(SR)ZigZag Levels-Divergence(RDHD) System

I decided to make this all in one thread and there will be 3 parts:

Part1: Basic explanation off all indicators
Part2: The system
Part3: Live trades posted almost in real time(GMT*1)

Before we begin, I think you guys want to know what is this system all about.... it is about trading almost naked and minimum indicators used:

MTF Stoch with fib leveling,
ZigZag levels,
Support & Resistance,
OSMA on chart divergence(RD&HD)

I must worn all the members that I WILL BAN EVERY POSTER THAT
TRIES TO CLUTER THIS THREAD WITH SOME EXTRA INDICATOR!!!
I know that this is a little to egoistic, but this method doesnt need anything
more to be profitable...sorry.

Good thing is that this system can be used for scalping and longer term
trades.....almost everybody can adapt this to his trading method.

Ok, now we can begin the journey

The first indicator explained will be MTF_Stoch_FibBreak

The Stochastic Oscillator track market momentum and consists of two lines:

1. %K compares the latest closing price to the recent trading range.
2. %D is a signal line calculated by smoothing %K.

Trending market signals:

If the Stochastic hovers near 100 it signals accumulation. Stochastic lurking near zero indicates distribution.
The shape of a Stochastic bottom gives some indication of the ensuing rally. A narrow bottom that is not very deep indicates that bears are weak and that the following rally should be strong. A broad, deep bottom signals that bears are strong and that the rally should be weak.
The same applies to Stochastic tops. Narrow tops indicate that the bulls are weak and that the correction is likely to be severe. High, wide tops indicate that bulls are strong and the correction is likely to be weak.

Ranging market signals:

Long signals:

1. Go long where the first trough is below the Oversold level.
2. Go long when %K or %D falls below the Oversold level and rises back above it.
3. Go long when %K crosses to above %D.

Short signals:

1. Go short where the first peak is above the Overbought level.
2. Go short when %K or %D rises above the Overbought level then falls back below it.
3. Go short when %K crosses to below %D.

Now lets talk about support & resistance......


Support

A support level is the price at which buyers are expected to enter the market in sufficient numbers to take control from sellers.
When price falls to a new Low and then rallies, buyers who missed out on the first trough will be inclined to buy if price returns to that level. Afraid of missing out for a second time, they may enter the market in sufficient numbers to take control from sellers. The result is a rally, reinforcing perceptions that price is unlikely to fall further and creating a support level.


Resistance

A resistance level is the price level at which sellers are expected to enter the market in sufficient numbers to takecontrol from buyers.
When price makes a new High and then retreats, sellers who missed the previous peak will be inclined to sell when price returns to that level. Afraid of missing out a second time, they may enter the market in numbers sufficient to overwhelm buyers. The resulting correction will reinforce market perceptions that price is unlikely to move higher and establish a resistance level.

Reversal

Support levels, once penetrated, frequently become resistance levels and vice versa.
The market logic is fairly simple: buyers who purchase near a support level, only to see price fall, are likely to sell in order to recover their losses, when price rallies to near their break-even point. The support level then becomes a resistance level.

Likewise, traders who sell when price approaches a resistance level will be disappointed if price penetrates the level and continues to rise. They will be inclined to buy if price returns to near the support level, fearing that they may miss out a second time. The resistance level thus becomes entrenched as a support level.


Some support and resistance levels are more important than others. The significance of the support level is identifiable by:

1. the number of times that the level has been respected;
2. the amount of volume that has been traded near the level;
3. whether the level is old or new - recent levels have greater significance;
4. whether the level is a new High or new Low - more extreme levels have greater impact; or
5. a level formed at a round number leaves a lasting imprint.

http://www.incrediblecharts.com/pan/...&cb=24babb077a

Next indicator is MF bar

There is not much to say about it, it simply shows you a trend on
various multiple TFs(each TF use few MAs).
Settings are totaly user selectable....you can select TFs, and Ma period
you want to use.

Zig Zag levels indicator

This is my favourite, it shows you a trend and draws a line at HH & LL,
wich could be some kind of SR...if price respects line more than 2 times
line will get bold to show you that this level is more significant that other levels........
I like to trail my SL acordingly to its recent levels!

Next 2 indicators are pretty useful...Magnified price and TimeToEndBar.

I mostly trade at the start of the new bar, at least from some lower TF.
And regarding price, it is very important....prices around round levels
can act "weird", there is probably some big pending order around it,
so price is mainly held at this levels before buyers or sellers "wins",
and price with build up momentum and volume "explode" in its direction.

