It's really very important that not too much time is spent with the 1m chart as good looking opportunities often turn out to be false flags.
Take a look at the immediate and short term moving averages on this one minute chart.
The price action is forever jumping above and below the averages and are far too sensitive to use alone.
For the record, these are 14 and 40 ema's, so technically we are looking at the 45 second trend vs the 2 minute trend.
Next lets add the 5m trend and the picture should begin to come a little clearer.
Not a lot, but a little clearer. Notice there's not so many crossovers and everything looks a tiny bit more manageable.
Now to put the finishing touches to the chart, let's add the red and blue ema's from the 15m chart so we can see the whole story without flicking between pages.
As we can see now, with the thick red and blue from the 15m added there's a really clear picture starting to emerge.
Since the red is above the blue we know we are only looking for buy opportunities as the 15m chart previously told us.
Therefore, the only set ups we are looking for here are when the green is close to and above the light pink, the pink above the light blue, the light blue above the red and the red above the blue.
In this next shot I will highlight the formations I am referring to....
Can you see the formations?
A nice order and gently fanning group of moving averages in the correct order signify a probable continuation of direction.
There are exceptions to the rule as we are incorperating the MFI, which must be within specific ranges for us to justify a low risk high probability trade.
This final shot shows the exact point where we received the signal from the 15m chart which was not a valid entry at 10:00.
We had to wait until around 11:45 for the price to settle. Take a look....
So, the 15m entry signal was at 10:00. This is highlighted on the 1m chart here by way of a green arrow.
What do you see at that time?
The averages are not orderly are they. However, the green is cutting through above signifying that the rest of the averages should follow.
What happens next is the MFI moves above the comfort zone and gets as high as the overbought zone as highlighted in the left hand bubble of the MFI.
Once the MFI hits the overbought zone the price action stagnates, the MFI slips below the blue average and a period of consolidation sets in.
As you can see in the right bubble in the MFI that at around 11:40 the buyers volume begins to build strength again, rising above the blue average in the safe zone with all averages pointing to a go go go situation.
The buy button was pushed and within 20 minutes the price is trading 25 ticks higher.
Did we make 25 ticks from this trade? Actually no. Just 15 ticks.
you may say that's a lot of hard work for 15 ticks, but 15 ticks with this strategy is almost 2% profit.
Do that once a day and bye bye boss!
In the next post I will explain about money management. How much to stake, how much to risk, how much profit to take and when.
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