Strategy Based On Chart Pattern

trading strategies and money management discussion, code, results

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fatdog1
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Postby fatdog1 » Fri May 19, 2006 7:17 pm

I have a screen shot of the 5 minute eMini Russell from this afternoon showing a textboox pullback to a new downstair to enter a short, and a upstair pattern to cover the short and go long at around 718.
The reason I would cover the short trade is because of the way the Russell exploded past 718 when it rallied out of the "upstair" this morning.
I would stay with the short if a downstair pattern forms above or across from the upstair and move my stop to the back of the lowest downstair.
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@ER2 SHORT TRADE 5-19-06.jpg
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fatdog1
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Postby fatdog1 » Fri May 19, 2006 7:59 pm

That didn't take long! :lol:
Have a great Weekend everyone
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@ER2 LONG TRADE 5-19-06.jpg
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fatdog1
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Postby fatdog1 » Sat May 20, 2006 3:32 pm

Let's see if my home computer is a smaller screen shot.

Here is a daily eMini Gold (@YG) with the upstair and downstair highlighted.

I only use large timeframe charts to look for areas of support and resistance for anything that is thinly traded like gold, silver and oil.

Until the either the sellers or the buyers in those two areas are absorbed, gold will trade sideways between these two areas.

I would be a buyer near the upstair and a seller near the downstair the first time gold trades at either area.

I should point out a problem I run into quite often.

The "near the area" of support and resistance is a problem I have with the way I trade. The problem is that a candle wick on a daily chart is a candle body on a smaller time frame chart. When there is a lot of demand in an area as there was when the eMini Russell returned to the 718 area yesterday afternoon, I miss a lot of trades because my buy stop is below the price when the turn happens.

The low tick in the eMini Russell yesterday afternoon was 717.90 before the rally back to 724, but it could have happened at 718.50 and missed my entry.

The strategy would need to only enter the long trade with buy stop as gold heads up when it visits the demand area.
I would need some kind of a filter like increasing up volume when the turn happens as a signal for the strategy to "chase" the price so as not to miss the entire move if that is possible.

FD1
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@YG 5-20-06.jpg
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fatdog1
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Postby fatdog1 » Sun May 21, 2006 9:34 am

Michal,
Here are the daily charts for USDCHF and USDJPY workspace.
FD1
Last edited by fatdog1 on Thu Jun 22, 2006 12:32 pm, edited 1 time in total.

fatdog1
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Postby fatdog1 » Sun May 21, 2006 9:39 am

Here is the workspace with the daily charts for EURUSD and GBPUSD for anyone with TS version 3159.
FD1
Last edited by fatdog1 on Thu Jun 22, 2006 12:33 pm, edited 1 time in total.

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Postby fatdog1 » Sun May 21, 2006 4:30 pm

I work on Sunday's every now and then when there are opportunities.
Today I have a screen shot of how I use the upstair pattern to trade a breakout. I have been experimenting with this lately and it works rather well.

This chart of the Yen future show the two parts of the upstair already formed. The up candle is the first part proceeding the congestion area which is part two.

The only piece missing is the up candle leaving the area to complete the pattern.

Notice how even the candles are in the congestion area.
This means supply and demand are in balance. Anyone who wants to buy and sell can do so. For every buyer there is a seller.
If the next candle or so should rally out of the area, then supply and demand will be out of balance with the explaination that there were more buyers than sellers at that price.
That is why a pullback to that area will produce a high odds, low risk, long entry in the future.

For those of you willing to take the risk now, you could place a buy stop at .9003 and be a part of the up candle or breakout that completes my upstair pattern.

That is 1 pip higher than the highest wick in the congestion area.
I will use a candle wick for this breakout trade rather than the candle bodies I use for the pullback trades. It keeps me out of the trade unless a breakout happens.

There is always a chance that you could get dragged into the congestion area if the Yen ticks up to 09003 and then retreats into the congestion area. That is not the end of the world if it happens.

The trick to reducing your risk if that happens is to cut the trade off if the yen trades at .8977 which is 1 pip below the lowest wick in the pattern.

That will mean the pattern failed and it would be a small loss.

No trade is without risk and I never enter one without knowing where I will kill the trade. Same thing with where I will take my first profit.

The first target is the area of fresh supply at .9040.
Since it is fresh, the Yen will at the very least move sideways either just below or across from that area of supply until it either builds a new upstair pattern before moving higher to the old area of congestion
at .9084 or sells off.

