Trial Run for Volume&Range Patterns

This is an example of trading with EFFI trend lines. Buy position in EURJPY was opened last Friday, after the false breakout of the main line. There were no signs of the real breakout till the end of Friday, I kept the trade through the week-end. Now it continues up, supported by the fresh line. Besides, there was a flag also broken upwards. By this moment the fresh line moved again, to the last closed candle on the picture. The real breakout of the fresh line will stop the trade, but if not some sudden market reasons to the opposite side - the basic and the main lines are good magnets for the price direction. The trade is protected at BE so far.

Another example of EFFI trend lines in EURJPY. The daily chart has a basic trend line and a main trend line. Note, that the upward trend is confirmed by the sets of “3 in a row, with one EFFI among them”. The main line was broken, and the price moved down to the basic line and bounced from it. (Steep main lines are easy for breakouts). There were no EFFI candles after the breakout of the main line, so it is a correction, obviously. All together it looks very much like the wave 1, 2, 3, and the correction 4th wave now.

I had BUY positions, and when they went down, I just waited for the comeback. I closed them now, but only for personal reasons (outside trading). If any pullbacks, I’ll try to enter into Buy trade again.

Sell EURJPY opened at 130.68 by EFFI trend lines. The chart H4 has a basic line and a main line. The main line was effectively broken. There is enough room to the basic line. So – Sell, with a possible stop if any H4 candle would effectively close above the main line again. Though, the trade is protected at BE already, because it is a countertrend trade.

Besides, there was the model of broken reinforcement (the candle with EFFI number 560 stands for reinforcement, and it was broken at the breakout of the main line, too).

I saw this setup a bit after the breakout of the main line, so I could take a better price. In any case, it would be advisable to wait for the pullback to the main line from below to open a Sell position.

One more illustration in EURJPY daily chart. In the previous move down the daily chart had a basic trend line and a main trend line. After the breakout of the main line the price went to the basic line and bounced from it. Then it came again to the basic line. Now it is already the forth touch of the basic line, and this is one more reason for BE stop in my Sell position.

Sell in EURJPY was opened at 131.58 by H4 chart after true breakout of the main trend line and return to this line from below. The basic trend line is waiting below. I will stop the trade if this H4 candle remains EFFI at the end of the period and/or closes above the main trend line again.

what manner of wizardry is this? I tried to understand the concept but I couldn't.
anyway I'm blown away by the results.

H4 candle grew to 614 (which is EFFI), and I removed Sell position.

Hi pemully, this concept is based on my own tool and my own idea. In the post # 104 I invited those who could be interested to test it (http://www.forexfactory.com/showthre...61#post6682861.) I keep the theory in my own website (www.effimethod.com), where I can add and edit at any moment. Hope, one day all that material will become comprehensive and well structured. So far, you can find some examples and the links to different explanations (inside my website) in this thread, after the post # 104 and ahead. Introduction to the method begins in the post # 111.

I added one more Sell in EURJPY at the breakout of EFFI inside bar on M30 (pic.1).
Next hour on H1 also created EFFI inside bar (pic.2), and it was also was broken downwards, thus supporting the new Sell position.
Stop-loss for this Sell is set at H1 chart, above the chief of the inside bar.
You can see, on M30 the inside bar was first broken upwards, and then the price went down. As I said in the basic post about EFFI inside bars, I choose only one direction for a breakout (which is more probable to my mind), this time it was a Sell direction. Note that it would be already a Stop-loss if to take a Buy at the breakout upwards.

If my Sell position is stopped at H1 chart, I will think of closing the profitable position too, to balance the loss. With EFFI inside bars, one stop for a breakout upwards on M30 plus another (still potential) stop for a breakout downwards on H1 would mean a choppy market without driving ideas.

Just quick lines, why Buy positions in EURJPY. General idea goes from the weekly chart; two Buy limit orders were set on Friday at the level of the first candle in the main pair on H4 (the main pair – two candles that support the main trend line) – triggered and now confirmed twice by efficient breakout of the main trend line on H4. Though H1 chart remains in hesitating mood, and I will not be surprised with a new wave down. One Buy limit order was set at the daily basic trend line – not triggered, missed 9 pips.

Sorry, pictures with more details later.

Here are the promised details about my yesterday’s Buy entries in EURJPY and some outlook on the pair.

