Help with Entry/exit Points Based on Different Timescales?

[theman 10]

Hi there

 

Wonder if you can help me?

 

I have 4 charts of BIDU

 

1. 512 tick chart

2. 233 tick chart

3. 133 tick chart

4. 51 tick chart

 

Please can you show me how you would trade with the following charts, I'd like to know when you would buy/sell. I'm new to trading and I like to learn more about trading Intraday. I'l like to trade like a momentum trader (If there is such a name).

 

The red/blue line on all the charts are Hulls moving average.

 

Please find below the charts.

 

Many thanks

theman

[BlowFish 10]

Personally I would approach things from another direction. I would ask what I wanted to achieve and then select suitable charts to help do that.

[theman 10]

I've been looking at BIDU for a long time and I like the way it moves in either directions. So that why I like this chart BlowFish.

 

I guess being a new trader, I'll like to learn from the masters about how they would get in and out of BIDU given the timeframe above.

 

Thankyou

[BlowFish 10]

\I wasn't trying to be cryptic. What I meant was to think about how you want to trade. What size swings do you want to capture? How long do you want to hold a position. What sort of risk are you prepared to take. This dictates suitable time frame charts to see the information you need to reach those objectives.

 

I would pick 3 principle charts to start with. As a rule of thumb each should be roughly 4-7 times greater time frame than the next. (A couple of your charts are essentially showing quite similar information). Charts are like maps, an atlas wont help you fond a street in your city and a city map wont be any help getting to Peru.

 

Have a large time frame 'context' chart this show the major trend S/R levels etc. Next one down is a 'focus' time frame. This would be the chart you actually trade (i.e. look for 'setups') the lowest time frame chart is a 'trigger' chart that you can use to actually trigger a position once things set up.

 

Just some ideas.

[brownsfan019 17]

Based on a tick chart with a hull MA, here's what I would do:

 

Learn everything about the hull MA. What's the strengths and weaknesses? From there, apply to the chart and see where you may take a trade and why.

 

The easy solution is buy/sell based on the color of the hull MA, knowing there will be some choppy conditions. When does this work best? AM, lunch, and/or PM? Why? Does it work better certain days of the week? Why?

 

And so forth.

 

That's where I would start with having a hull MA and tick chart in front of me.

[ckait 10]

You may want to think about loosing some of the charts, a medium term chart such as the 233 tick should be sufficiant to day trade off. Too many charts will only cloud things up in my opinion. In your second chart there is an area where price rotated for an extended period or balanced. When coming out of balance go with the direction of the move out of balance.This can be done with all liquid markets and on all time frames just figure out which one suites you best. One more thing you dont need MA's or indicators to do it .

[Hlm 10]

Note: I DO NOT condone using averaged indicator systems without first understanding the raw ebb and flow of the market. However, the question was asked so I will proceed cautiously with an answer.

 

The theory behind momentum trading is that one enters in areas of least resistance between different time frames. This increasing directional bias with the alignment of time frames gives a skilled momentum trader the ability to enter on a small time frame (using it's small stop) and exiting on a larger time frame (using it's profit). I agree with BlowFish's comment about the time frames being a little more than four times each other. I use an easy system that uses fib numbers to determine time frames.

 

For example....

 

Fibs: 5 8 13 21 34 55 89 144 233 377 610 987 1597

 

So if I wanted my main chart (pull back pattern) to be 144ticks, my entries would be on the 34tick and my main bias/trend/targets would be on the 610tick. I just put two fib numbers in between my trading time frames.

 

As for moving averages, I am not against them and have a use for them...but be warned that you must understand what information they can and cannot give you. I know some very successful traders that use moving average systems. However, every single one of them can trade without them. If you ask them why they use them their answer will be along the lines of "Do you not own or use a calculator? Why not just do it by hand?" Their point being that one can possibly get better results, depending on trading style/strategy of course, by increasing their speed and efficiency in the data mining process. However, you first must have the knowledge to separate the bad data from the good in the process.

 

I have not used a Hull Moving Average past some simple back testing (ie no live trading). My rule of thumb is SMA's for Time Charts and EMA's for Tick/Volume Charts. There are a couple of ways to look at moving averages. You can read the time frames based off of turns, crosses, or bounces. One thing to take notice is that many times the market will pick one or two moving averages and use it as S/R for the morning or possibly the whole day. Now which moving averages to use you ask? Well the best way to figure that out when first studying is screen time - screen time - screen time. Throw up a few variations of fib numbers and watch them across the three time frames. Where is price bouncing? What happens when the MA's cross? What happens when they get spread out? What happens when a larger MA is broken with force? What happens when price gets squeezed in between several MA's? Then go a step further and try to answer "why". These are the questions you should be asking yourself.

