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4 Hour Strategy (MACD)

  • #18,221
  • Dec 15, 2008 9:19am Dec 15, 2008 9:19am
Quoting time1300
hello everyone,

Hope you all had a great weekend. Lets hope we can have a less volatile market this week to bank a few pips. I want to bring up a point. I had taken a look at price action and what it does after a big candle. I have noticed that when there is a huge candle on the 4H whether it be long or short and it is followed by a MACD signal lets say TC or Zero break or Zero bounce, If all other rules are intact then stop loss in most cases are huge, maybe about 100 pips. Now what I have noticed is that usually in more cases, the price retraces...
You have spotted it well. This is surely a way to decrease the stoploss.
  • #18,222
  • Edited 10:02am Dec 15, 2008 9:41am | Edited 10:02am
A nice TC is forming on the 4H usd/jpy currency pair.
Price riding on the 8ema.
And stop loss is very manageable unlike the recent candle on the Gbp and the Euro, big candles on those two pairs.

Entered on TC signal
entry @ 90.61
S/L @ 90.95
TP @ 89.55
Attached Image (click to enlarge)
Click to Enlarge Name: usdjpy.gif Size: 45 KB
Keeping Life Simple
  • #18,223
  • Dec 15, 2008 11:24am Dec 15, 2008 11:24am
Quoting Palmer
When the ryhthm is flowing well, and this can be over a period of weeks, where price action comes back down to the 21 and then continues in the original direction several times, and when (if) price breaks the 21 and closes on the other side and makes it to the 89 and stalls, that's rhythm. That can take a long time to see in the chart. You'll see how price reacts to the moving averages, channels, trendlines because you already know where those are and should have a clue as to what price 'should' do. The MACD is secondary.

I've been going through all the items listed on the first post and studying this system for a couple weeks now. Could someone point out a few examples (pairs, and date/time) of the rhythm? In some instances I see it, but admittedly, I'm having issues really understanding when the market is in rhythm and when it's not.

Many thanks in advance.
  • #18,224
  • Dec 15, 2008 11:37am Dec 15, 2008 11:37am
possible 1 hour short on e/u approaching? (aggresive)
  • #18,225
  • Dec 15, 2008 1:10pm Dec 15, 2008 1:10pm
Quoting time1300
A nice TC is forming on the 4H usd/jpy currency pair.
Price riding on the 8ema.
And stop loss is very manageable unlike the recent candle on the Gbp and the Euro, big candles on those two pairs.

Entered on TC signal
entry @ 90.61
S/L @ 90.95
TP @ 89.55
looks like the red TL acting as a support ,hope we see a down break soon
i'll join u if there is a breakout
Attached Image (click to enlarge)
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  • #18,226
  • Dec 15, 2008 1:38pm Dec 15, 2008 1:38pm
Hey guys, I was curious how do you enter your trades (especially Phillip and Palmer). I mean, do you use pending orders in which case I'd assume you have your SL and TP already setup, or do you just enter on the spot and set SL and TP after the order has been executed?

Say you want to enter with 1 lot, but you want a TP for half of that lot and another TP for the other half. You know, just in case the power goes out or something. If you enter manually you're likely to get different prices for each 0.5 of a lot, especially in a fast moving market.

No problem when you can be at your computer and you get a power or net failure once every couple of months, cause you can just close 50% when you want and let the other 50% run, but I'm talking about the situation when sitting in front of the computer is not an option.

So how do you manage? So far I've used a combination of all 3 methods.
  • #18,227
  • Dec 15, 2008 2:10pm Dec 15, 2008 2:10pm
Quoting bshadroo
looks like the red TL acting as a support ,hope we see a down break soon
i'll join u if there is a breakout
im in ,with small lot size because i should sleep now
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Click to Enlarge Name: 1.gif Size: 16 KB
  • #18,228
  • Edited Dec 16, 2008 3:55am Dec 15, 2008 10:10pm | Edited Dec 16, 2008 3:55am
Beautiful round top on the Eur/usd and Gbp/Usd.

Both pairs have had a great run past few trading sessions.
The Eur/Usd is the more distinguished of the two pair as it has been in a more clear trending trend in the past week. The pound seems to be forming that trend as well as it has just crossed the 200sma.

The eur/usd has also reached a major daily trend line going back a few years.
Also it would be a counter trend trade as it has not retraced back to the 8 or the 21 so this might be a good entry back to the 8 or 21ema

Edit:
Entered on the Round top signal as price is due to retrace slightly before continuing. This is a counter trend trend, looking for few pips to the 8 or the 21.

