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Stairstep trading using the SQ dynamic indicator

  • #1
  • First Post: Edited 8:27pm Apr 7, 2012 5:56pm | Edited 8:27pm
Since the other thread was successfully hijacked by Favorite and Forex Hard and became a rant fest I am now forced to open this thread.



This thread is specifically for the development of a tradeable strategy using the SQ dynamic box indicator. The purpose of this thread is to develop rules of entry and exit as well as default settings for the indicator. It is asked that discussions be limited to these parameters.

If you cannot be courteous then please dont post I am not here to argue but learn and teach and grow. Thanks in advance.


Given that it is the easter holiday for many and the markets were thin the last couple of days set ups may be flawed this coming Monday. I will be looking to get long on GBP/USD. The reason I chose this pair will follow.

The settings I will test for the indicator are as follows:

22/15/30/true These are the default settings. Lets see how they work.

Regardless of the system one is trading it is always a good idea to do some analysis first. Weekends are great for doing this since you can take your time.

Starting with a 4 hour chart gives you a good sense of what has been going on so we will start there. Naked trading doesnt mean we dont look at other charts. The more info you have on what price is doing and why it did what it did the better so lets start with the 4 hr GBP/USD


There was a pretty big sell off towards the end of the week. and then price reversed so lets see why.

Looking at the 4 hour chart we can see that there was horizontal support at the big figure of 1.5800. There are multiple touches across this line both as support or resitance. TA tells us that if it was once resitance it can become support and vice versa. So it makes sense that a bounce occurred at this point from the sell off. Is there anything else that might build a case for me to look for a long on GBP/USD?

The indicator we will be using was not created by me it was created by Squalou it is a great indicator but does not plot the same on every pair with the same settings
  • #2
  • Apr 7, 2012 5:57pm Apr 7, 2012 5:57pm
Here is teh horizontal suppport can you see anything else that makes a long a great trade to look for this upcoming week?
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  • #3
  • Edited 6:02pm Apr 7, 2012 6:00pm | Edited 6:02pm
Here we see a nice upward trendline that was respected also So we have 2 forms of support converging
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  • #4
  • Apr 7, 2012 6:10pm Apr 7, 2012 6:10pm
Ok so we have a reason to validate looking to go long this week since the 4hr chart showed some good logic for the bounce in thin markets. Now lets look at the 15 minute charts and the Stairs of the Stair step system.


Yes we will use the SQ box indicator but it doesnt always find the channels and while a great indi its also good to know how to spot CZ's on your own.

Here is the first chart and box. There was a nice CZ that formed of roughly 15 pips. TA tells us that if this breaks we should expect at least a 15 pip run.
Attached Image (click to enlarge)
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  • #5
  • Apr 7, 2012 6:12pm Apr 7, 2012 6:12pm
Do channels have to be horisontal?...and not reflect lines of the extremes of the congestion zones?
  • #6
  • Apr 7, 2012 6:17pm Apr 7, 2012 6:17pm
Here is the second step. I am using a simple process to find my steps. I simply want a double, or triple top or bottom. If you are not clear on that please let me know I will try and help. The more touches the better.

In this chart the channel break out exceeded 15 pips and then settled and consolidated exactly 15 pips above the last break a very nice step indeed.

The next step up is also 16 pips. Pretty uniform so far
Attached Image (click to enlarge)
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  • #7
  • Apr 7, 2012 6:27pm Apr 7, 2012 6:27pm
Quoting Pavaka
Do channels have to be horisontal?...and not reflect lines of the extremes of the congestion zones?

No channels can also be diagonal I will try and draw some of those as well. I am not clear as to what you mean by extremes.

Simply put a CZ is a resting spot. A spot where the market pauses before its next move. Think of climbing up a mountain. It is done in steps to avoid exhaustion. Price moves the same way as a climber does. If a climber climbs to fast he will tire and not be able to get used to the change in altitude. He will flame out and fail.

If price shoots up to fast people will not see it as a value and it will quickly flame out and fall to a point where it is considered a value. The same holds true for coming down the mountain. Do it to fast and you fall to your death and are being pulled out by a rescue crew. Do it slow resting on shelfs you survive.

Price does exactly the same thing so we look for a place of rest and contemplation. or what is know as a consolidation zone.

