Price Action on Daily & 4H Charts- No More Indicators, News or Smaller Time Frames

Trading Systems
1

The goal of this thread is to show traders a more consistent, reliable way of trading the Currency Market using Price Action on the Daily & 4 Hour Charts. You will see a more practical, realistic way of trading that is in sync with the major market movements, independent of;

[ul]
[li]Lagging Statistical Indicators;
[/li][li]Contradictory Economic News;
[/li][li]Volatile, Stressful Lower Time Frames;
[/li][/ul]

INDICATORS & ECONOMIC DATA

Statistical Indicators are the most widely used tools in trading, but most are based on past price data. This makes them lagging in nature and inaccurate when providing entry signals. Short-term economic data are also used to support technical-based trading, but most are often quite volatile and lead to erratic, short-lived reactions. Since the major economic factors that actually lead to strong currency movements will be reflected on the Larger Time Frames, using these signals for market direction will always be the better decision for traders.

HIGH FAILURE RATE OF TRADERS

The reality of Forex Trading is the vast majority of persons lose money. Since most tend to be Day Traders, using the smaller time frames for their trading, the high failure rate is at least highly correlated with this way of trading, if not the cause of it.

Most persons that were exposed to the market for the first time are likely to have headed straight for the smaller time frames in an attempt to capture small, but quick pips. This is what the Trading, Marketing and Brokerage Companies promote since the more frequently their clients trade, the more money there is for them, regardless of how profitable Day Trading actually is. If we were in charge of these companies, wouldn’t we do the same?

This isn’t to say that there aren’t successful Day traders, but there are several bad habits that are forced upon them by the volatile nature of the Smaller Time frames and daily currency movements that makes it highly unlikely:

• Indecision about the size of stop losses and pip targets;
• Constantly switching from currency to currency to decide on which to trade in the very short trading day;
• Anxiously waiting on a target to be hit;
• Indecision as to whether to monitor a trade or leave it until it is closed;
• The pressure to meet daily or weekly pip targets/monetary goals;
• Resisting or falling to the temptation of violating a trade plan in order to meet these targets;
• Trying to stay objective while wanting to take ´revenge´ on the market for a loss ;
• Getting more emotional, irritable and anxious than you normally are;
• Feeling trapped like a mouse in a maze, with the cheese nowhere to be found;

Another reason relates to the promoted approach to Currency Trading that comes from the prevalent culture in today’s society;

• Everything must be done NOW OR ELSE! Am I right?

Trading is just a click away and with the ability to see several pips of movement happening right in front of us everyday, it is very tempting to want to trade when we want to. But desire is one thing and reality is another.

Feeding our emotions on a regular basis when it comes to money is a recipe for disaster; using Discipline, Patience and Self-control along with High Probability, Stable Trades are the pillars for financial success over the LONG-TERM.

This is what the Swing Trading on the Larger Time Frames offers. You can identify a setup, trade it, then leave it until the target is hit a few days later. No need to micro manage your trade. I you were to just take a cursory glance at these time frames relative to the smaller charts you can see the greater stability and consistency in their movements.

When this is combined with my Price Action strategy, which identifies high probability candlestick patterns without the use of lagging Statistical Indicators, trading becomes a lot simpler. There is also no need to follow the news since most of it is volatile and contradictory and are usually reflected in the signals given on the larger time frames.

FROM DAY TRADING TO SWING TRADING

I used to Day Trade and failed at miserably, no matter how often I tried different approaches. It was only after several years of losing money that I actually started to look at the higher time frames and started to be profitable. Unfortunately it took me a while to humble myself and ignore the lower time frames for good. Having finally done this, I spent several months developing a Trading Manual that narrows down the parameters needed to successfully trade the larger trends. This was done to both serve as clear and strong guide for myself as well as to share with others who are also tired of the futility of Day Trading.

The advantages of this approach to trading generally and my method of trading specifically, include;

• High Probability Trade Setups that Require Less Trading;
• Predictable times for entry using the Daily and 4 Hour Charts;
• Clear Candlestick Patterns that start and end Trends;
• 100- 200 Pip Trades such as those executed during the Financial Crisis and European Debt Crisis and that have already beaten the BarclayHedge Top 10 Traders this year;
• Practical, Unemotional ways to avoid checking trades;
• Pre-determined exit rules based on each trade setup;
• Weekly & Monthly Ranges not seen in any other strategy;
• A Proven set of parameters built on 10 years of trading and analysis of market patterns;

Let´s take these two examples that reflect the greater stress and indecision that a Day Trader goes through compared to that for a Swing Trader.

