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Higher low, lower high system

  • #4,401
  • Jun 22, 2011 2:29pm Jun 22, 2011 2:29pm
Back to the H4 theory. Does this have any validity to you more experienced chaps out there.

You take the most recent H4 candle close value as S/R. If the MAs arelined up in the direction of travel, then you can trade the first HL/LH above or below the H4 close. If the MAs do not line up, then you need to see a LL or HH to confirm the change in direction.

I think, looking at Lawgirl's thread, and also backtesting as much as I can, that H4 closes are reasonable S/R levels.

Can anyone see an obvious flaw in this plan?
  • #4,402
  • Jun 23, 2011 1:47am Jun 23, 2011 1:47am
Quoting Delite
Back to the H4 theory. Does this have any validity to you more experienced chaps out there.

You take the most recent H4 candle close value as S/R. If the MAs arelined up in the direction of travel, then you can trade the first HL/LH above or below the H4 close. If the MAs do not line up, then you need to see a LL or HH to confirm the change in direction.

I think, looking at Lawgirl's thread, and also backtesting as much as I can, that H4 closes are reasonable S/R levels.

Can anyone see an obvious flaw in this plan?
I will be focusing main trades as we have set up here on eur and gu. If I get another currency with an obvious move at a SR level, eg engulfing close, several candle stall etc, 4hr hl/lh on 8 other currencies I now have up I'll look at their charts (so scan every 4hrs) to see if 5 min hl/lhs are set up better.
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  • #4,403
  • Jun 23, 2011 1:53am Jun 23, 2011 1:53am
Quoting Vantage
I will be focusing main trades as we have set up here on eur and gu. If I get another currency with an obvious move at a SR level, eg engulfing close, several candle stall etc, 4hr hl/lh on 8 other currencies I now have up I'll look at their charts (so scan every 4hrs) to see if 5 min hl/lhs are set up better.
Yesterday when I was stalking* gu and the pa was, at that time, no where near as good as this. Ma's nicely angled down, confirming 4hr move still ok, perfect lh's.


*My girlfriend thinks I'm stalking here. Well she's not my girlfriend yet ........................
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  • #4,404
  • Jun 23, 2011 2:09am Jun 23, 2011 2:09am
Quoting Delite
Back to the H4 theory. Does this have any validity to you more experienced chaps out there.

You take the most recent H4 candle close value as S/R. If the MAs arelined up in the direction of travel, then you can trade the first HL/LH above or below the H4 close. If the MAs do not line up, then you need to see a LL or HH to confirm the change in direction.

I think, looking at Lawgirl's thread, and also backtesting as much as I can, that H4 closes are reasonable S/R levels.

Can anyone see an obvious flaw in this plan?
Delite,

Re. "MA's are lined up":
are you referring to h4 ma's or m5 ma's

can you please post a chart to explain the 2 scenarios you have mentioned?

observation:
h4 candle closes do operate as small s/r levels.
from what you have said it would imply that you are essentially looking to trade h4 close breakouts. i should think that strategy would entail bigger s/l levels and drawdowns as quite often price moves both ways within the h4 range, at times, more than once, before it resumes direction.

cheers.
  • #4,405
  • Jun 23, 2011 7:23am Jun 23, 2011 7:23am
Two trades this morning on GU.

1st trade: 1 hr down but I was aware of the lower wick, couldn't close below the previous bar. 15 min was showing rejection of the Asian lows, nice 5 min LH showing earlier support turned resistance. Entry at 6009. I was trading into a big RN so prepared to take an early BE if necessary. When the 5min hammer rejected 6000 I closed out on the next approach to 6000 for +8. It went on to a 15/85 trade.

2nd trade: Was against a 1 hr hammer but 15 min was showing big upper wick rejections of the 6000/S1 combo. 5 min LH after the second 15 min SS, entry at 5991. Price meandered down and I eventually closed out at 5979 for +12 when 75 level showed signs of holding.

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Follow, don't anticipate.
  • #4,406
  • Jun 23, 2011 7:49am Jun 23, 2011 7:49am
Vantage, I was looking at these EU 5 min bars. I'm sure this has been covered in the thread before but could you just clarify whether the left arrow down qualifies as a lower high bearing in mind it didn't break lower. If it does then right hand arrow becomes a higher high and therefore shouldn't be traded short. RH arrow was a system short, rejecting the earlier support level, if you don't count the left arrow as a lh.

Grateful for your comment on this.

Thanks.

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Follow, don't anticipate.
  • #4,407
  • Jun 23, 2011 8:16am Jun 23, 2011 8:16am
Quoting Ian
Vantage, I was looking at these EU 5 min bars. I'm sure this has been covered in the thread before but could you just clarify whether the left arrow down qualifies as a lower high bearing in mind it didn't break lower. If it does then right hand arrow becomes a higher high and therefore shouldn't be traded short. RH arrow was a system short, rejecting the earlier support level, if you don't count the left arrow as a lh.

