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  • #221
  • Apr 7, 2007 9:23pm Apr 7, 2007 9:23pm
Quoting KudzuFX

* What I like about your approach is how you can visualize a Stoch's behavior in lower TFs influencing the Stoch in a higher TF.

* The other thing I like is how you analyze the Stochs in terms of what is happening now instead of, as some traders do, being overly influenced by what happened a couple of days ago or even yesterday or over-anticipating what price may do in future TFs.

Thanks for your contributions.
You hit the nail on the head. There is no way to "predict" price movement other than we know statistically price will move a certain way given certain indications over a certain amount of the time.

It would make sense then, that the older your data has less influence over the current price. Having said that, patterns that do occur in the past are like any indication representing a statistical probability of a future movement. The question to using old data is how well does that indication work and does the trader know it?

Stochastics actually work on the past lowest low, and highest high in their formula over the time period we choose. This already takes in account the past movement, especially as we use it over multiple time frames. Therefore adding the past into the equation in some other form is like looking back and multiplying the effect of the past on your decision making.
  • #222
  • Apr 7, 2007 9:51pm Apr 7, 2007 9:51pm
Quoting Pluto2
Hello Spud,
thanks so much for your lessons and the system. I am approaching the trades by your system from the other end. I always look at the 4h first - if the stoch. on this time frame is going from the 20 up, I am then waiting for the other time frames to agree to enter a buy position, I am not even considering to sell. Is this wrong? Also, do you always wait for the stoch. to turn from above 80 or from below 20? On 4h, or all?
Thanks again.
May the pips be with you.
Pluto2
Wow, what a great follow up question and perfect timing to the previous statement and my response.

You are right and you have it perfectly correct...you look at the 4H first as your indicator...or trigger if you like. This is the manner to set up the optimum trade.

Statistically the 4H price is telling us where it has to go...crossing up across the 20...obviously long....however that does not mean it will stay in a long trend.

That is why as you say we wait for the other 3 time frames to be in the "up" position all above 20 themselves and moving up. From this point on they will decide the 4H's movement.

The statistical odds of all reversing (15M/30M/1H) in making a down move that also pushes the 4H down is small. That does not mean the 15M may not turn down, but if it does we can watch the effect on the 30/1H and 4H to know if the move is going to be a burp, if we are on a scenic tour, or if the price is going to take a big dip before it plays back to our favour.

The reason we wait for all 4 time frames to be above 20 in a long or below 80 in a short trade is that our odds of suffering a loss or reversal from all 4 time frames reversing is almost non-existent.

In fact if you want a good challenge, try to find 4 stochastics over 4 time frames that meet this criteria and see how many times all 4, or even 3 time frames reverse back on themselves to cross the 80/20 line again.

What I have put in here is the "safest" way you can make pips on a consistent basis. You can start "having fun" and enter on only 3 time frames, or use only the 15/30 as an indicator as long as the 1H or 4H is in the same trend....but your loss rate will increase the further away you get from the "optimum" trade I showed you. So you have to bear that in mind.

As I'll probably put in here 1,000 more times...the hardest thing about trading the way I suggest is waiting for the trade to come to you and not getting too eager or ahead of the game. You will see hundreds of missed opportunities because the 15/30 lined up, or the 15/30/1H lined up...that's ok.....realize that if you trade aiming for the "optimum" examples you are going to have more than enough opportunity and pips in your pocket to control your pip value and income. If you trade the other opportunities you may be like me, trading for the fun or excitement of the trade...but realize it's a much larger risk and your understanding of reading stochastics will need to be that much better to have success in those trades.

That too doesn't mean a 3 time frame trade is such a huge risk I wouldn't trade it....it isn't a bad trade.....just be diligent as to you where you are in relation to the overall price trend. Trading long against a short trend is not the best idea with 3 time frames....and worse with 2 time frames.....but can be a good idea with 4 time frames. A trend can save your butt if you fall victim to an early trade if you use less time frames.
  • #223
  • Apr 7, 2007 10:40pm Apr 7, 2007 10:40pm
Spud, you continue to amaze me. I eagerly check my computer all day long to see if you've posted something new. That's because every time you do, I feel like I'm one step closer to being a truely successful trader. Thanks for passing on your knowledge. I'm sure we'll have many questions in the coming weeks, but your responses are molding us all into better traders...
  • #224
  • Apr 8, 2007 12:21am Apr 8, 2007 12:21am
yeah SPUD for president!
  • #225
  • Apr 8, 2007 7:32am Apr 8, 2007 7:32am
There seems to be some confusion from the PM's I have received on trade entry and exit. With reference to the 15M/30M/1H/4H time frames:

We always use the 4H to signal our entry possibility first and to enter the trade ALL our remaining time frames are in sync with our 4H before we trade.

