On the left of the chart we come off a downward BB walk.
Candle C is the extreme candle with the CBL drawn from the 2nd candle as shown by the blue line.
The stoploss line from C is also shown in red.
The entry candle is B.
Now we see that the lower wick of B passes thro the stoploss meaning we would be stopped out. But this would not be so if we only look at the CLOSE of the candle.
The CLOSE of candle B is near the top of the candle - this means the CLOSE is not below the stoploss line and we, therefore, stay in the trade. We would only exit if the CLOSE was below the stoploss line.
The rest of the candle does not matter - it can go below the stoploss a million times for all we care!!.
The trade then makes its way to TP1 (assuming the 2 contract method).
We then move the stoploss to break even as shown on the chart as BE.
However, as we move on in the trade, we note that candles A + K + a few others, touch or pass thro the break even stoploss and hence stopping us out and we only get TP1.
Again - if we only consider the CLOSE of the candles, we note that no CLOSE ever came near the break even stoploss.
As such, we stay in the trade and go on to collect TP2 at the simple exit method as shown.
Consider this approach of using the CLOSE only with the stoploss.
For those using DodgeV83’s backtesting EA, the results should be promising!!
Another 1 hour chart of the Cable - very recent and NOT cherry picked!!
The blue and red lines at the top extreme candle are the CBL and stoploss respectively.
The price action goes down to the BB standard deviation = 1 band where we exit 1 contract of the 2 contract strategy.
This is shown on the chart.
After this, the stoploss is moved to break even - shown by the dashed red line.
The price action then makes its way to the mid BB which is now depicted as TP2.
We, therefore, collect both profits.
Note that after the mid BB, the price action retraced, and the very last candle hit the upper BB again. This one is probably an extreme candle ready for a new trade.
Hello Tymen, this is my first post here. It took my two days to read the hole thread, and i just wanted to thank you for the effort and the very useful information you are giving! I´m already demo trading the CBL and DNA method and if i get good results i will integrate it to my trading method.
I have a question about the chart you posted: If we come off a downward BB walk, why did you take the trade? Wouldnt that be a NO trade area?
Correct me if i´m wrong: there isnt a no trade area. You take every trade but use different strategies.
Hello everyone. I have come to share my trade of the day.
Some explanations:
My input is in fact based on the graph 30 minutes and I decided to enter a sell limit because the market close of 1.4750 seemed nervous, I asked a SL to 30 pips.
The entry is not quite in the CBL workmanlike but not far if we check the graph on 30 minutes.
Then I took the TP 2 at the BB through because I was afraid of a turnaround and not a tracing.
I took two lots on the red candle after the retracement and I followed the trade by rebuilding an entry after each stop.
This trade was carried live and real. Good day for me and for you too I hope.
A big thank you to Tymen for his method of entry and also to Dodge, and has multiple openings for its Graviton.
I hope you will come to read my explanation, because my English is poor.
Have a great weekend and enjoy your families and your children.
Regards Didier.
Great stuff Johnny! I agree completely. A retrace across the mid-band is a very bad sign for a counter trend trade. It’s easy to exit and re-enter, perhaps at even a better price! Even if I only get back in at the same price, paying a few pips in spread is nothing compared to a big stoploss.
Yes, this is what I would call a counter trend trade, since the mid BB 20SMA is pointed up in a down entry. Tymen’s CBL entry has a very high win/loss ratio, about 80%, on these trades. The question is how to maximize profit from them.
As we’ve discussed before, the fixed increments between adding lots, be it 20 or 30 or 50 or whatever is just a target based on volatility of the pair and such. If one is trying to range trade, Tymen’s 2 lot strategy should work best. If looking for a long trend trade, I would not move the stop loss and add another lot until a new lower high is formed. if I’m trading with a target of 50 pip increments and stops, that may happen at 25 pips or 75 pips.
Once a lower high is formed, I know where to move my stop loss, just above the new lower high. If I’ve made enough pips to put on another lot, I’ll put it on, if not, I just have to wait until the next lower high.
