:DWOW!
Very interesting!
Thanks!
Momentum and Entry , Exit Areas
In the last Part we show how to get a good idea which way to trade. Now lets look at how we can tell when it is time to look for a
trade. We need to know when the current move is running out of steam.
On our charts the first is a 15 min EUR/USD from today. The yellow arrows show the 1 / 15 min red candle we are looking at
it opened around 1.3201 and touched 1.3120 then closed around 1.3140 . Everyone says if I can only get 20 pips a day… That pull back ( the wick was almost all you needed then). But how could we know it was going to do that pullback. We use a quicker chart.
The next chart is the 5 min. The yellow arrows mark the top and bottom of the move. The red arrows mark the 3 candles that make up the 1 / 15 m candle. We see the same move but doesn't look like we could have got into that trade of the 1 green candle.. Oh well ,,,
The next chart though is the 1 min . Now we have 15 candles to look at for the same 1 /15 min candle. On this chart you can clearlly see what took place. We hit 1.3121 and then pulled back the next candle went green , Further indication that we are considering a change of direction. The next 2 candles retested the bottom which held. So I would have entered on the next when it passed the body of the previous red, at about 1.3128 , Stop below 1.3120, This is a scalping trade of course off the 1 min. But pips is pips… I personally would have closed the trade around 1.3140, After the 3 green candles each which was getting weaker ( smaller ) than the red. I am out, why give it back. You just made half your days amount of pips. If it had gone against you. Then you only have to make up about 10 or 12, not a big deal.
On the last 15 min chart we. We can see the green candles are opening and pulling back ( the lower wicks ) and the bodies are getting smaller a sure sign the the force of the move is weaking Momentum is falling. Then the red Doji with a lower high than the green beside it is a confirmation. Good for 20 or 30 pips then a retest that pushed above but the big number of 1.3200 held it back. That is coming in a later section.
But this is what I look for to get me ready for a trade. The price slowing then turning. This was the 15 minute. I know on the 5 or 1 min. There were multiple trades available.
This is also what we look for to exit but I ussually look at the 1 min. for that. Shows it's hand quicker...
Good Trading To All Ken Lee :eek:
1 min Momentum.bmp (733 KB)
5 min Momentum.bmp (730 KB)
15 min Momentum.bmp (730 KB)
15 min Momentum weaking.bmp (1000 KB)
This is GOLD!!! 
Swings Summary
Let's now sum up what we know about swings. If you have a Higher High and a Higher Low you are in at up trend on that time frame chart your looking at. If you have a Lower High and a Lower Low your in a down trend.
In chart 1 You will see that we have Lower Highs and Higher Lows. This is the signal of a consolidation area, Which we now know normally breaks out in the same direction it entered the consolidation area. But not always. This one went down tested the 1.3600 area then went up. But this is a 2 hr. Chart and there were some good trades to be had.. Hundreds of pips.
In chart 2, 15 min GBP/USD from yesterday. The Blue arrows Point to a Higher High , The Green arrow points to the Higher Low of that swing. The circle shows a consolidation area . With the Red arrows showing a Higher High and Higher Low . Warning of a impending Long Break out.
Take a look at the Blue and Green arrows and even the Red, Look at the candles they are pointing to. Don’t they look like the arrows pointing in the direction you should go ? When I look at candles I imagine them to be rockets and the wick is the exhaust. So the rocket has to go in the opposite direction of the wick. This is a warning of a possible turn. Longer the wick or exhaust stronger the push…
So even without a trendline to trade off of we should be able to make a EDUCATED choice. ( not guess) Which way the price is going to go. As we continue we will just be adding more tools to our tool box making us the best armed traders out there.
Good Trading To All Ken Lee ;)
Consildating Swings.bmp (1.03 MB)
Swing Signals and Entries.bmp (914 KB)
You Want to Go Up Why go Down
When I started trading and wasn’t paying attention and didn’t know diddlly or His brother. I was constantlly jumping in trades only to have them go the other way. So of course I would change direction to go the right way… WRONG WRONG WRONG , That is what is called chasing trades it will never work.
Another analogy… Sorry… You are on the 20th floor of a highrise , and you want to go to the 40th floor. There are 2 elevator cars both buttons are pushed one for up, one for down. One car is coming down from the 30th floor the other is coming up from the 10th floor.
They both arrive at the same time. The doors open and you get into the one that was coming up from the 10th floor only to have it start down. Darn what happened? You were not paying attention when the doors opened the signals at the top of the doors changed the car coming down was now going up and the car your in is now going down . In the wrong direction.
