In order to trade my Numerical Price Prediction (NPP) system correctly, I need to be monitoring the markets on an ongoing basis so I can adjust to any change in the prevailing winds. However, this is not possible at present, so in an effort to find a workaround, I’m curious about an idea that occurred to me this morning, which I am conceptualizing as a “Mis-colored Day” strategy. Basically, I plan to record when daily candlesticks are the opposite color of what I would expect, and also where they close within the day range as I calculate it. What I wish to see is if, for example, it would make sense for me to be primed to buy a foreign currency pair whose candlestick is red on a day I would expect it to be green, and whose price is also located near the bottom of the day range as I quantify it. I will still enter positions in accordance with my normal method of operation, but what I wish to find out is how often such trades are ultimately successful even if, after entering the position, I ignore the trade rather than monitor what the market does subsequently.
I would have expected AUDJPY to be red today, so I might look to scalp short positions anywhere above 74.60, and perhaps even enter a short position and walk away if the rate climbs as high as the region I'm defining as the top of its day range (anywhere above 74.73 or so). All of the yen pairs I watch are in a similar situation, as are AUDUSD, GBPUSD, and NZDUSD. On the other hand, EURAUD, EURGBP, and USDCAD have formed red daily candlesticks when I would have expected green, so I might be looking to buy these pairs at some point, depending on where price is located at the time in relation to their projected day ranges. UPDATE: At this time EURAUD looks like it holds the most promise, since I would have expected a green daily candlestick today, and the rate is currently at the lower end of the anticipated price range. So I'll buy the pair at this level and wait to see what develops over the next 24+ hours.
Those bars are IBGS's (Intra Bar Gaussian Shift), they probably won't make much sense without working with bars, without volume nor understanding the fractal pattern of the market.
I use a similar but less precise approach, with software that lets me colour daily bars - a higher high and higher low prints a blue bar, a lower high and lower low prints red (standard swing bar colour scheme, ignoring opens and closes). This makes it easy to see a red bar appearing in a sequence of blues or mostly blues. I use breach of the red bar high to enter long in an uptrend. Colouring bars in this way also encourages me to exit a profitable position before it turns over - its rare (these days) in forex to get 6 blue or 6 red bars consecutively.
Thus far the strategy seems more-or-less sound. I've taken some profit while it was available, but I expect more from AUDJPY and EURAUD. Even without having allowed these trades to fully play out yet, the returns per position are significantly greater than scalping intraday. I got off to a rocky start with AUDJPY because I entered before harmonizing the strategy with my intraday protocol, but hopefully this is resolved now. I think of this technique as depending on position, but since "position trading" refers to holding investments for weeks, months, or even years, I'm going to have to call it something like Numerical Price Prediction (NPP) structure-based swing trading. I used NPP successfully for pseudo swing trading in the past, but it appears that with the inclusion of "off-colored" daily candlesticks and outer day range boundaries, I can swing trade "for reals" now, exiting positions when the trend reverses the next day or even after the next couple of days depending on how long the run lasts. (That is, of course, after I have gained enough confidence in the approach that I'm no longer reaping gains periodically along the way, assuming it turns out that these kinds of trades actually do follow through more often than not).
I did not have the patience to hang in there until any of my trades hit their original take profit targets near there previous highs or lows, especially given that CADJPY turned against me. So these are the final results after adjusting my targets… EURAUD offered significantly more profit, as anticipated, but AUDJPY did not. All in all, I am satisfied with this new (for me) strategy, and plan to now make this my primary methodology for trading Forex.
My signals suggested that 107.85 marked the end of the present surge north, so it made sense to pocket recent gains here and then wait until after the imminent pullback before reentering the long position for more...