If you wish to read my thoughts regarding any important levels in the future, you will need to go here: https://www.elitetrader.com/et/threads/south-winds-red-skies-clouds-in-the-west.313399/page-20
This informal quest led to the development of an offshoot of Numerical Price Prediction (that I am calling Dynamic Probability Trading) which operates based on the same principles, but employs the use of three (actually, it’s now four) proprietary price range envelopes and two carefully selected moving averages. But yesterday I added what I have labeled as “Clarity Lines” consisting of three proprietary moving averages from the past which I believe might greatly facilitate the attempt to succeed at letting profits run… I think it’s possible that this might be accomplished by entering positions when the three bold moving averages (the indigo, dark green, and crimson lines) reverse direction and remaining in the trades as long as the clarity lines maintain the same slope. I also suspect that used in concert with shorter-term trend lines (if and when positions can be monitored and managed) the lines have the potential to enhance a trader’s gains by offering the ability to exit trades when the direction of the candlesticks’ progress begins to conflict with the slope of the clarity lines, and then reentering positions when all the moving averages come back into alignment. Yesterday's results after employing "Clarity Lines" for the first time...
New take on clarity lines.... Essentially the same thing though. Pretty much the same kind of results too... Rather than selecting predetermined targets, the clarity lines will now tell me when to exit positions. Today my average profit trade was about five times the size of my average loss trade. Addition of "Dead Zone" today (the striped-blue-line band). Haven't tried it out yet though. The idea is that when the candlesticks climb above or crawl below the zone it means that price action has picked up enough momentum to warrant executing trades in the corresponding direction.
The "Dead Zone" has now been tested and functions as envisioned, so it shall remain a part of my chart setup. My success rate over the last couple of days dropped below 80%, but my profit trade to loss trade ratio was 4:3, so that might have helped with overall performance. My win-to-loss ratio does not always meet the 1:1 minimum standard, but it happens a lot more often now than it used to (which used to be never) so the "let your profits run" tactics I am currently using appear to still be working to some degree. I'm hoping the mediocre 74% profit trades was due to my adjusting to the clarity lines and dead zone modifications, and given that I have now gained a measure of familiarity with them, my success rate will return to above 80%, or better yet, back up to 90%+.
My Progression from Multiple Simple Moving Average Envelopes to Numerical Price Prediction spawned an offshoot I called Dynamic Probability Trading which morphed into a culminating “Triple Zone” strategy. I cannot fathom there being any replacement to this system in that it changes nothing from the past, but is simply a cohesive amalgamation that congeals all my previous insights into an assemblage with crystal clarity. So all I am doing here is testing the practicality of using a particular methodology to determine exit levels. I am currently short USDCAD from 1.3366 and long CADJPY from 84.66 and, in the spirit of “let your profits run,” am “sworn” not to exit these trades until a certain (dynamic) target is hit. So that’s what I’m planning to do, and I will then note afterward how many pips profit (hopefully) this reaps in the end.
I was preoccupied with my NADEX trades and failed to check on CADJPY when I could have cashed out for maximum profits. (I broke my commitment to remain in the trade until my original take-profit target was hit.) By the time I finally adjusted my target, the trade was worth about 50 pips. USDCAD would have been worth about 100, but either I neglected to ever actually make the trade, or I forgot that I had a plan to remain in it until it hit its designated dynamic target. (Actually, from its original 84.11 rate, CADJPY was more like a 70-pip trade.) Also, it turns out the CADJPY did in fact hit its dynamic target (dynamic in the sense that it changes over time, and in checking the corresponding one-hour chart setup, I found that the target had dropped to 84.88).
This has to have been a second effort, since the original post refers to an 84.66 starting point, and I entered this last trade originally at 84.11. During my first (failed) effort, I discovered that I could not trust structure alone, and isolated the particular moving average that I needed to look to for confirmation, which is what I used during my second effort. This also means I was probably stopped out of my first (failed) USDCAD trade, and yes, I never actually executed the second one, though I had it mapped out on my charts.
I only made three trades today because I was busy evaluating the feasibility of trading off four-hour charts in an effort to maximize the principle of "let your profits run." Even without using four-hour charts, my average profit trade yesterday was more than four times my average loss trade, so perhaps I am (still) on the right track. As it turns out, the indicators I was trying to apply to four-hour charts actually worked better when transferred to a one-hour timeframe. Just one aspect of the system is represented in the image below. The idea is pretty simple...capitalize on situations in which price backs off after having violated or pushed/ridden the extreme limits of its typical price range. Again, the system attempts to take full advantage of what traders are often advised not to try doing, which is picking tops and bottoms. I'm already applying the concept so I'll be noting how well it performed when I look things over tomorrow.
I couldn’t ask for this system to work any better, praise Yahweh! I’m using proprietary moving average envelopes, both dynamic envelopes and envelopes linked to carefully selected/designed moving averages, to define the normal and extreme limits of the immediate, intermediate, and intraday price ranges (and the typical day range as well). Moreover, this morning I switched back to lower timeframe charts to evaluate price action at a more intricate, detailed, precise level considering everything I learned in the past in concert with all the new insights I’ve gained over the past few days, weeks, and months. The result is an amazing clarity that suggests anything but a random walk, at least when it comes to changes in foreign currency exchange rates. However, the system would not work well at all if it were not for reliance on an idea I’ve been told is total folly, which is that there are specific moving averages that track the actual/ultimate direction in which an exchange rate is headed better than your standard 10-, 20-, 50-, 100-, and 200-period moving averages. Using these carefully selected moving averages enables a trader to verify when price reversals are valid so as to avoid head fakes, false positives, and the problem of trying to catch a falling knife only to suffer the death of a thousand cuts. I feel like I’m looking at a system that is operating like clockwork right now and can only hope this remains to be the case when I return to full-time trading sometime during the first quarter of next year, God willing.
I believe I might have enough data at this point to successfully automate the Numerical Price Prediction system of trading, so next week I plan to begin to work on formulating and refining the rules in a workable format.