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Flag trading the trend

  • #5,041
  • Sep 6, 2011 9:57am Sep 6, 2011 9:57am
Q for Divergence, please : if I understand correctly, the most recent update to this excellent method uses the SUB size + spread as the target, with a minimum of 9 pips & maximum of 20 pips (as per the pdf file someone kindly put together), maintaining the 1:1 RR.

So, given that one must on occasion be pretty darned nimble to make the entry, how do you calculate your position sizing, please ? Obviously if your pos sizing is based on 3% risk per trade, then a 9 pip SUB is going to have twice the size of an 18 pipper (now that calculation I can do in my head...).

Do you have one of those automatic, dynamic position sizers or a simple sheet with the 12 possibilities adjusted for current account size ?
  • #5,042
  • Sep 6, 2011 1:14pm Sep 6, 2011 1:14pm
Hi Guys
Have been following this thread for sometime now and absolutely love it!!!

Great strategy, very simple yet oh so effective!!!

I understand the rules but have just one question for someone familiar with this entry method.

When you get a sub but it doesn't get triggered by the next 2 candles can you use one of those candles as a new sub as long as it meets all the rules, eg CCI +/-50 candle within 2.4 pips of sma etc or do you have to wait for a retrace over the cci middle line and start again?

Other than that I believe I understand system well and many thanks to Divergence and all you guys that have spent so much time explaining this system to everyone.

If I could add my twopennies worth I think some guys are experiencing problems taking poor setups when the 1 min is trending the opposite way to the direction of the 15 min. I've found its best to ignore all subs until the 1 min trend agrees with the 15 min trend.

Just wait for the 1 min chart to reverse its trend then take the first sub that comes along in the direction of the 15 min trend. Basically either enter on a 123 or 2b reversal of the 1 min trend or even better wait for the reversal to happen then take the next pullback for entry.

I've attached a chart that demonstrates all these pionts from last Mondays London open.

Hope that helps.

Thanks again to you all.

Happy Flag waving Clive
Attached Image (click to enlarge)
Click to Enlarge Name: Wait for subs in a 1 minute downtrend.jpg Size: 156 KB
Feel the Fear and do it anyway!!!
  • #5,043
  • Sep 6, 2011 9:45pm Sep 6, 2011 9:45pm
Quoting clivepackham
Hi Guys
Have been following this thread for sometime now and absolutely love it!!!

Great strategy, very simple yet oh so effective!!!

I understand the rules but have just one question for someone familiar with this entry method.

When you get a sub but it doesn't get triggered by the next 2 candles can you use one of those candles as a new sub as long as it meets all the rules, eg CCI +/-50 candle within 2.4 pips of sma etc or do you have to wait for a retrace over the cci middle line and start again?

Other than that I believe I understand system...
++++++++++++++++++++++++++++++++
Excellent analysis Clive. You are obviously paying attention to detail. Good show..

As for your question regarding no trigger by 2nd candle following sub, here's the way I understand it and trade it;
• Once the set up fails to trigger, it becomes fair game after you get a cci reading of neutral or the opposite +or-50. In the example below there are four +50 bars, followed by a neutral bar (+or- does not matter) and then 6 more +50 bars. This is all that's needed to begin the set up procedure again. Hope this is clear.

In your commentary regarding price action returning to the trend and taking the 1st sub; in my experience I choose to wait for the 2nd sub simply to confirm that the trend is continuing. Adding a 123 or 2b reversal (http://www.trading-naked.com/2b-reversal.htm) can be confirmation enough for some, particularly on a 5m chart. A former floor trader I know, gives no credence to 1min 123's or 2b's. I tend to agree with his analysis unless the 123 or 2b covers several candles and therefore shows up on 5m or higher charts as well.
Darryl

"Gold is the money of Kings; Silver is the money of Gentlemen; Barter is the money of Peasants; but Debt is the money of Slaves!" ~ Norm Franz
Attached Image
  • #5,044
  • Sep 6, 2011 9:59pm Sep 6, 2011 9:59pm
Quoting jtrade
Q for Divergence, please : if I understand correctly, the most recent update to this excellent method uses the SUB size + spread as the target, with a minimum of 9 pips & maximum of 20 pips (as per the pdf file someone kindly put together), maintaining the 1:1 RR.

So, given that one must on occasion be pretty darned nimble to make the entry, how do you calculate your position sizing, please ? Obviously if your pos sizing is based on 3% risk per trade, then a 9 pip SUB is going to have twice the size of an 18 pipper (now that calculation...
++++++++++++++++++++++++++++++++
Hi JT. To clarify your comment on figuring targets, etc., the trade parameters you are referring to are for the 5m charts only, not the 1m. This is the 2nd revision to the 5m method which was put into use last spring.

