verbtheory

Are you using the J16 method?

Hey john, dont want to muddy kraven's thread but yes with much more objective indicators measuring levels, sentiment and trend.

In actuality Jim (J16) did not create these methods, it came from Martin Pring, the original trader who coined the term "pinbar" short for Pinocchio bar. Why? Pinocchio's nose would grow every time he would lie, in the same way a pinbar's nose points in the direction it's lying about. Check out Pring's book Technical Analysis Explained for more info, covers outside bars as well.

Anyway totally different scenario, I've looked through the daily charts and combined ADX for trend confirmation and I've got:

USDJPY = Buy (risk reward isnt that good on this one)

EURGBP = Sell

GBPJPY = Buy (Maybe if ADX closes above 25, great RR here if it does)

Cheers!

Hey kraven, here's the link: http://www.forexnirvana.com/f30/verbtheorys-day-break-system-v1-0-a-549

I mainly trade price action, support & resistance and sentiment intraday, i might get back into doing daily trades as well but time is at a premium these days.

The main issue i ran into with daily trades of this nature was trade management and periods of consolidation.

There's plenty of ways to complicate things but I think accepting established areas of support & resistance form the the basis of SR levels for trade management, add your krapp levels and the RecentSR indicator from Hanover on FF then you might be rounded out nicely.

The issue of consolidation still is an issue but trading the pullbacks in an established trend is a smart way to handle it. There's some indicators that do trending or ranging signalling like VarMA and ADX which is the only thing I'd probably add to the system.

I'll try to drum up some screenshots and post them next but im in a $y trade so it might have to wait.

Ciao!

It's been awhile since I've posted on this forum or anywhere for that matter. You've got a gem here, Kraven. I created a system called DBS about 2 years ago and this is the missing link for it. The only issue was consolidation of trends with DBS otherwise it still is quite a profitable system.

I'm lurking! :O

Quik's trade manager is pretty good but I like the simplicity of this J16 Manager, you can search for it on FF. No offense Quik ol buddy. ;)

Re: Verb's TA Thread

Just a quick post to let everyone know I'm not dead. I've just been busy with developing the system a bit more. Will update soon, sorry for the delay.

Ciao!

Re: Verb's TA Thread

Still working through the system. This type of trading between S&R takes a long time. I survived drawdown on EURUSD then got stopped out at 1.4225 for about +42 pips.

The GBPUSD trade is still in drawdown so still in development. I'm not happy with the duration of these trades.

Timing will need to be adjusted also I believe another major issue I had was the Murrey Math Lines were set to H4, I'm adjusting this to Daily (1440) with the basic premise being that we are using H4 for entrys and Daily for direction. I believe this will clean it up a bit.

The H4 chart showed current price between 1/8 and 2/8 on the cable however with the Daily setting it now displays between 2/8 and 3/8. That's a huge difference given the duration of these trades.

So at this point:

EURUSD: seems to be at the bottom of the trading range at MML 3/8. It should range to 5/8 around 1.4280.

GBPUSD: broke below 3/8 however trading has stayed above this level over the past 10 days or so. I expect this to head up to 4/8 to 1.6600 before the market jams up.

Ok going long on both on H4 price action when:

- price breaks to 0/8, -1/8 & -2/8, I'll drop trades in grid fashion.

- candle completes above 4/8, then I'll go long, if not going short at 4/8.

I should probably test this on H1 as it will go faster in developing but I've got other trading I'm doing... only so many hours in a day.

Ciao!

Re: Verb's TA Thread

It's definitely a start.

I'm going to be doing tweaking live on this thread. The UK session has put these trades into drawdown so I'm seeing what's going to happen.

My observation is that the Murrey Math Lines are holding much stronger as support & resistance than the SHI channel. I find the channel breaks a LOT and I think is probably best for just trend confirmation. Moving it there.

In examining where price is currently with relation to MML, it has breached the 4/8 lines which would be too early for a buy entry.

Wont be using SHI as setup signals instead will be using MML along with Price Action.

MML Rules:

Shorts:

8/8 -1 lot

+1/8 -2 lots

+2/8 -4 lots

Longs:

0/8 -1 lot

-1/8 -2 lots

-2/8 -4 lots

Work in progress. I will release indicators when I feel we have a better sense of how MML reacts with S&R.

Ciao!

Re: Verb's TA Thread

Thanks for moving the thread, I thought about this after the fact.

I'll post a template and indicators here in the next day or so. Just want to strip it down to the bare minimum before putting it up.

I'm also working on the rules and such.

Regarding inside bar and outside bar, yes to OB. No to IB. Inside bars really dont give you a trade direction and that's sort of the idea. Outside bar is already in the template. You can see it.

BEOVB = Bearish Outside Vertical Bar

BUOVB = Bullish Outside Veritcal Bar

Trades are moving along as planned, let's see what happens in UK session.

http://i28.tinypic.com/2zqramb.jpg

Ciao!