The choice of Buy direction was made on base of the pattern “Yellow Blues” on the weekly chart. This is the pattern from the collection which I tested in the first half of the thread. Slowly, but steadily I prepare this collection for a PDF publication. This particular “Yellow Blues” has all attributes of a good outcome, though the patterns from such high TFs may take time to develop.
Buy limit orders were set at the level of the first candle in the main pair on H4 chart. It would be better without the touch in the red circle, but not bad as it is.

I had one more Buy limit order at the daily basic trend line (the blue line). The price did make a new attempt down, and it did triggered the level of my entry (129.67), but by that moment I had already removed the pending order, because if yesterday’s daily candle would close below 129.70, it would be a stop-loss situation. Besides, there was already one touch of the daily basic (blue) trend line. And I decided not to add more positions for a while.
The red line on the daily chart is the basic trend line at the previous downwards movement. This line provided strong resistance earlier, and it is playing its role till now. So the daily candle is a prisoner in a very narrow triangle, with a range 65-70 pips as of today. My Buy positions will remain live, unless there is an EFFI breakout down of the daily basic (blue) trend line.

I took the profit from Buy position in EURJPY at 131.24 (from 129.97), there are several limiting lines between 131.25 and 131.30 (Murray 8/8 on H1 and H4, Murray 4/8 on D1, the first resistance by SupRes indy, EFFI trend line on H1 from the previous move). Pity, I’ve put BE at the second Buy position and lost it during the night after FOMC.

As far as I can guess from my method, the upward trend in the pair is not confirmed yet. I will watch the close of the next H4 candle (in about 2 hours) and then decide if to add more Buys or what. Besides, the basic and the main trend lines on H4 made a rare bunch: both are below the price (it’s a common case), but the main line is below the basic line (this is a strange situation, I don’t remember it earlier).

Wow your system really amazes me, it keeps on delivering. One quick question, I see you entered at 129.97, and on another one at 130.07. Price went against you for some time to as low as 129.36. My question is; How do you set you stop loss? in other words what are your stop loss ranges? are they fixed or not.
Thanks

Hi Tamzy1,

My stops are always different, and virtual, and activated only after the close of a candle on the chosen TF. The Buy positions you mentioned would be stopped if the daily candle July 29 would close below the basic trend line on D1 and with EFFI number above 600. It looked very probable on July 29, and I decided not to add more positions. Stop loss would be about 40-60 pips, but didn’t happen.

Earlier, when selling in the post 123 (http://www.forexfactory.com/showthre...03#post6822203), the principle was the same: Stop if H4 candle efficiently closes above the trend line. It did close, and I cut the trade. That time I made 4 attempts to sell before it worked, 2 at BE and 1 with minus 30 stop.

Even earlier, in the post 122, I bought at 130.11, and the price went against me to 127.90. But I didn’t close the position and only waited, because the price was going to the basic line and bounced, and then went higher. There was no efficient breakout of any trend lines, even no efficient bearish candles – so, no stops.

For other cases, not based on trend lines, stops are linked to more or less traditional levels, but also depend on efficiency of the candles which close beyond those levels.

So, my stops have clear logic, but are hardly predictable from the formal point of view. I trade small lots and feel comfortable when stops are wide.

The move to 129.36 was an expected move this time. July 30 the daily picture for a possible stop loss has changed, and I put one more Buy limit order at 129.43, you can find it in the Trade Explorer. I cut it too quickly, in an attack of headache – I shouldn’t, really.

A bit more about my stops. I took a trial Sell in EURJPY H1 after the efficient breakout of the recent trend line, and the appearance of EFFI inside bar, though a “second-class” one, with more volume in it than in the chief candle. I waited for a pullback to the trend line and opened a Sell.

My standard stop would be if any H1 candle would efficiently close above that trend line again. But with the coming NFP, and inability to break EFFI inside bar down during two periods – I closed the Sell trade only at the fact that H1 candle grew again bullish and EFFI.

At that moment stop loss was equal to 0 pips. And this was a very conservative method of applying stops.

