Tymen, thank you for all the advice you’ve provided here. I do have a few questions regarding the BB squeeze scenario.
Waiting for a bounce off a BB squeeze, the likelihood of entering on the mid point of a BB is very real given that it is a squeeze. Do you still advise we enter even if the price point hits the mid BB in a very tight squeeze?
Second question, a squeeze can last for long period of time (see EURCHF, a squeeze lasted May 3 - 6th). Should we wait for the squeeze to start trumpeting before entering off the extreme candle to avoid entering into a trending market?
Very interesting videos DodgeV83. They are a great teaching tool.
A number of those trades seem to have been in the “grey” no trade zone (meaning they are likely to have been counter trend trades). I see that you are entering as soon as price crosses the CBL & I also note you don’t take TP1.
My query is; what BB rules you are using for entry? Do you use a visual on BB slope or is it calculated?
I ask because your results appear to differ from NorwegianBlue, who also ran EA backtests from 2009 & 2010 using Tymen’s BB DNA rules. It would be great if you and he could compare notes and see where the differences are.
Tymen,
Welcome back. I see you still say you are from Perth in your profile. Haven’t become a complete Victorian yet?
Is my understanding correct, in that the grey (no-entry) areas for Rachel, Denise, Robert & Daniel now extend from the end of one squeeze to the beginning of the other?
Good to see you back Tymen. I’ve resisted the temptation of joining Graviton on his thread until you concluded the work on the BB DNA method here so look forward to it being tied up with his 5 contract method.
I am to anwer a number of questions regarding the squeeze…
The best way to anwer the questions is to point out what not to trade.
Then all else is ok - as long as you are going with the trend in the higher timeframe.
Here is what not to trade - given as a red line >>>
In both these cases the part of the line shown in RED should not be traded!!
By avoiding this, you automatically keep out of a BB sausage also because a bubble turns into a sausage.
So what is a squeeze?
It is any area that does not consist of a BB bubble or sausage.
Some of these areas may stay squeezed for a long time but you do not know that.
If this is the case, then you trade anyway and collect small profits along the way.
Or, alternatively, you could stay out of this area until you see the BB widen somewhat but NOT a bubble or sausage.
To be sure I will give an example in the next post.
The green areas - good trading areas.
The red ones - keep out.
Lets go thro each one…
A - GREEN
all in a squeeze area.
Trade top to bottom, bottom to top, then top to bottom again ending in a bubble.
B - RED
The finish of a bubble walk - do not trade.
The second part of (B) is the same - the end of a bubble walk, do not trade.
C - GREEN
Entry in a squeeze - price drops in a gap and ends in a nice BB walk.
D - RED
End of bubble walk - do not trade.
The price action then walks the upper BB in a squeeze area and you would attempt and entry and lose.
This loss would put you off and cause you to wait until the walk was over.
You do not know when it is going to be over so the down price action resulting in a walk of the lower BB is also no trading.
A bubble is then formed - no trading and price goes on to area E.
E - GREEN
We are in a squeeze area here.
Two entry attempts result in a loss each, then a third entry results in a travel to the upper BB.
F - RED
We are at the end of a bubble walk - no trading.
Price moves to area G.
G - GREEN
Squeeze area.
Entry from the upper BB results in a walk of the lower BB - good trade.
As a newb I want to trade, trade and trade some more. A demo account makes it even easier to feed into that.
What you and Graviton is showing me is wait. 4 quality trades a day of at least 20 pips is very, very good. Add in the multiple lot strategy and I am making more than 80 pips a day with low risk.
I understand the method to your madness. Now I just need to discipline myself to quality trades and trust my long term charts.
hi tymen,
what is the entry candle in green C area?
very often hammer pattern formed as in the C area and it make me close the trade, sometimes it is for good , sometimes for loss.
Can you recoment something how to deal with such hammers if they formed on the way?
I have that same issue with C. If you miss the extreme candle on the upper BB are you just out of the trade? You miss the walk? Do you use the mid bb instead?
I think the hammer is the most common and I am always late, so I have just been missing the entire trade. I do look at lower tf to see if it is still in a squeeze and try to enter… But that can get you in trouble…
Candlestick patterns have nothing to do with this BB DNA method!!
Please forget candlestick patterns for this method.
If you wish to see good candlestick patterns to trade, then consult my candlestick trading PDF.
