Jerome's Journal

EC patterns are definitely very powerful, especially on higher time frames,
When all three sessions result in a candle being overwhelmingly bullish or
bearish it probably means something

when a candle on the M1 or M5 prints a similar pattern it can be 10,000
times less substantial and convincing than the weekly time frame! - a blip
even

Today some very compelling setups on both Daily and Weekly.

Of particular note are currencies where there are confluent setups on both.

Short on-
GBPJPY 144.097
GBPCHF 1.26861
CHFJPY 113.386

A beautiful sample here of engulfing pattern on GBPJPY -

There are many conflicting schools of thought and I reject rules that just
plain don’t make sense to me.

So currently here are my rules for EC patterns:-

Range of Signal candle must engulf range of preceding candle

The signal candle body does NOT need to engulf the body of the preceding candle however the body (Close) must exceed the range ie High or Low, of preceding candle.

The Close of candle must be in the top or bottom 25% of range, the ideal close being a ‘Shaved head’ where the close is equal to either the Low or High of candle. Some say within 33% of top or bottom, - it may still be profitable but I’m looking for no ambiguity.

I use ammended Fib tool to check for below bottom 25% or above top 75% - makes life much easier and eliminates error - This is an important rule, unless the Close is decisively near top or bottom I cannot consider it unequivocally bullish or bearish

The Entry candle must exceed range of Signal Candle by at least 10 pips. If it is very much less then I will hold back for another one or two candles and will be looking to enter as much as 30 pips beyond the High or Low of Signal Candle. If nothing much has happened within three candles I place the currency on my ‘Watch List’ but I would then need extra compelling reason to enter as
no Signal is relevant forever, - so ideally I want to see movement within the next one or two bars.

Exit - This is tentative but one Fund Manager managing at least $750 Million,
backtested EC patterns with NO S/R zones whatsover on Daily chart only and turned $10,000 into over $2 Million. His strategy was to stay Long or Short until an Opposing EC pattern emerged and then simply Close and Reverse. So an excellent example of letting winners run.

I believe he is genuine, and he wasn’t even selling a service when relating this, but one thing didn’t quite ring true - Letting winners run on higher time frames is where the money is made, I already know that, but he claimed backtesting over 11 years on EURUSD yielded 86% win rate.

I have always associated very high Win rates with only modestly
winning systems and even losing systems that might win a little most
of the time but the rare massive drawdown all but wipes them out.

Usually, letting winners run in a trend following system relies on just a
very few really big wins that just go on and on, even though most trades
might lose for a moderate loss.

So even with a 30% win rate, with most losers losing between
1% - 3% but some of the winners chalking up 10%, 20%, 30%+
you would still do very well and $10,000 could be turned into
$2 Million with compounding.

I would not expect this style of trading to return 86% winning trades or even anything like it. but I like the sound of his approach albeit a little skeptical regarding the stats.

It will be interesting to put this to the test - something profitable is likely to come of it

Also very curious that a Fund Manager should recommend a Micro account so that you could risk 2% precisely on every trade, which you can’t usually do on HTFs with a standard account

It makes mathematical sense but I didn’t think anyone took PAMM micro accounts very seriously, and I have seen Broker warnings to the effect ‘‘This PAMM manager’s Micro account allows him to take extremely high risks!’’

If there is one thing investors are not looking for its very high risks - indeed any risk at all!

but at any rate I’m quite sure that higher time frames, and letting winners run, is where long term success in Forex trading is to be found

Great Start, 7% up at the moment with two 1% risks now
better than Break Even

my CHFJPY trade retired almost straight away as
conflicting setups on W1 and D1.

GBPJPY
GBPCHF

both in very good profit

POs on
NZDJPY
NZDUSD
EURGBP
EURNZD

6 trades and each includes either GBP or NZD

These are the only currencies with EC pattern and
a symmetrical chart. Not a coincidence.

In Forex you don’t need to understand anything, just
notice everything.

I have already found that much of what the above mentioned
Fund Manager relates is fabricated nonsense.

He took every EC pattern on Daily chart over 11 year period
with no regard to structure or S/R

I have sine noticed that a good many EC patterns form in horrific
Choppy sideways markets!

It is not possible to win 86% of the time! far more likely lose 86%
of the time.

I still look for exactly the same Signal candle but only in a very
symmetrical setting ie no chop

Also looking for a cross of 30 EMA and RSI (3) also has to cross
75 or 25 level.

Entries are all working out very well, exit is the big challenge.

I am looking for cross back over 30, significant reverse candle
colour forming, RSI to cross back over 75 or 25

That said, although I have a 90% mechanical entry, my exit
is still far more subjective.