As you should have noticed in our swing section price comes back before it goes in it’s intended direction. This is common 101 science for every action there is a reaction. So the key is to pay attention to all the information available.
We will get into that more in our next section on what forms our swings. We will look even deeper into our charts and get down into the microscopic level… You will see everything has a reason for being there, and all we have to do is look…
Good Trading To All Ken Lee :rolleyes:
Elevator Analogy chart.bmp (770 KB)
First I would like to Thank everyone that is reading. I started this for me as well as anyone else that gets a little from it. I also e-mail this to a small group of friends. Some have asked for entry exit signals which we will do some of at some point . But that is not the focuse of this thread it is to show you where to enter and exit. As we progress through this you will gain the knowledge you need to make those choices yourself.
Taking signals from someone else is the same as using a indicator, But instead of a cross of this EMA over that SMA it would be a slow Ken signal.
We will also get into some long term trading ideas after we have all the tools to do so. That is what I like to call the millionaires club as it takes more money to do but a little less stress if you are properlly funded.
Also to properlly get everything out of this you can try and look at everything we are talking about on your own charts. I am trying to use current information. When I can find it on recent charts.
Anyway sit back and enjoy… I will attach al ittle teaser chart of things to come…
Good Trading to ALL
Fibonacci ??? What The %#@@
You know we would have to get to it. Is Fibonacci Devine Intervention or Quantium Phsyics ? Do we care ? Does it only work becuase so many believe. Here is at little Information from The University of Georgia on the subject. Food for thought. This will be our next section.
The Fibonacci numbers are Nature's numbering system. They appear everywhere in Nature, from the leaf arrangement in plants, to the pattern of the florets of a flower, the bracts of a pinecone, or the scales of a pineapple. The Fibonacci numbers are therefore applicable to the growth of every living thing, including a single cell, a grain of wheat, a hive of bees, and even all of mankind.
Plants do not know about this sequence - they just grow in the most efficient ways. Many plants show the Fibonacci numbers in the arrangement of the leaves around the stem. Some pine cones and fir cones also show the numbers, as do daisies and sunflowers. Sunflowers can contain the number 89, or even 144. Many other plants, such as succulents, also show the numbers. Some coniferous trees show these numbers in the bumps on their trunks. And palm trees show the numbers in the rings on their trunks.
Why do these arrangements occur? In the case of leaf arrangement, or phyllotaxis, some of the cases may be related to maximizing the space for each leaf, or the average amount of light falling on each one. Even a tiny advantage would come to dominate, over many generations. In the case of close-packed leaves in cabbages and succulents the correct arrangement may be crucial for availability of space.
In the seeming randomness of the natural world, we can find many instances of mathematical order involving the Fibonacci numbers .
Don't Hurt Yourself thinking about this to Hard Ken Lee :confused:
Fibonacci and Nature.bmp (125 KB)
Hi kenneth! Nice posts!
I have some questions!
Correct me if im wrong. You use 4h chart as your big time frame right? You drow your trendlines, suport and resistance points. And then you change to a smaller time frime, which is 15 min right? And you make the same thing, drow yor trend lines and support and resistance points.
My first questions is: Do you use a smaller timefrime to get your entry signals? You also look at 5min charts? or 1 min?.
And my second question is: How do you set your stop loss and profit target? How many pips is that?
well…it was more than two questions!
thanks!
Correct me if im wrong. You use 4h chart as your big time frame right? You drow your trendlines, suport and resistance points. And then you change to a smaller time frime, which is 15 min right? And you make the same thing, drow yor trend lines and support and resistance points.
I personally trade off a 15 minute, when Looking for trendline areas and other points of interest. I change the time to 2 or 4 hr depending on what I find. I am looking for anything that might impact my trading during the time I will be trading. Somethings we haven’t covered yet. I then make the same chart a 15 minute and all the lines and areas of interest will still be there,. Some might not be visible becuase price might not be near them yet. But if some time during my trading session it starts getting close I will not be suprised.
I then draw any lines and note any areas of interest that I see on that same 15 minute chart. I am then ready to trade…
My first questions is: Do you use a smaller timefrime to get your entry signals? You also look at 5min charts? or 1 min?.
In trendline trading there is no reason to look a different time chart as the entry is on the Line for a bounce, Just enter as close as you can , This way if it goes against you , you will have the least lost possible. On a Break out trade the price crosses the line and closes on the otherside the next candle we hope pulls back toward line and if it then goes past the extremeof the first candle including the wick we consider the line broken and a breakout trade is in play. Sometimes the second candle just continues without a pullback this is riskier as they normally all ways retest that line.
