Eur/Usd Analysis 23/6/19

The context: institutions bought at 90% discount – refer to my article about “If You Were an Institution”.

This happened after a show of strength: first price left the long term over oversold black marker.

What target they have in mind is anyone’s guess, but the usual, stand out suspects are the 50% line and the 80%+ area.

The last measuring low was 1.1281 – until that gets violated, the uptrend remains (a divergent violation should be discounted). On Friday they goosed up the price to the Purple Haze line which is a 3x stretch from the mean. A correction is very likely here: they would have to give a discount to get enough bears interested.†††

Given the steep incline of Mr. Maroon, as my first thought, I would not expect the correction to get to 1.13. The neutral zone around the upper guard rail is currently at 1.1313 and rising.

About the upcoming correction: it would go oversold twice = there would be 2 measuring legs down, and the second one would ultimately adjust the channel low.

The deepest correction currently possible would fake out the 2nd 4H doji.

1.1288-1.1285 would certainly do the trick.

This would coincide with the spark zone between Mr. Maroon and the Green River by the time price gets there.

The prospect is a start of a daily wave 3 to the upside. Scary, huh?

Behold the Energy Bands (the moat)

Don’t forget to mention about them in my Wikipedia article please.

Power Trading #2

Let’s talk about numbers first.

To participate in power trading, you would need high leverage.

1:500 would do.

Scaling in can help you witha good average price.

I would normally not trust more than 7.5 lots on an auto-trading routine (given a 5k account), but under exceptional circumstances, like for the sake of this maximum achievement – power play competition, I may open 11 lots and on rare occasions a little more.

With the above mentioned account leverage, after maxing out the account, you should be able to double the balance on a 40-pip move (on a 1:1000 account you would need even less travel). This would normally mean a wave 3, for your target exceeds the Fluctuation Maximum.

I do realize that at some point someone would set the record below 30 minutes; when the stars align right, this becomes possible.

Here is a 31-pip travel in 5 hours generating 81% returns from yesterday.

What you would need for this sport first and foremost is the ability of interpreting what the market is doing currently with high accuracy.

The rest of this post would be the article I started typing under the title

†††

To catch a mocking turn

In order not to bleed out on a turning progress and not to be hedged in the worst possible place, you need to be conscious of what and how can happen to have a trading blue print at hand.

1st step is learn where and under what circumpstances the market is prone to turn around.

Have a checklist and know it by heart.

Since wave 5 isn’t over till it’s over, it is possible to see multiple red tails showing up and additional higher highs / lower lows until the music is on.

The right thinking?

Know your total maximum size, and how many chunks you are willing to cut it up to.

Know the instrument’s fluctuation maximum. Placace a protective hedge stop order Fluctuation Maximum + a little away from the end of the last red tail.

EUR/USD: 38+4 = 42 pips out.

Divide the Fluctuation Maximum by your maximum position number to arrive at the pacing you would have to maintain between the opens.

38 / 6 = 6 pips distance 

Your maximum size divided by the maximum position number = individual opening size.

5k account, 1:500 leverage,  max overdirve 14 lots – open 2.25 lot sizes. 

Open the first position 1 pip beyond the red tail, and put out the rest of the stack with your spacing size in between.

Ripe conditions for a price reversal

1. Sufficient stretch from the Mean

2. 4H is strong trending / exhaustion

3. Red tail event

4. 26-sample new low / 46-sample new high

Squaring: 

It could come in handy to plot exhaustion levels: closing out your positions in gains may turn out to be fruitful in obtaining a weight further out (and yield some extra cash). The squaring levels are the exhaustion highs / lows and the ends of the red tails. (Red horizontal lines on the image).

Footnotes:

There is no wave 1 until the price manages to cross to the other side of Mr. Maroon. Therefore after wave 5 of wave 5, you either get mere structureless
fluctuation or an ABC correction that would ultimately fall short of Mr. Maroon’s dark side.

