Swing Point Indicator

Hi all

I have searched and cannot find a simple MQ4 indicator which identifies:

1. a 3 bar pattern in which the middle bar makes a higher high and a higher low than the bars immediately on either side (for a top swing point) and
2. a 3 bar pattern in which the middle bar makes a lower low and a lower high than the bars immediately on either side of it (for a bottom swing point.)

I am looking for something very like the Fractal indicator, however it would be a 3 bar and not a 5 bar pattern, and would require not just lower highs on either side of a top but lower lows as well.

I would be eternally grateful to anyone who can help me - I'm sure it will have already been programmed by someone.

If you search for DeMark on the site there's quite a bit about this.

Here's something to get you started. It's based on the DeMark method and while it doesn't quite meet all your requirements it'll get you on the right track.

http://www.forexfactory.com/showpost...8&postcount=16

Thanks PeterFM. The indicator does way more than I need - it seems to plot the signal bars (the swing points) with an almost invisible small blue dot but then has many options to add trendlines etc according to de Mark's method.

I am really just after a clearer version of the blue dots which indicate the swing points.

Peter, I have noticed many times on FF how helpful you are to others and thank you for attempting to solve my problem. At least now I might be able to point someone in the direction of the signal bar element of the indicator, which can then be highlighted without all of the deMark bells and whistles!

Cheers

TraderZer0

I guessed it wouldn't be the answer but your search was so close to the Demark method it seemed worth a shot.

Take care

I took a shot at it as it didn't sound too difficult at all. See if its what you're after. the arrows point out the type of bar it is.

regards,
Zen

Zen

Thank you so much - you nailed it perfectly!

If it is not too much to ask, is it possible to do a second version which has all of the same attributes but which allows for any combination of the two bars immediately either side of the high/low bar to make the pattern (i.e. mark each bar which has immediately on either side of it a bar or combination of two bars, which form both a higher high and higher low, or a lower low and a lower high.)

I don't mean to be exploitive of your generosity but I expected if I could find examples of code already written for the first, that the second version would also be there. They are fairly commonly used patterns in 1-2-3 setups, De Marks' methods and also Ross' methods.

I'll understand if you have other priorities - you have certainly helped my a lot already.

-John

you're most welcomed. I don't quite understand what you're asking for in version 2. would you mind posting a simple diagram to illustrate your point? After which I'll see what I can do.

regards,
Zen

I'm probably not very good at drawing examples and had two goes at it - I've included both and hope they give you what you need. I am very grateful for your interest Zen.

EDIT:

Usually the pattern is completed in just three bars, but occaisionally one of the side bars does not make a lower Low than the Swing Bar. When this occurs, the pattern is considered to be still valid provided that the next bar to the one which failed to make the lower Low does make a lower Low than the Swing Bar. In this way the pattern sometimes takes 4 bars to complete and sometimes even 5 bars. The "failure" bar will cause the Swing Bar to form an Outside Bar if the "failure" is to the left of the Swing Bar, and will form an Inside Bar if it is to the right of the Swing Bar.

ok... sounds simple enough. Try this one...

However, I can't help but question how such an indicator would be used. since most of the time the directional move would've occurred before the arrow was drawn... so we can't use this to base entry on.

regards,
Zen

Zen

It looks like you've nailed it again - thank you so much!

As to how you might use such price patterns: you are quite correct in suggesting that the reversal move occurs before the signal, but if your objective is to obtain a fair amount of the new trend rather than trying to pick exact tops and bottoms it is a very useful tool.

An example of the current AUD 30 minute chart is attached. I've marked up on the chart one very simple method to trade using the swing pattern. The short horizontal bars mark entry points according to the method outlined below. The red horizontal lines are losing trades, the gold lines are winning trades (with the final trade still open.) In this illustration there were 2 losers, 7 winners and 1 still open. The method rules for a long trade could be:

1. Enter 2 positions in the direction of the signal only on a breach of the Trigger Bar High (the bar to the immediate right of the Swing Bar.) The breach must occur on the very next bar to the Trigger Bar, or the pattern is invalidated.
2. Set an initial stop at the bottom of the Trigger Bar and set a trailing stop for both positions of 150% of the range of the Trigger Bar (ie. one and a half times the size of the initial stop.)
3. Set a profit target for the first position equal to the initial stop ( a 1:1 risk/reward) and a profit target for the second position at 3 times the size of the initial stop ( a 3:1 risk/reward.)

