HAC & RAC - A Simple-Minded Approach

Here's the setup going the other way.

This one's not as "clean," but one has to consider that it's going counter-trend. Eventually, the trade nearly hit a 3x target, but it took several days. But even the 1x target, which was hit very quickly, provided 156 pips on H1.

Consolidation Setup:

This setup is a little counter-intuitive, but it does help in dealing with those consolidation areas where things are often unclear. What happens here is much the same as the prior setups, only this time, a crossing BELOW 20 is needed for a short (above 80 for longs). The profit targets are drawn from the top of the consolidation area to the low of the trigger bar.

Everything else is still required though:
1. a break of a trendline
2. a close in the direction of the trade

In this example, the 1x was hit very quickly.

Here's a real beauty. This one hit a 5x target. It should be noted however that the trigger bar was the same as the bar that broke the trendline. I think these are much more decisive and less prone to retracements.

And here we go back the other way... A nice, 2x target was reached without issue.

Interesting Phenomena:

Some of you have carefully read this thread and have followed my journey in developing what I'm intent on using. The more I investigate my own methods, the more I discover, both on a theoretical level, as well as practical.

In a prior post (I can't remember which), I talked about the 80 and 20 levels where the RAC was concerned; how they were places where the market would attempt to "escape" its bounds and go into a heavy trend mode. As I thought more about that, I realized that "normal" market activity occurs in between those levels - above 20 and below 80.

Since I'm a Fibonacci fan from way back, and because I have a special regard for the 78.6% level, I added two more lines to my oscillators. What I did was take the "normal" zones of +20 and -80 and located the 78.6% level within those. They are:

67.16%
32.84%

There is a high tendency for highs and lows (or at least the beginnings of pullbacks) to occur when either the RAC or the adaptive stochastic reaches those levels. If the pullback doesn't occur, then the tendency is for that level to be support/resistance for the next swing. It may or may not be of practical value, but I do have a better sense on whether or not the market will continue in its direction.

First, I'll show you what I'm talking about:

In the examples below, note that the RAC crossed the 67.16% level down and then later crossed it back up. I put those levels in green. Those places will be either beginnings of a retracement, future S&R areas, or both. Either way, it's a good way for me to be alerted to a specific area. Note the stochastic setups that happened around those levels (examples are above).

I like to be more contemplative than reactive with trading. Stuff like this helps me not get too trigger-happy and encourages patience.

Hi Almuten, I'm glad your starting trading again. I'm certain you will succeed. Thank you for keeping up this thread. I like the way you think.

I'm a bit surprised however, that you would abandon the Hac and Rac, after all that work on it, and it showing the cycles in the market etc, but it's still there for us to use if we want, and thanks for that!

It all boils down to high probability trades, no matter what method is used. So please, keep us informed, I will also back test and forward test the adaptive stochastic method, it looks good so far, and it's simple, and not a resource hog. Perfect!

Hello Almuten , welcome FF home !
Me too , as Timo7 , I'm surprised for the abandonment of amazing Hac & Rac . You had done an excellent and hard work with H&R : in my modest opinion, you should continue the development of this method , maybe introducing some novelties as ATR and Hac-Composite ( post # 415 ) .
Of course , you decide !

Hello! The indicator in the 419 post is not displayed on the graph. Build 1045.

I haven't abandoned it. It will still figure in my outlook, but I wanted to find something to keep the trades coming. It's been a year since I first posted the HAC & RAC and it's still holding up well!

I'm not an MT4 expert. But maybe somebody can lend you a hand.

Yeah the adaptive stochastic really does help on the resources. I'm also noticing that there's a pretty high tendency for it to cross 50 when the HAC line is crossed, so that might be an adequate trigger instead of using the RAC.

I am going to display some good uses for it on a D1 chart as well. It helps to find some really great setups.

Yes, D1 is the way to go. Lifestyle trading. 15 mins per day.

/media/tj/88EA-26A7/adaptive stoch.png

I'm beginning to pull out my old technical analysis training and am looking at the D1 charts for good setups. It makes sense to trade logical setups on that timeframe. Fancy indicators are great and I'm glad I spent so much time developing them (because they, too, have a logical basis), but traditional things on D1 are also of great value; especially since the H&R can validate what's happening and offer a reasonable expectation for profits.

I'm looking at a couple of things that I think will be of use to others. The first is just a really simple sort of setup on D1 that uses trendlines from high to high and low to low, etc... Lots of professional traders trade the D1 in this way.


M15 and H1 are probably of the greatest value when combining D1 analysis because the setups have enough bars to complete. The first one I want to show is just a basic trendline from high to high.


The next chart shows what it looked like on M15.

Closing Prices on D1

Another thing you can watch for are the closing prices on D1. On the VERY BEST trades, what tends to happen is that the next day's HAC line will be very close to the prior day's closing price. Logically this makes sense, given what the HAC line represents: The line in the sand where losers are on one side and winners on the other.

The screenshot below is of the GBPUSD when it made its low earlier this week. I've circled the area of interest on D1:



The pic below has the closing price of the red candle from D1 drawn on an M15 chart

Here's another example on the short side:

There's also other things that can be watched for using the adaptive stochastic and the RAC indicators. As I mentioned a few posts back, they have a tendency to indicate pivotal highs and lows. In my research, I'm finding this useful, particularly on D1.

Of specific interest are the 67.16% and 32.84% levels.

When either one of those indicators crosses through one of those levels... beware of a high or low in the making. It's not a guarantee, but it is a very high probability. If a strong trend is present, then all bets are off. Stochastics is meant for choppy or medium swing markets.

In the example below I marked the places of likely turns.

A cross UP indicates resistance or upward exhaustion. A cross DOWN indicates support.

Can someone help me with the indicator of 419 posts? The problem is depicted in 428 post.

I was wondering... Do you have the "CyclePeriod.exe" indicator in your list of indicators? If not, then that is most likely the reason nothing is working.

H4 Setups & how to find them

After working with this every day for over a year I finally found out how to locate good H4 setups. This is done similarly to how setups are found on M15 for short term trades, but H4 trades, because they can go for weeks sometimes, must be located using trendline breaks from key pivots on D1.

In the pic below I've drawn multiple trendlines on a D1 chart:



In the next screenshot, I've circled the areas where the D1 trendlines made an impact on H4 (I stripped that chart down to the bare essentials so it's easier to read).

The red circled area (the impact zone of the D1 red trendline) didn't produce anything, but even so, that level was important a week later when the green D1 trendline was broken at exactly the same level. Also, prior to that was the area where the white D1 trendline was touched just prior to the drop in price. The market was clearly being boxed in little by little.



The next shot was when the D1 blue trendline was broken.



And finally, here's the area where the white D1 trendline was broken.

Today's short on EURJPY

This one had a trendline break to the downside. The place where the TL was broken was only 5 pips from the HAC on H1. Generally-speaking, the HAC line will be very close to wherever there is trendline interaction with the price. It's not always certain (what is though!), but it's a reasonable expectation and I think it lends itself to more confidence when pulling the trigger.