BBmac's Gbpusd thread

[bbmac]

Th 26th Nov 09

Nice steep downtrend on the lower t/f's with Hi-probability Re-entry (to next higher t/f trend after a pullback) set-up opportunities as well as thrust candle entry opportunities to the trend.

Price reaches 130% of it's 20day average pip range and finds demand/support in the previous 1hr swing lo=prev supp=potential support zone that is co-existant with an obvious near-term prev sw lo on 4hr...at whch a 1 and 5min regular divergence based repeating reversal set-up develops on both t/f's, the 5min supporting the 1min set-up...and a nice +25+ pip gain ensues.

Even against trend there are hi-probaility trading opportunities, although most would tell you there are not.

The potential support is here

The 1min set-up is here, notice the double regular immediate bullish divergence on the 1st oscillator

The supporting 5min set-up is here

You can see how the 1hr prev sw lo zone is co-existant with a similar prev sw lo zone on 4hr here

G/L

 

[bbmac]

re-test of potential support zone

Price re-tests the potential support zone discussed in post above , no 1min set-up but a great 5min bullish pinbar develops, for another hi-probability entry @ an effective HL, price now buying above the last LH and =LH of the downtrend..hi-probability pip gain again with entry at close of the 5min pinbar.

G/L

 

[bbmac]

selling continues after pullback to 6575

Price sees a shallow pullback off the same Low as this morning in the 1hr/4hr potential support zone discussed above following a sell off from the 6575 first pullback hi, this 2nd test, see-ing a 1min regular bullish divergence based reversal set-up. This is followed by a 1min hidden-divergence Re-entry (to next higher t/f trend after a pullback) set-ups develops which goes on to see a 'with trend' downside breech of the support zone price currently around 6475 correct at time of writing.

This current low is at the top of the next near-term obvious 1hr previous swing lo=prev supp=potential supp zone that is also co-existant on 4hr:

Price has now breeched the 1hr and 4hr ascending potential support trend lines and is @ 145% of it's 20day average pip range so far today, with t/f's to 1hr now in a downtrend, correct at time of writing.

G/L

 

[bbmac]

Below current price...4hr

Below current price and the below the prev 1hr/4hr swing lo=prev supp=potential support zone discussed in posts above are the 38.2% 5707-7044 @ 6431 and the 76.4% 6285-7044 swing @ 6404. The previous swing lo=prev support=potential support zone below these fibs is co-existant on the daily t/f.

G/L

 

[bbmac]

Fri

More $ buying on back of Dubai problems has seen cable plummet again. Price pulled back from the overnight / asian lo of 6374 to a pullback hi of 6429 before london open and the selling of this pairing started again.

Price has arrived @ the prev 4hr swing lo = prev support=potential support zone that is co-existant on the daily t/f, that was discussed in post #344. Under this zone and barring the unbreeched fibs of the 5707-7044 move (61.8% @ 6152, 76.4% @ 5982) you have to turn to the Daily chart for potential support/rbs factors..it is shown below:

The 4hr screenshot below shows the descending channel on that t/f and on the daily t/f now we have the L below the last HL, a LH and L as 1hr/4hr are firmly in a downtrend

G/L

 

[bbmac]

volatility

Clearly volatility has increased over last few days across many instruments...in cable the currrent intraday low [finding some support in that prev 4hr/daily swing lo=prev supp=potential supp zone discussed in posts above,] saw a breech of the 3rd and most extreme fib tunnel (red solid) on 5min as the first 2 narrowed, something I have rarely seen since the heady days around the height of the financial crisis (Lehman's collapse etc..)

 

[bbmac]

Pullback or more ?

Extended +100+ pip pullback so far off the current i/day lows at that 4hr/daily potential suppoirt zone discussed in posts above..there were Regular divergence/oscillator extremes based repeating reversal set-ups to 1hr (The 1hr is shown below)

Price has now breeched the 61.8% of the 6529-6270 (current i/day lo) swing and this is now the biggest pullback of the fall from 6744.

G/L

 

[smbtnt]

Hi bbmac,

Scenario: cable dropping sharply but approaching previous swing on the higher time frames. Divergence developing on the medium term time frames. You would like an entry and stop. Where do you take it from there?
Also have spotted terms like 1 min Aii and 1hr c....what is that please?

 

[bbmac]

answer to question above

Hi bbmac,

Scenario: cable dropping sharply but approaching previous swing on the higher time frames. Divergence developing on the medium term time frames. You would like an entry and stop. Where do you take it from there?
Also have spotted terms like 1 min Aii and 1hr c....what is that please?

Yeh the pullback just popped above the last LH and oscillator peak of the downtrend on 15/30min (on my osc settings) thus invalidating the hidden divergence..see 30min screenshot below,...your s may be different as diff osc settings.