Re: Verb's TA Thread

Both the Cable and EURUSD are both at the bottom of their channels on H4 and descending timeframes.

Yes it's NFP day and yes the EURUSD took a nose dive but this is a pullback and an opportunity to buy at the bottom.

I am now long on both pairs off of Pinbar setups on the M30.

http://i25.tinypic.com/971dz8.jp

EURUSD:

M30 Entry: Pinbar @ 1.4183

Take Profit: 1.4450 (Psych)

Target 1 & Move to Breakeven: 1.4250 (just under MML)

Mental Stop: 1.4145 (just under MML)

GBPUSD:

M30 Entry: Pinbar @ 1.6701

Take Profit:: 1.7050 (Psych)

Move to Breakeven: 1.6800 (just under MML)

Mental Stop: 1.6595 (just under MML)

Ok our first trades are on!

Ciao!

Re: Why Not to Trade MA Crossovers..

I personally use 3 EMA's for most of my trend confirmation.

10 EMA (applied to close, 0 shift) = Fast

50 EMA (applied to close, 0 shift) = Medium

150 EMA (applied to close, 0 shift) = Slow

When the fast is above the medium and the medium above the slow and as said before the gap between MA's starts to widen and expand, the trend can be considered strong.

The key though to trends is support & resistance.

If you have an up trend that closes above resistance then you will see trend continue. If it closes below then beware as there may be some sideways motion before continuing the trend. There's a bunch of psychology thats behind this but I can get into that on a different post. Vice versa for short trends.

I never use MA crossover's as trade signals, they are trade validation when you have a trade setup.

My .02.

Ciao!

whats the best value for moving averages ? is a cross over at 50 considered reliable indicator of a change of direction ?

Re: Verb's TA Thread

Nice catch, B!

Looks like the Gartleys agree with the overall assessment. 8-)

I have watched Gartleys a lot earlier on and found that they are pretty reliable on the higher timeframes. The key is finding the right entry with Gartleys and I believe price action is the only way to go. I had the Gartley indi from funyoo on before but it just wrecks up my zen on my master analysis charts.

Ciao!

Hey Verb, I keep an eye on gartley formations on these pairs thought you might like to see the gartley's presently formed on daily charts of EU and GU

Re: Verb's TA Thread

Reserving this for later. Will add indicators and templates and such. 8-)

Trade Setups:

http://i31.tinypic.com/2vhxe01.jpg

Trade Validation:

3 EMA's for most of my trend confirmation:

- 10 EMA (applied to close, 0 shift) = Fast

- 50 EMA (applied to close, 0 shift) = Medium

- 150 EMA (applied to close, 0 shift) = Slow

When the fast is above the medium and the medium above the slow and as said before the gap between MA's starts to widen and expand, the trend can be considered strong.

The key though to trends is support & resistance.

If you have an up trend that closes above resistance then you will see trend continue. If it closes below then beware as there may be some sideways motion before continuing the trend. There's a bunch of psychology thats behind this but I can get into that on a different post. Vice versa for short trends.

I never use MA crossover's as trade signals, they are trade validation when you have a trade setup.

These are validated by price action around support & resistance as well as confluence and fibs.

Updates:

- Added trade setups

- Added trade validation part 1

I've decided to start up my own technical analysis and how I view the market since I do this elsewhere as well, might as well put it up here as I find myself lurking from time to time.

I mainly trade GBPUSD (cable) and EURUSD (fiber). I'll break down what I see, hopefully you see the same. :)

Ok here's what I think is happening with the Cable and Fiber. Very similar stories here.

I'm standing on the sidelines until I see the following:

http://i31.tinypic.com/35jb8z5.jpg

http://i27.tinypic.com/2962l5k.jpg

Bottomline: wait for the price to get back to the median and a bullish setup before making a move on the daily.

Seems that we are in the middle of a shakeout.

Happy Trading!

Just in case you are using this indicator or a version of it, there's a new version out. Essentially there were too many http requests for their web servers so they changed out to a different server to feed the indicator.

FYI, for anyone who is using News Avoidance in your EA. You will need to update the web adress within the code to make your EA work again.

Here is the link to the post from Twee.

Forex Factory - View Single Post - FF Calendar Indicator for MT

http://www.forexfactory.com/showpost.php?p=2927059&postcount=404

Follow the directions! :D

Ciao!

Re: GBP / USD

Here's my take on GBPUSD...

GBPUSD Weekly

http://i30.tinypic.com/2vx2hpk.jpg

Notice that the cable has attempted twice unsucessfully to close above 1.6600. Additionally we are very close to the 50 fib level on the weekly, if another pinbar appears then we have a good opportunity to head to the next support around 1.6100 then onto 1.5600. You can see on the weekly that this is a triple top. The key is getting a candle to CLOSE above resistance for this to be considered a continuation of the uptrend.