And the last FX5 OSMA divergence

OSMA = MACD-SIGNAL

Moving Average Convergence/Divergence is the next trend-following dynamic indicator. It indicates the correlation between two price MAs.

The Moving Average Convergence/Divergence Technical Indicator is the difference between a 26-period and 12-period EMA.
The MACD proves most effective in wide-swinging trading markets. There are three popular ways to use the Moving Average Convergence/Divergence: crossovers, overbought/oversold conditions, and divergences.


Divergence
An indication that an end to the current trend may be near occurs when the MACD diverges from the security. A bullish divergence occurs when the Moving Average Convergence/Divergence indicator is making new highs while prices fail to reach new highs. A bearish divergence occurs when the MACD is making new lows while prices fail to reach new lows. Both of these divergences are most significant when they occur at relatively overbought/oversold levels.

Moving Average of Oscillator — OsMA

Moving Average of Oscillator is the difference between the oscillator and oscillator smoothing. In this case, Moving Average Convergence/Divergence base-line is used as the oscillator, and the signal line is used as the smoothing.

Solid line is Classical divergence
Doted line is Reverse divergence

Ok, that is it with the part1. I will post here everything together along
with 2 scripts and one expert.

I use 2 scripts, buy and sell with TP and SL......you can edit them
but the size of SL & TP are irelevant cos you will use an expert caled
SL&TP move by mouse....you simply drag script at the chart, trade
with the TP&SL are executed, put expert on chart, double click the TP or SL
line and drag them where ever you want, I trail my SL&TP constantly
adapting it to the current market.

I trade ONLY when price touch the S\R on 1hr TF.


Picture says a thousand words.....

This is bassicaly SR trading, and the biggest drawback
with any of SR method is :

WILL THE PRICE RESPECT THAT LEVEL, OR WILL IT BREAK THROUGH!

Well I have a great indicator that will warn you is the breaktrough of
level possible......I picked this from T101 method and I think that majority
knows who is Trader101! I have no nerves to explain this into details,
and the short explanation will be that this indicator tracks PA of 14 pairs,
7 green pair are buy side while 7 reds are short pairs....
The thing that interest us is where are that pairs for the last 4 lines
(weekly, daily,4H,1H). If you have all green pairs up while all red are down
for that TFs, it is a strong suggestion that breakout of the trading range
is possible and vice versa!!!
If greens are up while reds are down that is a buy trend,
and if all reds are up & greens down that is a short trend....

If the pairs are just clutered all over the place that means that there is no strong
trend between pairs, and you dont need to be woried about breakthrough.

Best possible scenario is if your price touches the resistance,
while this indicator shows a strong downtrend and vice versa!!!

I guess that Im missing something cos there is no posts here yet........
ohhhhh here it is: YOU WILL BECOME MILLIONARE USING THIS METHOD

Saturday/sunday-not many people here. Nice thread, just need time to read it again and apply your method. BTW, I'd be interested to know pairs you trade, best timeframes and your hit rate. Thanks.

Hi forex flash

very good presentation, if possible post some charts about Divergence

Fyi, people are probably back tracking and S/R is not alway true since market is random.

You didn't even explain how to use the ''force'' indicator...

And most of all you even said to ban people who post their indicator to ''Help'' system.. out.

I am pretty sure this is why people don't post because you don't accept it anyway.

Note, I have to add in like fibonacies and other trendline stuff and even like : autopivot (to show daily resistant and support and pivot line).

Also the chart is messy with many lines.. some line you dont' need like : the line that draw divegense..and level1,2,3..gray line. It serve no purpose .

Anyway, that's my input and you should re-think about.. the ban ... or this system..will not have any support and I am pretty sure this system does not make you a millionaire. So doing baning any outside help is like saying you don't want this system to improve.


- Victor -

I don't blame him a bit for not wanting anyone adding indicators.
You have 5 posts and haven't seen what the indicator adders will do to a system and a thread.

Besides, where could he put another indicator on that chart? Where is there room?

.

I dont understand you......what do you want to know!??

