Cat's whiskers

Welcome! Not sure how and when I am going to use this journal, but this is a start I guess. As I have my own personal log elsewhere, this will be my public noticeboard through which I will attempt to share the knowledge I have gained during six years of being a full-time trader. I am currently formulating a relatively simple London opening strategy for the Dax, which I hope may be of interest to some people, and will follow this up when it is ready, because it is one thing to know how to put on a trade oneself, but quite another to convey this knowledge to others. This is what I hope to be able to do in this thread.

Good luck with your Journal cat.I'm also trading DAX only at London's session.Looking forward to hear more from.

Cheers alone. This morning's open was a really difficult one to catch as the initial move could have gone either way so was ultra risky. Having said that, I did post a bit earlier that it looked like we were rolling over, so this morning's fall was not a surprise.

Yes today's LOndons opening was strange.A nice huge drop.I didnt had any shorts on this drop but i got some small longs later at pivots .

Many thx for your ongoing insight ydy - especially pre London open and later when momentum slowed and you raised the red warning flag

Pre/At london open your 24hr charts give a proper heads-up on the MAs - thx

I think it's time I posted something here. Following the threads as I do, I don't see too many people making use of diversion, which is surprising as it can be a very powerful tool. I use MACD as my diversion indicator, usually the ribbon rather than the Histogram, but both can work well, provided you have other signals in support, such as trend line and price action. I want to post a chart shot of a great diversion trade for the Dax on Tuesday. The price had risen beautifully off the London open, broke through the 5m 200ema, but then came back around 40 pips to give another long entry ( momentum was still firmly up ) It then carried on to hit the 30m 100sma, leaving a fairly long upper wick, and then a powerful doji as the 1pm GMT candle. The chart here is my 5m chart. I managed to get a nice trend line in on the pullback, and once I saw the doji on the 30m TF, I waited for the price to drop as I could already see a very strong diversion pattern between the price and the MACD. The blue/red ma is the 20ema, and you can see that as the price drops down towards it, the candle close right above it is a shooting star, a great candle pattern to trade off in a situation like this. This for me was a perfect set up. I have great diversion - I have a trend line confirmation - I have candlestick confirmation - and I have a drop down to my MA 20E. For my SL, 20 pips got me above the Bollinger band, which I always try to set my SL above/below on any trade. With all these signals, the odds were definitely in my favour, and in trading, you really cannot do much more than this. The trade produced 68 pips down to the 61.8% fib, probably the biggest in the pack, though I like 76.4% as well.

So don't forget about diversion, it really can help a great deal.

Morning Cat, thanks for the words on diversion and the MACD.
I have been looking at this but not quite seen the correlation with my trading; until the move has already bolted of course so more analysis needed.
You mention about momentum is this purely from the perspective of an increase in volumetric pressure or with price action taking establishing an affirmative direction? Or just from the momentum component of the MACD indicator?

Cheers,

Hi Kiwis. It is very easy to overlook diversion, and also very easy to get a false signal if you go by the MACD alone. When it is combined with other signals, as I try to show in this chart shot, it can work really well. Gauging momentum is very important. I use moving averages ( not shown in my screenshot) to help me determine volumetric pressure, but because this is a very difficult thing to determine, as in, is it just a pullback, or is it a change of direction, I look at other indicators, such as MACD and trendline to help me. I also use various timeframes to aid me, typically, 20sec, 1m, 5m, 15m, 30m,1 hour, which I have open on 4 screens. I also check the 4 hour and daily from time to time. What also aided me with this trade, was the fact that the price hit the 100sma on the 30m chart before it looked like the previous up move from the low of the morning had run its course. As I mentioned in the above post, the 30m chart put in a very strong doji candle just a few minutes before taking the trade, and the doji as you know is a powerful reversal signal when taken in conjunction with other signals. What with the price dropping to the 20 exponential moving average, the crossing of the trendline, the MACD diversion, and the final shooting star on the 5m chart, and it was an opportunity that was screaming to be taken. As with all my trades, they are taken when a culmination of certain key signals come together. It doesn't always work out, and I miss loads of opportunities that in hindsight look like sitters, but I get enough of them to make a good living.

Anyway, its really good to share my knowledge, and I only hope that this has been of some help to you. Crazy week though, Dax is so volatile atm, especially the last couple of days, and today, with that enormous spike, was just a joke! Have a great weekend

Cheers Cat for above. I will try to place the MACD into my calculations and see how it goes with backtesting over the weekend. Yes crazy markets right now; especially just after 1300 CET.
I guess now we can start the count down for 160 days and see; at least it may allow for an overdue retrace on DAX to a more respected level.
Good weekend to you too.... time to go and watch the Cricket World Cup series down here... PAK v Windies live...

