HAC & RAC - A Simple-Minded Approach

Boiling it ALL Down and Simplifying

After much deliberation I finally decided on a method of finding what I like to call "Bread & Butter" trades. A lot of you have probably noticed that M5 sets up a lot of decent trades pretty regularly. Problem is, it also sets up a lot of not-so-good ones too.

I know I've been all over the map recently and I think it's partly because I've learned these indicators inside and out. There's just too much to be seen with them! But of what can be seen, there must also be a way to prioritize it. Otherwise, confusion quickly sets in. What often happens for me is that, because I've been in "research mode" for so long, I go off on yet another idea or my curiosity beckons me to look into "just one more thing."

I'm done with that now. Going cold turkey!

Today I deleted all the non-essential work spaces, templates and indicators from my trading platform. I think this thing is ready to finally go online for real.

Who Helped Me recently was a trader named "TooSlow" here on FF. "Too Slow" has a very simple method of selling the highest open for the day and buying the lowest open on H1 bars. Generally there's not many pips involved, but every once in awhile, he finds a whopper and because the money management is so rigorous, he can receive at least a pip or two until the big one hits.

So I started investigating this method. Here's a link: https://www.forexfactory.com/showthread.php?t=590623

Anyway, after reading hundreds of pages of not only the system being used, but the wonderful inspirational/mind-training bits, I felt convinced that TooSlow's method has something to offer where the M5 Hac & Rac is concerned. It wasn't immediately evident because his HILO method shuns any indicators or "squiggly lines" (as they put it over there), but I could see how using no indicators at all would help me retain focus on just the price and thereby keep me in a state of readiness. Using the HILO method simply tells me that something significant might be happening with the price and to keep an eye on the H&R indicators for a good signal.

Below is a great example from this morning. The GBPJPY generated a HOLO alert on H1. Note the simplicity of the chart - there's hardly anything to have to watch.



Next, I go to my HAC & RAC workspace for GBPJPY and see what's what. M5 & M15 were in great alignment with the HAC lines. The RAC on H1 hit the 32.84% level and created a support area (always good to see before a signal, whenever that happens). Risk on the trade was around 12 pips. Going to the 3x target produced 48 pips. The 4x (which I didn't have the patience or nerve for), produced 64 pips.

I've added levels 20 and 80 and set maximum at 100 and minimum at 0. So we could see stochastic as we all know it.

Thanks Rammstein!

More New Stuff

After several weeks of testing, I thought a couple of things I've been working on might be helpful. In conjunction with the 'x-levels', I've found that price projections can be made using the RAC and dynamic stochastic. What drove this was the fact that, in a lot of instances, by the time a good signal forms, the price has really pulled away. Hence, the risk/reward becomes unacceptable.

This could really challenge some of you because it won't make logical sense, but allow me to explain myself here. What drove my mind toward more mathematically-based methods was due to my experience with the E-Mini futures several years ago. There seemed to be a sophisticated bunch of traders who always knew what the crowd was doing/looking at and where their stops were placed, etc... To my mind, they were using something hidden that measured market momentum. Whatever it was, it wasn't very obvious in either the chart patterns or standard indicators. Anyway, I wanted to find this 'hidden perspective' and trade on their side. I don't know if I've succeeded in doing that, but I think I have uncovered some solid statistical tendencies.

Here's what I'm doing:

First I'll talk about the RAC when used as a price projector and then the stochastic. They're similar, but I use them for different reasons. The RAC is for getting a feel for the overall trend projection, whereas the stochastic is for fine-tuning a trade entry or finding a risk-acceptable way of entering an already established trend.

Here are the steps:

1. Find the dominant swing low/high. This will be point "zero"
2. Watch the RAC when it crosses 20, 50 & 80.
3a. If it crosses UP through one of those levels, then draw Fibonacci levels from 'point zero' to the HIGH of the bar that first exceeds the level.
3b. If it crosses DOWN though one of those levels, then draw the fibs from point zero to the low of the bar that first exceeds the level.

#3 will not make sense in some circumstances because it will seldom be on a swing high or low. Most likely, it will be in the middle of a swing, which is why it won't be intuitive.

Here's how this generally plays out in a good, clean & strong trend:

333-424% or higher from point zero to a break of the 20 (for longs) or 80 (for shorts) will match the 3x or 4x target.
205%-333% from point zero to a break of the 50 will match the 3x or 4x target
127%-162% from point zero to a break of the 80 (for longs) or 20 (for shorts) will match the 3x or 4x target.

