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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

  • #5,001
  • Oct 18, 2013 2:31am Oct 18, 2013 2:31am
Quoting hao
{quote} What you are doing, I do not see any signs of reversal.
It 'a Gartley, aggressive entry ...
  • #5,002
  • Oct 18, 2013 2:42am Oct 18, 2013 2:42am
NZD USD 30M aggressive entry C

Attached Image (click to enlarge)
Click to Enlarge Name: nzdusd.png Size: 28 KB
  • #5,003
  • Oct 19, 2013 9:47am Oct 19, 2013 9:47am
I think we need new material expanding on the concepts introduced in this thread.

Heres an article about how momentum changes can be used to determine high-probability break out scenarios. Maybe we can discuss some insights into momentum and how to apply them, in relationship to the concepts introduced in this thread?

http://www.futuresmag.com/2013/04/24/everything-you-know-about-breakout-trading-is-wron?t=education

Here's some of the questions I can think of. Ill ponder on them and see if I can get some sort of discussion going on these questions, or similar. Surely we can come up with something that is useful, based on our experience and intuition.

1) What is the relationship between order flow and momentum?
2) What is the relationship between price action and momentum?
3) How do I use momentum to take profit, instead of using a predefined pattern take-profit price.
4) Given an understanding of momentum by exploring these or similar questions, what sort of objective strategies could be created to maximize returns (similar to the break-out strategy in the link above).

What do you guys think?
  • #5,004
  • Edited Oct 20, 2013 10:42am Oct 19, 2013 11:13am | Edited Oct 20, 2013 10:42am
Or we could discuss/discover/verify certain formula or concepts, like (and theres more combinations too!)

deep retracement, shallow projection => deep projection
deep projection, deep retracement => shallow projection

possible definitions (not really sure about the neutral definitions)
notice: 55.8% is halfway between 50% and 61.8%
132.7 is halfway between 127.2% and 138.2%

shallow retracement: less than 55.9%
deep retracement: between 55.9% and 88.6%
shallow projection: between 88.6% and 132.7%
deep projection: greater than 132.7%

Attached Image (click to enlarge)
Click to Enlarge Name: projection_retracement_type.png Size: 35 KB


neutral: between 50% and 61.8%, between 88.6% and 100%, and between 127.2% and 138.2%
  • #5,005
  • Edited Oct 20, 2013 10:43am Oct 19, 2013 1:41pm | Edited Oct 20, 2013 10:43am
Ill start with what to expect with retracement and projection.

Note that I dont (yet) know what to expect, but Im pretty much into figuring it out and it should be straightforward if we discuss it, since we all have experience to draw upon.

Maybe we can agree on a format and basic definitions (post above), if you guys are interested (so the example is an example of the format)?

I don't know if I should use projections of the previous down swing (to determine its a shallow projection), but i think that its correct.

Format Example:
We have a shallow projection and then a deep retracement which results in a deep projection. Does this hold a lot of the time?

shorthand description (format): shallow projection, deep retracement => deep projection

This means swing 2 is a shallow projection of swing 1, and swing 3 is a deep retracement of swing 2.

In other words, we formed a NSH (new structure high), and then had a deep retracement.

Attached Image (click to enlarge)
Click to Enlarge Name: deep retracement.png Size: 91 KB
  • #5,006
  • Oct 19, 2013 7:15pm Oct 19, 2013 7:15pm
Quoting Starry
I think we need new material expanding on the concepts introduced in this thread. Heres an article about how momentum changes can be used to determine high-probability break out scenarios. Maybe we can discuss some insights into momentum and how to apply them, in relationship to the concepts introduced in this thread? http://www.futuresmag.com/2013/04/24/everything-you-know-about-breakout-trading-is-wron?t=education Here's some of the questions I can think of. Ill ponder on them and see if I can get some sort of discussion going on these...
Momentum is a great indicator.
I use it constantly, especially for divergences.
Not sure if it this the place but count on me.
Greetings.
  • #5,007
  • Oct 19, 2013 7:18pm Oct 19, 2013 7:18pm
Quoting smallcat
{quote} Hi TheScorps, Is this file you're looking for ? enjoy, -smallcat {image}
Thank you for the file! This reminds me.
I think mr pip optimized the harmonics based on his intuitive or objective observation of retracement and projection depth.

gartley and abcd: deep retracement, deep projection => deep retracement (61.8%)
bat: deep retracement, deep projection => deep retracement (61.8%)
butterfly: shallow retracement, very deep projection => neutral retracement (50%) or projection (88.6%+)
crab: neutral retracement, very deep projection => deep retracement or neutral (88.6-100%)


gartley, abcd, and bat take profit rules of engagement are similar ....

