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Higher Highs

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Could the community please share their insight on the following graph. If A is a new high and B is a lower high then what is C described as? Is it a new high because it is higher than B? If it is, why do you think the large red candle came into play the day after followed by an even larger green the day after that which is now a new high or is it?

EU Stocks 50_20190313_18.15.png

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Hi @Nelsy-Boy,  you need to stand back a bit, you've got a higher high at A and then a higher low at the bottom of the red pin bar and price is then unable to make a new higher high because it has run into confirmed strong resistance.

The bears were waiting there all the while and that level is now the dominate chart feature, the trend has stalled until the battle over the resistance level is resolved. 

image.png.7daae67fbf6b9bc0dd01e1518f9ec7a7.png

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Thanks @Caseynotes I understand the HH and the resistance. I'm not totally clear on the HL though. Which low is that higher than and why is it significant when there has been three red candles prior to that point after the A and B candles? Really appreciate you spending time to answer this.

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No problem @Nelsy-Boy, trends should always exhibit a zig-zag succession of higher highs and higher lows (bull), if that pattern is broken the trend has at least stalled or may have collapsed all together. The pullbacks are caused by profit taking, the continuations are caused by re-entries, there has been no real bear participation up til now because the bears have all been sat here waiting for price at 3340, after all, why sell at a lower price when price is rising. This is why support and resistance is the king of indicators, they are obvious levels on a chart for like minded types to hang out and wait for price to come to them.

image.png.3abe9fd14be7563738b46f1e850b9dd0.png

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Thanks again @Caseynotes. That is clear. One more question please. Just how important is it to look at the low as the bottom of the wick of the candle rather than the close?

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@Nelsy-Boy,  good question. On the main time frames such as H1 and Daily owning the bar is important and the close will be fought over but on the less popular time frames say 30 min or 10 min the close is not so relevant.

The wicks however are always important because they show the precise level that bears (for example) stepped in and turned the market. This also begs the question 'did all their orders get filled or are there more sell orders sat waiting at that level?'

Your chart shows this well, every time price ran into 3340 sell orders overwhelmed the bulls, not just once or twice but over and over again. 

From here it becomes a battle of attrition, who has the resources to win, we can't know so have to wait for a victory and then follow the winner up or down on to the next level. Stay out of the battles at the levels and look to catch a ride between them.

 

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Pivots can also be used 

In metatrader fractals are a high with 2 lower bars on each side (opposite for low)

In prorealtime you can use this indicator

/////////// FRACTALS DE BILL WILLIAMS
//Varible = cp  - par défaut =2

cp = 1


if high[cp] >= highest[2*cp+1](high) then
LH = 1
else
LH=0
endif


if low[cp] <= lowest[2*cp+1](low)  then
LL= -1
else
LL=0
endif


if LH=1 then
hil = high[cp]
 
endif


if LL  = -1 then
LOL=low[cp]
 
endif

return hil, LOL

 

 

(If you use cp = 1 then you have a top with 1 lower bar on each side)

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@Nelsy-Boy,

I appreciate your trading strategy and timeframe may be  different to mine but I tend to look at 'Higher Highs' and 'Higher Lows' being formed. This is what I would like to see when trying to identify strong bullish trends to trade. If you look at the chart of Gold from August 2018 then it illustrates this rather well. 

I then try and use 'Oscillators' to try establish a good entry point on the dips of any long trends upwards once my indicators have indicated to me that my criteria has been met. It is by no means perfect and certainly does not guarantee profitable trades but that is what I tend to look at.

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Thank you @TrendFollower. I was hoping you would add to this thread. Would you or @Caseynotes or like minded people within the community please share your insight into a period on the gold daily chart. I am interested to know about what a higher low looks like. So starting from point A, is point B considered a higher low and the same for C and D.   E is lower than D and level with C so how would you describe that. Lastly, as point F closed higher than the last higher high at X. Having bought at Y, would you have added to your position, and if so at which point?

By the way, I appreciate your input @Kodiak but that is well beyond me at this stage in my trading life-line.

Spot Gold_20190314_17.53.png

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@Nelsy-Boy,  if you zoom out you can see the general pattern much clearer and be less bar specific.

The first higher high (labelled) puts you on alert, a short pullback to give the higher low (labelled) would have been the long entry for some while price going on to pass the first higher high would be the entry for many.

More recent we had a lower low followed by a lower high yesterday which gave an entry point for shorts today but the red line (1276) is strong support as well as the lower low and will take determination to break in order to establish a new downtrend.

image.thumb.png.b2d4dcdfd1599c6c1a3afcbb2bf7a151.png

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Thanks @Caseynotes I hope my next question is my last, I'm sure you do too!! The recent lower high is only confirmed as a lower high because of the rather large red candle today. If that is correct, then would we only go short on this confirmation candle. And, if we do, why would we think that because todays red candle has not passed the close of the red candle on Monday, that it would indeed continue down to at least the more prominent support line?