 

You were asking about entries...well, I will quickly show a simple system based off of MA crossings (again, I do not necessarily condone using). Take the time frames above and throw up...lets say...a 13ema and 55ema. So to put simply, for a long to take place the 13ema has to be above the 55ema on ALL of the charts. What you look for is first the cross on the 610t chart. This shows the bias is up. Next step is to wait for the 13ema to pull back on the 144t chart. This is the start of your continuation pattern. Finally comes the entry point which is the up crossing of the 13ema on the 34t chart. You could also add a 5-3-3 stochastic to each chart and use it as a filter by only taking a trade when the stochastic is pointed in the correct direction on all charts. Now what about those consolidation areas you ask? Look at the chart, do you see anything interesting? What happens a lot of times when price gets in between the 13ema and 55ema on the 610t (trend/bias) chart. Many times we get consolidation in this area because that's where you have many time frames (forces) coming together and trying to transition/decide direction. If you add the missing fib numbers in between it may also become more clear. In my opinion this is one "legit" way to use moving averages. Moving averages can be a good way to estimate potential consolidation and volatility. Targets can be obtained from many places. Maybe a turning of a stochastic or a break/test of the 13ema on the 610t. One could also throw up much larger fib numbers on the 610t to see if there are time frames that we may be heading towards to test.

 

Note: Again, this is just a very simple example. I do not condone trading such a system without first understanding exactly what you are looking at.

 

I will leave this topic on a note about combining everything into one chart. Depending on your strategy this may or may not be a good idea. For example, you could combine all the moving averages on to the 34 tick chart. However, sometimes you then get too much information with the bigger time frames. A moving average on a 610 may never show the slight dip that an equivalent moving average on the 34 tick does. This could be a good or bad thing. That's just something to keep in the back of your mind.

 

I hope this gives a very basic insight to multiple time frame trading using averaged indicators.

[Hlm 10]

One more thing you dont need MA's or indicators to do it .

Absolutely correct. However, that doesn't mean it can't be done or at least assisted with MA's or indicators. Especially if you take a more advanced approach and are watching/measuring several different instruments to take the opportunity on the one with the highest probability and best risk/reward structure.

[Hlm 10]

One more thing to add (for now )...

 

Your time frames do not have to all be tick charts. By mixing up the type of time frames, you can add extra insight and checks and balances to what's going on.

 

An example is as follows...

 

Smallest(Entry) - Tick Chart (21-144 depending on instrument)

Middle(Formation) - Time Chart (3min or 5min)

Largest(Bias) - Market Profile Value Areas

[stanlyd 10]

All OF HLM posts are great stuff. I would also just like to mention a technique I have been testing in which you enter off a chart on more fib number down but use the one right above it for atr based stops. So taking HLM example from above with moving averages, if the 610tick is the main largest timeframe and the entry was on the 34, I might actually change it up so that the entry is on the 21 tick based on a buy stop. This way the "momentum" of the market takes you into the trade. And in a lot of cases that momentum will also go through the buy stop and almost right to your first target. Now once that first contract has been hit I would then go back to the 34 tick chart and trail the stop based on that charts atr based stop area's. This can all happen very quickly and once you get to a certain amount of decent locked in profit, then its all about looking for the target on the largest 610 chart to be hit. That target like mentioned earlier can be found in many ways. Fib Extensions, range expansions,or whatever your style likes to use. Anyway this is just something I have been looking at the past few weeks.

Edited July 31, 2008 by stanlyd
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[theman 10]

Hlm

 

Your post really makes sense, thankyou so much and thank you ALL for replying to my port. Quick question

 

If on the long term chart lets say 610 tich chart, the trend is going up, on the middle it going down, and the smaller timeframe its going down, what would you guys do?

 

Thanks again for your help

[Hlm 10]

Hlm

 

Your post really makes sense, thankyou so much and thank you ALL for replying to my port. Quick question

 

If on the long term chart lets say 610 tich chart, the trend is going up, on the middle it going down, and the smaller timeframe its going down, what would you guys do?

 

Thanks again for your help

Have you ever heard the quote "Trend is your Friend"?

 

At that point I would just wait on the sidelines. If you want to look for a short you would make your middle time frame the highest and add another time frame below your lowest and see if you have a setup in the opposite direction. This will give you a correct idea of the risk/reward you should be looking for. In my opinion, when traders are first starting out they should remove "counter-trend" from their mind. They should try to think of everything as "trends". It's all about the theory of fractals...the same setup, different time frames, different sizes.