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     ingot54
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Username: ingot54
Post Number: 2101
Registered: 05-2004
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| | Monday, March 31, 2008 - 09:19 pm: |  
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In response to a couple of people who have contacted me regarding Forex Trading, it is appropriate that a thread be commenced where successful strategy can be discussed along with new ideas.
Of course hopefully we can endorse or dismiss certain concepts, but the vision here is for positive thinking - we can discuss what does work along with what does not - as long as a rationale is given so that we are all on the same page ... and with knowledge, move forward.
I have been successfully trading FX now for over eight months, but the road to finding what works for me and what doesn't has been paved with jubilation and disappointment - some indicators showed promise but soon proved they are better served remaining in the stock market arena, where they were probably designed.
Not all indicators can be used bilaterally in stocks and currency trading - to assume this will lead to frustration and further disappointment.
The nature of currency trading is such that Technical Analysis is the Siamese twin to Fundamental analysis, and the pair can not be separated without killing one or both entities.
I qualify that statement by saying if traders want to employ scalping techniques then this may be a "special case" where TA CAN indeed be used successfully in isolation.
But scalping implies (to me at least) the use of ST (short term) trading, and because I am not willing to sit by my computer night-after-night as I used to, in order to rake in the pips, I am hoping we not discuss ST trading on this thread. I would hope that ST traders could be generous enough to keep that topic pure, and for its own thread - a thread to which I would gladly contribute the little I was able to discover about it.
Further, I am of the view that FA issues can not be divorced from FX either - even in scalping techniques - the "News Announcement" has long been both saviour and pariah for FX traders - particularly the ST traders. But in the LT (long term) such announcements amount to little more than noise, and rarely ... if at all, affect our positions.
So I am going to discuss FX trading from a longer term perspective - beginning at the 1 hour candles and longer (we may "dip" into the 30 min candles if something positive can be brought out of that) and moving up to weekly, and even monthly views of a currency in motion.
Please do not preempt the discussion by feeling dismay at such long term views. I have been able to show with my own trading, that the 800-pip and 1300-pip runs are available to those who have the patience to stalk the setups - and win.
Please be patient with this thread - I am a story-teller by nature, and it can become agonising for some to see points laboured. But the end of the Rainbow is where the pot of gold has been placed. A lot of nuggets have been spilled from the pot - and while it is not possible to get the lot - we shall certainly be getting our share of the spilled nuggets.
Finally - before we get into this - I do hope you are able to find a gap in proceedings to try to see if your own "favourite" indicator has a place in this form of trading. It is likely that indicators that rely on VOLUME for their mechanical function will not be terribly reliable trading the Forex Instrument.
Ingot's Rainbow Strategy is essentially a Position Trading approach - one that allows both profit and quality of life (the much-desired "time with the family" or other goals) and can be successfully traded over several weeks, with only a daily, or second-daily review of where the trade might be heading.
The more you keep your hands to yourself and allow your initial choice to play out its own hand, the more satisfying (and enriching) the end result should be.
Without further yakking ... let's sign in and give this a go.
Here is one of my charts - I don't expect it will make sense to you - but if it did I would be quite surprised.
Keep Smiling - Don't look back
Hell, there are no rules here - we're trying to accomplish something ~ Thomas A. Edison
Never believe that a few caring people can't change the world. For, indeed, that's all who ever have ~ Margaret Mead
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lafee
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Username: lafee
Post Number: 817
Registered: 04-2003
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| | Monday, March 31, 2008 - 09:29 pm: |
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Ignot,
What is your interpretation of the chart?
Cheers Lafee
Don't ask an academic if what he does is relevant
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ingot54
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Username: ingot54
Post Number: 2102
Registered: 05-2004
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| | Monday, March 31, 2008 - 10:04 pm: |
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Hi Lafee - welcome to the thread
The chart I have put up is a "shock-and-awe" event to get some attention for the different strategy I employ these days.
To begin with - it is a MONTHLY chart and because I have not yet discussed where or if I will enter a trade in the current GBPUSD, I won't/can't say (just yet) where I think an entry might be. (To do that would preempt the other necessary steps I hope to explain as we go).
At the moment my interpretation of what I have posted above, is that we have an entity which is trending upwards very well (strongly even) but which is currently experiencing a pull-back. Whether that pull-back will go further to become a greater correction (for which Cable is renowned - historically buoyant) remains to be revealed.
The LT EMA's are still broadening, and have not compressed to any real depth just yet, and as such represents a possible ideal entry point for a LONG position. As we go along I will introduce things like wide stop-loss points - to allow LT trades to "breathe and mature" or else show their weakness and give us reason to call off the trade.
The window under the Rainbow chart is just a comfit of the Stochastics from 5-3-3 ... 6-3-3 etc right up to 24-3-3.
