INGOT'S RAINBOW ... A Position Trading Strategy

[cosgrove]

rgp, the trend on the daily chart is sideways/up-ish, and the trend on the weekly and monthly chart is up. You probably shouldn't have gone short and "traded against the trend," but good luck to you.

[rgp]

Originally Posted by cosgrove

rgp, the trend on the daily chart is sideways/up-ish, and the trend on the weekly and monthly chart is up. You probably shouldn't have gone short and "traded against the trend," but good luck to you.

According to my chart the stochs are sideways but pointing downwards on the daily, weekly and monthly more sideways but still downward bias. Not sure what chart your looking at.

However I never trade EUR-JPY in real trading so it's simply an experiment.

One problem I think I'd have to consider if trading this pair is the JPY cross roll over payments, which will probably vary depending on which company we all trade with.

[blackdog]

Hi rgp
E/J
I tend to agree with cosgrove on that
I am looking at the U/C on the daily chart with the monthly/ weekly/ daily trending down.saw the big down candle close on the daily(17/12/ ) with stochs heading down I then switched to the H4 and I am waiting for the price to close below the last swing low (1.0014 )to go short with a stop just above the last swing high (14/12 ) on the daily.
Anybody got any thoughts on this

Edit sorry forgot my target which I find hard to do
maybe look at a Fib retrace to 09646 which is around the 50%

[cosgrove]

Originally Posted by rgp

According to my chart the stochs are sideways but pointing downwards on the daily, weekly and monthly more sideways but still downward bias. Not sure what chart your looking at.

I'm talking about price. I've attached charts with thick yellow lines showing some semblence of uptrend. Ignore the stochastics when determining overall trend, no?

[rgp]

Originally Posted by cosgrove

I'm talking about price. I've attached charts with thick yellow lines showing some semblence of uptrend. Ignore the stochastics when determining overall trend, no?

Yes, good call! Glad it's only a practice account trade. I'm still a day trader in mindset, picking up tops and bottoms, trading both ways. I think I need to change mindset for this longer time frame. Cheers

[cosgrove]

Looking to go long on AUDUSD when the markets open back up. Thoughts? Think that 38.2 retracement line will be resistance? Think the intermediate downtrend is too strong?

Hope everyone had a wonderful holiday.

[Ingot54]

Hi Cosgrove - excellent picking there - it is exactly what I would be looking for in a setup.

I can not compare your chart with my own right now - Parallels Desktop on my Mac crashed and I did not have it backed up!

Duhh!

Looking at your DAILY chart I can see the reversal around 6th November 2007, which ushered in an Intermediate correction to the longer term uptrend.

I would also have taken this trade, had it appeared in similar presentation on a WEEKLY chart ... but having stated that, there is absolutely nothing amiss with your using the exact method on daily charts. The only rider I would impose, is that you also had examined the WEEKLY chart too, to confirm trend in that TF too.

The Stochs are ideal on your chart though. Nicely turning up from that 23.6 line. All are moving in unison, and the faster stochs (ST ones) are pulling the LT ones up strongly.

For early clues on a weakening of the trend, keep an eye on those blue ST stochs. At the very least you should harvest a few nice pips with that entry, but be aware of how fickle daily charts can be - it will require daily monitoring.

We can not tell the market what it should do of course - there could be 300+ pips in this trade of yours (and if it breaks .9000 there could also be heaps more). But keep in mind the Randomness of markets aside from their trends. The trade could just as easily continue the correction down.

The Stochs should tell you when.

Congratulations on not only a clear reading of what the thread is about, but also on having the courage to calculate and take the risk.

Further comfort could be taken from those 4 candles with the lower tails all bouncing off the 50% fib lines (or near enough - they certainly clearly respected that support).

While the thread largely attempts to select good opportunities using just Rainbow and MTF Stochs, it is excellent to see you are also using initiative to boost chances of success.