In the first case, the Day Trader would be faced with the indecision about where to exit and how many pips to capture following an interest rate decision by the Reserve Bank of New Zealand earlier this year-

NZD CAD - 30 MINUTE CHART


For the Swing Trader on the other hand, he would simply have identified the setup and signal and waited on the Pre-determined target to be hit a few days later - independent of the rate decision.

NZD CAD - DAILY CHART


Even during the European Sovereign Debt Crisis when volatility and market indecision was at its peak, several opportunities were available without the need for complicated indicators and lower time frame analysis;

EURO JPY - 1 HOUR CHART

EURO JPY 1 HR FRONT.jpg700Ă—343 34.2 KB

EURO JPY - DAILY CHART


Sometimes I got lucky, as in this case, the 200 Pip Target was hit the next day, well within my pre-determined holding period. This took place while I was watching an all day Marathon of my favourite TV series at the time, Bones, instead of constantly analyzing the trade.

In a nutshell, it is a strategy that Rewards the Trader instead of the broker by avoiding the Stop-Hunting and unexpected reversals that take place on the Smaller Time Frames.

If you follow my Swing Trades and my regular market analysis, you will see a consistent and stable way of trading for Long-Run Wealth Creation.

When you are convinced, send me a private message for more information on my Methodology.

Regards

DRFXTrading

1 Like
2

Thanks for the share! It’s good inspiration as I am looking to trade on larger timeframes. I feel it is lower risk so long as you keep SL R/R and TP without compromise.

3

agree the longer time frames are less stressful - what is on your radar now

4

I’m trying (on demo) to work on 4H and Daily timeframes, simply because I don’t have much time to see charts during the day, so I study them at night and try to leave pending orders on what I consider to be a good trade.

One problem (or concern) that I’m having is that Stop Losses become a bit bigger than I expected. And looking at your NZD/CAD daily chart I see that your entry signal is far from the support (I guess you put your stop loss below that support line), so the SL would be almost like your TP, if it’s not bigger.

Is that so?

5

That chart must be old - here is a UCad chart - looks like a wolf pattern especially when it went past the bottom trendline. In the boxes you see I wait for a lower high or higher low - if the retrace is 50 to 61 percent I usually take the trade and put ext fibs on looking for 1.61

imgur: the simple image sharer

6

ucad 5 point.jpg700Ă—366 42.1 KB

ucad 5 point.jpg700Ă—366 42.1 KB

here is a larger pic - the 4th wave I am hoping falls around 1.0784 then should get 5th wave then up

7

Hey kedcuk

Yes, larger time frames are definitely much better for trading. Difficult transition from lower- time frames though, but worth it in the end. Here is my Risk-Reward for my strategy as taken from my Trading Manual


Stop Losses are larger than the lower time frames of course and the RR smaller, but the accuracy of trading on these time frames generally makes up for it. The 120 and 90 Pips come from what is the maximum needed to use when the entry signals and setups I use appear.

What strategy & RR are you using?

8

Hey Kate,

That trade was actually the NZD CAD not the USD CAD.

Im familiar with fibs but not wolf patterns…what direction are you expecting to trade and for how many pips?

I actually missed this trade to go short- 1 of 2 missed recently since my focus was on finishing/promoting my Trade Manual. Here is a look at what I would have done.

The Daily Chart actually gave a bearish signal to break the Pennant consolidation, telling us entry would should be short.

DAILY CHART


It was expected to go down to the outer trend line seen here

DAILY CHART


Entry would have taken place at the close of that Daily Chart, with the Stop Loss placed at the Resistance of the 4H Chart Range.

4H CHART


Target would be set for just above the Trend Line, expected to be hit any time now-early next week.

What sort of targets you aim for and with what stop losses?

9

Hey Fx Ripp,

Yeah Stop Losses are definitely bigger, thats one of the drawbacks of the higher charts. But my strategy aims to get at least a 1.1 ratio.

