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4H 5EMA System

  • #2,981
  • Feb 4, 2009 1:15pm Feb 4, 2009 1:15pm
Quoting Dabestone
Finally , I had gone through all 198 pages. Phew, it took me days. I would like to thanks all people who had contributed towards this thread and a special thanks to Sterling for his selfless sharing about the system.

I am confident about the system and had started trading it since few days ago.

1 question though, I am using gft and the broker has a candle closing time at GMT 00:00,4,8,12,16,20 . Anyone in the room is sharing the same broker time?
As far as I am concern, the different in timing does not bring much negative towards my trading....
Hi

Daily bar close at 23 GMT or 24 GMT should not affect the results in the long run, I am using alpari with bar close at 23 and El Dee is using another charting with bar close at 24 GMT.

We trade the daily according to the latest word document prepared by El Dee.

There is a simpler version of the daily which DD is forward testing, I explained it in one of my posts back in December, I can't find the post number right now.

i wish you all the best
Regards
  • #2,982
  • Feb 4, 2009 1:22pm Feb 4, 2009 1:22pm
Quoting Dabestone

1 question though, I am using gft and the broker has a candle closing time at GMT 00:00,4,8,12,16,20 . Anyone in the room is sharing the same broker time?
As far as I am concern, the different in timing does not bring much negative towards my trading.


Sean.
I use IG Index for my trading which has the same closing times as you, and, apart from a few pips here and there, my charts seem to tie up with the Alpari charts shown on the thread.
You don't have to be right, just don't be too wrong
  • #2,983
  • Feb 4, 2009 1:23pm Feb 4, 2009 1:23pm
Quoting El Dee
Daily was doing great in Jan - taken a pounding in the last few days but it looks as though the price broke through a line of resistance today which hopefully gives us some clear water now
Wow, both daily versions have to "pray" for some comfort.

The version I use took two punches in Feb as well

4H has a big army and they comfort each other - for daily, its just me, Eldee and Howard. So, prayer doesn't hurt.

Hopefully, # will pull itself one way or the other.
  • #2,984
  • Feb 4, 2009 1:36pm Feb 4, 2009 1:36pm
Hello.
Can You confirm currrent situation on daily chart ?
Today was stopped sell -371 and now buy at 1.4551 SL 1.4046
Am I correct?
Thanks
Peter
  • #2,985
  • Feb 4, 2009 1:39pm Feb 4, 2009 1:39pm
Hi there El Dee, it's great to see you here.

Well I am just starting to learn the daily system and I have to say it gets a little confusing due to the fact that the rules of 4H EMA has planted in my head..haha..

Few questions EL Dee

1) Say candle A is a Long setup bar that breaches the low ema by 5 pips. And when it closed, we put a buy stop order 10 pips above the candle's high with a contingent stop loss 5pips below the low of Candle A. The number of pips that you mentioned here for the buy order (10pips) is inclusive of the spread already or not? let's say my broker has a 4pips spread on GU, then should my stop order be 14pips above, or just 10 pips?

2) Candle B triggers the buy stop order and closed with a higher high and higher low. The candle's high did not touch the higher EMA. Now, where do we set our STOP SELL order? At 5pips below the low of candle A? or 5pips below the low of candle B? I am aware that according to 4H EMA's rule, the stop order will still remain at 5pips below of the low of candle A and it can only be adjusted once a sell setup bar formed. But my understanding of the document that you created, there's some stoploss variation in this daily system, or maybe I'm wrong?

Thanks for all the feedback.
Sean.
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Discipline is PRIMARY, Method is Secondary.....
  • #2,986
  • Feb 4, 2009 1:43pm Feb 4, 2009 1:43pm
Quoting denverdude
Wow, both daily versions have to "pray" for some comfort.

The version I use took two punches in Feb as well

4H has a big army and they comfort each other - for daily, its just me, Eldee and Howard. So, prayer doesn't hurt.

