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Ratios & Harmonics: a Different Way to Trade

  • #13,101
  • Feb 13, 2015 11:34am Feb 13, 2015 11:34am
Quoting honestknave
{quote} Thanks Matts Micro, Nice trading on EU! I've only taken a couple of scalps today until this trade. There is a lot of confluence marked up in the lower blue box, so predictably we're currently running a retracement. I'm not convinced the retracement will have the power to push back through that round number. Possibly just the AB=CD completes at the RN, major 23 fib and the minor 50 fib (not marked but confluent) then the bears continue south. Well, that's the theory... {image}
Well, things didn't go quite to plan! Out at +27 pips, with more left on the table.

I underestimated the significance of the yellow area mainly because I missed marking an important fib (green 38.2) which was just plain sloppy. I noticed but didn't react to the momentum shift shown in red. Again, poor performance on my behalf.

The expectation was a pullback to the RN which would hold. A period of congestion followed (shown in blue) and weakness can be seen on breaking back through the major 50 fib (black). +27 pips, but the correct exit would have been earlier. The news followed not long afterwards.

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Daily target missed, but weekly target hit so I shouldn't complain.
  • #13,102
  • Feb 13, 2015 11:42am Feb 13, 2015 11:42am
Quoting Jamos
This is my second entry of the day - helped by news. Any comments, questions or advice welcome. {image}
Hello Jamos,

It looks like that worked out nicely for you

Where did you exit in the end?
  • #13,103
  • Feb 13, 2015 6:20pm Feb 13, 2015 6:20pm
Quoting honestknave
{quote} Hello Jamos, It looks like that worked out nicely for you Where did you exit in the end?

I exited once it consolidated. I gave it some time to see what it would do. Exiting trades at the correct most profitable time is still a work in progress for me. I try to let the trailing stop do the thinking for me, but after a few successful trades in a ranging market I am seeing that it is now my exit methods that leave a lot to be desired. In this case I wasn't sure when/where to expect price rotation. I think I was "hoping" that it would continue to fall, it ended up being +27 pips -entered and exited on the USD/JPY -1 & 5 min chart. Hope the charts are clear and simple.
Although this was news driven. I feel that the simple setups are the ones that the most traders are seeing.
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  • #13,104
  • Feb 14, 2015 1:27am Feb 14, 2015 1:27am
Quoting Jamos
{quote} I exited once it consolidated. I gave it some time to see what it would do. Exiting trades at the correct most profitable time is still a work in progress for me. I try to let the trailing stop do the thinking for me, but after a few successful trades in a ranging market I am seeing that it is now my exit methods that leave a lot to be desired. In this case I wasn't sure when/where to expect price rotation. I think I was "hoping" that it would continue to fall, it ended up being +27 pips -entered and exited on the USD/JPY -1 & 5 min chart....
All things considered, I think that was a good exit. And nice chart analysis.

There are a couple of ways to look at things. You could exit on the first sign of weakness (a pullback is inevitable, it's just a matter of when) and then enter short again once the retrace completes. The problem with this is that sometimes we misjudge the start and/or the end of a retrace. Or, you can hold the position through the retrace but this too carries a risk (that the retracement becomes a reversal).

With large moves, it is hard to judge the place where price will stop for a breather. Dropping a timeframe can help (not in this case because you were M1, but perhaps something would have been visible on tick charts?). Also, watching the bars as they develop is a useful tool.

Zooming out to see the big picture is also good (which you did), because it is rare to see all time highs and all time lows.

And, of course, fib extensions (labelled left) and expansions (labelled right) can help. I would be looking for price overreaching itself, so 100% 127.2% 161.8% 200% on the various swings would be of interest to me. This can help identify areas to start watching for signs of weakness. I've marked those up in yellow boxes.

Just a note of caution which I'm sure you know - trading news can be very risky, and price could easily have spiked the other way on you.

