Time frame Co-relation

Hello All,
This is my first thread on the forum. Here, I would like to share a specific method of trading which mainly deals with time frame co-relation (TF Co-rl). It has been a result of studying different trading systems and analyzing them and finally clubbing the useful elements together.

Rules are simple. Discuss and share ideas pertaining to the topic, no negative criticism. Have fun and try making green pips.

Regards, M.

I use very prominent and simple to follow indicators. MACD, Stochastics, 5-15 ma's, Heiken Ashi (a little different one) and Pivots & SR.

As regards to the pivots, there is daily pivot but no daily SR level. Reason being the daily SR I don't work with personally as they seem to be too small a price point on the larger picture which I try to analyse. Instead, I find the weekly and monthly pivots and SR levels which the price obeys much better than daily SR. Also in the indicator are Hi & Lo levels of the day, week and month.

The Heiken Ashi indi is also a little different in that it has two distinct colors for identifying trends but the candle pattern is same as the normal one. Thus I get to see the normal price and also what trend the price is following on various TF's.

The MACD is normal except it's locked to a certain TF (4H). Stochastics is plotted in the same window but shows only OB / OS levels. Also there is a digital MACD. We'll get to the specific use of it later.

Despite it all, I've attempted to have what I need and keep the charts as clean as possible 'coz the most important aspect to chart analysis is still PA (Price Action). I have not added a couple more indi's as to keep confusion away. I'll do it as and when required. The template for the same is attached too and should look like the attached pic when loaded.

More in Next. Regards, M.

Now we come to the crux of the matter. For the discussion from this point on, I assume we are on the same page, i.e the template that I have provided.

Something very basic the I have learnt through the course of my study, practice and trading is that there are TWO CRITICAL FUNDAMENTALS of chart analysis for the Forex markets. 1. Time Frame Co-relation and 2. Currency Co-relation. The first I will try to discuss here whereas for the second, I recommend following a particular thread by a fellow boarder namely Capito - http://www.forexfactory.com/showthread.php?t=317893

I have tried using 4 different methods of Currency Co-relation but the thread by Capito explains the best of the four methods that I have used. Excellent method, must read and must use kind. Please do your self a favor.

The setup that I use for finding a trade consists of three main TF's, 4H, 1H & 15M. Some of you would say that the 15M TF is not what they are comfortable with. No problem. Just move up the order , i.e 1D, 4H & 1H (I don't recommend moving down this TF order but rather moving up is ok and as for myself, I find this order optimal). This is a matter of personal choice and see what suits one's self. The main principal is the crux of it, TF's are yours to choose.

The guiding principle here is the 4H MACD (MACD of the highest TF) and co-relating it with 15M MA's ( Moving averages of the lowest TF). Thus in essence look for a cross of the MA's which corresponds to the MACD and keep a SL for the trade a few pips away from the previous days Hi or Lo, as the case may be and when the trade is fruitful, just keep adjusting the SL to the previous day's Hi / Lo until stopped out. An important point here ( as advocated by Capito) is to look for these setups at the beganing of the month and following them with paitance.

That in itself is a good trading system if one is willing to study, practice and follow it. There are a few tweaks to it but I'll keep it for later. More in the next post.

Regards, M.

I decided to try the system on my demo account and as you can see from the picture i have a runing trade wich is profit.I belive that is a good system to follow

Good Trade there.

I see U took the trade after a break of Weekly Support 3. The actual signal was yesterday right about London open time. One just had to keep a decent SL a few pips behind the day's high.

If U were to follow the currency co-relation pattern also, you would see that the trade is long short from some time now, that's about the beginning of the month. So all you had to do was use the Ccy Co-rl with TF Co-rl and you are sitting easy with good pips.

Regards, M.

Is it possible for you to put all indicator in zip file?
Your kind help is always appricited.

Dilip

Check Post #2 bottom.

Could you post it as a .zip file rather than .rar? For some reason I'm unable to extract this even though I thought I had the correct software to unzip rar files

Here U go.

Thank you

Hello.

Just about time for a perfect sell. Look closely at the picture. The cross of the 15M MA's co-insided with the FXI Scalper, (A grey down arrow at the 15m MA's cross). This is another indicator I left out. Though the best analysis for this indi is on 1H or higher, it just add's to the picture of a sell signal, though I would suggest not to use it on the 15M tf. For further reading on this indi, please refer to a thread by Kibed83 - http://www.forexfactory.com/showthread.php?t=306354.

There is no point in using any indicator or executing a trade if one is not confident of it. This is a very popular sentiment I have come across when studying methods of prominent and consistent traders.

Also look at the pivot indicator (PAM - Pivots And More). Yesterday's high co-insides with last week's high. The more different lines converge, the stronger the area of SnR (Support & Resistance). Notice also the pattern of PA (I can't stress any less the importance of this). First it goes for an attempt to break the last weeks high and it fails there. Then it comes down and every thing converges at about the same time, the 15M MA's cross, the FXI arrow appears and it also breaks the daily pivot there. It then goes on to break even yesterday's low also. And while all this is happening in the 15M tf, the MACD of 4H come in negative territory. That's the Time Frame Co-relation in perfect example.