Hopefully, # will pull itself one way or the other.
Hi Denverdude,
Pray indeed!
We're in a situation where we had a full stop loss that resulted in Tweak #1. This resulted in a buy and this bar became a sell setup.
The sell was triggered which subsequently stopped out today.
According to the daily rules, tweak #1 is a 'one off' to get you back into a trade - in this instance it has failed by virtue of 2 sequential stop losses (that is - the trade had not progressed at all since the tweak was applied) so now I will only place a sell stop below today's sell setup (and pray that it is not triggered before Monday!)
You don't have to be right, just don't be too wrong
  • #2,987
  • Feb 4, 2009 1:51pm Feb 4, 2009 1:51pm
Quoting Dabestone
Hi there El Dee, it's great to see you here.

Well I am just starting to learn the daily system and I have to say it gets a little confusing due to the fact that the rules of 4H EMA has planted in my head..haha..

Few questions EL Dee

1) Say candle A is a Long setup bar that breaches the low ema by 5 pips. And when it closed, we put a buy stop order 10 pips above the candle's high with a contingent stop loss 5pips below the low of Candle A. The number of pips that you mentioned here for the buy order (10pips) is inclusive of the spread already...
Hi Sean,
1)The 10 pips includes the spread - you don't add it on.
2) This is exactly the same as 4 hr - your SL / stop order remains 5 pips below 'A' until you get a new sell setup then your SL / stop order moves up to 5 below its low.
The 'advisory' tweak I put in the daily rules only applies to bars that do not breach either EMA (all of the price action occurs between the EMA's). Backtesting suggests that these bars tend to occur before a reversal.
Hope this helps.
You don't have to be right, just don't be too wrong
  • #2,988
  • Feb 4, 2009 2:48pm Feb 4, 2009 2:48pm
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Thanks for the swift reply El Dee. Here's a chart and explanation subtracted from the document that you created regarding the daily system rules.

1.Bar 4 fails to fill buy stop order placed above bar ‘2’ but fails to make lower low than bar ‘2’. This is a second failed reversal bar. Note, even if this bar had made a lower low than bar 3 but not bar 2, it would still not be a new long setup bar. On the close of this bar we have had 2 failed reversal bars so according to Tweak #2 we close our position and apply Tweak #1

2.This bar 5 fills the buy order placed above bar 4. When the bar closes a stop loss and sell stop order are placed 5 pips below its low point.

3. The first bar in this series hits the sell stop order below bar ‘5’ , the index moves down forming new successive long setup bars.

Questions:
Why is the stop loss/ sell stop order placed below bar 5 instead of bar 4?

Thanks for the explanations, appreciate it
- Sean
Discipline is PRIMARY, Method is Secondary.....
  • #2,989
  • Feb 4, 2009 4:22pm Feb 4, 2009 4:22pm
4.7 Exception to the rule


There is only one exception to the reverse order placement rule and that is when the order has itself been opened due to a full stop loss resulting in a reverse order being triggered; in this circumstance a further reverse order is not placed.
This rule only applies if there is no valid setup bar between an order opening and its subsequent closure due to a stop loss.

Hi EL Dee, this is extracted from the daily system document that you've made. This exception rule refers to both 4H EMA or Daily system only? It sounds to me that it's the original rule for 4H 5EMA regarding reverse trade. Just to clarify


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  1. Buy setup bar; note that the previous two bars are also buy setup bars but bar ‘1’ is the first bar that is followed by a reversal bar that fills the buy stop order that has been placed 10 pips above bar 1.
  2. Reversal bar – fills buy stop order placed above the setup bar and is then stopped out when it goes 5 pips lower than bar 1. We are now flat so Tweak #1 is applied
  3. Reversal bar that fills the buy stop order placed on bar 2. A reverse sell stop order is placed 5 pips below it when it closes with a contingent stop loss at 10 pips above its highest point.
  4. Bar 4 hits the stop loss and triggers sell stop order placed below bar 3. Note – see point 4.7 above – Exception to the rule; as this sell order is the result of a full stop loss, no reverse buy stop order is placed above this bar when it closes.
  5. Bar 5 triggers the stop loss above bar 4 so we are now flat. When it closes, Tweak #1 is applied. (Note – Tweak #1 cannot be applied to two successive stop outs; in this case it was last applied to bar 2, 2 bars prior to this application).
  6. Bar 6 fills the sell stop order placed under bar 5 and is a new buy setup bar (as it makes a lower low than bar 5), when it closes a buy stop order is placed 10 pips above it, contingent stop loss 5 pips below it.

