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Sunday, October 17, 2010

The evolution of my strategies (part 3)

Make sure you read the first two posts - and the comments in each - before you read this one.

On this chart I show the other indicators I use which - in conjunction with Fibonacci lines and candlesticks - make up my repertoire. I have removed the Fibonacci lines so you get a clean view; on the chart you see:

1.) 8 period EMA
2.) 100 period EMA
3.) A black horizontal line representing a "whole number" as Tom C. calls it - in this case, $27. Refer to some of Tom C's previous posts for the importance of watching these dollar levels for support and resistance.
4.) A red horizontal line representing the Pivot Point (calculated using the standard pivot formulas in my software package).

As you can see, the first three candles print strong green bars and rally through the moving averages, the pivot line, and the $27 level. Price then pauses and pulls back to test those levels and is met by a rising 8EMA. The hammer-type candle forms, and the rally continues. If you remember from the previous post, looking at the Fibonacci lines you have a valid "beyond the Fibonacci extension" setup with price testing the FE as support. If you are keeping count that is five areas providing support for price to rally.

I will make another post in the next day or two answering questions from comments and documenting any other thoughts on this trade. But I encourage you to go back and look at your charts for similar setups and see how they work.



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8 comments:

DreamIt Ventures said...

It's great to see you back. I have studied dozens of strategies over the last few years and what you do is the one I still have not mastered but hope to strive for at some point.

I hope that you can continue to provide us with some insights; it is truly appreciated.

Mike

Times of Your Life said...

ah thanks Trader X
lots of confirmations with high probability

I am going to read some charts today and make some analysis

T4S said...

Hi X,

great to see you back!

I have a question concerning the trade management on this trade.

Where did you exit?
What was your initial profit TGT and how did you end up managing the open trade?

Thanks for letting us in on your insight!


T4S

Michael B. said...

Nice Trader-X. Your analysis is second to none on the interwebs or in books. Your free giving and sharing is much appreciated, and I hope you get it back a hundred fold in your life.

Javier said...

Hi X,

Here are my questions regarding this set up:

1) Using a lower time-frame as 2 minute candles, how you prepare your watchlist ?
2) How is the 100 period EMA helping you in selecting the trades ?
3) How do you manage your exits ?

Thanks for sharing your new strategy and happy to read your blog again.

Javier

MykL FL said...

Your return is like an early XMas present X. Thanks for your generosity. Before your "sabbatical" you had mentioned experimenting with PPs which my GF calls "magic lines" because of the price reactions. Combining them with the Fibs definitely creates even more persuasive expectations based on "2 self-fulfilling prophesies" (as you more or less referred to Fibs in that cyber trader interview you had done.

I'm curious though, why did you eliminate the 34EMA, yet another intraday watermark?

MykL

Danson said...

Hey X,

After years of chart studying, do you look at every one of your chart and perform that in-depth level of analysis still?

It seems impractical to do that on a 2 min-5min chart given 30+ stocks you have to review constantly, or you would simply run out of time.

Also, does intuition play a role in deciding which stock you decide to take?

todd said...

I would like to give the readers of this post another morsel of potential with this setup process. Especially those that would like a visual trigger candle. Most humbly, might I suggest, for those that have the software ability to do so, create a custom paint-bar which paints the Highest (and Lowest) Close of the last 5-bars (for a 2-min chart). I think you will find some interesting potential therein.