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"Ratios & Harmonics: a Different Way to Trade." Summary 37 replies

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Ratios & Harmonics: a Different Way to Trade

  • #1,801
  • Jan 21, 2013 12:34pm Jan 21, 2013 12:34pm
Quoting Starry
For example, would this ABCD be invalid because it found support before it reached D? And if you had placed the sl 10 pips below 161.8 , you wouldnt have gotten stopped out (i guess this is a spike on a larger timeframe), but would you need to readjust the 38.2% breakeven level, since it went down far below the 127.2%?

Attachment
Look at my chart and tell me what you see based on what I drew.
Attached Image (click to enlarge)
Click to Enlarge Name: $GBPJPY (1 Min) 1_21_2013.jpg Size: 87 KB
If you fail to plan, you plan to fail.
  • #1,802
  • Jan 21, 2013 12:38pm Jan 21, 2013 12:38pm
Quoting Starry
Ive attached a chart. It seems i didn't extend the 100% down to the low of the swing that didn't reach 38%. Also, i placed the equal distant swing at the very top, while you placed it at the doji. In addition, it also closed below the 61.8% retracement, so could've been an abcd trade.

So are you saying you wouldn't have traded this because it only got to the 23% harmonic?

Also, i dont know how to trade general confluence (anything other than abcd and gartley). do you just put the sl 2 pips below the bottom of the prz (since its 1 minute), or...
I would have traded point D and the stoploss is not a on patterns have the rules outlined but in the absence of a pattern or on a regular trade that you take the stop goes where your analys is wrong. Basically what you are saying is that if price get here then I know my analysis is incorrect and I no longewr have any reasons to stay in this trade. that's where a stop should be placed.
If you fail to plan, you plan to fail.
  • #1,803
  • Edited 1:06pm Jan 21, 2013 12:50pm | Edited 1:06pm
Quoting Mr. Pip
I would have traded point D and the stoploss is not a on patterns have the rules outlined but in the absence of a pattern or on a regular trade that you take the stop goes where your analys is wrong. Basically what you are saying is that if price get here then I know my analysis is incorrect and I no longewr have any reasons to stay in this trade. that's where a stop should be placed.
K, so the analysis was based on the completion of an AB = CD into the 61.8% zone. The analysis would be wrong if it went to the 78.6% line, because that would mean the AB = CD wasnt the reversal signal. 2 pips below the 78.6 is 141.94.

The 78.6 line is the next area of harmonic support, so the first harmonic line below our confluence is our sl. Then again if you used that logic with the aggressive ABC buy, you wouldnt place the sl a few pips below A, so maybe thats a bad general rule.

Where would you have placed the sl?

Attached Image (click to enlarge)
Click to Enlarge Name: 1_21_gbpjpy_place_that_stop.jpg Size: 146 KB
  • #1,804
  • Jan 21, 2013 1:02pm Jan 21, 2013 1:02pm
Quoting Mr. Pip
Look at my chart and tell me what you see based on what I drew.
I see an area of confluence based on the 138 extension of AB, the displaced AB leg, and the 161.8% exhaustion of the previous swing before it went down.
Since it broke the support, the orderflow was down. then it bounced off of it, so move to breakeven when it bounces off. Or could you hav emoved to breakeven because it pierced the 38.2% of the final leg?

Also, where does the stop go when its displaced like this. 2 pips below 161.8% extension of BC @141.84, since it is sort of like AB and the displaced leg is like CD? Im not sure where our analysis would be incorrect here. Clearly we want a bounce off of the area of confluence, and normally i would think that when trading off of support like confluence you would simply put it a few pips below the confluence. Perhaps, to prevent getting spiked out, we could put it at the next extension below the confluence, the 161.8 line @ 141.96.I think that would be safe.

Thank you very much for taking the time to share, much appreciated
Attached Image (click to enlarge)
Click to Enlarge Name: 1_21_gbpjpy_abcd_again_orderflow.jpg Size: 151 KB
  • #1,805
  • Jan 21, 2013 1:14pm Jan 21, 2013 1:14pm
example of AB=CD
GU H4
Attached Image (click to enlarge)
Click to Enlarge Name: gu.gif Size: 30 KB
In trading, you have to be defensive and aggressive at the same time
  • #1,806
  • Jan 21, 2013 1:14pm Jan 21, 2013 1:14pm
a deep gartley winner

http://s2.postimage.org/ihhad07hh/gpyyen.jpg (http://postimage.org/image/ihhad07hh/)
  • #1,807
  • Jan 21, 2013 1:23pm Jan 21, 2013 1:23pm
Quoting Davit
example of AB=CD
GU H4
Actually, the long ABCD prior to this was even better (your point A = prior move's point D). The problem with a AB=CD that is shallow is the risk:reward. Where do you set the stop. Either must be arbitary or based on other information (confluence, structure, prior patterns) which necessitates careful R:R characterization before trading.

