Lilmoe's Trading System and Analysis

Hello traders,

A month or so late, but here it is, the thread where i'm posting a full and detailed explanation of my system. sorry it took that long. but i wanted to make sure i had everything tested out, simple, and complete.

I've never wrote down the rules on a piece of paper, i've had them hard coded in my brain and scattered them around on auslanco's thread for the past 6 months. I might have left out some minor points/rules, if one pops out, i'll add it to the set of rules in the first 6 posts, or add a new post with that rule.

My system is split into 2 parts.

1) Intraday and short-term swings.
2) bottom and top picking (my version of buying dips and selling rallies).


Notes:

1. Please read the first 6 posts before you ask any questions.
2. This thread is designated to discuss my system. Analysis from other systems or strategies are also welcome.
3. The first part of my system adopts greatly from auslanco's system, and also from other systems contributed on auslanco's thread
4. I mainly contribute to Auslanco's thread, but i will be posting here regularly.
5. If, for any reason, you come to think that this system is useless, plz feel free NOT to use it.
6. Constructive criticism is most welcome. on the contrary, destructive criticism is NOT welcome.
7. I will assume that the trader has good basic understanding of technical analysis and MM techniques
8. I will also assume that the trader has fully read and understood everything provided in babypips.com about technical analysis.
9. Also I will assume that you have read the first 3 pages of Auslanco's system

please feel free to ask any sort of question regarding my implementation and style of trading. i will try my best, during my free time, to answer all the questions and requests.

This thread is not intended to be as huge as auslanco's thread, so if you're more interested in live calls from different traders, please pay more attention to his thread, as lots of traders post their live calls and analysis there. if however, u have a question about a current market signal using my strategy, feel free to post all you want.

abbreviations.

GJ: GBP/JPY
YM: Dow Jones E-mini Futures.
MM: Money Management.
RR: Risk Reward.
SL: Stop Loss.
TP: Take profit.
B/E: Break even.

TF: TimeFrame
TL: Trend Line
UTL: Upper Trendline
LTL: Lower Trendline
S/R: Support/Resistance Level.
Fib or Fibo: Fibonacci level
FE: Fibonacci Expansion

DP or DPP: daily pivot point.
DR1 : daily resistance 1
DR2 : daily resistance 2
DR3 : daily resistance 3
DS1 : daily support 1
DS2 : daily support 2
DS3 : daily support 3

CD: classic Divergence
HD: Hidden Divergence
PA: price action
div: divergence
CCI: commodity channel index
Gann: gann hilo activator
50ema: exponential moving average (closed) period 50.


TRADE AT YOUR OWN RISK. PLEASE DEMO THIS SYSTEM FOR AT LEAST 1 MONTH BEFORE TRYING IT ON A LIVE ACCOUNT.

OK, let's start with swings.

What you need.

1. Gann Hilo Activator (standard period 10)
2. CCI (commodity channel index) period 30
3. MACD (5,34,9)
4. exponential moving average period 50 (50ema)
5. Daily pivot (for 1h and below Timeframes)
6. Momentum indicator
7. Simple moving average period 5 (5sma)

for longs

rule#1: Price has to trade above DP.
rule#2: Price has to close above Gann.
rule#3: Price has to trade above 50ema.
rule#4: CCI (period 30) has to close above the 100 line for longs and below the -100 line for shorts.
rule#5: Price has to be at least 100 pips below a major or strong s/r - fibo level.
rule#6: Make sure a bearish HD is not visible when u make a trade.
rule#7: it is always BEST to enter at 5sma. if price is over a +50 pips above 5sma don't enter the trade, wait for it to get there, and when it does check all the rules again before making the decision WHEN price reaches 5sma. The Momentum will give a hint if price is going to retrace (pull back) to 5sma; when going long, and if price is a bit over 5sma AND momentum is pointing down, it usually means that price will have a GOOD chance of going there.
rule#8: Exit when price closes below Gann on the TF smaller to the one you're trading (so if u're trading, 1h, close ur long when price closes below m30 gann).

important note: 5sma represents the REAL price. therefore waiting for 5sma to cross or at least "touch" the last condition for confirmation is better. what this means is for example, if price is alread trading above gann/50ema, and CCI above the 100 line, but price is STILL not above DP, wait for 5sma to at least touch DP, and NOT only price closing above it. this usually yeilds better results and safer entries, because you would avoid fake breakouts. you can apply the same technique on Trendline breakouts.


for shorts: Vice Versa of the above.


this system works 70% of the time (good RR) on ANY TF, m5 and above. i use this system to scalp on m5 and m15 TFs

best TFs are m30 and 1h for intraday trading, and 4h/daily for short/medium term swings.

too many rules? nahhhh, very easy rules and easy to identify. one might think there's a bunch but when u're used to them, u'll make a decision in seconds. think of it as when you first learned how to drive a manual shift; LOTS of things to concentrate on, especially when making a U-Turn, but after a while it becomes so easy that can drive and lid a cigarette while talking to your mistress on your cell phone at the same time (don't do this at home folks, it's illegal in some countries )

Take Profit and Stop Loss.
intraday swings usually need a 75pip SL at least, and 2% MM. but we will discuss later how to reduce risk and use tighter SLs in my top/bottom picking strategy.

an average setup should yeild at least 100-200 pips.
it is always BETTER to take partial profit when you see a good S/R level in the way, and raise (or lower) ur SL accordingly. remember, this is not only a game of making money, it's a game of STAYING IN the market for a long period of time!

