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4H 5EMA System

  • #1,361
  • Nov 20, 2008 5:38pm Nov 20, 2008 5:38pm
Hey Sterling

I checked the post for the one that Howard reworded a rule for ya and it looked pretty good. That is the way I understand the rule. And it seems to explain it a bit better. The post is #1282.

I will go over the rules myself today. Maybe see if I can tweek them a bit to make them more understandable for newcomers. I will try to email ya a copy over the weekend. If I dont talk to ya sometime today.

Good trading to all and have a great weekend

Chad
  • #1,362
  • Nov 20, 2008 5:40pm Nov 20, 2008 5:40pm
Quoting Pip Hunterr
Hey Sterling

I checked the post for the one that Howard reworded a rule for ya and it looked pretty good. That is the way I understand the rule. And it seems to explain it a bit better. The post is #1282.

I will go over the rules myself today. Maybe see if I can tweek them a bit to make them more understandable for newcomers. I will try to email ya a copy over the weekend. If I dont talk to ya sometime today.

Good trading to all and have a great weekend

Chad
Thanks man, have a good weekend.

-Sterling
Founder of Day Trading Forex Live
  • #1,363
  • Nov 21, 2008 12:03am Nov 21, 2008 12:03am
Quoting stersuhr
You should not have reversed the trade. You only put the reversal order in once the reversal candle closes. Alpari charts still have us short from 1.5014 with no buy order having been triggered as of yet.

-Sterling

Hi everyone,

Thanks for all the help you have given me so far, I'm really struggling to understand this wonderful system as fully as possible here as I am going to make this my staple system! So cant afford to shoot myself in the foot all the time haha...

After digesting what you have all said(thanks El Dee, Howard, Sterling etc), please let me know if the way i understand it below is correct.

Candle #2 makes a higher high than #1. We are stopped out of our short and we also initiate a long position cos this is a signal to go the opposite direction. However #2 makes a lower low than #1 later. So this long position would have been stopped out at the low of #1.

According to the rules, I dont jump in to reverse the trade right away as I have to wait for the #2(reversal bar to close). So when am I supposed to reverse the position here, at the open of #3 or at the low of #2? And according to Sterling, I have to just wait for a valid set up. Sorry I am very confused here, should I reverse or wait for another set up and why? I have marked all the subsequent bars so its easier for you guys to refer. If the answer is to wait for the next valid set up, should the rules read as "Only put a trade to go the other direction in the market after a proper reversal bar closes and if this reversal bar is the same bar that initiated the trade as well as stopped it out, dont reverse and wait for the next set up.

Oh yes just to update, at the time of typing out this post, i have now gone long at 1.4829

Thanks a million!
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  • #1,364
  • Nov 21, 2008 12:04am Nov 21, 2008 12:04am
The Sell trade was closed a few mins ago +97pips. A Buy Stop was also in place 8 pips above the high of the current Setup Bar (arrowed). Currently Long @ 1.4846, SL @ 1.47060.
Attached Image
If there is ever any doubt then there is no doubt.
  • #1,365
  • Nov 21, 2008 12:52am Nov 21, 2008 12:52am
Quoting piptrees
Hi everyone,

Thanks for all the help you have given me so far, I'm really struggling to understand this wonderful system as fully as possible here as I am going to make this my staple system! So cant afford to shoot myself in the foot all the time haha...

After digesting what you have all said(thanks El Dee, Howard, Sterling etc), please let me know if the way i understand it below is correct.

Candle #2 makes a higher high than #1. We are stopped out of our short and we also initiate a long position cos this is a signal to go the opposite...
Basically if you understand all the rules it will eventually all come together. None of the rules contradict another. That being said you know two things...one is that you dont put the reversal order in until the reversal bar closes, and two you need a proper setup bar to put a order in. Knowing that on the short we closed it when are buy got triggered but then the long got stopped out before it closed and therfore we dont reverse the buy to a sell. So what next, well #2 you know that you dont enter without a proper setup bar and reversal bar. So we were stopped out and at that moment couldnt reverse the trade because the reversal bar didnt close. So we go back to basics to get it the trade...a proper setup bar followed by a reversal bar. As of right now you should be long from 1.4843 with the stop at 1.4706 Hope this clears some things up for ya.

