Pips of GLORY - Smart Money Trading

[Sweet Pip]

I think it's about time I got my own thread ...BDay present to self...

This is going to be more of a blog/journal to facilitate a bit more discipline for myself, so I'm not going to present any tutorial type posts of how to use the tools/indicators that I'll be using...like what are fibs or gartley patterns...there are plenty of those to refer to if you want to learn them. What it will contain are examples of the setup conditions and whether a trade comes out of it or not. I will be hooking up my demo account to MT4PIPS.com for trade results.

I've bounced around for the last 2+ years trying to find a profitable method that I could work on a part time basis. I've gone from EA's to Scalping and now to Swing Trading.

This method is based on what I've come to know as Smart Money Trading as introduced by InnerCircleTrader. It uses Pivots, Patterns, & Support & Resistance levels. What I like is that it brings together many tools I've been using separately, and in doing so brings what I feel is some clarity to what I see on the charts and what it means probability wise.

I may bumble around a bit as I'm still learning this myself..lol, but more importantly, the goal is to practice the patience that is required. I will be focusing on the GBPUSD initially, but I'd like to see it eventually work for me on other pairs too.

So I will start as soon as I see my next setup...warning...may contain colorful charts!

[wrtm_19]

Hi SweetPip,

Great to see you've started your own thread, plus it will be a great place to keep sharing the smart money concepts. You're not new at this and I'm sure there's a lot to learn from you.

I'll be lurking around

Cheers!

[Synergistik]

Ah the students of ICT continue his legacy... I love it. I'm certain I will be a long term viewer of this thread. Looking forward to it.

Synergy

[Sweet Pip]

The main ingredient in this method is patience - patience for price to setup. Now would be a good time to recap what the setup looks like while waiting for it.

On my charts I have key support & resistance levels plotted on the Monthly down to the intraday timeframes. I also have the daily pivot levels plotted using the midnight to midnight EST zone for their calculation. Finally I have the previous day's Hi, Lo & Open plotted. I also throw a couple of fibs on swings of the higher timeframes and use those levels too.

As for indicators, I am using a 2 period CCI histogram indicator with the period settings of 9 & 26....kinda like the MaCD. This indicator has 2 purposes...one for Overbought/Sold conditions, and also for Divergences between price & momentum. The other indicator I'm using is EURUSD price. The GPBUSD & EURUSD are highley correlated, so I'm looking for Divergences in their correlation. I could use an indictor and keep them in 1 chart, but I have them in their own charts stacked together for comparison.

Other indicators I use are informational like when news reports are scheduled to be released, the range price has traveled so far, the average daily range, and a pattern recognition indicator.

So that's my chart setup. What I am looking for now is for price to setup. At 9:00pm PST zone (or midnight EST) my new pivot levels are calculated and then I wait for price to be at or near the previous days' hi or lo to trade false breakouts (bounces). I create an alert to let me know when it gets there. Then when it gets there, I start looking a little deeper and add some filters.

What I'll be looking for is at least a triple confluence of events that gives reason for price to react (bounce) here. The events are retests of price levels that also converge with chart patterns, divergences of price/oscillator, divergence of the EURUSD correlation, key S&R levels, convergences of fib levels, and pivot levels of the S1,S2,R1,R2 or their mid points. I also need to note what the directional bias is, whether price is in an oversold or bought condition, and whether price is in a trending or consolidation period....phewww!

That's it for now. Hopefully the late Asian session tonight will provide something to work with and I'll explain my entry, stop & target placement strategy then. If I've misunderstood or missed anything for this stage, then please comment.

** 15-JUL-11 REVISED **
I have removed the CCI Histogram, pivots, and the pattern recognition indicator. I have added MT4's Volume indicator. I still have the previous days high & low, and other key multi-timeframe S&R levels mapped out, but now I have an indicator that automatically draws them for me. I still have the daily range, news releases & market flow dashboard informational indicators. I did add the 3 Ducks SMAs on my market flow dashboard just for fun and to see how much of an extra edge it gives me when they're all lined up with my directional bias. I added a candlestick pattern alert too, which will sound when a pinbar or engufling candle pattern forms on the 6 pairs I monitor. Saves me from having to monitor so much and from missing any especially on the 5 min charts.

For directional bias starters, I check the DAILY timeframe for specific candle patterns (pinbars & engulfing). The last one to form remains in effect until an opposing one forms, meaning if a bullish pin bar formed a couple of days ago, bias will remain bullish until a bearish pinbar or engulfing forms.

Once I determine my bias, I move down to the HOURLY and wait for 1 of 2 setups in harmony with the bias:
1) price retraces/pullsback into the previous daily range (PDR) between the 38-2% fib zone and forms a bias candle pattern (pinbars & engulfing) that's suggests the retrace has ended, or
2) price continues the bias with a breakout and hold of the PDR.

Once either of the above happens, then upon the close of the hourly candle I move down to the 5 MIN and wait for either of the 2 setups to happen again. once either of those happen, entry it on the close of the 5 min candle.

The volume indicator is to help determine the strength of the candle patterns...a low volume pinbar or engulfing candle may indicate a fakeout....learning a little VSA helps. For breakouts, higher volume seems to indicate higher probability of a false breakout, where lower volume means there is not much to stop the move from continuing.

The stop goes at the end of the retrace, or the pattern candle...whichever risk is more acceptable. Take profit can either be left open, or set to the next S or R level accordingly.

