...received a PM regarding how I trade a Guppy profile - and not for the first time, I might add. I apologize if others have read this before, but recalling an old post is the quickest way to respond, and thought that I would drop in the thread.
Hi ???, this is how I responded the first time I was asked the question. Of course, the chart is now a little old - erm, over a year old, but the principle remains the same.
Hi (Name withheld), let's take the recent trend as defined on a 4hr chart - yes, this recent trend makes it easy to highlight, and yes, I was happy to see James Chen mention the Guppy profile. This is to answer your question of how I enter into a trend based on a 4hr chart. I will trade slightly differently on a 1hr, or daily, and must state, again, I try to swing trade – if possible, and not everybody’s cup of tea – but do day trade, and even session trade when I feel like it. But as you say, once in a nice swing, the stress is far less, and as you remember from a previous post of mine, I can bugger off to the garden with a glass of Rose.
The red MAs are considered longer-term investors, the blue, shorter-term investors. Red takes primacy on any trend identification. Increasing separation between the red MAs in the same direction indicate increasing strength in the trend. Compression can represent consolidation, profit taking, trend change indication. As can be seen, the primacy in this chart is up. I regard the blue MAs as day trader activity, and as can be seen, there is far more fluctuation in direction; with them either agreeing with long term investors, or taking profit/probing for market weakness.
If we look at where price ended this week, we can see the red MAs are twisting south, and this has been occurring over the past few days. I will not be convinced of a major trend change until these red MAs align with the aqua-coloured MA sitting atop, and the remaining red MAs begin to separate out in a southerly direction. As can be seen by the rectangular areas marked 1 and 2, the red MA compressions were false indications of trend change, and after some chop, PA resumed its previous trend. The resolution of the aqua MA at this stage indicated so, and so scalps to the downside on a lower time frame chart were in order for those that wished to take positions contrary to the 4hr trend… a trend that is supported by the daily trend, which was up during this period.
There are many ways to trade a trend on the Guppy, and as some here realize, I like to give myself targets based on Fibonacci studies of swings in PA. I do take note of previous SR regions, and TLs and some patterns, but feel that an awful lot of trading desks around the world use Fibonacci to aim for, and so ask why I have to try and produce some sort of proprietary indicator. I am not saying that they are not useful, but one has to ask how the professionals managed before now. My answer would be; on probability studies based on mathematical principals, and previous zones of PA.
To answer your question about when I enter. Well, the safest for me, on this chart, would be at point 3. Yes, I took a short at point 4, and was stopped out, but, hey ho, that’s how it goes sometimes. I try to put my stops beyond the aqua MA – thus giving me breathing space. Yes, it may seem a lot of drawdown, and not to everyone’s taste, but my MM prevents catastrophe.
On the chart presented, there were many opportunities to enter, or take additional entries, and these are all based on watching PA drop into a rising, separating red MA profile, and then to place orders, or take the manual, based on risk appetite. I try to allow price to move into the red MAs, and then place an entry just above the fastest of the red MAs. Admittedly, I will sometimes move down in TF to get better entries, and can discuss this with you another time, should you wish. Areas marked 5, 6, 7, 8, and 10 were good, and depending upon how many pips you wanted, and what your accepted drawdown would be, you could have lowered you SL beyond the aqua MA – I admit to doing this as I aim for fib levels once the trend is confirmed.
Area 9 was a bummer, but can be explained by PA hitting significant fib confluences.
Area 11 didn’t really pierce the red MAs, and so as soon as PA shot back into the blue MAs, one could be confident that the trend was firmly intact.
Area 12 could have provided for entry, but as a major expansion had been hit – second chart - and profit would undoubtedly be taken, an entry here was speculative at best, in spite of the good separation on the red MAs. Hence why I use Fibonacci studies, as strong trends cannot last forever.
Charts 3 and 4 provide for a closer look at PA around the FE levels.
I am not in any trade now, and am mindful of how price has retreated back to the 38.2 FE from the 50 FE. In addition to this, the time of year would suggest that traders are apprehensive of what will happen come month end/September, and so perhaps a period of oscillation between these two FE levels will ensue – thus, I will probably not position trade, but day/session trade, until convinced that Cable is resuming a trend. Now that I have said that, price will probably drop to the 1.50 level without a chance for me to enter, such is her respect for my wishes.
If the drawdown is too much for the entries mentioned in this post, drop down to a 1hr chart and follow the same principles. It’s surprising how quickly one can accumulate the 50 or 100 pip daily target needed to satisfy the pip count.