In this case, the stop was 90 pips and the target 120 or 122 pips. The stop was actually placed at the Support of a Pennant on the 4H Chart.

4H CHART

BABY PIPS USD CAD 4.jpg700Ă—337 25.7 KB

What strategy you using to see those trades?

10

I’m kinda in between strategies at the moment. I have studied EW & Fibs, Gann Trading, Divergeance, Candlestick Strategies, Box Breakout, Triangle Breakouts & Lately I’ve been playing with Rubber Band.

Really, I’m fed up of it all and I want to use something that requires minimal effort with best consistency. I only trade at about 62% accuracy but use to trade better when I was more into it. Long story short, I got a bit too deep and blew a reasonably large account. After staying out of it for a long time, I got back into it and started trading demo. I am no longer on demo and am trading a small 100 Euro account in micro lots.

Have you got any advice that I could use or a strategy that works very well for you that you can share?

11

Keyduck

Ive used and experimented with a few indicators myself, especially MACDs, STOCHASTICS but like the rest of them, they only served to complicate things even more. It was even more disastrous when I traded several strategies on the smaller time frames which will always be a game of Russian Roulette…

Basically my strategy involves identifying the Candlestick PAtterns that indicate that the market will move by at least 200- 300 Pips on the Daily Chart over the next few days. After they appear, I decide where to place the stop loss based on the patterns seen and then determine how much of that move I can get (minimum 100, maximum 200 Pips). I hold on to the trade for a set, pre-determined period and exit when that target is hit/period expired/ or stopped out.

I NEVER check the trade after it is executed. I only look at the window of the platform that shows that the trade is still open at the end of each day, then close till the next day. I NEVER check the news to avoid hearing or seeing anything related to the currency I am trading. All of this was important to getting rid of the micro-managing and impatient bad habits of day trading and allowing the market to do what it naturally does.

I think that most people know that the larger time frames/trends are better, but since it is hardly promoted and we are led to believe that trading is an everyday activity, we never take the time and develop the patience and strategy required to take a larger view of the market.

Over the years I went back and forth between smaller time frames and larger time frames, getting my ass kicked with the short-term strategies then getting saved when traded the larger trends (more examples to follow). It is only in the last 7 months that I began to focus on the larger trends and develop a solid plan with checks and balances to ensure that this would be the long-term way of trading. (Available soon in the Advertising section). Confirmation has come from the results of these trades and when I compared them to the returns of the BarcalyHedge top 10 Currency Traders so far this year-no comparison.

What I recommend is this

[ul]
[li]Practice opening an arbitrary trade on the Daily / 4H Chart and leave it open until target hit/stopped out
[/li][li]
[/li][li]Close all time frames lower than the 4H Chart
[/li][li]
[/li][li]Start Identifying Trend Lines and Consolidation Patterns on these Time Frames
[/li][li]
[/li][li]Abandon Live Account for now and practice on demo account.
[/li][li] -Persons who get the Manual receive my Trade Setups for Entry 15 Minutes before I execute them which you [I][U]could[/U][/I] use on your live account (with my Disclaimer of course) BUT!!! I recommend doing anything new first on demo account.
[/li][li]
[/li][li]Start identifying the Candlestick Patterns and Signals that start, continue and end trends and consolidation breakouts that lead to 200- 300 Pip Moves;
[/li][li]
[/li][li]Look at the patterns on the Daily and 4H Charts as the currency goes to these targets;
[/li][li]
[/li][li]Try to identify any relationship you see between the signals on the Daily and 4H charts;
[/li][li]
[/li][/ul]

12

Here are some examples of the trades executed on the larger time frames of the Daily and 4Hour Charts. Some are taken from earlier this year and others over the last 3 years.

