally we would think of exiting. However, here we need to ride the M5 a little 1 or 2 candles and see if it bounces up like it does here in our chart.
Now we start a short ride up. M15 crosses the 20% mark but M30 is still below 10%. That leaves us quite aways away from a Escalator To Pips move unless M30 quickly decides to go up. Unfortunately we hit our M5 short trigger before that happens and we exit. We would have pocketed somewhere after our spread 2-10 pips.
Nothing to write home about but it shows how following our system on entry and sticking to it did pay off, even in a small way. This is the difference between exiting at a loss on emotion and sticking to the system and rules we set up when we entered the trade.
Some things to notice here is the "elasticity" developed between M5 and M15 and M15 and M30. This is a sign of exhaustion. The alternative is for M5 to stay in the overbought area and everything to climb to it. However, with M30 in the oversold and H1 as well.....this is unlikely.
A few tricks to note here:
M15 and M30 will normally move about 0-20% between candles.
If M5 and M15 are moving in an opposite direction to M30..in this case M5 and M15 move up and M30 down we expect M30 to move up but we also expect M5 and M15 to move down first so they can bring M30 up. With H1 down this "tension" is even greater. As such we can expect M5 and M15 to "snap" back like a rubber band and fall towards M30. They may not reach M30 just move towards it. we have to use our tools again to gauge the short side.

Spud,

Please correct me if I'm wrong at any point along my analysis and walk thru of this trade setup. The 4hr (not shown) is down. The 5m/15m stochs are way up and pulling up the 30m/1h. I'll pass on any longs right now because I don't like entering a trade when the 15m stoch is so far up. I have a short entry with the 5m being >90 but it's currently invalid because price is moving up and 15m/30m/1h are all moving up. So I'd expect some downward movement on the 5m/15m and a turn back up to continue bringing up the 1h and the 4h. Is that a correct assessment? We know that the 30m has to climb to bring up the 1hr. Do you think it will make it over 80?


**EDIT: The 30m stoch just crossed 80. Now I wait to see what the 1hr will do in relation to the 5m/15m.

Alright, the 1hr candle has just closed and the 1hr stoch updated. We're definitely better off waiting for a short setup now.

Alright..I smell a short The 5m is going to be first to start building the short according to our PMTF rules. I'm waiting on 5m price to build our 15m short.

Yep it certainly doesn't look like its gonna go up from here JD but one thing...

We've had a GAP open and this could be giving us misleading information on our stochs... I'm not sure if it matters or not would be interested to here Spuds policy on this!

Do you know?

The 15M and the 30M seem to be stuck to the ceiling right now. I am waiting on them to fall too.

No Cindy, I don't but I'm pretty sure we have to see a down move at some point. I was tempted to go long an hour ago to grab a few pips but I changed my mind. Posting these charts keeps me from doing stupid things

Yeah, like Spud says it's a little risky to enter now since they've gone up so much...not sure how much more upward momentum is there. The 5m stoch is all over the place right now. Even if we're going up more we'd probably have to come down and then back up to pull our 4hr up so at any rate, a short is in the queue.

The price has broke yesterday's high, so this trade has entered the realm of Spud MTF Fibonacci Stoch? My guess is the price will go up higher or stay above 80 for a while in accordance with MTF Fib Stoch theory.

To short, is it better to wait for price to break below yesterday's high?

I'm in and up +10 pips right now when I saw the bend on the 15m stoch.

Good job, I hesitated and am watching it drop...oh well.

Harry, if I remember correctly, that method was using only the 1hr charts. I suppose that even with the rise after breaking the highs, there is some downward movement before more upward as the lower tf's build the higher tf's. I think what we're concentrating on is catching those reversal points during all the climbing or descents as price rises or falls. By the way, I'm out right now at +13. I'm waiting on a new 5m short trigger.

Well done. The price at moment is supported by yesterday's high. I think you are right, this method is use for quick scalps as well with added opportunity for escalator ride.

Well, we saw a 70+ pips down-move. It looks like it may be done for a bit. I'm still in right now but I'm not sure how long I'll hang on to it before I bail.

Hey Spud, what do you think about fading the 5min moves if the 15 and 30 agree. For example. The 15 is below 20. 30 is moving down. The 5 spikes up, but you feel it is an invalid long. Would it be worth it to scalp for 5-10 pips on a short. Thanks for the help.

Nice one JD I'm spewin I didn't get in on that - Just curious where did you enter at 1.2886 or 1.2880?

1.2750 actually. Hey, no problem that you missed that one. Everything's heading down and will be turning back up sooner or later. 15m/30m are both down and the 1hr is heading down. Then we just watch the move back up.