Tuesday was a really good day for me last week. I'm posting two screen shots here of a long at 9am GMT, one of the 1m chart, and the other of the 20 sec chart which pinned down my entry. What I want to try and show is how I was able to spot an trade opportunity on very small time frames, entries that would not have shown up on anything bigger than 1 or two mins, and how, using a trend line on the 20 sec chart, fibonnacci, candlestick formation, and a moving average, I was able to get pinpoint accuracy on the entry.

The price dropped very aggressively at the open, but stalled just above the 61.8% fib level anchored from the low of the 10th Feb. At this point, it can either reverse or it can carry on down. When it shows signs of having found support, the long opportunity is on. There is no way of knowing whether it is just a pullback, or a reversal, but that doesn't concern me. I will enter if I get a signal, and then move my SL up to BE by the time the price hits the 1m 200ema. However, as this is a move back into the direction of the major trend, which is up, the chances that this is a reversal are good.

Look at the 1m TF. You'll see how the price stalls, and moves up to the 20ema ( blue/red), where it falls again. Now I plot my fib, and it is the 61.8% and the 76.4% I am most interested in. I will be looking for the price to stall at either of these, and then I will be looking for preferable a positive hammer, which as you see, I get.

Now to the 20 sec TF. Fiirstly, I put in a trendline from the high which was the 1m 20ema. Now look at the 100sma ( dark blue dotted), and see how as the price moves sideways, it narrows in towards the 20ema. The SL was set at 15, tight yes, but it cleared the 1m bollinger band, which is normally my requisite for setting m my SL. The 1m MACD is also rising, another confirmatory signal that the trade was on. I closed the trade when it hit the 5m 200ema for 75 pips, and entered another long after it had dropped back to find support on the cluster of the 1m 200ema/200sma/100sma, which I exited on the 30m 100sma.

ps - Always, always, try and get a trend line in, even on the smallest time frame, as it can really help narrow down the entries. For exits, aim for the major moving averages, pivot levels, and fibonacci levels on the most popular time frames - 5m, 15m, 30m, H1 and H4. Daily comes into play as well, but less so for intra-day trading.

Thanks for the explanation Cat; yes the fibs are a very important tool and when placed correctly can often show the limits of a defined move and as such, a good point at which to bail ahead of the crowd on the trade.
Couple of questions regarding the charts you have placed in there - you mentioned 1M and 20S TF charts when they are both DAX, and also alluded to a dark blue dotted line (100SMA) but can only see a dashed line. Just wanted to clarify that the correct charts were actually shown and prevent confusion for readers.
Thank you for you insight and experience; most appreciated

Hi Kiwis, hope you had a decent week. When I say ' dark blue dotted line ' I should have said ' dashed ' as that is what it is, not dotted. So whenever you see that MA in the future, on any chart, it will always be the 100 simple moving average.

I'm hoping to put some more stuff up on this thread this weekend provided I have time. I want to concentrate on getting into a trade in the direction of the trade following a pull back as I see so many traders who have missed the initial move trying to trade against the momentum when really the best strategy is to wait for a pullback and jump in just before it rises or falls again in the direction of the trend. These trades offer the safest and most rewarding trades but because it is programmed in people's brains to try to catch the tops and bottoms of moves, I think most people miss them. Pull backs can be traded, but they are much more difficult to catch, and you have to know where to get out and whether it's a pullback or a genuine change of direction. I also want to get back to the London entry at some point, but for some reason, they's been really difficult to catch on the whole these last couple weeks, but catching these is really key because there are always quite a lot of pip;s to be had from the London open on the Dax which can really set you up nicely for the day.

Catch you later and have a great weekend down under. I've been to NZ btw - north and south, picking Kiwi fruit and playing rugby in Te Puke, working on a building site in Wellington and generally bumming around. Have to get back one day!

Do you spend the day watching the pips you should and could have had? I've pretty much completely given up on trying to catch ' the big move ' of the day. Why? Because with these highly volatile markets, particularly the Dax, there are literally hundreds of pips going both ways on any given day that most people never come anywhere near to capturing. The secret for me is to significantly lower the time frames you usually use. People are put off from trading very small time frames because they think that the smaller the frame, the more noise there is and the harder it is to trade. Well this is just not so. A 10 second time frame is no more difficult to trade than an hourly, indeed, I doubt you'd know the difference between the two if the time period was hidden from you. You simply trade the smaller frame in exactly the same way as the bigger one, only with a much smaller SL.