In the above simple method the 5 bar pattern is not used, nor is the 4 bar pattern where the bar to the immediate right of the Swing Bar is an Inside Bar. In those patterns the set-up is not confirmed until after the bar which should signal the trade (the Trigger Bar) although there are various methods in which the 4 and 5 bar patterns mentioned are valid (for example by simply defining the Trigger Bar as the last bar in the pattern regardless of whether it is a 3,4 or 5 bar pattern.)

As you can imagine, this sort of method works best in trending markets and is designed for swing trading, rather than position or scalping. By identifying a confirmed swing point and then entering only if the swing is maintained the chances of gaining the 100% target are very good and the 300% target is reached often.

There are a number of swing trading methods which incorporate the concept of a swing bar high or low and you have just programed an indicator for two of the most useful definitions of swing bars.

I am again very grateful for your help Zen and would love to hear from you if ever I can return the favour!

Regards - John

You're most welcome, my friend.

hmm... you've got me interested. Being a relative newbie when it comes to trading, I've never explored these swing bars that you spoke of. I believe I can write an EA to test out the strategy you've described.

Are there any other details I should look out for when it comes to identifying a valid entry? I'm always eager to learn more. =)

regards,
Zen

Zen

There are two primary strategies I use the Swing Bar for:

1. swing trading using M30, H1 or H4 timeframes trading mainly the AUD and the EUR;and
2. position trading on the H4 or D1 timeframe, again trading the AUD and EUR.

POSITION TRADING

I have attached a pdf document which describes the method of Joe Ross, whose approach to trading 1-2-3 patterns is close to mine. I don't trade the other patterns he mentions in The Law of Charts, just the 1-2-3 using the Trader's Trick entry. This is my most used strategy for position trading where I will hold a position (I hope!) for days or weeks with a wide trailing stop (1.5 times daily ATR20) or trailing up the various support/resistance levels if they are obvious.

After the entry, which is mechanical, this style is quite discretionary in its trade management and would be more trouble than it is worth to back test. I thought you might be interested though to just have a look, for I have traded this style successfully for years in stocks, indices, commodities and now forex.

I have also traded the 3 Bar Swing pattern you programmed on H4 and daily charts with good success - I look for a strong trend which has been in place for six or more bars and look then for the 3 Bar Swing around support/resistance levels and at 50% retracement levels for a reversal in trend, even if it is short-lived.

SWING TRADING

My Swing trading is more mechanical or rules based and might be able to be successfully backtested. The most simple and I think reliable (for me anyway) pattern setup is using the 3 bar setup with the entry rules being the same as in previous posts.

I don't apply any other filters other than I don't trade if the pair is just creating too much traffic (trading sideways or constant whipsawing). This is part of the discretionary element I guess but I know some traders who ignore this and take every trade signal no matter what. I have experimented with using the 200ema as a filter and only trading in the direction of the trend as defined by the moving average. Whilst I didn't backtest beyond a simple manual chart markup over a few months it seemed to me to filter out too many of the most profitable trades. It could be a useful filter to backtest though. The other filter I am just mucking about with now is the filter used in the DIBS method (refer the threads on FF of this name) which marks the Open of the day's trading with a horizontal line and trades are then only taken long if the entry is above the daily Open line and only taken short if the entry is below the line. The weekly Open is used by me if trading the H4.

The trade management I would use is one half of the position taken off at 1:1 with no trailing stop and one half with a target of 3:1 with a 100% trailing stop. That way if you get the 100% (1:1) target you have that banked and your second position is at break even.

It may be worthwhile comparing the different timeframes for each pair. I gravitate to the M30 and the H4 as I obtain better results but that may have more to do with my personal habits than any result of the rules being applied strictly the same to all timeframes. The 24 hour nature of the markets is a factor as well I suppose - unless you are automated no-one can trade every session, unlike the stock markets.

Anyway, have fun with this and keep in touch. If needs be you can contact me at pacrim at bigpond dot net dot au.

regards,

John

Appreciate your detailed explanation. Coincidentally, I too was reviewing the DIBS method which was the first EA that I've posted in FF (now at version 7). As I recalled, that's the only system I've attempted that incorporates price action and chart formation for entry without the use of indicators. although I've stopped playing with the DIBS ea, its filter methods are worth considering when I'm brainstorming how to go about with the strategy you described.

