Building an equity millipede

Hi Graeme,
A very illuminating comment; however there are two points from previous posts that I am still trying to resolve, - On Monday you were selling EUR/USD and at one point you noticed a bullish FB or other signal and you bought EUR with a 12 pip stop; your comment at the time related to a potentially large retracement.
Also in an earlier post you suggested closing a trade for a small profit in order to give your primary position a better stop;
Are these two related? (i.e. if the buy on EUR had moved up in anyway would you have sold your last entry short to boost the SL for prior entries and would you repeat this if there was a serious move?)

Also I observed, but missed them myself that there was a double bottom on the hourly for EUR/JPN and EUR/USD, (a few hours after the initial bounce) and several more long opportunities followed. I do not know if you were watching any of the first bounces, but would you have gone long on these or if you missed them be looking to go long on any of the opportunities that followed or would you be waiting for the daily close?

Many thanks

Ray

Thank you Traderray.

Your question is related to one of the topics I will touch on before this weekend. It is about using opposite signalling hindsight on different higher timeframe to our benefit on the lower timeframe.

First of all, I would like to take few steps back to basic and rehash on price action.

Alot of traders on this forum understand the importance of price action. This is true as price action is far more effective/faster than what an indicator might indicate. For example, most large engulfing price pattern that closes below/above the previous up/down candle will signal a reversal. However, this will show on ema crossover later on when the prime opportunity is already over.

Interpreting price action is very simple and it is heaviliy related to the phrase I have used few times, if its up then buy, if its down then sell.

Please allow me to add further clarity in price action first before advancing on to explain the other topics.

http://img709.imageshack.us/img709/2117/aa1p.png

So we already have a 'hindsight' that price is reversing. This is interpreting pure price action. Lets add some emas.

http://img9.imageshack.us/img9/2093/aa2m.png

Continuing on..

Interpreting price action effectively is deadly in a skilled traders hand.

Allow me to show all, candle by candle how I interpret price action. Interpretation is the same on lower timechart or higher timechart.

You will notice how simple and deadly it is. This is what happened last night for me.

This is eur/usd 5min chart of last night. Blue is uk session.

http://img826.imageshack.us/img826/7607/aa1e.png

Hi there,

I'm keen to partake in the weekend assignment but perhaps I do not understand it all correctly and I hope someone could clarify for me. It seems implied to me that it is set to start this weekend and it also sounds as if Graeme is expecting to receive them this weekend, but I thought Graeme wanted to see the entries and the results after the weeks battleplan was complete?

When I first read the assignment I thought submissions would commence at the end of next week with the battleplan and all the trades taken around that battleplan accompanied by their sound reasoning. But it seems that this isn't how it is going to work?

My thanks in advance for any clarification.

With kind regards,
MK

uk session opens.

I note that price is coming up. First 3 candles are flying buddhas (for now im disregarding any hindsights from higher timeframe and just concentrating on price action on 5min)

http://img94.imageshack.us/img94/8232/aa1k.png


http://img827.imageshack.us/img827/4259/aa1g.png

This is my train of thoughts

1. First candle after flying buddha. Does not close below or above the s/r
2. Buyers pushed up but couldnt close over the previous down candle. Sellers still in charge but support not broken
3. Sellers push and break the support of candle 1 and 2 but not flying buddha. This is good sign.
4. I notice open price is same as the low of lower wick of candle 1. Buyers push up but close at 50% fib of candle 3. Not enough power from buyers. Goody.
5. Buyers gather strength to push it up but all they create is a wick. This new wick creates another descending wick pattern. Getting better.
6. Clear breakout of support from flying buddha and closing well below it. Now I know sellers in charge.

Continuing on..

Now I know sellers are in charge but I want a low risk, very tight entry from candle 7 onwards (by the way, I hope all traders are not looking at the charts this close..)

http://img831.imageshack.us/img831/5558/aa2l.png

7. I do not want to enter at open of this candle as the stop loss is larger than what I think is required. However, yesterday I did (we will come to this later and the reason I entered sell at the open of candle 7 is because I had hindsight from higher timeframe). Price retraces past 50% of previous down candle. Uh oh. And then bounces off at open price of the previous candle. Yes, seen that all too often and another position around there. 2 positions on single 5min candle. This means im very confident but will not risk any more until something better comes out.

8. Im expecting a big drop of price. It doesnt. Uh oh. My only saving grace is the descending wick pattern. Still ok.

**As long as price doesnt retrace and close above the breakout I will wait. Dont need a hard stop loss yet**

9, 10. I notice the price is now stalled again in this mini range. Another support happening below candle 6,7. Not good but not bad.

11. I still see descending wick pattern. Buyers are away for now.

http://img707.imageshack.us/img707/5893/aa3r.png

12. Uh oh. Price closed above the previous down candle. Not good. Is this the end to my 2 positions? Price couldnt close above uppoer wick of 9. Still ok.

13. Hmm... down candle? Closing below candle 12 the up candle. Good Good Good.

14. And there. Breakout again. My 2 positions was never in danger. Now I want to stack more

Continuing on..

http://img827.imageshack.us/img827/8330/aa4.png

15. I notice ema crossed over and now a gap is opening indicating strength between 5/10ema. Good Good. Price opens and retraces up. Excellent I say. As long as it doesnt close above the previous 14 down candle. Since this is fresh momentum. I add 1 position at open and another just around 50% fib. Need to be quick on fingers. Now 4 positions and I will close out 3rd and 4th position if price closes above candle 14.