Entry @ 1.3705
S/L @ 1.3743
TP @ 1.3605

Edit:
closed 1/3 of position @ 1.3674 for +31pips
Remainder moved to BE -15 with 45pip trailing stop

Edit:
closed 2/3 of position @ 1.3647 for 58 pips
(round number 1.3650 was in the area so I thought I bank a few pips incase it acts as support)

Remaining position is being trailed with final TP @ 1.3605

WARNING: lots of news coming out tomorrow especially FOMC meeting so If I am in positive I will close my position or set it to BE which I have and if it goes my way then i profit more, if not then i am protected.
Attached Image (click to enlarge)
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Keeping Life Simple
  • #18,229
  • Dec 16, 2008 1:40am Dec 16, 2008 1:40am
I am short EURUSD at the open of the 8:00 candle
beautiful round top double top very far from the 8 and 21 stop loss 35 pips
  • #18,230
  • Dec 16, 2008 1:51am Dec 16, 2008 1:51am
Quoting teddyb
I am short EURUSD at the open of the 8:00 candle
beautiful round top double top very far from the 8 and 21 stop loss 35 pips
out half for 30pips
  • #18,231
  • Dec 16, 2008 4:03am Dec 16, 2008 4:03am
I have been studying this system for the past several months and am now in my first live trade with it. I shorted the Euro at 1.3700 based on the RT signal. Initial stop loss was 1.3750 because I wanted it to be away from the high reached during the Asian session. Took half profit at 1.3650 and am now trailing the rest.
  • #18,232
  • Dec 16, 2008 4:15am Dec 16, 2008 4:15am
hey yall,

Something I have been pondering about, about the stop loss and profit target.
When someone scales out of profits, say 25, 50, 100, the R:R after the profits taken would not be the same as calculated at the beginning. Now the R:R would be less than that of entry.

This whole idea of when to take profits is part of a never ending discussion in every book and website that I read and everyone has their own idea of how to take profits. I myself do like to bank a few pips and not let it become loss while protecting and adjusting my stop loss.

My thought here is that, if one plans to scale out to bank some profits in case of a turnaround. Should we not also think about scaling out to minimizing the pips lost. Why should the Reward part of the risk:reward be tamper with when we do not tamper with the Risk side.

Lets say our trade is going to risk 50 pips in order to achieve 100 pips.
Now in this case if the trade moves in our direction we are going to take some profit @ 25 pips, maybe another at 50 and let the rest run.

Now why don't we do the same if the price goes against us, say if it goes against us 25 pips then we close lets say 1/3 of our position and at 40 and then full stop loss, now we have minimized our initial stop loss where if we would have let it just run because one that scales out does not let the price run until profit target is hit but will let price go against him/her for a full stop loss.

Any thoughts.............................
Keeping Life Simple
  • #18,233
  • Dec 16, 2008 5:22am Dec 16, 2008 5:22am
Quoting time1300
hey yall,

Something I have been pondering about, about the stop loss and profit target.
When someone scales out of profits, say 25, 50, 100, the R:R after the profits taken would not be the same as calculated at the beginning. Now the R:R would be less than that of entry.

This whole idea of when to take profits is part of a never ending discussion in every book and website that I read and everyone has their own idea of how to take profits. I myself do like to bank a few pips and not let it become loss while protecting and adjusting my stop...
ur overal R:R ration should be ok always .u can find the calculation of that in yorik's posts .i can explain ur example here:
u said u enter with 3lots and 50pips initial stoploss and ur profit taking plan is 25 for 1 lot ,50 for another one lot and 100 for the last 1 lot :
risk=(50*3)=150 < reward=(25*1 + 50*1 +100*1)=175
as u see R:R ratio is still ok even if u dont devide ur stoploss to smaller parts,and general speaking should say as long as out R:R calculation is ok we can trade and if there isnt we should change our plan to make R:R ok.(phillip sometimes dived his stoploss to 30 and 60 pips to make R:R ok)
(in the case above/sometimes if u divide ur SL to smaller parts u may loose more than winning because stoploss is usually the minimum possible pips to protect our trade and should let the market breath a little)
  • #18,234
  • Dec 16, 2008 7:29am Dec 16, 2008 7:29am
Remember the fed statement on interest rates later today....
  • #18,235
  • Dec 16, 2008 7:56am Dec 16, 2008 7:56am
Missed a possible long trade for the Euro. A bounce off the 21MA with MACD giving a Zero Bounce/ Round top

Entry 1.3683
Stop loss 1.3641

So good luck to whom ever manage to hitch a ride. You'll currently have bagged +60
  • #18,236
  • Dec 16, 2008 8:24am Dec 16, 2008 8:24am
Would've stayed out. Maybe it's just me, but there's not much of a rhythm at the moment on EUR/USD. I'll wait for the rate cut this night (I'm GMT+2 btw)...
  • #18,237
  • Dec 16, 2008 10:07am Dec 16, 2008 10:07am
Quoting time1300
Lets say our trade is going to risk 50 pips in order to achieve 100 pips.
Now in this case if the trade moves in our direction we are going to take some profit @ 25 pips, maybe another at 50 and let the rest run.