-Sterling
Founder of Day Trading Forex Live
  • #1,366
  • Nov 21, 2008 12:56am Nov 21, 2008 12:56am
Quoting stersuhr
Basically if you understand all the rules it will eventually all come together. None of the rules contradict another. That being said you know two things...one is that you dont put the reversal order in until the reversal bar closes, and two you need a proper setup bar to put a order in. Knowing that on the short we closed it when are buy got triggered but then the long got stopped out before it closed and therfore we dont reverse the buy to a sell. So what next, well #2 you know that you dont enter without a proper setup bar and reversal bar. So...
Thanks Sterling,

That helped a lot and its very clear now!
  • #1,367
  • Nov 21, 2008 3:49am Nov 21, 2008 3:49am
I am new to this thread and would like to thank Stersuhr for this great system.
I would be grateful if anyone can critique my understanding of the current trade.
I entered the long trade when the price moved 8 pips above the high of the set-up candle (1.4827)
My stop loss was initially placed 8 pips below the set up candle (1.4700 on my chart)
The current candle is already a set up bar for the next short trade so my stop loss is now moved 8 pips below the low of the current candle and a short sell order is placed at the same price. (I am assuming that the price will not come tumbling down on this candle)
If the next candle continues north I will move my stop loss and sell order to the low of that candle when it closes.
Hope this is clear ( and correct)
This is my first trade and already up over 110 pips- resisting temptation to jump ship and take profit- must stick to plan
Many thanks to you guys in anticipation
  • #1,368
  • Nov 21, 2008 3:56am Nov 21, 2008 3:56am
Quoting thedave
I am new to this thread and would like to thank Stersuhr for this great system.
I would be grateful if anyone can critique my understanding of the current trade.
I entered the long trade when the price moved 8 pips above the high of the set-up candle (1.4827)
My stop loss was initially placed 8 pips below the set up candle (1.4700 on my chart)
The current candle is already a set up bar for the next short trade so my stop loss is now moved 8 pips below the low of the current candle and a short sell order is placed at the same price. (I am assuming...
Hi Dave,

Congrats on taking the 1st trade! I did exactly what you did and will move my stop at the next candle as per what you have mentioned above. I know its tempting to take profits at this point when its a green candle all the way up. But I've learnt my lesson to stick with the system so that I can ride the big moves. Good luck to everyone, especially to those in the current trade!
  • #1,369
  • Nov 21, 2008 4:28am Nov 21, 2008 4:28am
Quoting thedave
I am new to this thread and would like to thank Stersuhr for this great system.
I would be grateful if anyone can critique my understanding of the current trade.
I entered the long trade when the price moved 8 pips above the high of the set-up candle (1.4827)
My stop loss was initially placed 8 pips below the set up candle (1.4700 on my chart)
The current candle is already a set up bar for the next short trade so my stop loss is now moved 8 pips below the low of the current candle and a short sell order is placed at the same price. (I am assuming...
Hi Dave,
Most dealers add their spread to the Buy or Offer price.
Assuming you have a spread of 3 pips then entering (i.e. buying) 5 + 3 = 8 above the setup bar is correct. When selling (your stop loss) you do not pay the spread again so it should only be 5 pips below the low of the setup bar.
Hope this is clear
You don't have to be right, just don't be too wrong
  • #1,370
  • Nov 21, 2008 4:28am Nov 21, 2008 4:28am
Hi guys,

I've been without posting for 2 days (work issues), but reading the thread whenever I can.

piptrees & thedave:
My chart is Alpari... I suppose yours isn't?
In my case I'm long since 1.4843 (too bad the next candle failed to be a new setup bar by 2 pips, as it would have given a much better entry).