I personally do not have such a calculator. What I do if I'm figuring position size for a 5m trade is look at my cheat sheet. btw I do not yet trade 3%. 1 1/2% is my size at this time.

Do this:
• You know that your minimum target is 9 pips. Simply calculate your position size for 12 different targets, 9 through 20 and write them on a piece of paper which you tape to your monitor. Once each month, or week, revise your position sizing based on your new account size. Much better than recalculating every day.
Darryl

"Today, I would like to become the man my dog thinks I am." ~ Jack Thomson
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  • #5,045
  • Sep 7, 2011 1:54am Sep 7, 2011 1:54am
Thanks, diamonddbw (I do wonder how Div does it, as he is managing OPM).

I like the dog quote .
  • #5,046
  • Sep 7, 2011 3:16am Sep 7, 2011 3:16am
Quoting diamonddbw
++++++++++++++++++++++++++++++++
Excellent analysis Clive. You are obviously paying attention to detail. Good show..

As for your question regarding no trigger by 2nd candle following sub, here's the way I understand it and trade it;
• Once the set up fails to trigger, it becomes fair game after you get a cci reading of neutral or the opposite +or-50. In the example below there are four +50 bars, followed by a neutral bar (+or- does not matter) and then 6 more +50 bars. This is all that's needed to begin the set up procedure again....
Hi Darryl

Thanks for your quick response, much appreciatted!

I'm still a little confused about what is a correct trigger.

So just to clarify if the first 2 candles after the sub don't take out the sub then its game over for that particular setup, regardless if CCI stil right or within 2.4 of sma. (didn't I read somewhere about trying on 3rd candle if still within 2.4 of sma?)

Once these 2 candles have passed then I have to wait for neutral or better reverse CCI signal, and start again?

Is that right???

Thanks for your comments on the 1 min 123's etc, yep that makes sense I personally think its best to "watch" the 123's reverse the 1 min trend(don't enter just watch it happen) then take the first pullback, after the reversal, in that new direction, which of course would be in the direction of the 15min trend.

Thanks again Darryl not just for your response here but for all your work on this thread, it is superb and IMHO probably the best thread on FF and trust me I've read a lot of them!!

But before I shoot off must say a really big thank you to the main man "Mr Divergence" himself.

For starting this amazing thread, for his webinars, comments and tireless support for all us guys searching for that "Holy Grail".

Many thanks Divergence, as we say in England "You are a true Gent!!!"

Lets keep those flags flying guys, Clive.
Feel the Fear and do it anyway!!!
  • #5,047
  • Sep 7, 2011 6:37am Sep 7, 2011 6:37am
Quoting clivepackham
Hi Darryl

Thanks for your quick response, much appreciatted!

I'm still a little confused about what is a correct trigger.

So just to clarify if the first 2 candles after the sub don't take out the sub then its game over for that particular setup, regardless if CCI stil right or within 2.4 of sma. (didn't I read somewhere about trying on 3rd candle if still within 2.4 of sma?)

Once these 2 candles have passed then I have to wait for neutral or better reverse CCI signal, and start again?

Is that right???

Thanks for your comments...
++++++++++++++++++++++++++++++++
If the first candle after the sub (set up bar) does not trigger, then that candle becomes the sub. If the 2nd candle beyond the original sub does not get you into the trade, stick a fork in it, cause you're done.

Ever since the Swiss bank worked their mojo, the charts are a mess. I certainly hope that some sort of normality returns soon.
  • #5,048
  • Sep 7, 2011 7:48am Sep 7, 2011 7:48am
Struggling to get a good entry today, is it me or the charts?

Anyone had any luck today?

Struggling to decide direction on 15 min chart, is it up? Has it just turned?

Would say 5 min is definitely down since 10 this morning and 15 probably just turning over.

Probably best to wait for a clear 15 min trend heh?

Anyone got any thoughts on which way to trade right now?
Feel the Fear and do it anyway!!!
  • #5,049
  • Sep 7, 2011 7:56am Sep 7, 2011 7:56am
Quoting clivepackham
Struggling to get a good entry today, is it me or the charts?

Anyone had any luck today?

Struggling to decide direction on 15 min chart, is it up? Has it just turned?

Would say 5 min is definitely down since 10 this morning and 15 probably just turning over.

Probably best to wait for a clear 15 min trend heh?

