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Snow Dog

Higher Lows Lower Highs

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can you give me atleast one rule of your trade? how you calculate those.

 

One rule of trade, not sure if this is what you mean but:

 

You look at bigger pic daily, 4hr charts. Are you in up/down trend. Are daily/4hr candles suggesting trend or counter trend? In other words have an intelligent look at your bigger pic charts. Not trading rules just good old common sense.

 

Eur D chart the red line was a clear resistance level. So the neg close candle arrow left (the candle itself has a lh and ll compared to the prev candle), goes below the D 8 lwma, the rsi is below 50 level. That all adds up to SELL!

 

So then you'll be looking at 1hr and 5 min charts for entry. NB with small stops you can STILL lose money if you are jumping in against the wrong candles.

 

 

Rules are simple. If selling, are you below 1hr 8 lwma, have you got a 5 min lh, 2b or evening star pattern.

 

Wait for 5 min candle to close with little/no lower wick, price must go 1 pip lower next candle (latest 2 candle) to confirm sell.

 

Opposite for buys.

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COT data showing some interesting long yen positions and sure enough pic perfect set up.

 

1hr treble top, 1hr close below 8 lwma, lovely angle on 5 min ma's highlighting great lh set ups. Mrs V was in aud though.

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can you give me atleast one rule of your trade? how you calculate those.

 

I posted elsewhere that I take a look at charts top down, nothing magical but a basic look and trying to assess where pa will go.

 

I look to follow the daily candles as much as possible. Trying to keep things as simple as possible, starting from the daily chart:

 

1) try and identify support and resistance levels

2) look for positive/negative closes to follow through the next day (as we believe this will hold true approx 70% of the time), failure of a good candle to follow through should be a clear warning signal

3) watch for divergence (I'll post something on this shortly)

4) Look for D chart higher lows/lower highs, double tops/bottoms, engulfing candles, hammers/shooting stars, morning/evening star patterns

5) rsi crossing its moving average or crossing the 50 line

 

If we are confident that a confluence of the above exists then the next day we will look to trade in 1 direction only. This keeps us out of some head fake moves typically around London open and the US open (weak counter trend 1hr candles in and around US open just as big a fake move as LO).

 

From there we are looking for good 1hr set up candles and the 5 min higher low/lower high that follows for entry.

 

There are some days where we will consider buying or selling but the most success follows everything lining up on D chart to trade in 1 direction.

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I posted this on Fri 20th about 6.30 am gmt.

 

Bias down for today. D couldn't follow through on the hammers earlier at an identified resistance level and still below RSI 50 level, 4hr and 1hr sell divergence, 4hr shooting stars, 1hr higher low, higher high cycle appears broken.

 

Just a common sense assessment of the charts, nothing ground breaking or out there, just basic common sense. From there it was just about waiting for neg close candles to confirm the assessment. When the arrow up on 1hr failed and had a neg close, the search for a 5 min lh entry was on.

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I posted this on Fri 20th about 6.30 am gmt.

 

Bias down for today. D couldn't follow through on the hammers earlier at an identified resistance level and still below RSI 50 level, 4hr and 1hr sell divergence, 4hr shooting stars, 1hr higher low, higher high cycle appears broken.

 

Just a common sense assessment of the charts, nothing ground breaking or out there, just basic common sense. From there it was just about waiting for neg close candles to confirm the assessment. When the arrow up on 1hr failed and had a neg close, the search for a 5 min lh entry was on.

 

Look at the above post and the D view checklist 2 posts earlier. We had identified a resistance level. D candles turned from hammers after an engulfing positive close to a doji, clearly couldn't go higher. D still below RSI 50 level. We had 4hr and 1 hr divergence (the crucial difference its not counter trend divergence but smaller time frame divergence back into D trend). Lots of reasons to be looking to sell.

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can you give me atleast one rule of your trade? how you calculate those.

 

1 rule. We like to focus on the 'flow of funds' on 1hr higher highs, higher lows to confirm trend. For example if as per our description of D trend we decide its a downtrend and we'll say on EUR downtrend resumed on 4 July (an engulfing lower high D close, RSI crossing below) then we'd be looking for 1hr to have lower highs and lower lows. If the 1hr is breaking this its having a short term correction to the D trend.

 

If the 1hr is not 'obeying' this rule you might need to wait for it to correct before selling. This can be an intra day lower high as on 19th July.