When we have entered a trade our focus is on the 15M time frame first.

The most important thing you can remember is that the shorter time frames will determine the longer time frame movements.
The big mistake will be to believe because the longer time frame is moving up it is in an up trend and the shorter time frames will follow.
If you don't understand what that means..ask me! This is extremely important to understand.

When the 15M peaks (80 long; 20 short) you can either exit or move your focus to the next higher time frame...in this case the 30M. Repeat until 1H or until you feel you have enough pips. There is more risk the longer you go. Never trade the 4H.

During the trade the 15M is likely to move against you either as it moves up to the 80 or after it hits 80. This is where you must pay attention to the effect the shorter time frame moves have on the longer time frames. In many instances you will find that even if the 15M drops from 80 to 20 in a long trade, there is no large effect on the 30M or 1H time frames. If the 15/30 make strong moves against you then you have to pay close attention to what the 1H/4H charts are doing.

Your safety net in a long trade as an example, is how close the 1H and 4H stochastics are to the 20 line. Any move against you has far less chance of sustaining that move. Watch the 15M/30M in such a situation as when they go up this is in your favour in a long trade and should push up the 1H and 4H. The further the 1H and 4H get from the 20 line in a long trade the more danger you are in of a reversal or reverse move that you cannpt recover from.

It is extremely dangerous to enter a short trade with any time frame stoch above 80 or in a long trade below 20.

Don't be greedy and always protect your pip profits. It is better to win more times with less pips than losing more trying to gain more pips.
  • #226
  • Apr 8, 2007 8:18am Apr 8, 2007 8:18am
Spud,

Thanks for taking the time to put this together so clearly. I've learned a lot, and un-learned some things - I paid good money to be taught wrong!

I've made a slight mod to the bar end time indicator so it will clean the screen when removed. My minor contribution.

Rob
Attached File(s)
File Type: mq4 EJ_CandleTime.mq4   2 KB | 612 downloads
  • #227
  • Apr 8, 2007 8:22am Apr 8, 2007 8:22am
Spud,

Very nice job of putting all of this together and explaining it clearly. Big thanks!

For those still learning to spot good entry setups, here is a trick I use to cover up price so I can only focus on what the Stochs are telling me:

(This is for MT4)

Right click on the chart and go to Properties>Colors. In the Line Graph pulldown, select Black (if you use a black background, or whatever color matches your background color) for the Line Graph color and when you select Line Graph as the price indicator this will hide the price from you. This allows you to go back in time looking at setups without the bias of knowing what price was doing. When you think you have found a good setup, choose either Bar or Candle (whatever you normally use for price indicator) and then price will appear and you can objectively judge your performance.

Hope this helps,
Randy
  • #228
  • Apr 8, 2007 9:23am Apr 8, 2007 9:23am
Your safety net in a long trade as an example, is how close the 1H and 4H stochastics are to the 20 line. Any move against you has far less chance of sustaining that move. Watch the 15M/30M in such a situation as when they go up this is in your favour in a long trade and should push up the 1H and 4H. The further the 1H and 4H get from the 20 line in a long trade the more danger you are in of a reversal or reverse move that you cannpt recover from.

Hi Spud,

Just to make sure I got this quote from yours right: The ideal setup will be when all TF's are pointing up (in a long position), all of them are between the 20 & 80 line, and the 1HR and 4Hr stochs are very close to the 20 line (but above it)? And the further they move from the 20 line the higher the risk?
  • #229
  • Apr 8, 2007 9:58am Apr 8, 2007 9:58am
Quoting alcastro
Your safety net in a long trade as an example, is how close the 1H and 4H stochastics are to the 20 line. Any move against you has far less chance of sustaining that move. Watch the 15M/30M in such a situation as when they go up this is in your favour in a long trade and should push up the 1H and 4H. The further the 1H and 4H get from the 20 line in a long trade the more danger you are in of a reversal or reverse move that you cannpt recover from.

