On May 17th I wrote something about two particular trade setups likely being my “bread and butter” moving forward. However, I’m no longer thinking in those terms. Though it might be that I still watch for the exact same two scenarios, if true, I’m now doing it with the idea that what I need to see is the various components of the system relating and interacting with one another in accordance with a specific set of parameters. I’m no longer inclined to comment on my intraday trading due to the fact that: (1) the chances that I will be modifying any of the settings I’ve settled on after two years of experimentation are slim to none; (2) the process of day trading using Numerical Price Prediction is extremely fluid and dynamic, so my time is better spent monitoring and reacting to the market as opposed to commenting about it; and (3) I don’t anticipate there being many, if any, new revelations or insights stemming from my guerrilla trading activity. With my settings pretty much finalized and my approach to intraday trading having essentially become routine, I now plan to turn my attention to using the Numerical Price Prediction system to capitalize on major trend reversals to realize 20 to 100 pips or more of profit per a single trade as often as possible, if I can. In doing so, I’m going to refer to a bullish sentiment on my daily charts as a “blue string” and a bearish sentiment as a “red string” with the intention of looking into how often entering a long position following the formation of a red daily candlestick during a blue string, and entering a short position following the formation of a blue daily candlestick during a red string, lead to successful outcomes. On Friday AUDUSD and NZDUSD both formed red candlesticks during a blue string, so I will be curious to see if their rates head higher from Friday’s close at the start of this new week. According to my forecast model, AUDJPY was nicely position to swing north at 82.88 if it had wanted, but it decided it would rather continue south instead. At 110.45 CHFJPY is presently saying that it wants to swing higher, so let’s see if it actually does so.
I’ve decided to try to take the monthly trend under consideration in addition to what is going on from a day-to-day standpoint. That being said, I’m noting that though AUDUSD and NZUSD formed red candlesticks on Friday in the midst of a blue string, the two pairs are also in the midst of a monthly down trend, so they need to be monitored closely for the almost inevitable turn south. And though CHFJPY seems to be saying it would like to swing north, it too is in a (weak) monthly down trend. USDCHF is of interest to me because its monthly up trend is rather pronounced, but it has spent the last ten to twelve days moving in the opposite direction, so when they day-to-day trend resumes a northbound trajectory, it might very well offer the opportunity to pick up quite a few pips worth of profit. USDJPY is in a similar situation. Even though it spent only three or so days falling, at 109.35, it might soon experience substantial upward pressure, if it isn’t already, due to its location near a significant support level.
I was looking for a “green” daily candlestick from both AUDUSD and NZDUSD, but only the second pair is currently on track to deliver. (I’m going ahead and looking at things now, even though the 24-hour market cycle is not yet over.) Nonetheless, it was possible to exit AUDUSD with a profit given that it registered intraday signals of a pending reversal south in the region of 0.7571 - 0.7576, giving any trader who was monitoring developments the opportunity to lock in gains at that level. CHFJPY gave up on the idea of swinging north early, essentially unable to climb above Friday’s high and pretty much hammering a final nail in the coffin when all the intraday moving averages assumed a southbound trajectory between 110.45 - 110.53. USDCHF could be trying to initiate that trip I mentioned north, but there’s not even a hint of confirmation that this is occurring yet, and definitely not at this point with USDJPY.
It appears to me that whatever I do leads to a growing body of evidence that, if I wish to avoid heavy drawdowns, or more to the point, to virtually guarantee every day is profitable, the highest time frame with which I should effectively concern myself are one-hour charts at the max. (Doing so is likely to help me avoid losses like the first trade recorded above.) This means that there is little need to go beyond the HH-period simple moving average to gauge overall price direction for the purpose of intraday trading, a trendline I originally employed when using the multiple simple moving average envelope trade strategy. The numerical price prediction system substitutes this line with the JJ-period simple moving average, But in practical terms (in actual application) the two lines are not that far apart or different. Nonetheless, it is probably better to use the one of lower value, especially when generating an equivalent moving average at the lower timeframes. Yesterday’s analysis led me to conclude that the DD-period simple moving average, which I had been using as the "central" or "core" intraday trend, lags too far behind the short-term trends to be considered precise, but is also too sensitive to intraday fluctuations to serve as a reliable or valid indication of where price is headed generally speaking (overall). I therefore deleted this moving average as essentially useless (though its related envelopes still serve a purpose), substituting it with the EE-period simple moving average to convey or suggest where exchange rates are headed in the longer run (relatively speaking), and depending on the lower-term simple moving averages to reflect the lower-term trends. These are my conclusions regarding one-hour charts, but from my perspective, the best time frame to use for entering positions are typically five-minute charts. I have pretty much abandoned the use of one-minute charts in that they are unable to encompass enough market activity to paint any kind of overall picture of what is going on, and the X-period simple moving average I once used for entering positions has no statistical significance as an indicator of possible Bona fide reversals in direction. Indeed, using it reflects a philosophy based on the belief that you better get what you can before the opportunity passes you by. But this belies any kind of correct understanding of price action. The Y-period simple moving average I used to use for confirming X-period simple moving average reversals on a one-minute chart is more along the lines of what constitutes a valid and reliable entry signal, with price almost sure to continue along the same