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Harmonic Trading
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Harmonic Trading

  #61 (permalink)
Just starting out...
lisb
 
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btw! What happens at the top reverse point?? what kind of reversal is suposed to happen?

in the case ive posted, at the targeted reversal point (after that huge rally) it developed a double top, and came back down... is this typical behaviour?

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  #62 (permalink)
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fredyyy

On an AB=CD pattern D is always your pattern completion or potential reversal point. I backed the chart up using a 60 minute chart. I think it shows you what you want to know. You had an AB=CD inside a larger one. The inside AB=CD actually extended the CD leg to the 161.8 point of the AB leg. Your inner pattern actually provided no signal at the 1099 area, the larger outer AB=CD did. George will probably explain it better.

Jeff
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Last edited by TraderJesse; October 22nd, 2009 at 04:03 PM.
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  #63 (permalink)
Market Wizard
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TraderJesse,

Are you drawing the A B C text on the chart manually or is there an indicator that does that in Ninja?

Tks,



TraderJesse View Post
and how Fib extensions be used for target predictions.

Chart is kinda busy but you can see 2 AB=CD patterns that are clean with retrace and extensions.

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  #64 (permalink)
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DavidHP

Manually, I draw the AB leg then do Ctrl-C and Ctrl-V which copies that line and I drag it into place for the CD leg projection. The BC leg is drawn manually too.

Jeff

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  #65 (permalink)
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TraderJesse

hey dude thanks for the reply.

I was amazed to check that the ABCD pattern ive found, just made up the upper leg of the bigger ABCD pattern. that was cool.

But actually, the inside ABCD pattern ive found did give out a reversal sign!

if you check the printscreen ive posted, on the first fibonacci scale i drew, at the 1,618% point ( =around 1100) i was expecting a reversal so i drew a blue horizontal line there...

and the price has risen ever since, up to that point, and around yesterday i guess it double toped and came back down.

Thats exactly why i asked what was suposed to happen at this reversal point.

I'm seeing a double top... what do you think?

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  #66 (permalink)
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sorry, my bad.

Actually you cant see the blue line i drew at 1,618% that i was talking about on the last pic ive posted... BUT HEY it was there anyway xD

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  #67 (permalink)
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TraderJesse View Post
George:

My tape reading skills leave a lot to be desired that's why I gave up discretionary trading, too many decisions for me ment a down sloping equity curve. So I use Harmonic Trading in systematic form. I'll continue to follow your thread and see what I can apply in my trading. Just wanted to clarify too avoid confusion on my end.

Thanks..


Jeff,

Thanks for your input, it's an nice one and is very important as well!
Let's take it step by step. When you're trading a system, you're looking for the set-up to take place. How that looks, is different from case to case of course. But it includes some rules that says if that and that, then that and that.

In this case, what we're looking for are the HR (HarmonicRelations) in price (and time). So, if price action (retraced) measured from one point to another hits the level of ,618 then it means that you have found the HR, and the criteria for the pattern is fulfilled.

However, because there aren't any guaranties out there (because of the chaos - it takes only 1 actor to change historically repeated price (pattern) action), the next step is to identify the PRZ (PotentialReversalZone).

Step one is already fulfilled by the action hitting the HR (0,618). Step two is to look at the action that occurred while hitting the HR.
We have to go on thinking in probabilities. Unfortunately we can never rely on the IF that Then that, but we can use some hints, and use the risk equation in order to find out if it will develop in the desired way!

I believe that, if traders STOP thinking in terms of HOW MUCH MONEY they could recover (I'm saying recover, because most traders are loosing money), and start thinking in terms of Let's find out what happens,It's like going to the movies, you've read the review, you've listened to your friends, but you still have to pay for the ticket in order to spend your time sitting on your a.. during two hours! Are all movies good?! NO, but you still have to pay the ticket in order to find out. (in case you're not paying for the ticket, you still have to pay with your time).

The beauty of trading is that you don't even have to stay til the end, if it's not good, (well, of course that's in case you're not getting hypnotized by a bad movie, and you just have to find out how it ends).

However, back to step two. What step two helps you with, by looking at the relations of the action that completed the HR, is to give you a map of what the current mindset of the crowd looks like. (GO to post #36 and have a look).

Step three is to identify if any of Non PRZ (Remember PRZ is the area where the HR are fulfilled, -normally 2-3 ticks or points above/below the HR, depending on your time frame- and the point from which the potential to reverse exists) relations are there. (Post #36).

If we have Price Gaps/Tail Closes/Extreme Price Action, it simply means that the mindset of the crows is so anxious to continue with its momentum, that it will hit you very hard if you get in it's way! You never get on a train by putting yourself in front of it, you wait for it to slow down, and stop. However, there are moments when the train doesn't stop, but I will assure you that it will not look like it's speeding when it make it's U-turn.