An example for an ABC correction that went as far as it was possible: just shy of Mr. Maroon’s dark side (wave 4 of wave 5)

A wave B ends in an RSI2 divergence. On the image below the purple thin line shows the measuring leg that is connected to the divergent leg by the yellow line.

…and a couple more of those divergences = rising wedge; let’s not forget about this possibility

So what is happening in these B waves that makes them go on seemingly forever? More than anything this has to do with the price location: in Bull Zone 1 the bull is trading with the other bull, half of them are covering upon realizing that they won’t get paid here, the other half is going long even more. This is not the place to forge a rally from.

Other than getting the exit value perfect on the mentioned 80% run I sucked balls all along.

I happen to be my own worst student, and so I do need to read things out loud for myself. This blog is a selfish thing as such.

Now I need to figure an unrecognized server name issue on my phone.

Picture: Wave B wedge breaking in the wrong direction first (hitting a liquidity void)

In addition to the above:

Looks like the break was merely a wave 4, not an A. There is always a possibility that you are looking at a wave 4 when the market pulls back to the Water Line.

When price has exceeded the upper guard rail, and is in the Bull Zone 1, there is a new game called Catch 22 that can goose the price to the next mile stone, the Purple Haze.

Every time the price dips 22 pips from the most recent high, there is an opportunity to make or break the market. Habet or non habet.

It is a relatively low cost way to inflicting additional pain, kind of like throwing a log on the embers.

Power Trading

Achilles saw that what he was doing was good and so the Power Trading was born…

The game is simple: try to make 100% gains in the fewest number of trading hours possible.

Here is a qualifier run:

First trade placed: 14/6/19 at 20:13 server time

Last trade closed: 18/6/19 at 20:04 server time

That comes to less than 48 hours since on Saturday and Sunday there was no trading.

(The first four trades placed)

Yes, I closed the last trade at a loss for the 100% target was reached.

Do you still believe in compounding? Not in Forex, I don’t.

Why? Because every dog would have its day.

By taking out the gains, you are not capping the upside, but rather, you are limiting your possible losses.

If you have a last line of defense which is a ratio hedge at about 40% equity to balance, then you may impose a rule for yourself to be calling the run a defeat and if you would liquidate all positions including the hedge, what you would end up with would be something like 50-70% of the starting capital, for most likely you would had amassed some extra balance by that time, so the actual draw down is not likely going to be 60%.

At this moment, you may proceed to start with a clean slate by topping up your margin.

Remember, the greatest asset in trading is time.

Instead of fighting a losing fight, admit defeat and start all over.

So, how long would it take for you to double the money on the account?

48 hours? 24?

We are on!

Hedging – Corazón Sensitivo

Grim and graphic content – PG 13.

Read this article only if you are truly interested in hedging.
It is not for the fainthearted.

Being a hedger is the financial equivalent of the heart surgeon.

If your trading relies on hedging, auto trading is your life support.

If your life support line is broken, your patient can die – this is the grim reality.

The account flat lining when the auto trading (auto hedging is off)

The life line can be broken by the stupid surgeon forgetting to attach the lifeline (not turning on auto trading), a power outage, a communications outage and the latter problem can happen at the end of the broker’s server – so much of the control is out of your hand.

A stop loss is a half answer for a non-local power outage (may or may not work), it gives no answer if the brokers server has issues, and in general is volunteering for losses, especially during low liquidity such as Sunday opens, news event turns, overnight trading and around re-balancing at the daily close. It is fair to say that stop losses can cause you unwanted losses, therefore aren’t suggested for use.

This calls for an alternative protection system, that is of hedging – this is a lot easier said then done.

The first step upon realizing how out of your control the whole environment is, that you would impose a cap on your losses by choosing the account size right: your total risk should not exceed what you can afford to lose => account size should not exceed 1% of your total wealth.

Hedging is a full time profession

I currently engage in two types of hedges: ratio hedge and RSI2 divergence box break hedge (a kind of a break out hedge).