16. Big rush down and I didnt want to add another position at open. Thats overexposure. No retrace but I note the very short uppoer wick of the previous candle. Not even 33% indicating sellers are well in charge with good strength (which also means other sellers are jumping on). Candle 16 retraces and I add another position at around 50% and ready to close this position if price closes above the previous down candle.

17. Goody. 5 positions and all ok. Candle 17 another retrace to 50% another position and finger ready to close it if price closes above the previous candle 16. If price closes above 16 I will most likely close this one and the one just before just to minimize my risk little further. Total 6 positions. Now every tick is worth 6 pips for me.

Continuing on..

Now I know this long streak of opportunity could last very long time or stop very soon.

I stop stacking as soon as something happens against this momentum and go into defensive mode.

http://img529.imageshack.us/img529/9246/aa5e.png

18. I remember placing another position when price retraced to 50% of candle 17. However didnt know it will close around that area. Uh oh. 7th position is now in danger. Im watching carefully now.

19. I really want to see price close below candle 18 as a engulf pattern. Please please please. Hmm.. it does close below 18 but it doesnt close below 17. Looks like a stall.

** Price all over the place, ascending wicks, double top wicks **

I need a clue very soon or I will start to close my legs.

20. Not good. Alarms ringing. 3 up candles with price closing over previous down candle of 19. This is not a good sign. My only saving grace is that the price did not close above 17. My 7th is now in danger and now Im going to get ready to close it if price moves sharply. Finger already on enter button here.

21. Hmm.. Engulf pattern. Buyers chickend out. Sellers pushed it down and closed below 20. Good sign but I want to see other sellers also seeing this.

See how I buy if its up and sell when its down???

Continuing on..

http://img827.imageshack.us/img827/6686/aa6.png

Candle 21 is hinting a continuation. This is a good sign but I need more info. I will be extra tight and draw a s/r lines on this candle. I dont want to see price closing above this engulf pattern.

22, 23, 24. Stuck in another mini range in between candle 21. Not a good sign but not a bad sign either. Upper wick of candle 24 breaches resistance but does not close above it. Good.

25. Breakout. Danger is over and I held on with 7 positions.

I notice daily open line coming and I know there will be most likely a stall or clear breakout. I prepare for the worst case scenario.

Move all positions SL to BE and off to dinner.

7 positions, 0 loss.

http://img201.imageshack.us/img201/2192/aa7.png

When I came back it was up 400 pips. So I closed last 3 positions for a small profit and let it run.

Final end story?

All the remaining legs just died on BE today. Not disappointed but happy that I risked very small that could have been very large.

Now the above step by step interpretation is very important and I need all readers to understand what/why my train of thoughts. It is linked to my next topic in a planned flow of explanation.

I will address next topic tomorrow afternoon but until then I have a mini quiz for all

Continuing on..

This is quiet important quiz.

Can anyone tell me from the below 2 charts, which is 5 minute chart and which is weekly chart? And the reason why.

Chart A

http://img163.imageshack.us/img163/172/aa8.png

Chart B

http://img59.imageshack.us/img59/7178/aa9b.png

Chart A or Chart B?

Look forward to your answers tomorrow and will return to further add to what I have shown today

Sincerely,

Graeme

My stab at it:

Chart A = 5 min. with 30 min. and 1 hour cycles apparent.

Chart B = Weekly with monthly cycles shown.

well i will give it a crack, i may be way off here, but i dont think i could tell with any real certainty from the 2 static charts which one is which. If they where moving charts, maybe you could tell, but being static pictures, i personally dont think you could tell for sure, it is just pictures of price.

Uh oh! A trick question. LOL! A failing mark for me?

Hey Graeme,

I'm going to say that chart B is the 5 min and chart A is the weekly.

I believe this is true because chart B has candles with much longer ranges and price changes direction much more frequently and quickly then chart A.

Hope this makes sense

Hi Graeme,
Im with Geoff there is no way of knowing you get ranges and trends in all timeframes.
Regards,
Ben

Just before I head out I should have mentioned that there is no right or wrong answer to the quiz (to a sense).

However, I appreciate a honest response for the willing participants.

Thank you.

Continuing on tomorrow.

Kindest Regards,

Graeme

guessing chart a should be weekly and chart b shorter tf as weekly trends more.

uhh HMM... no way of knowing because anything can happen in the markets. i would even say these 2 chart have similar characters.. maybe they are from the same time frame?

actually now that i look at it.. the ma on chart A is a lot smoother, maybe it is the weekly chart. chart B's ma move around too fast, dons't look right. maybe its 5 min

hI GRAEME, i think A is the weekly chart?.. the trend is more defined.. and B 5 minutes... candles abit all over the place?.. cheers

Jean

Hi Graeme,
On a lighter note, how in the world did you come up with such a name as "Flying Buddah," a.k.a FB?
It's just that it gets me every time, especially when somebody states that he or she is seeing one on some chart.