The slightly heavier yellow line is the MID-PT 14-3-3 stochastic.
The green Stochs are the shorter term ones, or faster ones, while the orange are the slower, LT stochs.
Currently we see the stochs falling in an ORDERLY way - in upper case because whether they may be orderly or disorderly will later have a very important meaning for us in relation to choice of entry, or staying out.
I use the Fibonacci levels of 23.6 for the lower level and 76.4 for the upper level simply because they work - if the Multi-Time Frame (MTF) Stochastics are ABOVE the 76.4 level then the movement of the currency will generally be LONG.
Vice versa for the 23.6 level - if MTFS are below this level, the trade should be SHORT.
But these are not the criteria for entry or exit - that will come - at the moment, on this MONTHLY view, it seems the MTFS are beginning to signal a turn back to the LONG direction. A look at the weekly or daily will probably tell a clearer story - and that is where I would be heading now for the information I require to make that choice.
I can see from the chart that the 5-3-3 stoch has bounced right off the 23.6 level, but it means little on this view - an artifact really.
As mentioned the FA and TA in my method are parts of the Siamese Twin paradigm and I try to keep up with the economics and other drivers of currency direction as well - always in flux.
Best wishes
Ingot
Keep Smiling - Don't look back
Hell, there are no rules here - we're trying to accomplish something ~ Thomas A. Edison
Never believe that a few caring people can't change the world. For, indeed, that's all who ever have ~ Margaret Mead
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ingot54
Member
Username: ingot54
Post Number: 2103
Registered: 05-2004
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Votes: 0
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| | Monday, March 31, 2008 - 11:51 pm: |
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Zooming in a bit we can see the WEEKLY chart now - a bit more "noise" appearing on the chart ... I will post both MONTHLY and WEEKLY views below for comparison.
Notice the LT trend - always we need to be mindful of this - because in the ST views - when we get down to 4H and IH and even the 30 min for thrill-seekers, the trend is anything but up.
The Golden Rule for me is this - and it has come to my rescue time after time ... IF you read the LT trend correctly - even a BAD trade will eventually come good.
But we wish to avoid the pain of a big drawdown - that's why we set rules. The rules will set us up only for trades where we have a definite edge - such that we NEVER trade against the LT trend, and we never enter trades unless at least 2 TF preferably 3, are in our desired trading direction.
I expect you to call me out on this if I ever attempt to trade counter-trend. As mentioned earlier - it may be OK to discuss these issues in a ST thread- but even then we need to be mindful of the trends in the adjacent TF.
This chart - weekly - seems to be consolidating the ema's now - and the MTFS look like they are heading down - alluding to a correction in this pair. However - we are not taking the signal/trigger from this TF. If you look back at previous waves of the stochs you can see that even though they APPEAR to be dropping - they simply turned around - probably at around the 50% level, and turned north once more ... in keeping with the LT trend.
At this point I am not forming any bias really as to whether I will or will not trade this. But I make a note that in this weekly TF consolidation is occurring, and that can mean breakout in any direction.
I have included a screen shot of the MTFS in close up -because there is the engine room of the trade - with the tappet cover removed for the curious!
You can see from the 4th November to 6th January there was a fantastic downtrend - the triggers I will explain in the next post - but it delivered 1200 pips in those 9 weeks.
There is no "wastage" or "slippage" involved either - nor am I claiming pips I am not entitled to - I will explain in the next post why the entry was specific, and why the pips can be claimed.
For now - just look at the comparison between the Monthly and Weekly charts, plus the close-up of the Weekly MTFS.
Keep Smiling - Don't look back
Hell, there are no rules here - we're trying to accomplish something ~ Thomas A. Edison
Never believe that a few caring people can't change the world. For, indeed, that's all who ever have ~ Margaret Mead
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ingot54
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Username: ingot54
Post Number: 2104
Registered: 05-2004
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Votes: 0
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| | Tuesday, April 01, 2008 - 12:45 am: |
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Now to begin to clarify some of the triggers - note - I did not trade this - this is a learning exercise, and we have to begin somewhere to point out the triggers we need to be seeing.
While hind sight is marvellous ... and a great teacher ... we will later get to do a live trade on whatever currency is setting up correctly to trade.
So what can be learned from the MTFS?
Looking at the chart of them below, we can notice several things:
* The current relative position of the MTFS is beginning to criss-cross each other - it's called "fish-netting" and is only a sign that the market (Currency) is entering an indecisive period. This is NOT a good time to be entering the trade - it is trendless, will lead to whipsaws, and the probability of success is reduced to 50:50 - eroding any edge you may have had. Note that such fish netting patterns may only appear in ONE TF - in this case it is showing up (so far in the weekly chart, but not in the Monthly chart).