A nice way to end your trading week!
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  • #13,105
  • Edited 4:01am Feb 14, 2015 3:50am | Edited 4:01am
Quoting Jamos
{quote} huh? there is a line going one way and a line going the other way, then a couple of fib. levels, I am lost amongst the subjectivity of the analysis. At what point would an angled trend line be considered ambiguous?. What aspects of the analysis are the more important ones that I should consider?.

Sorry Jamos, I was re-reading through the thread and noticed that I missed your question.

The coloured TL's (blue and yellow) were measurements of swings, quite often the length of a swing is repeated, sometimes extensively. The white TL's are just the swings themselves except for the long white TL that extends below PA that was also a swing measurement (shouldn't have really been in pic as was just estimating a further drop). Note- Also I just noticed my first HH white TL's were at the wrong point, they should have been at the top where the first blue TL was, it's not important though.

As you can see by the yellow TL's the first swing measured the second swing. So after the slight bull correction at the bottom of the first yellow TL I took that measurement for an expectation of where PA may go on the second swing down (this was a lt OF expectation with swings going lower). There was already a lot of confluence with Fib levels and support where the second yellow TL line ended and now I had that order flow swing to strengthen the case.
With the Blue TL -The bears had been quite aggressive on the way down to the current bottom of the chart so I came to the conclusion that the pullback was going to reach a certain height. I then looked for fib levels/resistance and then went in search for an obvious recent bull swing that would coincide with my expectations (the first blue TL).

The fib levels are obvious levels but some are out of the picture (hrly and perhaps even 4hrly). The main objectivity of the fib levels is to look for clusters that assert support/resistance levels to create confluence.

I know this sounds quite subjective and to a certain degree it is but combined with other factors such as order flow (which is pretty well what I'm describing), harmonic patterns, confluence, trend lines (the thin bluish TL's on my chart) and price action, it begins to paint a picture with reasonable expectations.

I hope I haven't made it sound more complicated (or confusing) than it actually is which is just- the measurements of the range of previous swings to create a case for areas of confluence, but I thought I'd explain the thought process behind it.

As for the bluish TL's they are just normal TL's that I use for wedges H&S's etc. for further confirmation on direction/confluence and BO's.
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As the lights go by so too do the shadows move
  • #13,106
  • Edited 9:42am Feb 14, 2015 5:42am | Edited 9:42am
Quoting Jamos
This is my second entry of the day - helped by news. Any comments, questions or advice welcome. {image}
Hi jamos,, certainly the news were on your side and helped your trade, as to me that was a risky entry Short considering the big bull candle prior to the entry,so my expectation would've been an average retracemment of 50 to 61.8% fib and then a NSH,, or at least to wait for a better confirmation that the bulls are getting weak and bears taking over,, although your entry candle had a fairly long wick it still was a bull candle in body and closed high compared with the candle prior to it,,, and then comes the NEWS,,,,, and that what saved your bacon ,, however still well done with the green pips
  • #13,107
  • Feb 14, 2015 5:18pm Feb 14, 2015 5:18pm
Quoting Georji
{quote} Hi jamos,, certainly the news were on your side and helped your trade, as to me that was a risky entry Short considering the big bull candle prior to the entry,so my expectation would've been an average retracemment of 50 to 61.8% fib and then a NSH,, or at least to wait for a better confirmation that the bulls are getting weak and bears taking over,, although your entry candle had a fairly long wick it still was a bull candle in body and closed high compared with the candle prior to it,,, and then comes the NEWS,,,,, and that what...
The majority of news is nothing to be afraid of, with the exception of the NFP data and central bank announcements price is usually fairly predictable. On friday the USD/JPY market was waiting for the news at the NY open to create some movement. I did take one small loss in getting the right entry. I often consider fundamentals when trading, although I do not mention them here. However, thankyou for the advice, I am still having trouble setting technical analysis based expectations. This is exactly what I need to work on.
  • #13,108
  • Feb 14, 2015 5:20pm Feb 14, 2015 5:20pm
Quoting honestknave
{quote} All things considered, I think that was a good exit. And nice chart analysis. There are a couple of ways to look at things. You could exit on the first sign of weakness (a pullback is inevitable, it's just a matter of when) and then enter short again once the retrace completes. The problem with this is that sometimes we misjudge the start and/or the end of a retrace. Or, you can hold the position through the retrace but this too carries a risk (that the retracement becomes a reversal). With large moves, it is hard to judge the place where...
This helps. I really appreciate you taking the time to look over my chart. Cheers.
  • #13,109
  • Feb 14, 2015 6:00pm Feb 14, 2015 6:00pm
Quoting Matts Micro
{quote} Sorry Jamos, I was re-reading through the thread and noticed that I missed your question. The coloured TL's (blue and yellow) were measurements of swings, quite often the length of a swing is repeated, sometimes extensively. The white TL's are just the swings themselves except for the long white TL that extends below PA that was also a swing measurement (shouldn't have really been in pic as was just estimating a further drop). Note- Also I just noticed my first HH white TL's were at the wrong point, they should have been at the top where...

