The SETUP and the Chuvashova Fork

WAB. The SETUP and the Chuvashova Fork.

There is no free lunch.
Please read the whole thread.
No one likes to have to stop and explain things over and over, to newcomers who have not done their homework. If you are referred to this first post, please read the whole thread. It is really annoying to have someone jump into a discussion when they dont have a clue what is being discussed. Do your due diligence. Read the thread. Bring some education into the discussion. Going to a gunfight with a knife is not going to get you any points.

I am interested in a discussion on ways to use the Chuvashova Fork (hereinafter referred to as the CF.) and its relationship with the principle of the HH HL LL LH chart structure and something that I call the SETUP.

You can find information on the CF at https://www.mql5.com/en/articles/1352. There is a link there to Stanislav Chuvashovs web page, however the web page is in Russian and we will require a translator to help us out with that. There is also a link to 17 lessons further down the page, also in Russian. Hopefully a translator will come along and be kind to us.

Meanwhile, I am sure that we can form a good group here and figure it all out ourselves.

The CF is similar to what I have referred to as a BW line in my FF Animal Farm thread for those interested in it, as discussed there. My interest in the CF is a result of that particular facet of my interest in a Renko System. (We will use both standard and Renko charts here.)
So, I would like to discuss and develop a trading strategy using the CF and chart price structure.

Some basic thread rules:
1. Be polite.
2. Do not add all sorts of indicators. (The focus here is on price, not a million different pet squiggly lines.)
I will use the standard Bill Williams AO, AC, Alligator and Fractals, which are an integral part of the system and should not be changed or modified.
ea development:
Anyone who wants to develop an ea for this, please do so on a separate thread. I dont want this one to lose its focus.
(There is code for an ea on the /1352web page link above. I checked this out a couple of years ago but I think there are issues with the code since MT4 underwent all of its upgrades and I remember it was less that satisfactory to me at the time. Feel free to look there for ea information, but please do any development of that on a separate thread. I would like this one to be on topic, not consumed with tweaking code. Thanks.)
CF Indicators:
There are several CF indicators that I have found. They all seem to do much the same thing with the exception of one, which adds entry levels and stops.
Later, I will use one on my charts and suggest that we either try to confirm its use or find reasons to reject using it, in favor of something better, or even not use an CF automatic indicator at all.

I want to develop the idea of the CF before we go to an indicator for it. Having an indicator without understanding it is pretty much useless.

Lets have some fun, see what we can learn and see if we can make some pips.

Any Indicators that I use will be attached here on the first post.

Our first chart is the basic template that I will be using:

It has the standard Bill Williams indicators: Alligator, Awesome Oscillator, Accelerator Oscillator and Fractals. (I have added a five period exponential moving average to the Awesome Oscillator.)

Basic Chart.

Attached Image (click to enlarge)

If you post charts here for discussion please keep them clean and similar to this one. Some people get some pretty amazing works of art going that don’t add much beyond artistic content.

Each part of this chart has a purpose and anything beyond that is not needed.

Direction.
I have seen a lot of discussions on how to establish the trend on a chart. I have two ways of doing that.
First is to use the Alligator. This is quick and visual.
If the price is above the Alligator and the Alligator moving averages are spreading apart, then it is in up trend. If the price is below the Alligator and the Alligator moving averages are spreading apart it is in a down trend. Just a glance at the status of the Alligator tells you a lot. When the Alligator is closing and the price is inside the Alligator it is not trending.

My second method of establishing a trend direction is based on price action.
A chart moves in a series of Higher Highs and Higher Lows until it reverses, then it moves in a series of Lower Lows and Lower Highs.
An uptrend is HH HL and a down trend is LL LH. I mostly use the Fractals indicator to locate these points. When a Change in direction occurs, the progression of HH HL changes to LL LH.
This gives us powerful information to use.

On this chart, I have identified a powerful top and a powerful bottom.

(Note: last low on the this chart is labeled as as LL and it should be HL.)



The Top: The HH HL sequence is broken at the E line by a LL.
The Bottom: The LL LH sequence is broken at the E line by a HH.

There is nothing new here. Head and Shoulders patterns or a Kings Crown are other names for this, but you can see how they are derived from the universal march of HH, HL, LL, LH fractals.
Note how the Alligator behaves after the Top and Bottom

How the E line got its name:

I needed and easy way to describe tops and bottoms to help identify them. I came up with the acronym SETUP.