Grateful for your comment on this.

Thanks.

Attachment
Left arrow down qualifies as lh but as you say never went 1 pip lower so not a trade. Right arrow down is 1 of those marginal ones (I was out Mrs V got it)but move into 4250 clearly a reject of the R level, 15 min green doji, then red doji. IF you are going to stretch rules do with trend.

So yes if you close your eyes to one candle that made arrow left a lh then arrow right is a perfect lh wave.
  • #4,408
  • Jun 23, 2011 8:31am Jun 23, 2011 8:31am
Hi Vantage and pgd

Thank you both for your replies. My strategy is a bit of a work in progress at the moment, but uses a great deal of the great teachings of Vantage!

Can I bother you both with a quick question? If I was looking to use a breakout of either a H4 candle of H1 candle is it okay to ignore the wicks on those candles?

I know this seems to vary from trader to trader, but my understanding is that the actual close is more significant as the wicks can simply be an overshoot or stop hunt. Do either of you have an opinion on this?

Will post some charts tomorrow, along with the rest of my musings!

Best wishes.
  • #4,409
  • Jun 23, 2011 8:32am Jun 23, 2011 8:32am
Quoting Vantage
Left arrow down qualifies as lh but as you say never went 1 pip lower so not a trade. Right arrow down is 1 of those marginal ones (I was out Mrs V got it)but move into 4250 clearly a reject of the R level, 15 min green doji, then red doji. IF you are going to stretch rules do with trend.
So yes if you close your eyes to one candle that made arrow left a lh then arrow right is a perfect lh wave.
Thanks, that's what I thought the answer might be.
Follow, don't anticipate.
  • #4,410
  • Jun 23, 2011 8:40am Jun 23, 2011 8:40am
Quoting Delite
Hi Vantage and pgd

Thank you both for your replies. My strategy is a bit of a work in progress at the moment, but uses a great deal of the great teachings of Vantage!

Can I bother you both with a quick question? If I was looking to use a breakout of either a H4 candle of H1 candle is it okay to ignore the wicks on those candles?

I know this seems to vary from trader to trader, but my understanding is that the actual close is more significant as the wicks can simply be an overshoot or stop hunt. Do either of you have an opinion on this?

Will...
I have strong feelings on trading break outs, simply I don't. However IF and its a big IF you want to trade in that area I have set ups I will take. Confirmed hl/lh's (smaller bounce from key level often means level will fail) that comply with system is a trade and not a break out.

I hope you can see the difference. A confirmed lh sell for example instead of just selling the low.

In general the failure of a higher time frame lower wick can well be a good set up, so the principle is fine. I just prefer the idea of trading the lower high as opposed to just placing a trade.

I never had good luck just placing a sell order and hoping.

There is one of the 1 2 3 threads that uses good angle on 15 min ma's to trade the 2 point and they do not seem to worry about wicks at all.

There are a couple of ways of skinning that cat. The important thing I think is that whatever method you use its something thats repeatable ie you are following a laid down method.
  • #4,411
  • Jun 23, 2011 8:46am Jun 23, 2011 8:46am
Quoting Vantage
I have strong feelings on trading break outs, simply I don't. However IF and its a big IF you want to trade in that area I have set ups I will take. Confirmed hl/lh's (smaller bounce from key level often means level will fail) that comply with system is a trade and not a break out.

I hope you can see the difference. A confirmed lh sell for example instead of just selling the low.

In general the failure of a higher time frame lower wick can well be a good set up, so the principle is fine. I just prefer the idea of trading the lower high as opposed...

Yes, I agree. I don't want to just place an order under/over an H1 candle low/high, but to use in conjunction with an lh/hl. So, for example, price breaks under a H1 candle close/low and we then get a LH, the chances are that the trade will be successful. Or if we see a LH and the setup candle then breaks an H1 low. Does that make sense?

The laid down method, is just what I am working on right now!
  • #4,412
  • Jun 23, 2011 8:53am Jun 23, 2011 8:53am
We have had a natural progression of two things being:

 

  1. we have reduced trades from at one stage around 10 a day to a couple per day, and
  2. Mrs V has wanted us to focus on trend

We are making the 2nd real adjustment in 3 years (first was bringing 15 min in). The 1hr can move around a little whilst 4hr still showing trend. So we have changed definition of trend from 1hr.

The current set up I have then is 4hr, 15 min 5 min. Trend is described as above/below 4hr 8 lwma and 8 rsi confirming above/below its 8 sma (fozzy cross, I know an indi has appeared). You might see that this is basically the same as the trading made easy set up except I am using standard mt4 indi's. I am grateful to that threads author and appreciate the simplicity of his set up, I pray that he will get over his illness.