I appreciate the effort you put into explaining your chart, however, I do apologise but I am just as confused as before.

Technical analysis is our way of interpreting market activity. Here we use lots of tools -fib. levels, Support/resistance, order flow, RN's, PA etc. The charts are merely a representation of the buying/selling between market participants. We call them bulls and bears. The market is a buying and selling conflict between the bulls and the bears. They are always attempting to resolve their conflict by placing and exiting positions. When one gets the upper hand then we have our order flow and market direction. If markets participants are in agreement then the market moves in that direction. For example- If a market is rising, and then we see a pullback, a lot of market participants will see a chance to enter long ( buy on the dips), the bulls enter and the bears realise they cannot do anything more than a retracement, so they take their profit and stand aside. The market is once again in agreement and the bullish order flow resumes. They have resolved their conflict. This is an aggressive C entry. Order flow is simply an imbalance of orders to one side. If the market participants execute more buy than sell orders we have bullish order flow. If they are balanced we have a range market. A reversal can only ensue when the participants all agree that it is time to take profit, causing the move to become "exhausted" and then only if enough participants enter in the opposite direction does the order flow change, creating a "reversal". It is herd mentality.

Do you think that the majority of market participants are seeing the same as you are when considering their entries and exits, with subjectively placed trend lines, and subjective technical analysis? It is most likely that they are seeing and perceiving something entirely different on their charts.
Subjectively we try to make sense of the markets through the use of our technical analysis but it is not the market, nor are our charts. Our technical analysis is only as useful as how we perceive the market participants behaviour.
  • #13,110
  • Edited 10:46pm Feb 14, 2015 9:09pm | Edited 10:46pm
Quoting Jamos
{quote} I appreciate the effort you put into explaining your chart, however, I do apologise but I am just as confused as before.
Hi Jamos. I actually do think people are looking at the charts in this way to a certain degree, I'm not sure there is such thing as a majority in this market however as there are too many variables to consider.

This is my understanding of what I am shooting at. The swing levels also quite often fit within Fibonacci retracement levels and as we know these levels happen in nature repeatably and the same holds true for the charts.. So once the current range has been established retracements are drawn and levels and ranges are repeated.

Think of an ABCD pattern. AB=CD meaning that the range of AB is the same as CD. If you can now find reversal points, the 61.8% of AB in this example, you now have an expectation of where to enter the trade (61.8 fib) and another expectation of where the move will take you (the range of the main swing AB).

I chose a chart at random to show you that these ranges do repeat. Now all that is needed is to find reversal points (say 61.8 fib level) and expectations of how far the reversal will go (is it in the lt or st OF). You can then find a range that suits your expectations by looking at previous swings (marked on the chart).


Edit: That being said, this isn't meant to be the base line of my TA but rather it is just used as a confirmation of confluence and expectations.
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As the lights go by so too do the shadows move
  • #13,111
  • Feb 15, 2015 1:12am Feb 15, 2015 1:12am
Quoting Matts Micro
{quote} Hi Jamos. I actually do think people are looking at the charts in this way to a certain degree, I'm not sure there is such thing as a majority in this market however as there are too many variables to consider. This is my understanding of what I am shooting at. The swing levels also quite often fit within Fibonacci retracement levels and as we know these levels happen in nature repeatably and the same holds true for the charts.. So once the current range has been established retracements are drawn and levels and ranges are repeated. Think...
Is that a correct swing high?