The ratio hedges are provided by two different routines, one applies half/full hedges if the balance/equity ratio drops below 70% and 60% whilst the other applies full hedges at 50% and 40%.
The reason I do not try to hedge any more at 80% is that I’m using high leverage and excessive sizing – I believe in miracles, words and heavy doses.

I could not possibly produce gains like 182% in 6 trading days, if my sizing wasn’t a little on the aggressive side. Time spent in the market comes with the uncertainty factor that the human element starts overriding things based on emotions or illogical thinking prompted by bad interpretation of something that has not been encountered or is much too uncertain. You must pull out gains and do so frequently. Above 100% for sure in case of a 1:500 account, and at 40% on a 1:100.

The 70% and the 60% hedges as I mentioned, can at times be half sized, if their opening should happen against the tracked direction discussed in the previous articles.

The RSI2 divergence hedges have a 9-pip displacement beyond the far side of the last available un-stabbed divergence box found within a certain sample size.
When there isn’t such box within the limit, I put out a pending order at 1000 or 0 to have the required size for hedging calculated and displayed in the pending order list (especially helpful when you only have a cell phone to access the market with).

Complications

The number one problem with hedging is human error.

The human may close the hedge at the wrong time or may leave the life support turned off entirely.

The human is negligent, disrespectful and has bad habits.

To train the human to become a hedging-surgeon, thorough education is needed.

The human has to

– start respecting the patient’s life which is the funds on the account
– be able to distinguish among the different kind of hedges
– be trained for surgery situations such as amputations or other interference

An amputation is when a hedge was clicked on, it is in the right direction and an effort is needed to get rid of some of the excess fat – the toxic holdings. Upon any of these holdings come into money or show minimal loss, it is highly advisable to make the cut. This would help with weighting more heavily in the direction of progression.

Here comes the surgical precision part. The Hedger must be conscious that by opening up the balance, the auto hedging may immediately open the now missing portion back.

Although the corner stone of hedged trading is that the life support, the auto trading does not get turned off, for this kind of surgery, the button may have to be turned off before the amputation or imposing the chemical imbalance:
The same condition that opened the hedge the first place might still be on and if you do not first adjust the trigger (i.e. the ratio) you would end up with unwanted excess risk.

An animated heart may sound graphic and excessive, yet it may be necessary to be put on the screen when the patient is being cared for or all hedging systems go.
These labels may not be attention-grabbing enough.
I have discussed about the Red Tail in the previous blog entries.


You must always think of the system as a whole and think ahead of what the consequences might be.

Always be conscious of the Balance/Equity ratio.

One basic principal of hedging that it should not add to an existing problem.

For instance, if you have adjusted down the hedging rate and this overlaps another hedging routine’s range, two different routines may end up coming to the same conclusion of having to hedge and you would end up first with a double sized hedge, which would suddenly be counter balanced in the opposite direction (given that the magic number is not in use), and the doubled size in both direction would be merely a best case scenario. By using the same magic numbers for routines acting alike you can minimize the risk of a doubling down, but at the same time may leave your flank open by disabling a routine from opening.


Preventive hedging

Preventive hedging is a sensitive topic within this sensitive subject. I do not currently use it, for it may cause more harm then the benefit it comes with.
Only if you are certain that your directional logic is correct should you consider engaging in preventive hedging, and at extremes / precise triggers (such as sharpie or an RSI cross down).

These sharpies along with the coloring logic could had been preventive hedge opening triggers.

A relative of preventive hedging would be preventive opening, which is based on the same ideas, but would open a precalculated size position if there is nothing or less than the precalculated size is currently open in the opposite direction. This of course makes a leap into the offensive zone from the defensive one.

Overall I would suggest half size for this type of an open.



In conclusion, the ratio hedge would always have to cut manually, so it should never have a target or a stop loss.

The cardiograph of the Hedged Patient is the CI.

A hedge can be closed off manually when the following conditions are met:
– The 4H 7-sample CI is below 36
– A Red Tail was printed
– The current high is a 46-sample high / the current low is a 26-sample low (30 min candles)

The hedge would be closed with 1 micro lot being left behind normally to prevent from a re-open. The micro lot can be taken away later, when the hedging condition isn’t present any more (at a loss).