Last week I experimented with a 3 second time frame, ( this was the smallest I could go without disfiguring the bars) with great results. I have 3sec, 10sec, 30s, 2m, 10m, 30m time frames open all the time, and was able to capture moves that gave me an entry on the 3 sec TF that I was even missing on the 10sec before. I use a tight SL, max 10 pips on the 3 sec, and I never chase. If I don't get a clean entry with minimum risk, I leave it, as getting in too late can see you getting stopped out too easily using a really tight SL. For the Dax, 50 pip moves in a matter of minutes are a daily occurrence, which is why I never waste my time trading some forex pairs such as eur/usd, as they are just dead most of the time compared to the Dax.

I'm going to post some images this week. I won't be posting trades live, I just don't bother with that, as for me it is a distraction when one must be fully tuned in. It's up to anyone who is interested to try out these ideas for themselves. If you are someone who cannot afford a lot of screen time, say if you have a job, then this could be really useful for you.

See you later in the week.
Cat

meow.

good luck; subscribed because cat.

Hopefully not the only reason

Cheers Cat, been going hard on the smaller time frames too and testing out various options. Looking forward to viewing your screenshots.
Kiwi

Hi Kiwi, good to hear it. Yesterday was a brilliant day on the Dax for the smaller time frames as it was up down all day with a short bias but lots of longs as well. I slightly altered the frame sizes I have open, to 3sec,10sec, 1m, 10m, 30m. Up to 1m gives me the entry, and the 10m and 30 m give the daily support and resistance. Anything between 1m and 10m acts as interference. I'll try and give some examples of this asap.Good luck!

I missed the initial short move from the London open this morning, which was very fast, blink and you missed it, but there was a great opportunity to get into it 5 mins later when the price retraced back up to the 3 second 200ema. The 10 sec 200ema and sma had also crossed above the price, and this is what really gave me the strong edge to go short on this set up. You'll see that I was able to get in the all important counter-trend line. I never go on the first break below the trend line, but always wait for it to re-test the 200ema, simply because that is usually what it does. On the first break below the 20ema, ( blue/red) I shorted with a 10 pip SL which is well above the Bollinger and moving averages. I took this down to 11,400 and got out for 50, but re-entered in a similar way using the counter trend line and the 3sec 200ema a bit later on. The key thing to pay attention to here is that when the price is trending, and the 200ema is ( in this case) above on all your time frames, it's more than likely going to fall again after a retrace, so forget about trading the other way - go with the trend and pick your entries using counter trend lines and the big moving averages like the 200ema.

ps - try experimenting with a moving average ( it's up to you which one ) which comes up and crosses above the 20 ema in a situation like this. Back test it to see which MA aids with your entry using a counter trend-line. ( it'll work on any time frame) It is a bit of a secret weapon of mine so I'm not giving my MAs away completely, why would I, but there is one, and so it is up to you to find it

pps - one more thing about an MA system like this using multiple time frames, and that is that it is important to understand the positioning of the moving averages from frame to frame, because whereas you might take a trade off of a 200ema in line with the trend on the 10 sec time frame, you may have another opportunity later on where the 200ema is right beneath you on the 10 sec TF. So what do you do now - trade into it?? Well, it depends on what your next highest time frame is saying. There was an example of this this morning on the Dax just after 9am. The price rose sharply up to the 1m 100sma, put in two middle dojis, and then a negative candle. On my 10 second frame, all my major MAs well sitting beneath the price, but because the 1m 100 sma was abobe the price, with the 200ema above it, all the MAs beneath me on the 10 sec chart were nullified, that is, cancelled out. I put in a counter trend line onto the 10 sec chart, and shorted as soon as the price crossed it. Hope that's all clear

Wow... thanks for the insight. Lots of charts but yes do understand the intent here. Standby PM
Regards

Hi Kiwi. Did you take a post down, as I had a brief look at a much longer post of yours earlier this morning that I was going to answer to?

The point I was making above with the time frames is that although I do try and keep things as simple as possible, all the time frames that you have open, usually four or five ( remember I'm starting as low as 3 seconds) have to correlate, not perfectly, but they have to sort of slot into each other to confirm a trade. The larger the TF, the less this applies, as for example if the 30m shows upward bias, but I get a perfectly good sell signal in the 1m, then I'll take it down to an area of support. Using MAs, you get to know which ones to pay attention to on which time frame. With this system you cannot simply use a set criteria, say, only sell when the 200ema is above, because you have to take other time frames into account. That may work on one trade, when you are selling away from the 1m 200ema, but on another potential trade where the 200ema is beneath you, you leave it and the price drops straight through it. This is because on the 5 or 10m time frames, the MAs on the two trades were doing something different.

Anyway, I've had a very good morning as Dax played ball and I got out right at the top of this morning's rally just above the confluence of the 15m 200ema/sma/61.8% and 11,400 level.

Congrats on the cricket by the way