Each one has different price action associated to it, because each is different in retracement and projection type. The gartley and abcd are different because the gartley, and all of the 4-leg patterns, have confluence with the XA leg in order to make sure that the D point is truly the end of a larger swing (where the AB, BC, and CD perhaps form a larger swing, and the XA is already a large swing)

Since people trade these 5 patterns ...
  • #5,008
  • Oct 19, 2013 7:20pm Oct 19, 2013 7:20pm
Quoting pampaq
{quote} Momentum is a great indicator. I use it constantly, especially for divergences. Not sure if it this the place but count on me. Greetings.

cool!

I don't know what type of momentum is used because it isnt talked about much, but I'm sure if we talk about momentum related to taking profit for harmonic patterns, then everything will be OK.

Night folks
  • #5,009
  • Edited 10:36pm Oct 19, 2013 10:25pm | Edited 10:36pm
Quoting Starry
{quote} cool! I don't know what type of momentum is used because it isnt talked about much, but I'm sure if we talk about momentum related to taking profit for harmonic patterns, then everything will be OK. Night folks
thanks your articles, but I'm interested in finding the start and end, as a result, simply, in running from point A to B. it very easy to understand, something you need to discrimination price refusal and to adjusted price. a simple example: new people make the mistake of going on in between 61.8 - 78.6, in slow moving, there is much silver should reject the current trend. everyone forgot one thing, but the price moves can decelerate in continuing the trend. There must be something in movement deterrent. S / R???, Not the S / R is a part does not mean insurmountable. similar situation in the PRZ, you need discrimination to respect the price and adjust flow.
has a pseudo-random rate, you need a method of treatment.

I use fib and analyzed using the closing price of the current should compared with candle on the previous swing. it very precise and requires a stoploss closely. stoploss is very low. it allows me can trade large quantities, adventurel not exceed 5% and ratio R / R high.
Trading in the zone
  • #5,010
  • Oct 20, 2013 6:44am Oct 20, 2013 6:44am
Quoting hao
{quote} thanks your articles, but I'm interested in finding the start and end, as a result, simply, in running from point A to B. it very easy to understand, something you need to discrimination price refusal and to adjusted price. a simple example: new people make the mistake of going on in between 61.8 - 78.6, in slow moving, there is much silver should reject the current trend. everyone forgot one thing, but the price moves can decelerate in continuing the trend. There must be something in movement deterrent. S / R???, Not the S / R is a part...
I agree, finding the start and end is the most important.

PRZs are areas of confluence, which are supposed to be where price ends (price goes from A to B). In order to verify this, mr pip uses order flow weakness and price action weakness, which probably involves momentum (so, the swing has somehow shown signs of bullish momentum in a bearish market, not necessarily slowing down but actual small pushes up).

Is your method of analyzing similar to mr pips video on the way he uses candle price action, using the previous 1 -3 bars?
  • #5,011
  • Edited 7:12am Oct 20, 2013 6:47am | Edited 7:12am
Just for fun: heres a bitcoin vs usd chart (i imported it from raw online data, so its not live)!

where will it go


edit: hey, its at a harmonic completion ab = cd. most likely bearish with the quick acceleration at the end there. target around 120. oh wait, I have no clue how to make profit on a virtual currency going down now the other way is easy

Attached Image (click to enlarge)
Click to Enlarge Name: btcusd.png Size: 84 KB
Attached File(s)
File Type: txt $BTCUSD.Last.txt   50 KB | 342 downloads
  • #5,012
  • Oct 20, 2013 8:27am Oct 20, 2013 8:27am
Quoting Starry
Just for fun: heres a bitcoin vs usd chart (i imported it from raw online data, so its not live)! where will it go edit: hey, its at a harmonic completion ab = cd. most likely bearish with the quick acceleration at the end there. target around 120. oh wait, I have no clue how to make profit on a virtual currency going down now the other way is easy {image} {file}


