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  • #161
  • Dec 5, 2005 4:09pm Dec 5, 2005 4:09pm
Quoting volan
Iso, I think you may be implementing the 50 pip rule in an opposite manner to which post #13 prescribes. The following figure shows my understanding of post #13. The lines that say 50pips are just approximate because I eyeballed them.

http://i28.imagethrust.com/t/113534/eurgbp.jpg

The two horizontal red lines were generated using Iso's "tun_lines" indicator. The turquoise horizontal lines show (about) 50 pips above the turquoise 8 SMA. The grey horizontal lines show (about) 50 pips below the grey 55 SMA. Even though the two regions overlap a little, it can plainly be seen that the 8 SMA is more than 50pips away from the 55 SMA. But the "tun_lines" indicator shows that all indicators (including price) are within its bounds.

Dial, is my understanding in line with your post#13?

Iso, is my understanding the same as yours?
Yes, your turquoise lines conform to post 13. I think you are right that Iso is measuring from the wrong ma's.

It does not matter which ma is higher or which is lower. The 8 can be above the 55 or below it. It only matters that when the two ma's are within 50 pips of each other, the upper boundary line will be 50 pips above the LOWER ma, and the lower boundary line will be 50 pips below the UPPER ma. Think of it this way. If the 8 and 55 are exactly 50 pips apart, and the 55 is uppermost, then the upper boundary will be on the 55 and the lower boundary will be on the 8. As the 8 and 55 move closer together, the boundary lines will move further apart until both ma's are at the same level (crossing). At that point the two boundary lines will be at their maximum distance of 100 pips apart.

Iso's reasons may be different from mine, but I'm considering ditching, or at least modifying the 50 pip rule. In my backtesting, I have seen slope changes that would have been ignored because the 50 pip rule was in effect that ended up garnering well over 200 pips. I have also seen instances when the 50 pip rule was not in effect, but the 8 sma and price were in bed with each other for an extended period. Now nothing works all the time, so the best we can do is come up with rules that work most of the time in order to stack the probabilities in our favor. Even though I am considering ditching the 50 pip rule, I would not do so just because of the occasional occurence of the two scenarios just outlined. Ignoring the current 50 pip rule just to capture the above two scenarios might also let it a lot of losing trades. It may be that the current rule, warts and all, may be the best current solution. I just suspect that it can be improved. And that will require additional testing. As always, rely on your intra-aural computer for case by case discretion.

Dial
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  • #162
  • Dec 6, 2005 5:36am Dec 6, 2005 5:36am
Yes good spot volan. I messed up the code when I was changing it last time around (can't even remember why I changed it now).

It should be OK for this pair. I did a quick check on the swissy too and it looked fine. Pick up the revised indicator in the attachment.

Thanks for reporting the bugs.


Quoting volan
Iso, I think you may be implementing the 50 pip rule in an opposite manner to which post #13 prescribes. The following figure shows my understanding of post #13. The lines that say 50pips are just approximate because I eyeballed them.

http://i28.imagethrust.com/t/113534/eurgbp.jpg

The two horizontal red lines were generated using Iso's "tun_lines" indicator. The turquoise horizontal lines show (about) 50 pips above the turquoise 8 SMA. The grey horizontal lines show (about) 50 pips below the grey 55 SMA. Even though the two regions overlap a little, it can plainly be seen that the 8 SMA is more than 50pips away from the 55 SMA. But the "tun_lines" indicator shows that all indicators (including price) are within its bounds.

Dial, is my understanding in line with your post#13?

Iso, is my understanding the same as yours?
Attached File(s)
File Type: zip indicators.zip   3 KB | 605 downloads
  • #163
  • Dec 6, 2005 5:41am Dec 6, 2005 5:41am
I think I might be jumping the gun by ditching this rule since I haven't really explored this system to the degree that you have. So it might be foolish on my part to remove it only to add it back later on if I change my mind.

From your explanation below it looks like I would need to consider the implications a bit more first!

