Technical Templates

[Sarah Foster]

I may need to go over the basics again. I took an example from VisualXray from some time back on the EurUsd action in October:
Could you give me some insight here? Am I over complicating things and/or missing something obvious?

I'm not sure in what context visualxray posted that example, but it looks as though it was showing how to determine an intraday (contra-bias) long set up whilst price is trading with a dominant short bias.
If so, then that is what is probably confusing you.
Unless you are very experienced & extremely nimble that tactic is not recommended at all.
Be very careful indeed attempting to place intraday bets against a potential higher timeframe bias flip.

I understand you prefer to trade intraday, closing out your bets at end-of-day?
If so & you're using the 4 hour chart to help determine an intraday bias, then keep it very simple by just tracking the swing highs & lows on that timeframe.

I'll pull up my previous chart of the Cable from earlier today & try to explain how I (& a few of the others on here) view it.
It's clear from the past couple weeks activity on the 4 hour chart that Cable was cycling down, printing lower lows through each session.
The failure to print a lower low (shaded @ 6080) on the 28th was your fist sign of a potential flip in the bias if you're betting from an intraday perspective.

It was confirmed by price holding the 6150 level into this weeks trade & printing the 2nd higher low.
If i had been tracking this pair & trading intraday, i would have been priming my trigger for a favorite set up (hook or otherwise) off that level to the long side.

The first time price has shown a reluctance to maintain the uptick momentum on that timeframe was identified today with that inability to trade above the higher low @ 6250.
A violation of 6230 (line on the chart) flipped the bias to short & identifying a setup/trigger combo biased in that direction on your 15min chart was/is the higher probability option into today's action.

So bringing the action up to date, that 6250 area is still the current 4 hour active swing level.
For me, in order to begin planning a long intraday bias position (& until the next 4 hour swing level prints) price needs to trade through that 6250 level.

[jcpfx]

I may need to go over the basics again. I took an example from VisualXray from some time back on the EurUsd action in October:
Could you give me some insight here? Am I over complicating things and/or missing something obvious?

I'm not sure in what context visualxray posted that example, but it looks as though it was showing how to determine an intraday (contra-bias) long set up whilst price is trading with a dominant short bias.
If so, then that is what is probably confusing you.
Unless you are very experienced & extremely nimble that tactic is not recommended at all.
Be very careful indeed attempting to place intraday bets against a potential higher timeframe bias flip.

I understand you prefer to trade intraday, closing out your bets at end-of-day?
If so & you're using the 4 hour chart to help determine an intraday bias, then keep it very simple by just tracking the swing highs & lows on that timeframe.

I'll pull up my previous chart of the Cable from earlier today & try to explain how I (& a few of the others on here) view it.
It's clear from the past couple weeks activity on the 4 hour chart that Cable was cycling down, printing lower lows through each session.
The failure to print a lower low (shaded @ 6080) on the 28th was your fist sign of a potential flip in the bias if you're betting from an intraday perspective.

It was confirmed by price holding the 6150 level into this weeks trade & printing the 2nd higher low.
If i had been tracking this pair & trading intraday, i would have been priming my trigger for a favorite set up (hook or otherwise) off that level to the long side.

The first time price has shown a reluctance to maintain the uptick momentum on that timeframe was identified today with that inability to trade above the higher low @ 6250.
A violation of 6230 (line on the chart) flipped the bias to short & identifying a setup/trigger combo biased in that direction on your 15min chart was/is the higher probability option into today's action.

So bringing the action up to date, that 6250 area is still the current 4 hour active swing level.
For me, in order to begin planning a long intraday bias position (& until the next 4 hour swing level prints) price needs to trade through that 6250 level.

Sarah,

you totally nailed it! Yes, you Visualxray was explaining the lower tf counter trend cycles that form the pullbacks we like to see in a healthy trending market.

You also assume correctly that I DO NOT want to play them (although I may get caught in them by mistake?!) and that I also believe in the Intraday approach.
My belief (for right or wrong, but it's what I am trying to do) is that each trade starts as a "scalp" which means that I am psychologically ready to pull the plug very early if I don't like the way the market is acting. It can lead me into getting out early (like Cable yesterday...grrr) but I don't have deep enough pockets (or another job - situation in Italy is horrible!) to act with more of a detached mindset. If the trade goes like the Euro today and doesn't come back, I follow the 15Min cycle until it gets me out, or until it prints a candle I don't like (i.e. a pin.bar against me).

So you also got my point of view right: I am trying to pay close attention to the 4H cycle using ONLY that cycle as my strategical (trend) guide and dropping down to the 15Min "tactical" or entry tf.

So down to business: I had your same outlook going into today. My question, then, is regarding the point of entry. I diddn't keep close attention on the higher low breach, as I was waiting for the pullback directly to the green zone/prior low. Let my chart explain:



So basically, what I thought was the right course of action was:
1. wait for the pullback (avoid fake-outs)
2. when the market reaches the general area, switch to 15min chart and if ADR, time of day (LDN), stop loss and target are good, then watch for a 15Min pin with a good stoch reading (not necessarily a hook but something close) OR a 1-2-3. Yes, I like to see pin bars form on the 15min chart to signal me in. It's fatal attraction
3. flip the coin, and hope for the best...