Hi Spud,

Just to make sure I got this quote from yours right: The ideal setup will be when all TF's are pointing up (in a long position), all of them are between the 20 & 80 line, and the 1HR and 4Hr stochs are very close to the 20 line (but above it)? And the further they move from the 20 line the higher the risk?
Yes, all the time frames should be going up and above 20 in a long trade. The closer they all are to 20 the better....but it usually doesn't workout that nicely. Just keep in mind where everything is and the effects each is having on the other and you will be able to get a much better "feel" for what is happening.

The safety statement is pretty general but logical....if the stochs are down there and already came up from below 20 on the way up...they really don't have much place to go against you...as compared to if they are the 50 level as an example.

I realize I am typing out specifics and you must realize that learning to feel how the stochastic behaves and their effect on each other is your most powerful tool.

I'm telling you trade all time frames above 20 on a long because it is a safe move that will win you pips. My goal is to get people winning.

As you trade this way live you will learn as you go and get the feel of stochastics and how they are moving and affecting each other. You can only do this live I'm afraid which is why I strongly suggest that we always practice, practice, practice with the stochastics...even if not trading. Just try and predict what will happen and study why it did or didn't do what you thought.
  • #230
  • Apr 8, 2007 10:07am Apr 8, 2007 10:07am
Quoting RandyG67
Spud,

Very nice job of putting all of this together and explaining it clearly. Big thanks!

For those still learning to spot good entry setups, here is a trick I use to cover up price so I can only focus on what the Stochs are telling me:

(This is for MT4)

Right click on the chart and go to Properties>Colors. In the Line Graph pulldown, select Black (if you use a black background, or whatever color matches your background color) for the Line Graph color and when you select Line Graph as the price indicator this will hide the price from you. This allows you to go back in time looking at setups without the bias of knowing what price was doing. When you think you have found a good setup, choose either Bar or Candle (whatever you normally use for price indicator) and then price will appear and you can objectively judge your performance.

Hope this helps,
Randy
That's a great idea Randy.

One thing I used to do was print the charts out and cover up the price and the stochastic and start left to right predicting what both would do from how they moved.

An interesting endeavor is to try it with just 2 time frames, but mix and match them...like 15M/4H or 30M/4H or 15M/30M and see how much your accuracy varies with certain time frame combinations or the lack of a specific time frame. You'll soon understand why it is better to wait for the trade to come to you than trying to predict and catch the move early.

Also learn to recognize divergences with the price and stochastic...it's a wonderful tool for catching a good move. You usually only see a divergence on one time frame.
  • #231
  • Edited 11:39am Apr 8, 2007 11:27am | Edited 11:39am
Hey Spud,

I am a "tweaker" by nature, so I have been looking at ways of improving upon your system. Let me tell you that I was hard-pressed to find something to improve upon, but I did think this would be helpful to everyone.

What if instead of using 4 charts, we just put 4 stochastics on 1 chart?

Well then, let's make them the equivalency of having 4 charts then.

SO,
Stochastics(5,3,3) for 15 minute
Stochastics(10,3,3) for 30 minute (5x2)
Stochastics(20,3,3) for 1 hour (5x4)
Stochastics(80,3,3) for 4 hour (5x16)

I think this will make our "chart glancing" more efficient, and potentially allow us to trade more pairs using your technique. I believe all the same rules will apply, and from what I can tell, the same signals come up as "ideal" trades.

Regards,

Kevin

PS
I am now realizing my logic may be off here. The 3's in the parameter settings will have to changed as well, and does not seem to be yielding quite as accurate results when multiplied by the appropriate ratio. Anyone else have some thoughts on this?
  • #232
  • Apr 8, 2007 11:58am Apr 8, 2007 11:58am
Quoting kharvell
Hey Spud,

I am a "tweaker" by nature, so I have been looking at ways of improving upon your system. Let me tell you that I was hard-pressed to find something to improve upon, but I did think this would be helpful to everyone.

What if instead of using 4 charts, we just put 4 stochastics on 1 chart?

Well then, let's make them the equivalency of having 4 charts then.