Any way you look at it, that is a great chart!
  • #1,808
  • Jan 21, 2013 1:23pm Jan 21, 2013 1:23pm
Mr. Pip,
I may have spotted a bearish butterfly a few days ago and I have set all the parameters except the ext levels and BE and TP. If the limit order extends beyond X where would the ratio drawn on the pattern to BE and TP? Is it XA leg similar to a gartley pattern? Also would the fib ext always be drawn on a AB leg? Any help would be great. I starting to get the hang of this I think? Do you have criteria sheet to go by. I have the reference guide and it has helped tremendously.
Empower Your Mind
  • #1,809
  • Jan 21, 2013 1:23pm Jan 21, 2013 1:23pm
Quoting Mr. Pip
In trading we don't assume anything. The decisions have to be made based on facts. Build your case, find the confluence and the path of least resistance. Price will follow that path more often then not.
k. i guess is till need to learn where the path of least resistance from the prz is, price action as price approaches and enteres prz will help, though in the case where it plunges to the PRZ and bounces off sharply , you would have to probably use general s/r. Where to enter, midway in PRZ? hmmm
  • #1,810
  • Jan 21, 2013 1:25pm Jan 21, 2013 1:25pm
Quoting cuchuflito
try OANDA, no lots limitation, just units...you can adjust your risk size to the cent....I test strategies, literally risking (exactly), 1 Euro...when I feel comfortable, I go back to my usual 1% risk of the account...again exactly...
No matter if your account is a 100 bucks or a million...same proportions.
After that, I can go to my excell and get my RR value...exactly...

By the way, I´m by no means a "friend " of OANDA or any other broker...they will happily run your stops like most of them.
Other sweet practices: put a TP order, it runs...
yeah, but i really like how traders way has hihgh leverage and ability to hedge, even if its not regulated right now, if i trade 1 minute, i can trade with the min lot size, 0.01, with a risk of 1% per trade. 2% per trade is also fine. so as long as i start winning
  • #1,811
  • Jan 21, 2013 1:28pm Jan 21, 2013 1:28pm
Quoting Starry
K, so the analysis was based on the completion of an AB = CD into the 61.8% zone. The analysis would be wrong if it went to the 78.6% line, because that would mean the AB = CD wasnt the reversal signal. 2 pips below the 78.6 is 141.94.

The 78.6 line is the next area of harmonic support, so the first harmonic line below our confluence is our sl. Then again if you used that logic with the aggressive ABC buy, you wouldnt place the sl a few pips below A, so maybe thats a bad general rule.

Where would you have placed the sl?

Attachment ...
How would that be wrong? We are trading a correction of point D it may only be a correction and not a full reversal. We just do not know this when a trade is taken and in this case you would be refering to 78.6 resistance right?
If you fail to plan, you plan to fail.
  • #1,812
  • Edited 1:53pm Jan 21, 2013 1:31pm | Edited 1:53pm
Quoting Mr. Pip
How would that be wrong? We are trading a correction of point D it may only be a correction and not a full reversal. We just do not know this when a trade is taken and in this case you would be refering to 78.6 resistance right?
right, i was talking about the 78.6 @ 141.96 (the previous swing, not the ab=cd were trading). Since its a correction of point D, it should go to the 61.8% of AD., break even at 38.2. If it isn't a correction, it will probably go below the 78.6 line of the previous swing? So put a stop below that.

edit: i mean, i know it could go below the 78.6 and then correct, but we're trading a correction based on our small ab = cd.


edit 2: for an aggressive abc, we are trading a a completion of an ab = cd if its with orderflow. Since we have no other area of confluence (no smaller harmonics which go into the 61.8% zone), we place the sl below the A point, because we're trading the completion of an ab = cd, and an ab = cd is valid until the c goes below the A. Putting the sl 10 pips below gives us time to get out based on price action.

If we were trading an abcd instead (in the sense that it cant go below the 61.8 - 78.6 zone, because there is another prz in that zone), we would place the stop 10 pips or so below the prz in the 61.8 zone, as long as our RR is right. So, in the case that we have a harmonic ab = cd going into the 61.8 zone, we can place our stop 10 pips below the completion of that ab = cd , instead of 10 pips below the A of the larger ABCD. But we would still be trading the larger ABCD.