For a Top:

On the left we have a Shoulder and Elbow followed by a Tip. When price breaks Under the Elbow we have identified a reversal. It then pulls back, usually above the Elbow but not always, to a Pull Back. (If price continues and goes above the Tip it is not a Top.)

For a Bottom:

On the left we have a Shoulder and Elbow followed by a Tip. When price breaks Under the Elbow we have identified a reversal. It then pulls back, usually above the Elbow but not always, to a Pull Back. (If price continues and goes below the Tip it is not a Bottom.)

Get into the habit of labeling the SETUP on your charts. After a while it is second nature to check for them before you do anything else.

(I have not labelled every SETUP on this chart. Someone will be pointing that out. Good if you noticed.)

Once price breaks the Elbow fractal the E line is what controls the market. Combine that price break with what the Alligator is telling us and you have the key to the highway.

Trends and Counter Trends:

With the E line break and the Alligator showing direction and trend we can soon see that there are counter trends that occur where price pulls back towards the Alligator or even into it.



A fractal above the green Alligator line and a fractal below the green Alligator line denote a Counter Trend in a bullish market. You can see them marked on the chart with short black lines.

Note that not all counter trends will penetrate back into the Alligator. I marked one on the chart (third form the right) as an example.

Well the stage is set.

We have a way of identifying direction at a glance (open Alligator.)
A way of finding tops and bottoms with price action (SETUP.)
We have not used any other indicators, though we will get to that in due course.

Now, go and look at a lot of charts.
Check the faithful Alligator for direction.
Identify the SETUP and the E line that started the Alligator off on its trend.
Draw those counter trend lines.

Practice until it gets second nature, then I will show you some things about SETUP and the CF.

Then, I want you to consider this:

At every single fractal there is a SETUP on a smaller time frame.

Detailed and complete explaination of great strategy. Thank you for the template

Thanks Dragon. We are just getting started. Welcome aboard.

Hello Wab,

this one sounds really interesting, I can´t wait to learn more about the other Bill Williams indicators and "the fork".

Subscribed

Greetings from Bavaria, Germany

Glu

Danke Guldulbaer.

I recommend to anyone trading that they read Bill Williams books. The man is a genius.

SETUP. SETUP. SETUP.

It tells you when the market is turning.
Where to enter a safe trade - namely the break of the E line.
It is easy to spot. (After some practice, you will wonder why you never were aware of this before.)
SETUP occurs at every fractal all you have to do to see this is go to a lower time frame.

SETUP occurs at every fractal.

Now think about those counter trends. The ones that I like are the ones that start with a fractal outside the Alligator and end with a fractal inside the Alligator. I generally use the green (lips) line of the Alligator as a qualifier. At the fractal inside the green line we want to enter a trade in the direction of the trend as price probes the Alligator but then moves back away from it resuming the dominant trend.

Most traders say enter on a trend line break to to get back in after a counter trend. I say entering on an E line is a good alternative. (We will get to another with the CF.)

To find the E line in the counter trend fractal, you just go to a lower time frame and look for it.

Here is a recent Counter Trend on the H4 chart:



Here is the same CT on the M15 chart. Can you spot the SETUP? I Left the heavy black line to the left to show the Counter Trend as marked on the H4 chart. At that bottom H4 fractal, we can soon spot a bullish SETUP by moving down to a lower time frame to bring out the internal detail. We can also spot a nice E line.



Here we are again back on the H4 chart:



You can see how an entry from the M15 E line looks on the H4 chart. ( I had to remove the S, E, U, P, labels as MT squished them up on top of each other.)

Now, let's compare a traditional entry of a a trend line Break on H4.



Generally you would wait for a close above the blue H4 trend line break. Look how much you give away.

The M15 E line gets you in 34 pips ahead of that entry on this particular example. I hate not getting those extra pips waiting for a close above an old dinosaur style, traditional, counter- trend line.

It gets even better.

Now, you need to go play with some higher time frame (HTF) fractals and look for the SETUPS hidden inside them.
Identify some HTF Counter trends (HTFCT) and see how you could get back into the dominant trend by drilling down into Lower Time Frame (LTF) Setups.

I haven't even talked about the other indicators or the CF yet. You already have enough here to work on for a while.

Well thought out thread, and nice approach.
Slight error on post #3 which labels last low as LL and it should be HL.

Question: Is the E line always horizontal?

I will be interested in how you pull everything together. I did some experimenting with CF trend lines a couple of years ago, and found that you did need other confirming methods to get reliability.

So far so good.

