This is a comment that was made on another thread about this trade and the charts I refer to are provided.
Originally Posted by mtrmth looks like you wait until the candle closes above the 50 and then you get in the next candle. am i right???
Not quite. With the 200 ema in the position near the C.P. I wanted to wait for a close above. I have found through this system that if the 200 is on the side of the 55(50), and the price passes it, then it goes for the 200 (to the pip)before it stalls and continues or turns around. So in this case I wanted to wait for a close above the C.P. and 200ema before I got in. Once that happened I knew price action was in my favor for a nice long position. The signal I used was to wait for the price to go two pips above for a new high and got in. In another thread about the 200 ema system the explain how a break of the 200 ema is a powerful price action area. If there is a cross of the 200 then hold on for a nice ride in the direction of the cross. Check out the thread for details. Read post #6.
when the cross is caught this early then the move will be a good one if you see the length of the 21. A 25 ema will show the same results just a little farther away (not by much). This is why Effilang's 25/50 system is worth a try. It is virtually the same as the one I use. The only difference is that I am more conservative and wait for a cross to confirm the move.
As you can see in this chart 12, if the cross is not confirmed then you could be easily be stopped out as chart 13 shows. If a cross is confirmed then you don't have to worry about capital preservation and the probability of the price action working in your favor dramatically increases.
I hope this answers your question.
Last edited by techtrader10; 05-03-2008 at 11:42 PM.
Your welcome. I really like helping people out. It's my way of paying back to others for all the help I've gotten while putting my dues in. If I can help one person become successful then I feel all my efforts have been worth it. If I say something that someone doesn't understand than please ask me to explain it. I'll be glad to do so. If the questions aren't asked I'll assume that everyone understood my posts. To me, the only dumb question is the one that is not asked. I'd like to see everyone who follows this thread to be part of the 5% to make it.
Well I said I'd post the good the bad and the down right ugly. Here is an ugly. Here is a case where the system is not perfect. As the chart shows a cross is confirmed and I waited for a close above the 200 and C.P. You can see my entry and exits. Now I went short just after the stop was hit. Since there is no news from the U.K. due to the market being closed there. There was nothing to keep it moving in the direction of the cross. Also the sentiment of the market is on the short term bearish side. The outlook I get is for a downside to 1.9676 which is the april 30 low. or to the april15 low of 1.9601. S1 is @ 1.9648 so that will be my target for today.
Ok as I mentioned before I took the short after I got stopped out. In this case due to strong price action to the downside and bearish sentiment I wanted to see how far down it would go before it would turn to go back to the 21. At this point the market volume dropped off a bit and it looks to be going back again. So I took my profit and ran.
In an earlier post I mentioned I use a daily, 4hr, and 15 min. chart. Well to this point I've been talking about my 15 min. charts because those are the ones I do the actual trade on. In this post I want to talk about the 4hr charts. As you might have noticed I don't put alot of junk on my trading chart. I set up a separate chart with my trend lines on them and I make all the trendlines visible on all timeframes. That way when I go to my lower timeframes, only the relevant trendlines will show up. Now since the commercial and institutional traders use 4hr and daily charts, the trendlines , moving averages and stochs are just as important as the ones on the lower TF's. You may notice that some candles just stop at or turn around in the middle of nowhere (in between P.P.s or trendlines on lower TFs). This is where a trendline or horizontal line usually falls on the 4hr or daily charts. The most powerful trendlines and horizontal lines are those that match on both charts. These will be areas of strong support and resistance. They are also places where orders are placed by the real market movers. Now on this chart I don't have the daily, weekly and monthly P.P.s, I keep a seperate chart for that. I will get into that aspect in a later post as well as daily trendlines.
Here on this chart you will see two different color trendlines. I color code my lines to let me know which are more relevant to me at different points in time. As time goes on I get rid of the lines that are more than 2-3 months old because new highs and lows since then have become more important. It also keeps from getting analysis paralysis and the charts cleaner. Theoretically, you could put thousands of lines on and everyone of them will be touched by one candle or another. We are not out to figure where every candle will stop or turn around because it's impossible to do so. All we can do is to look for some areas of interest. Such as' where do they cross, what matches another TF, past order placement by the market movers, and the overall sentiment of the market players in the medium term.
The one thing you want to look for is the angle of the trendline. I like the rule I was taught when it comes to this subject. The steeper the angle the easier it is broken. For this reason I don't like trendlines greater than 45 degrees. This will also cut down clutter and useless information. As time goes on I will get into this subject more as well as others I have mentioned but, for now this will give everyone some insight into what information I'm looking for in my charts.
I hope this is useful to everyone.
The descriptions about how you expect the price act regarding moving averages is quite helpful. I am following.Thanks again.
Thank you for letting me know that. I don't want to make it hard by using lots of market lingo to confuse people. The easier I can make this the better everyone will understand and succeed. Try reading some posts that analyst put out there and try and figure out what their talking about. Some of them are just confusing. They throw all these numbers at people expecting everyone to know what they mean and then they get frustrated. Some just give so much information I have found to be useless to me. Maybe if I was carry trading then it would be of importance. I'll be doing more on chart reading as time goes on then everyone can get whatever information that suits their needs for this system.
The following charts were taken before the London open. Chart 16 is the 15 min., chart 17 is the 4hr, and chart 18 is the daily. In each one the market sentiment is bearish. So here a short position would be in order and an entry sought.
Here you can see what the results were. As the charts earlier showed there was a bias to the downside and the price going below the pivot would be the time to take a short position as chart 19 shows. If you look at chart 20 (4hr), you see the red candle before the last red one has touched the 21 and closed lower. The last red candle retested the 21 and failed there and here again the short position should be taken just below the CP for a nice move and good profit taking.
since there was no new low made on the next bull candle it retested the 21 on the PMI news being over 50 which was good, given a 2 full point deviation. A break above the m3 was a good indication of a test of the 55, based on past performance (90% of the time). With bias still bearish on the 4hr and daily, I see the bullish trend to be only a correction, so the bias is still bearish. Especially since on the daily chart, a new low was achieved and a higher high was not.
If anyone has any thoughts on this please let me know.
Question I was asked...
Linear Mode