Anyone got any thoughts on which way to trade right now?
It's not you, it's a crappy morning for flags for those of us who start our trading at NY Open.

And, yes, I avoid flag setups when there is no clear trend on the 15m (I determine this by the slope - or lack thereof - of the Bollinger Bands).
  • #5,050
  • Sep 7, 2011 11:15am Sep 7, 2011 11:15am
Quoting clivepackham
Struggling to get a good entry today, is it me or the charts?

Anyone had any luck today?

Struggling to decide direction on 15 min chart, is it up? Has it just turned?

Would say 5 min is definitely down since 10 this morning and 15 probably just turning over.

Probably best to wait for a clear 15 min trend heh?

Anyone got any thoughts on which way to trade right now?
+++++++++++++
The EU has been down 6 straight days. That makes the odds in favor of an up day. The snb deal yesterday, makes it difficult to determine direction because of the spike. I generally discount at least a portion of a news spike in my trend analysis.

I suppose you could make an argument for 2 flag trades, although I believe many traders are remaining on the sidelines until they feel comfortable that yesterdays action has settled.

I had a few small trend line brake trades work out. But finding anything over 10 pips is a task.
  • #5,051
  • Sep 7, 2011 2:38pm Sep 7, 2011 2:38pm
That was a tough day nothing seemed to set up right but as ever took some bad ones and paid the price, but heres something interesting as I had a bad day I was analysing my bad trades trying to work out what I could of done better etc.

When I noticed something I thought well worth mentioning, whenever the the CCI indicator went over +200 the following sub when triggered worked out pretty good. In fact between 1000hrs to 1500 hrs it gave up 4 winning trades worth over 60 pips. In fact if held until the first green HA candles these 4 trades would of netted over 100 pips!

Of course the 5 min was in a down trend for this period which meant looking only for sell entries.

I think this is probably works because the CCI going over 200+ quantifies the pullback as a good one. Of course maybe this was peculiar to today only so I am going to back test it manually and see how it works out.

Wonder if it would work on a good 15 min trending day or maybe its best use is in a ranging market like today.

Well "Every little helps" as they say at Tesco's. If all goes well with my back testing I shall be keeping it in mind going forward for sure.

Chart attached for todays examples.

lets keep the flags flying!
Attached Image (click to enlarge)
Click to Enlarge Name: Using CCI(8) 200 level for signal (page 1).jpg Size: 146 KB
Feel the Fear and do it anyway!!!
  • #5,052
  • Sep 7, 2011 8:06pm Sep 7, 2011 8:06pm
Quoting clivepackham
That was a tough day nothing seemed to set up right but as ever took some bad ones and paid the price, but heres something interesting as I had a bad day I was analysing my bad trades trying to work out what I could of done better etc.

When I noticed something I thought well worth mentioning, whenever the the CCI indicator went over +200 the following sub when triggered worked out pretty good. In fact between 1000hrs to 1500 hrs it gave up 4 winning trades worth over 60 pips. In fact if held until the first green HA candles these 4 trades would...

Looking forward to testing your observation - great work!
Enter Signature
  • #5,053
  • Sep 8, 2011 2:09am Sep 8, 2011 2:09am
Well being GMT+2 myself; i was well and truly in the land of nod, however i hope some of you from across the pond traded this one?!

It is a perfect trend change scenario, with the last HL being taken out and an immediate retrace, any flags over 30/40 minutes long and i switch to the 2min chart, this gives a good quality SUB, valid trigger and 15 point target.
Stop 1pip above the SUB gets tested but survives...

http://i464.photobucket.com/albums/r...rk72/flag2.png
GoFundMe -stage-4-glioma-brain-cancer-fighter (link in my profile)
  • #5,054
  • Sep 8, 2011 3:10am Sep 8, 2011 3:10am
Interesting observation, thanks, Clive.

Here's a bad trade for a change : I entered on the SUB, rather than waiting with Patience & Discipline for the correct trigger .

Next !
Attached Image (click to enlarge)
Click to Enlarge Name: Wrong entry.jpg Size: 112 KB
  • #5,055
  • Sep 8, 2011 3:37am Sep 8, 2011 3:37am
..and a scratched trade.

Market going nowhere at the mo, so taking a break (so 100+ pip move coming in 1 min...).

This method also works on FDAX.

