Re-entering a trend

bbmac

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The attached diagram is a reperesntation of a typical trend.

This post concerns finding high probability low risk re-entries to the trend. Although I trade forex the methodology/technique is technical and can be used on any liquid instrument and any sensible combination of time frames

The methodology is as follows:

a. Designate 3 time frames as your 'longer time frame' your 'intermediatte time frame' and your 'trigger' time frame. Essentially you are looking to re-enter the trend that exists on your longer t/f by looking for set-ups on your intermediate t/f, with entry fine tuned on the trigger time frame.

The general method is as follows.

Once your longer t/f begins to trend by making a higher high or lower low for example or breaking out of a range (A and B represent the top and bottom of this example range) Look for price to retrace off a lower low on your intermediate time frame (in this down trend eg) and to make a lower high, finding resistance any where in the range/congestion. (this 'congestion 2nd b/o' is very often the true break out one, ie you often see a range/congestion break only to retrace back into the range or the bottom/top of the range before the true breakout occurs.)

In this example price indeeds finds resistance in the bottom half of the range consolidation at point C before selling down to a lower low at point D. Now if the trend is true the potential 'Resistance becomes Support' Zone is now the last retrace, so long as that retrace has been exceeded by a lower low (in this downtrend example) or indeed a higher high in an uptrend. Ie as price sells down to point D before retracing back, the RBS zone is now point X, the previous lower low to point C, the previous lower high, and so it goes on.

In terms of pinpointing entry I look for a combination of oscillator extremes/hidden divergence and band/channel deviation on the intermediate time frame with regular divergence or oscillator extremes onthe trigger and place the stop outside the last lower swing high on the intermediate time frame (in this downtrend example, points C,E,G,I ) or the last higher swing low in an uptrend example.

Staying with the downtrend example, when a retace of the last lower swing low [J] results in the last lower swing high being exceeded, then the trend on the inetrmediate time frame becomes questionable. In thisa example price retraces back off point J making a lower swing high at point K before making a higher swing low at L, so that at point M if you get a re-entry set-up which is still within the upper end of the last RBS zone, (points H to I) you would be wary that price made an equal lower swing high rather than an outright lower swing high, (ie lower than the last swing high at point I) and secondly price made a higher swing low at point L. If price had made a higher swing high at point M, than point I then I would hesitate further before re-entering the trend.

The methodology utilises the Alex Elder triple t/f approach with the phenomenon of Support becomes resistance (SBR) and resistance becomes support (RBS.)

I prefer the time frames of 1 5 and 30min as my trigger, intermediate and longer time frame, and utilising this methodology you will see today that in Gbpusd price consolidated in an asian range of 0108-0160 before an early european high at 0174, price then selling down out of the asian range bottom and making a lower low.

Following the 30min short trend the RBS areas on the way on the intermediate chart became 0079-0104, 0047-0075, 0022-0049, then a lower low at 0097 before a slightly higher high at 0052, price then consolidating between 0069 the daily low at the time and 0020, before the range/consolidation broke to the downside, price eventually finding support at the 9950 area, and although it made a lower high at the 2.0000 area in the last RBS zone of 9968-0013, it retraced down to make a higher low at 9964 before taking out the top of the last RBS zone ie the last lower swing hig at 0013 indicating that the trend on that time frame was probably over for now. ............Subsequently price has now retraced back to 0026bid at time of writing.

Of course in these situations you can move up your time frames in which case you would be looking for regular divergenec in both your old trigger and old intermediate and hidden divergence on your new intermediate time so long as the 'new' longer time frame was still trending and price was falling in the new intermediate's last RBS zone, in a downtrend example, as explained above.

Hope this is of some use to tech traders.
 

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replies to pm's

In answer to a couple of pm's i've received on this Trend re-entry subject;

a. The phenomenon of support becoming resistance and resistance becoming support is an important one in any market.

b. In essence the high probability entries lie in the sbr or rbs zones that are comprised of , in an uptrend example for instance, the last broken higher swing high and the last higher swing low. As price retraces down off it's new high it is most likley to find support now at it's broken swing high or somewhere inbetween the broken higher swing high and higher swing low. If the higher swing low is taken out, the trend begins to look doubtful on that time frame.

c. Remember that it is the trend on your longer time frame you are re-entering using the sbr/rbs zones that develop on your intermediate t/f, with entry fine tuned on your trigger t/f. Per the Classic Alex elder triple t/f approach, use a factor of 5 for the t/f's or thereabouts so 1,5,30m, or 15m,1hr,4hr or 4hr,Daily,Weekly for eg.

Eg this morning in cable as it broke up out of the 9972-0024 asian range and exceeded too yesterdays N/Y hi at 0028, finding resistance at it's higher high now, creating a poyential RBS zone of 0042-0019 as it made a new high at 0085 before retracing to 0035 (within that 0042-0019 potential RBS zone) before another assault higher, price as i write this yet to take out the last high at 0085 area.