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here's an example of a m30 long trade, followed by an example of a short trade.
please note that m30 is a dangerous TF (needs lots of experience), 1h should give newcomers better and more efficient signals.

Long:


short:

Here are the indicators you need along with my template.

Please unzip the files, and copy them to your "program files"/"-your-platform-name-here"/experts/indicators folder. Copy the .tpl file to your "program files"/"-your-platform-name-here"/templates folder..
restart your application, and you're done.

Feel free to change any color you don't like on that template.

here are some examples of bad long entries, because of a visible bearish HD.

Auslanco's system was what got me on my feet. that's a fact. he has all my thanks and respect.

Let me tell u guys a little difference between mine and auslanco's. i had finished testing my refined system back in july. my new system is collective knowledge, i only contributed to 40% of it. what i added was the 50ema and later the concept of divergence in relation with 50ema and CCI, not as simple as determining a gann and QQE cross for a newbie, BUT the most powerful i've ever used. scrat had told me once that the combination of hidden divergence and 50ema was already there, and VERY powerful. i didn't know that there was already a system based on it, it was simply my own observation, which makes me proud

conclusion:

This edge of my system is designated to simply catching tops AND bottoms OF major and minor pullbacks in an established trend OR a potential major reversal. An extended implementation of buying dips and selling rallies. it filters out the "Bad" dips and rallies that lots of traders including my old self fall into.

on the other hand, auslanco's system is simply catching the train of an established trend. buying dips and selling rallies were called waiting for 5sma retracements when moms were pointing in the opposite direction how cool is that? simple, but yet VERY powerful!!! HOWEVER, auslanco's system did not provide any guidlines to filter out those bad 5sma retracements or reversals (basically a trade going against you). In lots of instances back in the days, we got burned bad along with auslanco, ESPECIALLY in corrective markets.


OK, Now for the fun part.

Details

rule #1: CCI period 30 is our eyes and ears for trend detection. when CCI is over the 100 line on the weekly chart, the medium/long term trend is bullish. when CCI is below the -100 line on the weekly chart, the medium/long term trend is bearish. the trends stays bearish/bullish unless the other end of CCI is taken out and maintained for 1-2 weeks at least. price has to trade above 50ema for bullish confirmation, or below 50ema for bearish confirmation.

something worth mentioning about CCI 30. when CCI is above the 100 line, it DOES NOT mean that price is overbought, it simply means breakout. it doesn't matter how high it gets. i will post notes if i see something "unusual".

please apply the first rule to all timeframes with confirmation of the higher timeframe. the highest needed is the weekly chart, no need for monthly confirmation.

rule #2: when CCI and/or MACD detect a classic divergence while price is touching a strong SR level when CCI is below/above the -100/0/100 line (in that established trend), price tends to "seek" 50ema of that timeframe IF CCI makes it back above/below the -100/0/100 lines. classic divergence is confirmed when a trendline is broken (example in chart). a classic divergence is not necessary for this to happen, but in most cases it does.

so for example, in this chart, price was below the -100 line, but while it was retracing, it made it back above the -100 line signalling a breakout and a retracement to 50ema on the weekly chart.

rule #3: when price approaches 50ema, watch for a hidden divergence. if a hidden divergence is present, price tends to bounce again and go back to it's major direction. a stronger signal is when CCI bounces from the -100/0/100 lines. if however, price makes it through 50ema, watch for the closest and most reliable S/R-fibo level. this pattern is valid unless the divergence is broken.

example: take a look at that chart. the bearish HD was visible on MACD, coupled with a bounce from the 100 line. STRONG short signal, signaling a very high possibility of taking out the lows. which it did. PERFECT top picking

rule #4: in some instances when a hidden divergence forms on a Timeframe where price has already taken out 50ema, that divergence would most probably reverse price when price reaches the higher TF's Gann Line and/or 50ema.

There are also instances where 50ema of the higher timeframe is not in the same direction (meaning price aready took it out too), that's when price targets the previous peak (high or low), and a bounce from there is highly probable. If by any chance the previous peak is taken out, then that would mean the hidden divergence is broken, and price is setting itself for a reversal.

example, we're looking at the 1h TF, and suddenly we see a bearish HD when price is rising. if price has already taken out 1h 50ema, then the target should be 4h gann or 4h 50ema.

