Trend Follower m1 Scalping WITH m5 Revised Rainbow Setup

Hi guys,

For those of you who dont know me my names Vish, Im 23, Been into Forex Trading the last 2 years, hopping from method to method as none seem to be suited to my style of trading and money management as I spreadtrade living here in England, but all 2 years my basics ive kept seem to be moving averages, cci, and rsi...This thread is to revive interest in trading TheWicker's original Trend Follower 5 Minute which I first stumbled upon 2 years back found it difficult to hold onto because of not having enough trades and scalping setups. If you want to learn more about the guppy and learn more about compression/expansion of these moving averages please refer to TheWickers original m5 thread, there is plenty to learn from.

I want to share a setup im using now which is pretty similar, but more visual, and should give a trader more potential trades/scalps. In my humble opinion for me this setup is more useful for Trading the m1 safely along with m5 compared with the Original if it was to be traded on the m1.

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+++ Basic Rules And Guidelines +++

Basics here are that m1 is used for entry, and m5 Trend Direction is our base for which way to trade in the m1. Trend Direction on m5 will be determined by the Guppy Rainbow. The guppy trend orientation is as follows:

Longs: Purple guppy at BOTTOM of rainbow, yellow guppy at bottom.
Shorts: Purple guppy at TOP of rainbow, yellow guppy at top.

Once a long guppy rainbow is setup in the m5, we can begin to look into the m1 for long entries which I will explain, and when Short guppy rainbow is setup in m5 we can begin to look in m1 for entries to go short. Simple?

Charts are comprised of 5 different elements which I will explain >>>

1) Guppy Rainbow for our Main Trend Direction - m1 entries should only be taken with prevailing m5 guppy direction.
2) RSI arrows set to period 8, matches my method perfectly and works well to help me spot a retracement and get ready for an entry point, these can be seen on my chart over the guppy with red/green arrows
3) Trend Envelopes 2.0 - These are on my guppy which can be seen colored by orange/blue lines with blue/orange balls to show trend direction, VERY useful with this method and will help us to know when retracement is over and to get ready for our entry into the trend. Standard setting has been tested by me and seems to be the all around best so no need to change it at this point.
4) Mtf Laguerre - Crucial part of the method and will be used to take entries in m2 chart only. This does NOT repaint, it is simply a higher period than normal to try and emulate a longer term trend, but is still responsive whilst not being slow either. More on using this shortly.
5) RSI MTF Bars - RSI bars at the bottom of my screenshot run on periods of 42, 84, 126 and 252 rsi. These emulate a longer term trend to make our m1 entries safe, Again, it is CRUCIAL to enter ONLY when all are the same colorso it filters out chop and helps us to trade only when price is 'moving'. These settings do NOT need to be changed currently and work by giving buy/sell signals when these 4 RSI periods cross above/below the 50 level.

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>>> Longs <<<

1) m5 Trend Direction needs to be setup long.
2) Higher probability when m1 Guppy is established in same direction as m5, Purple at the bottom for longs, yellow at the top remember!
3) TrendEnvelopes 2.0 signal with blue ball need to be given to get ready for entry point. RSI 8 Arrow is a useful confirmation if this is signalling long also, if both RSI 8 arrow and TrendEnvelopes Blue Ball are signalling on the SAME m1 candle, this tends to give a higher probability for the trade.
4) Laguerre NEEDS to be coming UP from UNDER the 0.15 level, if you look closely on your Laguerre indi it will be displayed by a small GREEN dot. If this is signalling, but RSI bars at bottom aren't lined up yet, its safer to wait till they're ready.
5) Safer entries seem to be when RSI bars are ALL lined up Blue to signal that long entries are now safer. If you trade only when these RSI bars are all the correct color this will help you avoid getting into a weak or bad move according to what ive seen.

>>> Shorts <<<

1) m5 Guppy Rainbow needs to be setup Short. Purple at the TOP, yellow at the bottom.
2) If m1 guppy is oriented in the same direction as the m5 rainbow this will allow for more safer entries.
3) TrendEnvelopes Signal needs to be given with an Orange ball forming, RSI arrow can be used for extra confirmation but isn't necessary but increases probability when RSI arrow is given on the same signal candle as the TrendEnvelopes.
4) Laguerre needs to have dropped from the 0.85 level from ABOVE coming out and falling, this will be signalled by a small RED dot in the 0.85 area on this indy. If Laguerre has given signal to short but RSI bars at the bottom aren't quite ready yet, wait a candle or 2 and let the RSI bars align up properly. If the move is good things WILL line up on the same candle or 1-2 candles after the Laguerre signal is given.
5) For higher probability and stronger entries its important to make sure ALL RSI bars are red indicating a safe short.

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I will post more screenshots in the next few posts with some more explanations of retracements into the guppy and how to get ready for taking an entry with the Guppy. Files and my template are posted below in a zip file, settings and indicators seem to work together so I hope that changes may not be made or people clutter things with additional indicators as that may take focus away from the Guppy and we have what we need for entering safely on the m1 here to follow the longer m5 Trend.

