20 EMA and Patterns

[brownsfan019 17]

Guys have any tips on initial stop placements? Management?

 

IMO this makes or breaks this (or any system).

 

Stop placements:

1) Classic candlestick analysis would say one tick above the high or below the low of the entry candle.

 

2) Use previous support/resistance.

 

3) Fixed number.

 

Money Management (too many to think of at once):

 

1) Trade all day or after a profit target hit (which could be reached in one trade)?

 

2) How many losers in a row can you take before realizing it just ain't happening today?

 

3) Do you trade pre-market, if so, when? If not, why not?

 

4) If the first pattern fails, can you re-enter in the same area even if it's not a new pullback pattern? IE, you get a nice inv hammer to go short that fails. 2 candles later is another inv hammer... can you take it? Or do you need to wait for the full setup (move down, test back up to EMA, inv hammer)?

 

A few ideas there.

 

That's the reason why I say this part of the trading plan is more important than the entry method. I think this thread has shown there is potential here but it's also easy to see how it might not work depending on the money mgmt portion.

[Bearbull 10]

It is not a question of "IF THIS SETUP OR ANY OTHER WILL WORK", it is whether or not after having carried out the required research , testing, establishing entry/exit rules, that the trader sets about acquiring the skill, discipline, patience etc TO MAKE IT WORK

 

Brutusdog pointed out the inverted hammer 3 bars back, yes that is a valid setup, this time the trade is stopped out, then we have another immediate setup, again this is a valid setup, now as BF points out, is the trader still wringing his hands, moaning, banging his head against the desk, kicking the wife or the dog whichever happens to be in the vicinity over the loss on the last trade or has trained himself after having proved to him/herself the consistency in profitability of that particular setup over time, to be mentally prepared and available for the next trade.

 

As to the placement of stops, again this is getting into tactics as BF stated, there are just so many variations, the logical stop is normally over the previous swing high or low, but for some this could be too wide.

[brutusdog 10]

It is not a question of "IF THIS SETUP OR ANY OTHER WILL WORK", it is whether or not after having carried out the required research , testing, establishing entry/exit rules, that the trader sets about acquiring the skill, discipline, patience etc TO MAKE IT WORK

 

Brutusdog pointed out the inverted hammer 3 bars back, yes that is a valid setup, this time the trade is stopped out, then we have another immediate setup, again this is a valid setup, now as BF points out, is the trader still wringing his hands, moaning, banging his head against the desk, kicking the wife or the dog whichever happens to be in the vicinity over the loss on the last trade or has trained himself after having proved to him/herself the consistency in profitability of that particular setup over time, to be mentally prepared and available for the next trade.

 

As to the placement of stops, again this is getting into tactics as BF stated, there are just so many variations, the logical stop is normally over the previous swing high or low, but for some this could be too wide.

 

great post bb exactly what i was getting at.

[brownsfan019 17]

It is not a question of "IF THIS SETUP OR ANY OTHER WILL WORK", it is whether or not after having carried out the required research , testing, establishing entry/exit rules, that the trader sets about acquiring the skill, discipline, patience etc TO MAKE IT WORK

 

Nice post BB. As I've attempted to say here and many other times on TL, the system is only as good as the trader trading it and as good as the research and work they've put into it.

 

I think there is so much emphasis placed on when to enter a trade when the exits are just as important or more important IMO. The key for any trader is to attempt to maximize the return on your dollars while minimizing any potential losses. Of course, that's easier said than done.

[Bearbull 10]

Rare - but both setups (i.e hammer on the 1st , on the 2nd, a downbar, insidebars, upbar which when blended together constitute a hammer) in the first couple of hours on Dax,

 

Both longs have support to the left, plus if one wants to add other tools such as ADX etc , fine, ADX here was over 30. There was even further confirmation from the volume.

 

So the initial stage is to research the 2 setups first, then later on after gaining some experience in recognizing these in realtime, and evaluating the risk/reward etc, one can then proceed to bring in other additional tools such as support/resistance, trend, oscillators, volume etc, one step at a time.to fine tune the entry/exit

[Bearbull 10]

To drive home the concept of blending, same setups but on a lower time frame.

