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I still get confused on that. I can clearly see most times when they are too wide. But then I usually see them narrowing on the entry bar and looking like they are about to turn, and I will jump in at that point.
So not sure if I should just stay out all together if they are wide at entry no matter if they appear to be about to turn?
Can you help answer these questions from other members on NexusFi?
monpere, i am presently testing the rules as defined by Charles in his PDF along with my regular approach. I did some adjustments to trade the ES, namely the profit/stop lost and exit point (Charles suggests a close within the cloud, i use a close below the cloud or EMA[55]) Also, i am not yet convinced the ticks combo 1508/377 is optimal for the ES. My objective if the system performs well is to propose it to some of my friends who ask me how i trade. IMO, the system is relatively easy to pass along to someone new to trading. Finally, i used the 377t Yesterday but did not take the time to post the corresponding entries on this lower time frame. However, this is easy to check if you have Ninja
In comparing the size of the Keltner channel on the ES and Euro we have a range of 7 ticks on the ES versus 14 ticks on the Euro between the top and bottom bands that form the channel, a 2 to 1 ratio. This is the range as calculated on the 377 ticks chart. So if the objective is to get 20 ticks on the Euro then an objective between 8-10 ticks with a stop of 5-6 ticks on the ES is realistic. Ideally, to get a better idea you would want to measure the range of the channel at different periods and make an average and calculate the typical variance in Excel using the standard deviation function. This should give a more accurate idea of the profit/stop targets we should try to have on the ES.
Charles - This may have been discussed but I had a question about the reasoning behind the long trade rules for the 1508 chart. The plan states that price must be inside a RED cloud or above a BLUE cloud to look at the 377T chart for an entry. I am confused because it would seem that being above a red cloud is more bullish than being inside a red cloud and being inside a blue cloud could still be considered valid for long entries (as opposed to only being valid ABOVE a blue cloud).
Can you shed some light on this for me? My apologies if this has been discussed and I missed it. thanks!
The top & bottom edges of the cloud are S&R levels, When you are above the cloud even if its red that is a valid signal but it is much stronger if you are above and pulled back to the cloud when it is blue.
When inside the cloud use the 50 EMA as the next area to evaluate a trade setup. No candle if you are looking for a long trade can close below the 50MA. If price bounces off the 50 MA you could still have a long trade as long as the 377 chart is setup properly
Thanks Charles - that clears it up and agrees with the reasoning behind the filters as I understand them - I might suggest changing the wording of the 1508 rules (for long setups) to "above the cloud or inside a blue cloud" and for shorts "below the cloud or inside a red cloud" - I think this wording is consistent with your answer to my question?
I will wait for a double bottom/top inside the cloud after a lower low or higher high. This creates the "W","M" patterns that are very strong signals when taken with the trend