trajectory following reversals in this indicator for a sufficient duration to exit positions profitably—invalidating the impression that a trader better get what he or she can before it’s too late. The Y-period simple moving average translates to a Z-period simple moving average on a five-minute chart—but the A-period simple moving average is what I actually use in practice. INTERPRETATION/TRANSLATION: So then, one a five-minute chart, the JJ-period simple moving average that represents an exchange rate’s overall trajectory one a one-hour chart translates to SMA (CCC), with the core trendline reflecting the general intraday trajectory of “price” at a practical level (i.e., the direction in which trades should be executed) reflected by SMA (AAA), which is aided by the smoother but slightly lagging SMA (BBB). Together, these three moving averages paint a relatively clear picture of where price is likely headed in the near future. As already mentioned, trade executions are triggered by reversals in SMA (A) on a five-minute chart, though SMA (B) is considered more reliable. These two moving averages constitute the earliest trade alerts, but are confirmed by SMA (C), which is a solid reversal signal and suggests reasonable/logical entry levels if a trader has opted not to act earlier. The slowest “fast” moving average—the one that communicates the overall general short-term trend—is SMA (D). RECAP: So in summary, on a five-minute chart, I have SMA (CCC) tracking the general longer-term trend. I then have SMA (AAA) tracking the general intraday trend, with the assistance of the smoother but slower SMA (BBB). (NOTE: All trades should be executed in the direction matching the trajectory of these two moving averages.) And finally, I have SMAs (A), (B), (C) and (D), with SMA (B) functioning as the most reliable entry signal, and SMA (D) doing the best job of assessing the actual short-term direction in which “price” is ultimately headed. Positions should be entered based on how these three sets of moving averages related to one another along with their associated envelopes (i.e., average price ranges) to execute trades with he highest probability of ending in success. (I could have remained in the last five trades recorded above longer to collect more pips profit, but it was like 2:30 a.m. here in Los Angeles and I needed to get some sleep.)
At this point, I think I can safely slide into cruise control. Moreover, I’ve now quantified the above cited methodology, so eventually I hope to finish teaching myself coding so I can go ahead and write my own EA in MLQ4 to do all the trading for me.
The first of several observations… USDCHF and USDJPY have yet to show an inclination to turn north on the daily charts. EURAUD has been on a northbound trajectory generally speaking ever since May of 2017, but has been headed south on a day-to-day basis since the last part of April and all of this month. Given that it is currently in the process of forming a “green” daily candlestick in the midst of a red string, does this mean that Thursday will offer an opportunity to profit from entering a new short position, or is the “green” candlestick simply an initial sign that the pair is ready to resume the general trip north it began approximately a year ago, in which case, multiple hundreds of pips worth of profit would potentially follow the entrance of a long position? This question will probably not be answered until Thursday at the earliest, and perhaps not until the following week.
How ironic that one day after commenting that I had pretty much abandoned working with one-minute charts, I just found compelling reason to continue employing their regular use. More specifically, a number of pairs appear to be in the process of reversing their bias from bearish to bullish, and in this situation, it looks to me like one-minute charts might possibly prove invaluable. I commented that I felt SMA (D) did the best job of assessing the actual short-term direction in which “price” is ultimately headed. But in assessing my charts in the context of the most recent developments, I’ve concluded that SMA (C) does this more accurately and with greater validity. In fact, I went so far has to delete SMA (D) as too lagging, though I have kept its corresponding simple moving average envelopes in that they continue to define key support and resistance levels. Moreover, on a one-minute chart, the moving average that is equivalent to a five-minute chart’s SMA (B) takes on quite a bit of added significance. Not only does it work closely with the equivalence of SMA (C) to provide a truer sense of an asset’s short-term trajectory, even better, its corresponding envelopes (as I rediscovered while reviewing a one-minute chart setup from the past) provide precise and detailed information that renders a fuller picture of price action, explaining price behavior I might otherwise find difficult to understand or figure out, as well as revealing trade opportunities I had previously been missing…
My observations can all be summarized by stating that I saw several “green” daily candlesticks in the midst of a red string at the end of Tuesday’s trading, so I will be watching to see how many of these pairs form a red daily candlestick today (Wednesday).
This is probably the last results shot from my Numerical Price Prediction records. Nothing is changing anymore. I’ve proven to myself that I’m not full of it, and the settings are all optimized now as best as I can tell. Implementation is becoming pretty routine, so I will continue to spend more time doing other things and less and less time in this thread.
Generally speaking, the above did not happen. USDCHF’s daily chart is still showing no signs of what is almost certainly going to be an inevitable turn north, but USDJPY looks like it is finally starting to try, though it is nowhere near being confirmed yet... The bottom line is that all this has probably solidified in my mind the notion that I will NEVER switch to swing (or position) trading due to my desire to reap profits on a daily basis, avoid any kind of drawdown whatsoever as much as is humanly possible, and close all my positions whenever I am going to be away from my laptop (i.e., sleeping). The intraday trading continues to go extremely well, but I will no longer be posting daily records of my performance. More than likely, I will post summary data a year or so from now as empirical evidence attesting to the validity of my assertions claiming the existence of specific moving averages that track the longer-term, intermediate, and shorter-term trends in the Forex (and most other financial) markets better than all other options—a major part of my Numerical Price Prediction Strategy.