Cable, candles and divergence signals

A simple trading method which requires a good knowledge of candles and candle patterns with positive and negative divergence signals on stochastics (settings: 10/3/3). This method is for trading cable only.

My 5 trading tools are candles, moving averages, trendlines (including s/r levels), fibonacci retracements and stochastics, though this journal will concentrate mainly on candles and stochs.

I view all larger time frames down to 4h, 1h and 15m (only those 3 under daily, though occasionally it's helpful to combine two 4h or two 1h candles in your mind if they happen to form a hammer or shooting star).

I have been trading live since February, a little under 6 months, and this journal is for the purpose of saving my charts for instructional purposes only.

cable has been in a tricky position this morning. However there was a clear trade on the 15m chart this morning which combined a higher high in price and a lower low on stochs (negative divergence). This was combined with a hanging man candle (second circle) at the higher price. I did not have a price target in mind at the time though when stochs hit oversold partial profit was taken.

(first chart)

15m -- positive divergence, previous candle closed with shaved bottom

(second chart)

1h - the 15m shaved bottom candle closed just above the 62ema (aqua line) for longs

Open a long either on the 15m candle following the shaved bottom with a tight stop, or wait until that candle develops and closes to see if a reversal is in the works. In this case it was with a bullish piercing pattern and positive divergence.

(first chart)

1h - negative divergence. When the high green candle with the long wick closed, one could have looked for short opportunities after with the lower stoch close (and also the 4h resistance area at the top of wick -- no chart of this).

(second chart)

15m - one could have taken the short following the circled shooting star, or following the subsequent bearish engulfing.

Even if one had waited to open a short, the candle after the long green one with the high wick is a combined shooting star and harami. Immediate sell on the following candle (which turned into a long red).

So on the 1h there was negative divergence, a resistance zone at the top of the wick, and a subsequent shooting star/harami. On this trade between 45 and 60pips were available.

1h hidden bullish divergence (higher price, lower stoch). With price resting on the black 50eMA it would have been a good long trade

This is a trade I would have taken at other times during the week but in this case I let the matter of it being Friday, combined with Prelim UK GDP news 30-45m later, cloud my judgement and stay out of the trade (you can see on the 15m chart the big sell off when the news was released, in spite of the previous hammer with tiny top wick).

1h - hidden bearish divergence with a lower price yet higher stoch. The subseqent bearish engulfing candle confirmed this. Sell on the opening of the next candle as price moves up the previous candle towards its open.

15m - alternatively one could have sold following the huge shooting star (before the 1h bearish engulfing candle had formed). The hidden bearish divergence would have sufficed to have taken that sell. On the 4h we were looking at a downward moving stoch as well. I would have closed half my position when the 15m candle passed through the black 50ema line (before the shooting star), and the other half would have been set to b/e.

This was a very good trade -- many times better not to even look at the coming news releases for the day because they just cloud your judgement and instill unneeded emotions

Here on the 15m is an example of trend continuation. Each circled price closed slightly lower. Anyone without stochs considering a long on the opening of the third circle (following the tiny green body and long wick which closed just above the wick bottom a few to the left) would have lost money as stochs confirmed a lower low in line with the lower price

I'm pasting my post from EO's thread here for the sake of saving the link about seasonal movements

I've been trading cable for only 6 months so this is a question for more seasoned traders: have you noticed cable involved in seasonal cycle patterns? I ask because this morning in Murphy's TA book I read that the $ tends to bottom in January (and looking at the chart he provides, tends to rise in September for several months). It also falls in line with a fascinating VIX composite of the past 19 years which shows seasonal movements here:

http://vixandmore.blogspot.com/2009/...cycle-low.html

So far we have not seen the VIX rise. But like the $ its fall has slowed. Considering that equity markets have continued to follow seasonal movements in spite of the recession, it would seem logical that the VIX and $ will do so too, soon.

seasonal charts and production map by month and season. very useful

http://www.spectrumcommodities.com/e...rts/index.html

three reasons to have taken this trade last night

1h chart shows positive divergence and the midnight candle closed as a harami

4h chart shows the midnight candle opened above a support line.

Buy on the 1am candle (following the harami/positive div)

easy one this morning

a more difficult one this afternoon -- hidden bullish divergence, confirmed by the bullish engulfing candle (circled).

Hey there Ezo - How you doing. Sorry I couldn't post. I had to wait a while for permission. Since moving to this site my trading has gone much better. I dont get all the jargon yet but listening to all the traders on here i get to consider the best and worst senarios. I consider my self a bit of a leach or freeloader but each to their own. Look forward to hearing from you soon. All the best wmloto

Hi wm, welcome I'm glad to hear your trading has improved -- it'll keep getting better I'm sure. One of the best threads on FF is the one by EOHater called Trade what you see NOT what you expect. It's in the Trading Journals section -- page 1 has a pdf file of his strategy. Other than that I view the 'daily candle chart' which is Hussin's thread in the Interactive Trading section. I don't view any other ones -- the cable thread is too disorderly to follow

appears to be hidden bearish divergence in the works on the 4h.

the one above did not play out -- price stalled at the top then during the asian session moved up further, somewhat. However with huge US GDP news this afternoon all movements are open to be questioned, and there now is 1h bearish divergence showing -- waiting for candle confirmation (looks like a hanging man is setting up).

the 1h bearish divergence did indeed play out

I did not take this but it was there to be taken. One has to pay attention though and act very quickly. Such quick action is something that most people are not comfortable with. But that is the secret of Forex -- once you have a clear, proven system, you don't need to sit back to think about it, you simply act, immediately, on the data in front of you, because your system has a proven track record of working. The 1h 62ema is great for a reason--lots of forex traders map it and/or the 65ema--and you can see it has worked again. Some people take it blindly--and it usually works--though I tend to look for signals on the 15m before acting on it.

15m -- bullish divergence, and bullish engulfing candle

1h - right on the aqua MA (62ema), and 1h closed as a harami. Even if the 62ema had not held, the 50ma (green) was just below.

A week ago I posted an identical trade. Even if one had missed the first large reversal candle (15m), one could have bought after it closed, or even at 3pm after the 1h harami had closed.

Hi Terje - WM here. I got caught out on Friday. There is a lot of rubbish going round about conspiracies etc. But after such a huge move whats your opinion on new ranges etc, or is this just a blip. Your comments truly appreciated and hoping your trades are going for you. ATB WM

I hope it wasn't too bad on Friday. I haven't had the best summer so far but I think things will improve going into autumn.

I agree with James Saettele's analysis on DailyFX (link below) that we'll see one more push higher to around 1.70, maybe 1.73, and then a turn. He calls it a "terminal thrust" out of the triangle (and I've read another Elliott Wave technician who agrees with this view). So for now I definitely would favour a move to 1.70, at least, if not further up. But I do think the $ will rebound, and quite soon, some time in August. USDX seems close to findingg support and printing some positive divergence if I'm not misreading it. So for now, for this week, I'd still favour buying dips which is what I'll look to do. Cable gapped up this evening to a new yearly high I think.

http://www.dailyfx.com/story/bio2/FX...073615960.html