Questions:

1) These highlighted sentences has brought some questions to me,I always thought I got it right. As per the rules, we are not suppose to place a reversal stop order on a trade which has already been reversed unless a new setup go going the opposite direction has formed. So my question is, isn't CANDLE 4 consider as a new Long setup bar? Or am I wrong?

2) If Candle 5 did not have a higher high than Candle 4, then we can consider it as a new Long setup bar and place a buy stop reversal order 10pips above the high of Candle 5 ? Is tat how it suppose to be?

3) El Dee, I suppose the rules of NO REVERSAL ORDER FOR A REVERSED TRADE rule applies similarly to both 4H 5EMA and Daily 5EMA system? or there's any variation in this particular rule?

Thanks a lot for answering my questions guys
- Sean

Discipline is PRIMARY, Method is Secondary.....
  • #2,990
  • Feb 4, 2009 6:32pm Feb 4, 2009 6:32pm
Quoting Dabestone
Attachment

Thanks for the swift reply El Dee. Here's a chart and explanation subtracted from the document that you created regarding the daily system rules.

[b]1.Bar 4 fails to fill buy stop order placed above bar ‘2’ but fails to make lower low than bar ‘2’. This is a second failed reversal bar. Note, even if this bar had made a lower low than bar 3 but not bar 2, it would still not be a new long setup bar. On the close of this bar we have had 2 failed reversal bars so according to Tweak #2 we close our position...
Bar 4 is a second failed reversal bar so it, and all previous bars, are ignored and the next bar is used for tweak 1 (in daily) or as new setup - if it qualifies - in 4 hour.
You don't have to be right, just don't be too wrong
  • #2,991
  • Feb 4, 2009 7:00pm Feb 4, 2009 7:00pm
Quoting El Dee
.... so now I will only place a sell stop below today's sell setup (and pray that it is not triggered before Monday!)
Hey El Dee -
The bar that just closed is the bar that took out the the last trade. It seems to me from my interpretation of the the rules that we would ignore that bar and wait for a set-up bar, instead of treating it as a set-up bar. I'm not arguing to stay out of a trade, I'm just wondering if treating yesterdays bar as a set up bar is per the rules or is a hunch on your part. Thanks for any clarification you can provide.

Shawn
  • #2,992
  • Feb 4, 2009 7:14pm Feb 4, 2009 7:14pm
Quoting Dabestone
4.7 Exception to the rule


There is only one exception to the reverse order placement rule and that is when the order has itself been opened due to a full stop loss resulting in a reverse order being triggered; in this circumstance a further reverse order is not placed.
This rule only applies if there is no valid setup bar between an order opening and its subsequent closure due to a stop loss.

[size=1]Hi EL Dee, this is extracted from the daily system document that you've made....
Good questions - I wish I'd never picked this chart as an example!
1) My interpretation of Sterling's rules are that following a Stop Loss / reversal order, no contingent reversal order is placed on the following bar - this is to prevent getting caught in a whipsaw - however, I think on a previous post I may have made a statement to the contrary. This rule is the same for 4 hr & daily.
"If you get stopped out of your reversal trade you do not put another reversal trade in the market" Sterling's post 1 of this thread
2) Yes - if the following bar is a setup then contingent orders / SL's are placed as normal.
3) Yes, no reverse order applies to both timeframes but tweak 1 follows a stop loss in daily.

