Comprehensive Trading System/Methodology

[bbmac]

Have a look at the screenshot below of recent price action in gbpusd on 1hr chart....you will see that price was in an uptrend and as it pulled back off the highs at point z it found some support at the previous swing hi (=previous resistance=potential support) at point x.

Now this previous swing hi whose zone is shown as b was not the most recent/immediate to current price action but it was a previous swing hi that produced a large swing swing. (actually the most recent/immediate previous swing hi to current price action was at zone a....but this was some way off, such was the steeppness of the move up.)

The point to be made here is that if looking to identify previous swing hi/lo zones as potential rbs/sbr after a pullback in an uptrend/downtrend respectively, the following general observations may be useful;

i. The most recent/immediate obvious previous swing hi/lo's to current price action tend to have the most influence on price action insofar as their potential for rbs/sbr is concerned..

lest,

ii. As in the case above another obvious previous swing hi/lo produced a big swing

and/or

iii An obvious previous swing hi/lo had multiple tests on it as res/supp before it broke to the upside in an uptrend, downside in a downtrend, respectively.

These are acute observations but generally hold good.


(In the actual example above minor support was found (60pip swing) before a further swing lower into the potential rbs zone b at the confluence of the 38.2% fib of the 4501-4989 move, as I write this.)

 

[bbmac]

I've made the above screenshot smaller and added the fib to show the confluence within that potential rbs zone b discussed above. You can see that the confluence of potential support was the zone itself (prev sw hi=prev res=pot supp) plus the 38.2% fib and the previous minor swing hi's circled in red at left of pic.

This is a good exaample of a furter accute observation of price action behaviour at potential sbr/rbs insofar as previous swing lo/hi's are concerned, and that is

i. Price tends to test deep into the zone ie toward the close of the candle that makes up the deepest extreme of the potential sbr/rbs zone (the zones being made up of the area between the highest/lowest candle spike/wick/shadow and the highest/lowest candle close of the candles that make up the obvious previous price swing hi/lo)

Confluence trumps everything and as in this example where you can find the confluence of other potential supp/res factors in the zones so much the better.

EDIT: In the example above a 'with trend' follow thru to new highs resulted - the move from 4803 topping at 5280 at time of writing (19:38pm gmt)

 

[bbmac]

Nice example of 2 x fibs confluence at a potential rbs zone today. cable pulls back off Yesterday's H at 5376-80 area and finds support at the potential rbs zone shown in screenshot below...between red lines.

For those that know the set-ups with this system/methdology, an 0757am gmt 1min Rev A was the trigger, supported by 5min Rev Extr, 15min Rev Aii (slightly imperfect re 40bol)30min Re-ent 2 (slightly imperfect re osma) and 1hr Re-ent 4.

G/L

 

[bbmac]

Another example of a trigger t/f reversal set-up in an obvious next t/f (intermediate) range...this time a Rev A set-up supported by

a. the doudle regular immediate bullish divergence in the lead oscillator-osma
b. the 5min small charts, breech of 1st extreme fib tunnel (red dotted) and the breech of the ascending fib channels (yellow)

The 5min ranging conditions (per overall price action-classic peak/valley analysis) are shown below:

The 5min supporting small chart is shown below

 

[bbmac]

Gbpusd Price continues with the longer time frame uptrend after the BOE/Mpc -0.5% rate cut.

Nice example of a 1min Re-entry (to trend after a pullback) set-up @ a 5min potential rbs zone shown in screenshots below. The 5min potential rbs zone shown between the red lines = previous swing hi=previous resistance=potential rbs when approached in a pullback from the topside.

You will see the 1min Re-entry type 4 went on to achieve a with trend follow thru to a HH shown circled in white, a quick +50+ pips.

The Hidden/reverse divergence and band deviation based 1min Re-entry type 4 set-up is shown below;

 

[bbmac]

A reminder

Introduction
This Trading System/Methodology revolves around the confluence of technical phenomena that is critical to and forms the essential basis of the System/Methodology, described as A-D below;

It is the confluence of these technical phenomenons that give rise to the trading edge provided by this trading system/methodology.

Completing Tasks 1-3 below, in the way described in this document will enable a user of the Trading System/Methodology to trade with high probability and low risk.

