I’m on board and ready to ride the Austalian Locamotive to Profitsville:p:p:p
Welcome back Tyman.
1st of all you have to spell “locomotive” properly - with an “o” and not an “a”!! 
I now need to deal with some troubling matters.
The 1st is the case of getting an entry with the 1 hour timeframe using the CBL while the 4 hour misses out for very good reason.
The CBL is really designed for only one timeframe, not going across timeframes.
We used the CBL on a 1 hour timeframe so that it would give a smaller stop loss.
But in the process we also get unwanted entries and entries that do not co-ordinate with the higher timeframe.
So what are we to do to get smaller stop losses?
Well, one way is to keep the standard stop loss given in a 4 hour timeframe but find a method that will give us a much better profit.
So instead of making the [U]risk [/U]in the [U]risk/reward[/U] smaller, we can make the [U]reward [/U]in the [U]risk/reward[/U] larger.
[B]But how are we to do that?[/B]
progressive orders ? 
The 2nd matter is that of looking at the risk/reward ratio more carefully.
In forex trading, it is not good enough to have a risk/reward = 1:2 or 1:3 or similar if we have a mediocre win/loss rate.
Most win/loss rates are around 50% or less.
Our 2 contract strategy improves that but still not enough for the above risk/reward ratios.
It is these ratios that cause forex traders to fail.
A reward twice or three times the risk, with a basic win/loss rate does not let your profits run.
You only need to have 3 or 4 losers in a row and you are in real trouble.
You are now behind, running at a loss and this needs to be made back again before any real profit is made.
That is a difficult ask and for this reason most methods out there fail in the hands of the general trader.
[B]Assuming a mediocre win/loss rate, we need a method that has bite!![/B] 
A method where you can let your profits go like there is no tomorrow!!
A method where your profits run like the wind and, therefore, the risk is tiny in comparison.
It is then that you can afford to lose several trades in a row.
Even after that you are still in profit.
Now [U]that [/U]is a method that works.
[B]So we will be looking at this idea. [/B]
We have already incorporated into our strategy the 2 contract approach to improve the win/loss ratio.
This is an excellent money management strategy and we should not modify it.
A 3rd matter is that we want to be able to trade all timeframes, not just the daily and 4 hour.
These are attractive timeframes to trade, but another way to cut the risk is to operate the CBL on a shorter timeframe.
In such a case, both the risk and reward will be smaller, but will appeal to those with less funding to execute a trade.
[B]So we need to look into this as well.[/B]
Having experimented with the SR lines I think we can all agree that there is not much potential for major profit runs with these lines.
One can be tempted to ignore close SR lines and go for the ones futher away, but this goes with the attendant risk that the price action could bounce and retrace.
In any case, there appear to be severe limits on your profit potential with these lines.
So lets look into this and see how we can improve our risk/reward ratio while keeping the CBL in the same chart.
Lets have a look at a trade.
This is a 4 hour chart of USD/JPY with a whole lot of SR lines on it >>>
The BB have been overlaid on the chart.
We start with a CBL which is taken from the low of a downtrend.
The trend goes up after this and we get an entry with 2 contracts at the squeeze of the Bollinger bands.
Yes, trends are often born in BB squeezes - MUST KNOW!!
We sit and do nothing while the BB expand.
The opposite BB contracts at the black vertical line and here the price action has retreated to the mid BB.
No worries, the mid BB is going up and we are in the trade until EITHER the price action hits our TP OR hits our stoploss - whichever is first.
Leave the trade to go - do not micro-manage it.
The price action pleases us by going up.
It then enters the area where we have drawn our many SR lines.
Now we know exactly what to do, don’t we? 
We do know what to do - yes??
Hmmmmm.
Which one tells us to exit?
The fact is that all these SR lines have rendered our chart meaningless.
The Bollinger bands, on the other hand, clearly show us that we are in a BB sausage.
We can make good use of that fact.
I humbly submit that those who use SR lines only, face trading problems of their own.
That is, the SR line trading method is not some holy grail - it has its problems just like any other method.
The great advantage of SR lines and CBL is that they are not lagging indicators.
The Bollinger bands need not be a lagging hinderance to us either, if we use it as a guide rather than a timing device for entries and exits.
Lets now look at exactly the same trade using the simple exit method >>>
Same CBL as before and the same waiting for the black line.
The simple exit method relies on price action hitting the BB, then exit on the 1st candle that pulls away from the BB.
The exits are shown.
Now we look at the same trade again using the other method of exit for the BB sausages, the parabolic sar >>>
In this case I have used the parabolic sar dots.
The exits occur when the sar switches over and the dots are projected forwards as can be seen on the chart.
The trade is a 2 contract entry, hence 2 exits - TP1 and TP2.
This is the same trade using the same parabolic sar but in line mode instead of dot mode.
This is done in case readers have problems seeing the dots >>>
We now go to a new and radical method of determining our exits. 
I have not shown this method before.
This method will indeed let our profits run.
It involves use of the Fibonacci lines.
Fibonacci lines are not an indicator and this approach does not lag.
Lets look at the same chart again with an application of Fibonacci >>>
The Fibonacci tool should be in every trading platform including MT4.
It is very easy to use - click one end point and drag to the 2nd end point.
My 1st two points are labelled P and are the end points of the first upward trend.
The blue line shows the lowest retracement line.
We note that in the area A, there has been no close below this blue line.
Therefore, the probability that the price action will continue going upwards is greater than that of retracing.
We, therefore, do nothing, and let the trade run.
Now to stage 2 >>>
We have had another nice run upwards, and when the price action starts to retrace, we identify the extreme points and use the Fibonacci tool again.
The extreme points are labelled P again.
Again we have a blue line.
At area B, there is no close below the blue line, so we do nothing and let the trade run. (the probability rules apply again).
Now to stage 3 >>>
Exactly the same thing again!! 
The extreme points of the last upward trend identified and labelled P.
The same blue line and retracement area C comes nowhere close to it.
As a result, we do nothing and let the trade run as before.
Stage 4 >>>
The same senario again.
Area D does not even come close to the blue line.
Do nothing and let the trade run.
Stage 5 >>>
Ah ha!!
Here we have a different scene!!
After identifying the extreme points of the latest uptrend, the retracement crosses thro the Fibonacci blue line.
At this crossing point we end our trade!!
What a spectacular run!!
what fibbonacci line is the blue line ?
and did we draw them: from the lowest point to highest or the other way ?
i cant see it from the charts
thanks
Now to compare the different exit methods to see which gave the best exit >>>
The Fibonacci exit came out way in front!!
The risk/reward ratio in the simple/parabolic sar approach is approx 1:1.
(the TP1 is an added extra).
That is not good.
The Fibonacci is approx 1:2+
Not the best but a whole lot better than before.
There are problems with this approach of course.
If the first retracement hits the blue line, we have an exit that would be far worse than using the other methods.
We note also a very important point here.
The Fibonacci exit method does not need the Bollinger bands.
The Bollinger bands would only be used to locate extreme points for drawing the CBL.
Read post #1883.