I hope this is of some help to Trend Followers using the Original m5 and will shed some light on how to safely look for more entries with smaller stops.

Credits & Inspirations >>
TheWicker for the guppy and original concept, CelticHeart for sharing his RSI periods in another thread kindly, Eati for the RSI bars indicator, My friend pilatus for support and help with this method from the beginning and also Pardy who has inspired my trading journey these past 2 years. To the gentleman who shared this Laguerre indicator on this forum please message me your name if you see this and I will add your name to credit your work. Thanks!

Happy Pippin' and More charts and explanations to follow. God bless...

---=[Exits & Stops]=---

Various exits may be use so I dont want to get into much detail here but give some liquid guidelines If i may as Exits, Stops and MM are entirely personal for everybody.

Since we're trading off the m1, I can suggest taking immediate profit of +10 pips or by taking 50% off the trade and moving the other half to BE or by moving the entire trade to BE at +10 and taking profit when you think you've gained enough.

We can use 2 main indicators for Taking profit more mechanically, Based on our m5 chart, we can use the TrendEnvelope indicator as ive marked in my screenshot above, if you look for todays trend between the Red Vertical lines which Ive marked, profit could have been taken when the TrendEnvelope Stopped and the blue dot becomes solid telling us of a potential reversal/retracement.

For those who want to take profit and ride a trend with the m1 whilst not getting out early and not too late, I can suggest exiting when the RSI period 42 indy (our first RSI bar in the bottom window) changes to the opposite color and closes that way. Again, please dont forget you can look for area's of recent support/resistance from within the last 24 hours or other Pivots of your choice to take profits at.

Stops: Stoplosses can be kept at 10pips to 12pips, I personally do not trade the EU on m1 with stops larger than 12 pips unless I know theres room for more pips then my stop loss amount otherwise for me this is going to skew my R:R ratio. Again this is different for the pairs YOU trade and your spread costs. Stops with using the guppy method can be placed VERY safely in recent high/low area's closest to your entry point, it doesn't need to be a million miles away, if price action is good, place stop near a most recent high/low area.

---=[reserved for screenshots and explanations #2]=---

I will be adding in more explanations on trade setups and spotting the retracements and trends within the next day or so. Thanks

LOL... I am ready to see some trades!

While waiting, what are your favorite pairs so far to trade this with?

thanks!

Brian

Looking good...for some reason had to reinstall the indicators but
now the templates seem to be working!

Looking forward to more from you soon...

thanks

Brian

In practice, do you just keep up the M5 charts...
then when there is an M5 setup, ie say rsi and
envelope signal same candle, guppy looks good
lang looks good... then you open that pairs M1 and
look for the next M1 entry? Again, prefering only taking
a perfect entry on M1.. rsi arrow, envelope dot and
lang all look good with all rsi agreeing on 1M
chart same candle for preferential entry???

And...we dont necessarily need all rsi to agree on
M5.. if we get otherwise the above signal on M5
we go to M1 and its there we need all RSI to
completely agree. Correct?

Btw...thank you so much for this, I am excited
already. I love trading 1M and have been working hard
on adjusting my 1M strategy..this looks like a fun road to
pursue.

PS: Have the template up but not seeing any audible alerts
yet..are there any working alerts on the setup?

thanks!

Brian

Just need to know, what is crucial and best on 5M before I
move to the 1M to look for the A+ 1M entries? Does everything
have to line up on M5, before I move to M1 for the same?

And second, I switch to the 1M, how long do you consider the 5M signal
valid before you stop looking for the best entry for that signal
and go back to the 5M.. ie the trend died and there is no 1M entry
coming so you go back to 5M.

thanks!

Brian

Hi Brian,
on the m5 I consider everything apart from the Guppy Rainbow secondary and of lesser importance...As long as our trend is taking place, our guppy is spanning out in the right orientation on the m5 we can hope to catch an entry into the m5 trend correctly when the m5 retraces a little, and the m1 will show this with a safe low risk entry.

If the RSI bars on the m5 agree and the Laguerre is under the 0.85 level for a short for example, Trend Envelope is showing short, it just increases the probability of setup. Apart from the m5 guppy we try and look at the m1. Keeping the m5 charts side by side will help you see the Guppy better, you'll see when the m1 retraces how far the retracement can go on the m5 before the m1 starts to setup again. A retracement on the m5 may go to the point where the m1 guppy will even change Orientation (purple color is our guide here in the rainbow as I mentioned), and in this case waiting for a proper setup matching the m5 is the safest choice.

Looks great and already got some positive pips out of it but with your experience of using this system do you have any advice on a exit strategy?

God bless you Wiltedfire; most complete Guppy I've ever seen. Will have to try it.......thanks for renewing this wonderful way to trade 1m chart.

Steve

Hey Vish,

Great to see your thread. Looking forward to some trade examples. What are your exit strategies, i.e., when do we snatch the pot of gold at the end of the rainbow..........

Pardy

Nice indicators mate, thanks for sharing. I will be watching how you scalp with interest. Do you trade this strategy for a specific time of the day, i.e. London open vs. London NY transition vs NY open?

