Comprehensive Trading System/Methodology

[bbmac]

Best advice

Before you start your trading session - get 'in the zone;'

a. What was y/day's Hi/Lo?
b. What was last session hi/Lo, ie London/European, U.s, or Asian. (Depending which session you trade..ie I trade the London/European so I note the Asian session Hi/Lo)
c. What was yesterday's candle (Bullish or bearish or neutral?)
d. What are the fundamental announcements due during your trading session?
e. What is the average daily pip range?

then specifically,

f. Note the conditions (range/consolidation or trend) on your trend and intermediate t/f's re overall price action-classic peak/valley analysis
g. Is the trend that may exist on your trend t/f co-existent or contra any trend on the time frames above that?
h. On trend t/f...Note the potential supp/res/sbr/rbs zones re previous obvious price swing hi/lo's and see whether any confluence exists with the other potential supp/res/sbr/rbs factors......Repeat for the most immediate zone (s) on your intermediate t/f.

You are now informed and ready to identify an individual price action trigger within repeating set-ups/patterns at these zones that add to the confluence of technical factors that may indicate a high probability trading opportunity.

Shortcut/don't complete any of these steps or otherwise comprimise your active engagement with this market analysis before or during your trading session and you handicap your chances of making the most informed decisions about the trades you entering, ...this information leads to the highest probability trading opportunities, and there is a positive relationship between this and long term consistent profitability.

G/L.

 

[bbmac]

Anatomy of a trend

As a trend develops re HH/HL - uptrend or LL/LH - downtrend (per overall price action-classic peak/valley analysis, ) the Re-entry (to trend after a pullback) set-ups based around hidden/reverse divergence and band deviation indicated by this system/methodology may materialise after such a pullback.

What they and the rules/guidance governing their use try to ensure is that you only try to enter a trend [after a pullback] only when a trend exists, and that you do so at the optimum possible point most likely to attract the buy the dip/sell the rally participants, and in the optimum price action conditions that have not indicated a potential threat to the trend.

So;

Assuming the 3 time frame set-up; trigger (lowest t/f,) intermediate (next time frame up from the trigger by a factor of x4 to x6) and trend(next time frame up from intermediate by a factor of x4to x6)

As a trend develops and a pullback begins;

Look first for a trigger t/f Re-entry (into next time frame's + trend after a pullback) set-ups (with individual price action trigger) @ pre-identified potential rbs/sbr on the intermediate time frame. (Potential rbs/sbr zones centering around previous obvious [and now breeched in trend direction] price swing Hi's/Lo's on the intermediate t/f,) seeking too the confluence of the other potential supp/res/sbr/rbs factors such as fibs, trend lines/broken trend lines and bids/offers/previous now breeched bids/offers, as well perhaps as the confluence of the minor factor, that of the pivots. )

For an optimum trigger t/f Re-entry set-up, at least the next t/f - the intermediate should be trending and the next 2 time frames (the intermediate and trend t/f's) macd hists should be above axis-uptrend, below axis-downtrend. At the very least the trend t/f macd hist should be pointing down-downtrend, pointing up-uptrend if it has not already crossed the axis.

The optimum position for a trigger t/f Re-entry set-up is at a LH-downtrend/HL-uptrend on the intermediate t/f (whose trend is being entered) and as close to that on the trigger t/f (where the Re-entry set-up appears.)

If the Pullback is deeper and there really isn't any obvious potential rbs/sbr on the inetrmediate t/f, so long as the trend exists beyond the intermediate t/f chart,..it is likely that an intermediate t/f Re-entry set-up might appear co-existing with a trigger t/f reversal set-up and these like the above are highest in probability when @ pre-identified rbs/sbr on the time frame above which in this case is the trend t/f.

For an optimum intermediate t/f Re-entry (into next time frame's + trend after a pullback) set-up, at least the next t/f - the trend t/f should be trending and the next 2 time frames (the trend t/f and one above) macd hists should be above axis-uptrend, below axis-downtrend. At the very least the t/f above the trend t/f's macd hist should be pointing down-downtrend, pointing up-uptrend if it has not already crossed the axis.