I like this approach but am I right in assuming that the 4hr fractal you show would only paint after the third candle. See picture.
Chris

Hi cfudge,

a classic fractal is always formed by 5 bars, 2 before, the highest/lowest and 2 after...

greetings robcole

Two good questions: (I have always learned more form my students than I have taught them.)

Thanks for pointing out the error in post #3. (I have noted that on post #3.)

When I was a teacher and made an error, I used to tell my students that I did that deliberately, to see if they were paying attention. You obviously were. Thanks.

First is the E line always horizontal?

The answer is yes. The E line is always horizontal from the E Fractal of a SETUP.

The search for a better entry is ongoing and the Chuvashova Fork can help with that. We haven't got there yet so watch out for that when we do.
Fractals as denoted by the Fractal Arrows in MT4 are the tips (Point T) of what I describe as a SETUP. Bill Williams states that between each pair of opposing fractal tips there is an Elliott Wave of some degree. The Fractal Arrows merely show the extremes of that wave. Another way to put it is without involving anything Elliott is that two opposing fractals are the two opposing tips of a bullish SETUP and bearish SETUP.

That leads to the second question. How do we know where a fractal tip is before the fractal arrow is added two bars later? Simple answer is that we dont, but we can get very sneaky inside a potential fractal by looking for the SETUP that will confirm that extreme tip long before Bill Williams confirms it two bars after the event on the same time frame.

A fractal as Bill Williams tells us requires five bars to form, two on the left and two on the right.
SETUP, takes us deep within those five bars and we can see that a Fractal really forms with many more than five bars (on a lower time frame) and the tip can be identified a lot earlier than waiting around for the fifth bar of the conventional fractal.

Lets have a look at the counter trend again. Once the price pushes below the green Alligator line we can mark that place on the H4 chart with a horizontal green line for reference on lower time frames. (Note the bar at which the H4 fractal is verified as pointed out in the question.)



Now, we can go to a lower time frame (h1) and check how the LL LH structure is doing.
Note how we have revealed more fractals inside the H4 chart and their potential significance.



Lets go to an even lower time frame (M30.)

It starts to get exciting on the M30 scale. We can see a potential E line which takes us into a trade an hour after the M30 fractal forms.



That same E line encourages us to look at the two fractals between the M30 E and the M30 T. Again, lets go down to lower time frames. The E line is still the one on the M15 and the M5 charts.

When we check the M15 and the M5 the same E line is in control. However when we get to the M1 chart ...

Between the M30 E and M30 T there is another smaller SETUP on M1.



We are really close to the fire at this point. T is the same Tip as it is for M1 M5 M15 aM30 H1 and Eventually H4.

Note where the H4 green Alligator line is marked. You could just use it for an entry too.

So, a long answer to a good question. I hope it is helpful.

On a side note, I used to do Elliott Wave analysis, on lower and lower time frames, to try and find when the big turn is happening.
I nailed it once and made a lot of money on an options trade, but it was an amazing effort that required hours and hours of chart time and numerous real time Elliott Wave counts. Exhausting.

This is lot easier. Learn to spot the SETUP and get inside the potential fractal. Check between E and T for a lower time frame SETUP.
Use the Alligator to know what you are in Trend or Counter Trend and plan accordingly.

You may have noticed that there is an H4 bearish Setup that I am working with on these charts. We will get to that next.

I will leave you with one more thought before I wrap this up.

Where is the first counter trend always located when the market changes direction?

Wab,

Thanks for an interesting system. Fractals, Alligator etc... are all new to me...If i have to get up-to speed with the approach, how do i get started?

I read this whole but i didn't get hope i will understand that approch by looking charts example that you post and will post.

Wab, Many thanks for sharing. I think its very clear explaination and very proffesional way. Regarding your question, i think the first counter trend located when 2 fractals appear below and above the green alligator line just after the Eline. I hope Im right

Read Bill Williams books on reading Chaos. You can also search on the net.

Here is one link that is useful: https://www.ifcmarkets.com/en/ntx-in...ams-indicators

We will get lots of charts as we go on. I realize the theory is heavy at this point but it will become easier to understand with examples.

I would think the first countertrend is always located (in MT4) on the 1 minute chart

Fellow traders, please don't waste your time on Chuvashov's systems. The matter is that I understand Russian language and know Russian trading society. Chuvashov was not and is not a trader at all. He did not made even a cent from trading, he is making money from teaching others and selling his lessons, courses ...
And Chuvashov fork is a system which was previously invented and described by a great trader Tom DeMark and copied by Chuvashov with mistakes that is why it is a BullShit not worse your attention.