I hope that helps.
  • #8
  • Apr 7, 2012 6:33pm Apr 7, 2012 6:33pm
Quoting calstar
No channels can also be diagonal I will try and draw some of those as well. I am not clear as to what you mean by extremes.

Simply put a CZ is a resting spot. A spot where the market pauses before its next move. Think of climbing up a mountain. It is done in steps to avoid exhaustion. Price moves the same way as a climber does. If a climber climbs to fast he will tire and not be able to get used to the change in altitude. He will flame out and fail.

If price shoots up to fast people will not see it as a value and it will quickly flame...
I am all attention...most probably will have few questions later
  • #9
  • Apr 7, 2012 6:44pm Apr 7, 2012 6:44pm
Here we see a 3rd step and one we want to watch on monday. A break here would test the high from the previous day. Can you see the left side of the chart how there was support at the area that is now resitance. And price is forming a CZ right below.


So if we were playing the break of the previous channel we would have wanted to target 16 pips (the channel distance) and if it went higher closed on a test of that former support area
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  • #10
  • Apr 7, 2012 6:45pm Apr 7, 2012 6:45pm
Quoting bluesteele
Good Luck with the thread Calstar.
Thanks feel free to contribute It takes a village to raise a child and make a trader.
  • #11
  • Apr 7, 2012 6:52pm Apr 7, 2012 6:52pm
Here we can see the steps clearly with the horizontal lines removed and the CZ as resitance
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  • #12
  • Apr 7, 2012 6:57pm Apr 7, 2012 6:57pm
Here we se eteh chart with the SQ indi attached using the settings discussedat the start of the thread 22/15/30/true.

As you can see it did a great job of picking CZ but hasnt drawn the last one yet. So knowing how to do it yourself can prove to be a great advantage.
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  • #13
  • Apr 7, 2012 7:26pm Apr 7, 2012 7:26pm
So now before I take off for the night lets look at how we may have managed the trade if we had taken the first breakout.


If one was to use a trailing stop indi it could create some doubt abd when in doubt one might get out. Look at this chart using this indi you may have exited early and then reentered leaving pips on the table and risking the spread.
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  • #14
  • Edited 7:51pm Apr 7, 2012 7:39pm | Edited 7:51pm
One way to avoid using indicators for trailing stops is to use Fibonnacci.

It does 2 things
1) it makes you think before you act
2) It tells you where price might go to and since we are using PA to trade we should use it tomange the trade as well.


What I have done here is draw a fib from teh low before teh CZ to the high of the break. This gives me a point of refernce for a retrace. If I miss the original break I can also reneter off a Fib. We all know the strongest fibs are 38 and 61 so I like to set stops at or below the 50 on short term moves when trying to catch a runner. In this case seting it to the 50 would have stopped us at even so no harm no foul if we had set it at the 61.8 we would have been in the red no reason to risk money on a profitable trade you will generally just make yourself mad and end up trying to chase the loss down.

So thats it for today up next money management strategies
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  • #15
  • Apr 7, 2012 7:45pm Apr 7, 2012 7:45pm
Quoting calstar
One way to avoid using indicators for trailing stops is to use Fibonnacci.

It does 2 things
1) it makes you think before you act
2) It tells you where price might go to and since we are using PA to trade we should use it tomange the trade as well.


What I have done here is draw a fib from teh low before teh CZ to the high of the break. This gives me a point of refernce for a retrace. If Imiss the original break I can also reneter of a Fib. We all know the strongest fibs are 38 and 61 so I like to set stops at or below the 50 on short...
Easy EA provides much better trailing stops...for me...but it's personal preference
  • #16
  • Apr 7, 2012 8:03pm Apr 7, 2012 8:03pm
Quoting forexhard
Really? I said that? I said that I invented Fibs?

No. What I'm saying is that you don't have a single fucking original thought in your head, and that all you're doing is trying to get your pound of flesh because I bounced you out of my thread on your ass. THAT'S what I'm saying.

There. NOW do we understand each other?
Forex Consolidation Trading - Trade The Calm, Profit From The Storm




August 04 2010 | Filed Under » Active Trading, Day Trading, Forex, Forex Technical Analysis, Forex Trading Strategies, Forex-Intermediate, Swing Trading


Much like the first dynamite compound invented by Swedish chemist and engineer Alfred Nobel, consolidation periods and patterns in the currency markets can explode, leading to great profit opportunities for the FX trader. Sometimes suggestive of indecision, consolidation periods are great for capturing potential because the burst of directional action that follows can last for an extended period.

