In applying my "messy charts" over the last few days, a handful of indicators have emerged as particularly helpful in discerning the dominant trend, as well as pinpointing precisely when to enter positions and when to exit them with profit. I have deleted all other graphics, with the following "duo cloud" configuration constituting the final result... A much "cleaner" setup indeed!
The Guppy Multiple Moving Average Presently, my plan is to rely on what I'm referring to as my new Dynamic Duo Cloud configuration to trade Nadex binary options. In applying its configuration earlier today, I was not quite clear on how I should interpret a particular setup structure. As I was evaluating the situation, I began adding moving averages, eventually ending up with a GMMA-like arrangement. This made me curious as to how what I had done might compare to the actual GMMA, so I plotted it on a chart... Investopedia says that... The Guppy Multiple Moving Average (GMMA) is a technical indicator that aims to anticipate a potential breakout in the price of an asset. The term gets its name from Daryl Guppy, an Australian financial columnist and book author who developed the concept in his book, Trading Tactics. The GMMA uses the exponential moving average (EMA) to capture the difference between price and value in a stock. A convergence in these factors is associated with a significant trend change. Guppy maintains that the GMMA is not a lagging indicator but a prior warning of a developing change in price and value. The GMMA consists of a short-term group of MAs and a long-term group of MAs, both containing six MAs, for a total of 12, and is overlaid on the price chart of an asset. The short-term MAs are typically set at 3, 5, 8, 10, 12, and 15 periods. The longer-term MAs are typically set at 30, 35, 40, 45, 50, and 60. When the short-term group of averages moves above the longer-term group, it indicates a price uptrend in the asset could be emerging. Conversely, when the short-term group falls below the longer-term group of MAs, a price downtrend in the asset could be starting. However, in the context in which I was operating, the short-term MAs were of little consequence, and even the longest MA was still somewhat unstable. After superimposing the MAs I was using over Guppy's, what emerged as most important was very close to an MA that NPP highlights as being a key measure. I then found that if I plotted its associated envelope at 0.02% and 0.03% deviation, it gave me a graphic I could then use in four ways: (1) to suggest/confirm the general, overall direction of price, (2) to define/outline a chop zone, (3) to recognize possible breakouts, and (4) to estimate/anticipate likely maximum limits to pullback levels. Combining the envelope with the Guppy multiple moving averages and my dynamic duo clouds (left empty in the following image) yielded the clarity I needed to make sense of the situation I previously found somewhat perplexing...
If I tried, I could probably come up with a list of at least 100 questions I might ask myself as part of a decision-making process intended to help me decide when to be active, and when not to me active, in the markets; and if active, when would be the optimal times for me to enter and exit my positions. Obviously, that’s far too many question to ask and keep track of. So, just as I went through dozens and dozens of moving averages to arrive at the handful of baselines and price range envelopes I’ve ultimately decided to continue plotting on my charts, I now plan to transition to listing, adding and deleting any and all questions which come to mind related to how I might make best use of those charts, until I end up with a list of ONLY those questions whose answers ALWAYS point me in the right direction—or if not always, then the ones that at least do so as close to 100% of the time as possible—so that I might compile a final checklist to go through each hour (if not more often than that). The ones that pop up right away are: Have the slopes of the three-hour, 30-minute and/or 14-minute baselines just reversed direction? Has the oscillator on the three-hour lower panel histogram (on 15-minute charts) breached the 0.039 or -0.039 level? Has the oscillator on the 14-minute lower panel histogram (on one-minute charts) breached the 0.0095 or -0.0095 level? Are the shorter-term GMMAs above, below or parallel with the longer-term GMMAs? Has the faster duo cloud pulled back behind the slower duo cloud while the slower measure is sloping in the opposite direction? Is price being rejected by (bouncing off) the upper or lower band of the 30-minute price range envelope at 0.08% deviation, or is it pushing into or breaching the envelope's band, forcing it to begin angling sharply in the same direction that price is headed? On the 15-minute (three-hour reversals) chart, where is price located within the 34-minute price range envelope at 0.15% deviation; and within the "five intervals" channel? On the 15-minute chart, in which direction are the 15-, 30- and 45-minute baselines sloping, if any? On the 15-minute chart, have candlesticks broken out above or below the three-hour price flow channel at 0.15% deviation? On the 15-minute chart, is price being rejected by (bouncing off) the upper or lower band of the three-hour price range envelope at 0.30% deviation, or is it pushing into or breaching the envelope's band, forcing it to begin angling sharply in the same direction that price is headed?
What about the 30- (34-) minute price range channel at 0.15% deviation (on a five-minute, or any other chart)? Are candlesticks being rebuffed there, or are they succeeding in pushing onward?
Three other measures to which this same idea, concept or principle applies are the ten-minute price range envelope at 0.04% deviation, the 14-minute price range envelope at 0.08% deviation, and the 20- (or 24-) minute temporal support/resistance channel.
There is one other lower panel histogram (NOT oscillator) you need to monitoring, which is the one that measures the degree to which the 34-minute baseline is sloping; having threshold levels of 0.0274 and -0.0274 on five-minute charts, and 0.087 and -0.087 on 15-minute charts.
