MTF Trend-Pullback Trading

Hi Jesper. Thanks for your post on the HA T3-1 thread, i'm sorry for wrongly assuming you hadn't seen the video, i apologize.

Thanks for your efforts in sharing and facilitating a learning experience for all.

Could you please give some detail into why you could not add when the MACD came back below zero?

Thank you for your time and efforts.

In appreciation of Jesper's work I thought I'd share my first attempt at trading his method. How faithful I've been to his ideas remains to be seen - but I'd spent some time looking at it and this ultimately worked out nicely. Sorry for messing around with the colours but a man has to find something that is comfortable with his own eye....

I actually traded this in a live account because I don't much get on with trading demo. Trading with real money makes me take it seriously - even if it was very small real money :o)

I'd be interested to hear from anyone if you would've considered anything that I maybe missed or even misinterpreted.

Hi Jesper

Was helpful seeing your thinking process in regards to pairs on 4 hour charts

Just wondering if you can share how you use J H2l Breakout in relation to your decision making process, thanks, Ed

Hi,

The reason I did (could) not add at when the MACD crossed below 0 is that I prefer having only one risk position per traded pair. My initial position had no profit locked in yet, therefore my rules kept me from taking a second position.

Later on, at the time of the slight retrace reflected in the MACD turning blue, the red again my first position had a good profit cushion locked in and I was free to add, making the second position the only one carrying risk.

Jesper

Hi,

From the screenshots and explanations you gave, this is a perfect trade!

I have nothing to add...

Jesper

Hi Ed,

In the context of this system I do not use the indicator to trade breakouts, but to help me decide on support/resistance zones for stops and sometimes targets. Trades are normally closed based on the Gann High/Low flipping, but I want to avoid trading into strong S/R and make it a habit to take a quick look before I leap. On the other hand, because this indicator does not redraw before the close of the displayed period, it can also help to gauge price action after the breakout (for example, price climbed above the high of the last two days -- is it still going strong or should I expect a reversal?).

Best,

Jesper

The indicator is entirely optional.

Hello,

I decided to practice this with cable because of the lower spread / ATR ratio (7.5% per Jespers PDF) for longer TF's.

I used the 4hr for the general trend and 30min for entry / exit with confirmation from the 1hr.

1. In what ways could i have optimized this trade?
2. I'm 'wet behind the ears', so please guide me through this:

- i use a 2% risk; assuming a USD 5,000.00 (demo micro) acct, how many micro lots could i have taken, what is the breakdown of the pips, where would you have set your stops?

Thank you for your time and efforts.

Hi Bwana,

Can you post your H4 chart to help with answering your questions? Without that I cannot tell you whether the trend was fulfilling the conditions at your time of entry, or where your initial stop zone (beyond the Gann on H4) should have been if you chose to set a hard stop.

As a quick answer,

1. You highlighted two candles, I will start with the one on the right.
   1. On your M30 entry chart, the Stochastics at the point where you put the second arrow had not fully crossed above 75 -- the red line stayed below it. So even assuming the H4 downtrend was strong, this would not qualify as a sufficiently strong retracement. Both lines are supposed to "fly off" the screen, and subsequently come back and both point in the direction of your trade. The red %D line on the highlighted candle was still going up, on the next (your assumed entry) candle the blue %K line turned upwards
      If you chose to make a riskier entry just upon the dead cross of the %K and %D lines, I would advise to confirm on the MACD, too. It was mostly flatlining at the time, telling that momentum is weak, and actually still in positive territory.
   2. Going back to your first arrow way over on the left, this is a tricky one. There was not enough of a retracement on Stochastics to give a clear signal, but obviously a very nice downward move did happen after %K and %D lines made a dead cross. You could have entered discretionary after seeing the Bollinger Bands widen and confirming on MACD; this would not have been fully by the system rules and therefore somewhat risky, but in this case it would have given you good pips, with three chances to add to your position when MACD turned from blue to red in negative territory (just confirm where the Heikin-Ashi arrows are, those would have been the add-on points).

2. Regarding position size, I do not know from your post where your initial stop would/should have been. One micro lot (1,000 units) on GBPUSD should mean $0.10 risk per pip; 2% of $5,000 is $100, so on one micro lot you could put a 1,000 pip stop loss.
   Simply divide 1,000 by the pip distance between entry and stop loss, and you get your position size. Assuming that you want to have a 150 pips stop loss, your position size would be 6 micro lots
   (1,000 / 150 = 6.7, rounded down to 6)

Hope this helps,

Jesper

Just took a short on USDJPY H1 -> M5; screenshots are attached. I use a slightly different template for the trend chart from the one included in the PDF -- it has the Heikin-Ashi body hidden with only the arrows displaying, and showing colored bars instead. The logic behind it is the same.

 

1. On the H1 trend chart, the indicators are line up: HA is pointing down from four candles back, price is below Gann resistance. Also, the optional indicators confirm: Stochastics are pointing down and almost off the screen, and the MACD is in negative territory; it is blue (red would be better) but does not appear to be going back towards zero.
2. On the M5 entry chart (I use a reddish background when I am waiting for short entries) there was a retracement but HA has flipped down again two candles back. Gann resistance has formed one candle back, so I was waiting for Stochastics to come back into the chart. On the candle where Gann flipped, only the blue line had come back, but on the right-most candle the red line followed. The main Stochastics line had also crossed 50, so I made my entry.
3. Entry price is 88.69; Gann resistance on H1 is at 88.85 (co-incides with the last hourly retracement high five bars back), so I want to put at least a 16 pip stop. However, I want to keep more room to survive a spike, so I will set my stop at two times the ATR(144), which stands at 17, plus spread. So, [88.69 + 34 = 89.03], add spread I come out at 89.10 (marked on the chart but not visible on the attached screenshot).

