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Trade What You See - Almost Naked Trading

  • #6,041
  • Nov 30, 2010 3:05pm Nov 30, 2010 3:05pm
Quoting erod84
Did you get into this breakout trade lawgirl?
I did not...after watching it for a few hours this morning. At the office and too busy. I'm glad you did though.
  • #6,042
  • Edited 5:40pm Nov 30, 2010 3:20pm | Edited 5:40pm
Quoting duffypratt
The basic theory behind the system is simple: follow the trend. There are lots of books (Trend Following and Trend Trading for a Living come to mind) about trend following that employ other methods, but the basic idea is typically the same. First, you have to identify the trend, and then you have to find a way to jump on board.
Duffyprat:

Your breakdown of the "theory" behind 3 Taps was masterful. It definitely helped me understand what's happening better. If it's not too much of an imposition, would you be willing to breakdown how you make sense of the H1 Breakouts?
  • #6,043
  • Nov 30, 2010 4:34pm Nov 30, 2010 4:34pm
Was just looking at this pair. RSI(3) pointing up on all relevant tfs. Couple of trendlines can be drawn on the 4H & 1H, but I think the boat has already sailed. Using IT Finance charts which are not perfect...

Any thoughts anyone?
  • #6,044
  • Edited 6:01pm Nov 30, 2010 5:51pm | Edited 6:01pm
Quoting tjfxtrader
Your chart begs the question... why not trade the breakout of the previous H4 candle open/close?



The last 6 H4 bars have the open and close lines. 6 * 4 = 24.
I am not lawgirl but its definately not the same thing since the bodies of the 1H candle with almost certainly represent a wider range than the open/close of the 4H candle.

So if you want to use the 4H you would have to use H/L and not O/C.

And it shows in the pic you posted it is a valid trade since we're only looking to short (trend is down).

PS: Also keep in mind that 4 1H candle does not automatically translate into 1 4H candle. Those 4 1H bars can be distributed trough 2 4H bars.
  • #6,045
  • Nov 30, 2010 5:55pm Nov 30, 2010 5:55pm
Looked ok to me but then I don't know much so I jumped on board and sailed away with 21 pips in under 40min and now closed out. Thanks for bringing it to my attention as it is not one that I follow.
  • #6,046
  • Nov 30, 2010 6:05pm Nov 30, 2010 6:05pm
Quoting branco
I am not lawgirl but its definately not the same thing since the bodies of the 1H candle with almost certainly represent a wider range than the open/close of the 4H candle.

So if you want to use the 4H you would have to use H/L and not O/C.

And it shows in the pic you posted it is a valid trade since we're only looking to short (trend is down).

PS: Also keep in mind that 4 1H candle does not automatically translate into 1 4H candle. Those 4 1H bars can be distributed trough 2 4H bars.
Thanks for answering branco. Spot on.
  • #6,047
  • Nov 30, 2010 6:09pm Nov 30, 2010 6:09pm
Quoting airbeat
Hi Lawgirl, I've been doing great so far just following your setups, watching PA and getting the hang of things. Not as great as most of you here but heck I'm up 64 pips today and I'm happy with it. Question one....

I understand the setup for the initial BO lines but what are the conditions for the secondary setups I see as in your current post.? Are you just looking for the highest and lowest of the next set of four candles?

Thanks, Harry
This was a consolidation BO set up. Lines drawn at highs and lows where PA is trading in a tight range for awhile..sooner or later it will go in one direction or the other.
  • #6,048
  • Nov 30, 2010 6:10pm Nov 30, 2010 6:10pm
Quoting branco
I am not lawgirl but its definately not the same thing since the bodies of the 1H candle with almost certainly represent a wider range than the open/close of the 4H candle.

So if you want to use the 4H you would have to use H/L and not O/C.

And it shows in the pic you posted it is a valid trade since we're only looking to short (trend is down).

PS: Also keep in mind that 4 1H candle does not automatically translate into 1 4H candle. Those 4 1H bars can be distributed trough 2 4H bars.
You didn't understand what I was asking. It is obvious that the bodies of 4 H1 will in most cases extend outside the body of the H4 candle of the same time period.
  • #6,049
  • Nov 30, 2010 6:12pm Nov 30, 2010 6:12pm
Quoting lawgirl21
Thanks for answering branco. Spot on.
Nevermind...
  • #6,050
  • Nov 30, 2010 6:14pm Nov 30, 2010 6:14pm
Quoting Location
Duffyprat:

Your breakdown of the "theory" behind 3 Taps was masterful. It definitely helped me understand what's happening better. If it's not too much of an imposition, would you be willing to breakdown how you make sense of the H1 Breakouts?
There are several different breakouts here. There is the H1 broker opening four candle breakout, the H1 consolidation breakout, and the Two Tap, move to H1 for confirmation breakout. The last is simply a variation on the three taps, so I won't talk about it here. The idea is the same as the three tap trade, but it looks for a different trigger.

The H1 consolidation breakout is the easiest to understand. It pays no attention to RSIs. Instead, in an H1 consolidation, the idea is that the trading range is holding steady and actually getting smaller and smaller over a fairly long period of time. The longer the consolidation lasts, the more likely that there will be an explosive move to break the consolidation.

Thus, when you see a long period of consolidation, you simply draw your horizontal lines at the top and bottom of the consolidation channel. Where, exactly, those lines will go will depend a bit on the channel, but if its not pretty obvious where to put them, then you probably don't have the kind of consolidation you are looking for.