The optimum position for an intermediate t/f Re-entry set-up is at a LH-downtrend/HL-uptrend on the trend t/f (whose trend is being entered) and as close to that on the intermediate t/f (where the Re-entry set-up appears.)

You should seek to place your stop above/below the sbr/rbs zone you have identified and at which you have identified a Re-entry set-up and individual price action trigger for market entry.

 

[bbmac]

Trade intelligently

Just got a bit of time to post this as I'm trying to occupy myself so I don't fiddle with a trade, lol.

Look at the 5min chart below, it was in an uptrend along with 30min chart....before a steep retrace off the HH to the HL and a subsequent 'with trend' pullback to the LH circled in white...at this LH point a 1min Re-entry type 4 set-up presented itself at the potential sbr of the previous minor swing lo shown between the dotted red lines which although not shown on the screenshot coincided with the 23.6% fib of the move off the HH top, and a minor potential supp/res factor-the Daily Pivot.

The 1min Re-ent 4 set-up at the LH circled in white on pic above is shown below;

Strictly speaking of course and the point of the post, the 5min was not in a downtrend yet after printing a HL albeit after a very sharp retrace/pullback off the HH, and now a LH at which the above 1min trigger t/f set-up came.

So what made this a high probability entry into what can at the point of entry probably have been considered a potentially developing 5min downtrend?

Well the macd histograms gave the first clue. As on the 5min chart above the macd histogram was crossed below the axis, and the 30min (trend t/f) and 1hr shown (ie the 2 t/f's above the t/f that the set-up appeared on plus one above that) shown on screenshot below were both pointing down (such was severity of the pullback off the HH top) although 30min not yet crossed below the axis.

The 2nd clue was the 1hr Re-entry type 2 set-up that appeared at that HH shown on 5min chart above indicating a re-entry into it's downtrend after the pullback off 4465 lows, and a great pinbar reversal candle....see screenshot below.

So all in all, this still made for a high probability trading opportunity, particularly as it was with the longer t/f trend directtion, ie 1hr/4hr downtrend.

The more general point is that by staying engaged with the market and identifying the trend and potential sbr/rbs and whether the trend is with or contra the trend above your own trend t/f (if one exists) makes for intelligent informed and therefore high probability trading.

Edit: set-up has seen +90pips max available at time of writing.

 

[babymush]

bb could you show some examples of your small charts confirming setup

 

[bbmac]

bb could you show some examples of your small charts confirming setup

Hi, As you know the optional small charts are composed of indicators that help in highlighting potentially overbought/oversold conditions on a particular t/f.

They are composed of

a. 3 x Fib tunnel extremes and you will see that as a trend develops and the more extreme price becomes it is the 2nd and 3rd extremes that get breeched (as they progressively narrow)...ie you have to use these in conjunction with the day's trend/volatility in the sense that the first and second extremes may be easily breeched on a trending day so that it is breeches of the third extreme that are significant.

Current template for 1 5 and 15min small charts show -
1st extreme...narrow red dotted
2nd extreme....wide red dotted
3rd extreme....solid red dotted.

b. Donchian channels (Pink,) again a breech of these can imply that price is getting to an o/b o/s state.

c. Fib Channels (the yellow and aqua horizontal lines) It is always useful looking the slope of these as it can be a good leading indicator as to trend, and the best use in determining potentially o/b or o/s conditions is when they are breeched by price, - particularly if descending into price at potential pre-ident res/sbr or ascending into price at potential supp/rbs. You will mostly see the Yellow Channel breeched not the Aqua, although a breech/touch of this can happen.

These optional small charts can be used as a confirming/supporting factor to the main charts that comprise this trading system/methodology particularly when say you see a 1min Reversal set-up but the 5min main chart may be unclear/not formed.