One might say that there are other pairs too that are showing good time frame co-relation. I agree. A couple of Yen pairs are doing it since late yesterday. But this system is very manual the way I do it. And to catch all that are in good trade zone is something I'm still catching up with, after all, I'm still evolving in my trading. Just like Big E recommends, find the perfect setup's to trade. If one is doubtful of a trade or misses it on timing, move ahead and look for another one that might be coming along the way. Thus I caught it at just about the perfect time here. Keep in mind that all this time, we are only discussing the entry points. Exits are a little different story and we'll get to it later.

Another word I wold like to put. My trade is at 1.30031. The sell from CICR thread (Which I have a subscription for, for their paid service) came about 3 minutes after I put this trade, at 1.29973. Just goes to show that the TF Co-rl and Ccy Co-rl are in fact very powerful elements of Forex Chart Trading.

More in the next. Regards, M.

PS. Ignore the picture right below. Consider the one in the next post.

This is the correct picture for reference to the earlier post.
M.

Similar trade example as the one taken earlier. All conditions satisfying. Only I am very late in the trade. As i mentioned earlier that I trade this manually, I was not present at the screen at the exact time of sell. The correct sell would be about the time when price broke the daily and weekly pivots, i,e the long term trend is in sell and when price pulled back and made yesterdays high, after that it went on to break the two pivots and also made a cross on 1H MA.

And now it also broke yest's low, means it could not sustain the pullback and the down trend continues as can be seen by the cross of the 4H MACD. While I'm still writing this, there is a good sell strength come into it.

As per the earlier given trade example, the first target of WP (weekly Pivot) is achieved and now that too seems to be breaking.

Regards, M.

Hello,
The EU trade example given yesterday and the ECad before that are worth checking for. Reason being that it builds confidence when the trade goes your way. Have adjusted SL for the two as I still have then open. The ECad is looking to break the monthly low too so it looks promising to carry it.

Here the personal skills of the trader are tested if one is looking to create and carry long term trades. The specific skills that I'm talking about are discipline and patience, and if one can develop such skill sets, one is in a position to create and carry trades which last sometimes like maybe a month or even longer and they are the best trades as they are stress free. Just looking at the two trades mentioned above, the sell momentum is building while I'm writing this in the European session. Having a good run with them.

Also to mention here is that I have missed some very good trades going into yen pairs. That's because of the conservative money management approach I have. That (MM) is another aspect of trading and I'm not too good at it so I keep a simple and conservative approach to it. One should study this very important aspect of trading. I have blown one account not because of bad trade entries but bad money management. That's the reason I have missed or rather not taken Yen trades.

Now I would like to draw attention to another aspect of chart trading while practising TF co-relation. And that's DIVERGENCE. BY far, the most powerful tool of chart trading is divergence. Practice, practice and more practice will get you there. It's a different thing to find divergence in hind sight and a different ball game all together to catch it and play it from the right side of your chart. Please refer to Babypips school of pipsyology for the definition of it and try finding different instance where divergence occurs and how price behaved after that.

Coming back to trading divergence, first understand as to what time frame you want to trade it on, then go a time frame or two lower and see where it occurs. But here's the catch, it could take some time to materialise so don't just jump on it with the first hint of divergence. if you suspect a divergence to be occurring, do normal trading as one would with TF-co-rel, then when the divergence is confirmed on the higher time frame, look for a valid signal to enter on the lower TF. Here the advantage of using divergence is the lot size, IMO. Divergence is a leading indicator, thus it will get you ready for the move early but don't get ahead of it or it will burn you out. I have been dealt this blow a couple of time thus I have learnt not to go ahead of it and wait for it to clearly play out on the charts.

So now you have identified divergence playing out on the higher time frame and you have switched to a lower time frame looking for a valid signal. Now when you get one, you should try to play it with a higher lot size. I am giving a trade example of Usd Cad pair trying to play out divergence. Look how the price is trying to hit the same price level if not higher, again and again, and then look at MACD of the higher tf (4H) going down. A classic example here. Notice how the divergence is still trying to only form here and has not finished doing so, i.e it is still a work in progress, unconfirmed as yet. Thus I have not gone ahead with the trade but will be on the side lines waiting patiently for it to finish on the 4H tf. When done, I will go down to may be 1H of 15M and look for the right entry point. At least I have a pair identified for a trade setup to occur.

The catch that I was talking about would occur if the price keeps going higher and macd goes above and forms a new higher high. That would not count as divergence. What would instead count as a divergence would be if price retraces from this level and take macd down with it too. A small risk trade here could be to take a dual hedge position ( A buy and a sell both at the same price level) and carry it to see how price behaves. If it forms a correct divergence, close a counter trend order and increase your position in the direction of the trade. Otherwise, wait for the whole divergence to play out and then pick an entry trade.

Hope this small brief is of some value to traders. I'm trying to show different scenarios where the TF Co- rel works well and incorporating small tweeks here and there. Post queries if you have any.

Regards, M.

This is an intresting and insightful article that was posted some time back. Recommend all to read it. http://trading-u.com/blog/2011/12/th...ss-stage-five/

BTW, the Uas Cad pair has not yet meterialised for divergence. Good call not to take a position there. Will & watch.

Regards, M.

Following the rules,i got stopt at +48 pips