Now why don't we do the same if the price goes against us, say if it goes against us 25 pips then we close lets say 1/3 of our position and at 40 and then full stop loss, now we have minimized our initial stop loss where if we would have let it just run because one that scales out does not let the price run until profit target is hit but...
I also thought over this thing. General rule is that the closer the order (both TP or SL) - the higher is the probability it'll be hit. On TC-s TP1 at 20..21 pips is reached in about 70..80% of time (at least it was so before this run). If we put SL1 closer to opening (say -20..-25 pips), it's likely that our SL will be hit more often (though I haven't tested that). On the other hand, it'll save some pips in cases when the original SL would have been hit also.

So on the one hand, it makes average SL (and loss) smaller, and on the other - it makes % of losses higher (the same is with take profit - the closer it is, the higher is %profits, and the lower - average profit).

Our final result depends on 4 parameters:
Result: %profits*av.profit - %losses*av.loss.
Unfortunately, specific numbers can be got only by backtesting Splitting SL into parts may make the final result better, but also it can worsen it.

P.S. By the way, just for thought - as it can be seen from the formula, if % of profits is very high, we can win even if av.profit<av.loss (R:R<1)
  • #18,238
  • Dec 16, 2008 12:32pm Dec 16, 2008 12:32pm
Hello.
I use this system too. Phillip, tell please more about emotion (chart, trend line, etc.) how it (emotion) look on the chart.
Very big thanks.
  • #18,239
  • Dec 16, 2008 2:25pm Dec 16, 2008 2:25pm
Heck of a move on the EURUSD this month. With all of this strength on the 4hr it may seem very difficult to find an entry for a TC. Consider the following only if you have put enough time in on the 4hr. This is where the entries on the 1hr can come into play. It's all about what the price action is doing and it really can't be narrowed down to a moving average cross or if the current close is greater than the previous high by 5 pips sort of things; a systematic approach. I believe this is where you have to look at areas of consolidation or pullbacks in the trend, especially a strong trend such as the 4hr when price has been 'riding the 8' for such a long time. Phillip studied these 8/21/89 moving averages for a reason. On the 4hr you see how price had a very hard time just closing below the 8 from about Dec 5th until now. Looking at the 1hr (again only consider this when you can recognize the strength of the 4hr trend) and see how price either consolidates arround the 21 or maybe even closes below it. The aspect of the 21 on the 4hr and 1hr is a little different as far as closing below it goes but look at the pullback on the 1hr nonetheless. Along with the corresponding MACD formation and the ADX +/- DMI cross here, these 'areas' ( 1hr is still a long time in the FX market) are what to look for strong entries on the 4hr. So what do we have...

1) A very strong trend in a given currency pair where price has a hard time even closing below the 8 EMA.

2) Migrating to the 1hr (when you have the 4hr principals down - don't rush things, the markets aren't going anywhere) and looking for the pullbacks, then strength again in price and the few indicators that are used here.

Runs like these only happen a few times a year but they do happen. It's a matter of recognizing and trusting the given trend. You're (we) aren't going to catch the first move and we may end up with a loser on the last move because we don't know when a trend will begin or end. We have clues though such as when price closes below the 21 or when approaching a major trendline or support area. Of course this is all after the fact but the overall picture of how things can 'work' happens over and over. Being ready for action when we know how this picture is being drawn out is what we wait for....
Attached Image(s) (click to enlarge)
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  • #18,240
  • Dec 16, 2008 2:54pm Dec 16, 2008 2:54pm
Could not agree with you more Palmer. So many times over the past few months there has been great trades to me made with action off the 21/89 on the 1HR when the 4H trend is strong. Some times you can even get in for a SL of about 20-25 pips. It takes a fair bit of understanding of the 4H rhythm, but once you have that you should be able to identify trades. I must admit I nearly always swtich to 1HR now to get a good entry when I think there will be a good 4Hr setup. Sometimes just simply waiting after a 4HR TC , the next 4HR candle will provide and entry off some 1HR level and get you in on a smaller SL.
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