Tonirai / Howard - Your thoughts on point 1 above?
You don't have to be right, just don't be too wrong
  • #2,993
  • Feb 4, 2009 7:32pm Feb 4, 2009 7:32pm
Quoting PowerBySol
Hey El Dee -
The bar that just closed is the bar that took out the the last trade. It seems to me from my interpretation of the the rules that we would ignore that bar and wait for a set-up bar, instead of treating it as a set-up bar. I'm not arguing to stay out of a trade, I'm just wondering if treating yesterdays bar as a set up bar is per the rules or is a hunch on your part. Thanks for any clarification you can provide.

Shawn
Hi Shawn,
The bar that closed on the 3rd Feb did not have a reversal order on it as it had not made a higher high than the original bar (Jan 30th) which had the sell order under it and no reversal order was placed above the Jan 30th bar on the close of the Feb 2nd bar as the sell order was the result of a stop loss / reversal order. The bar that stopped us out (Feb 4th), is a new sell setup so a contingent sell order is placed 5 pips below it.
This is all as per rules.
The reason I don't want it to open until Monday is that Fridays can display volatility and I don't want another F*&^!ŁG stop loss! (and a bit of tech analysis suggests possibly another day of upwards movement before a fall)
I have put my contingent order in place, though, because not to do so would deviate from the rules.
You don't have to be right, just don't be too wrong
  • #2,994
  • Feb 4, 2009 8:08pm Feb 4, 2009 8:08pm
Thanks El Dee -
No setup, no reversal order. Just didn't realize I could count the accursed stop-hitting bar as a shiny new setup bar. I watched the last trade way too much hoping to lower that stop when the lower EMA was hit. After starting to trade the daily I've hit the two losers in a row. That's odd for this system and I don't intend to miss the next big move so I've place my sell stop at 1.4318, SL at 1.4587. GBP set's rates tomorrow morning. I hope the mob (the rest of 'us') thinks we look good in comparison...
  • #2,995
  • Feb 4, 2009 8:36pm Feb 4, 2009 8:36pm
Quoting El Dee
Good questions - I wish I'd never picked this chart as an example!
1) My interpretation of Sterling's rules are that following a Stop Loss / reversal order, no contingent reversal order is placed on the following bar - this is to prevent getting caught in a whipsaw - however, I think on a previous post I may have made a statement to the contrary. This rule is the same for 4 hr & daily.
"If you get stopped out of your reversal trade you do not put another reversal trade in the market" Sterling's post 1 of this thread
2) Yes - if the following bar...
Some considerations, strictly following original 4H rules:
If we hit SL on a current trade, with the consequent filling of the reverse order, we do not place another reverse order UNTIL we get a setup bar to the opposite direction of the actual open position, which can be as soon as the bar that stopped us out.

(The only case where we don't consider the bar that has just closed is when we get 2 consecutive failed reversal bars - we start looking for a new setup bar starting from the following bar).

Current 4H chart has a situation like this in the past few bars:
A - Setup bar to a short;
B - Triggers the sell - we are short;
C - We hit SL and reverse pending buy is trigger - we are long. We normally wouldn't place a reverse order, but because the bar is a valid short setup bar, pending sell stop is placed;
D - New setup bar - SL and sell stop are moved up;
E - Triggers the short.
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  • #2,996
  • Feb 4, 2009 9:05pm Feb 4, 2009 9:05pm
I might add, for better understanding, that in the example of that chart, and strictly by the 4H rules, it would be:

1 - Buy setup bar; note that the previous two bars are also buy setup bars but bar ‘1’ is the first bar that is followed by a reversal bar that fills the buy stop order that has been placed 10 pips above bar 1.
OK;

2 - Reversal bar – fills buy stop order placed above the setup bar and is then stopped out when it goes 5 pips lower than bar 1. We are now flat so Tweak #1 is applied
(shitty example, because the bar had to go up, then all way down, then all up again to close green... but let's believe it did)
The bar leaves us flat, alright. But it is a setup bar to a long, so buy stop is placed above it.

