XO_Method REVISED - page 32
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My first chart I look at..............
The first chart I look at every DAY, is the Weekly chart to see where we may be heading for the coming week.
Here I place a screen-printof that chart with some explanation for you newbees in particular. I was also a Newbee once and if someone would have told me way back when that I had to start here and explained it properly, I may have been a better tarder long time ago.
Make NO mistake, we still FOCUS on the H1-chart as we are intraday traders, but I hope to get you to see the golden link between the weekly, 4-Hourly; Hourly and finally the entry-chart which is the M5. (once I transfer the Thread to a new heading, I will repeat the names of people that I am indebted to in my struggle to improve what I have had. The XO-method was very good, but we were not taking all the opportunities and hence the need to improve on what is otherwise an excellent method.
Please note that I have "seperated-out" the 2 most important RSIs to prevent any form of confusion. These are the RSI-2 and RSI-4. Very simple and very accurate.
I have added 3 only EMAs to finish off the chart and they are: 25 / 40 and 100. Once you have them up you will immediately see the obvious and it needs no further explanation. (Presently the GBP/USD is busy "painting itself into a corner" (CT = contracting triangle) before we will see some major moves imho.)
All you have to understand here is that the RSI-2 will give you the clue as to overheating and also when there is a directional change.
The important RSI is actually the RSI-4.
The important levels for the RSI-4 are 70 and 30 respectively.
Let us take a LONG scenario to explain how to read the RSIs:
The WEEK of February 10th, 2008, the RSI-4 comes back up from being underneath the 30-level (bottom window for better visual effect). Secondly, the RSI-2 crosses the RSI-4 (in first window for visual) and we can now expect that the direction has changed to LONG.
Further confirmation is the divergence on the RSI-2 and RSI-4 as marked with a Yellow-trendline in both windows.
Yet another confirmation is the fact that the price had "bounced-off" the 38% Fib retracement level and finally the 100-ema.
Looking at the SHORT scenario:
The week of March 2nd, closes with the RSI-2 being overheated @ 96,1% - a sure sign that a possible retrace is in the offing. The week following we see that the price do continue higher, but closes 20 pips lower than the prvious week. The RSI-4 now touches the 78.6% level from where it bounced the previous week and now drops.
The following week sees the drop ensuing and ends on the 23,6% level of the RSI-2. Also the previous 23,6%-Fib-level now as SUPPORT. Interestingly, the PRICE now stays under the crucial 40-EMA and the ensuing weeks, that level is NOT broken.
This week the RSI-2 bounces off thew RSI-4 amd the RSI-4 is in the process of crossing the 50-line. Either the direction is SHORT for tis week to come if it breaks the 23% Fiblevel @ 1.9767 or it may go sideways to complete the Contracting Triangle (or CT). Please remember this abbreviation - I am not one to use abbreviations, but this is one we can remember.
I suggest you study this set-up carefully and wait for the H4-chart that follows on this.
I will also let you have my Template and the 2 indicators before I start zipping the indicators for the charts to come.
Your comments are most welcome.
An additional indicator for the above template..
Due to space restrictions, I could not load the final indicator for the template above, so here it is now.
Best wishes.
The next will be the H4-chart and its details in full and that is when we will make the decision to rather MOVE this to a new Thread. You may decide with me.
Hey Valeo, great news you are back !
Directly from Mladen about the repaint of the indicator :
For non repainting, you must chek false on the last option :"Justlastbar"
This will clear things much better.
Hey Valeo, great news you are back !
Directly from Mladen about the repaint of the indicator :
For non repainting, you must chek false on the last option :"Justlastbar"
This will clear things much better.Hi Joe, thanks for the nice "reception" - good to be back. Also for drawing my attention to the "Just last Bar" which I forgot to mention.
Best wishes.
Welcome Back
ValeoFX - We have missed your guideance and support for too long. Welcome back and we look forward to your enhanced scheme.
Best regards,
Joe SDF
good news?
Valeo......see the bad news re the EA, but what was the good news?