Which brings me to a point where I'd like to leave a doubt:
If we're waiting for a setup bar, and we find one that makes, let's say, a high/low of 1.4900/1.4800;
If the next candle makes a high/low of 1.4850/1.4800 (meaning the same low, but lower high), is the first bar the setup bar, or do we consider it to be the second?

I understand the rule states "lower low & lower high" to be a setup bar for a long (so in the above stated, it would be the first bar);
However, I just want to make it clear, as the second bar would have given a much better entry and this is a very rare case.
  • #1,371
  • Nov 21, 2008 4:39am Nov 21, 2008 4:39am
Quoting tonirai
Hi guys,

I've been without posting for 2 days (work issues), but reading the thread whenever I can.

piptrees & thedave:
My chart is Alpari... I suppose yours isn't?
In my case I'm long since 1.4843 (too bad the next candle failed to be a new setup bar by 2 pips, as it would have given a much better entry).

Which brings me to a point where I'd like to leave a doubt:
If we're waiting for a setup bar, and we find one that makes, let's say, a high/low of 1.4900/1.4800;
If the next candle makes a high/low of 1.4850/1.4800 (meaning the same low,...

Hi Tonirai,

I would think that we use the first bar because the 2nd bar was a failed reversal bar that did not make a lower high than the first set up bar. So even tho the second bar would have made a better entry, I would still buy only when the 3rd or 4th bar makes a higher high than the first (above 1.4900). Hope this is correct because it just happened a few bars ago and that was what i did!

Cheers
  • #1,372
  • Nov 21, 2008 4:40am Nov 21, 2008 4:40am
Quoting tonirai
Which brings me to a point where I'd like to leave a doubt:
If we're waiting for a setup bar, and we find one that makes, let's say, a high/low of 1.4900/1.4800;
If the next candle makes a high/low of 1.4850/1.4800 (meaning the same low, but lower high), is the first bar the setup bar, or do we consider it to be the second?

I understand the rule states "lower low & lower high" to be a setup bar for a long (so in the above stated, it would be the first bar);
However, I just want to make it clear, as the second bar would have given a much better...
Good Morning Toni,
We had a similar situation to this the other day when a buy reversal bar didn't make a lower low but made a higher high but not by enough to trigger the order - Sterling's advice was that this was a failed reversal bar and the entry point stayed the same - It would be my guess the same applies in this case .
As this system is based on support / resistance, it is the resistance of the higher level that needs to be broken to confirm a change in direction - breaking the 'lower high' could result in a false entry that then hits resistance at the higher original entry level.
You don't have to be right, just don't be too wrong
  • #1,373
  • Nov 21, 2008 4:46am Nov 21, 2008 4:46am
Hi

One more common sense question just to clarify. When the next candle, opens, we adjust our trade by doing the following:

1) Assuming its still heading north, adjust the stop loss of our original buy to the low of the last candle,

2) put in a stop sell at the low of the last candle

3)Put in a stop loss for the sell at the high of the last candle.

Sorry it may seem silly but I have only been doing 1) & 2) but not 3)! I am afraid I may face the same situation as yesterday when the the current candle did a buy and at the same candle went lower than the last candle and I am not protected!

Thanks
  • #1,374
  • Nov 21, 2008 4:54am Nov 21, 2008 4:54am
Quoting piptrees
Hi

One more common sense question just to clarify. When the next candle, opens, we adjust our trade by doing the following:

1) Assuming its still heading north, adjust the stop loss of our original buy to the low of the last candle,

2) put in a stop sell at the low of the last candle

3)Put in a stop loss for the sell at the high of the last candle.

Sorry it may seem silly but I have only been doing 1) & 2) but not 3)! I am afraid I may face the same situation as yesterday when the the current candle did a buy and at the same candle went...
Yes - almost!