And my second question is: How do you set your stop loss and profit target? How many pips is that?
Stop loss I had already covered, But I personally on a trendline trade will watch the price action. If the price crosses the line I then wait to make sure it stays on outside. If it does I will look to trade it as a breakout. Which is the same thing we are looking for as our stop loss area.
On profit taking I will have a area in mind it will be a area of interest that I have already noted. We are going to get to all that pretty soon. I am not really teaching any one strategy but the whole price action issue and how we can get trades using everything I will show you. I don't trade any one thing. I use evrything availablr to make a desicsion.If you esplode the teaser chart I sent earlier it shows the entry for a breakout . Just push control and the + on your keyboard to zoom in.
Good Trading To You Ken Lee :)Thanks Kenneth, is clear now!
You said this: “On a Break out trade the price crosses the line and closes on the otherside the next candle we hope pulls back toward line and if it then goes past the extremeof the first candle including the wick we consider the line broken and a breakout trade is in play. Sometimes the second candle just continues without a pullback this is riskier as they normally all ways retest that line”
Lets say that prices break a resistance line. If the sencond candle doesn�t retest the line and just continuues…is that a good signal to buy? or we should wait until it hits the next resistance level (to sell).
I’m following this thread with great interest!
I have to ask: do you use Fractals (Bill Williams)? They seem to be a neat way of highlighting swing high and lows.
Best regards
Lets say that prices break a resistance line. If the sencond candle doesn�t retest the line and just continuues…is that a good signal to buy? or we should wait until it hits the next resistance level (to sell).
No we can take the trade but we are aware that it can an does turn back and retest the line, So we are cautious..
I have to ask: do you use Fractals (Bill Williams)? They seem to be a neat way of highlighting swing high and lows.
I have never heard of them or Him. I didn’t release anything was required to see what was right in front of us… Not try to be smart just honest.
Great stuff, Ken! I’m a lurker by nature, but just wanted thank you for the insight you’ve shared so far. I’m eagerly awaiting your future posts on the topic.
Jon
gr8 post ken
Just to add on what Kenneth had said, a pullback is a more ideal setup for playing breakout. If price doesn’t come back and retest the line, then a trader has to play enter according to his/her own risk management. 
Hi Kenneth Lee,
like so many other, I just want to tell you I really enjoy read this thread.
You make a great job!
I have a question for you
What do you think of [B]real fast[/B] chart using (ticks) [(3)ticks for exemple] combine with a 1 min chart?
Thanks!
What do you think of real fast chart using (ticks) [(3)ticks for exemple] combine with a 1 min chart?
I personnally have never used a tick chart. But my personnal veiw is that using different time charts together is the only way to go. Even those that say to stay on one time chart. Almost always do some analysis on large time frame charts first…
"Oh no Not another analogy !!" Your in a new area in rental car you have directions to where you want to go. ( A trading plan) You know the rules of the road. You cna follow street signs and exits etc.. But wouldn't it be better if you had one of those gps thinkys. So you could zoom out and actually see where you are in relationship to everything else ? I think so..
See attachments below for clarification…
Good Trading to All Ken Lee;)
Roadway.bmp (271 KB)
map.bmp (844 KB)
I saw this nice progressive trendline layout on the GBP 1 minute chart early this am. Thought I would post it up. Lets say in this scenario you had taken the breakout at of consolidation at the top. Where to get out ? You start drawing trendlines as the swings move down connecting the Peak to the Lower Highes as the progress. Whenever a line is broken this is your exit signal for max profits.
Think you could use this for aentry signal also ?? Look slike a nice 30 pip run back up after the breakout at the bottom. I will more than likelly repost this when we discuss stops and profit targets, which will be a bit later..
Good Trading to All Ken Lee :cool:
ps. Might not get to fibs till this weekend.
the wonder of the computer is that it DOES things for you !
trendlines, support and resistance areas and even automatic fibline placement are all within the purvue of those little add on indicators for the MT4 platform, the higher end charting programs and probably the ipod at this point in time (you think steve jobs dont check his net worth daily ?)
simpler to just let the computer do it methinks
enjoy and trade well
mp
[I][B]Within the great hall at Elfinore stands a wondrous coffer, precisely four cubits square and securely latched against the outside world. Inside that repository, shut away from impertinent eyes, abides many an intriquing trading secret garnered from around the world and over the ages !
As a child, i used to watch from the darkness as the secrets were debated and annotated by the elders. No one there held a single thought of my presence – BUT I KNOW WHERE THEY HID THE KEY !![/B][/I]
than help the readers and post indicators please!