A. Price Action:
i. Overall price action-Identifying what the prevailing market conditions are (trend or range) by means of Overall Price Action – Classic Previous Price Swings Peak/Valley Analysis. (Task 1)
ii. Individual Price Action -as the trigger to entering the market at one of the indicator based set-ups/patterns provided by C and D, described below.

B. Support & Resistance: Identifying what areas in the market may provide Support or Resistance, and where Support may act as Resistance if breeched to the downside and tested from the other side (SBR,) and conversely where Resistance may act as Support if breeched to the upside and tested from the other side, (RBS.) (Task 2)

Once this analysis (Tasks 1 and 2) is complete, the aim is to identify Individual Price Action as the trigger at one of the technical indicator based set-ups/patterns that indicate a high probability trading opportunity, either with or against trend.

These technical indicator based repeating set-ups/patterns are based upon;

C. Oscillator Divergence from Price/Extreme Oscillator Readings
D. Price Band/Channel Deviation/Extreme Deviation from it’s mean.

Memorising these set-ups/patterns comprised of C and D above, then recognising them in realtime, is Task 3.

Consistency is the key to longevity in any market. Professional traders wait for the probability of a successful outcome to be substantially weighted in their favour indicated by the confluence of technical conditions that suggest a high probability trading opportunity. The confluence of the 4 technical factors Aii -D, within the context of Ai, give rise to high probability trading opportunities.

The Trading System/Methodology analyses price across 3 time frames. The immediate / trigger, (hereinafter called the trigger time frame) the intermediate, and the higher/trend (hereinafter called the trend time frame.)

My own preference is to use the 1min, 5min and 30min as the trigger, intermediate and trend time frames respectively. The Trading System/Methodology can be used on longer time frames such as 1hr/4hr/Daily, or indeed 4hr/Daily/Weekly etc..

This underpinning 3 time frame approach is based upon, and is an obvious evolutionary development of Dr. Alex Elder’s methodology (Come into my Trading Room etc...) who looks for set-ups on the intermediate in the direction of the trend time frame, with entry fine tuned/timed on the trigger time frame chart.

The Trading System/Methodology can deliver attractive gains in any liquid market but demands of the user his active attention to and engagement with the market not least in the identification of the prevailing trend, potential Support/Resistance in the market, and the memorising of the Indicator based set-ups/patterns that enable high probability trading opportunities at such potential Support/Resistance/SBR/RBS.

 

[bbmac]

You can see the 1hr potential supp zone on screenshot below [previous swing lo=previous support=potential support when approached from topside] Price duly approached the extreme of the zone, there being no fibs or other such potential support confluence around...a 1min trigger Reversal type A (Rev A) set-up, no real 5min main chart supporting set-up, but a decent 15min rev A seq and 1 and 5min small charts supporting conditions. The 1min set-up is replicated below too.

1min Rev A shown below;

15min supporting Rev A seq;

 

[bbmac]

Price Pivots

Shown on screenshot below is the current 1hr Gbpusd chart re obvious previous swing hi/lo extremes (Remember the potential supp/res/sbr/rbs zones lie between the extremes and the highest candle close in a swing hi, and lowest candle close in a swing lo**)

**Use the cross hair tool to mark this end of the zone that price may be in.

(Use the 1hr as a proxy for the 30min time frame only in respect of finding potential supp/res/sbr/rbs zones as 1hr chart is more widely used over 30min in this respect...30min remains the trend t/f in respect of the set-ups/and overall price action trend)

For the intermediate t/f prev obvious swing hi/lo's .. just use the cross hair on the main 5min chart.

Remember to see if any other potential supp/res factors exist in the zones (fibs, t/lines, bids/offers touted, prev bids/offers touted and the minor potential supp/res factors of pivots [if used.]

Chart Key
green=prev swing lo
red=prev swing hi
white=prev swing hi and lo (ie where sbr or rbs)

 

[bbmac]

Confluence, Confluence, Confluence...

Another example of Confluence (see note at bottom of post.) A set-up with individual price action trigger confirm (circled in yellow.)

Cable finding resistance at the Potential resistance zone shown in screenshot below...with a 1min Rev A ii seq set-up. no 5min main chart supporting set-up but bearish divergence in 2 of the oscillators and a 15min Rev Extr ii set-up to support, and 1 and 5min small charts supporting conditions..

Set-up has seen +30+ pips at time of writing but U.s NFP due up so anything can happen.