Quoting diallist
Iso's reasons may be different from mine, but I'm considering ditching, or at least modifying the 50 pip rule. In my backtesting, I have seen slope changes that would have been ignored because the 50 pip rule was in effect that ended up garnering well over 200 pips. I have also seen instances when the 50 pip rule was not in effect, but the 8 sma and price were in bed with each other for an extended period. Now nothing works all the time, so the best we can do is come up with rules that work most of the time in order to stack the probabilities in our favor. Even though I am considering ditching the 50 pip rule, I would not do so just because of the occasional occurence of the two scenarios just outlined. Ignoring the current 50 pip rule just to capture the above two scenarios might also let it a lot of losing trades. It may be that the current rule, warts and all, may be the best current solution. I just suspect that it can be improved. And that will require additional testing. As always, rely on your intra-aural computer for case by case discretion.

Dial
  • #164
  • Dec 6, 2005 2:45pm Dec 6, 2005 2:45pm
Here are the last batch of charts from the study. They roughly correspond to the daily charts previously.

I haven't marked out all the 4h technical stuff you would normally see but you can see some of the setups forming on them.

http://img446.imageshack.us/img446/7...ad107kq.th.gif

http://img446.imageshack.us/img446/6...ad119xl.th.gif

http://img446.imageshack.us/img446/9...ad122lu.th.gif
  • #165
  • Dec 6, 2005 9:47pm Dec 6, 2005 9:47pm
FWIW, I just emailed the following question to the Vegas Team. I think Diallist is right on this, but I thought it would be interesting to see their response:

Vegas Team,

Hello, and thanks for the good free info you've put online about your two Tunnel systems. I have a question about the 4 Hour Tunnel. I'll just use the USDCHF pair to hopefully make it simple.

For the weekly chart, the 5 MA has been above the 21 MA since around April. However, there have been numerous weeks when the 5 MA loses relative momentum to the 21. When this happens, do you look to short the USDCHF (on 4 HR charts) until relative momentum switches directions again? In other words, when deciding to go long or short, is the weekly relative momentum change the key factor? Or is it the 5/21 crossover direction (in which case, you'd only be taking longs since April)?

Thanks!

John
  • #166
  • Dec 12, 2005 5:47pm Dec 12, 2005 5:47pm
Quoting FXLogic
FWIW, I just emailed the following question to the Vegas Team. I think Diallist is right on this, but I thought it would be interesting to see their response:

Vegas Team,

Hello, and thanks for the good free info you've put online about your two Tunnel systems. I have a question about the 4 Hour Tunnel. I'll just use the USDCHF pair to hopefully make it simple.

For the weekly chart, the 5 MA has been above the 21 MA since around April. However, there have been numerous weeks when the 5 MA loses relative momentum to the 21. When this happens, do you look to short the USDCHF (on 4 HR charts) until relative momentum switches directions again? In other words, when deciding to go long or short, is the weekly relative momentum change the key factor? Or is it the 5/21 crossover direction (in which case, you'd only be taking longs since April)?

Thanks!

John
I had the same question.. they refered to it as a 'medium term bottom' when it looses momentum.. but they never mentioned what to do. Do we stay on the side lines? Do we short when the 8 SMA terms negative?

Did you get a responce from them?
  • #167
  • Dec 12, 2005 6:11pm Dec 12, 2005 6:11pm
No, I haven't heard from them. And even after I re-read the document, the answer to your question still isn't clear. Maybe they left it intentionally vague so people can simply grasp the general idea then customize it like Diallist and others are doing...



Quoting xspowerx
I had the same question.. they refered to it as a 'medium term bottom' when it looses momentum.. but they never mentioned what to do. Do we stay on the side lines? Do we short when the 8 SMA terms negative?

Did you get a responce from them?
  • #168
  • Dec 12, 2005 6:32pm Dec 12, 2005 6:32pm
Quoting FXLogic
No, I haven't heard from them. And even after I re-read the document, the answer to your question still isn't clear. Maybe they left it intentionally vague so people can simply grasp the general idea then customize it like Diallist and others are doing...
Yea I read it once, read it again, programmed it, and read it one more time and when I went live with is thats when the question clicked.

My natural guess would be to sit on the sidelines, no? I mean, Medium term bottom and also be a begining for consolidation, reversal, or even continuation of trend. And without the 1 week lag to provide future referance you wouldn't know which side to pick so that is what I am doing right now.

Are you implementing this method on the majors like them or all? I sort of customized it for all.
  • #169
  • Dec 12, 2005 8:39pm Dec 12, 2005 8:39pm
For me to have full confidence in the weekly trend indication, I like to see three things in agreement:

(1) The momentum has increased from the previous week.
(2) The current weekly bar is bullish if (1) is up or bearish if (1) is down.
(3) The 55 SMA on the 4 hour chart has a positive slope if (1) is up or a negative slope if (1) is down.

