When Price is UP, buy; when Price is Down, sell short...

Hello LearnAlways,

Thank you for your excellent questions and giving me a chance to clarify my method, i can see deep thought here. Please keep it up.

I will return shortly to answer your questions, this short note is just to acknowledge u, as...the Zulu people of my country say"...i see you..."
{their greeting is actually...sawubona, which a literal translation will render as...i see you...same as the Navi' people of the movie, Avatar}

Hello LearnAlways,

As promised, let's do some clarifying...if any of my answers cause confusion to u or any other interested member please ask, OR if my understanding of your question is flawed, please do tell, thank you all. let's answer your question in order;

Q1.a) You are using the LINE graph to better visualize in seeing basically 2 things being namely the MOST CURRENT TREND based on month or week by using the SLOPE of the LINE.
Answer: yes, correct.

Q1.b) All the BIG & SMALL SWINGS HIGH/LOW
Answer:
Not entirely correct, we consider only the most recent Swings. i have used the GBPNZD as an example, please refer to the Monthly Chart as what i say of the Monthly will respectively apply to the Weekly which will have its own individual swing highs and swing lows. not all the big & small Highs/Lows

Please look at my Monthly Line Chart now::

...the Trend was UP
...There are two lines labelled {a} that mark the Last Swing Lows {lsl}, the last {a} marks the most recent lsl, which is the week just closed yesterday, friday. everytime price CLOSED below that lsl, we consider it a Trend Change...so from Monday we will switch to the DAILY chart or timeframe and what will we look for ??? we shall only look for short signals in that pair and trade them short...no longs will be entertained. the first trend change {a} didn't follow through down, and gave a few trade signals {ts}, checkout the Daily Chart of that period and the remarks on it...please not, if the RANGE of the Signal Bar is too wide compared to the prior bar then we may stand aside [as in the 1st and 3rd green x ts], it is up to you but i recommend to stay out. the bar after the last green ts was also a wide range bar compared to its previous bar so u would have stayed out, but i probably would have taken that ts based on the 2 prior bars plus the current bar forming an extremely bearish price pattern.


Q2) You then trade the BREAKOUT of the MOST RECENT PREVIOUS SWING pertaining only to the direction of the MOST CURRENT TREND as defined in month/week
Answer: yes correct. if Monthly gave a Trend Change Signal than we drop down to the Daily Chart tf and trade only the ts there that confirm our Mthly Bias...Mthly Dwn>>>trade only short in Daily

Q3) Because of using LINE CLOSE prices do u take trades while price is still developing or wait for H4 bars or D1 bars to close?
Answer: in the case of the Monthly>>if the trading Bias is down, we will drop down to the Daily tf and wait until the daily bar close before we will trade the signal. similarly for the 4hr bars, if the Weekly Bias is short, we will drop down to the 4hr tf and wait until the 4hr completes before we will take the trade.

Q4) How do u react during price swings of consolidation. I mean Swings High/Low are very close together. They trigger multiple entries.
Answer:
...we stand aside, but since there is no way of knowing beforehand that price will range it is inevitable that 1 or 2 losses will be encountered. make peace with the fact that losses will be experienced, will be experienced as this method is Trend Following so, we only need to catch ONE runner of a couple of weeks to put us ahead of the curve...that runner will have multiple stacks as we trade the "hot-hand"
{...in addition we may trade short-term Counter Trend based on the Daily Line chart close...this basically entails monitoring the trade intraday, but please this is just given for informational purposes now as i do not wish to go into intra day trading as yet. first i desire for us to grasp the essence of the long term trading method before addressing intraday time frames and trading, so please do not ask questions on that as yet}

Q5)How do you pyramid? Is it based on those small LINE SWINGS also in lower TF Daily or H4 or just based on +brb (long) / -brb bars (short) or fixed pips?
Answer:
partly correct, if we initiated a trade because of a Dly TS than we just basically do as my thread title says:: Buy when Price is Up and Sell when Price is Down...please see the previous Dly chart of GBPNZD above. i have labelled the pyramid entries. each new days Stop Loss will be above the previous days' high, what i mean;
...for shorts, ts on Tuesday...