Hi Forex, I am currently trading a system using Zigzag and there are some similarities with what you have put together. The bands you are using seem to contain the price action ( I use STARC Bands, or Bollinger Bands set at STD3), and the (I use B Williams Fractals for bit more of convinience in order to classify whether the market is in the impulse or a corrective wave structure)points where the price hits these boundries are significant. If one corraletes them with Stochastic or other momentum indicator/s on a given TF, it provides a valuable insight into the possible price action. One thing I would add is the advantage of using Multi TFs gearing, as it provides a map with a wider perspective as to where the current price is in relation to the cycle on a highier TF. Zigzag also assist me to take adventage of the principle of angulation or a parrallel price movement on a given TF to Bill Williams aligator. The common part with your system is the most important one dealing with isolating the extreems of the price action, and trading them for profit. Trading corrective waves is easier then the impulse waves, as the impulse waves will produce the price extreeme points in succession, without going to the opposite band. If one can establish that this is the case, reversing at the extreeme points might lead to losses, but riding the impulsive waves is profitable. That is whe the parralellism to Aligator is helpful, and counting significant fractals too.
I wish you many good trades using this approach,
2be

Thanks man, you hit the "spot" .....If I tried to put this method in a few sentences, Ill surely wont be as this good at it!!!

Respect

The principle of your approach is good. It is based on price action, the rest are filters. It does not matter which filters one uses providing they work and they do not clutter the picture. In this volitile markets I have come down to use M5 TF on G/U, geared to (M15), M30 and observing H1 and H4. It does work, especially when one spots angulation, or the parrallel move of the market to Aligator, or EMA21 if one thinks aligator is too much of a clutter. The market is a structured enviroment, if one trades in accordance with this strucure, one is more likely to trade in the direction of the market. Anything that assist a trader in recognising this strucure on any TF and of any degree, will prove to be profitable.
Best wishes,
2be

Here is one pictured explanation........

My main TF is 1H, I dont trade until price touch the support or resistance!
If you take a look at the first (1H) picture, you see that when price touched
resistance, divergence ocurred wich is a very good sign that price will bounce
in other direction......Also the MTF Stoch are in overbougt trend for some time now....also good sign.

Next thing I look is 30min TF...stoch is also in overbought and now
going down, while price already bounced off resistance(or bolinger),
and going down.

Now final look at the 15min, same here, price bounced in oposite direction,
but it is already close to the lower bolinger line so you can expect some
short term reverse, and stoch is almost in oversold....

It is good thing to try to match this TFs in the trend....now, you can execute sell trade cos 1hr tells you to do that, but the 15min tells you that there could be some short term reverse......either you can take a trade, or wait
to see what happens to the 15min TF, if price bounce of lower bolinger,
you wait untill that short term trend ends(at this point I watch only PA),
and then execute your sell when all the TFs are in same direction.

You can experiment with the TFs, it all depends how do you want to trade!!!
I preffer longer term trades.

Bar Charts (OHLC)

Your first step in interpreting a bar chart is to identify the direction of the trend. Then look for signs that the trend is either strengthening or weakening.

Identifying the Trend

An up-trend is a series of bars with higher highs and higher lows. A down-trend is a series of bars with lower highs and lower lows.
http://www.incrediblecharts.com/imag...ges/trends.png
When does a Trend Start and End?

An up trend is started by a bar with a higher high and higher low than the previous bar. Conversely, a down trend is started by a bar with a lower high and lower low than the previous bar.
http://www.incrediblecharts.com/imag...d%20starts.png

Expanding and Contracting Ranges

Expanding ranges in an up trend signal increasing eagerness from buyers and increasing eagerness from sellers in a down trend. Contracting ranges show decreasing eagerness.
http://www.incrediblecharts.com/imag...g%20ranges.png
Closing Price: Up or Down?

The eagerness of buyers and sellers is indicated by the position of the closing price in relation to the close on the preceding bar. The larger the distance - the greater the eagerness.
http://www.incrediblecharts.com/imag...us%20close.png
Closing Price Compared to the Range

The range is the distance between the high and the low on a bar. The position of closing price on the bar indicates who controls the market at the end of the day, and their level of commitment.

1. Closing price at the top of the bar signals that buyers have control. If they are committed they will buy into the close of the market, with less profit-taking, and move price towards the high for the day.
2. Closing price at the bottom of the bar indicates that sellers have control. If they are committed they will sell into the close and move price towards the low for the day.
3. If neither party is committed then price is likely to close towards the middle of the range as profit-taking retraces part of the gains or losses for the day.

http://www.incrediblecharts.com/imag...0v%20range.png
Conflicting Signals

Conflicting signals show indecision and a weakening trend. Be on the alert for a trend reversal, but remember the Golden Rule: Never assume that a trend has ended until there are clear signals that the opposite trend has started.