A confluence of small chart factors is always more preferable and the confluence of these factors with those of the main chart set-ups at pot pre-ident supp/res/sbr/rbs can provide more confidence in making a trading decision.

Some examples are posted below;

I stress these are optional to this trading system/methodology but some (as I do) find them useful support confluence.

 

[bbmac]

Logging of trades/journal...a useful excercise/tool

Finishing here for day and just updating log/journal;

Keeping a proper log of your trades and reasons for taking those trades as well as journalling anything else that affects your trading progress, - then reviewing and taking action on any issues as necessary is a very useful and oft overlooked too to aid trading improvement.

Replicated below is my trading log for today's London/European morning session in gbpusd. You will see that alongside the trade time (gmt+1) the type of trigger t/f set-up, supporting set-ups on longer time frames above the trigger, and small charts supporting if any, there are further notes explaining the reasons for the trade. (I have removed entry price/stop/exit price etc as not relevant to the point I am making.) In doing this I can quickly see where my mistakes are and spot any patterns before they impede trading perfornmance. (Well that's the theory anyway, lol)

** Uk Mandleson announcing Business Support re downturn**
0926am Rev Extr, 5min Rev Extr, 1hr Re-ent 2, 1/5/15min small supporting conditions @ pot res = round # 4700, prev 1hr sw hi zone, pot sbr = v.minor prev 1hr sw lo....set-up saw +30+
0938am Re-ent 1 into 5/30 uptrend 5/30macd hist above axis @ pot rbs = none identified,....set-up rejected....set-up barely saw +5
**Eu Ind Prod data **
1002am Rev Extr, 5min Re-ent 4 into 30min uptrend, 30min/1hr macd hists above axis...30min horiz, @ pot rbs = prev 1hr sw hi zone...set-up saw +10+ at best.
1017am Rev C. 5min Re-ent 2 into 30min uptrend but 30min macd and 1hr macd hists poining down though still above line...no pot rbs identified other than 'light bids' mni, although a 5min prev sw lo...rejected, set-up saw +15best.
1029am Re-ent 4 into 5min developing downtrend, 5min macd hist below axis, 30m/1hr pointing down (1hr re-ent 2 above and pinbar) @ pot sbr = prev minor 5min sw lo and 23.6% of move down/Dly Pivot,...set-up saw +30+
1109am Re-ent 1 into 5min downtrend, 5min macd hist below axis, 30min below but both now horiz/pointing up,...no pot sbr identified...rejected...set-up saw b/e @ best.
1212pm Rev Extr, 5min Re-ent 2, 1/5min small charts confirm into 30min range, 30min macd hist below axis, 1hr below pointing down @ pot sbr = prev minor 1hr sw lo....set-up saw +30+

 

[bbmac]

Point of clarity re macd

I should make it clear that when I refer to the 'macd histograms' - the macd indicator histogram I use is effectively a histogram of the macd signal line...it is the osma indicator that is effectively the macd histogram as you might other wise know it (on the standard macd indicator that has the histogram and the ma and signal lines...as shown on screenshot below)

You will see on screenshot below that at point X both the histogram and the signal line was showing bearish divergence, and in the macd and osma that I use this is effectively the basis of a lot of the repeating Reversal set-ups I look for.

Hope this clears up any confusion.

 

[bbmac]

high probability /strong set-up/patterns

As you will no doubt be aware by now, this system/methodology is designed to highlight high probability repeating indicator set-ups/patterns (based on band/channel deviation and oscillator extremes/divergence) at the confluence of potential supp/res/sbr/rbs with an individual price action trigger to gain a market entry.

One of the strongest patterns of regular divergence is regular immediate [seperate peak valley] bullish or bearish divergence from price...and if you can identify a set-up with this at pre-identified supp/res/sbr/rbs then it it is a high probability set-up.

By seperate peak/valley I mean that the oscillator crossed it's zero axis before forming the next peak/valley, from which the divergence is being measured.