SO,
Stochastics(5,3,3) for 15 minute
Stochastics(10,3,3) for 30 minute (5x2)
Stochastics(20,3,3) for 1 hour (5x4)
Stochastics(80,3,3) for 4 hour (5x16)

I think this will make our "chart glancing" more efficient, and potentially allow us to trade more pairs using your technique. I believe all the same rules will apply, and from what I can tell, the same signals come up as "ideal" trades.

Regards,

Kevin

PS
I am now realizing my logic may be off here. The 3's in the parameter settings will have to changed as well, and does not seem to be yielding quite as accurate results when multiplied by the appropriate ratio. Anyone else have some thoughts on this?
Interesting idea but I think there is a snag. The most recent close is coming from only the 15 minute chart which would skew the numbers, because the 30M/1H/4H charts would have different recent close numbers in the calculation. As you get further out in time that error would increase significantly to say the 4H chart. the 3-day averages would be trickier I think as they would have to be modified for each time period given where the current time is and the number of periods in each.

Secret is to earn enough pips to have 4 monitors
  • #233
  • Apr 8, 2007 12:13pm Apr 8, 2007 12:13pm
Quoting Spudfyre

Secret is to earn enough pips to have 4 monitors
LOL

Well I am hoping to get to that point soon! Thanks for your always prompt feedback, and I really appreciate what you've done here.

Regards,
Kevin
  • #234
  • Apr 8, 2007 12:30pm Apr 8, 2007 12:30pm
This is my only thank you message to Spudfyre and participants....(so as not to clutter this thread...will only post when useful question arises or i have something useful to add)...just couldn't help thankingyou for giving me a dfferent perspective...i've applied MTS systems before...but the way you interconnected the MTF's so clearly and logically its almost impossible not to use that whenever one trades...its just watching a brick wall being built ( alittle more exciting)...u know that one on top of the other eventually will give you the wall u expect to see....

..don;t know about the analohy but i tried....Thanx again.
  • #235
  • Apr 8, 2007 12:55pm Apr 8, 2007 12:55pm
Quoting Spudfyre
There seems to be some confusion from the PM's I have received on trade entry and exit. With reference to the 15M/30M/1H/4H time frames:

We always use the 4H to signal our entry possibility first and to enter the trade ALL our remaining time frames are in sync with our 4H before we trade.

When we have entered a trade our focus is on the 15M time frame first.

The most important thing you can remember is that the shorter time frames will determine the longer time frame movements.
The big mistake will be to believe because the longer time frame is moving up it is in an up trend and the shorter time frames will follow.
If you don't understand what that means..ask me! This is extremely important to understand.

When the 15M peaks (80 long; 20 short) you can either exit or move your focus to the next higher time frame...in this case the 30M. Repeat until 1H or until you feel you have enough pips. There is more risk the longer you go. Never trade the 4H.

During the trade the 15M is likely to move against you either as it moves up to the 80 or after it hits 80. This is where you must pay attention to the effect the shorter time frame moves have on the longer time frames. In many instances you will find that even if the 15M drops from 80 to 20 in a long trade, there is no large effect on the 30M or 1H time frames. If the 15/30 make strong moves against you then you have to pay close attention to what the 1H/4H charts are doing.

Your safety net in a long trade as an example, is how close the 1H and 4H stochastics are to the 20 line. Any move against you has far less chance of sustaining that move. Watch the 15M/30M in such a situation as when they go up this is in your favour in a long trade and should push up the 1H and 4H. The further the 1H and 4H get from the 20 line in a long trade the more danger you are in of a reversal or reverse move that you cannpt recover from.

It is extremely dangerous to enter a short trade with any time frame stoch above 80 or in a long trade below 20.

Don't be greedy and always protect your pip profits. It is better to win more times with less pips than losing more trying to gain more pips.


This is all great stuff
& in princible it is a 100% and its great to know this stuff
you are a great teacher

but in fact in the real world it works in the reverse


the 4 hour is way better then the 15 min chart & stoch
& the reason is not about time frame
but the traders in that time frame

the 15 min stoch speaks of us small traders & we can change on a dime

the 4 hour is the big boys & the funds
& the day is the banks & countries

& for them to let their TF change would cost them $100000000 of dallors
so they will not let it change - because they would be betting against theself

bro. it is way easier to see a trend on a month chart a 15 min chart for that reason-