 

2 rule. A higher low or lower high after divergence is normally a good trade.

 

On this chart on 19th EUR spiked higher with a shooting star in London session, sell divergence was showing (as it was on 4hr also). The US session had an intraday lower high. So in terms of the above ideas we had divergence back into trend then the lower high to confirm the flow of funds was back into selling.

3.png.ab8f81ce19f61209853a9485d9281ba1.png

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Rule 3. We avoid weak counter trend pre/early US session believing they are just as likely a fake out as London open head fakes.

 

The charts are essentially the same. The trend clearly continues in line with D chart with 1 hr lower highs. The weak pre/early US positive close reversal candles (marked x on 1hr) would be ignored waiting for opportunities to sell again.

1.png.11707440c37ce8caafb035195746182a.png

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Rule 273. Divergence D for bigger pic reversals counter trend, smaller TF for divergence back into D trend.

 

Divergence on a bigger time frame, D is a great way to get an early warning of a potential counter trend move. When pa confirms the divergence with a good candle set up (such as a hammer or engulfing close), or you get a signal from indicators you have tested (RSI cross of its ma, RSI cross of 50 level, move through 8 lwma) a decent move will generally follow. Thats good use of counter trend divergence.

 

As above, from 4th July its reasonable to say the downtrend on EUR continued, D chart lower high negative close through the 8 lwma, RSI cross below 50 level. Here the 1hr divergences shown are back into the D trend. A much lower risk than trading 1hr divergence counter to the D trend.

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Rule 941. Good candles should follow through. I posted this on the morning of 18 July.

 

EUR has now had 2 hammers after a strong positive engulfing close at the lows. The failure to follow through should raise questions. The 1 June low maybe providing a R level.

 

Yesterday 1hr also showed divergence, lots of upper wicks rejecting a break up through the R level. Depending on how you view the Asian pa yesterday you could still argue the higher high, higher low waves in tact.

 

Could go either way today.

 

You'll see from above posts the D followed up with a doji and from there a 1hr lh set up sells.

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I posted this on Fri 20th about 6.30 am gmt.

 

Bias down for today. D couldn't follow through on the hammers earlier at an identified resistance level and still below RSI 50 level, 4hr and 1hr sell divergence, 4hr shooting stars, 1hr higher low, higher high cycle appears broken.

 

Just a common sense assessment of the charts, nothing ground breaking or out there, just basic common sense. From there it was just about waiting for neg close candles to confirm the assessment. When the arrow up on 1hr failed and had a neg close, the search for a 5 min lh entry was on.

 

New charts for this post.

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2.gif.52a22e69fb98faf23f8029a854849175.gif

3.gif.6a2ccce7eda6ceefc42e94493b0409c7.gif

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1 rule. We like to focus on the 'flow of funds' on 1hr higher highs, higher lows to confirm trend. For example if as per our description of D trend we decide its a downtrend and we'll say on EUR downtrend resumed on 4 July (an engulfing lower high D close, RSI crossing below) then we'd be looking for 1hr to have lower highs and lower lows. If the 1hr is breaking this its having a short term correction to the D trend.

 

If the 1hr is not 'obeying' this rule you might need to wait for it to correct before selling. This can be an intra day lower high as on 19th July.

 

2 rule. A higher low or lower high after divergence is normally a good trade.

 

On this chart on 19th EUR spiked higher with a shooting star in London session, sell divergence was showing (as it was on 4hr also). The US session had an intraday lower high. So in terms of the above ideas we had divergence back into trend then the lower high to confirm the flow of funds was back into selling.

 

New chart for this post.

3.gif.1366f4ee25d9d57c8405b62611f495e3.gif

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Rule 3. We avoid weak counter trend pre/early US session believing they are just as likely a fake out as London open head fakes.

 

The charts are essentially the same. The trend clearly continues in line with D chart with 1 hr lower highs. The weak pre/early US positive close reversal candles (marked x on 1hr) would be ignored waiting for opportunities to sell again.

 

New charts for this post.

4.gif.db9c06bf6fa1ff5f923551a20a934721.gif

5.gif.02c104b302d010aa3b32e514c564d1bf.gif

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Rule 273. Divergence D for bigger pic reversals counter trend, smaller TF for divergence back into D trend.