A break-out hedge can have a smart trail stop applied to it. A break-out hedge is o.k. to be closed out manually, if the conclusion is that the break was a fake-out.

Directional logic – in colors.

Appendix A:

How to adjust the ratio hedger via cell phone:

  1. Set up Google remote desktop (for free)
  2. Log in to your desktop
  3. Go on the chart window with the EA pegged to it
  4. For right mouse click use two fingers
  5. Choose Expert Advisors / Properties
  6. Choose inputs, edit the value next to Ratio

Appendix B:

Relevant music

Appendix C:

182% gains.

The Best Trade Set-up

The best trade set-up starts when wave 5 of the wave 5 ends.

Without going into details, there is nothing beyond a Wave 5, this wave simply lasts as long as it does.

The Swan Sings in the Bull Zone 1 or a Bear Zone 1.

T1 would be 8-pips shy of the Green River’s closer end and
T2 would be 2-pips shy of the Green River’s further end.

Your entry:
1. The right configuration – E-16 closer than Mr. Maroon, separated.
2. Red tail made: price making a 3-4 candle run away whilst being separated from the Water line (E-16) for the last 9 candles.
3. Price makes a 46 sample high on the upside or a 26 sample low on the downside.

Load up & enjoy the run!

As for automated trading, when you need multiple puzzle pieces fall into place for a trigger combination, here’s how you can do it:

Store the Red Tail Switch in an integer array (I named it pkdir) – initialize it with zeros, and if you have a red tail to the upside, change the value to -1… and of course keep on copying the last one.

Now, once you have the pkdir in negative mode, you would be looking for a 46-sample highest high to make the switch in the other array, which I called pkcol (same, integer kind with -1 or +1 or 0) sometimes these two would coincide, other times they won’t.

For additional sophistication later you may decide to make a switch back up the color-direction to keep the opening on the right side.

if (ChoppinessIndex(7,i)<38 && ChoppinessIndex(7,i+1)>38 && pkcol[i]==-1 && Close[i]>iMA(symbol,30,39,0,MODE_EMA,PRICE_HIGH,i) && iMA(symbol,0,32,0,MODE_EMA,0,i)>iMA(NULL,0,135,0,MODE_EMA, PRICE_HIGH,i) ) pkcol[i]=1;

This image shows a switch back up, so that the EA does not try to short at the wrong place.

The image below features multiple directional logic, that are basis of my auto trading routines.

By the way, if your thinking is in the right place, then having the direction wrong temporarily may not result in losses:

If you are trying to open at extremes, there should be large enough rebound from your level, that would the trail stop would be able to apply the preventive 1-pip stop loss:

The EA took small profits on the misfires, thanks to the broker having low enough commission (and virtually no spread) and to the well thought-out smart trail stop routine.

The program did not try to open for the 3rd time, for the opening condition subsided by then. You can however shorten the opening window even further for example by comparing the 15-minute open and the 30-minute one.

I’m Taking Notes

Wave notes

wave structure to the up side from from the top of Bear Zone 1 + 9 pips

Wave 1 up – goes from consolidated state to exhaustion <34
ends with RSI2 settling below 97

Wave 2 down – it recharges the energy by taking price accross Mr. Maroon
starts afer energy crossing back above 38
ends with extra high level of consolidation and
RSI2 below 7

Wave 3 up – it starts as soon as wave 2 ends (RSI2 < 7)
and ends with a short exhaustion 41-45
RSI2 drops below 97

Wave 4 down – it quickly recharges energy and gives volatility a boost
it may start from E-16
it may take out the low of wave 2
it takes RSI2 back below 15

Wave 5 up – starts as soon as wave 4 ends
it ends in exhaustion
it ends in RSI2 crossing back below 96
it ends in a 3 or 4 piece ending tail

folling this: fluctuation may happen

wave structure to the upside from the Green River

Wave 1 up – if it starts from high level of consolidation
it ends in an RSI2 divergence:
measuring leg first!
2nd leg has RSI2 drop below 96
it may exceed its first thrust box up