4 major rules. I think they're simple.

something worth mentioning:

I have been using this method to confirm 5sma retracements as well. i would know if (for example) a 4h 5sma retracement is due (with high probability) when momentum is pointing to the direction of 5sma AND if a lower TF is signaling a classic divergence. 4h 5sma (in this case) will hold IF 50ema of that lower timeframe (with a hidden divergence) is at the same price level of 4h 5sma. You can call this lower timeframe filtering of higher timeframe 5sma retracements.
this rule applies to all timeframe, i used 4h as an examle

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here's the weekly chart.

here's the same chart i showed u guys 4 posts ago for a long signal on m30 again. this one with an enhanced entry. bullish HD formed when price pulled back to 50ema.

good stuff eh??

when u see me going crazy on auslanco's thread, u know i've seen a similar pattern on one of my favorite TFs (1m to 4h ).

note: 1m is VERY dangerous, don't u dare trade that TF if you don't know what you're doing!! you have been warned.

Thanks for sharing, your system looks very good at first look,and I will test it on my demo accout for a while.

no problem...

this is the basic thing, but please check sunday night, early monday, i should have fixed any spelling errors or info.

The grand master has just opened his secret book...
All the best...

Sonic

I have down loaded the templete and seems interesting few questions

You have not specified the use of M Z

What method you use for +100/-100 pip with in support and Resistance



How long you are trading this system

thanks for the flatter bro... let's try a joint effort to make this system benefit everyone

i've been trading auslanco's system since Aug-Sep of 2007. i added 50ema 2 moths later, and the concept of HDs and CCI about 6 months ago.

u used several indicator and strategies, but now i cleaned all of the "less reliable" ones out and left with what i have now.

+100/-100 lines in CCI mean S/R levels of Typcial price, therefore continuation/reveral of trend, you can learn more about CCI by googling it on the web.

i think u mean momentum ZL, by M Z right? momentum ZL is Que's virgion of the momentum indicator (i hope he doesn't mind me posting it here), i use that indicator to tell me whether price will or will not retrace to 5sma.

I will be in this thread so often like I can.
I wrote my opinion on Auslancos thread about all of You who do such a thing like this.
to You.
looking forward for this thread.

thanks for all your comments bro, and i hope u get back on your feet and trade more efficiently.

I will use the system from monday and post the results

Good Luck

Quitely learned alot from this man here by read the Aus thread (some friggin excelllent traders on that thread). I've taken bits and pieces of knowledge from them all and have developed a powerful system for myself.

So noobs take heed, this is great stuff.

thanks bro for sharing..u are nice guy.

I mainly trade GBP/JPY, also know as the "beast" or the "sl@t", lots of traders and i call it GJ...

my system works for any Currency/Commodity, but plz try it out before you go live. give urself at least a month before u get screwed..errm... i mean before u get the "hang" of how things are done

i'm going to be posting lots of analysis on different pairs, including cable, euro, and UJ... also some futures including oil futures and YM.

Also worth mentioning is trading CCI Trendline breakouts.
there are several instances where CCI on a given timeframe starts to form a trend line when you connect the lows or highs. when CCI breaks out of that TL price tends to comply. i will be posting live examples of CCI TL breakouts as soon as we get one.

OK...

here's daily GJ for ya.

something i also love to mention are price patterns in past PA history and how they match with CCI patterns.

the daily chart for GJ reflects a similar pattern we have seen back in September, where GJ hit the lowest point 2 times, and made a lower low on the 3rd try before failing to close (or maintain a close) below that point and reversing up like crazy. the reversal from 185 to 197 marked a 38.2 fibo.

NOW, let's take a look here at what we got. bullish divergence on CCI, and an IDENTICAL 3 hit pattern of the lows with the 3rd hit making a lower low but failing to close below it!

now now now, if we get a close above the descending green TL, u know what's up right??? daily 50ema or at least somewhere close to it. daily GJ missed 50ema by a small margin (150-200 pips) before reversing back down.

now at the time when the first pattern took place in september, i predicted that CCI would start forming a TL (the green CCI TL on the left), and that shorts will be back explosively when that CCI TL is broken daily CCI closes below -100. when that TL was broken, we managed to make a new low at 166. from my own experience, when CCI fails to reach above the 0 line, and goes back below the -100 line, it's a HUGE sign of a strong bear market. same with -100 line rejections.

NOW, if we DO go up this time with CCI closing over the -100 line and price starts targeting daily 50ema, im going to watch the 0 line very closely. if the 0 line is taken out, then the chances with taking out the previous lows will decrease dramatically. BUT if the 0 line wasn't taken out and CCI closes back below the -100 line, chances are that 139 will be taken out... and i'm gonna have a hard time afterwards dealing with karmo.... geez.


but again here's the daily chart, i'm almost postive this will start heading up, the big grean marked area is where i predict price to head. now don't go going off on me karmo and scrat, but if we break out of that Trendline, we WILL go up that far, and maybe further up!! who knows!

i'm watching this "3 times hitting the low, with the third being the lower supported by a bullish divergence on CCI" price pattern and telling myself: "Fool me once, shame on you. But fool me twice Shame on me."

you be the judge.
my bias is bullish, and will remain bullish as long as the 3rd low is not taken out and/or that CCI TL holds.

CHART: