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95% of the time Price will close above or below the open price

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  • First Post: Jul 10, 2016 11:58am Jul 10, 2016 11:58am
  •  strbac
  • Joined Feb 2015 | Status: Member | 24 Posts
"95% of the time Price will close either above or below the opening price. Less than 5% of the time, Price will close at its opening price. Within this truth lies the pot of gold."

This statement has changed the way I look at the markets and charts forever. When I first read this it was the greatest enlightenment I ever had about trading. Most people do not see the enormous edge in this statement.

How can we apply this to actual trading?

The above statement is equivalent to:

Price will always move away from any given reference point.
Price will always be up or down, market never changes.
Price is always moving.
95% of the time price is not at the line, it is almost always around it.
Every candlestick on any chart proves this.
As above, So below.

I have a great respect for CrucialPoint and have read all of his posts many times. He wrote:

"This has nothing to do with price history nor historical data. This apply to every TF. But for simplicity, I want you to pull up any daily, weekly or a monthly chart. Look at the very last candlestick and understand this observation. Don't look the history, just the last candle. And then apply this theory to the future candlesticks without any historical analysis. I can guarantee you it will be 100% all of the time. I also dare you to prove me wrong on this.

The very first epiphany in trading was the discovery of "Buy above the line and Sell below the line". It is the equivalent of the invention of the wheel. Although this discovery was and still remain a closely guarded secret and will never be fully revealed. This concept was then developed and incorporated into the bar graph. The purpose of a bar is to create a reference point in time. Because the masters knew that price will always move away from any given reference point. And in doing so, only then a trader can take advantage of such movement to profit.

There is a secret (I shouldn't be using the word secret, but it is a secret). In the past they discovered that as long as you "buy above a line and sell below a line" that you actually have a greater statistical edge. Now this statistical edge was never released, and will never be released to the public. In discovering this powerful concept, they invented.... drum roll... The Candlestick. Have you ever wonder, when you have a line graph, why in the hell would you invent the candlestick!!! ? Clever Japanese people, they never did tell you why they invented it in the first place. Decades had past and then candlestick patterns were published... but this is not as powerful as the main core concept of the simple candlestick.

I would only draw a line. Anything above it I would buy. Anything below it I would sell.

If price is above the line, it is an uptrend. If price is below the line, it is a downtrend.

This is one of the best advice you will get: 1. Pick one side (buy or sell) 2. Find a reference point (only buy above and only sell below) 3. Only trade according to point 1."

But again, how do we use this ? What is the secret? I am trying to figure this out and have been thinking about this almost two years. This is my humble attempt to apply this theory and ask the ones that KNOW to correct me if I am doing something wrong.

Here it goes:

We only need a horizontal line and an appropriate market condition to be profitable. Every candlestick trades like this, we should trade like the candlestick trades. This is the simplest way of trading, and by my opinion the most powerful. We are going for the fast range expansion (candle), starting from a single line (reference point).

The open price mentioned is any price, a reference point, it doesn't have to be the open of any time frame usual candle. It is the open of our trading candle which starts at the moment we put on a trade, and closes when we close the trade(s) with profit. That's our candle.

1. We first define the BUY/SELL hemispheres. We only buy in the buy hemisphere, and we only sell in the sell hemisphere. The boundary between these hemispheres will be 200 wma (slowest ma on the chart, I call it spine) on a pure price chart without time. I use renko 1 pip chart, which shows clearly how the market moves, there are no hidden moves inside a candle, it shows every 1 pip move clearly. On this chart I can see easily the price moving away from any line. We define the market condition, is it uptrend or downtrend? Is it above or below our boundary(spine)? We see that it is in uptrend.

2. We define the momentum of the trend. The risk is smallest when we have strong momentum pushing our trade(s) - Law of motion. We want the price to move fast away from our trading line, this means we will have fewer losses. I define here the strong momentum this way:

-spine starts going up (in this case) with an increasing angle-slope. We don't even think of trading when the spine is flat.
-smaller mas are also going up and are above the spine, spreading from each other and forming the rainbow - meaning momentum is getting stronger
-we want the price to be in the yellow ma group (the fastest) above all previous ma groups that form the ma rainbow. I like the rainbow, it clearly shows the trend and momentum strength. We are targeting the 6th dimension by taking the trades in this ma group because we are in the market when all (relevant to us) trends are up. It is the fastest speed of the market, the 6th dimension. We only trade when the price is in this group.

3. When we have trend and strong momentum, we find a reference point from which we will trade. We find the reference point 1.10700. That is our horizontal line from which we will trade. We know that the price will always move away from this reference point. The only trades we will execute are buys 1 pip above 1.10700. Our stop is 1 pip below this line, risk of 2 pips. If we are stopped out we will re-enter again. We have an uptrend and strong momentum and we are taking trades in the direction of the trend with strong wind (momentum) that will move away the price fast from our trading line. If we trade when there is no momentum and trend present, we could be chopped to pieces. That is why the right market conditions are an essential part of trading.

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That's it. Finding the right (fastest) market condition - trend and momentum and trade the horizontal line. Buy above, sell below. Simple. Price will always move away from the line - range expansion (candle), starting from a single line (reference point).

Is this a correct way of utilizing this theory? What do you guys think? CrucialPoint?
Thanks in advance.
  • Post #2
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  • Jul 10, 2016 12:59pm Jul 10, 2016 12:59pm
  •  BillYon
  • Joined Feb 2015 | Status: Member | 924 Posts
Solutions ONLY!!!
 
 
  • Post #3
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  • Jul 10, 2016 1:13pm Jul 10, 2016 1:13pm
  •  ronaleo10
  • | Joined May 2012 | Status: Member | 219 Posts
Its quite clear how you enter....but dont see anything about exit...Can you please elaborate on it?
 
 
  • Post #4
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  • Jul 10, 2016 2:31pm Jul 10, 2016 2:31pm
  •  mvp77
  • | Joined Jul 2012 | Status: Member | 430 Posts
Quoting strbac
Disliked
"95% of the time Price will close either above or below the opening price. Less than 5% of the time, Price will close at its opening price. Within this truth lies the pot of gold." This statement has changed the way I look at the markets and charts forever. When I first read this it was the greatest enlightenment I ever had about trading. Most people do not see the enormous edge in this statement. How can we apply this to actual trading? The above statement is equivalent to: Price will always move away from any given reference point. Price will...
Ignored
sounds like CrucialPoint
 
 
  • Post #5
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  • Jul 10, 2016 2:35pm Jul 10, 2016 2:35pm
  •  LITEchild
  • Joined Nov 2013 | Status: Member of the 5% club | 1,256 Posts
Quoting strbac
Disliked
"95% of the time Price will close either above or below the opening price. Less than 5% of the time, Price will close at its opening price. Within this truth lies the pot of gold." This statement has changed the way I look at the markets and charts forever. 1. Pick one side (buy or sell) 2. Find a reference point (only buy above and only sell below) 3. Only trade according to point 1.
Ignored
The biggest challenge most traders will face in trying to remain consistently profitable is the temptation and habit of continually adding and complicating simple concepts. Look at your chart. Look at the rules 1,2, 3. Have you added anything? Have you complicated anything?

In any case you are on the right path....
Understanding liquidity, Time Action and Price Action is priceless!
 
4
  • Post #6
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  • Jul 10, 2016 4:34pm Jul 10, 2016 4:34pm
  •  amoc
  • | Joined Nov 2015 | Status: JEHOVAH JIREH | 156 Posts
this is flawless......
 
 
  • Post #7
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  • Jul 10, 2016 5:03pm Jul 10, 2016 5:03pm
  •  BillYon
  • Joined Feb 2015 | Status: Member | 924 Posts
Quoting ronaleo10
Disliked
Its quite clear how you enter....but dont see anything about exit...Can you please elaborate on it?
Ignored

Exit on close of the ref. timeframe's candle
Solutions ONLY!!!
 
 
  • Post #8
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  • Jul 10, 2016 5:15pm Jul 10, 2016 5:15pm
  •  BillYon
  • Joined Feb 2015 | Status: Member | 924 Posts
Quoting LITEchild
Disliked
{quote} The biggest challenge most traders will face in trying to remain consistently profitable is the temptation and habit of continually adding and complicating simple concepts. Look at your chart. Look at the rules 1,2, 3. Have you added anything? Have you complicated anything? In any case you are on the right path....
Ignored
Solutions ONLY!!!
 
 
  • Post #9
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  • Jul 10, 2016 5:43pm Jul 10, 2016 5:43pm
  •  ronaleo10
  • | Joined May 2012 | Status: Member | 219 Posts
Quoting BillYon
Disliked
{quote} Exit on close of the ref. timeframe's candle
Ignored
Ok..let me summarize it.

Main point - "95% of the time Price will close either above or below the opening price. Less than 5% of the time, Price will close at its opening price. Within this truth lies the pot of gold."
( am i right in assuming through above sentence that we do not know whether price will go up or down from reference point , also we do not know how far it will go from the reference point )
1 We enter according the first post of the thread and if stop loss is not hit ....
2 than we exit at the close of reference candle.
 