Understanding and trading on consolidation patterns will give the currency trader in the know two "edges". First, the trader can hold his or her initial position for a shorter amount of time, thus minimizing the risk of holding positions in the case of higher rollover interest. Second, the profit potential from such a position can be big, as long as the trader follows strict, disciplined money management rules. Without money management, the trader might as well be playing with fire.



Taken from investopedia link ommitted as not to spam

So did you write this article as well. Also what exactly is your MM strategy do you have one or is it " there are no false breakouts only trades that hit your stop before your take profit"

Brillant

Side note does anyone no how I can ban this guy he is not contributing and I dont know how to do it.
  • #17
  • Apr 7, 2012 8:09pm Apr 7, 2012 8:09pm
So do you also run Investopedia because these definitons seem alot like what you spent 5 years of your life doing

I think the key word in the definition is "consolidation" I dont know I could be wrong.

Definition of 'Sideways Trend'

Describes the horizontal price movement that occurs when the forces of supply and demand are nearly equal. A sideways trend is often regarded as a period of consolidation before the price continues in the direction of the previous move.

A sideways price trend is also commonly known as a "horizontal trend". http://i.investopedia.com/assets_v2/img/icon_inv.png
Investopedia explains 'Sideways Trend'

Sideways trend is generally a result of the price traveling between strong levels of support and resistance. It is not uncommon to see a horizontal trend dominate the price action of a specific asset for a prolonged period before starting a move higher or lower. Brief consolidation is often needed during large price runs, as it is nearly impossible for such large price moves to sustain themselves over the longer term.

Read more:
Link ommitted so not to spam
  • #18
  • Apr 7, 2012 8:14pm Apr 7, 2012 8:14pm
I gotta run see you all on MOnday
  • #19
  • Apr 8, 2012 4:15am Apr 8, 2012 4:15am
Hi Calstar - There are quite a few posts in the first half of the Stairsteps thread which detail better settings for the indicator than the defaults. Your time will be better spent searching for those rather than starting from scratch.

It's good to see someone picking up the SQ indicator and trying to develop a strategy with it. I always thought the original thread had a huge amount of potential. Unfortunately, the OP didn't seem to understand that there was no real strategy or money management in the thread and didn't seem interested in developing one. When I tried to point this out, I got a lot of abuse and ended up descending to FH's level. Looking back at the thread this morning, I'm sad to say that it just looks like a big ego-fest. Sad that I wasted so much time on it when, without a strategy, it's nothing more than someone saying, "Hey! After price consolidates, it often moves a lot...or doesn't!" LOL

Having said that, there is an absolute ton of potential to develop a real strategy, so I'll stop by and see if I can help. A good starting point could be to integrate the CZs into another strategy. That way, they can act as a 'heads-up'. I like how you have focused on pure price action trading - that's most likely the best way forward. Mark up S&R lines and watch the reaction to the CZs.

I've had some good results from the Symphonie system and can recommend the money management strategy. It's simple but well thought out. Maybe integrate that to create a full strategy? I'll have a ponder and get back when I have more time.

Finally, I'd strongly suggest ignoring and/or banning FH if you haven't already. He won't add anything constructive to this thread and his earlier posts on here are worthy of a ban from FF.

Stay positive and happy trading,

PB
  • #20
  • Apr 8, 2012 4:55am Apr 8, 2012 4:55am
Quoting pixelboy
Hi Calstar - There are quite a few posts in the first half of the Stairsteps thread which detail better settings for the indicator than the defaults. Your time will be better spent searching for those rather than starting from scratch.

It's good to see someone picking up the SQ indicator and trying to develop a strategy with it. I always thought the original thread had a huge amount of potential. Unfortunately, the OP didn't seem to understand that there was no real strategy or money management in the thread and didn't seem interested in developing...
Good post PB!

I think this thread has the potential to become much better then original Stairsteps because there are few more intelligent people here with intention to actually develope the system instead of developing the ego like in FH case.

Trading the breakout after consolidations is not such a bad idea in itself but it needs to take into account major S/R zones and trendlines. Buying into a breakout just under the major resistance is not a good idea. FH fails miserably in many ways to adress the key problems of his version of the system. I hope his stupid thread will die soon and people should finally focus on developing this system further with proper tools and money managment and actually sharing the knowledge not keeping it for themself.
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