A-B-C-D Trade - page 325
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Our previous FCT was Nov 8th's low and Nov 9th's high and low, with channel sloping down (blue).
The next 2 FCT plots were:
1 = Nov 9th 05:00 high 1.2789
2 = Nov 13th 10:00 low 1.2659
3 = Nov 14th 19:00 high 1.2778
This plot is displayed in white.
The 2nd plot simply involves moving Point 1 to Nov 13th 12:00 high 1.2727, and labeled as 1(a). This channel is sloping up and displayed in yellow.
This is not conforming to our triangle rules. Therefore, we can make 2(a) Nov 13th 14:00 low 1.26707. This results in a lower trendline almost identical to using Point 2.
Besides the SELL opportunity off Point 3 which was a revisit to the Point 1 area, we also had the bounce up off the lower trendline Nov 15th 00:00 1.2724. This intersected the diagonal blue FC 31.4 and the white FC -50 (marked by "X").
The blue line is the Gann Activator SSL for trend guidance. Alternatively, we can use the HAMA_T3 (not shown), which showed its candles respecting the lower yellow trendline after the decline off Point 3.
The chart plots in last post was on the 1-hout time-frame.
Let's look at the same chart, with an addition of the HAMA_T3.
We saw a clean break of the yellow lower trendline (Plot Line B) produced by the FCT using 1(a) of Nov 13th 12:00 high 1.2727.
The break also corresponded with the HAMA_T3 trend change. The regular candles stayed below the bearish HAMA_T3 candles, and experiencing a 2nd pullback thus far.
Today's 15:00 pivot low had other support:
- a 78.6% retrace of Low-High leg Nov 13th 10:00 1.2659 and Nov 15th 15:00 high 1.2801.
- the 1st FCT's blue FC 31.4 intersecting that pivot. ( Its FC 131.4 provided diagonal resistance from yesterday's 15:00 high)
- the white FC -31.4 from the 2nd FCT plot.
Note that Middle East in focus as the 2 sides exchange fire. Going into the weekend, the markets may take some flight to safety (i.e. strong USD and JPY).
Here is EUR/USD Daily using this year's high and low as Points A & B
A = Feb 24th high 1.3356
B = July 24th low 1.2041
C = Sept 14th high 1.3168 (78.6% retrace of A-B)
The plot's FC -68.6, which is the first level down from Point C, acted as support this month thus far. When we zoom in at that area, we can see how strict the candles adhered to that ratio*.
The Sept 30th pivot low of 1.2803 was at the FC -68.6 based on Point A = May 1st high 1.3283. This was one of three peaks. In this case, the Point C was a 88.6% retrace of A-B.
In both examples the Plot Line A-C provided resistance at the Oct 17th pivot high, for a SELL opportunity. We probably covered this in a past post.
* Remember that the ratio of 68.6% is a result of subtracting .314 from 1.00.
1.00 is the entire space between the 2 fib channel plot lines.
We are measuring a distance of .314 from each Plot Line, whether it is above or below. The 50% ratio (.5) is significant with any methodology, and is the mid-channel.
We featured this tighter plot (yellow) perviously, but now overlay it on top of the last FCT.
A = Sept 17th high 1.3171
B = Sept 30th low 1.2803
C = Oct 17th high 1.3138
The interior ratios were respected at each level. Price pivoted at the -31.4 and retraced upwards to the -68.6.
From a horizontal basis, that was a 50% pullback.
When we apply the fib expansion tool starting the plot from the Oct 17th high, we see the FE 100 intersecting the Plot Line B. This analysis can be used for exit and even a small bounce up trade.
This months lows (candle bodies) are at the 131.4% expansion of this plot's B-C. This intersects the wider FCT's (white) -68.6.
edit: we added the trendline (pink) for the wedge we featured for the break to the downside.
Instruction for the Fib Channel Triangle (FCT) can be found on page 318 post #3173.
https://www.mql5.com/en/forum/198355
The -50 level has since been added to the 3 interior ratios between to 2 plot lines.
This did not include the extension ratios that are outside of the trendlines. Just add to the level above or below Plot Line B, which is the zero point. One side would be negative numbers, and the other side are positive numbers.
*******
Now let's look at the attached example for USD/CHF 4-hour. We also applied indicators PSQ9 Mars at 45-degree intervals and HAMA_T3. Horizontal fib plot using AB as the high/low is in gray color.
A = Oct 10th 00:00 high .9431
B = Oct 16th 20:00 low .9214
There are 3 locations for Point C, which are all highs, as price ratcheted upwards.
C(1) = Oct 26th 08:00 high .9386
Retrace of AB was 78.6 at Point C(1) and declined to the FC -50 precisely Oct 31st during the 08:00 candle period.
The bear candles dropped below the HAMA_T3 zone Oct 30th. Move absorbed a bounce up at the Mars 315-degree that was contained by the HAMA_T3, before its precise hit to the FC -50 mid-channel. BAJA Bullish Divergence evident.
C(2) = Nov 6th 08:00 high .9455
This plot was predicated on the revisit of Point A high, and labeled R-A, but guided by the Mars 90-degree sloping up. A precise hit was made a few candles earlier, and Point C was moved slightly higher on the probe above Mars 90.