61.8% is a level that the market can see, and fib. levels are a relatively objective tool that we use in our technical analysis, unlike trend lines. When we see the market reverse at this level, we are seeing the bulls and the bears resolving their conflict. Hence, the AB=CD pattern is our expectation.
  • #13,112
  • Feb 15, 2015 1:51am Feb 15, 2015 1:51am
Quoting Jamos
{quote} Is that a correct swing high? 61.8% is a level that the market can see, and fib. levels are a relatively objective tool that we use in our technical analysis, unlike trend lines. When we see the market reverse at this level, we are seeing the bulls and the bears resolving their conflict. Hence, the AB=CD pattern is our expectation.
I was just looking for a level to envelope the minor swings. If I was trading at that price range at that time I would use that level as a minor swing level. I could expand the chart and find the correct levels if you wanted but it wasn't the reason for the original post. Other than I don't understand your question. It's fine if you don't want to use TL's as they take some getting used to but for my analysis they work well.

Additionally what do you think AB=CD is if not TL's? I find many reasons for TL's that I wont expand on here because it will start to span outside of the range of this thread.
As the lights go by so too do the shadows move
  • #13,113
  • Feb 15, 2015 2:19am Feb 15, 2015 2:19am
Hi Guys great thread its really helped my trading alot, im thankful that there are traders that don't mind sharing their profitable ideas and strategy's to help others.
im currently looking at gold 1hr possible bat, possible cypher so i'll be keeping an eye next week.

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  • #13,114
  • Feb 15, 2015 2:38am Feb 15, 2015 2:38am
I often get a little confused between gartley patterns and butterflys when candles have high spikes that penetrate both areas this leads me to draw both patterns on my chart and 2 trade zones, sometimes they are so close together that it ruins the RR of my trade plan.

for eg. if at the B point 4 candles close above the 61.8 (gartley) but two of those candles spike the 76.8(butterfly) no candle close in the 76.8 area just wicks.
would you take this as a butterfly pattern or a gartley pattern???

currently im having to draw too many price zones and i would like to clarify this as i like to enter these patterns with limit orders.
i have tried to find the answer to this before asking you guys here but all the info i find is for the perfect set-up where price pretty much stops exactly at the fib they are demonstrating,.

any help will be appreciated this is a stumbling block for me.

thanks traders.
  • #13,115
  • Feb 15, 2015 4:37pm Feb 15, 2015 4:37pm
Quoting Jamos
{quote} What were your reasons for entering and exiting these trades?
Hi Jamos,

It's great to see your enthusiasm to learn.

I wonder though if you have spent time digesting the vast amount of learning material in this thread such as:

1. the videos
2. the pdf's and
3. the contents of the thread itself.

It takes time and a whole lot of time to understand what it's all about and then far longer to apply it correctly (read as consistently).

When you're ready (ie confident) post a trade you have taken well before TP and follow its progress to either TP or SL.

Why?

It will force you to think very clearly about your entry and exit (as you will be "watched" in this thread) and that's a good thing because you will benefit greatly from the whole process.

I think a few examples here and there are great but I personally would frown on running every single trade you take and post its running progress to this thread because firstly it might be hard to keep up with all the posts in a timely manner and it tends to create "lazy" onlookers who simply milk your trades. I don't like lazy people who simply want to be spoon fed.......... no trader I know of has ever become successful applying that strategy. Everyone I know has done the hard work, studied the strategies intensively and then spent many many hours of chart time addressing all the obstacles along the way. These people are the ones that are likely to succeed in trading!

Posting trade setups is great though because we can all benefit from it and perhaps discuss our individual entries and exits once the trade closes.

Comparing what individual traders did and did not do correctly is a benefit to everyone.