Cheers,
Chngster

Hello Wish

Good to see Rainbow revived the way you have done. Can you please clarify the bottom statement.

Longs: Purple guppy at TOP of rainbow, yellow guppy at bottom.
Shorts: Purple guppy at BOTTOM of rainbow, yellow guppy at top.

When I loaded your template, when trending up the yellow guppy is at the top & purple guppy at the bottom, and

when trending down the purple guppy is at the top & yellow at the bottom. Seems to be different to to what you say above. Please clarify.

Dedyal

Hi Wiltedfire,

Do yo use Stop Loss o Take profit in this system?
How to determine the points of exit?

thanks for sharing

Hi there, thanks for pointing out, made an error in writing because it was 1.30am here when I was posting the rules. Thanks very much for pointing out my mistake, much appreciated! Edited the rules now in the order they should be. Thanks!

Hi mate, I only trade the London open into 2/3rds of the New York Session, I be weary of trades after 12noon here in the UK GMT time and stay away from any setups during new york open because of news releases, I usually wait till the dow opens up and gets direction and look for trades from 3pm GMT onwards for a couple more hours. I only trade EU for the moment, but when I look at more pairs these times will vary for me after, Yen pairs for example can be traded later during the Asian session and London session. Hope this helps.

Guys Im posting up some helpful exit plans in a moment in the 2nd post and will post a screenshot of my trade I took earlier today with some brief explanations. Thanks for stopping by Steve and Pardy, nice to see you guys!

Do you mind if I post trades here and there to help others and
for your comment when appropriate at the beginning
of this thread?

I have not really added much, just basic trend strength
I use on all my setups. Look forward to being able
to contribute if you don't mind..

Brian

PS: I personally use these trend indications for
take profit, also the usual strong fib levels and pivots
if resistance is shown near the level.

This is an entry I took today on the Euro, live (outside of my mt4 client). The area Ive marked with the GreyBox shows a new Guppy Trend because the purple spine was at the bottom, but this is a fake Trend for us, it is to be ignored since its retracing upwards into the m5 Rainbow which is still pointing down south as you'll see in your charts. Notice how after this retracement a big move was signalled by the 1st Trend Envelope Orange Dot just outside the right of the grey box, coupled with the Red RSI-8 arrow on the same bar.

Since the guppy on the m1 is changed now, we wait...let price do its thign, and soon we get a Blue TrendEnvelope Dot and then an Orange one with our RSI arrow signal given earlier, This was my own discretionary entry based on my own confidence because I know im with the main trend, I'll explain more in a moment.

My discretionary early entry was at the purple line because the m5 chart had given a strong signal for a short already with the TrendEnvelope + RSI arrow along with the Laguerre matching up also, so If i was to wait, I may miss some pips here. An m5 signal is likely to be stronger than an m1 signal, so i took the entry based on the RSI arrow and Trend Envelope dot with everything else matching up. A good way to mark entry points is when price has come OUTSIDe of the guppy rainbow and closes outside of it, this is a sign that a retracement may be over and next wave in trend continueing here.

Unfortunately my entry was right but I adjusted my stops twice in my trade marked by the top 2 yellow horizontal lines, after a first wave against me, I let price move, the 2nd horizontal line is where I had moved me stop to, because of a broker difference of 1 pip I was cut out for -3 otherwise it would have held on for profit to my target area of around 65 which was support. (My entry on the Euro was at 84 ish).

NOW...Correct entry Ive marked on the screenshot according to the rules by the Red Vertical Line. We had m5 Guppy lined short, m1 lined up, and the Red Vertical line marks a Red RSI-8 Arrow + TrendEnvelope on the SAME candle, and as i discussed in post #1 these tend to increase probability when on the same signal candle. Laguerre was coming out of the 0.85 area and Laguerre indy marked its entry by a tiny red dot on my chart if you see...

I hope this helps. I'll share my thoughts on exit plans in post #2 with more screenshots shortly. If im wrong on anything here please do correct me guys, Im still learning just like all of you here.

Yeh thats fine, as long as it doesn't confuse people with different setups, If you feel what you want to share is valid, please go ahead, by all means Brian. All the best! I look forward to learning something from you I hope

Demo entry was taken for a few successful pips in my screenshot, Was not taken live because Ive only just got back to my PC for trading now, Price has moved too much in one direction for my risk tolerance so Ive not taken this one live but just demo purely to show you another entry example.

Red vertical line was the entry in the Euro, profit target was just set to near 21 marked by the bottom yellow horizonal line which was hit successfully.

1st yellow horizontal line on my chart is to show where stop would have been placed, as I mentioned in post #2 to place it near the most Recent high in the Guppy in this case, it was placed just a pip above Price on the left of my entry area...

Entry was because we had a red dot coming out of the Laguerre at the 0.85 area on our m1 chart, Our TrendEnvelope was signalling short with our Orange dot, and my Red Vertical line had a Red RSI arrow given also which means we're set. Again this is just to show an entry and how It would be taken, do glance at the M5 guppy so you know when things have moved too much and are due for a retracement.

Cheers guys. Those are all My charts I will post now for today.