2-minute Warning 2018

Knowing myself I probably have used “2-minute Warning” as a title at least once already.

Martin Lee Gore subconsciously has been writing Forex trading theories disguised as songs; at least as far as Little 15 or the 2-minute Warning goes.

Mike Maroon is a pair of 135 EMAs (highs & lows).

EUR871

 

_LEMA_30

Displaying it can help you understanding the gear the market is in.

If it does go back to Mr. Maroon, then it is in second gear; and if it does not even reach to the 3-minute LEMA, then you have a 2-minute Warning: selling in 3rd gear.

As far as 3rd gear goes, it is commonly known that it is darkest before the dawn.

I call this the Darkest Hour.  DH. Not DM.

EUR872

_divergencepetr_s6

It only shows up on 15 minute. It would be beaten briefly. Likely.

USDCAD019

…and it goes a little something like this:

for (j=0; j<=1000; j++){

if ( RSI2[j]<5 && RSI8[j]<15 && stoch[j]<15 ) {
summup=0;
for (i = j; i < 1000; i++) summup += ufcount[i];

if (summup>2) {

ObjectCreate(“txt 6″+j, OBJ_TEXT, 1, Time[j], 40);
ObjectSetText(“txt 6″+j, “DH”, 32, “Arial Black”, White);}}

if ( RSI2[j]>92 && RSI8[j]>92 && stoch[j]>88 ) {
summdn=0;
for (i = j; i < 1000; i++) summdn += dfcount[i];

if (summdn>2) {

ObjectCreate(“txt 6″+j, OBJ_TEXT, 1, Time[j], 80);
ObjectSetText(“txt 6″+j, “DH”, 32, “Arial Black”, White);}}

}}

I know, I could have used while loops to save some run time, but currently I don’t feel hard pressed.

One Variable Less

 

To simplify things, you need to consider what can be eliminated without having much significant effect on the end result.

Since 30 min is needed for measuring the strength of individual moves, yet the 1H is best for the Green River and the 2H LEMA, there is a possibility of making a Hybrid “30” minute chart.

The first thing to do is to eliminate the 30 Minute LEMA itself.

_LEMA_30

Lema 30 is strictly for a 30 minute chart.

The price location VS the LEMA channels can determine among three kinds of markets.

1. Above the 3 LEMA channels. Trending market. Buy dip – either an ABC or 3 pushes lower based on the strength of the qualifying push down.

2. Tangled: price is between two LEMAs. Here reversals are abound, things are range bound and it is hard to see clearly.

3. Below the 3 LEMA channels. Trending market. Sell rip – either an ABC or 3 pushes higher based on the strength of the qualifying push up.

For obvious reasons you should be looking for a pair in trending mode.

The white streaks are the Daily LEMA. Helps with getting a further idea of price location on the big picture. To anticipate a reversal, price has to get on the other side of the Green River (which is the 15-min LEMA here).

I have left the maggots in, if you don’t want them displayed, simply set the blacks and the yellows to clrNONE.

EUR861

GBPUSD on the same gauge:

GBPUSD067

This would mean that GBP is somewhat stronger than EUR, yes.

USDCHF is also trending, but in the opposite direction.

USDCHF14

This means that CHF is weaker (white lines) than the EUR and the GBP.

GBPCHF is tangled, it is not clear if the GREEN river or the 2H LEMA is gonna get touched first. A reaction from either of these would be likely though.

GBPCHF119

USDCAD is making weak bounces off the Green River.

USDCAD017

It is trending higher, but not with much conviction, and too many touches means that eventually it would crack below it.

I shall let you do the analysis on AUD/USD.

AUDUSD01

The current divergence interpreter that I use can be downloaded from the previous post. It is calibrated mainly for the EUR/USD, but may work well on other USD pairs too.

Again, you can set the things you don’t want displayed to No Color.

Below there are some examples for timing your entry based on the qualifying move’s strength.

When there is a halfway spike for the first move (green horizontal arrows), you can sell the second move up, or the C in the deeply overbought field – and aim for a lower low (green vertical arrows).

EUR862

When the qualifying move goes too strong, you end up with two more waves following it up, so your sell would be a Wave 5, and your aim cannot be a lower low either.