& that is why I would take the trend off the 4 hour chart & not the 15 min chart

because its the big boys with $10000000000000000000 of dallors
or us with 1000

the way you are doing it you are leaving yourself open to the small trend
& getting hit with the big D from the higher charts!

gone till Monday

TEB
  • #236
  • Apr 8, 2007 2:12pm Apr 8, 2007 2:12pm
interesting theory, TEB
  • #237
  • Apr 8, 2007 2:35pm Apr 8, 2007 2:35pm
Quoting TEB63
This is all great stuff
& in princible it is a 100% and its great to know this stuff
you are a great teacher

but in fact in the real world it works in the reverse


the 4 hour is way better then the 15 min chart & stoch
& the reason is not about time frame
but the traders in that time frame

the 15 min stoch speaks of us small traders & we can change on a dime

the 4 hour is the big boys & the funds
& the day is the banks & countries

& for them to let their TF change would cost them $100000000 of dallors
so they will not let it change - because they would be betting against theself

bro. it is way easier to see a trend on a month chart a 15 min chart for that reason-

& that is why I would take the trend off the 4 hour chart & not the 15 min chart

because its the big boys with $10000000000000000000 of dallors
or us with 1000

the way you are doing it you are leaving yourself open to the small trend
& getting hit with the big D from the higher charts!

gone till Monday

TEB
Hi TEB where's your source on this info or is this just your opinion (of course we are all entitled to one)? I'm just curious. We all know there are ALOT of thoeries regarding whats really going on behind the scenes with FOREX ...some info that we are not privy to.
  • #238
  • Apr 8, 2007 3:25pm Apr 8, 2007 3:25pm
I agree with Teb about the 4hr and daily TF's. However there is great validity using the 15/30 as described by Spud. Look at the daily and 4 hr to get a trend. Then take the trade when the 15/30 are in agreement with the 4hr as Spud does. From there use the escalator theory for taking profit.

B.
"Skills pay the bill's!"
  • #239
  • Apr 8, 2007 4:36pm Apr 8, 2007 4:36pm
Quoting TEB63
This is all great stuff
& in princible it is a 100% and its great to know this stuff
you are a great teacher

but in fact in the real world it works in the reverse


the 4 hour is way better then the 15 min chart & stoch
& the reason is not about time frame
but the traders in that time frame

the 15 min stoch speaks of us small traders & we can change on a dime

the 4 hour is the big boys & the funds
& the day is the banks & countries

& for them to let their TF change would cost them $100000000 of dallors
so they will not let it change - because they would be betting against theself

bro. it is way easier to see a trend on a month chart a 15 min chart for that reason-

& that is why I would take the trend off the 4 hour chart & not the 15 min chart

because its the big boys with $10000000000000000000 of dallors
or us with 1000

the way you are doing it you are leaving yourself open to the small trend
& getting hit with the big D from the higher charts!

gone till Monday

TEB
Everything you say is absolutely correct about trends. This is why I say that we use the 4H to look for our trade to start. We want to enter in a strong trend.

However, what happens to the next candle of the 4H is soley based on what the 15M/30M/1H movements do. The 4H will not dictate how the lower time frames are going to move next. The big boys don't trade simultaneously.

The 4H is a constant zig zag on it's way down and up and few small traders can ride the highs and lows from bottom to top.

So, what we are trying to do is enter on the 4H strong trend. Then we want to ride that trend and be "safe" doing it so we win.

With the other time frames in sync we can progress down the line 15-30-1H growing into the strong trend or from my point of view continuing to build the trend.......but we also know that as we move down the line the shorter time frames will be reversing within the 4H trend as the stochastic expires and turns at the peak of it's current cycle.

So what we want to avoid is riding a 1H reversal move that wipes out all our pip profit or takes us into a loss....which we are in far greater risk of when the short frames are moving against the long term trend. Again it is the short term that will be affected by the short term moves...not the long trend.

As such, we know that if we went long in the 4H and the 15/30/1H all go long then we are pretty well assurred of making pips.

If on the other hand all the time frames reverse...that reversal is not going to start at the 4H...it will start at the 15M and then progress to the 30M and then the 1H...eventually showing it's ugly side on the 4H. Keep in context I am working within our trade.
  • #240
  • Apr 8, 2007 5:14pm Apr 8, 2007 5:14pm
Spud you never ceased to amaze me this is some good stuff. Thanks for pming me and answering my question....
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