I was wondering where the sellers might come in again, but although I had a 1min trigger reversal set-up to short I could not identify any potential res/sbr factors at 6440 area.

As for the terms you mention I look for certain repeating oscillator divergence (both hidden and regular)/extremes and band deviation patterns @ potential supp/res/sbr/rbs factors. These are termed either as a hidden divergence based Re-entry (to next higher t/f trend after a pullback) set-up or a regular divergence/osc extremes based Reversal (against trend) set-up. The Re-entry set-ups are numbered type 1,2,3 and 4 whilst the Reversal set-ups are classed as types A, Aii, B, C, Extreme and Extreme ii. Seq refers to when the set-up develops with regular sequential as opposed to regular immediate divergence.

 

[bbmac]

w/e 27/11/09

The Weekly candle closes as a doji as price bounes off the 4hr/daily prev sw lo=prev support=potential support zone highlighted in earlier posts. the t/f is effectively ranging with bullish biais.

Turning to the daily and a perfect bullish pinbar close on the Daily candle. Friday's Low was effectively a LL on this t/f establishing a downtrend, 100 sma however remains above 200sma. Fibs to the 7044 current yearly hi are plotted from the swing lopws @ 3503, 3647, and 4389 and the area of the recent 5707 lows was in a 3 fib cluster connected to the fib retracements of those swings (now a previous swing lo=prev supp=potential support zone on this t/f, co-existant with the Weekly t/f, as is the prev sw hi zone shown in red.)

Turning to the 4hr, Friday's close just off it's Hi was around the 38.2% of the recent 6876-6269 (Friday's lo) swing, co-existant with the 50% of the more recent 6744-6289 swing down and 200sma on this t/f. Price is effectively ranging with a bearish biais, on this t/f after a recent H then L, and like the Daily t/f, the 100sma remains above the 200sma. The yellow fib is the 5707-7044 swing up.

The blue and red zones are co-existant with previous obvious near-term swing lo/hi's on the Daily t/f.

Friday's pip range was 139% of it's 20day average, and the week's pip range was 89% of the 52week average, with the monthly so far being @ 53% of the 12month average, so with one trading day of the month left it is likely to be a far smaller range than the 12month average, particularly if price does not go below Friday's 6289 low.

The 1hr t/f is an uptrend after a H above the last LH of the prev downtrend, followed by a HL and a HH at Friday's 6509 Hi, although unlike the 4hr/Daily, it's 100sma remains below it's 200sma.

The blue and red zones are co-existant with previous obvious near-term swing lo/hi's on the 4hr t/f.

G/L with forthcoming week's trading.

 

[bbmac]

Tech analysis-Precictive?

I received an email asking why I make no attempt to map out possible future price movement scenarios based on my '..extensive...' tech analysis? The mail goes on to suggest that I '..must have an idea based on this analysis and my own trading experience..', so why not include it in my posts?, ... I thought I would replicate the reasons I gave here.

The principle reason is that tech analysis is not predictive..as Mark Douglas (Trading in the Zone, The Disciplined Trader etc...) says, and I have oft repeated, no one knows what will happen next, so for me I make no attempt at predictions. My tech analysis provides me with a trading edge and knowing what the t/f's of interest to me are doing-based on price action analysis doing ( ie trending or ranging) as well as what the potential support/resistance/sbr/rbs is on my intermediate and trend t/f + allows me to act on my trading edge only in the highest probability price action circumstances.

Prediction is futile and I see may traders sharing their agonised opinions and analysis on various forume (most notably FF.com) about future price scenarios...but as Mark Douglasalso correctly states, you do not need to know what will happen next in order to make money...you just need a trading edge that is a set of variables that when present indicate a higher probability of a gain than a loss over a historical sample of times it set-up.

Of course it is difficult not to form an opinion on where privce may be headed over whatever time scale. but to do so can limit your ability to act upon a perfectly formed trading edge that sets-up contrary to this pre-conception, so it is always best to keep a clear and open mind. Even worse than a technical pre-conception, I see many traders on threads compleletly unable to act upon a technical edge because it runs contrary to their fundamental/global macro viewpoint , ie some will not buy the £ at the moment until the Uk economy recovers...this is crazy to mix the 2 forms of analysis. Even in the strongest bull or bear runs we see sustained movements in the opposing direction.

G/L

 

[searchlight]

Re: Tech analysis-Precictive?

I received an email asking why I make no attempt to map out possible future price movement scenarios based on my '..extensive...' tech analysis? The mail goes on to suggest that I '..must have an idea based on this analysis and my own trading experience..', so why not include it in my posts?, ... I thought I would replicate the reasons I gave here.