Once a basic method is outlined and understood, traders can - and should - try to personalise the method to place their individual stamp on it. Without trying to patronise, it does me good to see you doing just that.

[cosgrove]

Originally Posted by Ingot54

The only rider I would impose, is that you also had examined the WEEKLY chart too, to confirm trend in that TF too.

Weekly is attached to this post. We're looking at trend only here, right? Ignoring stochs?

If we're only looking at trend, which trendlines should we pay the most attention to? On this weekly, the lines start to go from "up" to "flat" at/around the 27 MA. From there until the 2MA, they are down, with the 2MA going up.

Originally Posted by Ingot54

At the very least you should harvest a few nice pips with that entry, but be aware of how fickle daily charts can be - it will require daily monitoring.

No problem! I've setup a blog to do just that: Choice not Chance

We're exiting on fishnetting, correct? How much fishnetting? Is it possible to draw the line between "ok that's fishnetting, exit" and "eh, not yet, wait another bar to see what happens" ? I guess here is where personalization comes in.

Originally Posted by Ingot54

Further comfort could be taken from those 4 candles with the lower tails all bouncing off the 50% fib lines (or near enough - they certainly clearly respected that support).

So that showed the 50% was strong support. Seeing as how support turns into resistance, and that being strong support: would it turn into strong resistance, or would that make it weak resistance?

Also, Ingot, how do you feel about trailing the stop by 200 pips or so? More personalization? I would hate to see my current +278 USDCAD trade reverse all the way and end up losing 200-250p when I could have trailed it to breakeven, +28, or +78.

I've been monitoring this thread religiously, as I feel it's a great strategy. I'm looking forward to learning more.

In the meantime, here's how I've been using it:

I'm trading the daily charts (currently GBP/USD only), placing my order at the open of the new daily candle.

I look at the rainbow (it truly is an easy visual aid) for the trend, then check to make sure the stochs line up, too. Then, I place my trade accordingly.

Now, I have also been checking the Forex Factory calendar to see what news might be coming out that day, paying attention to the major announcements and their "predictions". However, my main decision is made from the rainbow and stochs.

I'm trading on the conservative side right now -- and only in demo -- to test the waters, so I use a 100 pip S/L and 150 T/P. If I don't make my 150 pips one day, then I keep the trade open as long as the trend continues. If the trend changes, then I'll close my position and open a new one.

So far, so good. Last week's trades were all winners.

One thing I forget to do (thanks for the reminder, Ingot) is to also check the weekly and monthly charts. I'll try to keep this in mind from now on.

This is very interesting for me. When I first started in Forex, I used to think that I had to follow a strategy to the letter. I guess that's why most of them never worked for me -- they didn't fit my style and I wasn't personalizing them.

Now, with this strategy, I'm trying to personalize it a little and experiment a bit, all the while learning more overall. Eventually, I'd love to progress to trading weekly charts. It'll come.

Thanks for this thread, Ingot. I'm eagerly awaiting more of your wisdom.

And, thanks to all who are contributing here, as it makes us all think in different ways that we may not be accustomed to -- yet.

[Ingot54]

Cosgrove - it just might be that you are hitting a nice jackpot here ... maybe.

When you look at the weekly chart you do that to confirm trend, but you must not disregard the Stochastics.

As you can see from your WEEKLY chart on your post, the ST stochs were JUST about to turn upwards.

On the DAILY chart ALL of the stochs were already on their way.

So what can we deduce from that?

1) That the reversal CAN be trusted with a higher probability of success BECAUSE we have TWO time-frames (TF is the abbreviation I use for those just joining here) which are pointing to the reversal of trend.

It is signaling to us that the INTERMEDIATE correction is over, and the LT trend - a RALLY, is resuming.

2) Because the stochs are very closely knit into Spudfyre's "rope" it adds much more strength to the move.

3) Conversely, in the absence of "fishnetting" or criss-crossing of LT and ST stochs, there is nothing to fear about the trend slowing and moving sideways. There is only one thing this trend is wanting ... to rally hard.

