Buying/selling the dips - setup | Forex Factory

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Buying/selling the dips - setup

  • #1
  • First Post: Jul 7, 2016 10:23pm Jul 7, 2016 10:23pm
When buying/selling the dips how would you normally enter a trade, picking from the following?

A. enter with suffcient retrace and without a signal, placing a stop behind previous swing as in the left shot

B. enter when a signal forms following a retrace, placing stop behind the signal as in the right shot
Attached Images
  • #2
  • Jul 8, 2016 2:33am Jul 8, 2016 2:33am
The risk is much smaller at B, but A is safer. Trading includes trade offs. A or B, the stop will be caught, that's the ugly truth.
  • #3
  • Jul 8, 2016 5:59am Jul 8, 2016 5:59am
Quoting richhand
When buying/selling the dips how would you normally enter a trade, picking from the following? A. enter with suffcient retrace and without a signal, placing a stop behind previous swing as in the left shot B. enter when a signal forms following a retrace, placing stop behind the signal as in the right shot {image} {image}
Hi richhand, between these two examples I would choose B.
But with the SL not behind the first swing before the signal but behind the second swing before the signal (SL in A example)


But strbac, give us a good summary

Quoting strbac
... A or B, the stop will be caught, that's the ugly truth.
"You may say I am a dreamer .... but I am not the only one."
  • #4
  • Jul 8, 2016 8:55am Jul 8, 2016 8:55am
Sell on the blue moving average ?
Bottomless wonders spring from simple rules, which are repeated without end
  • #5
  • Jul 8, 2016 3:30pm Jul 8, 2016 3:30pm
Quoting richhand
When buying/selling the dips how would you normally enter a trade, picking from the following? A. enter with suffcient retrace and without a signal, placing a stop behind previous swing as in the left shot B. enter when a signal forms following a retrace, placing stop behind the signal as in the right shot {image} {image}
I have a couple of different methodologies to work with almost this exact idea.

Overbought in an downtrend.
Oversold in an uptrend.

The ideas I use are:
1. Drill down into a smaller time frame and watch for faster moving averages.
2. Work with a custom set stochastics.
3. by simple triggering methodology - code wise, it would read like:
if ((Close[1]<Low[2]) && (MAFast<MASlow)) return(sell);
if ((Close[1]>High[2]) && (MAFast>MASlow)) return(Buy);

Issue is, is that all of these ideas won't necessarily produce the best single possible entry and cherry picking the chart to time frames is really only easy when you are looking at what has happened, not when you are trying to trade, what is happening.

The best strategies aren't necessarily a single idea based on historical charts, but more of a complex set of rules dictated in "What If", situations.
Money Can't Buy Happiness. Poverty Can't Buy SHIT! You Choose!
  • #6
  • Jul 9, 2016 12:06am Jul 9, 2016 12:06am
Quoting Magix
{quote} I have a couple of different methodologies to work with almost this exact idea. Overbought in an downtrend. Oversold in an uptrend. The ideas I use are: 1. Drill down into a smaller time frame and watch for faster moving averages. 2. Work with a custom set stochastics. 3. by simple triggering methodology - code wise, it would read like: if ((Close[1]<Low[2]) && (MAFast<MASlow)) return(sell); if ((Close[1]>High[2]) && (MAFast>MASlow)) return(Buy); Issue is, is that all of these ideas won't necessarily produce the best single possible entry...
If you are watching the H4 charts, for example, and waiting for pullback before entering a trade, then you have to use H4 criteria such as aiming for overbought/sold stochastics on H4 or for price to hit the H4 20sma. You can't drill down into the M15 chart to enter a H4 trade. However you can gain direction of a H4 chart and then enter a trade using M15 signal or chart pattern.
  • #7
  • Jul 9, 2016 12:07am Jul 9, 2016 12:07am
Quoting guesser
{quote} Hi richhand, between these two examples I would choose B. But with the SL not behind the first swing before the signal but behind the second swing before the signal (SL in A example) But strbac, give us a good summary {quote}
That is a wide stop! I imagine your win rate goes up at the expense of your risk/reward
  • #8
  • Jul 9, 2016 12:10am Jul 9, 2016 12:10am
Quoting limprobable
Sell on the blue moving average ?
At the 20sma or a bounce of the 20sma for confirmation!
  • #9
  • Jul 9, 2016 12:15am Jul 9, 2016 12:15am
Quoting richhand
When buying/selling the dips how would you normally enter a trade, picking from the following? A. enter with suffcient retrace and without a signal, placing a stop behind previous swing as in the left shot B. enter when a signal forms following a retrace, placing stop behind the signal as in the right shot {image} {image}
You need the price action confirmation which B gives you with the engulfing rev. The other pa to get you in would be exhaustion, without the pa confirmation your going to struggle.
Never said I was Batman,all I'm saying is you'll never see us together.
  • #10
  • Jul 9, 2016 1:03am Jul 9, 2016 1:03am
Quoting strbac
The risk is much smaller at B, but A is safer. Trading includes trade offs. A or B, the stop will be caught, that's the ugly truth.
I have no idea how one can calculate the RISK of any movement to come while trading in real time, but that is another topic.

However, if one is a price action trader, one should NEVER use a hard stop loss. Reason being is that with a hard stop loss, you run a much higher chance of having your stop loss hit, before the candle closes, only for the trade to end up going in your direction. I think we all know that the market has certain weaknesses, but instead of looking for patterns and saying When I see pattern A I will buy, why not be prepared to go either way, once a variation of the pattern you are seeking is hit.