To tell the truth, I like trading with the slope of the 55 SMA as my trend indicator, but I haven't been doing that long enough to know if is reliable enough to use by itself. So, for now, I'm just using it to confirm what the momentum is telling me.

When in doubt, stay out.

Dial
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  • #170
  • Dec 13, 2005 10:37pm Dec 13, 2005 10:37pm
Hmm here is another question I have in regards to how they wrote it.

It says (and I programmed it a little differently but will reprogram soon) that you only buy (that is if it has bullish momentum on the weekly) when the 8 SMA is turning POSITIVE while being BELOW the 55 SMA, and to SELL when it begins turning NEGATIVE. In this case I looked back in history and we would have many buy signals with sell signals, all gains, however, not to the maximum without a re-entry procedure, since it would turn positive again while being above the 55 SMA.

Anyone have any comments to this?
  • #171
  • Dec 13, 2005 10:49pm Dec 13, 2005 10:49pm
Quoting xspowerx
Hmm here is another question I have in regards to how they wrote it.

It says (and I programmed it a little differently but will reprogram soon) that you only buy (that is if it has bullish momentum on the weekly) when the 8 SMA is turning POSITIVE while being BELOW the 55 SMA, and to SELL when it begins turning NEGATIVE. In this case I looked back in history and we would have many buy signals with sell signals, all gains, however, not to the maximum without a re-entry procedure, since it would turn positive again while being above the 55 SMA.

Anyone have any comments to this?
I'm sorry xspowerx, I just don't understand your question. I got confused with your pairing of buys & sells. Please ask your question again but with more detail please and I'll try to help you.

Thanks

Dial
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  • #172
  • Dec 13, 2005 10:55pm Dec 13, 2005 10:55pm
Thanks diallist.

In the method written by VEGAS, he states the when the weekly has bullish momentum, the 4hr buy signal would be when the 8 SMA < 55 SMA and when the 8 SMA is turning positive. The sell signal for profits would be when the 8 SMA begins to turn negative again.

Diallist, my question is, there are many tiems the 8 SMA turns negative yet there is more potential in the currency. How do we know when to re-enter? Or do we not and wait for it to get below the 55 SMA again? Or maybe turn positive again?

If we wait for it to turn positive again, that would be in contradiction to what VEGAS wrote, since it wouldnt be less than 55 SMA. Here is what I am refering to:

We now are looking for the 8 SMA to move lower through the 55 SMA. When it does, we carefully watch and notice when the SLOPE of the 8 SMA changes from negative to positive. It will do this when the 8 SMA stops losing value in one 4 hour bar and gains in the next. This is the 4 hour bar to initiate new long positions with 3 units [remember: units are whatever trading size you can handle. When you trade bigger, just adjust the size of the unit, not the number of units]. Stops can be placed using technicals [support/res/trendline] of the most recent 4 hour bars.

Assuming the market starts to go up, we stay long until 1) at some point in time the 8 SMA changes slope from positive to negative, at which point we exit the entire 3 unit trade, 2) the market moves up, there is no slope change, and goes to the 144 or 233 fib number from the 55 SMA line, where 1 unit is taken off, 3) the market moves up to the next fib number [233 or 377], again with no slope change, and the 2nd unit is booked.

If we follow his strict method, the USDJPY should be a buy in the next couple of days. The 8 SMA should be turning positive...
  • #173
  • Dec 13, 2005 11:43pm Dec 13, 2005 11:43pm
Quote
In the method written by VEGAS, he states the when the weekly has bullish momentum, the 4hr buy signal would be when the 8 SMA < 55 SMA and when the 8 SMA is turning positive. The sell signal for profits would be when the 8 SMA begins to turn negative again.
The 8 SMA turning negative again in this case means the entire trade has turned against you. You may get a profit, but you can also get a loss if it is early in the trade. I have had some trades where I entered when the 8 SMA turned positive and then turned negative again during the same bar for a loss. Ideally, during a picture perfect trade, where you have entered three positions, you will take profit at the first fib level with one of your positions; you will take profit again at the second fib level with another of your positions; and finally the third position will be closed when the 8 SMA reverses.