I am thinking that the thick yellow line (which represents the 14-3-3 stochastic) will NOT even reach the 23.6 line on the WEEKLY chart.

Why? (We MUST always ask "why" if we are to learn something)

Because the "rope" is so tight - it looks like it will drag the weekly stochs clean off their feet, forcing them to rally hard too.

Don't you love this stuff - doesn't it beat sitting there screen-gazing all day looking for a good setup to scalp 30 pips? (Couldn't help that comment - my adrenalin pumps when I see a setup like Cosgrove is sharing with us).

All of the above stuff to illustrate the importance of NEVER ignoring the stochastics in ANY TF - if it is not a good setup - go fishing ... and come back this afternoon, or tomorrow morning to actually discover a great setup like this one.

Benefit:
You have a great life (fishing is not so bad)
You get exercise
You have no stress
Your profits WILL come - in greater measure than EVER before
(Here insert your own lifestyle benefit!)
And always keep in mind, you do NOT have to be trading every day - just trade the good ones as they turn up - there is no need to force trades that are not there.

Next question: "We're exiting on fishnetting..."

YES! ... or exit shorts when the turnaround crosses the 23.6 from underneath, or exit longs when the turnaround crosses the 76.4 from above.

That is discretionary, but the guidelines have to be given to alert you to the fact that the trend may have run its course. Once you make an exit, I would hesitate to re-enter until ALL the correct factors realign once more.

Sometimes this seems like a hard rule (and it will be up to your judgement and experience to make that decision) because a trade may go on to add another 200 pips!

Ouch! But be content to take what you can and move ahead. Look around (amongst the majors) for another great setup - congratulate yourself for accepting the pips, and again, take a break and go fishing.

Once we relax as traders, nothing will break your confidence, or your common sense. Anxiety kills traders. Cut it out!

Regarding your question on Support/Resistance Cosgrove - I accept wholeheartedly that it is prudent to keep an eye on those. But be aware of the dangers of complicating a simple system. An edge is an edge ... and while you must personalise this to suit your own risk profile, the danger is that we again bog down in indicators.

I developed this because I was fed up with 180 + indicators and so on that were being promoted to traders. I'd had enough and my life was spiralling out of sync with reality! I took a step back and thought: "What th' ..." That's all I would comment about support/resistance. Good, but is it necessary in this strategy? If it helps - by all means observe it.

Regarding Stops:

If you look back at POST #38 you will see the kind of thing that happens. Read through the scenario regarding the triggering of contingent orders - entry/exit/stops and so on. Crazy. How much did THAT hurt traders? So yes - I would use a 150 to 200-pip stop.

Why? (there's that little question again) ...

... Because big moves SELDOM signal reversal of trend. They are the result of NEWS, and only highly skilled people whose lifestyle is geared to scalping-type trading (eg house-bound folks who rely on the intellectual stimulation to give them quality of life) would be able to do well from such volatility.

I have seen statistics that say that over the past umpteen years, only 35 news events have signaled trend reversals. That would be out of (proportionately ... only a ball-park guess) around 3000 news-related events. If you go over these events, you will see a violent UP-swing followed by a rapid DOWN-swing, followed by resumption of the trend in the current direction.

If you have close stops ... you are out of the trade ... and the market goes on its merry way as if the news never happened.

If you make 6,000 + pips each year, it is not too painful to give back 200 a few times as insurance against a melt-down while you are out fishing ... lol ... but I don't see this happening more than twice a year on average ... who really knows - I have not seen it.

Keep in mind that stops should NEVER be used to get you out of a trade - it is preferential to CHOOSE to exit a trade. But the wide stop has its function too - to save you from the catastrophe that would befall you if a 9/11 event occurred. The market can reverse 2500 pips under such conditions.

Again I congratulate you Cosgrove - thank you heartily for your interest and participation. gets my enthusiasm really fired up.