Instead, you may look for an entry right after the "confirmation candle"? So the 7-11 bullish pin or 11-15 confirmation candle close? If so, could you give me a visual on that?

Thank you so much Sarah...this is really helping! And I hope others are benefitting from my errors/doubts as well

I hope no one is keeping tabs here...or I will need my future profits to pay off the bills...

[Sarah Foster]

My question then is regarding the point of entry.
I didn't keep close attention on the higher low breach, as I was waiting for the pullback directly to the green zone/prior low. Let my chart explain:

I can see what you're getting at, & I agree that identifying likely pullback zones is both logical & practical but sometimes (as has been regularly commented on here) price simply doesn't pullback within the windows of opportunity we're active in.
When that happens we simply have to either wait for the next appropriate opportunity or let it go & focus on another pair.

Regarding your chart, once price breaks out above 6180 on the 31st on your primary 4 hour chart, unless price immediately pulls back into the green zone (which it didn't), you can no longer rely on that green zone as a primer for going long.
The reason being, price formed a lower high today at 6250 & therefore violated the uptick cycle on your primary chart.
Once it lost 6230 the bias on the 4 hour chart flipped to bearish.

In order for you to continue trading with a long intraday bias, price would have had to hold 6250 today & printed at least a series of higher lows on your secondary (15m) entry chart.

If it fails to do that it's telling you there's no impetus or enthusiasm for higher prices & therefore the green zone further back at 6150 is invalid as a pullback long confirmer.

[jcpfx]

My question then is regarding the point of entry.
I didn't keep close attention on the higher low breach, as I was waiting for the pullback directly to the green zone/prior low. Let my chart explain:

I can see what you're getting at, & I agree that identifying likely pullback zones is both logical & practical but sometimes (as has been regularly commented on here) price simply doesn't pullback within the windows of opportunity we're active in.
When that happens we simply have to either wait for the next appropriate opportunity or let it go & focus on another pair.

Regarding your chart, once price breaks out above 6180 on the 31st on your primary 4 hour chart, unless price immediately pulls back into the green zone (which it didn't), you can no longer rely on that green zone as a primer for going long.
The reason being, price formed a lower high today at 6250 & therefore violated the uptick cycle on your primary chart.
Once it lost 6230 the bias on the 4 hour chart flipped to bearish.

In order for you to continue trading with a long intraday bias, price would have had to hold 6250 today & printed at least a series of higher lows on your secondary (15m) entry chart.

If it fails to do that it's telling you there's no impetus or enthusiasm for higher prices & therefore the green zone further back at 6150 is invalid as a pullback long confirmer.

Ok, I understand now. I generally wasn't mentally dynamic enough...

Thanks for the clarification!

[kyle morgan]

So now that the current bias has been identified & established from your 4 hour primary timeframe you can view & plot the immediate close quarter swings from your secondary 15min timeframe knowing exactly where the first violation level is on this bearish move.

There hasn't been another clear lower high swing level print yet on the 4 hour gbp chart, so until one does print you can gauge & manage the momentum shift by using the same cyclical behaviour on your secondary chart, & that is clearly visible at the shaded area around 1.6175

Until the 15min prints another lower high, 6175 is your fulcrum or initial violation level keeping the short bias valid.
Any set up/trigger combinations that take your fancy below that lower high are now the higher probability option until the cycle flips again.

[jcpfx]

So now that the current bias has been identified & established from your 4 hour primary timeframe you can view & plot the immediate close quarter swings from your secondary 15min timeframe knowing exactly where the first violation level is on this bearish move.

There hasn't been another clear lower high swing level print yet on the 4 hour gbp chart, so until one does print you can gauge & manage the momentum shift by using the same cyclical behaviour on your secondary chart, & that is clearly visible at the shaded area around 1.6175

Until the 15min prints another lower high, 6175 is your fulcrum or initial violation level keeping the short bias valid.
Any set up/trigger combinations that take your fancy below that lower high are now the higher probability option until the cycle flips again.

...and that was probably the icing of the cake there Kyle

You and Sarah just clarified the time frames up for me today. Even if I studied hard to keep things in a top-down fashion, I was still confusing my time frames in a way. Now I think i've got them set straight so watch my charts in the days to come...and let's put the theory into practice.

Thank you once again...if you ever get to Italy, give me a shout It's the least I can do

[Eidriel]

Hi everyone!

I'm ready to dust off my forex account and get ready to trade again into 2013. So glad to see you guys again.

That being said, I have read the few previous posts written by jcpfx, Sarah, and kyle morgan. But I have a slight confusion regarding 2 things.

1. Is there a difference between a trend/bias, and a cycle? From what I always thought (I may be wrong, which is why I am trying to clarify it here), we determine the trend/bias by looking at the "general price action" and price in relation to the 60 SMA (ie. whether price is above or below the SMA, and the direction in which the SMA is pointing), whereas we determine the CYCLE from whether price is CURRENTLY making HH/HL or LH/LL.