CAD CHF

[ul]
[li]February 2014;
[/li][li]Breakout From Daily Pennant;
[/li][li]Target Set for 200 Pips;
[/li][li]Exited for 77 Pips - Market didnt reach target within pre-determined holding period;
[/li][li]
[/li][/ul]

PAST TRADES CAD CHF.jpg700Ă—501 37.9 KB

CAD JPY

[ul]
[li]March 2014;
[/li][li]Trading Within Daily Pennant;
[/li][li]4H Signal Given;
[/li][li]Aiming for Support;
[/li][li]100-Pip Target hit after 2 Days;
[/li][/ul]

PAST TRADES CAD JPY 4H RESULT.jpg700Ă—492 48.5 KB

CHF JPY

[ul]
[li]November 2013;
[/li][li]Breakout Daily Range;
[/li][li]Target of 220 Pips Set;
[/li][li]Target Hit after 4 Days;
[/li][/ul]

PAST TRADES CHF JPY RES.jpg700Ă—475 45.2 KB

EURO USD

[ul]
[li]January 2013;
[/li][li]Break of Daily Range;
[/li][li]Target of 100 Pips Set;
[/li][li]Target hit after 3 Days;
[/li][li]
[/li][/ul]


GBP CHF

[ul]
[li]May - July 2011;
[/li][li]
[/li][li]Trade 1- Trade Within Range;
[/li][li]Trade 2- Range Breakout;
[/li][li]Trade 3 - ABC Signal;
[/li][/ul]

FRONT GBP CHFF.png553Ă—524 33.2 KB

13

GBP JPY

[ul]
[li]Dec. 2011 - Jan. 2012;
[/li][li]Breakout Daily Pennant;
[/li][li]Target of 200 Pips;
[/li][li]Hit after 11 Days - A few days above current Holding Period Criterion;
[/li][li]
[/li][/ul]


CHF JPY

[ul]
[li]August 2011;
[/li][li]Breakout, Daily Range;
[/li][li]Target of 370 Pips Set (Above Current 200-Pip Maximum);
[/li][li]Target Hit after 3 Days;
[/li][/ul]


USD CAD

[ul]
[li]September 2011;
[/li][li]Breakout Daily Range;
[/li][li]200-Pip Target Set;
[/li][li]Target hit after 8 Days;
[/li][li]
[/li][/ul]

FRONT USD CAD RESULTS.png549Ă—520 135 KB

The key aspects of these trades were

[ul]
[li]
[/li][li]Patiently waiting on the right Daily/4H Signals;
[/li][li]Correctly identifying target based on the setup (Trade Manual);
[/li][li]Holding Trades for the Pre-Determined Period;
[/li][li]Exiting if Trade had exceeded Holding Period;
[/li][/ul]

14

This is really good! I fully appreciate your input. There are several things that interest me in what you are saying but mainly you mention time stops. I have only recently read material on time stops but have not met or read anything yet that suggests how a time stop should be used. Do you have a method for this?

Also about your start if mentions for indicators, I can only say that people need to know HOW to use their indicators. For example, everyone talks about MACD. MACD this and MACD that… blah blah blah… but did you know that the MACD is designed to be used in a less volatile environment and best not used in high volatile intraday times? No wonder people fail if they don’t know how to use the indicator.

Another one I found interesting was ADX. This indicator is only to be used on Daily TF or higher. It is too much of a lagging indicator to be used in any smaller TFs.

I have been trading for about 8 years now and in some times very successfully but I had not come across the thought of certain indicators are ONLY used in non-volatile or sideways markets and other are designed to be used in volatility. Lesson learned for me is that if you are going to use the indicator, study what the indicator does and when best to use it.

I personally like all your recommendations as I have come to the conclusion that trading forex is simpler that people hype it to be. Candlestick patterns on high TF with trend lines, S/R, breakouts & time stops are a great way to go. I too have noticed I need to set SL, TP and just not look at the market too much. My trade win ratio is not bad at the moment but it is not worth anything to me if I close my trade to early and don’t wait for a decent reward. I can’t just TP at 10 pips if there was 50-150 to take.

My latest study is to think about these S/Rs. There is so much out there. Fibs, Camerillas etc etc… I think my favorite one at the moment is Murrey Math lines. I think it’s because I was heavy in Gann theory at one point and would like to rework a strategy involving MMlines, Gann Theory with Candlestick Patterns.

I wouldn’t mind doing something with harmonic patterns but it seems to me they are not as successful as the hype makes it up to be.

Thanks for all your postings! :slight_smile:

15

Yeah, I have a method for holding period/time stops. Its based on the average time it takes for the trend to reach its targets once the setup and signals are in sync. (In the Trading Manual lol)

I think you can experiment with millions of indicators and you might eventually find the right combination…I did so with candlestick patterns. But candlesticks reduce the trial and error in half and gets straight to the signals that matter without indicators.