Note the faster stochs (green) beginning to cross down across the slower stochs (orange). While it is not yet a definite turn-off- it IS to be taken into account that further fish netting will be proof of sideways movement in this TF.
* I am interested in showing you something valuable about the appearance of the lovely down-leg of the November/January MTFS.
Look at the appearance of the stochs - all confined to a NARROW band, and all in an ORDERLY condition. In fact - they appear like a bunch of fine threads - all roughly combed and running in the same direction without criss-crossing any other stochs.
This is a "dream run" and is a high alert for a very strong trend indeed. In fact, if you get into one of these, you can safely load up your position and ride it all the way - as long as the stochs retain their orderly and tight conformation.
* There are a couple of early warning "hooks" visible in that November/January trend:
If you look at the top arrow in the chart below, you can see what I refer to. This is a signal that the trade is "on". At this point you can get an early entry - a toe in the water - particularly since the stochs are so tightly banded - a very positive sign.
Further, the MTFS have turned in unison and are retaining their conformation and as the YELLOW 14-3-3 stochastic crosses the 76.4 level from above - this is the absolute trigger that you v=can enter the trade. At this point, if you had taken an early tip from the "hook" and entered - you can now pile in much more strongly - as much as your trading plan (money management) will allow.
* Once the MTFS cross down through the 23.6 level, the trend will continue strongly until another "hook" shows up as a signal the trend is weakening or running out. In this case, we can see a hook (see arrow) formed, and can look for an exit to the trade.
* Further trades (ie to the upside now) can not occur under the rules, unless the MTFS forms a hook ... OR ... the yellow 14-3-3 stoch crosses UP through the 23.6 level, IN AN ORDERLY manner. By this I mean we don't have to have the tight conformation we saw in the short trade earlier ... but as long as there is NO FISH NET and the stochs appear in a "combed" condition, then a trend is intact.
The two vertical red lines intersect the MTFS at the point of the "hooks" as shown by the red arrows.
Off to hit the sack- enough for one session.
I want to give credit to a gentleman who posts under the nic of "SPUDFYRE" in this forum because he is the originator of the Multi TF Stochastics along with its interpretation and triggers.
Spudfyre has not posted for quite some time to my knowledge - and it is necessary to give him due credit and recognition for his invaluable work here.
I have adapted his ideas to LT trading, whereas they were initially designed for scalping the 5 min and 15 minute charts.
Keep Smiling - Don't look back
Hell, there are no rules here - we're trying to accomplish something ~ Thomas A. Edison
Never believe that a few caring people can't change the world. For, indeed, that's all who ever have ~ Margaret Mead
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ingot54
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Username: ingot54
Post Number: 2105
Registered: 05-2004
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| | Tuesday, April 01, 2008 - 11:33 am: |
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OK - just to move this thing along a bit more quickly now that you have an introduction to the basics.
Stepping down from Monthly charts to Weekly charts as above, we now arrive at the next in the series ... Daily Charts.
The main principle we need to grasp here is this:
An entry in one time frame may harvest a few pips, but ultimately, you will exit the trade as it begins to conform to the deeper trends of LONGER TF.
Those entries and exits not only cost you money in spread, they cost you time as you study the screen looking for the exit signals, or on high alert for reversals that can take away all of your pips.
Nothing wrong with that - a matter of personal choice, and I am happy to discuss adaptation of these principles to ST trading on another thread - they do lend themselves well to it. It's just not my forte nor my interest.
But what we have here is a system that allows us to exercise a bit of patience - check in daily (and the GBPUSD is only ONE of about 10 low-spread pairs amongst the Majors that we can have on our watch list) and if the signal is not there ... it's not there. Move to the next on the watch list.
Eventually a set-up is found that potentially can deliver these 1200-pip runs - all while you sleep, and all while you casually do your daily or second-daily check of the charts and of your watch-list.
The Daily chart below is showing sideways consolidation, and on both the Rainbow and the MTFS we can see some activity in the faster TF. Further - there is nothing remotely like an entry here for us at the moment - a quick glance at this TF and we move to the next TF or the next chart.
We can see the MTFS dipping under the 23.6 level, and therefore the downtrend - at least in the ST - is intact. Moreover, until the MTFS actually turn, are tightly or at least moderately grouped and in an orderly appearance, there is no danger of missing an entry for at least 24 hrs here. The 14-3-3 stoch needs to turn up from under the 23.6 level, and this means it is under scrutiny for a possible entry.
All that to explain why the Daily charts are not giving an entry signal just now.
Keep Smiling - Don't look back
Hell, there are no rules here - we're trying to accomplish something ~ Thomas A. Edison
Never believe that a few caring people can't change the world. For, indeed, that's all who ever have ~ Margaret Mead
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ingot54
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Username: ingot54
Post Number: 2106
Registered: 05-2004
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| | Tuesday, April 01, 2008 - 11:43 am: |
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Next TF down the list is the 4 Hour.