So, for example on my gartley with a smaller butterfly, i would've placed my stop based on the smaller butterfly instead of the larger gartley, but still trade the larger gartley. Or maybe not, idk.

edit3: never mind. we dont know if the smaller pattern marks the 'turn around' of the larger pattern. an assumption, maybe in some cases it works. like smaller butterfly in a gartley, but its still an assumption.
  • #1,813
  • Jan 21, 2013 1:32pm Jan 21, 2013 1:32pm
Quoting Starry
Yeah, the RR was large, so it wasn't a 1 minute pattern. Ive noticed that all the RR ratios are generally a little above 1, so if its 3 or 2 you need to update the sl til lit gets to an rr of 1.13 or so. thanks for the analysis btw.

maybe not, or just use 10 pips?
edit: So on this example, you could place the sl 10 pips below the entry price @141.94????
Attachment
In that particular case yes that would be the best place.
If you fail to plan, you plan to fail.
  • #1,814
  • Jan 21, 2013 1:42pm Jan 21, 2013 1:42pm
Quoting Starry
I see an area of confluence based on the 138 extension of AB, the displaced AB leg, and the 161.8% exhaustion of the previous swing before it went down.
Since it broke the support, the orderflow was down. then it bounced off of it, so move to breakeven when it bounces off. Or could you hav emoved to breakeven because it pierced the 38.2% of the final leg?

Also, where does the stop go when its displaced like this. 2 pips below 161.8% extension of BC @141.84, since it is sort of like AB and the displaced leg is like CD? Im not sure where our analysis...
Ideally below the 161 but at the very least a few pips below the swing low you have to decide what risk is acceptable. Too tight of a stop is a problem. Also you know that if price trades below the 161 you are most likely wrong so why not put it there.

What you call displaced legs are just small minor corrections that can be used to validate your analysis by adding confluence to the PRZ or an aggressive C buy or sell area. Does this make sence?
If you fail to plan, you plan to fail.
  • #1,815
  • Jan 21, 2013 1:43pm Jan 21, 2013 1:43pm
Quoting Davit
example of AB=CD
GU H4
If you fail to plan, you plan to fail.
  • #1,816
  • Jan 21, 2013 1:46pm Jan 21, 2013 1:46pm
Quoting jb19
a deep gartley winner

http://s2.postimage.org/ihhad07hh/gpyyen.jpg (http://postimage.org/image/ihhad07hh/)
Beautiful that's the way to do it. See how harmonics were used to zero in on the PRZ? Excellent!!!!
If you fail to plan, you plan to fail.
  • #1,817
  • Jan 21, 2013 1:47pm Jan 21, 2013 1:47pm
Quoting Mr. Pip
Ideally below the 161 but at the very least a few pips below the swing low you have to decide what risk is acceptable. Too tight of a stop is a problem. Also you know that if price trades below the 161 you are most likely wrong so why not put it there.

What you call displaced legs are just small minor corrections that can be used to validate your analysis by adding confluence to the PRZ or an aggressive C buy or sell area. Does this make sence?
ah, so 10 pips below the 161.8 that lies in our prz, and then when the low is established, we can move the sl to 2 pips below that low.

small minor corrections, makes sense.
  • #1,818
  • Jan 21, 2013 1:51pm Jan 21, 2013 1:51pm
Quoting vqtrader
Mr. Pip,
I may have spotted a bearish butterfly a few days ago and I have set all the parameters except the ext levels and BE and TP. If the limit order extends beyond X where would the ratio drawn on the pattern to BE and TP? Is it XA leg similar to a gartley pattern? Also would the fib ext always be drawn on a AB leg? Any help would be great. I starting to get the hang of this I think? Do you have criteria sheet to go by. I have the reference guide and it has helped tremendously.
I'm sorry I missed your chart please tell me pair and timeframe and I'll provide the chart for you. I am not ready to discuss the butterfly yet but I can give you my opinion.
If you fail to plan, you plan to fail.
  • #1,819
  • Jan 21, 2013 1:57pm Jan 21, 2013 1:57pm
Quoting Starry
k. i guess is till need to learn where the path of least resistance from the prz is, price action as price approaches and enteres prz will help, though in the case where it plunges to the PRZ and bounces off sharply , you would have to probably use general s/r. Where to enter, midway in PRZ? hmmm
We will revisit the PRZ again in the next couple of days and maybe I'll make a video this might help some. I can see the PRZ is a weakness. This is the most important part and I got hardly any question, there was more concern about patterns then anything else.
If you fail to plan, you plan to fail.
  • #1,820
  • Edited 4:15pm Jan 21, 2013 2:44pm | Edited 4:15pm
Quoting Mr. Pip
We will revisit the PRZ again in the next couple of days and maybe I'll make a video this might help some. I can see the PRZ is a weakness. This is the most important part and I got hardly any question, there was more concern about patterns then anything else.
k, cool. i got some questions.

How do you handle the situation where there are multiple przs close together (or did i define these przs wrong?) .

Also, in order to buy from the bottom prz, what would you look for? Since this is not an ABCD, but rather an ab = cd, would you look for confluence of a fib of a main swing which contains that prz ? (which is really far back in time, gbpjpy has been going down alot, so maybe cant do that in this case?) Or maybe just look for price action around the bottom prz. Look for a bullish harmonic abc pattern to form?

Since it was a really big drop, perhaps this is not a 1 minute trade.

edit: the sell would have gotten stopped out @ break even. too bad. i guess it got caught in a range before it broke out. prz at the top of a range.

Attached Image (click to enlarge)
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