If that selloff happens, I would take a profit at .9024 if the Yen trades back below about .9028 or so on the first candle that retreats when the area of supply at .9040 is tested.

If the Yen trades below .9024, the odds are it will test the fresh area of demand at .9004 where I will be a buyer on a pullback.

Forex traders could short USDJPY instead.
It has a downstair pattern forming and only needs the breakdown candle to complete the pattern.

The chart for that is the next chart showing the downstair forming.

There is a chance that the breakdown trade happens in the forex market first since forex trades as early as 1:00 PM Eastern Time where as the futures start trading at 5:00 PM Central.

No matter since I still have the pullback trade sometime in the future if I miss the breakout trade today.

Good tading to all,
FD1
Attachments
@JY Breakout Trade 5-21-06.jpg
@JY Breakout Trade 5-21-06.jpg (95.61 KiB) Viewed 487 times
USDJPY Breakdown Trade 5-21-06.jpg
USDJPY Breakdown Trade 5-21-06.jpg (98.6 KiB) Viewed 488 times

fatdog1
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Postby fatdog1 » Mon May 22, 2006 8:10 am

Good Morning,

Late start today. My oldest daughter went into the hospital to give birth to
grandbaby number 2 yesterday afternoon and grandma and I are watching number one. She is a handfull. :D

The USDJPY breakout and pullback trades are mute since the Yen sold off
yesterday. The breakout price of .9004 was never triggered so no loss.

However, the area of demand at 1.8650 on the GBPUSD and 1.8660 on @BP was hit this morning resulting in a bounce up to 1.8700 on GBP and 1.8708 on @BP.
I posted the screen shot showing this area of demand on Friday morning in case the selloff on Friday went past the area of demand at 1.8714.

This is very important!!

The area between 1.8700 and 1.8730 in GBP and 1.8711 to 1.8744 is now fresh supply and will at least slow down the bounce, if not stop it.

Once a downstair forms and absorbs a upstair, it becomes fresh supply or resistance.

Same thing with a upstair forming and absorbing a downstair and becoming fresh demand or support.

If you caught the bounce, move your stop up to catch at least 25-30 pips of this move in case the downtrend resumes.

I slept through it!

Grandpa FatDog1 :lol:

PS I am updating the charts with bigger text this morning.
Grandpa needs glasses.
Attachments
@BP 60 MINUTE CHART 5-21-06.jpg
@BP 60 MINUTE CHART 5-21-06.jpg (106.25 KiB) Viewed 473 times
GBPUSD 60 MINUTE CHART 5-22-06.jpg
GBPUSD 60 MINUTE CHART 5-22-06.jpg (110.92 KiB) Viewed 472 times

fatdog1
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Postby fatdog1 » Mon May 22, 2006 8:59 am

Here are the actual 60 minute workspaces for GPB and @BP with larger text horizontal lines on them from 1.95 all the way down to 1.60.
No matter which way the Pound goes, you will see the areas of supply and demand that will effect the Pound as it moves.

You can replace the other ones I posted last week with these.
Last edited by fatdog1 on Thu Jun 22, 2006 12:38 pm, edited 1 time in total.

fatdog1
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Postby fatdog1 » Mon May 22, 2006 9:31 am

When you get down to a 15 minute time frame for @BP,
you can see the supply demand battle as a downstair is trying to form above a upstair at 1.8731.
If the sellers win the battle then the @BP will move lower.
I would move my stop loss to 1.8718 in case the sellers win.
Attachments
@BP 15 MIN STAIR PATTERNS.jpg
@BP 15 MIN STAIR PATTERNS.jpg (91.65 KiB) Viewed 469 times

fatdog1
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Postby fatdog1 » Mon May 22, 2006 11:10 am

Here is how I use the DarvasBox strategy as it is now.

The Nasdaq formed a upstair pattern inside of the Darvas Box this morning.

Now I can buy the breakout of the Darvas Box and have a
place to put my stop loss which is below the bottom of the new upstair instead of the low of the Darvas Box which is 8 points lower.

That is a better risk-reward ratio on this trade.
Also notice how a new upstair is forming across from the first downstair.

The next area of resistance is at 1608 from here.
Attachments
@BP 15 MIN STAIR PATTERNS 3.jpg
@BP 15 MIN STAIR PATTERNS 3.jpg (93.13 KiB) Viewed 466 times
Last edited by fatdog1 on Mon May 22, 2006 11:20 am, edited 1 time in total.

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