Quote
Diallist, my question is, there are many tiems the 8 SMA turns negative yet there is more potential in the currency. How do we know when to re-enter? Or do we not and wait for it to get below the 55 SMA again? Or maybe turn positive again?

If we wait for it to turn positive again, that would be in contradiction to what VEGAS wrote, since it wouldnt be less than 55 SMA. Here is what I am refering to:

We now are looking for the 8 SMA to move lower through the 55 SMA. When it does, we carefully watch and notice when the SLOPE of the 8 SMA changes from negative to positive. It will do this when the 8 SMA stops losing value in one 4 hour bar and gains in the next. This is the 4 hour bar to initiate new long positions with 3 units [remember: units are whatever trading size you can handle. When you trade bigger, just adjust the size of the unit, not the number of units]. Stops can be placed using technicals [support/res/trendline] of the most recent 4 hour bars.

Assuming the market starts to go up, we stay long until 1) at some point in time the 8 SMA changes slope from positive to negative, at which point we exit the entire 3 unit trade, 2) the market moves up, there is no slope change, and goes to the 144 or 233 fib number from the 55 SMA line, where 1 unit is taken off, 3) the market moves up to the next fib number [233 or 377], again with no slope change, and the 2nd unit is booked.
There are actually two signals given by the system. I call them Primary and Secondary. (I was going to call them Fred and Ethel, but I couldn't keep them straight as to which was which).

Assuming the weekly trend is UP, you will enter a long trade EVERY TIME the 8 SMA turns positive.

If the 8 SMA turns positive while it is below the 55 SMA then that constitutes a Primary trade signal and you would enter the trade with your full position size as determined by your money management methodology.

If the 8 SMA turns positive while it is above the 55 SMA then that constitutes a Secondary trade signal and you would enter the trade with only half your position size. This is because secondary trade signals are not as reliable as primary trade signals.

You would do exactly the opposite if the weekly trend is DOWN.

During a strong trend, it is not unusual to get several secondary trade signals in a row. I think this is what you were refering to.

Quote
If we follow his strict method, the USDJPY should be a buy in the next couple of days. The 8 SMA should be turning positive.
Be very careful here. Yes, the weekly momentum is still saying UP on the USD/JPY. BUT, take a look at the price action on the weekly chart. We might be about to have a trend change on the USD/JPY from UP to DOWN. As Vegas so correctly pointed out: it is during trend changes that the system is most vulnerable to losses. This is where the use of discretion comes in handy. But, until you have traded this system long enough to get good at applying discretion, I would suggest that you stay out of the market if you are uncertain as to the true trend direction.

Does this answer your question? If not, let me know and I'll give it another go.

Dial
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  • #174
  • Dec 14, 2005 12:08am Dec 14, 2005 12:08am
Diallist, that exactly answers my question. Your explanation of primary and secondary trades helped define what he ment. Thank you.

I can see how the trend changing period can be more vulnerable to losses, example the USDJPY like you mentioned. I have just looked and I realize that I may have a small technique to add to this model. When the weekly bar breaks below the 5 SMA by more than 50 pips we may see a possible trend change and best to stay out until that bar reaches in within the 50 pips of the 5 SMA. Let me know what you think about that.

I like to look at bars as they close, I guess its a habit I have which is not good for the longer term charts. For example, this, its almost obviouse it will close down which will show a medium term bottom for the USD/JPY, if not all the JPY's. So I guess this is something I have to get used to.

How do you play medium term bottoms? Do you just stay out?
  • #175
  • Dec 14, 2005 9:01pm Dec 14, 2005 9:01pm
Hmmm I got a great idea. Why dont we post trades on here in relevance with this system.

As of right now I see nothing. And I dont know how to play medium term bottoms so i am just staying out.
  • #176
  • Dec 14, 2005 9:45pm Dec 14, 2005 9:45pm
Quoting xspowerx
Diallist, that exactly answers my question. Your explanation of primary and secondary trades helped define what he ment. Thank you.

I can see how the trend changing period can be more vulnerable to losses, example the USDJPY like you mentioned. I have just looked and I realize that I may have a small technique to add to this model. When the weekly bar breaks below the 5 SMA by more than 50 pips we may see a possible trend change and best to stay out until that bar reaches in within the 50 pips of the 5 SMA. Let me know what you think about that.

