rseye

Incorporate Multiple Timeframe analysis into your trading - to help minimize risk and maximize profit and be PATIENT

Hi rsx0005, Here's another option.................... False signals (bull/bear traps, false breakouts etc etc) You will greatly improve your trading if you learn how to use multiple timeframes in your trading Facts: 1 The smaller timeframes are the building blocks of the higher timeframes i.e. if there is going to be a reversal in price on your trading timeframe - then it must occur on your next lower timeframe 1st 2 When we enter a trade we do not know if ouranalysis is going to be proved correct i.e. it is the most dangerous part of the trade So what should we do You need to protectyour trade in the early stages of its "development" - and if it does not develop into a good trade, at least give yourself the chance of having at least a smaller loss or perhaps even a reasonable profit Method When you move to smaller timeframe - you tend to stretch out the time axis, and magnify the price axis e.g. what might appear as a period of untradeable narrow consolidation of price, when looked at on a lower timeframe will probably offer good pickings for a swing trader etc etc So basically what we need to do is..... Find our setup starting to build on our trading timeframe Check the next higher timeframe to ensure our trade is logical, i.e it has room to move, price is not at extremes etc etc THEN.... go to the next lower timeframe (to our trading timeframe) and look for an entry Your bull trap situation will be obvious on this chart and you exit at the bull trap hi reversal - using your normal technique otherwise: if your trade is successful, then you move back up to your trading timeframe to manage the trade i.e. look for your exit setting up THEN...go back to the lower timeframe and look for your exit , viola Result If you have a bull trap - you are most likely to get out with a small? profit If you are successful - then you have entered at a better risk (lower stop) and you have exited at potentially a higher profit i.e reduced risk and increasd reward What more can we ask for ?????? Easier said than done Peter again I have not checked the above and hope that it makes sense

Hi rsx0005, Try putting a line chart up on your screen, this will show all the pivot hi/lo's based on the price close For a downtrend, the trend is still in place so long as price shows lower pivot lows and lower pivot highs - if the sequence is broken, you no longer have a downtrend, if it shows higher pivot lows and higher pivot highs, then you have an uptrend - otherwise you have a ranging market or simply put a trendline across the pivot highs of the existing downtrend............. Sometimes you enter as per your analysis, and the market swings around and takes out your stop - thats life! it happens However the odds are on your side There is nothing wrong in re-entering a trade - after all the initial oversold condition has not changed ??? Hope this helps PS The line chart is also very useful for picking out patterns, takes away all the noise of candlesticks etc (Candlesticks and bar charts are still important though, they also provide a wealth of info) Peter

Hi, The RSI is my favorite indicator and is the basis of my trading It is usually based on the closing price so its trace is the same as that of a line chart, other when it shows either regular or hidden divergence The trace is contained within the limits of 0-100 Basics Cardwell found some interesting facts regarding particular RSI levels: An uptrend is contained within the 40-80 RSI levels A downtrend is contained within the 20-60 RSI levels A sideways market is contained within the 40-60 RSI levels The RSI is most sensitive in the 40-60 range Check it out - IT WORKS (I use RSI (9)) Uptrends can start from basically 2 conditions: From a breakout from congestion (40-60 levels) or from a downtrend or major correction, from a level below 40, when it breaks above 40 and confirmed when it passes up through the 60 level The opposite for a downtrend congestion (40-60) break below 40 downtrend - breaks below 60 and confirmed when it breaks below 40 Summarize: Uptrend - 40,60 When it is trending the trace operates above 60, when it is in the 40-60 range, it is going sideways (not in a downtrend), it could go either above 60 or below 40 (start trending), so the trend is neutral When the trace operates below 40 it is trending down when it retraces to operate between 40 and 60 - again the trace could break either below 40 or above 60 (i.e. begin trending), so it is neutral Trending An uptrend is still in place so long as the trend stays above the 60 level A stable uptrend tends to operate in the 60-70 levels i.e. trend reversals often occur at the 70 level, but a good trend will test the 60-70 levels multiple times If the trace operates above the 70 level, then its momentum is becoming unsustainable, particularly as it approaches the 80 level - it may be a good policy to trail a stop below each candle above the 70 level Again a really strong trend can stay above the 70 level and retrace to rebound several times before it finally reverses - that's trading But the majority of the time, the first retrace is signals the end of the trend Downtrend Opposite Uses 1 New trends - breakouts and reversals - as above 2 Using various RSI levels as Support / Resistance for S/R trading 3 Using the RSI trace for trendline and pattern trading 4 Using RSI for divergence trading As we have covered new trends already lets look at the others RSI levels used as Support/Resistance Drawing S/R lines on pure price action can be a bit subjective at times, as what may appear as important levels to one person may not be significant to others........... Also trendlines must be drawn for each instrument we trade, and they may require updating at times........ Using RSI S/R levels will overcome this "problem" Our RSI levels are 20, 30, 40, 50, 60, 70 and 80 These lines are used on ALL charts, thet never change To reduce this number and help unclutter out charts, the 20 and 80 levels can be removed. Remember once price goes above 70 or below 30 , we trail a stop below each candle So we are left with just the 30, 40, 50, 60 and 70 levels Try it, it works great - and we get early signals at least as good as pure price action 3 RSI trace for trendline / pattern trading The RSI race which is basically a series of pivot hi's and lo's is ideal foe drwing trendlines and chart patterns - they often give early signals Chart patterns in the RSI 40-60 range (congestion) are well worth looking for Trendlines - the current trendline is the last pivot low that can be connected to the furthest away pivot lo withour passing thro the RSI trace etc etc 4 Divergence trading Once we have our initial 2 pivot lo's or hi's to define our divergence with price - continue this line into the future to act as our trading trendline Then use our trendline trading management to manage the trade, if price should accelerate and trace a higher pivot lo (in an uptrend), then use this pivot low with the previous pivot low as your new trendline etc etc The last two pivot lo's hi's is the current trend direction - use with discretion The RSI works very well with cadlesticks and Bollinger Bands Conclusion The RSI indicator is very versitile and defies the often quoted GUROs??? who say indicators do not work or that they lag price When used properly it can give a very good indication of the price action to come I hope the above ramblings, they are probably a bit disjointed, make sense and be of help to some traders Time for dinner, no time to back check Merry Christmas from Australia Peter PS I hope there are no errors