In any case I will start from the basic and work my way through. Will post what I come up with in here so perhaps more can join in the discussion. Thanks for sharing. =)

regards,
Zen

Zen

A quick question - the 3 Bar Swing indicator and also I think the Flexi Bars Swing indicator do not seem to update in real time without refreshing by exiting MT4 or changing from one profile to another.

Is there a setting in MT4 that I have not enabled, or perhaps another explanation? I'm currently watching the 3 Bar Swing on both M30 and H4 and neither chart updates when a new bar creates a valid pattern.

Regards,

John

oops.. my bad. must've left out 2 lines of codes again... thanks for pointing it out. will get it fix when i reach home after work.

Here are the amended indicators, I forgot to change the recounting algorithm so that it recounts a few bars before the current as opposed to the usual type of indicator coding where they only recount the newest bar.

Let me know if you see anything wrong.

One other thing to clarify about the strategy.

you said, "Set an initial stop at the bottom of the Trigger Bar and set a trailing stop for both positions of 150% of the range of the Trigger Bar (ie. one and a half times the size of the initial stop.)"

just to confirm, we're not going to look at the candle where the arrow is pointing to place our stop ya? just base on the trigger bar for entry, stoploss and takeprofit?

regards,
Zen

Thanks Zen - I'll check out the new versions and feedback.

Regarding method rules, there are an almost infinite variety of ways to manage the set-up and the trade, but I would suggest in response to your question:

1. Initial Stop level is set 1 pip from the Low of the Trigger candle for a long position (or 5 pips if you believe that candles often are exceeded by only one pip.) This would be the case for both positions. You could use the Swing Bar low to set a Stop but that would be more of a position trader style, as it often gives a pretty wide stop and hence also creates a pretty big ask to reach a 1:1 or 3:1 target.
2. I would not set a Trailing Stop for the first position with the 1:1 target - especially if your broker uses the trailing stop method which doesn't kick in until profit is achieved. Just let the position ride to either make the 1:1 target, or hit your StopLoss.
3. I would set a Trailing Stop for the second 3:1 position of exactly the same size as the initial StopLoss. This means that if the 1:1 target is met, the second position is already at break even.
4. Some traders would set the Trailing Stop for the 3:1 position at 150% of the size of the initial StopLoss. This gives the position more wiggle-room and allows for a modest retrace back to the entry point without being stopped out. The trouble with this is that you still have 100% of the risk until the trade goes in profit equivalent to 150% of the initial StopLoss. Again, this is more a position trader style than a swing trader style.

I hope this is clearer now my friend. I'm probably a bit rushed when I write and may not be as direct and succinct as I should be.

Regards,

Zer0

Very interesting thread. I'm enjoying the discussion and the indicator.

Hi LongToBeFree,

The quest here is to add to the toolkit of robust methods to trade price action. BillyRayValentine, James16, Jacko, Peter Crown (DIBS) are among the FF masters who have shown us some of the best techniques. This is one I'm comfortable with. I'm lucky to have found Zen here to help me explore a bit more.

Love to hear suggestions from you or anyone else about strategies to help filter trades to cut the number of signals in congestion. This is the potential killer for this and a number of other price action methods - the signals which are part of consolidation/ranging activity rather than trend changes. Eyeballing the chart is the best I've come up with so far but I'm looking for something a bit less judgemental. I'm wondering whether Donchian Channels might be part of the solution to defining congestion and therefore a no trade area....

Regards,

Zer0

ps. Attached is an Excel spreadsheet which helps to calculate entry points, stops, profit targets, position size etc. To make it work live you need to enable DDE Server in MT4 (Tools; Server; Enable DDE Server) and have MT4 opened and then open the spreadsheet. It requires manual inputing of the Trigger candle parameters as you will see. White boxes require manual data input. Still mucking around with it - it doesn't look pretty and has lots of room for functional improvement. Thought some might have a play and may find it useful. Doesn't have JPY in it anywhere as I cracked the sh*ts with the Yen recently and deleted the rows - the Yen is also a pain to plug into these spreadsheets as the calculation base includes one additional decimal. If anyone really wants Yen in the spreadsheet I could resurrect it at some point.

TZ

Very interesting indicator.

I was watching it and realised that the arrow appear 1 bar 'late'.
Is there any way for you to make it so that it would appear on the 3rd bar instead of 2nd bar?

Thank you very much.