I like to look at bars as they close, I guess its a habit I have which is not good for the longer term charts. For example, this, its almost obviouse it will close down which will show a medium term bottom for the USD/JPY, if not all the JPY's. So I guess this is something I have to get used to.

How do you play medium term bottoms? Do you just stay out?
What do you mean by "medium term bottom"? I didn't understand Vegas' use of the term in their document and I still don't. What do you think it means?
sxaxlxvxaxtxixoxnxbxyxgxrxaxcxexdxoxtxoxrxgx
  • #177
  • Dec 14, 2005 10:00pm Dec 14, 2005 10:00pm
Thats the thing, I dont know how to define it either. A bottom as in reversal? Bottom as in consolidation? I am not sure.
  • #178
  • Dec 14, 2005 11:36pm Dec 14, 2005 11:36pm
Quoting xspowerx
Thats the thing, I dont know how to define it either. A bottom as in reversal? Bottom as in consolidation? I am not sure.
Okay, I just took another look at the Vegas document. Vegas states that the weekly chart with the 21 and 5 MA's is used to determine a medium term trend. When the trend changes, as indicated by a change in momentum, it is said to be a medium term top if going from an up trend to a down trend, and a medium term bottom if going from a down trend to an up trend.

To answer your question as to how I handle these tops and bottoms (trend changes), I use discretion by always being aware of the price action going on in the the weekly chart. I don't depend on the momentum indicator to tell me what direction the trend is because it is a lagging indication. Price leads any momentum change and will give early warning that the momentum is about to change as well.

For example, yesterday the momentum on the USD/JPY said the trend was up. But in my view, the price action on this pair on the weekly and 4 hour charts told me that the trend had already changed to down. Therefore, yesterday, I took a short position in the USD/JPY and was able to reap the pips caused by the Trade Deficit report. (the pair dropped like a rock, as you know). If I had traded strictly on the momentum as a trend indicator, I would have had a loss. As you can see, the momentum trend indication changed from up to down last night, long after the price action told me to go short. I use the momentum indicator as confirmation of price action. Not the other way round.

Price is King. All other indicators and oscillators are derived from price. That is why I think it is so important to be aware of price action on both the weekly and 4 hour charts to tell me what the true state of the trend is.

Further, if the momentum is indicating an up trend, but the current weekly bar and the slope of the 55 MA are showing down, I will trade down, not up.

Also, if the state of the trend is in transition, the 55 MA will usually be relatively horizontal. I will either stay out of the market, or will trade both directions, depending on my view of the price action on the 4 hour chart. And, while doing all this, I remain mindful of, but not a slave to, the 50 pip rule.

I believe discretion is required to garner the greatest profit from this system. But discretion is an art that can only be acquired with practice with and familiarity of a given system along with the personality of a particular currency pair. This is the main reason why in the PF, I am/will be emphasizing that traders new to this system, and especially newbies, trade this system on demo until they have mastered it.

Dial
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  • #179
  • Dec 14, 2005 11:51pm Dec 14, 2005 11:51pm
Ahh I see I see.

So when the prive falls below the last weeks x, which is x = 5 SMA - 21 SMA it may be a turn and best to short at that point... To play the top.. Opposite for bottoms.

Thanks for sharing your thought. They are much appreciated.
  • #180
  • Edited 2:28pm Dec 16, 2005 2:23pm | Edited 2:28pm
Thank you all for your hard work on this thread, especially Dial. A few weeks ago I sent an e-mail to Vegas; I just received a reply today which should be helpful for us all. Below is a copy of the e-mail exchange:

Hello Vegas,

I am interested in using a 4 hour strategy to trade the forex so I was very excited to read about your method.

Can you please give me an update about how this method has performed for you? and have you made any changes since you wrote this document?

-Claude in Calgary, Alberta


Claude,
Sorry for the delay.

Our performance results are quite good, but they are useless to you. It doesn't make any difference how much I make if you lose money. Discipline is the key.

The only changes we have made is that we now use daily candles with 24 and 28 ema's respectively as a guide in trading. Create a daily chart, then overlay 24 and 28 ema's, then plot the 144, 233 and 377 fib numbers. Do this on a weekly chart as well, but plot the fib numbers 377, 610, and 987 [these are for gbp. Other currency pairs will be different]. Now, look at all 3 charts [the 1 hour or 4 hour depending on which tunnel method you use, the daily, and the weekly. You will immediately see the wonderful trading opportunities.

-vegas
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