Its true, its really not worth it to be only getting 10 pips at a time when the market offer much more with less complication. But its hard to break away from these small targets when you have been used to it for most of your trading life. Its only when you get shock after shock of consecutive losses and drained accounts that one will get tired of it. For some its sooner, others when its too late.

S/R can be useful especially in trying to use them for Stop Losses…but I could never determine which was going to hold and for how many pips. It was always hit and miss that couldnt be relied upon to be put in a strategy. Decided that since the candles are the most certain signal as to which one will be obeyed, then its better to just wait on them.

16

What is this manual you keep mentioning?

Just a bit of observational advice with candlestick patterns. If you stick a volume indicator with your charts, you might notice that candlestick patterns with high volume have extra validation than the ones with low or average volume.

Something to chew on if you wish… :slight_smile:

17

I love the back and forth on this forum - read through everything :slight_smile:

Thanks for the input - encouraging to see that there are many who have gone the same direction as me - also blew an account, also sick of lower time frame fails and the continual advertisement of 12299991122% gains on scalping.

I’ve been focusing on trading daily charts lately, candlestick, patterns, price action, etc as well.

I’m curious, is there a good resource or price action guide that would help me determine what moves WILL be 100-200 pips, vs those that are too small? Been demo trading, and I often hit my stops before my targets so trying to identify some patterns, help would be nice :slight_smile:

I’m also curious as to how far back is historical price action truly relevant? I saw a setup for USD/CAD which use the trend originally started in 2012, even with the triple top in recent history, they comment on possibly making a higher move upwards. So much data, how do you filter through the noise? (even without indicators, I hate those now lol)

18

Yeah, volume indicators coinciding with strong candle may also be useful. However I tend not to trust indicators in general since they can give false signals at time. Price Action using Candlestick signals are more accurate but since they can also give false signals, the fewer false signals one uses, the better. lol

My blog at drfxtrading.blogspot.com describes the manual in detail, but essentially I have put together all the rules and parameters needed to trade the Daily & 4 Hour Charts after using 10 years of data and the last 3 years of actual trading results. This followed years of trading both the smaller and larger time frames at the same time but after losing money with the latest day trading method, finally took decision to stick to larger charts. It was only when I used the larger times frames that I actually made money, but was too impatient to stick to it given the temptation of the shorter time frames and so did not devote enough time to establishing the rules. Now that I have done so, no turning back.

I have rules in place to determine market direction, entry and stop losses as well as the type of targets to aim for depending on the setup. I have narrowed down the best Candlestick signals that give the highest probability of success and have also detailed how/why the market does what it does- from trending to consolidation and back.

100 - 200 Pips tends to be the average range of movement you can get when the best Candlestick signals are given. Aiming for less tends to narrow your Risk-Reward Cushion which is already tight given the stops needed on the higher charts. I also found that if a signal offers less than this, it will be very volatile. 200 is the maximum because it sits comfortably within the movements of the trend which tends to be 250- 300 Pips when it gets going.

Smaller time frame trading is an unbelievably difficult thing to master. Im not really going talk about conspiracy theory as to why persons are led to that time frame more than any other. Nor will I ever say that no one can be profitable long term trading this way. All I will say is that the suffering, stress, losses and headaches are a lot less and the time to get a profitable rhythm going is a lot shorter when all that effort is devoted to the Daily & 4H Charts.

Starting with this trade result on the AUD USD, I will continue to show how simpler it is to trade with my approach. Unfortunately this first one that I have traded since taking a break to complete the manual was a loss…lol…but for losses and gains, one will see a better thought process that allows a trader to be in sync with the market and accurately exploit it for personal gain-finally.

19

Trade Type - Breakout, Medium Consolidation
Signal Needed/Given - Daily Chart
Target - Breakout Equivalent
Result - 100 Pip Loss

The intention here was to continue to go long in favour of the Aussie in response to the breakout signal provided above the Daily Chart’s Pennant. The pair had actually formed a smaller Pennant above a larger Pennant before providing the Bull Candle Signal for entry. Instead of breaking higher, however, the currency pair reversed unexpectedly despite having a strong setup and signal. So what could have been the reason for this loss?

Let’s first take a look at what the overall picture was on the Daily Chart. As we see in the chart below, the smaller Pennant was essentially testing the broken Resistance before giving the breakout signal.