There are other nuances, such as the qualifying push cannot come from too high (merely oversold or worse.

Below some exceptions:

EUR863

The one I marked as not qualified resulted in 3 pushes up, that went nowhere, so it is close to a regular red marker.

The one with the white mark is merely a reaction, not qualified either. It is a double pump (that results in an “h”) and cannot be broken for a while unless a short covering, quick run follows (which by the way would result in a new, lower low).

The current, red push up is just a little stronger than it should be for an ABC, and there was a moment (30 min) of hesitation before the thrust, either way, the bulls’ three little wishes are either already over with or would be very soon.

Homework: should you be expecting a lower low?

h danger & Buy 4 3 Waves

EUR864

 

Little 30

Now all that she wants
Is three little wishes

…She wants a nice surprise
Every once in a while

These are general ideas. Not for every instrument, not for every time.

I have never seen someone with an RSI2 HL2 and a Stochastic 10 put together as an indicator. This is my invention. I find it perfect for finding strength, weakness and! figuring out which wave you are in.

I call overbought above 77, deeply overbought above 85, oversold below 23, deeply oversold below 15 and extra deep oversold below 5.

Understanding #1

You do not need to cover your short or take a long until a sign of strength. An RSI2 peak (I call it local overbought) that is just right, to start the first move up. It should not fall short of overbought or beyond deeply overbought. In this case, the line’s thickness make it look like it went further than it actually did. The reading was 84.8769 – trust me.

EU08

Understanding #2

When a sign of strength was made, the bulls get three little wishes.

Making money is as easy A -> short C.

EU09

EU10

EU11

“A” comes from below 23 lands between 44 and 56, it prints a peak, and 4-5 bars later you should see something deeply overbought… your sell – for a lower low at a very minimum. Cover in the deeply oversold section.

How does this work with other instruments? Don’t know.

_divergencepetr_s6

(I forgot to mention that you should put this indicator as the first one below the chart to have the letters plotted.)

Practice chart: find the sign of strength and the three tie-offs of the bull run.

EUR854

I was watching when this – not so nice – surprise developed. I knew that it was a bonafide bull run, and that we were in wave 3, I knew that upto 15 pips penetration into wave 1 was a buy, and then I saw no buying whatsoever for the 3rd wish of the bulls. Those E-s mean Entry points. I did the calculation in head before the break of the lower fractal even happened. I came up with 1.1954 or so at a glance.

The surprise accordingly is a head and shoulders in a bull/bear section.

 

EUR855

Read It Like I Would

Analysis, my way.

Think of potential = distance to go uninterrupted.

1. comfort levels – location & the road traveled

EU00

The reason you would be looking for a lower high is the fact, that price first traveled from the top of the upper reversal zone (shading) to the overbought neckline (thick black), and then you had a long retracement into the deeply overbought line (thick coral).

2a. the conditions to be right

EU01

The distance traveled back up to the deeply overbought line is in excess of a normal, single discharge of the 4H energy, which is about 165 pips. That’s a strike. RSI 8 above 85, that’s red hot, ideal to sell into. As time progresses, a root point gets justified by a higher high with a lower strength divergence.

2b. support-resistance readings highlighted by Skid Rock

EU02

In order to take a trade, the probability of the next move is only half of the story. You need to have little to no obstacles to ensure uninterrupted progression & length.

3. consolidations

Travel fuel can be ensured by sufficient consolidation. The following image shows where the 4H price movement has reached high levels of consolidation (>51 on a 14-sample CI).

EU03

I put the same black line up to remind you of the 160+ pips that started with a high energy, consolidated state, and was forced to make another consolidation after it got thoroughly exhausted by the distance / steepness.

Your best entry is upon leaving the consolidation zone. For a full reversal, you should have the divergence made first (Root point). You could had taken a short anywhere after price went below the root point, but to define your risk, and to keep it low, the perfect entry would had been a short stop at 1.2349 with a stop at 1.2369. 1.2349 is a little over 20 pips away from the middle of the consolidation – and you should not be expecting a fall back after the strength was proven by reaching this distance from it.

As for the potential, you should see the first move reaching 1.5x daily ATR, which is around 100 pips (add an extra 15 pips for extra surprise), given the 3-days average of EUR/USD movement.