Then, when price moves outside the channel, you wait for a decent PA confirmation. I think LG uses a full candle on the M15 chart outside the channel. Stop goes on the other side of the channel. As I said before, the trend doesn't matter too much because the long period of consolidation is an indication of extreme uncertainty in the market, and the price is just as likely to move either way.

I have a harder time understanding the broker opening four hour breakouts on the H1 chart. LG says that you use the opening of the day that your broker uses. I'm not sure, but I'd be willing to bet that there are brokers that use at least 8 different times for opening. To me, this implies that this technique might work on almost any four hour period. Having said that, I am very skeptical about whether that's true, and I doubt that anyone has thoroughly tested it.

I once thought that the rationale was as follows. My broker, and LG's both start their days during the doldrums of the market. That's typically from about 4pm EST to about 11pm. Volatility at that time is low, and there isn't much movement in most of the currencies, especially the non-Asian ones.

The channel that you draw thus often resembles a mini-consolidation channel, and the trade seems to work like a consolidation trade. What happens is that Frankfurt or London opens, and the currency takes off again in the direction of the prevailing trend. And of course, the trade already has an edge because it only looks at currencies where the RSis all line up.

Recently, LG has also noted trades of this type where its pretty clear that the pair is already trending. When this happens, I see what's going on as a kind of momentum trade. The RSIs are lined up, the PA is moving favorably, and you jump on the trend.

What the four candle, one hour trades have in common with the three taps trades is the three step process to get into the trade. There is 1) the filter of trading in the direction of the trend as confirmed by the RSIs, 2) the signal of price breaking out of a pre-defined channel, and 3) the trigger of Price Action in the direction of the trade (here by a full M15 candle outside the channel).

The basic consolidation trade also has three elements, but they are different. First, there is the requirement of a long consolidation, the longer the better. Then the signal of price moving outside the channel, and again the trigger when PA confirms that the move is strong enough to trade.

I hope this helps. And I'd be more than happy to be corrected if I have mis-interpreted something.
  • #6,051
  • Nov 30, 2010 6:24pm Nov 30, 2010 6:24pm
Quoting duffypratt
There are several different breakouts here. There is the H1 broker opening four candle breakout, the H1 consolidation breakout, and the Two Tap, move to H1 for confirmation breakout. The last is simply a variation on the three taps, so I won't talk about it here. The idea is the same as the three tap trade, but it looks for a different trigger.

The H1 consolidation breakout is the easiest to understand. It pays no attention to RSIs. Instead, in an H1 consolidation, the idea is that the trading range is holding steady and actually getting smaller...
WOW! that is such a good explanation of everything. Very clear and concise. I'm going to bookmark it for reference. Thanks for taking the time to do this.
  • #6,052
  • Nov 30, 2010 6:28pm Nov 30, 2010 6:28pm
DP, this is the only thing I am not sure about. I have been told that all brokers start their new trading day 5:00p.m. EST. I have no way of verifiying this, but it makes sense. Do you know if this is so?
  • #6,053
  • Nov 30, 2010 6:36pm Nov 30, 2010 6:36pm
Check out what has happened to monthly direction of the RSI, as this is the first day of the new month. All are neutral. Very interesting to see what they do.
  • #6,054
  • Nov 30, 2010 6:42pm Nov 30, 2010 6:42pm
Quoting lawgirl21
DP, this is the only thing I am not sure about. I have been told that all brokers start their new trading day 5:00p.m. EST. I have no way of verifiying this, but it makes sense. Do you know if this is so?
My broker started the day 1½ hours ago. Europe based.. Germany. 1½ hours agoit was midnight there.
In the days of old when sailors were bold, and seldom if ever contented.
  • #6,055
  • Nov 30, 2010 6:48pm Nov 30, 2010 6:48pm
Quoting babnz48
Looked ok to me but then I don't know much so I jumped on board and sailed away with 21 pips in under 40min and now closed out. Thanks for bringing it to my attention as it is not one that I follow.

Good going!!
  • #6,056
  • Nov 30, 2010 6:50pm Nov 30, 2010 6:50pm
Quoting lawgirl21
Check out what has happened to monthly direction of the RSI, as this is the first day of the new month. All are neutral. Very interesting to see what they do.
Appears normal continuation on my platform...
  • #6,057
  • Nov 30, 2010 6:57pm Nov 30, 2010 6:57pm
3 Tap setup and trigger on the monthly chart. For the not so faint of heart.
Attached Image (click to enlarge)
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  • #6,058
  • Nov 30, 2010 7:12pm Nov 30, 2010 7:12pm
Quoting lawgirl21
3 Tap setup and trigger on the monthly chart. For the not so faint of heart.
AUDJPY
I'm in this trade. Should work like any other 3 Tap trade. I also like the third tap pinbar.
  • #6,059
  • Nov 30, 2010 7:29pm Nov 30, 2010 7:29pm
Both a potential H1 4C BO trade and a consolidation BO trade.
Attached Image (click to enlarge)
Click to Enlarge Name: 4xxx.gif Size: 11 KB
  • #6,060
  • Nov 30, 2010 7:32pm Nov 30, 2010 7:32pm
Quoting lawgirl21
AUDJPY
I'm in this trade. Should work like any other 3 Tap trade. I also like the third tap pinbar.
Good to know I'm not the only one on this pair. I jumped on to AUD/CAD a little while ago what do you think of them?
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