Wave 2 down – it may take out the starting point of wave 1
it takes price back accross the Green River to the spark zone
energy stays outside the bands = volatility boost
RSI2 would tank to 0
ABC look possible
it may miss its thrust box down

Wave 3 up – it starts from around the Green River with high level of consolidation
the head start comes from energy crossing back into its bands first
RSI2 may not drop below 35, 50
it goes deep into Bull Zone 1
it end in RSI 2 divergence that has a higher high
measuring leg(s)!
possibly in a shape of an extension 10-16 pips higher
it ends between 46-41 short exhaustion

Wave 4 down – it takes price back down to the border of Bull Zone 1 (+10 pips) Remember: their weakness is your strength

it should fall short of Mr. Maroon
it may show a H&S divergence energy gets on the high side
it may have an ABC look to it
RSI2 < 7 is a buy

Wave 5 up – starts where W4 ends in the RSI2 divergence, close to Bull Zone 1 + 9 pips
it ain’t over till it’s over: ever increasing RSI2 divergence
thrust boxes can get exceeded
final thrust unable to settle RSI2> 93
Wave 5 of Wave 5 would come from below the oversold line and below E-16
energy bands narrow in

ABC correction down from Bull Zone 1 – the Shape

Wave A downs – starts with the final thrust of Wave 5 up
A ends with the 2nd return within the bands
possibly at the other side of Mr. Maroon

Wave B up – the shape has a prolonged flat move up that stays below the thrust box
it ends in an RSI2 divergence – measuring leg first

Wave C down – the thrust happens in the wrong direction as a no break extension
It may exceed a thrust box a bit
other side of Green River for maximum surprise

wave structure to the upside from the Green River variant

Wave 1 up – if it starts with high level of exhaustion
it would have to hurry to make the high:
sound barrier may mean the cap over the initial thrust (+36 pips)
the wave would end in an RSI2 divergence
but the second high may be lower than the first
RSI2 would drop below 93

Wave 2 down variant – it may stay in the overbought (embedded)
it would likely miss its thrust box
it takes back price to the other side of Mr. Maroon close to the Spark Zone
after RSI2 divergence – measuring leg(s)!
the trigger to wave 3 is CI crossing below 53

Wave 3 up variant – it starts from around Mr. Maroon with RSI2<15
it has bottom left dojis for features
it may muster a thrust beyond the Purple Haze
RSI2 divergence – measuring leg!
no break extension for divergent leg 16-20 pips excess
thrust box may be violated a bit

Wave 4 down variant – trickle down wave 4

it takes price back down to the border of Bull Zone 1 (+10 pips) Remember: their weakness is your strength

it should fall short of Mr. Maroon

disregard divergences until below E-16 and strength shows up:

shot over bow = RSI2 print above 80 – the next divergence shall live

Wave 5 up – starts where W4 ends in the RSI2 divergence, close to Bull Zone 1 + 9 pips
it ain’t over till it’s over: ever increasing RSI2 divergence
thrust boxes can get exceeded
final thrust unable to settle RSI2> 93
Wave 5 of Wave 5 would come from below the oversold line and below E-16
energy bands narrow in

ABC correction in Bull Zone 1

The correction takes price down to a major, obvious support such as the Green River.

The correction goes oversold twice (stoch)

If an A ends in a deep exhaustion, look for the pair of it to call the correction over with (plus a no break undercut).

A leg down to the other side of Mr. Maroon setting up the measuring leg

B leg is a big fat churning in a fluctuation’s bandwidth (can be as muted as 20 pips or less)

If nothing seems to be doing anything much, chances are you are in a B wave

C leg down washes out the money that was injected in at the beginning of the move – and could inflict maximum pain as well

However, the last move is still only a no-break extension, merely from a lower high printed on the back test of the previous PKTE box (failure)

After a Wave 5 of a Wave 5, price makes its way back to the Green River