Extracted Thread (per thread starter's request)

Already explained in detail at the beginning of the thread. Just read until it sinks in. Good things take time.

Haven't heard much comment on the Waiting EA. Is this a preferred way of staying in the game when away from the screen?

You really can only sit in front of the monitor so long . . .

Forest

Everyone: I have added Squalou's custom indicators for this method to post #1.

Squalou has agreed to take over the building of our EA from Steve. But he is on vacation with his family until the end of the month, so don't expect any more modifications on either the indi or the EA until at least mid-September.

Everyone: If you have any requests/ideas for modifications to the work Squalou is helping with here, please DO NOT send him a private message. Either send me your PM, or simply post your ideas here in the thread for everyone to see. Squalou is a very busy professional coder and trader, and we are extremely lucky to have him on board. Let's not take him for granted.

I have slightly modified sqaulou's indicator and added several default fib extension targets (all 9 TP targets are now filled in). These are all calculated from various Fibonacci derivatives and can be changed in the parameters.

I am using the first target of .618 a little differently than it's intended purpose. I use this first TP level as a trigger which tells me to move my stop to the middle of the box. I am going to be using TP2 as my first target instead. Because the .618 extension is a primary fib extension, many reversals can and will turn here and this will minimize the damage on a full reversal to the opposite side of the box. This is in no way a replacement to the original indicator, just a slightly different version for anyone to try out. My hope is when sqaulou gets time he can add the .618 extension in as a "Move Stop" trigger point parameter instead of a TP target as it is now. The only thing I can't figure out is the indicator is only showing 8 targets instead of 9, which might be a bug, I don't know.

Did you base the modifications on any particular pair cos as forexhard says what works on GBPUSD doesn't on other pairs. The drawing of the boxes manually is subjective and an indi of course is mechanical.

Are most of you waiting for the indicator boxes to appear, which seems infrequent, or drawing in your own boxes based on the many examples FH provided in the early posts?

You certainly can find and manage your own boxes, but possibly the intent is to wait for the indicator boxes to form?

Just trying to fully appreciate it.

Forest

I like this philosophy alot, Mer. Not being a "Fib guy" I don't know if Fibs are really the best tool for deciding this Trailing value, but in general I will be pushing for a similar parameter once the EA gets operational. I certainly see the value in reducing exposure once price has moved in our favor by 20 pips or so, providing all the entry filters have been satisfied and we are in what I would consider a confirmed consolidation breakout.

You can go either way, Forest. Trading is subjective, and my method is flexible enough to allow for personal preferences. I only caution against over trading. I urge everyone to fight to need to be "always in". You should instead be willing to sit back and pick out only the very best consolidations to trade from.

FxH:

I have been thinking about having the EA use the pair volatility to dictate the size of my position, based upon the maximum risk I am willing to take on in each trade.

As an example, the EURUSD has had much greater volatility in recent days versus two months ago. The ATR looks like it might be 50% - 60% wider than it was two months ago. This indicates to me that stops should be commensurately wider as well, and my lot size should be commensurately smaller to reduce the risk.

Although this calculation can certainly be performed by hand, it makes sense to have our workstation take care of it.

TPC

Extreme consolidation (what I am looking for) and volatility are opposites. That Squalou's indi isn't finding any CZ's over the last few days, is explained by market volatility (what you are looking for). CZ's are actually a break from volatility, and usually they are more prevalent (and predictable) than they have been since the whole default nonsense creeped in.

So to me, it seems like your concept should be reversed 180. When I see a CZ that has, say, 40 M15 bars with a height of just 27 pips, this gets me very excited. This makes me want to risk more, not less. And such a scenario is caused by anti-volatility. See what I mean?

Here's the setting at 10 bars, vs the normal 22

I have not tested this on the EA Steve has provided....


Although, this does suggest that this weekend will be spent (by me anyway) finding optimal bar lengths per pair.

And therein lies the problem - finding optimal bar lengths (all different) for some 28 pairs.

Well...I can confirm one thing. Running the backtester is taking a wicked long time. Starting from Jan 1st to Present, I'm not even through the end of January (based on the logs). And I started this about 40 minutes ago.


Unfortunately, this may take a rewrite of Sqaulou's code to make it only keep the current values/no drawing, as I am seeing a lot of removing/loading of the indicator. I assume is due to the extending the upper and lower lines per bar.

This is really something beyond my coding skills, but I may have to attempt it anyway, given that Squaulou will be away for some time. Steve, if your reading this, I'd be interested in your thoughts on how to tackle that....


Al Mo

Hello All,

Here is a test to test your trading skills.

The chart on post #1 caught my attention and so I continued to read through this thread. I also tried squalou's indicator.

What I see (Note: These are not my opinions, just what I see)

1. Posts #1 shows the tops and bottoms with only the first box showing low volume and thus low volatility.

Box Number One

This is a low volume time period between the end of the NY session and the beginning of the Asian Session. No surprises here. Will there be a break out if I was looking at this in real time? I wouldn't bet the house on it but the chances were very good.

There was a nice upward move as we see from the chart which was really just a continuation of what the London and NY sessions started. Why did the PA stop when it did? The reason is simple do any of you new traders know the answer?