Price declined to the FC -68.6 On Nov 7th during the 04:00 candle period.
We drew a white horizontal line here to display fact that it is the same as the previous Point C(1) and 78.6 level.
If a trader was trading the trend upward, this pullback can be analyzed properly to stay in the BUY position.
A more conservative exit was at the Mars 45-degree (.9401) and at the bottom of the HAMA_T3.
C(3) Nov 13th 08:00 high .9512
This was the 138.2% extension the the upside of A-B. The cluster of extension fibs are 127.2, 131.4, and 138.2. We can consider this a price reversal zone.
This zone is accompanied by the Mars 135-degree.
The first hit to this zone was at the 131.4 (.9499) on Nov 9th 12:00. A bounce down to the HAMA_T3 occurred.
If the trader did not exit, Point C must be moved to the new high at the 138.2.
Subsequent decline made a price hit to the FC -50 on Nov 15th 12:00 period (also Mars 45 and horizontal 88.6), after respect and pause at the FC -68.6. BAJA Bullish Divergence also evident.
*****
Price moves in thrusts but usually chops with pullbacks. This is a good example of combining tools to read pullback opportunity.
Some traders will feel uncomfortable with counter trend trading, thus a measure of experience should precede live trading of these scenarios.
Techniques don't have to be complicated or expensive. We now feature an entry technique that combines the ADX Cross indicator (default 14 period) that displays with arrows, and the HAMA_T3 (default settings).
Let's set simple rules, and remember that the arrow will lag one candle period. In other words, we'll see arrows one candle late, just like most indicators of this type.
All entry signals must be in the direction of the HAMA_T3 trend, and the previous candle must be the corresponding trend color.
A part of the body or wick of the cross candle must be inside the HAMA_T3 candle zone. The body of the cross candle must NOT be beyond the opposite end of the HAMA_T3. It's O.K. if the wick is beyond the zone.
We can trail the stop-loss by using the HAMA_T3. Place at the opposite end to direction of trade, plus cushion. The onset of the trade should have more cushion.
It can be tightened when the trader wants to protect some profit.
There are 4 price points for the HAMA_T3 and can be seen in the data window as Values 1 through 4.
This technique trades the pullbacks, and filters out most of the false signals usually associated with cross-overs. Some traders will use S&R to target take-profit levels.
The attached 4-hour charts:EUR/USD from Sept 19th to present, we had 10 entry signals that comply with the rules. Some overlap existing positions (next to previous signal).
USD/CHF from Sept 7th to present, we had 14 signals with only 1 considered bad.
We marked the signals with yellow lines. Too lazy to list the dates. If you are serious, you can view the pics and apply the indicators for further research/confirmation.
Attached are both indicators. We also attach a modified version of the ADX Cross with alert and e-mail functions.
It's important to understand that most cross-overs must lock in or it can repaint.
This means the arrow can disappear, if the cross-over changes and does not finish the 4-hour period as a cross-over.
The newer versions have corrected this by not displaying the arrow until it locks in. Make sure you study whichever version of the ADX Cross you use.
*****
Pairing the ADX Cross with the HAMA_T3, in our opinion, scores well:
- visually
- trading pullbacks, but using dynamic S&R (moving with price fluctuation) provided by HAMA_T3
- trailing stop option using the HAMA_T3, including multiple price points of its candles
- eliminates most false signals
- can choose 2 scenarios with trend color for entry:
Cross candle + previous candle must be trade direction color.
Cross candle only must be trade direction color (more aggressive)
Here is the Bull FCT based on our observation of the 78.6% retrace on Nov 16th, as displayed on the recent triple FCT post and pic. That entry point also had BAJA Bullish Divergence.
A = Nov 13th 10:00 low 1.2659
B = Nov 15th 15:00 high 1.2801
C = Nov 16th 15:00 low 1.2689 BUY entry (78.6% retrace of A-B)
Today's (Nov 19th) 15:00 candle made a precise hit to Plot Line B, marking a price of 1.2820.
That represents a gross gain of about 130 pips. The one S/L technique we comment on is placement just beyond the 88.6% fib. In this example that was 1.2675, plus cushion = 1.2670 (tightest).
If this BUY opportunity was traded to Plot Line B,
Net R/R = 120/25 and 4.8:1
Regular candles surfaced above the HAMA_T3 (not shown) just before price hit the mid-channel (FC -50). It stayed above the HAMA_T3 and allowed trader to stay with the BUY position.
Lurking SELLs at Plot Line B would trade the bounce down. Conservative exit would be horizontal Point B, which was just hit,
Here's an update to our previous chart of the wedge and FCT plots.
Price ascended from teh white FC -68.6 and made a hit to the 100% horizontal fib (gray) of 1.2803 today.
Notice that currently the body of the candle is at that price level. The "wick" probed higher, as was explained in the previous post.
In the past, we often wonder why price probes above or below significant horizontal S&R. Now, we understand that it may be working off diagonal S&R, and in this case the aforementioned FCT plot Line B resistance.
This is not to say price will not close above 1.2803 today. It tells us price is meeting both horizontal and diagonal resistance at the moment.
This is actually the 2nd revisit of this level, with a bounce down already having taken place Nov 15th-16th.