Thanks for responding. So what I can conclude is the following, would it be correct?
From your answer to monpere's question I was wondering if the first rule is no longer that price must be making HH/HL, but instead that the 1508 tick chart has to make a HH (which can be a break of a previous LH) as in the chart, and then retrace to the MA/cloud? and vice-versa for shorts?
So this was an agressive trade not recommended for traders that are new to your system.
Do you have a rule such as the one you mentioned where you dont take a trade in the direction of a round number if the entry is 10 ticks away, but related to the cloud as in the chart on that post? Or are you just more careful and ready to exit if price reverses too sharply?
This would be related to the possible change to the rule mentioned previously.
I understand what you mean when trading in the direction of the current trend. The reason I asked about waiting for the candle to close is because in your rules, you state that when a trend is reversing, the 1st requirement is for price to make a HH/HL inside the cloud and the retracement candle to close inside the cloud as well. So this would mean you'd have to wait for the retracement candle to close before entering or do we scratch that rule?
I will look for setups in my charts this weekend and post some questions if I have any.
There is a long red candle on the 1508 closing in the cloud 4 bars prior to the candle you have marked with the 3 green arrows.
1. Would you start looking for an entry on the 377 when that appears?
2. If yes, would you not have had an entry on the 377 back at about 8:32A unless down sloping Keltners cancel the trade?
3. At about 8:44A a double bottom forms with standard divergence. Would that not have triggered an entry 3 bars before the bar with the 3 green arrows? Perhaps a close above cloud is required as well as trigger lines?
the long red candle you refer to 4 bars earlier if you look at the 377 chart the ZigZag is making a lower low at 8:30, this would in no way be a trade setup. When I post on the forum I can't post a chart that shows 2 hours of data flow you would not be able to see it. Look at your charts and see the lower low on the 377 at 8:30
Now what do the rules say - "377 chart ZigZag cannot make a lower low before trade occurs. If it does you must get a double bottom confirmed by a stochastic divergence" It's rule 6
At 8:44 yes that is a double bottom with stochastic divergence, you need to wait as a filter for a candle to close above the cloud. This filter is designed to eliminate some of the head fakes hence rule #2 and the 3 green arrows
Last edited by cjbooth; June 4th, 2011 at 06:07 PM.
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When you answered this to Monpere, it seemed you were saying that is how you determine HH and HL, by price making a HH and a retrace that holds, without waiting for a HL to show on the ZigZag indy. However in the pdf file you state that the "1508 chart MUST be making HH/HL illustrated by ZigZag either inside blue cloud or above red cloud"
Here are the charts for post 41 and 126 to see what I mean.
I am trying to understand the rules, I'm sorry if I insist so much, but I figure it could help others that might have similar questions.
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