Box Number Two

This box shows true consolidation or does it? I see low volume as it is before the NY Open. Would I draw this box in real time and trade? I doubt it very much and believe this could only be seen after the fact. Without knowing the other factors involved, just looking at the chart in real time
gets you zero. Squalou's indicator never appears yet this is the best place to make a trade and the most obvious. Again the reason is simple and very obvious. Can anybody answer this question?

Box Number Three

Nothing here shows consolidation. This low was hit at the front end of the London open. Why didn't the PA go lower? Again a simple answer. See if you can answer this correctly. Take your best shot.

If you know the answers to these three the others are very similar.

This is just for learning how to trade and I believe should be a part of the discussion here for determining the box position.

I will post the answers in a couple of days. If I see no posts I will assume none of you know the answers.

Have fun,

Johnny

All the indicator is is a tool with basic default values to use in your trading and is not a permanent substitute for manual CZs. Yes, different pairs will require different settings, but I wanted to incorporate the fib extensions due to their sometimes uncanny accuracy. Just put it on a chart and visually watch how the price breakout from the CZ reacts to each level and make your own analysis and then decide to use it or not.

It's just how I use this because of the experiences I've seen from reversals off the 38.2 and 61.8 extensions. It is not something that has to be followed nor does anyone have to use the indicator in that manner, it's all up to the preference of the trader. Last night on Gbp/Usd was a great example though of how moving the stop can benefit you. Do you see how the price reversed exactly at the 61.8 extension and how we moved the stop? After it was said and done, we ended up with only a 20 pip loss instead of 40+.

Hi Johnny,

Nice post! Good to see another pair of eyes while all of us get this down.....


I realize you were referring to the chart on post #1

However, I will refer you to post # 7 , as the answers are there.

http://www.forexfactory.com/showthread.php?p=4745192#post4745192


Assuming your box sizes are all 30 pips, your essentially trading breakouts of the 30 pip range. This is very similar to trading say, Point and Figure charts if your settings for that are 30 pip box size, 1 box reversal.

That being said....Box 1 - our starting point, was just a break out to the up side.

Box 2 (which is chart 4 on post 7 ) - created when you reached your top and started going sideways. Yes, this can be drawn in real time. There are at least 10 bars going sideways before the 1st attempt of breaking the bottom of the box, with an eventual break followed another 5 bars after that for the start of the 115 pip run.


Box 3 - PA stopped due to hitting a previous support - can be seen from far left, but that area does not have any previous box or 2nd artifact drawn due to where we initally started box 1.


I think I see what your trying to say...Price will always attempt to reach and consolidate at previous Support/Resistance lines , given the chance.

I'm getting there. It's a somewhat different way of thinking for me. I'll keep working it.

T

we usually dont have break outs in a ranging market, so we need a trending market.

in ranges we play ''sell high'' ''buy low''

Hi almo,

Congrats! I tried to get you to take the bait by putting doubts in your mind but you passed the test anyway.

There is a difference of opinion as to what is a real consolidation so let's discuss shall we?

I look at consolidation as a calm before the storm as the price moves very little from low to high. At first thought you might be thinking, where's the disagreement as this is exactly what the indicator is trying to do.

Before discussing that further first let's look again at each box and define what is taking place.

BOX #1

There is little going on due to lack of volume and is pretty calm. A classic example of consolidation after the US Close and before the Asian Open.

Box #2

Why did the PA stop it's upward movement? Quite simply the number of buyers no longer outnumbered the sellers. It was a new H4 high and it was stretched quite a distance from the line of equilibrium.

The London Open is itself a major resistance point and the huge increase in volume made for some happy traders. There was only one logical direction for the PA to go and down it went on a free fall. There was only one slight hic-up at the 50% fib level where the Italians decided to go long but the rest of the free world wasn't buying into it so it dropped just above prior support. Besides it was tea time in Britain and they get real grumpy without their tea and biscuits. I know this only so well as my wife is British.

Box #3

I don't consider this a definition of consolidation as there is nothing calm going on here. It is more like chaos as the Professional traders sold just above support and the rest of the numb skulls are trying to figure things out as they were too busy counting there money before actually selling their shorts. It was an oh crap moment as they were caught in the middle of their day dream of what if's like the PA falling all the way to the Daily line of support and pocketing a pot of gold.

Finally they get there heads straight and the PA heads North only to run into those Iti's again at the 50% Fib line. The Americans were just getting to work and to give themselves a little more time to drink their morning coffee and flirt with the pretty girls in the office they go short with the Italians. This trend reverse happens quite regularly at the NY Open by the way as well as a trend reversal at noon NY time.

After an Hour and a half of goofing off they finally get back to the market and take the next bar long and up we go again. This time there was no slow down for the Italians and the PA went up like a rocket leaving the Italians choking on their spicy meat-a-balls at dinner time thinking holy crapola I losta my shorts.

Another way of putting it is a bounce off support and subsequent hook back towards support. This is a classic breakout signal.

Now let's discuss the definition of consolidation as mine varies somewhat from what I see here. Yes I believe it's smaller highs and smaller lows but not necessarily from a horizontal line. It can be a horizontal line but is more likely to be a sloped line. Vary rarely for any length of time will you ever see the PA stand still or even move horizontally.

To explain further view a chart and visually find the line of equilibrium.

Definition: A condition in which all acting influences are canceled by others, resulting in a stable, balanced, or unchanging system.

I will post a chart later.

Johnny


PS: I don't trade from a box I trade from S&R lines.