2 such occurrences worthy of note in Gbpusd this morning session. The 1st screenshot shows a Reversal type C where all 3 oscillators are showing that favoured regular immediate [seperate peak/valley divergence from price]

The 2nd screenshot exhibits the same divergence and was in fact the 15min Reversal type A supporting set-up to the 0943am gmt 1min trigger Reversal Extreme set-up.

Worthy of note here too is the bollinger bands, note after the original 4bol flip they stayed intact to give an effective supporting Reversal type A at that 0943am lower t/f trigger set-up...this in itself is an occurrence that has a high probability of success when seen.

Both set-ups saw +30+ pips available.

 

[bbmac]

Reversal type B

Nice example of a Reversal type B on the 5min (acting as a supporting set-up to the 1533pm gmt 1min trigger Reversal type A) at that potential support zone of the 1hr previous swing lo (Tuesday's low.) There was also a 15min Reversal Extreme set-up adding more confluence to the 1min trigger set-up at this potential support zone.

The 5min Reversal type B is shown below;

The potential support zone is shown below;

The set-up has seen over +100pips available.

Repeating (oscillator extremes/divergence and band/channel deviation based) indicator set-ups @ pre-identified potential supp/res/sbr/rbs with individual price action trigger...in the context of overall price action conditions-classic peak/valley analysis to determine trend or range = high probability trading opportunities.

 

[bbmac]

Replicated below is the answer that Trader_Dante gave to a question regarding what he calls ' Price Pivot Zones. ' in the Potential Set-ups thread on this forum. Different terminology but essentially these are the Previous obvious Price Swing Hi/Lo's that are the basis of identifying potential Support/Resistance/SBR/RBS, outlined in the system/methodology -that is the subject of this thread.

'...I definetly still use them. They are so powerful and work so well that they are the essential element in my trading. The study of these pivots is, in my opinion, the main technical element you should work on.

But I don't put them at or near round numbers. I put them where the price (and the chart) says they should go. My pivots are always at totally random numbers but that is where the market has dictated they must go.

Don't worry about where everyone else has their pivots.

You have one teacher and that is the market.

The market will let you know if your pivots are in the right place.

The market should react to every line you have on your chart. At the very minimum it should stall but in most cases react significantly.

If it doesn't then either the market momentum is incredibly strong or you have done something wrong. In most cases it is the latter.

The biggest tip I can give you is use your eyes and go from RIGHT to LEFT on the chart. This is very important. The eye naturally reads LEFT to RIGHT. You need to reverse this.

Also look at every major swing high and low and follow it back with your eyes.

Swings highs and lows are the focal point of the market...'

This is good advice. The previous Price Swing Hi/Lo's are the basis of identifying potential supp/res/sbr/rbs on both the intermediate and trend time frames, and of course pre-identified potential supp/res/sbr/rbs is one of the essential cornerstones of this system/methodology at which we look to identify a further confluence of technical factors to indicate a high probability trading opportunity, (ie one of the repeating indicator set-ups and individual price action trigger.)

 

[ralph_909]

perfect !

 

[bbmac]

Re-entry to uptrend @ a HL/L

Big move up in asian session in gbpusd. The screenshot below shows the uptrend as it developed...and the potential RBS zone that saw a 5min (intermediate t/f) Re-entry tgype 4 set-up. Although at a HL on the trend t/f (30min) into whose trend the re-entry was indicated by the set-up on time frame below, after the pullback, the set-up came at a L not a Hl on that intermediate 5min t/f thus not at the optimum HL into uptrend. So far although see-ing +60pips gain available price has stopped short of a new HH, retracing back down to this potential rbs area again.

The optimum of course is to see a Re-entry to trend set-up come at a HL/HL (uptrend) / Lh/Lh (downtrend) on both the time frame it sets-up on and the next one up into whose trend it is indicating a re-entry (after a pullback)

 

[bbmac]

Reversal Extreme set-up...optimum entry point...a reminder

Just got some time to fill to occupy myself so I don't interfere with a trade, lol

Screenshot below is a reversal Extreme set-up that occurreed today in Gbpusd...see the individual price action trigger highlighted and circled in yellow. But hy not enter at the clear reversal candle shown with a ?