1) Assuming its still heading north, adjust the stop loss of our original buy to 5 pips below the low of the last candle,

2) put in a stop sell at 5 pips below the low of the last candle

3)Put in a stop loss for the sell at 5 pips plus spread above the high of the last candle.
You don't have to be right, just don't be too wrong
  • #1,375
  • Nov 21, 2008 5:00am Nov 21, 2008 5:00am
Quoting piptrees
Hi

One more common sense question just to clarify. When the next candle, opens, we adjust our trade by doing the following:

1) Assuming its still heading north, adjust the stop loss of our original buy to the low of the last candle,

2) put in a stop sell at the low of the last candle

3)Put in a stop loss for the sell at the high of the last candle.

Sorry it may seem silly but I have only been doing 1) & 2) but not 3)! I am afraid I may face the same situation as yesterday when the the current candle did a buy and at the same candle went...
Yes piptrees, that is correct (plus 5 pip buffer & spread, when applied).
And that's without any assumption of the next movement (still heading north or not)... it's the rules.

Let me just say that I know, in my example above, that it doesn't apply to the recent situation (the low had a 1 pip difference);
It just made me think in "what if?" it made the same low.
But the rules were clear to me too - just checking if this context was taking into account, when making the rules.
  • #1,376
  • Nov 21, 2008 5:01am Nov 21, 2008 5:01am
Quoting El Dee
Yes - almost!

1) Assuming its still heading north, adjust the stop loss of our original buy to 5 pips below the low of the last candle,

2) put in a stop sell at 5 pips below the low of the last candle

3)Put in a stop loss for the sell at 5 pips plus spread above the high of the last candle.

Hi El Dee,

Thanks for clarifying... from now on i can have a true block of 4 hour freedom from the computer!
  • #1,377
  • Nov 21, 2008 5:26am Nov 21, 2008 5:26am
As regards moving the stop: you should move your stop to the low of the last closed bar(in case of a long trade) only if this last bar qualifies as a setup bar to go short, for instancsce if it is a bar which pierces both emas you do not move the stop below it.

In the attached chart we do not move the stop below bar 1 but we do move the stop below bar 2
Attached Image
Regards
  • #1,378
  • Nov 21, 2008 5:35am Nov 21, 2008 5:35am
Quoting piptrees
Hi El Dee,

Thanks for clarifying... from now on i can have a true block of 4 hour freedom from the computer!
Id like to just say welcome to the room and glad to see your first trade is a winner!!!

-Sterling
Founder of Day Trading Forex Live
  • #1,379
  • Nov 21, 2008 5:36am Nov 21, 2008 5:36am
Quoting howard
As regards moving the stop: you should move your stop to the low of the last closed bar(in case of a long trade) only if this last bar qualifies as a setup bar to go short, for instancsce if it is a bar which pierces both emas you do not move the stop below it.

In the attached chart we do not move the stop below bar 1 but we do move the stop below bar 2
That's correct howard,
The initial stop stays below the lower low of the former short (setup for the long);
Bar 1 doesn't qualify for a setup bar, so the stop stays where it was;
When bar 2 closed, as it was a setup bar for a short, stop went below it.
  • #1,380
  • Nov 21, 2008 10:27am Nov 21, 2008 10:27am
Hi,

Now we are short again at 1.4812. Just wanted to clarify something about weekend trades since we will be closing our trade for the weekend when this candle closes.

Sterling mentioned that on sunday at open, we put in our trade as if nothing has changed. If a gap gives a signal in the opposite direction, open the trade in the direction of the new signal. So can I say that if come sunday, the price opens below the red dotted line, we will go in and short like we are in a short position now. If the price opens the higher than the red dotted line, it will mean its a signal in the other direction and we will long instead. Is this correct or if not can someone tell me the correct answer?

Many thanks!
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