I want to have a balance, up powerful versus reversing quick and powerful. :nerd:
Trading in the zone
  • #5,013
  • Oct 20, 2013 8:36am Oct 20, 2013 8:36am
Quoting Starry
{quote} I agree, finding the start and end is the most important. PRZs are areas of confluence, which are supposed to be where price ends (price goes from A to B). In order to verify this, mr pip uses order flow weakness and price action weakness, which probably involves momentum (so, the swing has somehow shown signs of bullish momentum in a bearish market, not necessarily slowing down but actual small pushes up). Is your method of analyzing similar to mr pips video on the way he uses candle price action, using the previous 1 -3 bars?
my thoughts, a simple and easy to understand.
a small swing adjustments or household / HL / LH / LL => it is a strong trend.
In contrast, there is an adjustable swivel + HH / HL / LH / LL large => signs tend to reject.

you think?
Trading in the zone
  • #5,014
  • Oct 20, 2013 8:45am Oct 20, 2013 8:45am
Quoting Starry
{quote} I agree, finding the start and end is the most important. PRZs are areas of confluence, which are supposed to be where price ends (price goes from A to B). In order to verify this, mr pip uses order flow weakness and price action weakness, which probably involves momentum (so, the swing has somehow shown signs of bullish momentum in a bearish market, not necessarily slowing down but actual small pushes up). Is your method of analyzing similar to mr pips video on the way he uses candle price action, using the previous 1 -3 bars?
I should like to price candle close = Fib (required minimum 2 candles) or wicks candles = Fib (requires at least 3 candles)
it failed to have a closed candle through Fib or longer than the candle wicks longest.

you need to pay attention to candlestick analysis.
Attached Image(s) (click to enlarge)
Click to Enlarge Name: untitled.PNG Size: 62 KB
Click to Enlarge Name: candlestick-pattern.jpg Size: 108 KB
Trading in the zone
  • #5,015
  • Oct 20, 2013 8:53am Oct 20, 2013 8:53am
Quoting hao
{quote} thanks your articles, but I'm interested in finding the start and end, as a result, simply, in running from point A to B. it very easy to understand, something you need to discrimination price refusal and to adjusted price. a simple example: new people make the mistake of going on in between 61.8 - 78.6, in slow moving, there is much silver should reject the current trend. everyone forgot one thing, but the price moves can decelerate in continuing the trend. There must be something in movement deterrent. S / R???, Not the S / R is a part does not mean insurmountable. similar situation in the PRZ, you need discrimination to respect the price and adjust flow. has a pseudo-random rate, you need a method of treatment. I use fib and analyzed using the closing price of the current should compared with candle on the previous swing. it very precise and requires a stoploss closely. stoploss is very low. it allows me can trade large quantities, adventurel not exceed 5% and ratio R / R high.


Quoting hao
{quote} I should like to price candle close = Fib (required minimum 2 candles) or wicks candles = Fib (requires at least 3 candles) it failed to have a closed candle through Fib or longer than the candle wicks longest. you need to pay attention to candlestick analysis. {image} {image}
Similarly, candles close or wicks = yellow lines.
if Fib price or candles closed respected , stoploss really low.
Attached Image (click to enlarge)
Click to Enlarge Name: deep retracement.png Size: 115 KB
Trading in the zone
  • #5,016
  • Oct 20, 2013 9:30am Oct 20, 2013 9:30am
Lots of posts today, catching up with you guys, still reading on page 127
I Have Learned to Take Some Losses to Make Profits
  • #5,017
  • Oct 20, 2013 9:43am Oct 20, 2013 9:43am
Quoting hao
{quote} I want to have a balance, up powerful versus reversing quick and powerful. :nerd:

I agree :nerd: Its at a tipping point, up powerfully or down powerful and quickly
  • #5,018
  • Oct 20, 2013 10:02am Oct 20, 2013 10:02am
Quoting hao
{quote} my thoughts, a simple and easy to understand. a small swing adjustments or household / HL / LH / LL => it is a strong trend. In contrast, there is an adjustable swivel + HH / HL / LH / LL large => signs tend to reject. you think?

Im not sure how to visualize this, sorry, what do you mean by adjustable swivel and signs tend to reject? Can u quickly draw the patterns on a ninja chart using line segments?