DAILY CHART


Source: FXCM Marketscope

This was also taking place in an uptrend that added support for the currency pair to continue moving higher. Following the close of this candle, entry took place immediately with the Stop Loss set at the appropriate point on the 4 Hour Chart and the target of the Breakout Equivalent put in place. Within a few days, the market reversed sharply to take out the trade, resulting in the loss of 100 Pips.

DAILY CHART


Source: FXCM Marketscope

The issue at hand now following this loss and trading losses in general, is to ascertain the possible cause especially given the apparent clarity and strength of this setup. Two separate, but related reasons could provide the answer.

SCENARIO 1

It is quite possible that these two Pennants are actually about to give way to the formation of a larger Range Setup. This is something that happens from time to time in the currency market. If this is the case, then we could see a pattern that looks like this.

DAILY CHART


Source: FXCM Marketscope

If this is what will be formed, then we could either see another bullish signal to continue the uptrend or a bearish breakout that starts a downtrend.

SCENARIO 2

The alternate scenario involves taking a wider view of this currency pair’s previous patterns. The unexpected reversal that took place could actually be the start of a bearish wave within a much larger Consolidation setup that is being formed.

DAILY CHART


Source: FXCM Marketscope

Confirmation of this will come in the upcoming days or weeks in the form any of these Candlestick Formations below the Uptrend Line;

ABC Reversal Signal;
Formation & Break of Small Consolidation;
Counter Trend Line Setup & Break;

Provided they are strong, any of these signals could lead to a steady downtrend over the next few months until Support is hit, over 500 Pips away.

With any successful Methodology that is applied to the currency market, losses are always expected along the way in between profitable trades. One of the distinguishing advantages of trading with the higher time frames, however, is that it allows the trader a lot more time to calmly analyze the reasons for these losses and make adjustments where necessary. This helps to take the emotions out of trading and avoid the common habit of trying to exact immediate revenge on the market - a habit that inhibits long-run profitability in Day Trading.

Let’s patiently waiting on the next opportunity that this market will provide on this or any other currency pair as we start a new month.

20

[B]DAY TRADING VS WEEKLY RANGE/SWING TRADING[/B]

Day Trading is perhaps the most promoted way of earning income through the currency market and the stock market by trading companies globally. Relative to the larger time frames and longer holding periods, daily trading appears to fill that need for quick returns in this culture of immediate gratification, despite the greater risks that are inherent in this approach.

A proven, tested and reliable short-term method could provide some gains for the resilient day trader, but perhaps more could be made on the larger trends with less effort, stress and inconvenience. Let´s compare the two strategies in terms of some of their respective advantages and disadvantages.

[B]DAY TRADING - 1 HOUR & LOWER TIME FRAMES[/B]

[B]ADVANTAGES[/B]

  • Short, quick gains same day or overnight;
  • Risk is smaller per trade;
  • More trades are possible;
  • Multiple lots and positions possible;
  • Predictable end of trading range-market sessions;
  • Trading possible 24 hours.

[B]DISADVANTAGES[/B]

  • Daily Range of each pair limits gains per trade;
  • Entry signals are at unpredictable times;
  • Time Zone issues for persons in the West;
  • Constant monitoring of market needed;
  • More trading, more stress to meet daily goals;
  • Shorter time to recover after losses.

[B]WEEKLY RANGE TRADING - DAILY & 4H CHARTS[/B]

[B]ADVANTAGES[/B]

  • Larger Ranges;
  • Stronger, Stable Signals, Patterns;
  • Predictable Times for Signals & Entry;
  • Less monitoring of Market Needed;
  • Less trading stress;
  • More time to recover after each loss.

[B]DISADVANTAGES[/B]

  • Fewer Trading Opportunities;
  • Larger Stop Losses;
  • Longer wait for Trade Completion.

Day Trading can be fun, exciting and profitable, but perhaps less excitement and more stability could translate into larger profits, consistent gains and less stress. With the need to constantly monitor the market, analyze short-term movements and side-step increased volatility from fundamental news releases, day trading can become an emotional roller-coaster and take its toll on most persons.

On the other hand, if one had more time to analyze the market in between trades and calmly assess each pair while avoiding short-term noise, would that be a better option?