Hope this helps…
Hi ???, this is how I responded the first time I was asked the question. Of course, the chart is now a little old - erm, over a year old, but the principle remains the same.
Hi (Name withheld), let's take the recent trend as defined on a 4hr chart - yes, this recent trend makes it easy to highlight, and yes, I was happy to see James Chen mention the Guppy profile. This is to answer your question of how I enter into a trend based on a 4hr chart. I will trade slightly differently on a 1hr, or daily, and must state, again, I try to swing trade – if possible, and not everybody’s cup of tea – but do day trade, and even session trade when I feel like it. But as you say, once in a nice swing, the stress is far less, and as you remember from a previous post of mine, I can bugger off to the garden with a glass of Rose.
The red MAs are considered longer-term investors, the blue, shorter-term investors. Red takes primacy on any trend identification. Increasing separation between the red MAs in the same direction indicate increasing strength in the trend. Compression can represent consolidation, profit taking, trend change indication. As can be seen, the primacy in this chart is up. I regard the blue MAs as day trader activity, and as can be seen, there is far more fluctuation in direction; with them either agreeing with long term investors, or taking profit/probing for market weakness.
If we look at where price ended this week, we can see the red MAs are twisting south, and this has been occurring over the past few days. I will not be convinced of a major trend change until these red MAs align with the aqua-coloured MA sitting atop, and the remaining red MAs begin to separate out in a southerly direction. As can be seen by the rectangular areas marked 1 and 2, the red MA compressions were false indications of trend change, and after some chop, PA resumed its previous trend. The resolution of the aqua MA at this stage indicated so, and so scalps to the downside on a lower time frame chart were in order for those that wished to take positions contrary to the 4hr trend… a trend that is supported by the daily trend, which was up during this period.
There are many ways to trade a trend on the Guppy, and as some here realize, I like to give myself targets based on Fibonacci studies of swings in PA. I do take note of previous SR regions, and TLs and some patterns, but feel that an awful lot of trading desks around the world use Fibonacci to aim for, and so ask why I have to try and produce some sort of proprietary indicator. I am not saying that they are not useful, but one has to ask how the professionals managed before now. My answer would be; on probability studies based on mathematical principals, and previous zones of PA.
To answer your question about when I enter. Well, the safest for me, on this chart, would be at point 3. Yes, I took a short at point 4, and was stopped out, but, hey ho, that’s how it goes sometimes. I try to put my stops beyond the aqua MA – thus giving me breathing space. Yes, it may seem a lot of drawdown, and not to everyone’s taste, but my MM prevents catastrophe.
On the chart presented, there were many opportunities to enter, or take additional entries, and these are all based on watching PA drop into a rising, separating red MA profile, and then to place orders, or take the manual, based on risk appetite. I try to allow price to move into the red MAs, and then place an entry just above the fastest of the red MAs. Admittedly, I will sometimes move down in TF to get better entries, and can discuss this with you another time, should you wish. Areas marked 5, 6, 7, 8, and 10 were good, and depending upon how many pips you wanted, and what your accepted drawdown would be, you could have lowered you SL beyond the aqua MA – I admit to doing this as I aim for fib levels once the trend is confirmed.
Area 9 was a bummer, but can be explained by PA hitting significant fib confluences.
Area 11 didn’t really pierce the red MAs, and so as soon as PA shot back into the blue MAs, one could be confident that the trend was firmly intact.
Area 12 could have provided for entry, but as a major expansion had been hit – second chart - and profit would undoubtedly be taken, an entry here was speculative at best, in spite of the good separation on the red MAs. Hence why I use Fibonacci studies, as strong trends cannot last forever.
Charts 3 and 4 provide for a closer look at PA around the FE levels.
I am not in any trade now, and am mindful of how price has retreated back to the 38.2 FE from the 50 FE. In addition to this, the time of year would suggest that traders are apprehensive of what will happen come month end/September, and so perhaps a period of oscillation between these two FE levels will ensue – thus, I will probably not position trade, but day/session trade, until convinced that Cable is resuming a trend. Now that I have said that, price will probably drop to the 1.50 level without a chance for me to enter, such is her respect for my wishes.
If the drawdown is too much for the entries mentioned in this post, drop down to a 1hr chart and follow the same principles. It’s surprising how quickly one can accumulate the 50 or 100 pip daily target needed to satisfy the pip count.
Hope this helps…
Attached Image(s) (click to enlarge)
Author of: For Pip's Sake! (Available at Amazon... :-) )
you're a legend .
.