EU04

The lime lines are the milestones. A reaction is likely, so it is a good idea to cover around them, and then either go with the same direction if price surpasses the swing-point by 12-15 pips.

There were a number of good entry points, i.e.

the pull back towards the swing low – with low risk, 20 pips again,

and when the consolidation was printed, the upper border and the presence of the overbought neckline was sufficient for another low risk entry.

The opportunistic long – upon having traveled 2 milestones in one direction, was the beat of the low set primarily by the mile stone. Symmerty is something you should be thinking aboutof and looking for; the fist move got the sell started, the second ended it.

You are currently above the root point, a reversal had taken place. Wait for another consolidation to form to take a new position – or re-utilize a previous one.

This certainly looks like a re-utilized consolidation high:

EUR843

I should mention that it improves your odds to trade in a direction if you are far away from the LEMA quad (colorful lines above).

 

The current move up would qualify for a Wave 1 up (as soon as Fractal is printed). A pullback would be a buy (a drop to 1.2095 perhaps or to the 1H root point at 1.2080, for sure). I would expect a reaction coming from around the 1.2156-1.1269 area (1H oversold neckline / half way mark between the roots and is the lower end of the previous consolidation and a 161.8 extension). You could play this counter move down for 50-55 pips, for the current Wave 1 (or Wave A) likely would be utilized for a buy when penetrated. The continuation move down I would expect to come from the green river that would have dropped to/below 1.22 by the time of the rendezvous.

EUR845


//the logic for the consolidation, the outer limits & the label placement

// line 1 is the weight of the last consolidation

//line6 is the high of the last consolidation (weight + 18 pips)

//line7 is the low of the last consolidation (weight – 18 pips)

for (i=300; i>=0; i–){
line1[i]=line1[i+1];
if (ChoppinessIndex(14,i+1)<51 && ChoppinessIndex(14,i)>51) line1[i]= (iHigh(NULL,0,i)+iLow(NULL,0,i))/2;
if (Close[i]<line1[i]) line6[i]=line1[i]+.0018;
if (Close[i]>line1[i]) line7[i]=line1[i]-.0018;
if (line6[i]==EMPTY_VALUE && i<200) line6[i]=line6[i+1];
if (line7[i]==EMPTY_VALUE && i<200) line7[i]=line7[i+1];
}

 

deletetxt1(“txr 11”);
deletetxt1(“txr 12”);
deletetxt1(“txr 13”);
deletetxt1(“txr 14”);

for (k=0; k<=50; k++){

if (line7[k+3] != line7[k+4]){
ObjectCreate(“txr 11″+line7[k], OBJ_TEXT, 0, Time[k], line7[k]+.0005);
ObjectSetText(“txr 11″+line7[k], “Low:”+NormalizeDouble(line7[k],4), 16, “Arial Black”, White);

ObjectCreate(“txr 12″+line7[k]+”S”, OBJ_TEXT, 0, Time[k], line7[k]+.0022);
ObjectSetText(“txr 12″+line7[k]+”S”, “STP:”+NormalizeDouble(line7[k]+.002,4), 16, “Arial Black”, Black);}

if (line6[k+1] != line6[k+2]){
ObjectCreate(“txr 13″+line6[k], OBJ_TEXT, 0, Time[k], line6[k]+.0016);
ObjectSetText(“txr 13″+line6[k], “High:”+NormalizeDouble(line6[k]+.001,4), 16, “Arial Black”, White);

ObjectCreate(“txr 14″+line6[k]+”S”, OBJ_TEXT, 0, Time[k], line6[k]-.0002);
ObjectSetText(“txr 14″+line6[k]+”S”, “STP:”+NormalizeDouble(line6[k]-.001,4), 16, “Arial Black”, Black);}

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Executor.exe

A smart man knows when to be dumb.

High flying ego will get you squat. No more Mr. Trader.

You need to write a program for your self. You would be running the program as a platform. No more surplus overthinking.

I have written mine.

 

I am taking directional trades upon exiting consolidation or exceeding the 1.5xDATR+15 pips limit from the last 4h consolidation, preferably away from the 1H LEMA quad.