If I see signs of reversal eating all my profit I will bring Stop
down to lock in profits.

But the trade needs some room to breath, but how much?

If I knew that I’d be a very wealthy man!

If you’ve read the book ‘The One Thing’ available free online
you know success comes only by focusing on the one essential
thing that you need to do next, not being scattered.

My one thing is very clear - I need to master exit

Try to lock in too much profit and you will usually get Stopped.

Try to give trade too much breathing space and you will give too
much back!

Watching the interraction between RSI and price action has given
me some very good clues

but it still needs a lot of practice!
but I’m making good progress at the moment

Closed the week on +6.35% profit on two currencies
both opened on Tuesday although late Monday would
have been ok

but my trades I opened late THURSDAY are simply
spluttering around and not doing anything.

Like my very profitable Divergence system Monday
was best entry day and usually Thursday was more
Payday than Entry day

So this may still be the case as the guy on video suggests.

I will go on that assumption for the time being.

There may be a few selections next Monday/Tuesday

I may take them all if they qualify, knowing that over half
may need early retirement - you do seem to get a feel for
the complete non movers

As regard Exits

GBPJPY turned up at just past TZ1 and RSI well reversed up
to 25 level. Sure Sign!

GBPCHF is nowhere near TZ1 but price is breaking up through
RSI(3) 25 level indicating a reversal.

EURGBP looks ok and RSI pointing decisively across 75%
but nothing yet!

I’m looking forward to next Monday and Tuesday
My Entries are sound.

I need more clarity on Exits

First three trades +212, +173, -89

Opened Positions on EURGBP and EURNZD

Watching USDCAD, EURCHF, and GBPUSD

Also, I am recording every screenshot with commentary
to try to establish patterns of what works and what doesn’t

So far, I believe trades opened early in the week are better
than trades opened end of week.

Also RSI 3 is deadly accurate! - if you go short just as
RSI has crossed up over either 25, 50 or 85 you are
probably going to lose

‘‘Opened Positions on EURGBP and EURNZD’’

and in a week neither have moved and so have been retired.
I am now ensuring a very fresh bounce of EMA 50. These
two were far away from 50 and move was over

Nothing much yesterday or Monday but today, WEDNESDAY,
opened AUDJPY and CADJPY on D1

Looking for candle to close both in the top 25% of day’s
range and also in top 25% of candle range. If an EC or
Divergent Candle so much the better.

RSI (period 4) to cross RSI (period 200 ) or the 25 or 75 level
is good. with ideally RSI (14) crossing RSI (200) on W1, at any
rate, Weekly chart must be confluent.

Signal candle should bounce off 50 and entry candle must
cross EMA 8

EMA’s do not have to cross. - its ok if they do but not essential.
this is more looking at price action in relation to MA’s

Opened two positions on both currencies - 80% fixed target around
1:2 RR with 20% trail in case of a runner.

Short on GA H1 RSI 14 crossed above 200
https://www.tradingview.com/x/eVCEZgbJ/ +115 pips

Short AJ H4 14 crossed 200
https://www.tradingview.com/x/c0BZkzHg/

CJ short H4 14/200
https://www.tradingview.com/x/0vLHtHNu/

NJ short H4 14/200
https://www.tradingview.com/x/ERWsCzoa/
noticed RSI is quite different to MT4

Monitoring HA candles with TDI, results superb so far.
This is CADJPY on D1

I can’t mistake that Engulfing candles don’t need to be
full range engulfing, two examples here where full range
is not engulfed but body engulfed and with very
profitable results!

1 Like

Four TDI trades today, each entered green over red. Two reversed
on me whereas the other two did better


The two that lost had this in common:- a good decisive angle of
cross over red but green was pointing up when red was
pointing down!!!

Trade in direction of RED! when green crosses red on first
candle colour change

EU at 18 month high but I have a compelling sell
set up. red is down on H4 and green crossing
sharply down

entered on second candle.

The EU trade worked well for 50 pips.

Knoxville Divergence, recent missed weekly pivot,

red turned over and sharp green cross angle down

I used Todd’s guide of TP 50% toward missed pivot.

worked perfectly this time

a surprisingly good day

a second set up lost badly because it wasn’t a set up

  • perfect divergence, missed pivots, cross of TDI but
    ignored the fact that candle had no body

so it immediately reversed!

but three trades won, all at or just after CAD news
so I will monitor trading at news time with this system

in conjunction with Eelfranz’s approach, only seeking
around 15 pips. This non greedy approach actually
seems to work - on the H4 it does usually move 15 pips
at least before retracing at all.

even a SL of 10 pips should see most win with a
positive RR ratio.