 
  • Post #10
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  • Jul 10, 2016 6:31pm Jul 10, 2016 6:31pm
  •  The-Flipper
  • Joined Aug 2015 | Status: Member | 430 Posts
Not again this stupid sh*t.
2
 
  • Post #11
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  • Jul 10, 2016 10:44pm Jul 10, 2016 10:44pm
  •  NorthTrader
  • Joined May 2013 | Status: Digging deeper | 653 Posts
In simple terms, this is the secret of trading:

1. Only buy above the daily open, only sell below it.

2. For even better results, make sure you trade away from yesterday's close and the weekly open too.

3. Enter when price breaks out from a volatility contraction, or on a weakish pull-back. Both methods have good points and bad points.

4. Set fixed SL wisely based on your chosen method (e.g. other side of the range if trading breakouts).

5. TP is the hard part. The goal is to let winners run as long as possible (trailing stop), but that's easier said than done. At any rate try to move the SL to win the amount you risked after price has moved sufficiently in your favour.

6. Expect many losers and occasional drawdowns. But with the edge provided by this way of trading, you will profit over time.

7. For greater confidence, try backtesting your system to see how it performed over different conditions, timeframes and instruments. But be very careful about how the backtest is coded (always check a sample of the trades it took to make sure it's working as it should) and make sure it includes full trading costs such as commission and slippage.

8. Even with backtested proof you will still be tempted to tweak and/or override the system in realtime, especially after a string of losses. This will be your downfall! Know how many consecutive losers you can expect, and how much maxiumum drawdown you can expect, from your backtesting. Don't consider abandoning the system until these figures are exceeded in realtime.

Good luck everyone
You reap what you sow.
 
4
  • Post #12
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  • Jul 11, 2016 3:14am Jul 11, 2016 3:14am
  •  boxferret
  • | Joined Sep 2012 | Status: Member | 78 Posts
"95% of the time Price will close either above or below the opening price" - Thanks for stating the b*****ing obvious!!!

95% of the time it will either rain or not rain on a certain day
95% of the time you will either catch a cold or not catch one
95% of the time you will either lose money trading or make some
95% of the time the price action will either go up or down

Not even a nice try.
 
 
  • Post #13
  • Quote
  • Jul 11, 2016 3:47am Jul 11, 2016 3:47am
  •  Intrepidpips
  • Joined Aug 2011 | Status: Mos P from Cape to Cairo | 2,585 Posts
Quoting LITEchild
Disliked
{quote} The biggest challenge . Have you added anything? Have you complicated anything? .
Ignored
Let's give this another 100 posts, heh heh
Let it turn and find your entry.
 
 
  • Post #14
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  • Jul 11, 2016 3:59am Jul 11, 2016 3:59am
  •  CrucialPoint
  • Joined Nov 2009 | Status: Good-Bye FF | 857 Posts
I keep telling people that if they something negative to say about me, then they should post it in the link below:
I openly welcome for all the frustrated people to vent out all of their negativity into one thread and not disrupt other people's thread.

http://www.forexfactory.com/showthread.php?p=6645523

You guys will enjoy the link I provided (there's even a poll ) because you will find all the like minded people who share your views about me.

Please stop disrupting threads and go to the link provided and have a blast there and not in other people's thread.

Peace,
CrucialPoint
http://www.forexfactory.com/showthread.php?p=6645523
 
 
  • Post #15
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  • Jul 11, 2016 4:21am Jul 11, 2016 4:21am
  •  strbac
  • Joined Feb 2015 | Status: Member | 24 Posts
Quoting ronaleo10
Disliked
Its quite clear how you enter....but dont see anything about exit...Can you please elaborate on it?
Ignored
We can base our exit on several things:

1. loss of momentum - yellow ma group goes back inside previous ma groups, or ma2 crosses ma3. Interior mas provide trend and momentum quality.
2. or predetermined TP exit like 10 or 20 pips, considering stop is 2 pips
3. or price cuts back through another horizontal line (example 1.10900)
4. or anywhere we have bigger profit than previous losses on the line
 
 
  • Post #16
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  • Jul 11, 2016 4:25am Jul 11, 2016 4:25am
  •  Carllos
  • | Joined Jun 2006 | Status: Member | 298 Posts
I think TRO (The Rumpled One) built a strategy around this long time ago. From what i remember he just used statistics to get an edge.
"Hoe ur pips mate?" fxcarllos
 
 
  • Post #17
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  • Jul 11, 2016 4:54am Jul 11, 2016 4:54am
  •  carbonado
  • | Joined Nov 2012 | Status: Member | 450 Posts
"In simple terms, this is the secret of trading: 1. Only buy above the daily open, only sell below it. 2. For even better results, make sure you trade away from yesterday's close and the weekly open too. 3. Enter when price breaks out from a volatility contraction, or on a weakish pull-back. Both methods have good points and bad points. 4. Set fixed SL wisely based on your chosen method (e.g. other side of the range if trading breakouts)."