ON A 15-MINUTE CHART: In which direction are the three-hour and 34-minute price flow envelopes sloping, if any? Have the slopes of the three-hour and/or 34-minute envelopes just now reversed direction? Have the slopes of the 15- and/or 30-minute baselines just now reversed direction? Have the bars on the three-hour lower panel histogram breached the 0.039 or -0.039 level? Have the bars on the 34-minute lower panel histogram breached the 0.0274 or -0.0274 level? Where is price located within the 34-minute price range envelope at 0.15% deviation (and within the "five intervals" channel)? Have candlesticks breached (exited the interior of) the 34-minute price flow channel at 0.03% deviation? Have candlesticks broken out above or below the three-hour price flow channel at 0.15% deviation? Is price being rejected by (bouncing off) the upper or lower band of the three-hour price range envelope at 0.30% deviation, or is it pushing into or breaching this outer envelope's band, forcing it to begin angling sharply in the same direction that price is headed? ON A FIVE-MINUTE CHART: Are candlesticks being rebuffed at, or are they succeeding in pushing beyond, the 14-minute price range channel at 0.08% deviation? Are candlesticks being rebuffed at, or are they succeeding in pushing beyond, the 20-minute temporal support/resistance channel? Are candlesticks being rebuffed at, or are they succeeding in pushing beyond, the 34-minute price range envelope at 0.15% deviation. Have the bars on the 34-minute lower panel histogram breached the 0.087 or -0.087 level? ON A ONE-MINUT CHART: Are candlesticks being rebuffed at, or are they succeeding in pushing beyond, the ten-minute price range envelope at 0.04% deviation? Are candlesticks being rebuffed at, or are they succeeding in pushing beyond, the 14-minute price range envelope at 0.08% deviation? Have the bars on the 14-minute lower panel histogram breached the 0.0095 or -0.0095 level? Are candlesticks being rebuffed at, or are they succeeding in pushing beyond, the 24-minute temporal support/resistance channel? Is price being rejected by (bouncing off) the upper or lower band of the 34-minute price range envelope at 0.08% deviation, or is it pushing into or breaching the envelope's band, forcing it to begin angling sharply in the same direction that price is headed? Are the shorter-term GMMAs above, below or parallel with the longer-term GMMAs? Are candlesticks forming above, below or parallel to the shorter-term Guppy MAs? Are candlesticks forming above, below or parallel to the longer-term Guppy MAs? Has the faster duo cloud pulled back behind the slower duo cloud while the slower measure is sloping in the opposite direction? EVALUATE THE FOLLOWING: Should I monitor whether price is being rejected by, or breaching, the upper or lower band of the 34-minute price range envelope at 0.08% deviation on the five-minute and 15-minute charts? Should I monitor whether candlesticks have breached (exited the interior of) the 34-minute price flow channel at 0.03% deviation on five-minute and one-minute charts? There is no need to plot the 34-minute price flow channel at 0.03% deviation on a one-minute chart because the role it plays on 15-minute charts is taken over on one-minute charts by the ten-minute channel at 0.04% deviation. Likewise, it is not needed on a five-minute chart because the "highest and lowest close string" indicator serves almost the exact same function. Note however that the channel IS already plotted on the five-minute chart configuration that does NOT include the "string" indicator. (Your proprietary string indicator is a superior measure.) Moreover, there is no need to bother with the 34-minute 0.08% deviation level on 15-minute charts because the bars are so long. Consequently, it is sufficient to monitor the 0.03% level. And as for five-minutes, the same function is already covered by the 14-minute price flow envelope at 0.08% deviation, so adding the 34-minute channel would just be redundant.
On Friday, I purchased a binary option call contract, but debated exiting my position when It looked like price was going to turn against me, even though all my guidelines indicated I was perfectly justified in having executed the trade. It's a good thing I did, because as it turned out, the contract was out-of-the-money at the time of expiry. This would not have happened had I been using the green channel suggested by the checklist I've been compiling over the last two days, because I would have not even made the trade in the first place. However, I don't want to limit myself to ONLY entering positions when candlesticks clear the upper or lower band of the green envelope. Moreover, though I would have done well enough if going long at Points C and G, this certainly would not have been the case had I pulled the trigger at Points A, B, E or F. And at point D, it probably would have been virtually impossible for me not to lose money! Consequently, in search of a better "solution," I coded a third, even longer-term cloud. To generate it, I had to use a lot of data. So, to be economical with respect to memory, I sampled the data at set intervals rather use the numbers in total, which is why the borders of the cloud consist of jagged or squiggly (rather than smooth) lines. So then, if I purchased long calls immediately under the white cloud when the dark cloud had just been over it, and purchased long puts immediately over the white cloud if the dark cloud had just been under it (taking profit somewhere on the opposite side of the white cloud), ALL my trades would have (theoretically) been profitable. (Positions should not be entered if price climbs to high above or below the white cloud, because this indicates there is a high probability that the intraday trend is reversing direction.) I'm therefore going to see what this configuration looks like on all the other pairs I follow to evaluate whether this might constitute a consistent pattern, or if this might have just happened to have had a favorable appearance in this particular instance.
So, what did I get from this? It's that I should purchase binary option contracts EXCLUSIVELY when (and immediately after) price has just been rejected at the 24-minute temporal support or resistance level (the temporal launch pads), and at no other time.