Advanced system #6 (Picking Tops and Bottoms)

Hi,
By "over 30" I literally mean that. Even crossing 30 by a little is enough.

Kind regards,
Edward.

Hi,

Regarding unexpected results (ie candles breaking through 20EMA, trend reversal prediction)

I use this method to scalp on 1min charts (with some modifications) and its most effective when you know where your Trend Lines are (ie the 'hidden' resistance and support levels).

Often what happens is that if you look at the chart as shown above, you don't know exactly where the price is likely to bounce right back up, or indeed if it does, where it should go up to (you are sort of blindly expecting it to bounce off 20EMA). I used this as it is and kept getting whipped, untill I realised that the key is to find out the hidden R/S levels. Now these are extremely easy to draw.

All I do now is zoom way out keeping the time frame as it is (ie 1min or 5min) and link peaks and bottoms as well as any horizontal levels. This way you know that if a candle hit a near support level then its likely to bounce right back, but if the support level is way far away (ie like in this chart, based on the price movement i expect the nearest clear support is way way back, thus price started to range when it hit a low) the price will likely range.

So in reply to your previous posts, when the candle suddenly bounced back through the EMA20 (unexpectedly as you say), go back to that chart and check if there was a near support level that was hit. If it was hit with a candle with a wick (ie like a hammer fashion) then thats the explanation and the reason for you being whipped.

Let me know what you all find and think about this,

Thanks,
Nick L
http://happinessandnot.blogspot.com/

Very sound comment Nick, thank you!
I think it is a good technical approach to be added to this strategy. Using support and resistance levels as well as trend lines allows to confirm expectations on market direction and make right trading decisions.

I should have thought of it in the first place... Thank you!

Regards,
Edward

Hi

Would it be possible to post an updated jpeg of this strategy which includes the new ideas -S and R and trend lines ?

Also what if the ADX is actually falling even though above 30 ?

Rgds

Paul

When ADX is falling it means that main trend is weakening. ADX falls during retracements and recovers as the market continues to trend.

Therefore as long as ADX falling while remaining above 30 level, we consider current price move as a retracement only.

Here is another chart example with trend lines and support/resistance lines added.

These additional lines allow as to anticipate price's next turning points as well as pick better stops.

Regards,
Edward

Hi,

I looked at your diagram and notice that this strategy works when the ADX stay above 30 for quite sometime. I have been testing the strategy today and i wasn't getting the right direction as the ADX often cut below 30 not long after it cuts above the 30. I'm looking at 5 mins chart, do i need to look at larger time frame to get a longer period for ADX to stay above 30?

Hi,

I'm not sure what you are referring to by saying that you look at 5 min charts and whether you have to look at larger time frame... Please clarify, thank you.

With this strategy we operate ALL time frames mentioned in rules above at once. We constantly switch in between charts to get required setup, and we START with the HIGHEST time frame - daily.

Regards,
Edward.

What I meant is when the price touch the EMA20 and the ADX which is at above 30 start goes down to below 30. And the price will cross EMA20 instead of bounce off from EMA20. So im thinking, if the ADX could stay longer above 30 which is shown in your diagrams, the price would bounce off EMA20 instead of crossing. Im also thinking, the time frame i look at is 5 min so the preriod of ADX stay above 30 is short and if it's lager time frame It would stay longer and can follow your method.

Another question is, you've mentioned that start searching ADX above 30 from highest time frame, if daily match ADX above 30, i do not have to search lower time frame?