Say for an example the O.P. likes to enter on the first retrace of any spike. His first question or one of the first questions may have been How do I identify a retrace.
Once he answers that question, he may simply use MA lines to be a visual aide, as to what is the best price to enter into the extension. Using the same chart the O.P. posted, say he likes to enter right on the MA line. However, we all know that the price doesnt ALWAYS stop at the ma line, so a variation of that MA line wager could be......
If the price drops, then reverses to the ma line the following needs to occur
1) A touch or candle close at or on the MA line.
2) We most than have a red candle close any time AFTER the ma line is touched BEFORE the price makes a 100% correction ( A 100% correction would be a confirmed cup and handle formation)

By simply adding rule number 2............ You have created a variationwhich will save you many pips in trying to enter at the start of the extension, assuming you are trading for entry accuracy. Have a look at the chart below.
Attached Image

You see candle number 1 follows rule number 1
You see candle number 2 follows rule number 2
I would than enter the short and the red line would be my SL, yet..... Instead of making a hard stop loss at that price, I simply use an EA which closes my sell IF the BID closes AT or ABOVE the red line.

That will prevent you from being stopped out in case of a whip lash.
@GJscalper I've turned a new leaf. No more trolling.
  • #11
  • Jul 9, 2016 1:33am Jul 9, 2016 1:33am
The moving average is moving in response to the price action, there is no bounce off an average. All you can see here is the hindsight that price kept trading below its average What average anyway, we can use any number of them through all the different values, SMA's or EMA's. In the examples shown here the average is performing no functional task of any value to a trader, take them off the charts and you still have the same price structure to trade in exactly the same ways described here.

A simple trend line below each pull back would achieve the same results. However this is not a practical way to trade because trend line crosses are not reliable.

To trade without a reasonable stop is just plain stupidity...I would like to know what would have happened on the Brexit break without one. The currency market is very prone to sudden spikes and they don't all come back before your account is dried up. So what do you do without a stop...trade with tiny sums resulting in making tiny profits and large losses.

Almost every chart in these forums is a zoomed in shot of the market price action, that is like trying to identify and elephant by looking at a flea on its back. I sometimes wonder if people are for real in their approaches to trading...no wonder there are so many losers in this industry.

Amen
  • #12
  • Jul 9, 2016 11:03am Jul 9, 2016 11:03am
Quoting richhand
If you are watching the H4 charts, for example, and waiting for pullback before entering a trade, then you have to use H4 criteria such as aiming for overbought/sold stochastics on H4 or for price to hit the H4 20sma. You can't drill down into the M15 chart to enter a H4 trade. However you can gain direction of a H4 chart and then enter a trade using M15 signal or chart pattern.
Why?

If your trend is showing bullish on the H4 and you trade signals off of the M15, you aren't waiting for the H4 to go into overbought or oversold, you are waiting for the M15 to go into overbought or oversold.

H4 is your trend.
M15 is your trigger.

Applying MTF indicators to a chart or even an H4 candle to an M15 chart isn't wizardry...this can be done with free tools.

Past that, if you have the ability to use a calculator, you can apply an H4 Moving Average to an M15 chart by simply multiplying by 16...this of course may not apply to higher moving averages as there is a limit to what can be applied, but at the same time, it can still be done.

I drill down the daily candle to the M1's.

And will maintain that there is more to any trade system than just finding a great place to drop in a trade. You have to know when and where to exit, if and when to add and adjust these based on your own ideas of reasonable profit and loss guided by whatever risk to reward criteria is afforded by your account and leverage.

Here's my idea of drilling down the Daily Chart to trade bidirectionally off of the M1.
Determining the trend.
Taking the triggers.
Following trend.
And
Watching for overbought in a down trend, and oversold in an up.

This was Friday, live trading - Automated - EURAUD.
Attached Image (click to enlarge)
Click to Enlarge Name: drilldown1.png Size: 61 KB
Money Can't Buy Happiness. Poverty Can't Buy SHIT! You Choose!
  • #13
  • Jul 10, 2016 9:34pm Jul 10, 2016 9:34pm
Quoting Nala66
The moving average is moving in response to the price action, there is no bounce off an average. All you can see here is the hindsight that price kept trading below its average What average anyway, we can use any number of them through all the different values, SMA's or EMA's. In the examples shown here the average is performing no functional task of any value to a trader, take them off the charts and you still have the same price structure to trade in exactly the same ways described here. A simple trend line below each pull back would achieve the...
The 20sma (which is also the middle bollinger band) is adhered to by many traders and which does produce the self fulfilling prophecy many talk about.

Regarding your last comment on zoomed in charts, assume the 2 chart shots above are part of a larger daily trend and with plenty of space to continue. This was actually the case.
  • #14
  • Jul 10, 2016 9:38pm Jul 10, 2016 9:38pm
Quoting Magix
{quote} Why?
Because I like to enter off H4 criteria. It is more reliable and stops are more substantial. However, I will still look for signals on the M15 chart (within a H4 or daily trend) but I judge these on their own merit.
  • #15
  • Last Post: Jul 11, 2016 8:54am Jul 11, 2016 8:54am
Quoting richhand
{quote} Because I like to enter off H4 criteria. It is more reliable and stops are more substantial. However, I will still look for signals on the M15 chart (within a H4 or daily trend) but I judge these on their own merit.
I don't understand this at all, a 4H and daily can turn on a dime just as easily as any other time frame. Buy in the morning and sell in the afternoon etc.

The use of EMA's or SMA's are great tools but we have to compare these averages with averages. That is to say the smoother they are the less information they give us. No matter what average is used it will always meet up with the price somewhere. Price does not meet up with the average.

So a nice lumpy average is going to tell you a lot and a smoother one is going to tell you less thus the average has to be changed to suite the current conditions.

You can actually turn off the price altogether and just trade the averages if you know what to look for.
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