I may take a reversal trade upon a turn around the 1.5xDATR+15 pips limit, if there are other obstacles present, such as 5% marks or roots.

I may take a reversal upon a re-test of the consolidation range limit if there are other obstacles present, such as 4h overbought/oversold neckline.

I must be conscious about the 4h comfort levels, the state of embedding and the root points.

I exit upon price hitting the 1.5xDATR+15 pips limit –
and may re-enter in the direction upon exceeding the swing materianized by the limit + 10 pips.

 

Long Program
Long entry: 20 pips above 4H consolidation
Add to long: 30 min local deeply OS
Stop loss: middle of consolidation (-20 pips)
Long exit: in consolidation, in gains, 30 min local deeply OB

 

Short Program
Short entry: 20 pips below 4H consolidation
Add to short: 30 min local deeply OB
Stop loss: middle of consolidation (+20 pips)
short exit: in consolidation, in gains, 30 min local deeply OS

 

Cover line is 1.5xDATR+15 pips from open

 

Both Programs:
Consider lightening after the 2nd break of 4H 22-bracket

 

Stage 2 buy / sell – after the 2nd break of 4H 22-bracket

Long Program 2
Long entry: 1H local deeply OS, 1/2 size
Stop loss: -40 pips
Long exit: new higher high

 

Short Program 2
Short entry: 1H local deeply OB, 1/2 size
Stop loss: +40 pips
Short exit: new lower low

There is one more thing: do not sell embedded overbought / do not buy embedded oversold.

 

Air Lift #1

This piece was originally posted on the Current read page.

I am giving people indicators, but they can only learn the practical usage and the thinking from this blog. This is an all time lesson as such.


 

A wave 1 comes from beyond a root point.

See how the wind (MACD) remained down all the way during the move back up.

The 3 thick horizontal lines are the two root lines + the halfway mark between them.

The bounce back into the end of Wave 1 (Wave 4) coincided with the pro volume candle’s low (green line)

EUR819

After plotting the qualifying moves (thick red & green) – since the last move is a red down (happens to be the Wave 3), it is clear that you are looking at a retracement only in the up move, that would be the starting point of a wave 5 down – which could either stall out at the 55 pips black dash and storno the whole move or take it down much closer to 1.23097 – which would likely yield a consolidation at some point effectively moving the consolidation weight lower.

EUR820

If I also plot the 88 lines, you would see a double pump at the end, that would increase the chance that Wave 5 would be a short one: if they decide to buy the inner brown, at 1.2336 and put a stop beyond the lower brown, the move would be cut short.

EUR821

Also take note of the white spinning top. As soon as its bottom is crossed back up from below, the bear time would be over with.

EUR822

In terms of deflectors, price is currently tucked below the green river monster (15-min LEMA), and is having a second go at the 30-min LEMA and the 1H LEMA is right here as well. On regular days, the price tends to play ping pong between the green river and the 2H LEMA – starting at 1.22763.

We seem to be witnessing a letter “h”, a formation that price cannot get out of lower for a while. (It came back down for a re-test after a significant bounce (>23%) too quickly.)

Check how the Root point has just migrated higher.

EUR823

….

End of the air lifted part.

The outcome was a drop to the 2H LEMA (in magenta) and there was an extension made (to the end of its cloud – not displayed here, but a 1.272 extension),¬† 1.2260 by the way was last week’s low, and it got superseded to exchange positions through the revolving door. The sell off starter from the Green River, and the new wave kicked in upon beating the fractal on the left (revolving door again).

EUR826

Current move up to the root does not qualify for a Wave 1. You are still below the root point, and the back test of the bottom is highly likely.

By the way, the bounce happened off the 4H lower root. (Bottom left “R”). (You can also find the last flame signal on my Stochastic/RSI2 oscillator.)

EUR828

In the current setup, the three components are the following (more in the Principles article): the wind is negative, the position is above/at the 2H LEMA, which is neutral  and price is below the Root point which is also negative.

EUR827

The above image displays the cloud around the LEMA. Since this was a flush move, the next, lower low would come with a divergence and would be a buy. The projected distance lines put this value at around 1.2219, which as you can see would be in the oversold section of the comfort levels.