The answer is simple, remember one of the entry conditions of a Rev Extr set-up is that the cci has to be hooked back inside bol from an extreme at open of first rev candle or failing that there has to be a whole reversal candle closeing outside 20bol -and/or- local bullish/bearish divergence in the cci....these 2 exceptions very often occuring together. On this occassion there was neither.

Note also that price tested deeper in the pot res zone being the prev 1hr and 5min sw hi, and per the guidelines given about pot supp/res/sbr/rbs zones insofar as prev obvious price swing hi/lo's are concerned, remember too that price has a tendency to test toward the extreme of the zone lest there be any other confluence of other potential supp/res factors that highlight an otherwise obvious point in the zone.

The set-up saw +20+pips gain.

 

[bbmac]

Thrust candles...get with trend or breakout

Good example of a Thrust candle in hi-probability circumstances (a candle where the body is at least 3/4 of the whole candle including the wicks,...bigger body the better as a proprtion of whole candle) that implies momentum...see screenshot below.

Support had been found at points x and y before body of the double bottom reversal candle closed in around the same place. An upside break out of consolidation/congestion produced an excellent Thrust candle. Strategy with them is to buy or sell the close with stop managed on lower time frames or placed beyond other extreme of the candle.

This occurred during overnight/asian session so wasn't around to take advantage but it's good example nonetheless. These Thrust candles in breakout or with trend situations can be high probability triggers in themselves.

 

[bbmac]

Reversal set-up outside of average Daily pip range

The 0951am Reversal type Aii seq with 5min Reversal Extreme ii supporting set-up (shown in screenshot below) in Gbpusd didn't have much by way of potential resistance and certainly no previous swing hi/lo on 1hr chart to act as the basis of a potential resistance/sbr zone. in fact the only potential resistance I could identify was the 76.4% fib of the Monday Hi-Tues lo swing 5112-4466.

If you'd done your pre-session prep properly you'd have known that the average daily pip ranges in gbpusd (correct as of y/day's daily close) were:

Y/day 207
5day 264
10day 321
20day 326

At 332 today's current (correct at time of writing) lo-hi pip range so far exceeded those, thus giving some potential comfort to a decent enough set-up with a not very convincing potential resistance factor.

 

[bbmac]

re post 373,...example

Just got some time to fill to occupy myself so I don't interfere with a trade, lol

Screenshot below is a reversal Extreme set-up that occurreed today in Gbpusd...see the individual price action trigger highlighted and circled in yellow. But hy not enter at the clear reversal candle shown with a ?

The answer is simple, remember one of the entry conditions of a Rev Extr set-up is that the cci has to be hooked back inside bol from an extreme at open of first rev candle or failing that there has to be a whole reversal candle closeing outside 20bol -and/or- local bullish/bearish divergence in the cci....these 2 exceptions very often occuring together. On this occassion there was neither.

Note also that price tested deeper in the pot res zone being the prev 1hr and 5min sw hi, and per the guidelines given about pot supp/res/sbr/rbs zones insofar as prev obvious price swing hi/lo's are concerned, remember too that price has a tendency to test toward the extreme of the zone lest there be any other confluence of other potential supp/res factors that highlight an otherwise obvious point in the zone.

The set-up saw +20+pips gain.

An example of where the 2 entry conditions exceptions occur together re a Reversal extreme set-up (as discussed above in post 373) just occurred in gbpusd. Ie although cci had not hooked back in bol at open of reversal candle , there was both a whole reversal candle closed outside 20bol and indeed local regular bearish divergence in the cci.

This set-up was supported by bearish reg immed div in the 5min oscillators (no real set-up) and a 15min Rev B set-up, as well as 1/5/15min small charts supporting conditions.

The set-up has seen +30+ pips available at time of writing.

 

[bbmac]

Re-entry (to trend after a pullback) set-ups...more examples and commentary.