Hope this helps.
 
further to post above

So cable finds that support in the last 0042-0019 RBS zone making new highs at 0113 area, taking out the last 0085 high, (aided by stronger than expected uk retail sales data release.) The new RBS zone on the 5min as the intermediate chart for the intraday trend becomes the broken higher swing high at 0085 to the last higher swing low at 0035 under it. Sure enough cable is beginning to buy up off the 0048 area, which falls in this zone, although it has yet to make a new swing high, mervyn king et al currently speaking at a Treasury select Cttee may have an impact on this technical phenomenon.
 
another question answered

Reply to another pm: (please ask any questions now on the thread and i will answer here.)

It is the trend on your longer time frame chart that you are re-entering, the intermediate and trigger charts just provide the mechanism for entry, so when in the trade it is the price action on the 'trend' time frame you re-entered tht is most important, as the intermediate and to a a larger extent, the trigger will be noise, and will provide you with any number of 'spooks' as to why you should exit your trade before the target you have set. Even if your trigger and intermediate chart look o/b or o/s it really isn't until your longer time frame chart (ie the trend you re-entered) looks o/b or o/s that a trend change or significant pullback that may affect the trade's chances of success may occur, as highlighted by such technical methods as oscillator extremes/divergence and/or channel/band deviation at areas of support or resistance known to you.
 
following on with today's uptrend example

Cable finally breaks the highs at 0113 after the mervyn king tesimony making a new high at 0119 finding support at 0049 in that last RBS zone of 0085-0035, before retacing into what is the new RBS zone on the intermediate chart (5min in this case) of that broken high at 0113 to the higher swing low at 0049. per the post above notice how there was a lot of ' noise' on the intermediate and trigger before that 0113 high was broken to the upside.

Cable then retraced off the 0119 high and found support in that new RBS zone of 0113-0049 at 0093 before another assault north, taking out the 0119 swing high to record another swing high at 0124, before retracing. The new RBS zone becomes the broken higher swing high at 0119 down to the higher swing low at 0093, and sure enough price retraces at thaty new higher swing high of 0124 finding support in that zone at 0110 before the final push higher to highs of 0144.

A retrace down from resistance at that 0145 sees another failed attempt higher finding some support at 0122 in what was now the last RBS zone of that broken higher swing high at 0124 to the higher swing low at 0110. It continues to seel down from the highs before taking out that last higher swing low at 0110 indicating that the uptrend is now in some doubt. At it's high of 0145 price was up 172 lo-hi on the day, which was above the 10 and 20 day range averages 153 and 148pips respectively but still below the 5day average of 198.

So you see there are several opportunities to re-enter the intraday trend using this technique/methodology on the smaller intraday time frames, and so long as you get your stop under the last higher swing low of the RBS zone in an uptrend and above the last lower swing high of an SBR zone in a downtrend, these entry techniques in a trending market are low in risk.


Thanks for the pm's ...I think there is sufficient explanation of the technical technique/methodology here now, but I'm happy to answer any questions via the thread if not.

good luck.
 
Last edited:
It seems like an interesting method, i'm going to try to follow it, thanks for posting it. Will you be posting the custom indicators and chart templates referred to in the document?
 
thanks

Hi bbmac,
thanks for taking the time out to explain this perspective. By annotating the cable chart over a couple of days, you have managed to add some concrete detail to what can be quite tortuous when explained purely in terms of higher highs and higher lows etc. Much appreciated.
 
reply

Hello

In respect of indicators and their use, -vs- just price action, I prefer to use indicators to find an entry on my intermediatte chart then fine tune the timing of the entry on my trigger chart, mainly because using the lower time frames is noisy and I feel happier with some indicator confirmation.

Essentially I am looking for oscillator divergence both hidden and regular with some band/channel deviation at an SBR or RBS zone as explained above. Very often you will see hidden divergence in your intermediate chart oscillator (s) confirmed and entry timed by regular divergence or oextreme readings in your trigger chart oscillators., at such an SBr/RBS zone.

Put very simply, look for overbought in a downtrend and oversold in an uptrend on your intermediate and trigger time frames.

On the longer time frames, and for example using the 1hr 4hr and daily chart combination, it may be more desirable to use just price action, and i know of traders that do this, as there is less noise in a 1hr and 4hr price action, than in a 1min and 5min for example.

As for posting any custom indicators, there really is no need, any 2 oscillators and a 20bol band will do the trick in terms of assisting to find entries, but just remember: In order to re-enter a trend there has to be one present on your longer time frame chart, otherwise you are re-entering a range. Remember too that the safest place for your stop is outside of the last lower swing hi or higher swing lo of your last intermediate SBR or RBS zone respectively.

Hope this helps.
 
Hi bb - thanks for this interesting thread. You may remember that you got me interested in the support / resistance phenomena, and thought you might like to know that I'm using your ideas very succesfully - have really improved my trading as a result! Many thanks,

pj
 
Hey PJ, nice to know you are doing good.