Corrective moves and other, more complex aspects of market behavior are handled differently, but more on that later.

Below is a basic example. First we begin with drawing the fibs when the 20 level is broken. Note that we are measuring from the swing low to the high of the bar that broke the 20. Also note that there was a 78.6% pullback, which very frequently occurs after a level break (not generally 78.6%, but a fib level nonetheless).

Ok now the market continues on its way and when it crosses 50, we adjust our levels to expand with the market.

And here's when it crossed the 80 level.



Before it hit a probable projection, the RAC crossed down below 80 and though you can't see it on this chart, I'll show you on the next. What do we do about that? Well I'm glad you asked because what I'm going to show you is how to tell, with good probability, whether or not a level cross is strong or weak or just a corrective move.

A lot of times, just before a move exhausts, it crosses the 80/20 levels a couple of times. Generally what occurs is that when the level is crossed, it will make a bounce the other way. In the case below, when the 80 was crossed down, the market bounced back up to a new high and toward our original projection. But this also affords us a new opportunity for a more accurate projection.



In this chart, a new fib level was drawn with a new 'zero point' because once a level is crossed the other way, the market kind of 'resets.' The tan box was the original projection. The green box is the new one. We still use the 127%-162% levels for a target because it was an 80 crossing UP.

How all projections came together can be seen by that orange line near the high of the move. There were three RAC projections in EXACTLY the same place, along with a 6x H&R projection. Again, all in the same place. Soon, I'll talk more about the finer points of this, but I thought it might interest some people and help them to see that there is a lot more in the RAC than might meet the eye.

Here's the subsequent move down the other way. What I did here was average all of the probable projections for each RAC crossing and found that they were quite close to the 3x level. The green/yellow lines are the projections from the different levels. The red line is the average of them. Note it's proximity to 3x.

A Few Things to Share

This trading thing has really taken me on quite a ride and I thought it might be good to share some things I've learned along the way. First, I'd like to share the developments in my mind - what I've done to eliminate the fear, maintain peace of mind and objectivity, etc... Next, I have some ideas on how to find decent setups rather quickly.

The mind development has taken the most time and in my view is the most important. Without that nothing will work. Even if it appears to work on a monetary level, it can't be enjoyed because the fear of losing it again will always remain. There's just no peace in that. I've tried to completely eliminate the fear by creating 'foolproof' trading methods, but alas! Nothing is truly foolproof on that level. The real key, as I see it now, is in having consistency of thought; of the way I see EVERYTHING.

How I see anything will be a reflection of how I see myself in any given moment. And so the questions become: What am I? What is the purpose of life? These ARE BIG life questions to be sure, but ones that must be answered before fear can be eliminated. It's the only real way.

Answering these question can't be done with hypothetical thinking. They are answered with experience. They are answers that are LIVED because these answers are life itself.

For me, and perhaps for some of you, one of my issues had to do with my sense of "worthiness." I was always trying to become "worthy" of this or that and it led me on a fruitless search for self-validation. To look for something one already has is a sure way of never recognizing it. God made us all worthy. It's an innate quality. Nothing can be added or taken away, save for my illusions about myself.

But I had to discover this for myself and it was worth more to me than my own life. And so I 'lay down my life,' as it were, and decided to simply accept whatever came, however it came, without searching or grasping or 'working out' my own problems. I thought, "If I'm worthy, truly worthy, then God will care for me no matter what." I focused on two things:

1. Monitored my state of mind for ANY upset and forgave it, regardless of its source, magnitude, form, or how 'justified' it appeared to be. Sometimes this was very difficult because I found that my very identity, in large part, was based on grievances in the form of upsets. To give them up was like giving up my sense of self.

2. Committed myself to be helpful. Whoever asked for or needed my help received it.

Some of them paid me something and others could not. It didn't matter. I simply felt that being a servant to humanity, in whatever capacity, was the mission and to allow Spirit to care for the rest. Either God was real or He wasn't. He loved me or He didn't. That, in truth, was at the heart of every upset or worry I ever had. Sure, I dissociated it and put my reasons for fear and worry on other things, but truly, my worth to God was at the heart of it all. I had to be taught my own worth. I had to learn it through experience.