The confluence of pre-identified potential supp/res/sbr/rbs with individual price action trigger at a repeating set-up/pattern derived from oscillator divergence/band deviation.= high probability trading.

 

[bbmac]

When there isn't perfect confluence of tech factors

As you will know this system/methodology derives it's set-ups from a confluence of 4 technical factors...but what do you do when there is one or two of the technical factors missing ?

The example post NFP today in gbpusd demonstrates such a scenario...Cable saw an intial knee jerk buy up to the now proven resistance zone mentioned in posts above before a sell off to result in a 1min Reversal Extreme set-up...as shown in screenshot below.

At this level although it was a good 1min Rev Extr set-up there was little in the way of main chart supporting set-ups on the next t/f + (ie 5min and above) and no potential support/rbs could be identified there other than a minor factor of the Daily pivot. There was however good supporting (extreme o/s) conditions on both the 1 and 5min small charts....So with the absence of pre-identified potential supp/sbr other than the minor factor-Dly Pivot (doesn't mean to say there wasn't any, just that using this system/methodology it couldn't readily be identified) and the absence of any 5min+ main chart supporting set-ups it became less than the highest probability opportunity when all tech factors are present.

Going for the set-up was the supporting conditions on the 1 and 5min small charts and the fact that it was effectively a 1min reversal set-up in what was then a 5min range per overall price actuion-classic peak/valley analysis. [as it turned out the set-up saw a quick +30= pips before reversing)

In these situations you either leave well alone or make a judgement based on experience and these other factors, perhaps using less risk re volume traded.

Edit: Just realised Daily Pivot doesn't show on that pic above, so it is shown on pic below;

 

[bbmac]

To clear something up

The Support/Resistance Channels used on the main chart templates (and an essential factor in the Reversal Extreme set-ups) are actually the FutCh line of the Silver Channels indicator included in the indicators folder attached to this thread. You should ensure that on all the main charts you have at least 2...in the indicator properties Inputs tab it is the 61.8 and 161.8 values you need to set...and in the colours tab - all lines bar lines 6 & 7 are blacked out.

For jpy crosses in particular you can also add the 261.8 and 423.6 values so effectively you have 4 x support/resistance channels on each main chart template.

61.8 green dotted line
161.8 red narrow dotted line
---------------------------------------
261.8 red wide dotted
423.6 red wide/narrow intermittent dotted

 

[bbmac]

Support Becomes Resistance

Friday's 1hr congestion broken to the downside to see a new 1hr congestion zone form just below in the overnight asian session...a test on that previous support producing a decent set-up as Support becomes Resistance (SBR)

The screenshot below shows the previous swing lo=previous support=potential sbr.

Clearly support at bottom of asian session range 5055/45 area

 

[bbmac]

more potential sbr...high probability areas at which to seek a set-up in a trend

Times used below are gmt+1, the screenshots show the 1min Re-entry type 4 set-up @ potential sbr shown. Ordinarilly you would look nfor 5min potential sbr for a 1min re-entry set-up but in this acse there was the confluence of the 23.6% fib of the move down with that previous obvious 1hr sw lo=prev supp=potential sbr when approached from underside in a pullback....the set-up has seen +30+ pips.

(The fib is drawn from where price re-traced to est the potential sbr, before a further with trend follow thru to a new LL.

The 1min Re-entry type 4 is shown below;

Note too that the trend t/f downtrend (30min) was co-existent with the 1hr trend (per overall price action-classic peak/valley analysis) and that both the 1hr and 4hr macd hists were pointing down as well, the 1hr crossed below the axis too.

 

[bbmac]

Screenshot below shows how the trend time frame (30min) started to trend down...measured by overall price action-classic peak/valley analysis, as used by this system/methodology.


Remember; Add the individual price action trigger to oscillator divergence/band deviation (per the indy set-ups/patterns) @ pre-identified pot supp/res within the context of trend as detailed above,....and that makes for high probability trading opportunities.

 

[bbmac]

A deeper pullback in Gbpusd downtrend off 4905 LL to the previous 1hr sw lo [=prev support=potential sbr when approached from underside) that coincided with the 38.2% of the intraday down move; (confluence)

The area had been tested before and it had held re the 0947am 1min Re-entry type 4 in screenshots/posts above this one.

Produced a 5min Re-entry type 4 set-up but no clear 1min trigger Reversal set-up with which to fune-tune/time the entry to max effect.