The phenomenon of support/resistance is a very important one in technical trading. Price action around these areas gives fair indication as to the likely reaction of the market. Moreover, and per the main subject of this thread the associated phenomenon of SBR/RBS in the context of trend is also very inportant and can provide high probability entry points in the direction of a prevailing trend.

There are many measures of support/resistance used by market participants, from standard pivots through to camarilla pivots, even demark and woodies pivots etc... Fib retracements and extensions, and M (mid points) pivots. Previous swing highs and swing lows where any of the aforementioned may have existed or still exist too give us clues as to where the market decided to turn.
 
Good solid trading style presented here, what you have here are the basics and a great foundation /building block for anyone wishing to learn to trade .

There are a wealth of advanced techniques that can be learnt from this building block if one spends enough time studying the charts .

spxpro
 
todays example

Hi

Weds sees an overnight range of 2.0219 hi - 0160 lo in Gbpusd. Price breaks out of that asian range to the short side off the highs and then retraces off 0130 to just below it's lo at 0155, so that this becomes the first SBR zone on the intermediate chart (mine is 5min.) Price then sells off that lower high at 0154 and makes a new low at 0115 before retracing back =into that first potential SBR zone of 0154-0130, selling again at 0136, price yet to make a new low (lower than the last 0115) as i type this, standing at 0125ask.
 
Weds price action 1/5/30min cont....

Price now makes a new low at 0106 bid as I type this, so that the new SBR zone on the 5min as the intermediate chart t/f, becomes the broken swing low at 0115 to the last lower swing high at 0136, (0115-0136)
 
today's gbpusd cont....

Price finds resistance in the new 0115-0136 SBR zone at 0122 and has so far sold off that to an equal low at 0106, failing as yet to make a lower low.

The support at 01016 is Dly S1 pivot and mni suggest 0115-0100 as housing bnids, and of course the potentially stronger bid/support zone looks like the area around tuesday's lows at 0085/80. This later area alos houses the 76.4 fib of the move 9879 to 0317.

My point is mentioning the potential support areas is that there is a lways a judgemnet to be struck as to which point will cause problems to the continuance of the trend.
 
weds cont....

So that 0106 area support holds which is Dly s1 pivot and the 61.8% fib of the 9973-0317 move. A strong move up off it results no doubt helped by No bids forthcoming at the BOE 3mth £10B auction, taking out the last lower swing hi of the last SBR zone, making a current high just over 0170 as I type this. A pause and retrace at 0147 to 0130 produced a higher swing high than the last lower swing hi in the down trend at 0136 signalling that the down trend is questionable on this intermediate time frame now. This higher swing high and the resulting higher swing low becomes a weak RBS zone now in the uptrend (0147-0130,) an uptrend that is weak still on that time frame as the daily high from earlier on is still intact (0216,) ie the new 'uptrend' is still within the daily/session hi/lo.


Mni suggesting that offers lie in this 0175-90 zone, 0170/80 being former bids and housing the 61.8% retrace of the move down today at 0174 with the 78.6% at 0191
 
Weak U.s durable goods data at 1330pm london time, helps push price to a higher swing hi of 0181, the last higher swing hi and higher swing low now forming the new RBS zone 0169-0149, but a weak zone for the same reasons mentioned in last post. Resistance in this 0175-90 area is described in last post too.

Arguably entering into a long trend whilst price remains below the Dly Hi after an intraday downtrend is reversed, remains a riskier proposition than if the uptrend had taken out the current daily hi. Ie you are effectively trapped in the intraday range. In these circumstances if I decide to enter I excercise caution by using a lower volume traded. There are mitigating factors though that only experience brings, and for the purposes of this thread I won't confuse matters by discussing them here.
 
So price finds support in that last 0169-0150 RBS zone at 0156, the area of the asian lows, and a former lower swing high area on the way down, making a new higher swing high at 0192, the new RBS zone becomes the broken higher swing hi at 0181 to the last higher swing low at 0156 therefore, with the same caveat as above re still being within the Daily Hi-Lo range.

A strong recovery off the lows at 01016 now.
 
So this 0192 higher swing high holds, the offers around the 78.6% fib of the intraday move down off the asian highs at 0219-lows at 0106 holding. If The last RBS zone's higher swing low at 0156 gives way, the uptrend on this intermediatte 5min time frame looks questionable. Price currently remains in this last RBS zone of 0181-0156.

Further potential for resistance is above these highs at the daily highs of 0219 area. Lets see what happens in the remainder of this London/European session.
 
nice traders analysis, I went long into 2.0161, based on an indicator cross, so should attempt to take out daily highs from here on ? lets prey 2.0150 holds for longs, mind you couldnt sell then even if it did, ive got discipline to hold until me lines say sell, heres hoping........ gulp... !

love lift us up where we belong........:p
 
Thx, G/L with that trade.

That 0214-0220 area holds last weeks high, and of course Todays high at 0219, MNi now suggesting that ' strong offers ' reside in that area.
 
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