 

Now the 1st setup which was with a hammer exhibits itself as a 3-4bar turn, i.e. downbar with increased range, insidebars, followed by a up reversal bar on increased range.

So the 2 setups which were mentioned to experiment with are effectively 2 sides of the same coin, depending on the timeframe.

[brownsfan019 17]

Here's a setup on the Stoxx from this morning that I took on the OEC simulator to see how it reacted:

 

 

 

Trade required patience, that's for sure.

 

Green line is where I had my stop at.

 

Why Stoxx? B/c the ES did not have a setup IMO.

[brownsfan019 17]

And one from the EC:

 

 

 

And ES:

 

[Bearbull 10]

Think what has been demonstrated so far is that recognition of simple setups are sufficient for successful trading on any market provided the trader has injected effort into proving it for him/herself.

BF you are right, Patience is the Key, e.g on ES, it took over 40min with price meandering between 1206 and 1210 before the push up and many would have be tempted to get out by then.

Infact part of the tactics can involve time, e.g if the trade does not go in the anticipated direction within say 15/20min, get out and stand aside, don't want to get into Wyckoff here, but his methodology would involve looking for further evidence of support of the same entry via price/vol , and if it manifests then go back in , again all this has to be tested out and then adhered to. As outlined in your previous post, there are just so many variations on trade management.

[brownsfan019 17]

Couldn't resist... a little after market trade:

 

 

[Blue 10]

Saw a good opportunity to try this technique this morning in NQ 5 min chart.

Sim trade with a good result.

Green line is SMA20, pink line EMA20.

 

Any comments?

Thanks.

[brownsfan019 17]

Saw a good opportunity to try this technique this morning in NQ 5 min chart.

Sim trade with a good result.

Green line is SMA20, pink line EMA20.

 

Any comments?

Thanks.

 

PERFECT.

 

But to clean that chart up, all you need is the 20 EMA.I have the 200 SMA on mine (blue line) as a reference point.

 

Example:

 

 

 

=================

 

The next step blue is exits. It appears here you covered near the HOD and in this trade, that was an almost perfect exit. Some days covering at the nearest reaction point (in this example the HOD) is a really good exit method. Sometimes, price will blast past your exit and you'll think... got out too soon. But that's part of the game.

 

Glad to see you here Blue. I hope this thread can at least give you a new lease on your trading life.

[Blue 10]

Thanks for the comments.

 

I've only recently begun focusing on exits. In this case because the trade was a test, I left it on to see if I could catch a move to make target on a single trade. Closed it because the order flow indicated it was stalling on the premarket resistance. Turned out perfectly for $260.

But the trade wasn't easy. Initially it went against me about -2 pts and then on the first pullback it came back down to about +2 pts.

 

BTW, I'm mostly trying to apply it to a 1 min chart, but early indications show the 5 min chart to be more reliable.

[brownsfan019 17]

BTW, I'm mostly trying to apply it to a 1 min chart, but early indications show the 5 min chart to be more reliable.

 

The 5 min is fine. 1 min too choppy.

 

This is easily a one and done system looking for the morning volume surges to help. If not, $ management becomes vital.

[brownsfan019 17]

But the trade wasn't easy. Initially it went against me about -2 pts and then on the first pullback it came back down to about +2 pts.

 

Oh yeah - sometimes the trades are not an immediate profit. Requires patience at times. If you read the entire thread, you'll see bearbull mention this a few times. The entry system is valid, but how you manage your trades, emotions and fears is up to you.

[Blue 10]

Here's another couple of tests: sim trade on NQ 5 min chart this morning.

 

Both were a little ambiguous.

In the first (candle 1) the market was mostly sideways, not a clear up-trend.

 

In the second, candle 2 was not a classic hammer, plus the EMA20 had been severely broken; the tail of the hammer was on SMA40 (red line).

Was this a case of (fulfilled) wishful thinking? Would candle 3 have been a better entry signal?

 

BTW, both trades netted a little more than 10 pts.

 

Any comments would be appreciated..

[brownsfan019 17]

Here's my view of the NQ blue:

 

 

 

 

I'm sure BB would say otherwise on a few of them, but I am looking for a pullback/retest of the 20 EMA with a bullish candle pattern to get long.

