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Flag trading the trend

  • #9,821
  • Jan 29, 2016 4:15am Jan 29, 2016 4:15am
Back to the serious stuff and i am happy to be trading something which occurs time and time again without fail. Something the alogorithms don't seem to be able to deviate much from.

This from yesterday, PXI;

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DAX;

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Audi;

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The pattern is so recognisable, that i plan to pre-emp the outcome and freestyle an entry on the first pullback, with stop above the high. The key is the look of the steep 3rd wave giving overbought macd, then the sharp pullback 4th wave and the slightly HH creating sharp neg divergence. It is a combo of EW and the Hat reversal as i will increase position size upon trigger according to charts. I have several methods to help confirm the 5th wave end, mostly being fib levels of prior waves... let's have it!

and already this morning, Cable 1min;

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and Audi;

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  • #9,822
  • Jan 29, 2016 4:44am Jan 29, 2016 4:44am
I have noticed (and suffered!) so many losing trades with the 123 method, that i started backtesting whether it is better to place stop below point 1. I have been side-tracked a bit by the success of the H&S trades. It is basically finishing off something i was trying purely with EW methodology until recently and by reducing timescales i have countered my tendancy for boredom trades. Together with the break of the neckline as the clue for what comes next, it becomes a very high probability trade and by watching several charts at once, i think i can find enough of them every day to be my base trade. This whole game is about confidence and that is something that can only come through successive positive trades.

One thing is for sure, it takes masses of time and experience to match each alternative method to each corresponding phase or cycle that the market goes through.

It is clear to me that we battle against some of the worlds cleverest people who develop the algorithms that drive all markets, pairs, instruments etc

Typical failed example from the Bund, trend was up, pullback, 123 triggered and..... soab!;

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MACD was crossed and positive, but as a lag, soon uncrossed. H's wait for retest method would have been the ideal.
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  • #9,823
  • Edited 6:25am Jan 29, 2016 6:10am | Edited 6:25am
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My point being the R:R is massively skewed in your favour, with the target being a fresh HH.
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  • #9,824
  • Jan 29, 2016 6:48am Jan 29, 2016 6:48am
Just to further that above post, cos i realise how it sounds. The reason i was looking for a reversal pattern (and not a fresh low), hence the reason for taking the 123 was because on the 1min chart, (the above being the 15sec), i had already identified my favourite pattern;

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Again, the sharp drop prior causing positive divergence to form. The difference being quite lazy PA to create the HH. It only broke by 1 pip and then came all the way back down to near a fresh low (which would have negated the set-up). In this instance i am wary of the pattern playing out with the usual taking a long position upon the second fresh HH. Why wait, when a 123 near the low gives a reasonable probability outcome coupled with a great R:R. I hope this makes sense!

In short the PD was the heads up and hence why i wrote 'knowing when to expect.....'
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  • #9,825
  • Jan 29, 2016 6:52am Jan 29, 2016 6:52am
Wow, it seems i am taking over! Need some input from others! How is everyone doing today?! I will refrain from posting for a bit!
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  • #9,826
  • Jan 29, 2016 6:54am Jan 29, 2016 6:54am
Quoting The Cableguy
I have noticed (and suffered!) so many losing trades with the 123 method...
In my opinion, 123's intraday test out best using line on close. Also, you are using a very fast microbar interval for trading. The patterns are the same, but you are going to have many 123's that are successful, but you might judge them to be failures because they did not result in an outright trend reversal. The problem is that it did do all it was meant to do, but it did it on the time frame in which it originated. A 123 on a 15 second YM chart will have fulfilled its destiny if it merely resulted in a test of the last 15 second swing high, which might only be 12-18 ticks above the trigger. You can't expect a 15 second chart to yield 5 minute bar profits, in my opinion.
  • #9,827
  • Jan 29, 2016 6:57am Jan 29, 2016 6:57am
Quoting The Cableguy
Wow, it seems i am taking over! Need some input from others! How is everyone doing today?! I will refrain from posting for a bit!
Not even 8AM here in the states. I'm still on my first cup of tea

A lot of news out this morning at 8:30 AM Eastern and then again at 9:45 Eastern and 10 AM Eastern. I will not trade until after the 8:30 AM release of the Q4 GDP numbers and then I will also exercise caution in entering close to the PMI and Consumer confidence numbers.
  • #9,828
  • Jan 29, 2016 7:09am Jan 29, 2016 7:09am
Quoting ddaytrader
{quote} In my opinion, 123's intraday test out best using line on close. Also, you are using a very fast microbar interval for trading. The patterns are the same, but you are going to have many 123's that are successful, but you might judge them to be failures because they did not result in an outright trend reversal. The problem is that it did do all it was meant to do, but it did it on the time frame in which it originated. A 123 on a 15 second YM chart will have fulfilled its destiny if it merely resulted in a test of the last 15 second swing...

Good morning DD,

Exactly, but that is why i stated R:R is usually only 1:1 with the 15sec timescale (and also why i posted the above charts, as that R:R ratio improves massively on the much larger pullback). I think i wrote last week sometime, that even using the 15sec charts for 123 set-ups on either the DOW or the DAX, risk is often 20/25+pips, which is plenty to cover the +1 entry and +1 spread and still give the 1:1 R:R...

This is not the case with the FX pairs that i watch and the 15sec chart simply is too fast, set-ups are often less than 10 pip risk, thus the +1 entry and +1.5 spread skews the R:R too far for it to be worth taking, thus minimum of 1min charts req'd.