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@Nelsy-Boy,

First of all I keep my charts very simple and with less 'clutter'. If I need to look at higher highs and higher lows then I look at it using a 'line' chart rather than a 'bar chart'. The reason for this as I am applying trend following principles and my timeframe is likely to be longer than yours. For me bar charts are more for shorter term traders which I am not. Also I tend to look at each indicator individually on the charts. So when I want to look at volume then I just look at volume. When I want to look at moving averages then I just look at moving averages, etc. 

On any long trend following trades I tend to 'add to my positions on the dips' and pyramid upwards. I use oscillators to try and identify attractive entry points but I am not too fussed about not getting the optimum entry point. As long as I am around that area it is fine. There will be times when I do not execute additions to my trade efficiently as my timing or execution is out. That is also fine and is built into my trading strategy. As I am going to trade with the trend than against it then I have 'tolerance built' into my trading system to allow me to add to my positions not at optimum levels. If I could do that then I would be a perfect trader and there is no such thing and I am certainly no where near that. I have flaws and make mistakes just like any other trader. 

Gold is actually quite difficult to trade short term at the moment as Brexit and the US Dollar are making it rather volatile. Stop losses will get triggered if they are too tight. If they are too wide then losses could increase if the price moves against the direction of trade. This is one of the reasons why I tend to trade for the longer time period and ride the trend using a longer timeframe. Yes there are daily charges with Spread Betting but if the trades moves in your direction then your profits more than make up for it. 

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1 hour ago, Nelsy-Boy said:

Thanks @Caseynotes I hope my next question is my last, I'm sure you do too!! The recent lower high is only confirmed as a lower high because of the rather large red candle today. If that is correct, then would we only go short on this confirmation candle. And, if we do, why would we think that because todays red candle has not passed the close of the red candle on Monday, that it would indeed continue down to at least the more prominent support line?

@Nelsy-Boy, ask as many questions as you like. Speculative traders are not going to wait for confirmation. They will be looking at the lower time frame charts and have been thinking shorts since the end of Feb, and chancing their arm at every resistance level they can find. And why not, with a stop loss just above they are not going to lose much if they're wrong but when they are right the reward is big.

As soon as today's daily candle engulfed yesterdays and captured 1300 the next target must be the weekly support level at 1276, else why bother?

Different traders different game. Here is the H1 chart and see it tells a very different story to the daily.

image.thumb.png.8796b6e354fb65740f9a3a4fffd3e872.png

 

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@Caseynotes,

An interesting point you make. Different timeframes, different traders, different strategies. I try and stick to daily / 4 hour timeframes. The only time I look at 1 hour charts is to try and help with entry points. Different timeframes will tell a different narrative and hence those who switch between timeframes are more likely to make an incorrect trading decision.

@Nelsy-Boy,

Just remind me what assets you trade, your trading style and timeframe period you mostly use? I am assuming it is daily based on the charts you have posted?

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@Caseynotes and @TrendFollower Really appreciate your input on this thread so thank you. I am only trading using the daily charts on FX and some indices and more recently commodities. Due to margin constraints, I am only sticking to those markets valued less than 10,000 and on those, the lowest size per point possible. That rules out Orange Juice and Lumber but they are loaded on the demo. I'm still finding my way but feel most comfortable dealing just on SMA's. Cross overs or price crossing over. Ichimoku helps and sometimes the  Momentum indicator, but I have found that I can be put off by too much information. Therefore trying to just peel it back to HH HL support and resistance and of course only trading with the trend. When I am looking at the daily chart towards the end of the day, I have not found it useful to drill down to pinpoint entry. I only deal based on the TA of the daily chart. I would be extremely interested though, in how an Oscillator can help with your entry point @TrendFollower if of course you don't mind sharing that. Obviously, if that's too much information to share I completely understand.

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@Nelsy-Boy,

No problem. I thought you were only using 'daily' charts. In terms of drilling down I use the 1 hour chart when looking to select an entry point but I appreciate everyone will have different methodologies but I am sure several of them are profitable. The reason for this is that the trend will do all the work. The key is to identify suitable trends to trade. Do they have momentum? Are they supported by volume? Is the trend strong and bullish? Once you select this type of trend then it is a case of enjoying the ride and let the trend take you on an upwards journey if long and a downward journey if short.

There are different ways in which you can use 'Oscillators'. When I have identified a trend and meets my criteria then I need to find an entry point. So when the trend seems to have finished a short term correction (trends will correct along with way which is perfectly normal and healthy) and begins to move higher, you will begin to see the oscillator is moving out of the oversold zone area. This point can be used to enter a trending asset.

