Higher lows lower highs

Vantage · #1 06-13-10, 11:34 AM

Markets go from highs to lows with bounces along the way. These retracements provide good opportunites to enter into a move with a relatively small stop loss. A good trader said to me that the first retracement is the best trade, ie the first higher low/lower high.

Basically a naked trading thread, I use 2 moving averages. On all charts an 8 lwma. On 15 min charts a 1hr 8 lwma equivalent ie 32 lwma. On 5 min chart a MTF MA with settings 60,8,0,3,0.

The 1hr 8 lwma does a good job in showing the short term trend.

I mainly trade GU during London session.

There are 3 trades to consider. From 5 min charts:

1)Higher lows and lower highs at extremes (also known as 1 2 3 tops/bottoms) from 5 min chart and are great trades. I want to see some supporting information from the 15 min chart (ie a good reversal candle) and for the turn to be at a key level ie pivot, round number etc etc.

2)What I'll call 100% system trades that will follow the 1hr and 15 min candles. I do not want to see an obvious contra indication from 15 min, e.g. I would not want to be selling a 5 min lh immediately after a high vol hammer on 15 min. I would like to be selling a 5 min lh after an engulfing negative close candle/shooting star with little/no lower wick or a doji on 15 min. 5 min hl/lh's that are in direction of 1hr candles and are failures of 15 min candle counter trend wicks are also acceptable.

3)Between 7 and 9 am gmt where a decent range is around 50 pips, we will look for 1 min hl/lh's at key levels (round numbers, psych 75/25, prior session proven supp/res levels, pivots etc). Numbers show something like 80% of the time these are the London open head fake moves. Looking to bank anything from 20+ pips when a key level hit.

4)3)A 2b reversal trade which is a variation of the 123 top/bottom and is also an indication of a test and failure.

"In an uptrend, if prices penetrate the previous high but fail to carry through and immediately drop below the previous high, the trend is apt to reverse. The converse is true for downtrends." [Vic Sperandeo in "Trader Vic: Methods of a Wall Street Master"]

General
Each time there is a stall and turn that extreme becomes the starting point potentially for the 125 pip session move. This bigger move is more likely to happen after 9.30 gmt than before.

Some knowledge of candlestick analysis is required as you want to be trading the right candles. To help see candlesticker.com but I'd suggest looking at wicks and closing areas. In general I'd like to be buying after candles with little/no upper wick and selling candles with little no lower wick.

This is not an indicators line up press go system, analysis is required as markets change. Some of the key items are: consider key levels for turns (round numbers, D W and M pivots, some fibs), follow good 1hr candles, are we above below 1hr 8 lwma, look at 15 min candles, 5 min hl/lh's. A cross of an 8 lwma on 5 min chart gives an easy visual clue of a higher low or lower high in most cases. Once set up on 5 min price should move a pip or so beyond the high low of the set up candle to confirm the trade.

In addition I use a pivots indi for daily pivots, fibs based on prev days range and showing the prev days high/low and todays open. The days start can be amended so you can use any platform. I prefer trading London session and use fxpro which I understand to be gmt +2. I also use sdx sweetspots for 25/75 psych levels and round/half numbers. Pivot points multitime frame are for W and M pivots.

Stops: Around 15 pips 1.5% of capital. This means that you can comfortably trade 1 lot per $10000 or .1 per $1000.

Exits: I like to target key areas round numbers, fibs, pivots etc and re-enter where appropriate.

7-9 am gmt exits will be taken at key levels due to the small ranges in Frankies hour that typically exist.

After 9 am gmt we will look for the FH/LO range to break (there is typically a head fake move in that time). Once that has happened we will look to bank 50-75% of trade at a key level, stop to BE. We will look to re-enter with full trade size hl/lh's in line with move. Again exiting 50/75% at next key target. Moving stop from original position along.

This alows scaling without risk exceeding 1.5%.

We will endeavour to trade through news events.

A final word. NB Watching and trading the right candles is always important.

Vantage · #2 06-14-10, 04:10 PM

Sold this lh, stop to BE at around +15, there was a very quick move up that took out trade at BE.

Vantage · #3 06-15-10, 12:49 PM

Didn't have the opportunity to trade London morning session but these look good.

Left arrow down, 100% system sell.

Left arrow up, first hl at extreme and reject of move below even number. Then 2 hl nice hl trades.

Again I did not trade these just showing how many good set ups do present themselves.

Vantage · #4 06-16-10, 12:56 PM

Nice 100% system trade, entry 4791 for +26 looking to exit at the green pivot M3 at the earlier highs. We didn't enter the prev hl a couple of candles earlier as the set up 5 min was a little large.

1hr had pos close, 15 min hammer nice 5 min hl.

Vantage · #5 06-16-10, 02:25 PM

I unfortunately was away from computer for this one. 1hr down 15 min down left arrow is low of small 15 min hammer taken out with a 5 min lh. Right arrow is 5 min lh after a 15 min shooting star.

Perfect set up for a low risk 35 pips down to round number.

Vantage · #6 06-17-10, 09:02 AM

There was a pre Frankies Hour (FH) move up from S1 red dot line 4685. As is often the case the initial 15 mins of FH was a fake out move up that quickly failed. The top of range was 4715 or so.

Whilst the entry was from a 1 min lh the set up Mrs V took was from the 5 min lh. She just waited for the last 1 min shake out as we were on the even number. We did think that initial move up was a (first 15 min) FH fake out and although we were on even number we were selling a FH (half hour that is) reversal and we were following Y's strong move down.

Mrs V traded half normal trade size, stop move to BE at +12, exited at +25.

1 min chart attached.

Vantage · #7 06-18-10, 01:54 PM

1hr chart had a double top but the move could not take out the prev bars high. 15 min chart had 3 upper wicks in a row, confirming the struggle to move up culminating in a neg close inside candle.

5 min had a lh shooting star but we waited (incorrectly) for break of W M4. Anyway this was a lh sell at an extreme at an important level.

Missed the 1st touch of 4800 as an exit and we got out when the move below failed for 56 pips, nice 5% ROI trade.

Vantage · #8 06-21-10, 02:47 PM

Its school hol's here and we've been baby sitting, we have BS duties tomorrow not sure what time we'll be free for trading. No trades done today just showing for the record.

Left arrow down. There were a couple of lh's earlier than this but the prior ones were closing just above the even number. The left arrow down is the first 100% system sell that I could see. 1hr doji, 15 min shooting star, 5 min lh with the close just below the even number and the close is at extreme of range little lower wick. When that continues its normally a good trade. The even number would no doubt have had me spooked but yet again the 100% system trade works out. Wasn't around to take, posting yet again to show 100% system trades works even on round number. I'll only trade in and around even numbers if convinced of direction.

There was another chance to get in with another shooting star around 4880.

The x, in the bigger picture this is a lh, I wouldn't have taken this trade as when price broke above 4875 we moved to the possibiity of hl's. That failed and the arrow down on right gave another lh possibility. The 1hr was a doji perhaps suggesting up so I'm not sure if we would have been in that.

Vantage · #9 06-24-10, 12:42 PM

Missed out big time today. The red line shows both a lower high trade but also 1hr and 15 min were in line. Left arrow down was the first system trade. The middle arrow down was where we entered.

Got out much too early and didn't re-enter on right arrow down. On days like this system can give 7-10% ROI for the day.

After a worse than usual month this type of trade can obviously turn things around big time. Missed out NOT happy.

Vantage · #10 06-25-10, 11:04 AM

Took this trade on ej no follow through and we got taken out at BE after briefly hitting +20.

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Higher lows lower highs

Higher lows lower highs

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