[brownsfan019 17]

Also, this thread will show you how to post charts directly in the thread so it's easier and quicker to see.

[Bearbull 10]

Once again on the Dax and Eurostoxx, immense patience is required as moving prices generate emotions and leave us with a feeling of having missed a great move had we taken the trade without the setup, but that is in hindsight;)

[Bearbull 10]

Same setup on ESmini, Entry could be the easy part, exit and trade management is the most difficult and crucial part.

 

1. A trader with a single contract moving the stop loss over every downbar would be stopped out on the 3rd bar.

 

2. Another's tactics may involve moving it over every swing high

 

3. Another exit point would be the support at the second arrow

 

4. some may choose the break of the first trend line, another trader may opt out for the break of the second trend line (Red)

 

5. A Trader with multiple contracts could take half on the 1st exit and adopt any one of the above for the rest.

[Fedeo 10]

Hi,

this is my first post on the Forum after I spent few months trying to get the more I could from TL. First of all I want thank all of you that are joining their knowledge with person as me (that by now can give almost nothing back).

I want to share now my view of the use of candlestick in day-trading and how I have used the knowledge I got from this thread/corner.

As I was doing in swing trading I have mainly focused on 2 entry signals the Hammer (as often mentioned here in the previous reply) and the bullish/bearish engulfing. I want to focus more now on the second one as it is the one I am using more and we had two interesting opportunities yesterday on the ES on 5 min charts.

 

For example in an up-trend I am basically looking for for a bullish engulfing that 'develop' under the EMA20 but with close above it . As also stated by Nison, the more the volume on the second bar the better.

The 5 min chart shows 2 possible entries (I personally got only the first one as I was leaving the office when the second one appears).

 

What I find also very interesting, and this is something that happens quite often, is that a bullish engulfing as shown above in the 5 min charts is also an hammer that retrace under the EMA20 in the 15 min chart (it basically depends from the candle before the engulfing). From my point of view this makes the pattern even more powerful. In our case this was especially true on the first entry and for example I think it was the same in the post from BF of "09-30-2008, 11:11 PM" for the entry at around 11:30.

 

 

As always stated here there are many times when the pattern can fail.For example in the 5 min I can see a failed one at around 11:30, even if in that case I don't know if I would get it or not as a lower high developed few bars before and EMA20 was quite flat (I only take the pattern in clear a trend market).

 

To make my post o a bit more consistent (and open to everybody critics) these are the "basic" rules I follow for the pattern:

- When the engulfing appear I "generally" entry on the bar after a tick above the close of the second bar and place the stop loss one tick below/above the close of the second bar.

- I normally set the target based on market profile or S/R analysis

- I move the stop to B/E normally when the price touch the latest swing before the engulfing.

 

As always said here these are generic rules that I try to follow to have a consistent plan but that can be changed based on live osservation of the market.

 

Sorry for my long post...but as this was the first one I had lots to say...:-)...

 

Still many thanks to all ...and a bit more to BF for all the great job done here in the candlestick corner and everywhere in the forum...

[brownsfan019 17]

If you are reading this thread, then I would suggest reading this new thread I started after reading an article in the recent SFO.

 

Great article, much pertains to us here. I didn't want to clutter this thread up, so I kept it separate.

[james_gsx 16]

Thought this was interesting Friday. We saw several tests of the 20ema, each time proved crucial. Hope you all enjoy that hammer;)

 

 

 

 

[brownsfan019 17]

Hopefully a few have found some use of this thread, I know I have. While you may not use the 20 EMA and pullbacks as illustrated here, there are some good pieces of advice throughout the thread.

 

As w/ many threads, keeping it going is always a problem. I may just sticky this thread so it stays at the top of the candlestick corner.

[bakrob99 11]

Here's a failed one that just occurred:

 

This one was a solid setup that just didn't work.

 

 

The difference with this one was the consolidation zone which happened just before ... in my opinion the rapid retraces back from far away tend to bounce more... Also - look for key fib retracement zones or any other s-r zones to support the trade.

 

Nice work.