The principle reason is that tech analysis is not predictive..as Mark Douglas (Trading in the Zone, The Disciplined Trader etc...) says, and I have oft repeated, no one knows what will happen next, so for me I make no attempt at predictions. My tech analysis provides me with a trading edge and knowing what the t/f's of interest to me are doing-based on price action analysis doing ( ie trending or ranging) as well as what the potential support/resistance/sbr/rbs is on my intermediate and trend t/f + allows me to act on my trading edge only in the highest probability price action circumstances.

Prediction is futile and I see may traders sharing their agonised opinions and analysis on various forume (most notably FF.com) about future price scenarios...but as Mark Douglasalso correctly states, you do not need to know what will happen next in order to make money...you just need a trading edge that is a set of variables that when present indicate a higher probability of a gain than a loss over a historical sample of times it set-up.

Of course it is difficult not to form an opinion on where privce may be headed over whatever time scale. but to do so can limit your ability to act upon a perfectly formed trading edge that sets-up contrary to this pre-conception, so it is always best to keep a clear and open mind. Even worse than a technical pre-conception, I see many traders on threads compleletly unable to act upon a technical edge because it runs contrary to their fundamental/global macro viewpoint , ie some will not buy the £ at the moment until the Uk economy recovers...this is crazy to mix the 2 forms of analysis. Even in the strongest bull or bear runs we see sustained movements in the opposing direction.

G/L

Hi Bbmac,

Although I enjoy your analysis find them informative; I have a different take from you on the assumption that TA is not predictive. I would argue that, any analysis don't lend themselves to prediction is useless at best. Every time you place a trade you are predicting.(especially if you place an order for the trade to be activated if the certain conditions are met.)

While on the subject , I interpret Mark Douglas's explanation differently. I think what he is saying is that; your trading edge can not predict every trade as a winner (unless edge is %100) in micro level, but can predict that, you will be winner overall (in large enough sample) in macro level .

In other words if you have an edge that predicts ( yes your edge is your predictor in a way) % 70 winners after all is done and dusted (fibs,trend lines,s&r,ma combined and finally activated by Price action) you can not know which 70 trades going to be winners or which 30 trades going to be loser and in which combination/ order. hence the unpredictability of each trade. Yet you can predict with high certainty that over a large enough sample %70 will be a winner.Hence the predictability of an edge/market.

In conclusion when your edge (predictor ) present itself indicating likely direction of the market ; take the trade in the knowledge that , you have no idea if that particular trade is going to be a winner or not. Be content with it, because you don't know what the market is going to do next.(this where the; you don't have to know what market is going to do next in order to be a winner comes from...I think) Yet it is so predictable you know what is going to do most of of time in the same circumstances.

Best regards,

Searchlight

ps.( you ) used in general terms for (we/he/she...etc)

 

[bbmac]

Re: Tech analysis-Precictive?

Hi Bbmac,

Although I enjoy your analysis find them informative; I have a different take from you on the assumption that TA is not predictive. I would argue that, any analysis don't lend themselves to prediction is useless at best. Every time you place a trade you are predicting.(especially if you place an order for the trade to be activated if the certain conditions are met.)

While on the subject , I interpret Mark Douglas's explanation differently. I think what he is saying is that; your trading edge can not predict every trade as a winner (unless edge is %100) in micro level, but can predict that, you will be winner overall (in large enough sample) in macro level .

In other words if you have an edge that predicts ( yes your edge is your predictor in a way) % 70 winners after all is done and dusted (fibs,trend lines,s&r,ma combined and finally activated by Price action) you can not know which 70 trades going to be winners or which 30 trades going to be loser and in which combination/ order. hence the unpredictability of each trade. Yet you can predict with high certainty that over a large enough sample %70 will be a winner.Hence the predictability of an edge/market.

In conclusion when your edge (predictor ) present itself indicating likely direction of the market ; take the trade in the knowledge that , you have no idea if that particular trade is going to be a winner or not. Be content with it, because you don't know what the market is going to do next.(this where the; you don't have to know what market is going to do next in order to be a winner comes from...I think) Yet it is so predictable you know what is going to do most of of time in the same circumstances.

Best regards,

Searchlight

ps.( you ) used in general terms for (we/he/she...etc)

Hi, Symantics then probably,!? ...except that in my opinion each time you place a trade (when your trading edge sets-up) you are relying on the historical probability of the edge to continue to produce a gain over a sample of times it sets-up, ie you are neither predicting the outcome of that particular instance, or indeed the outcome of the sample, relying for this that your trading edge is based on sound principles tested in all market conditions/volatility - if this is not the case and your trading edge fails over a sample given changed market conditions/volatility than that the edge was based upon, then all the prediction in the world will have counted for nothing.

