I’m planning to post the details of a short term contrarian strategy, primarily looking to catch the reversal of the intraday trends that may or may not be part of an overall bigger trend, but also taking advantage of substantial retracements against the big trend. This is a work in progress, so I am [U]not[/U] promising a holy grail. Hopefully, an improvement in understanding will result from the search for profit. Watch this spot in the very near future…
The situations I am identifing is where the market has been trending in one direction and makes a very weak new high, which fails before getting much above the last high (or similar for lows). These can be identified by a combination of a strong sort of divergence on a well-chosen indicator, combined with the bars to confirm it.
Charts with bars around a couple of minutes seem suitable for a moderate number of robust signals, combined with a long MACD histogram. My chosen parameters are a (20, 40, 10) exponential macd hisogram. There is a choice of data point, the usual close being a bit more noisy than ((H+L+C)/3) and (H+L)/2 is the most stable of all (at a very slight cost in lag). The specific sort of divergence is a rejection of the zero line - i.e. the macd line crosses its average and retests it at a price extreme, but bounces off without crossing it [a slight penetration can be acceptable, but that is just complicaing things].
An optional second indicator to reinforce the signal is the macd line on the (10, 20, 5) exponential macd. A divergence on this line is encouraging, while a higher high on this line warns against shorts. It is a matter of choice whether the extra support for signals is worth missing some good signals without support.
With regard to the bars, a simple rule is that the new extreme is no more than the width of a bar above the last extreme, making it a relatively weak extreme. And we want the extreme bar to be broken when the signal occurs (or immediately afterwards).
This setup can be used on minute charts, tick charts or volume charts, but I prefer range charts. A 4 or 5 pip range bar gives about 2 minutes a bar on average on the EUR/USD during the main trading hours.
OK, enough said. I will post some examples next week before I go on holiday to escape the huge number of people who would like their money back because it doesn’t work…just remembered it’s free and came with no promises, which will give me some peace of mind.
Good trading!
Thanks for contributing new ideas, could you maybe also let us know a bit about yourself and your trading experience?
Presignals on the 4 and 5 range EUR/USD+ did not trigger with the required turn of indicator and price, so no official trades.
One setup leapt off the chart at me on the 2 range chart (generally viewed as a little less reliable), so I pressed the button. A strong point was the fact that the test of price was almost perfect, and the macd very negative. It turned out to signal a significant reversal, with up to 40 pips available to be taken.
No signals on the (relatively) longer charts in the very active hour from 7am to 8am UK time. One good quality signal on the 2 pip range chart triggered (test with strong macd), but gave only 6 pips upside. In high volume a fast trigger finger is required to catch these.
Not much of interest early on, but during the quiet time between the close of Eastern trading and the open of US trading, a peach of a setup appeared, triggering on the 3, 4, 5 and 6 range charts. Patience was needed to get the best return as it crept up around 30 pips.
Never agreed with that myself, but the 2-range chart provides evidence.
5-range short after 1330 is running into trouble, and may not give any more.
Volume picked up a lot around 1500 and a sharp reversal followed at an earlier congestion region. Absolute peach on the 3-range chart.
Didn’t get round to posting here yesterday. The day was broken up by a blood donation and a dental appointment, which disrupted my trading enough to mean I should have just taken a break.
There was another good setup at lunchtime (UK), with the 4 and 5 range charts catching a high with adequate potential (about 20 pips).
However, the later setup on the same chart (marked with red circle) is an absolute no-no as it occurred less than 15 minutes before scheduled news. I have an inflexible rule not to trade in this period, especially for this setup, as markets go quiet before news which gives false signals of weak momentum and possible reversals. This one would have run into trouble just after the news.
A couple of setups triggered this morning. The first at around 0724 on both 4 and 5 range charts had all the right features but failed to reverse the strong opening trend, which was characteristically energetic. After things had quietened down the 4 and 5 range charts both caught the low of the morning, with over 50 pips of upside.
A signal appeared on the 4 and 5 range charts less than a minute after 1330 US news, but a second chance came at a retest a few minutes later, providing a second valid signal on the R4 chart. Upside over 50 pips.
Hi again to the select group of people who read my thread! My trip to China was far more than I had imagined it would be. You can find a picture of mine of an azure-winged magpie on Wikipedia for one thing. 
It may be the jet lag, but I feel inclined towards longer term setups now. On to the action, (using a couple of macds on each chart)…
Time Chart Direction Swing
809 R8 Long 29
1002 R8 Short 23
1049 R16 Short No trigger
1103 R8 Short 30
1245 R8 Short No trigger
1335 R8 Short 35
1338 R16 Short 35
1632 R16 Short 27
Pretty good potential 
After an exceptional number of tradable situations yesterday, today was more typical. Just two opportunities on the 8 and 16 range EUR/USD charts.
Time Chart Direction Swing Result
941 R16 Short 20 13
1015 R8/R16 Short 53 Missed
Perfectly adequate, but room for improvement