I will post updates as the trade develops.

Jesper

(Charts are posted in the order trend -> entry -> exit)

The screenshot seems to be showing a chance to add to the position from post #29 just seven candles after entry: MACD turned blue for two candles but stayed below 0, then reverted to red indicating downward momentum is picking up again.

However, because I only want one position at risk and I only trail my stop if the Gann on my exit chart moves beyond my entry point (not yet the case), I have to wait and cannot make an additional trade.

The trade from post #29 is about 20 pips in the red, and normally I should have closed it manually upon the Gann switch on the H1 trend chart one bar back (see attached).

For better or worse, I was away for lunch. The hard stop is still holding, and because the stop loss in pips is not large, I will not touch it and hope (not a good word in trading) that the London session which is starting now will get back into the downward trend.

Not that it mattered for the trade decision or should matter now, the H4 is still clearly pointing downward.

Thanks for an elegant an simple system. Followed you from Tony's thread, which I've enjoyed. I'll definitely give this system a try.

Adam

Welcome to the thread, Adam, and I am looking forward to your feedback!

Jesper

Alright, it is 1 a.m. where I am and I am going to bed. The trade is not going anywhere, USDJPY was mostly flat all day despite quite a bunch of news coming out.

I won't be able to monitor it for a couple of hours, so I trailed the stop to break-even (entry was at 88.676, stop is now at 88.650). I do not expect the trade to survive until the Japanese session Thursday, if it does: great.

This was a really boring trade. On the other hand, I guess trading should not be exciting... I had just hoped to demonstrate a bit more about adding to the position, trailing etc. for the thread here.

Good night,

Jesper

Stopped out while I was typing

Well, going to bed without having to worry about trades going sour while I sleep is nice, too...

I gave a look at your system (similar to tony's one) and seems promising. I like how you use stochastic in order that you only get, most probably, the strongest possible moviment in your favorable direction on 1h.

I've to read the whole thread and study it better, I'll start to demo it as soon as possible (I will probably demo it on small TF like 1h-5m )
I like how you keep tidy and organized this thread as well .
Keep up the good work .

Xhandal,

I have made better experience with H4 -> M15 (or M30), so I would advise to start testing on that timeframe and only move down to H1 -> M5 when you are confident about making profits with this approach.

Additional benefit for you if you are using Tony's system is that you get a direct comparison on the same timeframe which one works better for you, be that in general or for a specific currency pair.

If you want to scan the thread quickly, I would recommend to read posts #1-4, #14&15, #22, and #29 and following.

All the best,
Jesper

Because this way, its very close to how I trade, your trend
chart, HA has to agree and be under or above Gann for
short/long... do you look at the macd and stoch at all?
I do.. but just basically to see its in basic agreement
doesn't have to strongly agree...

Then really everything has to line up correctly
on the entry chart.... that's how you are trading
this setup?

Brian

Hi Brian,

Yes, I look at the trend chart first, waiting for the Gann to be broken/flip direction and the Heikin-Ashi to point the same way. So I get an indication of price direction with significant movement (price goes through the Gann), support/resistance break with a small number of false breakouts (Gann flips after candle close) and momentum carrying the move further (Heikin Ashi). The really good trades, of course, are when this happens on the trend chart.

Stochastics and MACD on the trend chart are there only for further confirmation. I look at MACD to make sure it is not flat around the zero line for initial entries and add-ons. I look at Stochastics to point strongly in the direction of my trade for add-ons.

Stochastics and MACD play an important role on the entry chart, as documented in the attached PDF file. Stochastics (in combination with Heikin Ashi and Gann) is used for the initial entry, MACD to add positions.

Which chart to look at primarily -- trend or entry -- depends on your traiding style. You could wait for the signal on the trend chart to form and just make sure the entry chart is not currently retracing (in which case you would wait) in order to enter, or you could wait for a clear signal on the entry chart and just confirm it is in the direction of trend. The difference is whether or not you want to force yourself to wait for the first pullback and trend confirmation (entry chart signal) or jump right into a direction change (trend chart signal). This may be counter-intuitive, but trading off the short-term entry chart is actually more conservative.

Best,
Jesper

I have attached two charts for NZDUSD that demonstrate an opportunity to enter short.

1. H4 trend was pointing down but retraced. A new Heikin-Ashi down arrow has formed on the candle close (04:00 GMT) and a fresh Gann resistance point has formed: new downward trend started.
2. M30 entry had not gone through a pullback, but because the pullback had just played out on H4 and all M30 indicators cry "short me", I was comfortable entering a trade.
3. I sold at 0.68998 -- could turn out to be psychological support working against me and is also close to be two-day low, but price is below yesterday's NY close and the daily pivot (all these not actually used in the system, but reassuring). My stop zone is a break of Gann resistance at 0.6965.

Jesper