Also looking at M15 to watch for cross of 5. -
a close here may result in BE or no more
than -5 pips.

I know Eelfranz was very cautious about not giving
his initial gains back

so better than 3% today minus the non set up trade
which was careless stupidity. Even 2% not bad



Although this journal is just precisely that, a record of things
that seem to work and things that don’t, nevertheless I note
others are looking in. I’m not recommending anything but
some of my references might not make sense.

I am looking at an Engulfing candle system but also
trialing a system found both here and originally on FF.

If you are interested you can get more information
and pdfs from the thread entitled ‘Big E Trading’

In the short time I have been trading this simple system
I have been very impressed. Many thanks to Johnny Kanoo
and Big E. Very many traders have been helped.

Just watched a TDI youtube video for Binary Options

He recommends that Green first touch upper or lower
blue channel lines on TDI

Why not? so I’ve reinstated them and opened three
trades. Unfortunately my broker platform has crashed,
my second broker has 20 pips spreads around 11pm GMT.

so I’m just using horizontal lines to represent entry at open of
candle, SL under candle ( we’ll see if it was hit ) and TP 15 pips.

what I notice already is two of the trades are starting to move
and one isn’t

any clues?

yes! the two that are moving, both red and yellow are bending
round to new direction

the one that isn’t moving, red is bending round but yellow looks
more like its not for turning, and candle isn’t crossing it

maybe a rule that candle must cross yellow convincingly and
yellow and red must be bending round - but we’ll see

Last night’s three trades failed. EU came to 1 pip
of TP but the other two did nothing. but plenty of
opportunity to get out at BE.

I think trading graveyard shift responsible here

but backtesting sharp angle is key. and only
skimming 15 pips. you can often get 100 and more
but then many reverse after 15 - 20 pip start

Today I’m looking for 15 pips on EA

Also noticed that when green is outside of blue
channel lines and crosses through blue and red
at a sharp angle, it always proceeds to centre line.

not always straight away in which case it might end
up with a small loss, but most of the time you will
get your 15 pips quite easily.

as we can see, it’s better to come in from the outside
than to start around the centre area

Finally I might have cracked it! and if I haven’t the
fault still lies with me and not the system.

I think this morning’s trade might just be a perfect
model for me to stick to

Trade ONLY London and NY session! Today
was London session that Big E recommends.

  • The market needs to be moving

and once again there was GBP News -
invariably News causes some movement

and we see a perfect example of green going
right outside of everything, below 32, below
lower blue channel, then crossing up through
32, lower blue and finally crossing red -

Nothing much to say about the HA candles except
that I waited to enter until there was SUBSTANCE
to the actual body.

I only looked for about 15 pips, I didn’t measure
exactly as I saw the tight consolidation around
that area - it was actually 18 pips which was
more than I expected - Its been an hour since
the TP was hit and it only ever went 10 pips
above TP and has now returned to around
the TP mark - obviously I don’t know where it
will go later, but again, looking for small gains
might be the right approach, or at least taking
most off the table when you reach around the
15 pip region and leaving a very small position
to carry on if it wishes.

at the moment I am happy if I can just get the
15 pips consistently.

Today’s trade was just like the two circled examples
in the post above although I notice immediately after
the second circle green went just out of blue and crossed
red and price reversed for a loss!

REASON: Green never went below 32 or even anywhere
near it!

Its the old ‘rubber band’ analogy, unless the ‘elastic’ is
really stretched it won’t catapult price in the opposite
direction -

so whatever happens anywhere central in the
window will be, and has been far less reliable.

I also note that Big E might only cherry pick
two trades a week.

That means passing over literally dozens of
trades that must surely qualify, or come near
to qualifying

This system works - unquestionably!

Knowing exactly what set ups to cherry pick,
and having the discipline to walk away from
everything else is the difference between
winning and losing.

Engulfing Candles:

Just noticed two set ups that both were
profitable on H4 but only for 50 pips and
40 pips respectively. Both were counter trend

Trading against trend is tricky but there may be
opportunities if you just aims for 30 pips then
switch to M5 and take your cue from price
action and get out at first sign of price reverting
to the original H4 trend direction

It actually sounds like quite a smart approach
to my original strategy in the first posts of this
thread - will monitor

Similar formula to the EURGBP winner earlier
on the EURCAD

green right out before crossing everything
decisively

TP at 20 pips which is nearest resistance that
has already been hit by last two candles.

It may exceed that this time or go into
consolidation, but the hope is it will
at least hit my 20 pip TP