I'm guessing you mean that the adjustable swivel + HH/HL/LH/LL large pattern is a reversal pattern, while the small swing/HL/LH/LL is a continuation pattern?
  • #5,019
  • Oct 20, 2013 10:04am Oct 20, 2013 10:04am
Quoting hao
{quote} I should like to price candle close = Fib (required minimum 2 candles) or wicks candles = Fib (requires at least 3 candles) it failed to have a closed candle through Fib or longer than the candle wicks longest. you need to pay attention to candlestick analysis. {image} {image}

I like your stoplosses!

Thank you very much for the candlestick pattern chart, I am going to print that out and use it.
  • #5,020
  • Oct 20, 2013 2:04pm Oct 20, 2013 2:04pm
I have cobbled together some results and have put it to a practical use (analyzing one of mr pips trades).

Admittedly i only based the results on all of the days mr pip traded and posted, but i think its still valid.

6 common combinations

 

  1. deep retracement , shallow projection => deep projection/deep retracement

  1. shallow projection, deep retracement => deep projection/deep retracement

  1. deep projection, deep retracement => shallow projection
  2. shallow retracement, deep projection => shallow projection
  3. shallow projection, shallow projection => shallow projection

  1. deep projection, shallow projection => ranges from neutral to deep retracement

Chaining
We can take a (deep projection ,deep retracement => shallow projection) and then try to predict the outcome , if it is one of the six combinations above. In this case, (deep retracement, shallow projection => deep projection) will work out. These two combinations will produce a pattern (in the pdf i have drawn some of them out, divided into four sections just like there are 4 sections above)

If we use a fractal approach, this could work out. See the example below.

Example trade (from mr pips charts)

Here we have a larger swing pattern, and we have a chained smaller swing pattern (the left most boxes). The first swing pattern ends the larger swing and puts it in the aggressive C zone.

There is an arrow drawn to each box, and each box contains four swings which make up a pattern.


Attached Image (click to enlarge)
Click to Enlarge Name: mr_pip_trade_analysis.png Size: 90 KB


Python Data File Format (no need to read)

If you want to try this out yourself, download the zip file. Take a look at the format of data.txt.

You can have lines of the format
a,b=>c
or you can have descriptive lines, which are lines which do not contain a,b=>c strings (i use a date).

You can add data to the file as you analyze charts, and then see if there are statistically significant results. I didnt use too much samples i guess, and I didn't really double check, so ..... anyways,

Edit the python file by changing the topmost string which points to the data file. Then execute the python script, and it will print out a messy unformated python object which counts the number of types of results for each a,b combination in the file. I only used 'neutral retracement', 'deep projection', 'shallow projection', 'shallow retracement', and 'deep retracement.'

For example:

{'shallow retracement, deep retracement': Counter({'shallow projection': 1}), 'shallow projection, shallow retracement': Counter({'shallow projection': 1, 'deep projection': 1}), 'shallow projection, shallow projection': Counter({'shallow projection': 2}), 'neutral retracement, shallow projection': Counter({'deep retracement': 1}), 'deep projection, deep retracement': Counter({'shallow projection': 3, 'deep retracement': 1}), 'shallow projection, neutral retracement': Counter({'deep projection': 1}), 'deep retracement, deep projection': Counter({'deep retracement': 2, 'shallow projection': 1}), 'deep projection, shallow projection': Counter({'deep retracement': 3, 'shallow retracement': 2, 'deep projection': 1, 'neutral retracement': 1}), 'shallow projection, deep projection': Counter({'deep retracement': 2, 'shallow projection': 1}), 'shallow retracement, shallow retracement': Counter({'deep projection': 1}), 'shallow retracement, shallow projection': Counter({'deep retracement': 1}), 'shallow retracement, deep projection': Counter({'shallow projection': 3, 'neutral retracement': 1, 'shallow retracement': 1}), 'neutral retracement, deep projection': Counter({'shallow projection': 1, 'deep projection': 1}), 'deep retracement, deep retracement': Counter({'deep retracement': 1, 'deep projection': 1}), 'shallow projection, deep retracement': Counter({'deep projection': 4, 'deep retracement': 1}), 'deep retracement, shallow projection': Counter({'deep projection': 4, 'deep retracement': 1, 'shallow retracement': 1, 'shallow projection': 1}), 'deep projection, shallow retracement': Counter({'shallow projection shallow retracement, shallow projection': 1})}



later ....
Attached File(s)
File Type: pdf Cobbled Together Results.pdf   189 KB | 680 downloads
File Type: zip retracement.zip   < 1 KB | 858 downloads
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