Single line patterns are NOT good trading patterns.
The correct way of entering this area C is shown below >>>
Quick question Tymen. I can recall that with the 2 CBL method the bodies of the candles had to touch outer BBs before drawing the CBL. With reference to your recent post on highlighting good trade and risky trade areas, I note that the tagging of the outer BB by the candle wicks is all thats needed to start drawing CBLs. Can you confirm if this is the case.
regards
Finally, i’ve completed reading the whole thread today and learnt valuable trading methods up to now here. Thank you very very much all dedicated people here for their contributions especially [B]Tymen[/B] of course.
Tymen, I’m so glad you are looking at this 5 lot. Many have reported their platform won’t let them trade multiple lots, and I don’t have a solution for them. I’m sure the system probably isn’t in it’s optimal form, but even as it is, it’s a handful. I’m all behind further improvements as that helps everyone. I’ll do what ever I can to help in that effort. As you have correctly noted, it works best when the trend continues. In a choppy market it can cause the loss of the pips that could have been won by putting on just 1 or 2 lots with a good stop. So in a choppy or ranging market, other strategies may perform better. In any case, I only trade this with the direction of the next higher time frame trend.
I developed this strategy while trading futures many years ago. It and I have a long and storied history together. As I warned in my thread, it’s like dynamite. In the right hands it can be a great tool, but it can blow up an account in a flash if abused. Traders should practice this extensively in a demo before using it with real hard earned capital.
I’ve tried several variants, but only presented a simple case on my thread for an example. Even still, something I was doing almost by instinct turned out to be very difficult to describe to others. Some of the computer wizards are backtesting now and are finding ways to even reduce the risk further by letting the first lot run more and then locking the profit with a stop before putting additional lots on. They are also trying to increase profit by putting the later lots on a little faster, since it’s well into profit by then and only profit is risked. The danger of that of course is the blow-up I’ve warned about if one gets too aggressive.
Note that in MT4 there is an advanced function that will close all trades with a keystroke. I’m sure that would come in very handy when you have 3 or 4 trades on with 4 or 5 lots on each and a quick reversal occurs. I haven’t used it, so I’m not sure how it works. As far as the other changes some have suggested, I don’t personally feel comfortable putting lots on faster, as that could lead to a blow-up, but delaying putting the second lot on for a small time to even further reduce risk interests me.
Some math wizards convinced me not long ago that it’s better to let all the lots ride so spread is only paid once on each lot. I still usually pull the first lot of profit off, but I now let the other 4 ride as was proved to increase profit. I also now usually wait longer to pull the first lot off, so it’s a much larger chunk of profit when I do. Stops have to be trailed or manually adjusted to lock in profit as the trend progresses or a quick reversal can wipe out all profit with so many lots running. It’s quite a beast to handle real time, but people learn and adapt. With risk to rewards often running from 1:10 to 1:20, it’s well worth the effort. I always advise people practice this in a demo set up just for that purpose by taking many coin flip trades and following them to conclusion, before trying this with real money.
That’s all my thoughts on this for now. I hope you are staying warm and over your illness soon.
RenaLa,
Whilst not speaking for Tymen, I thought I might jump in here.
According to Nisson, a hammers lower wick should be at least 2 to 3 times the height of the body with no, or a very short, upper wick. The longer the lower shadow, the more the bears have lost out at the candle close. Whilst Nisson states that no confirmation candle is required for a hammer, (unlike a hanging man), he does say that no candle pattern can be assessed in isolation, and that “where” it appears is just as important.
In the case at C, my view is that the hammer was at a marginal wick/body ratio and it formed as the BB started to trumpet/flare, a known danger area which requires two separate reversal patterns before taking action.
During the 4 period pause in the downtrend after the hammer, the spinning tops show us the indecision between bears & bulls meaning it can go either way. A hard call; unless you take profit at the hammer and put in a new sell limit order underneath the wick of the hammer in case the downtrend resumes.
Note that I am am not addressing BB DNA entries or exits here, just your question about hammers.
Hi hachiko, its smart to put sell limit order underneath of the wick plus few more pips, like spead or around. Since my broker allow the hedge I previously was thinking instaed of SL place opposite to my trade order with double amount of the trade. what do you think? Too risky?
East is the parent of the candle stick patterns so which other one separate reversal pattern requires before taking any action?