PS. My chart times are CET.
Attached Image (click to enlarge)
Click to Enlarge Name: scratched.jpg Size: 80 KB
  • #5,056
  • Edited 8:16am Sep 8, 2011 7:08am | Edited 8:16am
Quoting clivepackham
I like to trade pairs that are in a major downtrend like EURCHF is right now. I just use the 200ema on 4 timecharts daily,4hr,1hr and 15 min, if all 4 are below 200ema then drop down to 5 min chart and look for selling entries looking for a trendline break in direction of trend.
Hi Clive

Are you using your filter with the 200 ema on multiple time frames, combined with this flag method?
WARNING: Don't follow me as I'm just learning
  • #5,057
  • Sep 8, 2011 9:49am Sep 8, 2011 9:49am
Quoting adam777
Hi Clive

Are you using your filter with the 200 ema on multiple time frames, combined with this flag method?
Hi Adam777

Well yes I am because I'm only really interested in pairs that are trending one way or the other and right now the eurusd fals into that category as its daily chart has just dropped under the 200 ema.

However when I am just scalping then I just want it under the lower timeframes from hrly downwards, just so I know the buyers or sellers are in control.

I got this from an instructor at FXCM called Tom Long, a very experienced trader, who says that most professional traders use it as a quick guideline as to which pairs to trade and if its good enough for them its good enough for me.

Basically if its below its in a down trend and if above its in an uptrend and as a quick guide its pretty dam good, also it regularly acts as support or resistance so if I get a sub anywhere near it they usually workout ok in my experience.

Hope that helps

Lets keep those flags flying Clive
Feel the Fear and do it anyway!!!
  • #5,058
  • Sep 8, 2011 2:26pm Sep 8, 2011 2:26pm
Hi Guys

Just taking my observation on the CCI going above 200 giving us deeper pullbacks to trade, I have come up with something that may help to avoid those dodgy SUBs and give us a higher probability trade.

I think one of the things we all struggle with in Divergences strategy is identifying the SUBs to trade and more importantly the SUBs to not trade! Well I know I do anyway!

So for those mere mortals amongst us without Divergences incredible price action reading skills, this 3CCI setup may help.

Looking at my chart below I have added 2 more CCIs to the 1 minute chart, they are the 5 min CCI and the 15 min CCI. All I do is make the 5 min CCI set at 40 (8x5) and the 15 min CCI 120 (8x15). This means I can see on one chart what state the 5min and 15 min CCIs are in.

How does this help? Well quite simply we are looking to enter on as deep a pullback as possible on a 1min chart to give us a higher probability trade. So, if we can identify when the 5min and the 15 min are pulling back together with the 1 min, then surely, this must be a deep pullback on the 1 min, leading to a higher probability trade.

So how to use it?

Lets look at the chart from todays New York open which is 1300hrs to 1700hrs for me in the UK. The 15min trend was down so I am looking for short entries.

Wait for all 3 CCIs to be pulling back together which means,in this case when shorting, they all go green, then enter on the next qualifying SUB immediately afterwards as per the normal rules.

I have shown 3 examples of successful trades using this method, identified with yellow vertical lines labeled entry1,2 and 3 accordingly.

Notice how all 3 CCIs went green before each successful SUB. Albeit entry 2 was a flicker of green on the 15min CCI, However entry 3 is a prestige example of the setup with all 3 CCIs very clearly showing green, also notice the 5min and 1mins went +200 as well!

Perhaps more importantly look how it would have kept us out of the 2 losing SUBs leading up to Entry 2.

Also notice (just for Adam777) how the 200ema acted as resistance on all 3 successful trades, so any SUBs near the 200ema are well worth considering. IMHO.

Anyway thats about it guys take a look at it and see what you think. I haven't backtested it or anything else, just thought I would run it past you all and see what you make of it?

Now I'm not saying its going to work all the time. After all what does? but hopefully it will give us yet another edge in Divergences amazing system.

Remember before trying this make sure we are clearly in a 15min trend as all flag trading needs a good trend.

Good luck!
Attached Image (click to enlarge)
Click to Enlarge Name: 3 CCIs signal system.jpg Size: 167 KB
Feel the Fear and do it anyway!!!
  • #5,059
  • Sep 8, 2011 8:57pm Sep 8, 2011 8:57pm
Quoting clivepackham
Also notice (just for Adam777) how the 200ema acted as resistance on all 3 successful trades, so any SUBs near the 200ema are well worth considering. IMHO.
Exactly
WARNING: Don't follow me as I'm just learning
  • #5,060
  • Sep 9, 2011 2:07am Sep 9, 2011 2:07am
I really like the spirit of your approach & also your willingness to share your observations, Clive, but being a bit of a chart minimalist (!), I prefer to trade off the one chart with as little on it as poss, & I don't like the feel of HA bars either...

Tescos and Waitrose, really (let the yanks try to work that out...).

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