Obviously the down-trend is solid at the moment.
Again - the MTFS are below the 23.6 level, and steadily bumping along near the zero level. A powerful signal that the current downtrend is in bloom.
When dealing with the 4H TF you need to keep in mind that 8 hours can turn the whole thing around. If you like this time-slot - you need to be closer to the computer or the live chart to follow what is happening - in these TF we begin to defeat our hopes of a stress-free trade.
Having stated that ... it is not at all difficult to set a "Take Profit" or a limit order to close the trade should it go contrary to desired direction. Kind of having your cake and ...
The Chart: Certainly heaps noisier than the upper TF naturally - but the faster Rainbow ema's are clearly showing their preference to dip. As mentioned, this can change quickly.
The MTFS: Fairly orderly - and because they are hugging the lower levels, any down-trend is intact.
However - no clues or triggers for an entry here either.
Keep Smiling - Don't look back
Hell, there are no rules here - we're trying to accomplish something ~ Thomas A. Edison
Never believe that a few caring people can't change the world. For, indeed, that's all who ever have ~ Margaret Mead
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ingot54
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Username: ingot54
Post Number: 2107
Registered: 05-2004
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| | Tuesday, April 01, 2008 - 12:02 pm: |
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The last card in our deck is the 1 Hour.
The Rainbow is establishing a clear and clean down-trend - no likelihood of a turn just at the moment - just what scalpers in the ST TF would like to see for their 30-pip or 60-pip scalps.
The MTFS are a bit restless though - you can clearly see a couple of the faster stochastics (Looks to me like the 5-3-3 up to the 9-3-3 stochs) have attempted to break (unsuccessfully) to the upside.
A close-up view of this action, on the second chart (below) shows some very strong fish netting behaviour accompanied by chaotic organisation of the stochs.
Definitely not a time to be entering a trade at all.
Keep Smiling - Don't look back
Hell, there are no rules here - we're trying to accomplish something ~ Thomas A. Edison
Never believe that a few caring people can't change the world. For, indeed, that's all who ever have ~ Margaret Mead
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ingot54
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Username: ingot54
Post Number: 2108
Registered: 05-2004
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| | Tuesday, April 01, 2008 - 12:40 pm: |
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That's a fairly complete run through just one FX pair.
I deliberately chose a pair that is not currently showing any entry in any of our TF.
Further - we have seen that it is possible to analyse a chart without looking at price action per se - but the ema Rainbow is another representation of price action in a way that clearly demonstrates trend without "noise".
Do I use candles anywhere? Oh yes - I love my candlestick charts - I love looking for and discovering the reversal candles - especially in the LT TF.
And I do use other indicators - not too much - just out of boredom really - because let's face it - trading in the Daily and weekly TF can be very boring.
Out of interest I will mention I look the standard candles, as well as Heikin Ashi (be warned - they are certainly NOT interchangeable with Steve Nison candles- you need to study the HA candles and understand how they differ - in brief they are a kind of MA of a candle ... another topic for someone else to expound).
I've played around with the Relative Vigour Index (RVI), The Absolute Strength Indicator (ASI), Williams' Accelerator Oscillator (AC), OsMA, Awesome Oscillator (AO) and Fractals - all of which I have thrown on a single chart for you to see.
Confusing is it not? Where is the edge in those?
In the finish I opted for simplicity and just 2 representations - Rainbow with MTFS.
They work.
Trade management is important - more so than getting the entry and exits accurate.
We can discuss that a bit later - I would appreciate input from anyone right now - it's like talking to an empty room.
Which would you prefer ...THIS?
or THIS?
Keep Smiling - Don't look back
Hell, there are no rules here - we're trying to accomplish something ~ Thomas A. Edison
Never believe that a few caring people can't change the world. For, indeed, that's all who ever have ~ Margaret Mead
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nat
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Username: nat
Post Number: 69
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| | Tuesday, April 01, 2008 - 05:40 pm: |
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Hi ingot thanx for that explanation ,ive tried getting back into currencies but life is to hectic at moment .
In saying that i set up multi stochs on ig markets and guppy multi mas and am currently day trading the cfd spi with it ,i feel it has def helped my trading i have various time frames up to c longer term trend then mostly trade off of the 1 min chart .
also since ig doesnt have hekin aski candles i have them on a cmc platform to help to ,sounds a lot for trading one instrument but oh well if all helps ill keep it ,i have no vol so its purely on price and trends .
I might go through the currencies tonight and c if anything i thinnk is setting up according to your criteria.
Nathan
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ingot54
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Username: ingot54
Post Number: 2109
Registered: 05-2004
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