Regret the delay, but now I am back and on top of that with even better news. First the "bad" news though - we have tried unsuccessfully to make an EA for this method. Believe me we tried and the coder who tried, went an extra mile without the success that we are seeking. With what is to come, the chances have improved "dramatically" and I will NOT be surprised if someone beets me to the "market" with their version before I do as my testing criteria are very stringent. (I know that you areeading this Charl & Naira)
I know that what is to be revealed will make you more pips consistently as I have the proof in the Bank.
Best wishes.I think this is the good news...the new thread, the new version of the system --- and the fact there is no ea and we can be traders!
Divergence explained
Excellent trade, ValeoFX. Regarding your mention of divergence, I explain below for newbies because it's such a valuable concept to me. If you join elite membership, all such threads on different trading ideas such as divergence, pivots, fibonacci are organised along with their indicators in one of the threads.
When ValeoFX talks about divergence it refers to where the price makes a higher high or a lower low than before (or even the same high or low), and the divergence indicator FAILS to make a higher high or a lower low than before. In other words, you can see the price getting higher before reversing, but the indicator on the second top or bottom seems to be headed in the opposite direction. In other words, momentum has decreased - the strength in that direction has actually significantly weakened and it is a reversal signal and a half.
ValeoFX also talks of a contracting triangle. I include an example (it's classic on the 4 hourly chart/longer time frames. You can catch them sometimes on lower timeframes if you know what you're doing and how to listen to the market. The tend to be continuation patterns (but can be reversal). In other words, consolidation followed by continuation in the same direction on the breakout. Again, the example ValeoFX is referring to is on weekly chart, which makes it that much more powerful on the breakout.
Two classic examples indicators which can show divergence for you include MACD, RSI. You can see the examples of divergence that I have drawn in below in recent times on GBP/USD, including CCI. Really, really powerful stuff.
Divergence (2 examples)
1) 4 hourly chart subtle divergence on MACD - do you see it?
Price makes a set of three lows, but MACD is slowly making HIGHER lows (blue line on MACD). Blue and Red triangle on chart point out the double/triple bottom and indeed the divergence point. There is divergence evident on the CCI I've added, too.
2) The second example shows the same bottom formation on GBP/USD and the divergence on the MACD. There is also subtle divergence on the RSI. I've actually drawn in a British Racing Green trendline to show you the downward direction of the trend on the chart and the upward direction in the MACD (ie the divergence)
NB. Also has an amazing example because you have the evening star candlestick pattern in place the MA with a compliant MACD further on and it is daily chart. Can you see it? What a beauty! This "evening star" candle (it is the one before the last printed) has a particular long wick/shadow (indicating sellers coming back in) and is also around the resistance provided by the MA line in the middle of the bands. It's a good signal - simply wait for the next day candle to start to turn black for confirmation of some good short action that day. This is one of the ways I look out for day direction and I wholeheartedly agree with ValeoFX that studying the monthly, weekly and daily outlooks can provide extremely effective hints at the action for the day ahead (the above is just 1 example of many of "classics")
Triangle (2 examples)
Both of these triangles were continuation of the prior trend. I just had to simply draw in the lines and enter on the break of the triangle point. Again, it needs to be said that the lower the timeframe, the less likely the pattern is "valid" - but worth watching out for in consolidating market. They can be quite an effective "scalping" strategy in choppy markets (example 2) for around 10-20 pips on these lower timeframes I've found.
Hope that helps. It's an essential foundation to understand this idea/concept of divergence I think to understand ValeoFX's excellent new weekly template examples.
The 13 pips was profit here. I was trading against trend and it was a "bonus" trade that day - there was more in it, but like I said before using triangles on a lower time frame than 1-4 hours requires a pretty substantial risk appetite. I have a fairly strict trading plan I follow because I am starting a private investor club later and want to be able to make promises I can keep!
I think the CCI may also be a reverse "ghost" in any regard, it is a continuation of the previous uptrend after the "anomaly" big bearish candle.
It's a 15 minute chart with a classic Woodies CCI (15 minutes, 14,6 settings). I drew it in after to show there was a nice zero line cross in place.
More info on divergence, indicators etc: https://www.mql5.com/en/forum/175886
ValeoFX, you have asked me before for some of how I use or compliment your strategy. The above is a taste. Hope it helps newbies on some of the ideas you mentioned in the description of weekly template.
An 8 hour chart animal