Thanks so much north.....you just opened my eyes, i used to have issues on what should be the reference point....i do like to ask..1) incase of the daily open...it varies with broker..how do you deal with this....2) do you trade this way exclusively or added some other things...say depper understanding of the structure of the market....thanks in advance...
 
1
  • Post #18
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  • Jul 11, 2016 6:50am Jul 11, 2016 6:50am
  •  BillYon
  • Joined Feb 2015 | Status: Member | 924 Posts
Quoting Carllos
Disliked
I think TRO (The Rumpled One) built a strategy around this long time ago. From what i remember he just used statistics to get an edge.
Ignored
Indeed
Solutions ONLY!!!
 
 
  • Post #19
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  • Edited 8:52am Jul 11, 2016 8:16am | Edited 8:52am
  •  NorthTrader
  • Joined May 2013 | Status: Digging deeper | 653 Posts
Quoting carbonado
Disliked
Thanks so much north.....you just opened my eyes, i used to have issues on what should be the reference point....i do like to ask..1) incase of the daily open...it varies with broker..how do you deal with this....2) do you trade this way exclusively or added some other things...say depper understanding of the structure of the market....thanks in advance...
Ignored
Good questions carbonado. About the daily start time, I think that depends on which instuments you are trading. I trade mostly the Asian session (Nikkei, JPY pairs, sometimes AUD) so I use midnight GMT for the open. When I trade GBP.USD I use 06:00 GMT for the open. Just figure out which hourly bar at the start of the session usually has the most volume, and use the open of that bar as the daily open.

About the discretionary aspect, I find that with the entries it's better to be as systematic as possible. This is what the backtested results are based on, after all, so just trust your system and go with the flow. There are times when I won't take a signal though, such as just before high-impact news or if something looks wrong somehow (hard to explain, but maybe huge stopping volume on a recent bar or something like that).

A good example of following the system happened just today actually. The Nikkei had just surged up about 4% (fortunately I was long from Friday) and I got another signal to go long at 15:10, which is the end of the day session. In the past there's no way I would have gone long there. For one thing all the charts were screaming "oversold overbought - retrace is imminent", and it's dangerous to place orders after the break because the price can gap over 100 points against you when it reopens at 16:30 . But... I placed the trade anyway (albeit smaller size because of the risk), and that particular trade is now 120 points in the green

Where you can be more discretionary is in trailing your stops to extract the most profit. This is definitely an art form and not something I'm particularly good at to be honest. It's frustrating to see your trailing stop get hit almost to the tick, only for the price to then reverse and continue without you. But that's trading, isn't it? If we get stressed out by losing trades and lost profit potential then maybe we shouldn't be trading. But if you get it right (and are lucky) with your trailing stops then you'll make a lot of money in a good trend. Don't forget that you'll keep getting signals and eventually you'll have a bunch of trades all in profit

I hope this helps. Good luck!

(edited due to typo)
You reap what you sow.
 
 
  • Post #20
  • Quote
  • Jul 11, 2016 8:56am Jul 11, 2016 8:56am
  •  carbonado
  • | Joined Nov 2012 | Status: Member | 450 Posts
" Good questions carbonado. About the daily start time, I think that depends on which instuments you are trading. I trade mostly the Asian session (Nikkei, JPY pairs, sometimes AUD) so I use midnight GMT for the open. When I trade GBP.USD I use 06:00 GMT for the open. Just figure out which hourly bar at the start of the session usually has the most volume, and use the open of that bar as the daily open. About the discretionary aspect, I find that with the entries it's better to be as systematic as possible. This is what the backtested results are based on, after all, so just trust your system and go with the flow. There are times when I won't take a signal though, such as just before high-impact news or if something looks wrong somehow (hard to explain, but maybe huge stopping volume on a recent bar or something like that). A good example of following the system happened just today actually. The Nikkei had just surged up about 4% (fortunately I was long from Friday) and I got another signal to go long at 15:10, which is the end of the day session. In the past there's no way I would have gone long there. For one thing all the charts were screaming "oversold - retrace is imminent", and it's dangerous to place orders after the break because the price can gap over 100 points against you when it reopens at 16:30 . But... I placed the trade anyway (albeit smaller size because of the risk), and that particular trade is now 120 points in the green Where you can be more discretionary is in trailing your stops to extract the most profit. This is definitely an art form and not something I'm particularly good at to be honest. It's frustrating to see your trailing stop get hit almost to the tick, only for the price to then reverse and continue without you. But that's trading, isn't it? If we get stressed out by losing trades and lost profit potential then maybe we shouldn't be trading. But if you get it right (and are lucky) with your trailing stops then you'll make a lot of money in a good trend. Don't forget that you'll keep getting signals and eventually you'll have a bunch of trades all in profit I hope this helps. Good luck!"..
Thanks north
 
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