Having our description of trend we do not intend taking ANY counter trend trades (London close set up a very specific exception).

So we will take hl/lhs, morning/evening stars, 2b's and the odd flag but they will be in direction of 4hr trend.

Haven't changed 1st post yet that will come shortly.

  • #4,413
  • Jun 23, 2011 9:09am Jun 23, 2011 9:09am
What that means is from the times shown per red line on 4hr NO buys of any sort would be considered on eur and gu. Waiting for sell set ups only.

The eur 5 min, from the 2b shown its just selling the right set ups. The 2b is fine as its not a reversal trade BUT a sell set up in line with 4hr down trend as described. From there on its sell your chosen set up.

Mrs V somewhere in there whilst I was out had a eur buy (as per prev system) and out for -9. Re-sold later to make up.

Anyway we realise there will be some perfectly valid trades we miss out on waiting move from 1hr to 4hr but there are losing trades as above that would be avoided.

We are looking for fewer, longer trades using the small stops we are accustomed to.
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  • #4,414
  • Jun 23, 2011 9:45am Jun 23, 2011 9:45am
Quoting Vantage
We have had a natural progression of two things being:

 

  1. we have reduced trades from at one stage around 10 a day to a couple per day, and
  2. Mrs V has wanted us to focus on trend

We are making the 2nd real adjustment in 3 years (first was bringing 15 min in). The 1hr can move around a little whilst 4hr still showing trend. So we have changed definition of trend from 1hr.

The current set up I have then is 4hr, 15 min 5 min. Trend is described as above/below 4hr 8 lwma and 8 rsi confirming above/below its 8 sma (fozzy cross, I...

Hi V, just a suggestion ... instead of changing the first post why not just add on the new changes and keep the original the same for those of us that prefer the original method ?

Dan
  • #4,415
  • Jun 23, 2011 9:47am Jun 23, 2011 9:47am
Quoting dan89
Hi V, just a suggestion ... instead of changing the first post why not just add on the new changes and keep the original the same for those of us that prefer the original method ?

Dan
Cheers Dan, that we can do.
  • #4,416
  • Jun 23, 2011 12:36pm Jun 23, 2011 12:36pm
Quoting Vantage
What that means is from the times shown per red line on 4hr NO buys of any sort would be considered on eur and gu. Waiting for sell set ups only.

The eur 5 min, from the 2b shown its just selling the right set ups. The 2b is fine as its not a reversal trade BUT a sell set up in line with 4hr down trend as described. From there on its sell your chosen set up.

Mrs V somewhere in there whilst I was out had a eur buy (as per prev system) and out for -9. Re-sold later to make up.

Anyway we realise there will be some perfectly valid trades we miss...
vantage,

i see a sync error.

your red vert. line on eu h4 is at 08:00. that line would be marked when the next bar starts i.e. at 12:00. so, your the trades you take on m5 on that basis can only be at or after 12:00. thus red vert line on m5 should be marked at 12:00 not at 09:55 as done.
  • #4,417
  • Jun 23, 2011 1:46pm Jun 23, 2011 1:46pm
Quoting pgd
vantage,

i see a sync error.

your red vert. line on eu h4 is at 08:00. that line would be marked when the next bar starts i.e. at 12:00. so, your the trades you take on m5 on that basis can only be at or after 12:00. thus red vert line on m5 should be marked at 12:00 not at 09:55 as done.
Pgd, I think you're right that trades would start from the beginning of the bar following the one that V. marked, but that would be from 00:00 (ie midnight FxPro time) onwards, therefore the 09:55 2b would be OK to take under new rules.
Follow, don't anticipate.
  • #4,418
  • Jun 23, 2011 11:16pm Jun 23, 2011 11:16pm
Thanks guys, eur set up above on 5 min. I was just trying to show that the first trade of the session, the 2b, wasn't a reversal trade as such but an acceptable move back into the existing 4hr trend.
  • #4,419
  • Jun 24, 2011 12:03am Jun 24, 2011 12:03am
Quoting Ian
Pgd, I think you're right that trades would start from the beginning of the bar following the one that V. marked, but that would be from 00:00 (ie midnight FxPro time) onwards, therefore the 09:55 2b would be OK to take under new rules.
I stand corrected, Ian, Vantage.

the marked H4 bar is 20:00, not 08:00 on the basis of which i had proceeded. it seems, i took the time from the other h4 chart, attached to the same post, where the time is 08:00.

cheers.
  • #4,420
  • Jun 24, 2011 12:13am Jun 24, 2011 12:13am
I have made my first humble contribution to Ralph Shell's work! Hanging man here hoping looking for move back below 8 lwma. There is a major base at 0450.

A big London close bounce yesterday!
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