Trading with dynamic fibo levels--4pma indicator.
How I use 4pma
Here is how I use 4pma to trade. I trade when the following 6 conditions are met(see screen shots):
Condition 1--price is above(for long), below(for short) two trendlines(lo x.px or hi x.p x)that are exactly the same. the first example shows price>lo1.p2=lo1.p3, and price > ma1.p2>ma2.p2, and price>ma1.p3>ma2.p3. So the first condition is the price to be greater(for long) than the trendlines, and greater than the sma's.
Condition 2--two trendlines to be exactly equal to each other, lo1.p2=lo1.p3(there is a typo in the charts comments)
Condition 3--the trenlines above the price(for long) to be exactly equal to each other, in the example lo2.p2=lo2.p3. This is our profit target for long.
Condition 4 and 5--ma1>ma2(for long) in both timeframes, 5 and 15 min in the example.
Condition 6--you have "clear road" between the two trendlines, no sma's in the way. you can have trendlines in the way. L:et's say you could have lo2.p1, or lo2.p4 before our profit target, it is ok. The sma's however provide monster resistance. In the example I didn't trade because the price had just broken the 233 period sma--ma7.p4(the one hour grid) at 1.1326, we got a signal to trade at 1.1327. It is a safe bet that the price will retrace after hitting the 233 sma. Look at what happened to the eur/usd twice this week. This is the biggest challenge that I have with my ea... I will post another example in my next post.
one more example
Here is another screenshot of usd/can. This worked out even there were obstacles(sma's) in the way. It is same idea. So we trade when two trendlines line up--1&5 min, 5&15, or 15&60, and ma1>ma2 for long, opposite for short. lo1.p1=lo1.p2=take profit, there is another typo in the chart comments.
Modified 4pma indicator
Attached you will find the 4pma indicator that I have modified to suit my strategy. Feel free to try my strategy, and please leave a comment. Good times to trade are London open, NY open, especially AFTER data releases. Unfortunately, I don't have any screen shots of recent trades, but I will have some before the end of this trading week. I will try to analyze the trades, and see why they did or did not work out. Until then happy trading everybody!!!
Ooops, very important...
OK, forgot to mention. do not trade beyond hi2, and lo2 levels. Price will not go from hi2 to hi3, or lo2 to lo3. Period. Price simply doesn't move through more than two trendlines without retracement. Example, eur/usd moves up thru hcf to hi1, and from hi1 to hi2--THIS IS IT!!! price will retrace big time guaranteed..
swing trades
hmmm, you could even do swing trades like that as well. For example, today eur/usd hit the ma7.p4 on the 1 hour chart at 1.2714-15 at around 9 a.m. eastern time(I am in the US now). I looked at GBP/USD and USD/CHF, they were just breaking lo2.p2, lo2.p3, lo2.p4, and hi2.p2, hi2.p3, hi2.p4 respectively. I thought, that's it, there will be at least 25-35 pips retracement on all three currency pairs. I went out, came back a few hours later and there we go...I was right...I didn't trade because that is not how I play the game, but it is just food for thought.
Quick 20 pips EUR/JPY Asian session
I was looking for a set up to show you how I trade with 4pma and I saw that eur/jpy, usd/jpy were about to drop down. eur/jpy looked cleaner so I took a scrren shot before and after.
So here is my logic behind this set up. I saw eur/jpy drop to 149.97--below all ma's in all time frames. I saw hi2.p3~hi2.p4=149.78 our exhaustion level--talked about it previously. So look at the screenshots, a picture says a 1000 words...
A prediction
I think eur/jpy will not go much lower. I would put in a buy order 148.62 right now 21:28 eastern time. t/p 149.06, s/l 148.16. Let's see what happens...
I have been trying to develop a strategy using 4 pma for the past 2-3 months. I will share my strategy here. Feel free to try it on a demo acct. I think you might get good results. Comments, suggestions, ideas, improvements are welcome. I will try to post screenshots of actual trades from this week.
Let me explain how the indicator is constructed first. It uses 7 simple moving averages and 7 fibo sr levels. I have changed the default settings since I think my settings work better. The modified indicator is attached. The 4 grids that you see represent different timeframes--1, 5, 15, 60 min from left to right. the 7 sma's are represented by little numbers in each grid column/timeframe. The lines are the "mysterious" "Fibonacci" levels. Here is how they are calculated. You might want to insert the 7 sma's on the chart so that you can understand my explanation. Insert sma's of 21, 34, 55, 89, 113, 144, 233 periods(these are all fibo #'s except 113). Now find the lowest sma on the 60min chart(see eur/usd chart attached). It is 55 period sma=1.2675, add 13 pips and you get the lcf level, which is probably not displayed. The lcf level is like a pivot line, if price is above lcf, we have an upward momentum. Now if you add another 21 pips to 1.2675+13, you will get lo1.p4 level, which is at 1.2709. To get lo2, you add another 34 pips, and so on. So, the seven "lo" fib sr levels are "shadows" of the lowest sma that are calculated by adding 13, 21, 34, 55, 89, 144, 233 pips to the lowest sma.
We calculate the 7 "hi" levels in the same way. Just take the highest sma, and subtract 13, 21, 34, 55, 89, 144, 233.
Ok in the next post I will explain how I use it to trade.mpower,
When you say find the lowest SMA, do you mean the lowest point in your chart, that is, the blue line [the southern most line]? I guess that one have to calculate these lo?? values manually everytime or do you consider them as being fixed for the duration of the entire trading session? Also, if all your conditions are met, when would you enter a position immediately or are you waiting for some type of pullback?
reply
You don't have to calculate any values manually, the indicator calculates everything. I was just trying to explain how the computer calculates the values so that people can make better decisions about using the indicator. The lowest point in my example(look at the first graph) is ma3.p4=55 period sma so you use that value to calculate the sr fibo shadows. anyway, didn't mean to confuse anybody... It is important to know how to use the indicator, not how it is calculated...
If you followed my advice, you would have made some money...
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
You agree to website policy and terms of use
I have been trying to develop a strategy using 4 pma for the past 2-3 months. I will share my strategy here. Feel free to try it on a demo acct. I think you might get good results. Comments, suggestions, ideas, improvements are welcome. I will try to post screenshots of actual trades from this week.
Let me explain how the indicator is constructed first. It uses 7 simple moving averages and 7 fibo sr levels. I have changed the default settings since I think my settings work better. The modified indicator is attached. The 4 grids that you see represent different timeframes--1, 5, 15, 60 min from left to right. the 7 sma's are represented by little numbers in each grid column/timeframe. The lines are the "mysterious" "Fibonacci" levels. Here is how they are calculated. You might want to insert the 7 sma's on the chart so that you can understand my explanation. Insert sma's of 21, 34, 55, 89, 113, 144, 233 periods(these are all fibo #'s except 113). Now find the lowest sma on the 60min chart(see eur/usd chart attached). It is 55 period sma=1.2675, add 13 pips and you get the lcf level, which is probably not displayed. The lcf level is like a pivot line, if price is above lcf, we have an upward momentum. Now if you add another 21 pips to 1.2675+13, you will get lo1.p4 level, which is at 1.2709. To get lo2, you add another 34 pips, and so on. So, the seven "lo" fib sr levels are "shadows" of the lowest sma that are calculated by adding 13, 21, 34, 55, 89, 144, 233 pips to the lowest sma.
We calculate the 7 "hi" levels in the same way. Just take the highest sma, and subtract 13, 21, 34, 55, 89, 144, 233.
Ok in the next post I will explain how I use it to trade.