The key in my mind is moving stops and putting on lots as new lower highs are created, since that is what defines a down trend. Sometimes, like in Iron Heart’s example, there are no lower highs formed for a long string of bear candles. I have a rule to move stop loss to capture 1/2 of profit in such cases. I get stopped out lots with that rule, but it’s always stopped out with nice profit
I think you have already answered your own question. If you are clearly in a squeeze, you take the trade. If it looks like some sort of mis-shapen sausage, I would look for confirmation elswhere to take the trade, or just not take it. There are lots of clear cases and trades to take. When in doubt, stay out.
Remember, you miss 10,000 good trades a day in some market somewhere. Missing a good trade is no big deal. Taking a bad one that was doubtful in the first place is a big deal. It’s overtrading and that can ruin an account.
I have to say, I really do love this method. It has kept me out of plenty of bad trades. The bollinger bands are great and the CBL way to get in is superb.
I am still in demo mode, but I use Oanda, so I will probably switch over to a real account shortly and use small lots so I get the feel of risking actual money.
Thanks Tymen and Graviton and everyone else for all the wisdom and experience. I have a feeling this is going to turn out very well for me indeed.
I just had a nightmare where I was a Forex Newbie and watched a 30m candle go down 100 pips before exiting, thinking to myself “THE RULE SAYS NOT TO EXIT UNLESS THE CANDLE CLOSES!”
Hey guys, I guess the testing I’ve been doing is coming to question.
I normally also trade by looking at the timeframe above and ensuring I take trades in the direction of the main trend - but Tymen’s orthodox BB DNA strategy is to take all valid CBL trades.
What I am trying to do is find out how profitable it is to take all of these CBL trades without any regard to anything else. I have found that 4H charts work reasonably well with both the 2 contract and the multi-contract strategies.
Following this, I have been attempting to combine and find a common ground between the two money management strategies. If my theory proves to be correct, we will end up normalising the result of both the 2-contract and multi-contract strategies. The plus side to this is that it will remove the need to worry about which strategy works best as the market evolves.
As always, I’ll share my experiences with everyone else and hope to learn from yours too.
Thanks for your post. The methods are many that’s quite obvious and no one method works best all the time. Taking profit anytime is a good thing in this game and some would suggest the sooner the better. It seems like tymen doesn’t agree with our suggestions and has some different methods I will look at and analyze. I thought the boss was away on vacation? LOL.
Thanks pineapple, i understand where you are coming from.
The mid BB really does play apart, but like graviton said, if unsure sit out.
And that’s what i will do.
And graviton, i really like your stair stepping method of adding additional lot, and putting SL at the lower high. It’s great and im going to try it out!
And tymen, the close of candle before the SL sounds great, it probably would have save me out of one trade this week.
However, it comes at a heavy price should the close be much below our SL level.
I thought the same dodge when i saw the post - you just do not know where candle A is going to close, so if your stop loss is not SET at BE it could well go way past your 1st entry point and then close below it.
It might be useful when waiting for a close to operate a stop loss below the breakeven point, which will combine with TP1 to ensure a total profit/loss of $0 if stopped out.
This may still not be enough to ride the whole move but will be less risky than waiting for a close.
Or use the method I have just outlined using the standard deviation = 1 band.
As we’ve discussed before, the fixed increments between adding lots, be it 20 or 30 or 50 or whatever is just a target based on volatility of the pair and such.
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[B]Graviton[/B], your multiple entry method will come into its own when I post the MACRO method!!
In this method, I think it will be superior to the 2 contract strategy.
Hordane, I read through the pdf you created and the only thing I would suggest is to make a section about the BB’s. The section should include information about the BB Bubble and Sausage, how to determine which one is which and what they are all about. I think some of the earlier discussion was missed for a reason but some of that still applies with the later discussion.
Also can someone tell me if we are still doing the CBL as bottom, left, bottom, left, bottom. I thought I read some where we are only doing one. If we are can someone link me back to were this was talked about.
The bollinger bands are great and the CBL way to get in is superb.