1. we enter short Wednesday morning...SL above entry day, which is Tuesday's High
2. Wednesday closed down, we enter a sell again on Thursday morning...SL above Wednesday's High...our 1st SL is now moved down tobe the same as Thursdays SL,
3. Thursday closed down, new shortn entered AND all SL's are moved on Friday morning to above Thursday's High.
4. so if we enter short today than tomorrow morning when we open our trading station, we will move our SL down to be just above Yesterdays High.
5. to summarise: for pyramiding:: just FOLLOW the Daily Candle once in a trade... we will do the same if the trade was initiated on a 4hr tf {i should have done that with my AUDUSD short trades then i would not have left so many pips on the table.}
6. we keep on doing that until we get stopped out or we get a non-trading day candle formation, such as Doji's, Spinning Tops and Hanging Man candles. Please refer to the Daily chart below for a current visual clarification as at Fridays close, thank you.

​

​Q6) When do u TP or close all your pyramid positions? Based off those LINE SWINGS again on higher TF or lower TF?
Answer: see the answer to Q5 above please.
basically we stay in a trade as long as the high of the previous bar is not exceeded by a few pips, generally 10 pips, depending on spread. Look at the weekend spread of the GBPNZD, 54 pips !!! so i prefer not to put a SL when leaving postion open over the weekend. i advise to trade pairs with lower weekend spread. i had a SellStop activated in this pair of Friday during the NFP farce the spread widened considerably and it stopped meout for a loss although price was stll 16 pips below my SL...so one more lesson learned.. {!}if in a trade before the nfp is released then don't have any SL entered, {!!} or don't enter trades before the NFP is released.

Q7) Lastly a dumb question, is there any difference in using LINE OPEN price (1 EMA Open) instead of CLOSE prices to make decision except it will be slower? Open Prices remain stagnant while close prices tend to move in real time. I ask because recently FF threads all starting talking about trading using OPEN prices. Pls pardon me if it sounds stupid.
Answer:
not a stupid question at all.
there is a difference in their plotting on the charts but since we use Line Charts to analyse our long term charts and derive a trading bias from that, the plotting of the Monthly Open Line chart compared to the Monthly Close Line chart is immaterial to our analysis. see the monthly chart below with both Open and Close Line charts on it for comparison.
to my understanding, the big funds use a price line based on closing prices, therefore we will stick with that.

Thanks sunshine for the clear explanation. Pls continue.

Sorry got 3 questions
1) Actually u can just base your trading on LINE chart only for both (Month - Daily Setups) & (Week - H4 Setups), there's no actual need to trade using candlestick. U can just trade the BreakOut of the swing in LINE chart format am I correct?

2) Why the Weekly Swing is taken off from the (Month - Daily) I mean skip? It sounds silly as u might be wasting a lot of pips.
3) Why the Daily Swing is taken off from the (Weekly - H4). Same question as above.

Best Regards,
LearnAlways

u welcome and thank you for taking the time and effort to understand what i'm trying to convey.

Sorry got 3 questions
Q1) Actually u can just base your trading on LINE chart only for both (Month - Daily Setups) & (Week - H4 Setups), there's no actual need to trade using candlestick. U can just trade the BreakOut of the swing in LINE chart format am I correct?

A1) Yes correct. actually after a while, u won't need a line chart or bar chart or candle chart, especially if u have multiple positions in that instrument. all u will need to know is where did price closed this week in relation to last week and u will be able to manage your open positions accordingly, bring SL down, close out some trades or open new trades.. i have been told that some of the most successful traders only trade off a line chart with only closing prices plotted. no moving averages or any other mathematically derived indicators.

if u checkout my profile u will notice that my favourite trading book is "How i made 2,000,000 in the stockmarket" by Nicolas Darvas, a touring dancer at the time. that book was written over 50 or is it 70 years ago. in it he tells us how he studied the prices that he received by telegraph and how he will buy if today's price closed higher than yesterdays {like what we trying to do her...buy when price is up...} and also if there is a breakout after a retracement in a rising stock, {again, what i'm trying to illustrate here amongst others} he will enter long especially if it's a new position he's opening in that particular instrument, than he will enter on the breakout.

Q2[a] Why the Weekly Swing is taken off from the (Month - Daily) I mean skip? (Q2)[b] It sounds silly as u might be wasting a lot of pips.
i have divided your question into two parts for ease of answering.

A2[a]) u are asking why are we skipping the weekly tf and go straight to the Daily when we have analysed the Monthly for tf for trade direction and bias ? yes ? ok very good. this is the same question that that PiTERMAN asked but i never got round to answering, my apologies Piterman, please take this as your answer too.

please see the Mthly chart below. i have highlighted the mthly wick and no:'s 1 & 3 pyramid entries in white of the Daily Chart. the red dotted line is the Weekly bar close entry. note the difference in pips. i have missed out one dly short.


(Q2)[b] It sounds silly as u might be wasting a lot of pips.

