Remember... this particular setup for entering short and long positions comes from your "15-Minute Extreme Ranges" chart configuration: It is a simplified illustration in that there are a number of additional entry points that are not marked because the requirements for determining their locations are not obvious from the single moving average plotted on this graph.
I believe, based on my observations, that the financial instruments also exhibit simultaneous peaks. Having completed the development NPP and started the process of finishing the corresponding book, I'm noting repeating patterns as I seek a systematic approach to trading that reconciles all the stuff shared about lower-time-frame charts with all the stuff shared above higher-time-frame charts. What this is recommending to me so far is entering positions when there is a convergence between the one-hour, four-hour and/or six-hour price range envelopes.
The key to successful trading is to NOT trade. To put it another way, if you're doing this right, you should be spending 99% of your time just waiting! (Perhaps I overinflated that figure just a tad bit...but you get my point.) The figure below shows one of the main setups we use... We do not enter the market until and unless we see this structure! (Or one of the other configurations we have in our limited arsenal.) If you're not ready and willing to accept this fact, more than likely we are just going to frustrate you, and this program probably isn't right for you. Trading, done correctly, can be a somewhat boring endeavor, so if you find this to be undesirable, you are welcome to ask Ms. Roberts for a refund and leave our program at any time before our next lesson. As you can see from the above chart, this particular tactic, which is one of our favorites, failed five out of seventeen times. Accordingly, for our next lesson, we are going to drill down to the lower time frame charts to see if we can discover any signs (there) that would have recommended we not pull the trigger in those instances where doing so would have ultimately resulted in a loss.
So then, after drilling down to a five-minute chart, we can see that if the 18-minute baseline does not cross over the 2-hour baseline in the direction we are considering trading—WE DO NOT MAKE THE TRADE. This is the arbiter that decides whether the potential entry point constitutes a confirmed, bona fide, validated scenario for getting into a position as price executes an intraday reversal. If this condition is not met, it tells us to pass on the trade, and saves us from becoming victims of what would have otherwise been a misinterpreted situation.
This is another one of the best setups we have in our quiver. It is the Straight Engulfing Moving Average Envelopes... It is another example of a precise configuration that we MUST observe, or else, we just sit on our hands and do nothing but watch.
Regardless of whether the inner (thinner/green) envelope is straight or not, if the wider envelope is sloping up or down, under normal conditions, the side of the envelope that is AWAY from or OPPOSITE the angle in which it slopes defines the maximum degree to which price typically pulls back before resuming a course aligned with the trajectory of the slower (wider) envelope.
And what we have here is a reference chart that you'll find on page 71 of your trader's manual. The envelope consisting of the thinner bands is generated from the typical maximum length observed on daily candlesticks. It will therefore give you an idea as to when price has breached its normal limit on a given day and is therefore prone to pulling back, at least a little, before the close of the 24-hour market cycle. The envelope consisting of the thicker bands is the maximum price range typically observed on any given day, irrespective of the length of the daily candle. Consequently, it too gives you an idea as to when price has breached its maximum limit on the corresponding day and is therefore prone to pulling back sometime before the close of the 24-hour market cycle.
In considering the interpretation of indicators to forecast what price is most likely to do in the not-to-distant future, we are going to use the categories of "stable" and "unstable." We will consider as stable those measures that have "directional tendency" within the temporal framework that they are being used. For example, the six- to eight-hour baselines are the fastest (or lowest) stable measures we use to track the day-to-day trend, because in this context, they tend to maintain (or sustain) progress in a given direction for a prolonged period of time. (We will use the average and settle on the [violet] seven-hour baseline.) On the other hand, the two-hour baseline is unstable in this context, because from day to day, it can fluctuate up and down quite frequently. Yet, at the intraday level, the two-hour baseline is the slowest (or highest) STABLE measure we use. (We COULD use the four-hour baseline, but the longer-term outlook is already conveyed by the seven-hour measure, with the four-hour indicators tending to lag behind price action when evaluating what is going on at the shorter-term intraday level. So then, where four-hour measure DO come into play is in identifying possibly optimal entry and exit levels based on the maximum size of the typical four-hour candlestick… In the above image, the bold black seven-hour baseline with the white core/center suggests the direction in which NPP day traders "should" ultimately be looking to enter positions. (The associated [violet] moving average envelopes reflect the projected or estimated span of the maximum seven-hour price range.) As illustrated by this figure, a trader will ideally enter a position in the direction of the slope of the seven-hour baseline as price is rejected by the far side of statistical support or resistance in the form of the (blue) four-hour measure, especially if accompanied by the reversal of the (red) two-hour price range envelope. On the other hand, if the two-, four- and eight-hour measures are all three angled in the same direction (or if the two-hour measure is neutral), a trader might alternatively opt to enter positions if and when price makes contact with the far side of the (red) two-hour price range envelope. Again, the key to success is waiting! A trader should not act until and unless one of these conditions is met—until one of the structures described above is actually observed. (This structure is an extension of the one described in Post #483.)
This holds true ONLY if the slope of the two-hour baseline (as represented by the lower panel histogram) is above the threshold level of 0.02, or better yet, 0.036; OR below the threshold level of -0.02, or better yet, -0.036. In any case, rejection at resistance or support must be signaled by a hook in the olive green seven-minute price range envelope, and possibly confirmed by the 16- and/or 30- (not 18-, as mistakenly quoted in a previous post) minute baseline(s). The bold black bands belonged to 1¼-hour price range envelope at 0.10% deviation—which lags! For a long time you debated whether the immediate trend is most reliably conveyed by the 20-, 30- or 40-minute baseline, but in looking at your best five-minute chart as presently constituted, they are not all that dissimilar and in fact, it appears that the best approach is to use a consensus of the three! However, rather than use the 40-minute baseline, use the 40-minute envelope at 0.03% deviation, and use the same measure at 0.17% deviation as a more valid level for the maximum amount of pullback you will normally observe in the immediate intraday trend than the bold black bands!
We're going to need to totally revamp the decision chart... ...starting with whether price is currently located in the upper of lower half of the eight-hour price range: (Don't forget to add the date!)