I have a couple of scripts to open orders...a buy script and sell script...that sets the magic number of the order. After that, an EA will manage orders by taking partial profits and moving the stop to b/e after reaching adjustable targets.

This can be repeated throughout the day as long as the current daily range hasn't been exhausted, or it's too close to a news report release time, or too close to an opposing S or R zone.

You can skip ahead to my trade examples with the revised method

[wrtm_19]

Hi SweetPip,

How was the celebration!?

Did you trade today's set up?. This one was my first loser with this approach, and even though I had no price pattern at all, there were good and enough convergences (ok, better said, confluences would say some guy) and what to me looked like a price divergence.

I'm aware we can't win them all, but also I don't know which could be a sign to switch from bull to bear, when we are, for exemple, in the buy zone. Not always a false break out occurs, and as the guys in the Daily High/low thread have been trying, actual break outs do occur frequently.

I know, congestion/multiple events and price patterns would confirm that, but I'm still confused about which key levels to consider important, and in which cases.

Also I don't quite understand the real use of daily trend/direction, in my short time watching the key levels, that doesn't seem to be of much influence in price behavior when it hits key support/resistance levels when we are talking of intraday trading.

Do you have any thoughts regarding this?

Thanks

[donkey]

a total "newbie" perspective. I will be following this thread closely as I found the ICT thread at about the same time I started researching this whole forex business. I am going to try to use these concepts as my foundation, so I will be very interested to see if some of the setups I see are similar to what you more experienced folks see.

That being said - if I run my pivots etc. correctly, it looks to me like the 1.50ish KSR holds promise for monday. 1.5019 was the Sunday high, and 1.5018 was a high on 3/24. On the 4 hour charts that level looks to be the neckline of a head/shoulders pattern. It also looks to have provided support resistance on at least 6 different occasions in March (1H chart). I believe that level will be a nice short opportunity Monday. If price does break through, the level looks to be a potential support level for long positions. I am still in Demo, but plan to make a move off of that KSR based on what happens between now and London open.

Looks like a green bull candle just touched 1.5017 and is in a drop as I typed this up, so resistance at that level on Monday? Thoughts?....and let me know if I'm intruding on the thread.

[Sweet Pip]

Hi SweetPip,

How was the celebration!?

Did you trade today's set up?. This one was my first loser with this approach, and even though I had no price pattern at all, there were good and enough convergences (ok, better said, confluences would say some guy) and what to me looked like a price divergence.

I'm aware we can't win them all, but also I don't know which could be a sign to switch from bull to bear, when we are, for exemple, in the buy zone. Not always a false break out occurs, and as the guys in the Daily High/low thread have been trying, actual break outs do occur frequently.

I know, congestion/multiple events and price patterns would confirm that, but I'm still confused about which key levels to consider important, and in which cases.

Also I don't quite understand the real use of daily trend/direction, in my short time watching the key levels, that doesn't seem to be of much influence in price behavior when it hits key support/resistance levels when we are talking of intraday trading.

Do you have any thoughts regarding this?

Thanks

Hi wrtm...celebration was great!...still feelin the after effects...lol. Which is part of why I didnt trade today along with wasn't really able to.

For now my longer term bias for direction is seated in a nice looking bullish Bat pattern on the weekly which I have projected to complete at 1.3900.



As for determining the intraday direction, ICT commented that one looks for rallies towards a pivot support or resistance on retracements or corrections of the longer term trend direction...markets trade higher to trade lower, or they trade lower to trade higher. The same question exists as with EW...are we at the end of the correction, or the beginning of a reversal...lol.

So following the checklist:

1) the market flow of the daily chart could be up...a bounce up from support level as in an up correction of an overall down flow.

2) can the downward flow swing lower without being oversold?...according to my CCI indicator, yes it could.

3) now look for the new daily high to be made in the first 4 hours.

4) The H1 & H4 need to be in sync then sell signals are looked for at the pivots above the center pivot.

5) We did not open below the previous days low.

6) We opened in the SELL ZONE...but not in the R1-R2 pivots area which apparently is where new high is expected to form.

So it looks like we wait for price to get up to the PDH and perhaps R1

[Sweet Pip]

Hi donkey, don't mind at all...welcome.

My last post took over an hour to type with watching a couple of favorite shows....lol...and upon finishing, price has passed the PDH, and now reached the R1 pivot level

So now need to define at least 2 more reasons for price to want to go down somewhere around here.

[wrtm_19]

and now reached the R1 pivot level

So now need to define at least 2 more reasons for price to want to go down somewhere around here.

And I don't seem to find any! lol.

Thanks for answering to my post, I get all confused when things don't seem to present themselves in an easy way with this method. I need practice.

To me the level with more influence would be R2 (1.5088ish). Some important historic support/resistance lines lie there plus the 50% fib level of a previous important swing.

If price gets there, the thing would be confirm if the smart money tool shows some hints.

Let's see

[ddinnov]

On my charts I have key support & resistance levels plotted on the Monthly down to the intraday timeframes. I also have the daily pivot levels plotted using the midnight to midnight EST zone for their calculation. Finally I have the previous day's Hi, Lo & Open plotted. I also throw a couple of fibs on swings of the higher timeframes and use those levels too.

I'm very interested in learning more about this side of things. Glad this thread is here