I opened a Sell in EURJPY at 130.78 in my live account, but by mistake chose another demo for this trade, and it will not appear in the Trade Explorer. Here are the reasons for the position and a possible stop.
On H4 chart the bearish candle efficiently broke the basic trend line.
On H1 chart 1) the bearish candle efficiently broke the basic trend line; 2) the price bounced with a pin from so called phantom trend line. (This is one more, rather rare type of a trend line, I’ll write about it later in the blog).
After I opened a Sell, the next H1 candle formed the reinforcement (R-candle on the pic.). Remembering about the possible model of broken reinforcement, I will activate the stop loss if any H1 candle efficiently closes above this R-candle. Earlier exactly at this level there was an R-candle in the upward movement. Look to the left at the next picture.
There was an attempt to break that R-candle down, then the price continued higher, and now it is back here, so it is twice interesting. I’ve seen such construction several times, and I wait for another move downwards. The perspective of this movement (if it happens) will depend on how the price will act around 130.45 (the main trend line on H4), and then around 130.26 (the basic trend line on D1).

hi Shaltay,

I like your colourful sub-window indicator What do the colours in the sub-window represent: Efficiency candle Patterns?



I do not understand what you mean here:

* where would you Set the SL?

* what if a candle closes 150 pip above the R-Candle - you still wait for the close or cancel the Sell trade before that?


All the best to you


Ati

Hi Ati,
This indicator is Market Facilitation Index of Bill Williams combined with volumes. It doesn’t create spikes in the diagram at the opening of a new period and saves place on the chart. It shows exactly what BW said: interest (green)/fake (blue)/fade (brown)/squat (yellow). The colors are just my preferences. If you like it – it is here for download. http://www.forexfactory.com/showthre...30#post6304830

The patterns which I tested in the first half of the thread are based on the combination of my own tools and this indicator. I also use it to refine some entries inside EFFI method. Alone, as it is, it doesn’t show neither efficiency, not patterns. Just a traditional indicator, a bit improved.
Above the high of this R-candle, really – somewhere, where EFFI candle would close. It can be 10 pips above, or 30, or who knows.
I admit, “Sh..t happens” (copyright, Forrest Gump). Sometimes my stops grow wider, than I would like to see them. Nevertheless, I do will wait for the close of a candle. It can be just a hysterical splash, after all. And the price comes back or at least half the way. I’m ready to accept the result if something like that happens. During the current Trade Explorer I had worse losses, but with a right lot size it wasn’t a disaster. My panic stop loss is set 300 pips away. I can outlive it.

There is, though, one more option – to go to the smaller time frame and watch the close of a candle there. That depends on the confidence in the chosen market direction. For example, I could open a trade at H4, but assign stop loss on M30 chart. Or vice versa – to open on H4 chart and to watch stop loss on D1 chart.

To resume, I’m an apologist of virtual and well reasoned (for me) stop losses. I don’t want them to be like “a mouse ran, a tail waved, an egg fell and broke”, only because the egg was put on a wrong shelf. (Photo credit)

All the best

And the reasons for today's SELLs in EURJPY: These positions were opened at the pullback to the broken yesterday main trend line on H4 chart. At the same time, on H1 chart the price broke down the main and the basic trend lines at once. Stop loss would be at the close of H4 candle above that broken trend line, but now the trades are already protected with some small pips.

The entry level coincided with the supply zone in the classical supply&demand trading. All (good) roads lead to Rome.

Hi Shaltay

I have been trying your EFFI Index for a while now, but some time it doesn't show the EFFI numbers on some candles. How ever much I try to run the script, it doesn't display them and yet it display on other candles well. Another issue is when switching from one time frame to another, the script doesn't allow you to do so, unless you first stop it and then re-run it on the new time frame. Is that how it's meant to work?

Thanks, I enjoy your interpretation, reading of the market, and your system is the best I have seen so far.

Thanks again

Hi Tamzy1,
Thanks for your interest! I'm very pleased that you think the method is useful.

Yes, the script warns before switching between time frames, as any other MT4 script. I have H1, H4 charts with the script, and open other charts to see different TFs. Besides, if it would even allow to switch, there would be a mess of numbers from various TFs.

About the missing numbers. Very rarely I also have to move the script line forth and back before it gives a number, but this is due to bad interaction between my MT4 copy and the distant server. A number appears with the next tick - no ticks, no numbers.

Another case is that the distance between a number and the high of a candle depends on ATR. For example, right now, on my H4 chart the numbers are 50-70 pips above, and on H1 charts they are 8-12 pips above. Sometimes numbers just can't be seen on the screen, hiding at the ceiling of a monitor. Try to squeeze the chart a little.

Last, the script dies after a doji, though the line remains on the chart. But in this case it will write the word "text" above that doji.

Ah, one more - very rarely the script can disappear from GBPUSD charts. But this is something with GBPUSD. I've seen other EAs, that had problems precisely with GBPUSD and perfectly worked with other pairs.

Hope that helps. I have never seen absolutely missing numbers.
Best regards,