At least that's my opinion.

Now, as for the trades I took at the end of the trading week they are based purely on PA and flowing with the momentum for opportunistic gains (preparation and expectation for the trade was to watch price, identify a direction and trade in that direction for several pips).

Note: To show your trades better on your chart so we know where you have entered and exited I suggest you do the following:

1. Open your terminal window
2. Click on "Account history" tab
3. Find your completed trade, click on it and drag it to your chart (eg if GU then drag it to a GU chart)
4. The trade entry and exit will be shown on your chart.

Good trading,

Masterrmind..............
Master your Mind then Master your Trades
  • #13,116
  • Feb 15, 2015 5:15pm Feb 15, 2015 5:15pm
Looking at AU [M5] and GU [H1] shorting opportunities...........

Masterrmind...........
Master your Mind then Master your Trades
  • #13,117
  • Feb 15, 2015 7:01pm Feb 15, 2015 7:01pm
Currently short NZDUSD [H1 chart]

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Depending on positive OF to the downside additional entries might be considered (likely)

Additional entries would have smaller TP targets based on 382 and 618 fibs however the 1 st trade TP will remain just shy of the 161.8 retracement of the ABCD leg as shown.

Asian session entry so an appropriate SL has been used but on the top side of resistance with plenty of breathing space.
It is quite reasonable to expect price to carry up a little higher and test this level.

AU and GU: still waiting for an appropriate entry!

Masterrmind............
Master your Mind then Master your Trades
  • #13,118
  • Feb 15, 2015 7:52pm Feb 15, 2015 7:52pm
Quoting Masterrmind
Looking at AU [M5] and GU [H1] shorting opportunities........... Masterrmind...........
Hi Masterrmind, ready to make some pips this week?

I am looking at long USD as well on EU. I am looking at the hrly H&S on AUD with confirmation of the break of the .7800. There is a lot of structure above though, so there should be at least another pullback before that happens. EU has potential to go up as well, it seems to be at one of those levels where it could go either way with no defined lt OF for me as of yet.
As the lights go by so too do the shadows move
  • #13,119
  • Feb 15, 2015 8:02pm Feb 15, 2015 8:02pm
Quoting Matts Micro
{quote} Hi Masterrmind, ready to make some pips this week? I am looking at long USD as well on EU. I am looking at the hrly H&S on AUD with confirmation of the break of the .7800. There is a lot of structure above though, so there should be at least another pullback before that happens. EU has potential to go up as well, it seems to be at one of those levels where it could go either way with no defined lt OF for me as of yet.
Hi Matts,

Hopefully by the end of the week our positive gain is something to be proud of but there is a lot of water to flow under the bridge before we reach that stage.

Depending on what TF you are analysing its quite possible to have a fully completed short order within a longer term TF bias to the long side purely based on reversals within the longer TF. Makes for intuitive trading I think............

In terms of looking long USD I've also taken a look at UJ (H1) and there is potential to go long for sure.....will need to let price unfold a little before I get involved.

Hope you have a very good week!

Masterrmind.............
Master your Mind then Master your Trades
  • #13,120
  • Edited 8:34pm Feb 15, 2015 8:24pm | Edited 8:34pm
UJ (M5 chart)

AB=CD completed (based on the 38.2 Fib)

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Looking at going long.......... sT OF suggesting upward drive but I'm cautious at the moment ..... happy to be observing PA

Would really like to see price do 1 of 2 things....(1) at least a small pullback and then UP or (2) a deeper pullback to test "most" recent lows and then UPward bullish movement.

UPDATE:

Price did make a little pullback however I do anticipate a stalling of price at the DO level (you can clearly see how the candles have interacted at this level on several occasions)
This being the case I'd be looking at a r:R that is barely 1:1 for a TP of 8 - 10 pips.

NO TRADE for me based on the analysis (higher TF = different story)

If price were to go down into my PRZ zone and then produce Bullish drive to the UP side then that's a different story...r:R good since SL small.

Masterrmind............
Master your Mind then Master your Trades
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