For two years I've not had any steady income or even a place to stay of my own and yet...and yet... I've not spent so much as a night outside or lacked for anything or went hungry for even an instant. I'm never lonely or without peace of mind. There's always just enough...and very often, much to my amazement, I'm the one who gives other people money or feeds them. All this and without so much as a trifling of steadiness in income or a "place" in the world. I mean I don't even make minimum wage and my life is better than it ever was!

Through all this, naturally, there were times of great fear with regard to how things would turn out or whether or not I'd perish from my apparent foolhardiness. My mind would go to the future and it made me fearful, but it was only because I looked upon the past and hated what I saw there. And having judged it hateful, I projected it onto my own future and condemned myself to repeat it. Slowly, I learned that I was projecting illusions onto the world. I was projecting illusions onto everything - wishes and regrets both. And how could I, having such a mindset, avoid projecting illusions onto the markets? How could I accept the present message they were telling me? I could not.

Over time, my sense of worthiness was restored. I discovered that, at my core, there is an unchangeable, immutable Being. It's is God's true Creation...and that is Me. That is You. It's worth is beyond question. Everything else is simply an illusion of a self with all its apparent needs and frailties, but what God wills for His True Creation is perfect peace, unlimited power and unquestioned worth. We are truly mirrors of Himself.

I discovered the answer to question #1: What am I?

Next question... What is the purpose of life?

It almost answers itself, doesn't it? Would it not be to answer question #1? And in the answering of the first question, are all things in life channelized to bring about its expression. There is no real danger or cause for fear. It can't be harmed, even though the world seems to be dangerous. The world, for all its seeming ferocity, is an appearance only and if you see it as such, (the power of your mind being what it is) it will dissolve like a cloud in the sky and touch you not.

These days, markets look quite friendly to me whereas before they seemed ominous and terrifying - great punishers and causes for pain. What I see in them now is so different! They kind of mirror my own life in that they depend on cooperation and inter-dependence. It's a peaceful picture! And how could such a picture be a cause for fear?

Ok...so much for the mind reformation! I had to give an account of myself on that because I haven't been posting much. I've been quite busy with it in that it's a night & day kind of project!

My next post will show how you might be able to find good H&R setups across markets - which ones are more likely to produce something, etc...

Finding trade-worthy markets:

In earlier posts I described the basic premise behind the HAC line. Basically, it's a place where crowd wisdom has arrived at a kind of equilibrium.

Anyway I thought more and more about the places where traders focus their attention. I looked at trendlines, for example, and found that on D1 charts, H1 & H4 trades frequently occurred almost exactly on trendline breaks of D1. But there is another place where traders focus attention - the closing price.

So I studied the effects of the closing price of the Synergy APB indicator. I like this form of candlestick because it takes into account various factors and collects them into a pretty reliable place. At any rate, what I found was that if the HAC line is very close to yesterday's Synergy close, that market should produce some good setups. Also, if at some point during the day the HAC line draws near to that area, it will most likely produce a setup. The timeframes that have their HAC line near or on that Synergy close should be the ones to focus on. If the HAC line begins the day near or right on the Synergy close, there's a good chance that the move will begin just after the open. Sometimes it waits until later, perhaps during the London or New York session.



To illustrate:

In this example, the place where the D1 Synergy close from the previous day was marked on the current day's chart. H1 had its green HAC line there and M15 had its red HAC there.

Hi Kris - good to "see" you still going strong

A few days later another decent/clean setup happened on M15. M15 red HAC matched the green H1 perfectly and were exactly on the Synergy close from the previous day.

The following day it happened to the long side with the same kind of scenario

Two days after that it happened on the short side. It was a Sunday, but look what happened!

If the previous one was missed, it set up again on H1 the next day and also on M15 again.

It never really setup again until the bottom of the daily swing - there was some crappy M15 interaction the day before, but it was probably a little too choppy for anyone to want to trade it.

Anyway, here's what it looked like at the bottom:

Thanks Go5!

Yeah, I've had my 'moments' over the last year especially, but I've come through. I've even managed to collect $1000 for a trading account despite everything else

I very nearly stepped away from this entirely, but a few people from the board PM'd me and kept me going. Many thanks to them!

After the market raced up for awhile it paused and took a rest. At the resumption of the trend it setup again with a similar scenario - M15 red & H1 Green

After the big run up, the market became really choppy and there weren't any clean setups that were close to the Synergy close. But after it futzed around for about 3-4 days, a setup developed that produced something clean.