As you rightly point out, i am matching trends to the timescale i am watching and the reason is obviously to find many more set-ups. I can find 123 reversal (or continuance) trades with move that would not even show on say, the 5min.
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  • #9,829
  • Jan 29, 2016 7:21am Jan 29, 2016 7:21am
The key is knowing what to expect imo. In EW terminology, a corrective move will be in 3waves, (ABC), these will often look like a 123 and then return to main trend, thus failing;

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(sorry the 123 labelling refers to waves 12&3 of a 5w impulse move), 123 as we refer to them on this thread is obviously the same pattern as either waves 1&2 (impulse) or waves A&B (corrective)

Whereas the reversal 123 will lead to a 5wave (impulse) move and thus easily give a minimum R:R of 1:1 (usually multiples of this)

Positive or Negative Divergence is a great indicator of impending trend change if only for a larger corrective move before the prior trend resumes.

It should be skewed in favour of a successful outcome as an extended C wave within a corrective move will also give a positive result.

This all sounds technical to non EWers, but it goes to explain the reason why the above trade was a winner and well worth trading. The 123 was a return to impulse move with the prior HH already printed...
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  • #9,830
  • Jan 29, 2016 7:47am Jan 29, 2016 7:47am
Quoting jtrade
Thanks to all who post charts here - I find it really helpful to see the charts of others, although personally I greatly prefer it when people leave their trade markers on (so others can see the exact, filled entry & exit prices) and are also not afraid to show their losing trades (we all have them, right, and often they teach us more than the winners, which we all love to post !?). Lastly, I really take heed of what H posted yesterday about finding and maintaining a low-stress approach to the trading day. Onwards & upwards...
I only have my charts set up to show active orders and current positions. Once a trade is over, it is over, and I cannot stand looking at all those markers on my chart. I showed each trade yesterday as best I could in real time, and anyone following along would be able to see discern the winners form the loser.

Here is my first YM trade today. Short two contracts @80 with 15 tick stop loss and 30 tick profit target.


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EDIT: -15, now long @101, same stop and profit targets (+30/-15)
  • #9,831
  • Jan 29, 2016 7:55am Jan 29, 2016 7:55am
Quoting ddaytrader
EDIT: -15, now long @101, same stop and profit targets (+30/-15)
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  • #9,832
  • Jan 29, 2016 8:04am Jan 29, 2016 8:04am
heres what I am observing CG is you are trying to combine ew and HHLL senario on 15 seconds you are letting all the swings to determine your setups which is fine but I look at direct price action at the very present where price makes a HH HL but not a HH yo me that's a 123 in the now
  • #9,833
  • Jan 29, 2016 8:11am Jan 29, 2016 8:11am
Same trade, stop loss is now @99 which would be a -2 tick. Logic of the stop should be apparent. Uinsg the same line on close pivot break framework, the stop, imo, should below the latest pivot low for a long once this is established.

Just stopped out as I type this, and I will wait for the open before trading again.

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  • #9,834
  • Jan 29, 2016 8:32am Jan 29, 2016 8:32am
Here's the thing DD on trading YM before 930 if there are not a lot of players a few weeks ago there were a ton of players so until that happens I wait till a little after 930
  • #9,835
  • Jan 29, 2016 8:55am Jan 29, 2016 8:55am
Quoting Divergence
heres what I am observing CG is you are trying to combine ew and HHLL senario on 15 seconds you are letting all the swings to determine your setups which is fine but I look at direct price action at the very present where price makes a HH HL but not a HH yo me that's a 123 in the now

Hi Harold, yep, but to be fair, i am not really concentrating on EW, or at least trying not too. I do find it difficult to ignore after thousands of hours of study, but in all honesty, the overall strategy is based on yours. The H&S reversal after strong divergence seems to be my strongpoint and of course it's origins come from a completed 5w sequence, so that part is my EW influence! but thereafter, the fresh LL/LH combo is where it's at (as you rightly point out effectively a 123 in itself).
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  • #9,836
  • Jan 29, 2016 9:43am Jan 29, 2016 9:43am
D, when you say enter out of box, is that the moment it broke the point 2 or does price need to close above/below point 2 first to confirm? Thanks
  • #9,837
  • Jan 29, 2016 9:45am Jan 29, 2016 9:45am
here's what i'm seeing for ym so far today:

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Become the casino
  • #9,838
  • Jan 29, 2016 10:07am Jan 29, 2016 10:07am
Quoting zenline
D, when you say enter out of box, is that the moment it broke the point 2 or does price need to close above/below point 2 first to confirm? Thanks
if direction is up and we get a setup whether its a 123 or 2b we enter 1 tick beyond pt 2 so we always use stop entry on first trade. only after you get the +15 do you then take a pb to pt 2 with a limit order at the exact 2 pt
  • #9,839
  • Jan 29, 2016 10:14am Jan 29, 2016 10:14am
Quoting erasmus66
here's what i'm seeing for ym so far today: {image}
Erasmus what I am doing is having a 999 tick chart with macd and a 333 tick chart no macd. I am using the 999 tick charts macd to determining which direction to look for setups here are todays trades so far
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  • #9,840
  • Jan 29, 2016 10:23am Jan 29, 2016 10:23am
I'm having a hell of a day;

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*Edit, just tried the same on the DAX and it failed, only positive is that it can be a tight stop of merely 5 pips on 15 sec chart and then can no longer be considered as valid resistance point* First loser of the day.
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