I must make it clear that using 'Oscillators' does not guarantee an effective or profitable entry point which leads to success. It is not foolproof and can be applied at the wrong time or simply incorrectly. Let me try and explain in as simple terms as possible for those who are not aware of what an 'Oscillator' is. 

It is important to understand what an 'Oscillator' is. It helps to show us a specific point in the trade we are observing whether it is 'Overbought' or 'Oversold'. Now when a specific asset you are looking at is overbought on the long side then one may expect selling to occur leading to the price falling. On the other hand if the market if oversold then one may expect buying to increase and a price rise could occur. The mid point in this is described as market balance. Now when the 'Oscillator' crosses this mid point the balance shift from buyers to sellers or the other way around. I hope this is making sense. 

Using 'Oscillators' are great for those who follow trend following principles. It is great at giving trend following signals. I have been caught out on 'false breakouts' and also got my entry wrong using this method so is is not 100% successful as all markets and conditions are different and unique and so one must bear this in mind. 

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Thanks @TrendFollower. Not sure if the Momentum indicator is classed as an oscillator but I have found it useful when the line crosses the mid point line in terms of a trend reversal. I have also found divergence quite an interesting benefit but at the same time, it has stopped me from entering trades only to find that the divergence was false and the market was just consolidating prior to the next leg up. Do you bother to pay attention to divergence when trendfollowing?

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@Nelsy-Boy,  anything that goes up and down between set values is an oscillator and you are right to be wary of divergence but if thought about the right way can be very informative. 2 examples, the worst of and the best of a divergence signal.

1/ After a large spike an oscillator will always fall away signalling divergence though price is still rising simply because the momentum generated by the spike cannot be sustained in the subsequent price action so the divergence signal should be ignored.

2/ When price is at a double top and has then broken up through the previous high but momentum has fallen away signalling divergence and is supported by decreased volume the divergence signal may well be true and the break may well be a fake. 

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@Nelsy-Boy,

To answer your question honestly, yes and no. It is all about risk and we all have different risk tolerances. I am a high risk trader so the level of risk I take on is high. I use the MACD to help me when I am trying to identify trends but it is not just one indicator I use. I use several but I also try not to use too many as otherwise it just becomes complex for the sake of complex. 

The MACD helps me to establish whether any selling has been exhausted and whether there is the potential for a trend reversal. Again I must stress it does not guarantee anything. It is merely an indicator which could provide a wrong signal or it can change very quickly. 

@Nelsy-Boy, everyone you ask will give you a different variation of using indicators. You must find those indicators that increase your trading success based on your trading strategy and system. For me trading volume is an important indicators as I want to see an increase in volume which supports the price action either on the long side or short. In my opinion using divergence can help to identify trend changes. You must use those indicators which works best for you. There are many indicators and many different ways to use and interpret them depending on the timeframes you are trading. 

I do not always buy or sell at the optimum or most efficient price levels. The reason why I get away with this risk in my trading system is because I try to trade those trends which are the strongest. Strong trends allow me to get in the 'middle' and ride the trend because the momentum is so great. I know a lot of traders worry about entry and exit prices. My exit is taken care by my stop loss strategy and trailing stops when in profit on a trade. For day traders or very short term traders they must have an effective trade entry system. For me as I am a longer term trader then my entry points are not as crucial as I have time on my side and as long as I have identify the strongest trends to trade, it does not cause me any real issues. This is why you will see that I do trade all sorts of various assets from Cryptocurrencies, Commodities to Indices. I tend to stay away from FX though I have when an opportunity has presented itself traded FX too. For me it does not matter what the asset is. It is the strength of the trend and price action combined with volume which is the most important for me. 

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@Nelsy-Boy,  was looking at the Gold forecast from Trading Central this morning which is in line with my own mentioned in this thread last week only to see gold bolt off in the opposite direction as this was being published lol.

Does raise the point that if you are trading on a daily chart that though you would not have got the entry confirmation you mentioned last week you do need big stops and from here a first target for a short would be less than 1:1.

I was also wondering (anyone) if IG email these out twice a day? I signed up with another broker to receive them some 8 years ago and though IG does have Trading Central I don't ever recall IG advertising the service.

image.thumb.png.5ad4563306ad9ac168b6035cb2cbd58b.png

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@Caseynotes You are right about the extent of the stop required when trading daily charts. Deal ratio is one of the main things I have really tried to improve but it isn't easy.

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Perfect example of supply and demand in action on the gold chart at 1310, see comparative chart above in this thread. The confirmation is the strong kick away from the level, if the price action was uncertain about the level it would suggest it was not being used as a supply level.

image.thumb.png.29a34f3d5ac2d1c0ed49b66e872576d9.png

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