Advanced system #6 (Picking Tops and Bottoms)

better to use rsi gt 50 rather than adx

Hi Muhammad,

According to rules you have described, that when ADX is above 45 the trend will weaken and it is better to stay aside, your choice then is right - 15 min chart is the one you should stay with.
Your observation about ADX readings close to 45-50 levels is correct, however, it is not known if weakness of the trend will be temporary or not. Hence you would have to look for additional clues by performing further analysis of the market.

Regarding your last question about ADX readings on daily = 32 and ADX readings on 15 min charts = 32, it may happen, then we choose daily charts.

Regards,
Edward

hi,

ok now i am looking at gbp/jpy, adx now is :

daily - 46,
4 hr - 10,
1 hr - 12,
30 min - 21,
15 min - 31.

my understanding is : i stick to 15 min chart and monitor for sometime before it reverses. i will use this chart to enter trade. correct ?

i will not use daily chart coz it is already 46 and from my readings, 45 is already weakening trend and if it is 50 and above, stay aside. do not trade. correct ?

i will only trade, to be on the safe side, adx is between 30 to 35 ? for any time frame. in any situation, there will NOT be same adx point, say 32 for daily chart and 32 for 15 min chart. am i right ?

this one looks promising. will demo.

regards,

muhammad b salleh

That's right, if daily time frame has ADX above 30, we do not check further upon lower time frames, no matter what they suggest.

Now I understand your point. According to your comments we will be more confident entering upon ADX suggestion if it remained above 30 level some extended period of time. On 5 min chart this period is usually short.
Once we've checked all time frames from highest to the lowest and found no ADX above 30 except for 5 min chart, there is no considerable opportunities for us except to scalp Forex with 5 min frame. Therefore, you may easily exclude 5 min charts from your trading analysis if you prefer to and use only larger time frames for trading.

Please let me know if some aspects of your question are left uncovered.

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?

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.

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?

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

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

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,

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/

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

Kind regards,
Edward.

Hi Edward, What is considered over 30 in ADX? Should it be well over or even the ADX crosses by a little, is also considered over 30?

Hi buangcla,

Yes, it is a valid signal.
The only filter here is ADX. With this indicator we are trying to pick the highest time frame with ADX being above 30. Then we stick to that time frame and ignore all smaller ones. E.g. if we stopped at 30 min time frame, smaller ones (15, 10, 5 min) are no longer in focus until, of course, situation changes and we need to switch to a new (higher or lower) time frame.

Regards,
Edward.

I tried to get better filters on this system, but so far yours (SAR and 62 EMA) are the most accurate. I like what I see on the chart with those additional tools. Thanks a lot for this idea!
In case I find additional filters, I will gladly publish the rules here.

Happy and profitable trading!
Edward.