You can see where gbpusd found resistance at today's current Hi (circled in red)...there being Reversal set-ups extending to the 1hr chart..(not shown here but 1min trigger was the 1344pm gmt Rev B)

As price sold down quickly and sharply off the potential sbr it found some support @ 4797 which was a previous 1hr swing hi (circled in red) and had already acted as rbs (green cirle) so a proven prev res/rbs area.

Price pulled back off that potential rbs/supp to form a clear 1min Reversal type A with 5min Re-entry type 4 supporting set-up @ the 50% fib of the then move down

...no previous swing lo on the 1hr chart to act as potential sbr, but very clear set-ups @ the fib...Problem being as highlighted in this thread before price on the trend t/f (30min) was not yet in a downtrend per overall price action-classic peak/valley analysis. So, Looking at the 30min and 1hr macd histograms (ie the 2 time frames avove the re-entry set-up) they were both favourable, 30min having crossed below the axis and 1hr pointing sharply down;

Given the sharp sell-off and the macds, and clear set-ups at the known potential res factor of the 50% fib, an entry was warrented...the 1min and 5min set-ups are shown below:

1min Rev A;

the 5min Re-ent 4 shown below;

Price sells down sharply from the set-up to find interim support at 4765 area retracing to the previous 5min swing low=potential sbr shown below;

By now of course the 5min was in a downtrend with 30min trend t/f following. The 2 macd histograms above the 1min Re-entry set-up that developed at that 5min potential sbr were both crossed below the axis at this time, as indeed was the one above that, the 1hr, so a high probability 1min Re-entry type 4 became another good trade, although the set-up was slightly imperfect re the macd hidden div....

With both set-ups see-ing attractive pip gains it is further evidence that Intelligent hi-probability trading when a confluence of technical factors required by this trading system/methodology are present, can result in consistent gains.

 

[bbmac]

Confluence of Reversal set-ups

These are the trigger [1min,] intermediate [5min] and supporting trend time frame [30min] Reversal set-ups that developed at the potential sbr/res zone pictured in the first screenshot in post #377above.

Additionally price had exceeded it's 5, 10 and 20day average pip ranges at the point of the set-ups, and there were supporting conditions on the 1/5/15min small charts.thus adding to the confluence of reasons to trade 'against' the prevailing intraday up trend @ that 4978 area intraday High.

Confluence, Confluence, Confluence !

1min Rev B

Supporting 5min Rev Aii seq

Further supporting set-up, the 30min Rev B

 

[bbmac]

Confluence

Re this Trading System/Methodology; It is the confluence of the repeating indicator based set-up (s) with individual price action trigger @ pre-identified potential Supp/Res/SBR/RBS that gives rise to high probability trading opportunies and consistent low risk gains.

* Learn the repeating indicator based set-ups so that identifying them in real-time is second nature, get to a point of unconscious competence.

* Do the pre-trading and intra-trading session prep, ie

-identify the conditions (trend or range/consolidation/congestion) on both the intermediate and trend t/f's.

- identify the obvious previous price swing Hi/Lo's on both the intermediate and trend t/f's so you know in advance at what areas you are looking to trade if a set-up (s) and price trigger presents itself.

Give yourself the best possible chance of making informed trading decisions in the highest probability circumstances. Leave nothing to chance, your money and your financial wellbeing/future may be at risk if you do.

Accept it may take you time to become consistently profitable whatever your trading edge. If you train to be a surgeon would you expect to be able to perform a complex operation without the necessary time/skills/training? Of course not,...trading is no different.

G/L.

 

[jabba917]

Hi bbmac,

Thanks for telling me about your thread.

I trade divergences where price double bounces off 4hr/daily/weekly/monthly s/r levels, on a 1 min chart.

Use a tight stop, normally 5 pips and take profit of 5 or 10 pips usually.

I use OSMA / MACD & Stochastic divergence indicators, if they line up and the stochastic is overbought/sold I take the trade.

What do you think of this strategy?

Cheers

Alf