A2[b] the opposite is actually true, believe it or not !
When we analyse the Mthly, then we go straight to to the Dly to look for entry signals. This give us 3 advantages over the Weekly tf;

1. the Daily tf Signal will get us in on the Wick or top of the monthly candle which is the best place to be.
2. our first entry is much earlier, almost 100 pips earlier
3. by the time the weekly gives it entry signal, we may be already 4 or 5 entries ahead with all or most in profits. Don't believe me ?, lets take a recent example using the AUDNZD pair. i have prepared a few charts, please follow along using the chart of the different tf's. i will do the mthly and Dly...it's a shorting example. if anything is unclear , read again then study the charts again pls...make sure u understand the Dly Line chart and why we didn't take the 1st red reversal bar as a trading signal.

​important: when we are looking for a trading signal on the lower tf which in this instance is the Dly, we DO NOT want to see a Higher High Close { HHC}. Should there be a HHC then we will wait until price makes a new Lower Low Close {LLC} before we will take any shorting signals.
...we see two HHC's...see the white x's. when a new HHC occurs, price says ...no new shorts just yet, i am still going up.
...the 2 green x's indicate where price has cancelled that HHC signal and made a new LLC, price says...its ok now we are going down, u can can enter shorts as of now.

Please take a moment to study the 2 x Daily charts and see these signals.

Daily Chart entries

 

1. the first green x is the 1st short entry, the numbers are our additional shorts known as pyramiding or stacking.
2. the weekly chart will close when we enter our 5th stack. Please compare the Weekly and Daily Charts now
3. so u can see that quite the opposite is true of what u were expecting, the Daily chart gets us earlier in the trade plus we have 5 positions by the time the Weekly bar closes and the weekly short is entered.
4. the 1st position is entered almost 100 pips above the weekly entry.

​

The Weekly and 4hrs i will leave up to u to research and post here.

Hi sunshine,

I would rather leave this task to the master. I'm just a learner, and I would very much like to learn from the master first before venturing out on my own. Pls pardon me as I'm very busy at the moment and doesn't have the time to do homework from you and if I do it, most likely it will be a shabby work of sub-standard and might derail others from learning the correct approach from you. I would therefore greatly appreciate it if u could also post the weekly chart and proceed with your explanations.

Sorry & Best Regards,
LearnAlways

Hi sunshine,

Thanks for the recommendation. I finished the book "How I made $2,000,000 in the stock market". Its an interesting read by the way. Darvas trading methodology is a Trend Trading System that enter on Breakouts with Increasing volume as the first signal. There's no mention of LINE charts. Only mention is the Darvas Box Method which is the Breakout but I assume we can all draw boxes ourselves.

Q1) Do u feel the Darvas Box Method works similar like what a Donchian Channel is? I mean its like the same thing. And if its the same why re-invent it?
Q2) Not much info is mentioned about his Darvas Box, eg. How many bars are inside his Darvas Box? I'm not sure why this important piece of info is left out inside the pdf? If u could pls enlighten me, I would be grateful thx.

Best Regards,
LearnAlways

hello there LearnAlways,

you are indeed a seeker and u are right, Mister Darvas's trading methodology is Trend Following with a Breakout strategy on increased volume. thank you for the question.

i have read this book early on in my trading quest and his story as he searches for success could have been mine with a few additions and omissions though a few decades and massive technological advances separate us. When i first read this enthralling true story, i as u, was looking for a very specific trading method but then as he relates his journey i realised that there is both a general trading method as well as a few specific trading rules being presented. That rules i regard as my turning point in trying to get closer to the market.

...be that as it may, i am not trading Darvas's Box method therefore i cannot tell how many bars are inside his Box.
i am trading my own method based on two things mainly;

1. Line Charts and
2. different related {as i see it} Time Frames.

...my LINE CHARTS are based on the CLOSING PRICE and not HIGH or LOWS as in Darvas's Box Method or as in the High and Low Moving Average Indicator better known as Donchian Channels.

nevertheless, i have taken a screenshot from some utube video that illustrate what u looking for, please see the image below.

the chart below illustrate the essence of my method. please take a moment to study it...i mean really ponder on it.

 

1. the chart below is without a time frame on purpose...
2. WHY ? so as to make u realise its numerous applications,
3. can u see it ? because it is timeless it can be applied to any time frame !!!

​

If u like to trade off Daily Charts on your favourite pair or commodity, then do this:: {let's do it in reverse this time}

... u are looking at your Daily chart and u want to buy a fx pair for whatever reason, whether u just have a feeling or your system have generated a buy signal. do this please...