G/L

 

[searchlight]

Re: Tech analysis-Precictive?

Hi, Symantics then probably,!? ...except that in my opinion each time you place a trade (when your trading edge sets-up) you are relying on the historical probability of the edge to continue to produce a gain over a sample of times it sets-up, ie you are neither predicting the outcome of that particular instance, or indeed the outcome of the sample, relying for this that your trading edge is based on sound principles tested in all market conditions/volatility - if this is not the case and your trading edge fails over a sample given changed market conditions/volatility than that the edge was based upon, then all the prediction in the world will have counted for nothing.

G/L

I think you are predicting the outcome each and every time you place a trade, by either going long or short. If that wasn't the case (your edge didn't predict the likely direction of given trade when it presented itself) all the analysis in the world counted for nothing.

In my opinion edge can not exist , without prediction being integral part of it.

Searchlight.

 

[bbmac]

Re: Tech analysis-Precictive?

I think you are predicting the outcome each and every time you place a trade, by either going long or short. If that wasn't the case (your edge didn't predict the likely direction of given trade when it presented itself) all the analysis in the world counted for nothing.

In my opinion edge can not exist , without prediction being integral part of it.

Searchlight.

What if your trading edge operated on a 10% strike rate (ie averaging 1 winner in 10 ) but had a reward: risk ratio of 15:1, would you still be predicting a winning trade each time it set-up? Of course not beacuse actually statistically the highest probability is for a losing trade...so perhaps you would be 'predicting' the higher probability of a losing trade occurring?

An edge does not predict the outcome of the result, and it is an important distinction, albeit probably a more symantic/academic one when you reach a certain level of trading given a consistently profitable trading edge. An edge simply tells us that there is a greater probability of one thing happening other any other outcome given the historical evidence. This greater probability, for the reasons you stated in your first reply (ie we have no way of knowing in advance the actual sequence of winning/losing trades) does not represent prediction, just a greater probability based on historical precedence, and it is the historical nature of the precedence that renders such an edge non-predictable the next time is sets-up in the future.

(I know what you are saying, but to me it really is an important distinction, particularly for newbie trades who would do well to understand what a trading edge actually is and probably more importnatly, what it isn't.)

 

[searchlight]

Re: Tech analysis-Precictive?

What if your trading edge operated on a 10% strike rate (ie averaging 1 winner in 10 ) but had a reward: risk ratio of 15:1, would you still be predicting a winning trade each time it set-up?

Answer to your question is yes; I would be predicting winning trade each time it set-up
knowing that only 1 in 10 will be successful.

Anyway, I think we both know the where the differences lies. We agree to disagree on that one.

Good trading,

Searchlight.

 

[mpat89]

Hi bbmac, your posts are very detailed and informative, thank you for posting them. Since you have been analysing this pair for some time I was wondering if you could help me out - on the daily charts where do you think this high/low could retrace to? my high is 1.6875ish and low is 1.622. I am trying to build skills on creating analysis for what fib level a swing move is likely to retrace to and would greatly appreciate any input you may be able to give.

 

[bbmac]

answer to question

Hi bbmac, your posts are very detailed and informative, thank you for posting them. Since you have been analysing this pair for some time I was wondering if you could help me out - on the daily charts where do you think this high/low could retrace to? my high is 1.6875ish and low is 1.622. I am trying to build skills on creating analysis for what fib level a swing move is likely to retrace to and would greatly appreciate any input you may be able to give.

Hi, Thank you for your comments,...well in light of my post and subsequent posts since post #351, I didn't know whether your question was loaded with irony? The answer to your question is that price could go anywhere, and for me to speculate where would suggest that I have predictive analysis, which I don't. On that Daily t/f there is a perfect bullish pinbar which implies rejection of that lower 4hr/Daily t/f previous swing lo=prev support=potential support zone detailed in previous posts. Price has already pulled back 38.2%/50% of the recent 6876/6744-6269 (Friday Lo) moves respectively with the higher 50%/61.8% of those moves @ 6573/6563 respectively...maybe this is the bull target? ...I have no idea..certainly the 1hr is in an overall price action uptrend and the move off Friday's low was a strong one. The best advice is to trade what you see, not what you think. As for you building up skills to create analysis for what fib level price might retrace to-this falls into the predictive ..so for me I will determine if any trend has/is developing on the t/f's of interest to me because of the pullback/extended pullback/reversal in a longer swing move and act according to my trading edge.

G/L

 

[mpat89]

Thank you for answering, there was no irony. I just wanted to see what kind of things you would point out to give me thoughts and ideas and a general direction by which to think about this. You've done exactly that so thank you.

 

[gamma]

Hi mpat89.
using the fib levels that bbmac highlights along with price candles, is a strategy I find very helpful.