So, if step three is on your side -meaning that PRZ is OK- you go to step four, which is to identify a good entry point. Does that mean getting in as soon as the HR is hit?
No, it means that you'll need a confirmation. In order to get the confirmation on your side and to keep your risk low you need to zoom into a smaller time frame. Imagine you're looking at a 60 minute chart, you could have a high range of price that will make you have a BIG stop. That's OK, as long as the price action develops in the right way, but you never know that, and in case the movie is bad, you don't want to pay overprice for the ticket, right?

That's why you switch to a lower time/range frame. And you go to step five, meaning that you use your set-up criterias. This is, however you chew it and speet it out still including the same essence. By that I mean that there's nothing discretionary about this. If you have a hard time executing is because you're way to much in your past. Meaning that you rely on former experiences, looses, missing out, etc...

So doing it mechanically is good. There are several methods. Remember we're talking about a reversal. And reversal means an U-TURN. Let me see if I can plot this in here:

|
|
|_ _/_ _
| /
|_/

We have Key Reversals, We have failure swings, We have 1-2-3's, And I'm sure there are several, pick one that suits you. If you are tottaly into indicators and MUST use one, then use an indicator that is based on price action. Here's one that's worth taking a look at. It's called Scalper and it plots a signal after 3 higher closes or 3 lower closes. (I've just put it on my charts, and I'm still observing it, and it seems that it plots the high/low instead of the close). Any help will be appreciated in observing and developing it.
The use of it, is that in convergence with the PRZ it helps us to confirm the U-TURN.

Here it is:
https://futures.io/free_downloads/ninjatrader/indicators/#linkid166

Step six, take your entry. Step seven, put out your stop. Step eight, lay back and enjoy the movie. Step nine collect

A short summary.

STEPS:

0. Prepare yourself mentally by learning to identify HR before you start trading them.
1. Identify the HR
2. Study the action where HR have taken place
3. Identify if the PRZ is valid
4. Start looking for entry
5. Have the criteria met for you set-up
6. Entry
7. Put out your STOP
8. Enjoy (and that goes for whichever outcome)
9. Collect (or do yourself a favor and erase the experience, whether is good or bad, a clean mindset helps you stay in the now, where all action is taking place)

Do you think that these steps are to many?! Then just think of how many ways you could be dressing yourself in the morning, still you JUST DO IT!

Trade safe, and the money will take care of it self!

/George


Last edited by George; October 23rd, 2009 at 07:40 AM.
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  #68 (permalink)
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Bullish/Bearish ,768 Retracement


The next area to grasp in Harmonic Trading is the 0,786 level. Same rules applies to the ,786 retracement level as for the ,618 retracement. If the price action continues through the ,618 level then we get our next support/resistance at the ,786 level.

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The 0,786 is a very significant Fibonacci retracement. When price action is declining, it is a crititcal area for supprot before retesting the initial bottom. When price action is rallying and attempting to retest a recent high, the retracement can act as significant resistance. The key to gauging the 0,786 as a potential reversal point is to study the price action at the 0,786 ratio and assess the following move. The price action around the 0,786 can provide substantial inforamtion regarding the potential future of the price action.

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  #69 (permalink)
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1,27 Projection

1,27 is important for several reasons. It is the first area to examine after the price action has moved beyond a significant previous point of resistance or support. In case of a break out, the 1,27 projection is the first area to either take profits or enter a short position. In the case of a break down, it is the first area for potential support, covering a short position or entering a long one.


Bullish 1,27 Projection

The bullish 1,27 projection is an important area to look for potential trade set ups. When price action breaks down past its initial starting point (at X), the 1,27 projection is the first place to look for potential support.

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Bearish 1,27 Projection

After price action has broken above a previous high, the 1,27 is the first area to look for potential resistance.

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After price action breaks out above a previous high, it is easy to believ the rally will continue for a while. Quite frequently, the price action will experience resistance above the break out point at the 1,27 and not yield much of a rally. Therefore, the bearish 1,27 is an important area to examine to determine the strength of a breakout.


Simply put. Have a look at the trend. Observe if it's up or down in order to define your entry bullish/bearish (for the set-up not for the trend). Find the latest retracement of the wave in the direction of the trend.

-Wave meaning to define/locate/state the last price action beginning point and ending.-
-Retracement meaning the recoil of that wave-

Project now the retracement by multiplying it with 1,27 (for i.e. retracement = 10 then projection = 12,7). Now you have your entry buy/sell point.

Remember, the key word here is retracement, you project the retracement in order to find the reversal point.

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Almost too good to be true!

Take a look at this. Current live price action, CL 89 ticks.


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