1. change your Daily chart format to Line,
2. look if price has closed above the Last Swing High, {LSH}
3. if it has, you now have additional confirmation in addition to your own for going long. This trade may last u from one to 7 days...so manage your position accordingly once in profits.
4. NOTE:: this could be a counter trend trade or a trade with the trend. i will stop here.

the chart below gives an explanation of the different colour codes that i use. the colour differences is so that when i look at a trading chart then i will immediately know why that trade has been taken and it will automatically tell me the expected holding period. it also tells me when i come back to my trading station, what i was waiting for...to buy or sell.

hello traders,

below are 3 dly charts that are numbered according to my trading preference. by that i mean, in the order that i think its more likely to pay off when longs are taken.

here are my reasons for anyone interested;

{1} NZDCAD is preference no: 1...why ? because

1. the Mthly and the Wkly trends are both Up, and
2. the pair fit my trading method...long term trend, Mthly is Up, enter on the Daily,
3. and the Dly has closed above its previous SHC, not really a SH, its just a wiggle but enough for me to acknowledge it. (switch to Line format and u may see it)
4. price formed a very bullish candle after first dipping below both the lows of the prior 2 bars and then proceeded to end in an Engulfing Price Pattern.
5. 4hrs gave a buy signal corresponding to its larger Wkly trend.
6. average daily range for the last 66 bars is 103 pips so 50 to 60 pips intraday is just fine, i reckon.

​{2} GBPCAD is preference no: 2..here are the reasons

1. Mthly trend is Up
2. Mthly is Up, so Dly gave an intraday entry signal, again, not a confirmed buy bcz price didn't close above the last Dly SH but enough to trade intraday long.
3. price formed a good bullish bar after a very bearish upside down hammer.
4. 4hrs gave a buy signal. this pair could be traded in the 4hrs or lower tf's intraday.
5. average daily range for the last 66 bars is 196 pips so taking a large chunk, say 50 to 100 pips of that intraday should be very rewarding.

​{3} AUDCAD

1. Mthly & Wkly trends are both down
2. so taking intraday longs on this pair are highly recommended
3. 4hrs gave a buy signal...recommendation is to trade intraday.
4. average daily range for the last 66 bars is the same as the NZDCAD pair which is 103 pips so 50 to 60 pips intraday is just fine. if u wish to increase increase the gains than stacking is recommended.
5. edit: this is obviously a counter trend trade that is why i suggest an intraday strategy.
6. edit: i forgot to mention when to exit so here are a few suggestions for all the pairs mentioned; [a] after price has put in the rough guide to all 3 pairs' daily ranges, i.e. a predetermined number of pips, [b] in your entry timeframe...ride only the green bars and exit as soon as a red bar completes...please wait for it to complete, [c] exit when in line format a New Swing Low {NSL} is formed then price moves back up and than after a 1 or 3 bars closes below that NSL. [d] this applies to any intraday tf u choose to trade, from 5min to 4hrs and all those inbetween.

​{4} and NO, the USDCAD leaves an entirely different foot print then these 3 above that have the Loonie as the counter pair. if u wish to know what i see then please ask.

​

I am following with interest! I like the thread and also your analysis and you are on the right approach! Will be following to see how you get on!

Good luck!

Just a heads up for the week ahead...the Cable and the Ozzie both have given trend change signals on the Weekly according to my method.
i do anticipate a retrace before the march northwards can continue. how much of a retrace ? i don't know but i reckon about 50% of the week just closed.

Although the AUDUSD, the GBPUSD & the EURUSD have similar long term down trends, the EURUSD did not give a Trend Change Signal in any of the 2 higher time frames.

Good thread fellow countryman

u welcome and thank you and please do participate

Hi sunshine,

I am very puzzled as to why u said NZDCAD GBPCAD monthly Trend is Up, Weekly Trend is UP?
From the LINE chart as what I perceived, NZDCAD GBPCAD, MN is DOWN, W1 is DOWN, D1 is UP, H4 is UP.
Pls refer to attached pic.

Edit: Sorry I should rename to GBPCAD




Best Regards,
LearnAlways

Hi sunshine, I'd be keen to know your view on USD/CAD?

its ok was preparing the reply but since your edit i will look at GBPCAD

anyway, since i prepared the NZDCAD, here are the 4 different tf charts...pls see if my explanation is crystal clear

hello duderoo,

how is the weather this morning in the southern tip in your part of our Africa ?

i will answer u just now after i have addressed LearnAlways's concerns about my interpretation of the GBPCAD so stay tuned.