The 3 candles circled in yellow form a bearish candle formation on that 5min chart which might have given the individual price action trigger. Personally I tend to favour having the 1min trigger set-up and if it's not there, I sit it out (as a general rule) in this case it looks like an opportunity missed but it's not always the case....I just prefer the highest probability set-ups with a repeatable known set-up/pattern on the trigger t/f.

 

[bbmac]

Basis of Potential Supp/Res/SBR/RBS

The 1hr chart today is a great example of how previous obvious price swing hi/lo zones can be the basis of your identification of potential Support/Resistance/Support becomes Resistance (SBR)/Resistance becomes Support (RBS)

The green and red circles mark the original obvious previous price swing hi/lo's and the white circles mark where they have been tested and held identified as potential Supp/Res/SBR/RBS at which the confluence of;

a. other potential Supp/Res factors,
b. identifiable repeatable indy set-ups patterns,

and

c. an individual price action trigger.

are sought for high probability trading opportunities.

 

[bbmac]

when a re-entry set-up isn't at an immediate HL [uptrend]/LH [downtrend]

Good example of a Re-entry (into trend after a pullback) set-up on the intermediate chart (timed as a 1min Reversal) indicating a Re-entry into trend t/f trend,...not coming at an immediate HL (into downtrend,)...see screenshot below.

The potential SBR zone was that 1hr zone (previous swing lo) discussed and shown in posts above, with the confluence of former bids 5000/4990 (mni).

Although the set-up didn't come at an immediate LH on the intermediate t/f (5min,) it was a LH on the trend t/f (30min) into whose trend (+) the re-entry set-up was indicating a potential high probability re-entry after a pullback.

The fact that the intermediate chart was effectively ranging and the set-up came at a H not a LH on that chart didn't mean that it wasn't still a high probability set-up for pip gain, but that you should excercise caution on expecting a with trend follow thru to a new LL, particularly as a HL and L above the ultimate LL had been seen on that t/f.

The most important element is that any Re-entry (to trend after a pullback) set-up comes at a LH on the time frame into whose trend a re-entry after a pullback is sought (ie the one above that it sets-up on) The fact that it doesn't come at an immediate LH (downtrend) or HL (uptrend) on the time frame it sets-up on is a potential early warning that the trend may not continue to a new LL/HH off that set-up,... particularly if that t/f has seen a HL/LH before the re-entry set-up. This isn't to say of course that the trend won't continue, just to excercise caution. (There are few absolutes in trading unfortunately!!)

The 1047am gmt 1min Rev B with 5min Re-ent 2 (slightly imperfect re osma) has seen +25-30pips max gain at time of writing.
g.

 

[bbmac]

Subsequent 5min price action has duly obliged to prove the point in above post, with another HL off the H where the Re-entry set-up to 30min downtrend came....see screenshot below.

This is not to say that new lows will not be seen but that 5min is now in a range/consolidation.

 

[bbmac]

following on from point in post #357 & 358 above

Have just taken a look back to see what actually happened re above scenario...Price climbed above the Re-entry set-up @ the 5min H described in posts above to make a HH on that 5min t/f at which a 1min Reversal type C seq set-up with no 5min main chart supporting set-up but with a 15min Re-entry type 1 and 1/5min small charts supporting set-ups/conditions.

The set-up described above came at a HH on the 5min intermediate chart but still at a LH on the 30min trend t/f chart into whose downtrend it indicated a Re-entry set-up but I cannot identify the potential SBR there either in the form of a previous swing lo or any other factors such as fibs, former bids or t/lines) Further selling took place resultingf in a new LL some 190pips off the retrace high where the set-up appeared.

The 1min Rev C seq is here:

And the supporting 15min Re-ent 1 is replicated here;

 

[bbmac]

You can see where gbpusd is finding support, the previous swing hi/lo zone shown in screenshot below.

This area saw first resistance then rbs and now is providing some measure of support again...of course any break to the downside and subsequent pullback re-test might result in it becoming a potential sbr area on this t/f.

Always useful to pre-identify the potential supp/res/sbr/rbs zones re previous obvious price swing hi/lo's as well any confluence at them derived from the other potential supp/res/sbr/rbs factors (main-fibs,bids/offers [previous bids/offers] and t/lines, minor-pivots.)