3 - Reversal bar that fills the buy stop order placed on bar 2. A reverse sell stop order is placed 5 pips below it when it closes with a contingent stop loss at 10 pips above its highest point.
Without the tweak, we have also the buy filled. A reverse sell stop is placed below bar #2 (our setup bar), where the SL of current buy is.

4 - Bar 4 hits the stop loss and triggers sell stop order placed below bar 3. Note – see point 4.7 above – Exception to the rule; as this sell order is the result of a full stop loss, no reverse buy stop order is placed above this bar when it closes.
Hits SL and enters the reverse sell (we are short);
The bar is a valid setup to a long, so we place buy stop above it.

5 - Bar 5 triggers the stop loss above bar 4 so we are now flat. When it closes, Tweak #1 is applied. (Note – Tweak #1 cannot be applied to two successive stop outs; in this case it was last applied to bar 2, 2 bars prior to this application).
Stops the short, fills the buy stop and then stops us out, leaving us flat.
It's a valid setup bar to a long, so we place buy stop above it.

6 - Bar 6 fills the sell stop order placed under bar 5 and is a new buy setup bar (as it makes a lower low than bar 5), when it closes a buy stop order is placed 10 pips above it, contingent stop loss 5 pips below it.
New setup bar bar to a long, we move the pending buy above it (we are still flat).
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  • #2,997
  • Feb 4, 2009 10:13pm Feb 4, 2009 10:13pm
Quoting tonirai
I might add, for better understanding, that in the example of that chart, and strictly by the 4H rules, it would be:



2 - Reversal bar – fills buy stop order placed above the setup bar and is then stopped out when it goes 5 pips lower than bar 1. We are now flat so Tweak #1 is applied
(shitty example, because the bar had to go up, then all way down, then all up again to close green... but let's believe it did)

This chart proves, that the Mighty and Powerful Oz, Lord of the Forex,
Master of the Markets, Manipulator of Market Makers, Founder of Fear,
Giver of Greed has stolen a copy of all these rules to forever twist the
chart patterns into a veritable black hole of chaos and confusion.

Imagine what NFP Friday will bring.

Dr. D.
  • #2,998
  • Feb 4, 2009 10:42pm Feb 4, 2009 10:42pm
Quoting fourxtrader
This chart proves, that the Mighty and Powerful Oz, Lord of the Forex,
Master of the Markets, Manipulator of Market Makers, Founder of Fear,
Giver of Greed has stolen a copy of all these rules to forever twist the
chart patterns into a veritable black hole of chaos and confusion.

Imagine what NFP Friday will bring.

Dr. D....
lol
  • #2,999
  • Feb 5, 2009 3:43am Feb 5, 2009 3:43am
Quoting El Dee
Good questions - I wish I'd never picked this chart as an example!
1) My interpretation of Sterling's rules are that following a Stop Loss / reversal order, no contingent reversal order is placed on the following bar - this is to prevent getting caught in a whipsaw - however, I think on a previous post I may have made a statement to the contrary. This rule is the same for 4 hr & daily.
"If you get stopped out of your reversal trade you do not put another reversal trade in the market" Sterling's post 1 of this thread
2) Yes - if the following bar...
That is correct, stop and reverse is applicable once only for both 4hr and daily, following that we should wait for a new setup bar for 4 hourly and a new setup bar or a tweak for daily to get back in a position.
Regards
  • #3,000
  • Feb 5, 2009 3:44am Feb 5, 2009 3:44am
Quoting fourxtrader
This chart proves, that the Mighty and Powerful Oz, Lord of the Forex,
Master of the Markets, Manipulator of Market Makers, Founder of Fear,
Giver of Greed has stolen a copy of all these rules to forever twist the
chart patterns into a veritable black hole of chaos and confusion.

Imagine what NFP Friday will bring.

Dr. D....
Chaos is the name of the game.
Regards
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