 

Divergence on a bigger time frame, D is a great way to get an early warning of a potential counter trend move. When pa confirms the divergence with a good candle set up (such as a hammer or engulfing close), or you get a signal from indicators you have tested (RSI cross of its ma, RSI cross of 50 level, move through 8 lwma) a decent move will generally follow. Thats good use of counter trend divergence.

 

As above, from 4th July its reasonable to say the downtrend on EUR continued, D chart lower high negative close through the 8 lwma, RSI cross below 50 level. Here the 1hr divergences shown are back into the D trend. A much lower risk than trading 1hr divergence counter to the D trend.

 

New charts for this post.

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7.gif.dbdb9c5f34a6efe432ed121c298259bf.gif

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Rule 941. Good candles should follow through. I posted this on the morning of 18 July.

 

EUR has now had 2 hammers after a strong positive engulfing close at the lows. The failure to follow through should raise questions. The 1 June low maybe providing a R level.

 

Yesterday 1hr also showed divergence, lots of upper wicks rejecting a break up through the R level. Depending on how you view the Asian pa yesterday you could still argue the higher high, higher low waves in tact.

 

Could go either way today.

 

You'll see from above posts the D followed up with a doji and from there a 1hr lh set up sells.

 

New chart for this post.

8.gif.f5274bfb300f7061c8700e37d687ff3e.gif

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Rule 7b clause C. Get better at reading the flow of funds ie 1hr higher lows higher highs, lower highs lower lows.

 

The daily chart for the eur clearly shows a downtrend that resumed from 2 May. Price didn't want to carry on higher for the 3 days preceding and 2 May was an engulfing negative close, RSI crossing lower through its MA and closing the day below the 50 level. So from 3 May we would generally be sellers. We may potentially buy after a positive day (we never know when a positive close day will be the start of a trend up) but in the back of our minds is the likelihood a positive day is just a rally in a downtrend. Unless there has been fundamental news to change a market view most turns require 4-7 days or so to play out with a higher low/double bottom or lower high/double top and most likely divergence.

 

If in a downtrend you have a counter trend move up when will the trend down resume? Always tricky but there should be evidence of price action clearly stalling over a period of time, yes again a double top/lower high, candles indicating rejection ie upper wicks or engulfing neg closes. Stopping at a clear support level would help and lower time frame divergence indicating a return to trend might also help.

 

The 1hr chart should be showing lower highs and lower lows in down trend. If you are seeing higher highs, higher lows on 1hr in a daily downtrend you may need to take care selling, waiting for the trend to resume. I have attached numerous screenshots showing generally the 1hr lower highs and lower lows in the downtrend. There was a clear break of this trend on 18 May and a significant higher low on 21st. However on 22nd this move up clearly failed with a significant lower high and an engulfing negative close. The counter trend move up on 6 and 7 June ended the same way with lower highs and engulfing negative closes.

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Edited by Snow Dog

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On our description of trend eur had an engulfing lower high neg close below 50 RSI level on Fri stopping at a possible S level. Our target the general lows shown on W chart.

 

So on Monday we would be biased on sell, any move up regarded as a rally in downtrend. Looking to sell good candle set ups on 1hr from 5 min lh's.

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Mrs V wasn't in front of the computer this am.

 

We left the positive close candle pre/early US session as a CT fake out, as discussed above see post 209. 1hr turned neg again. 5 min lh below 25 psych level, little/no lower wick. Ran straight down to RN for +22.

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The pre/early US session attempt to move up fizzled with the 1hr chart upper wicks and a doji, intra day lower high. Sold the 5 min lh little/no lower wick (on 1st 5 min candle after 1hr doji closed) for run down to prev days lows and M1 (as it was Y) for +29.

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I have for some time been more and more focused on the flows on 1hr charts as set ups for 5 min hl/lh entries. 1hr flows = 1hr higher lows and lower highs.

 

The attached charts should be clear enough.

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If anyone is wondering why a few months back counter trend was not working (still recall reading elsewhere someone posting 7 of 8 recent to the time EUR 1hr CT trades failed) but now its buy sell all over the place and everything is fine.

 

Well the market changed. US hols perhaps lower vol's, ECB head talks up the EUR. Whatever the reason at the moment its support/resistance levels and W pivots ruling. The moves between them are tradable.

 

Have a look at your GU EUR D charts over the last couple of months to see the ranges we have been in. When we break these ranges that may (repeat may) be the time to again take more care with CT trades.

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