Example: From the 4H CHFJPY chart I attached, This 4H chart clearly shows price in an uptrend bias, it is "generally" making higher highs and lows, with price above the SMA and SMA pointing up. However, the CYCLE seems to be down, as it is CURRENTLY making lower highs and lower lows.

So is it higher probability to trade with the TREND or with the CYCLE? or BOTH? In other words, for this CHFJPY pair, should I be (A) looking for longs according to the TREND, or (B) look for shorts according to the CYCLE, or (C) look for longs BUT WAIT for the 4H to change into a upward CYCLE (ie. printing HH and HL)

2. The second thing I am confuse about is, If we were to trade with the cycles on our primary chart, it can be kinda confusing when 2 different timeframes are showing different cycles.

Example: From the 4H CHFJPY chart I attached, It is in a down cycle (LH/LL) , so I should be looking for shorts. But if I were to flip to the 1H chart, it now shows me an up cycle (HH/HL), so I should be looking for longs.

I do not understand, as this approach is meant to work across various timeframes, regardless of the timeframe we choose. But why is it that 2 different timeframes are telling me different stories? Which means that depending on whether I choose the 4H or 1H chart as my primary timeframe, it would mean a win or a lose.

Thanks a lot guys! Happy 2013 to all.

[kyle morgan]

this approach is meant to work across various timeframes, regardless of the timeframe we choose.
But why is it that 2 different timeframes are telling me different stories? Which means that depending on whether I choose the 4H or 1H chart as my primary timeframe, it would mean a win or a loss.

It doesn't mean that at all Eidriel.
If your risk attitude & trading objectives are solid & well defined you won't be experiencing any confusion whatsoever. That's why those 2 extremely important elements are referred to & mentioned so often on here.

Remember, this isn't a mechanical system, rather a discretionary technical based approach designed to offer the individual a choice in establishing a framework & structure to trade these instruments.
There has never been & never will be a perfect fit or ideal scenario.
Which is why the generic approach is a flexible one which appeals to the different styles.

From what I always thought we determine the trend/bias by looking at the "general price action" and price in relation to the 60 SMA, whereas we determine the CYCLE from whether price is CURRENTLY making HH/HL or LH/LL.

Correct.

From the 4H CHFJPY chart I attached it clearly shows price in an uptrend bias, it is "generally" making higher highs and lows, with price above the SMA and SMA pointing up. However, the CYCLE seems to be down, as it is CURRENTLY making lower highs and lower lows.

Again, nothing to disagree with there.
Price is indeed biased to the long side & until 94.60 was breached (on the 4H) this week, the bias was solid.
It has located & found support at the prior S&R zone of 93.90, but until price moves back through 95.20 (the lower high on the 4H) it's suspect to another lower high.

It was only cycling down on the 1H chart until yesterday, but if the 1H doesn't figure in your timeframe analysis or it's moving contra to your primary 4H chart, you simply ignore it until it begins cycling back in sync with your primary 4H chart.

So is it higher probability to trade with the TREND or with the CYCLE? or BOTH?

If your objectives are influenced & driven via the 4H timeframe & that is your primary source for analysis then you trade according to the information supplied by that chart.
Therefore, if price slips off the highs & forms a lower high you have to patiently sit & wait until price reacts to the next logical area of S&R (which in this case is 93.90-94.0) & make your decision at that juncture.
That's when you can refer to the 1H chart & use the LONG cycle to re-engage with the general bias.

In other words for this CHFJPY pair, should I be (A) looking for longs according to the TREND, or (B) look for shorts according to the CYCLE, or (C) look for longs BUT WAIT for the 4H to change into a upward CYCLE (ie. printing HH and HL)

The only bias you're interested in will be defined on your primary chart.
Therefore, if the 4H chart is biased long but slipping back, you have no choice but to wait until you have more information before acting.

I've underlined the important passage in your question.
If you want to use a combination of 4 & 1 hour timeframes & you are biased LONG on your primary 4H chart, you MUST wait patiently until price reacts to the next logical S&R zone & act on the next LONG 1 hour cycle to get seated.

[Eidriel]

Very clear explanation. Thank you kyle That clears up all the confusion I had!

[Se7en]

So now that the current bias has been identified & established from your 4 hour primary timeframe you can view & plot the immediate close quarter swings from your secondary 15min timeframe knowing exactly where the first violation level is on this bearish move.

Until the 15min prints another lower high, 6175 is your fulcrum or initial violation level keeping the short bias valid.
Any set up/trigger combinations that take your fancy below that lower high are now the higher probability option until the cycle flips again.

And following on from kyle's cycle violation/fulcrum levels from yesterday, we now have more information available from which to establish fresh updated zones of likely reaction.

The 6175 violation level can be adjusted down to 6100-6110 & Euro has a lower level too at the 3050 area.
Those are the levels that would temporarily arrest this bearish leg on the current descent.
Until price trades back through those levels, continuation shorts are the higher probability play.

When the lower high ledges eventually get violated to the long side that will be the time to hold fire on shorts, scroll back out to your primary timeframes & plot the necessary swing zones to begin establishing the next technical move.