Bottomline: GBPUSD is heading downward.

Ciao!

Re: EUR/USD Support - Resistance

Here's my feeling on this subject.

EURUSD Weekly Chart:

http://i29.tinypic.com/2q1xvyt.jpg

If we see this week close above the 1.4150 resistance area then there is room to go up to the next resistance on the weekly to 1.4650. Dropping down to the daily chart you can see that a higher high was created indicating another attempt at breaking resistance.

Bottom line for me is there is a good chance of that we will continue the trend upward however if a pinbar forms then we are headed down.

Hope that helps :)

Originally posted by Darkstar at Forex Factory. A truly awesome essay on how the Forex "market" and the banks and brokers behind it.

I thought this would be particularly good to add here to this forum given much of the talk of starting brokerages and the evils of market makers...

Enjoy!

---original post---

There has been much discussion of late regarding broker spreads and liquidity. Many assumptions are being made about why spreads are widened during news time that are built on an incomplete knowledge of the architecture of the forex market in general. The purpose of this article is to dissect the market and hopefully shed some light on the situation so that a more rational and productive discussion can be undertaken by the Forex Factory members.

We will begin with an explanation of the purpose of the Forex market and how it is utilized by its primary participants, expand into the structure and operation of the market, and conclude with the implications of this information for speculators. With that having been said, let us begin.

Unlike the various bond and equity markets, the Forex market is not generally utilized as an investment medium. While speculation has a critical role in its proper function, the lion’s share of Forex transactions are done as a function of international business.

The guy who buys a shiny new Eclipse more then likely will pay for it with US Dollars. Unfortunately Mitsubishi’s factory workers in Japan need to get their paychecks denominated in Yen, so at some point a conversion needs to be made. When one considers that companies like Exxon, Boeing, Sony, Dell, Honda, and thousands of other international businesses move nearly every dollar, real, yen, rubble, pound, and euro they make in a foreign country through the Forex market, it isn’t hard to understand how insignificant the speculative presence is; even in a $2tril per day market.

By and large, businesses don’t much care about the intricacies of exchange rates, they just want to make and sell their products. As a central repository of a company’s money, it was only natural that the banks would be the facilitators of these transactions. In the old days it was easy enough for a bank to call a foreign bank (or a foreign branch of ones own bank) and swap the stockpiles of currency each had accumulated from their many customers.

Just as any business would, the banks bought the foreign currency at one rate and marked it up before selling it to the customer. With that the foreign exchange spread was born. This was (and still is) a reasonable cost of doing business. Mitsubishi can pay its customers and the banks make a nice little profit for the hassle and risks associated with moving around the currency.

As a byproduct of transacting all this business, bank traders developed the ability to speculate on the future of currency rates. Utilizing a better understanding of the market, a bank could quote a business a spread on the current rate but hold off hedging until a better one came along. This process allowed the banks to expand their net income dramatically. The unfortunate consequence was that liquidity was redistributed in a way that made certain transactions impossible to complete.

It was for this reason and this reason alone that the market was eventually opened up to non-bank participants. The banks wanted more orders in the market so that a) they could profit from the less experienced participants, and b) the less experienced participants could provide a better liquidity distribution for execution of international business hedge orders. Initially only megacap hedge funds (such as Soros’s and others) were permitted, but it has since grown to include the retail brokerages and ECNs.

Market Structure:

Now that we have established why the market exists, let’s take a look at how the transactions are facilitated:

The top tier of the Forex market is transacted on what is collectively known as the Interbank. Contrary to popular belief the Interbank is not an exchange; it is a collection of communication agreements between the world’s largest money center banks.

To understand the structure of the Interbank market, it may be easier to grasp by way of analogy. Consider that in an office (or maybe even someone’s home) there are multiple computers connected via a network cable. Each computer operates independently of the others until it needs a resource that another computer possesses. At that point it will contact the other computer and request access to the necessary resource. If the computer is working properly and its owner has given the requestor authorization to do so, the resource can be accessed and the initiating computers request can be fulfilled. By substituting computers for banks and resources for currency, you can easily grasp the relationships that exist on the Interbank.

Anyone who has ever tried to find resources on a computer network without a server can appreciate how difficult it can be to keep track of who has what resources. The same issue exists on the Interbank market with regard to prices and currency inventory. A bank in Singapore may only rarely transact business with a company that needs to exchange some Brazilian Real and it can be very difficult to establish what a proper exchange rate should be. It is for this purpose that EBS and Reuters (hereafter EBS) established their services.

Layered on top (in a manner of speaking) of the Interbank communication links, the EBS service enables banks to see how much and at what prices all the Interbank members are willing to transact. Pains should be taken to express that EBS is not a market or a market maker; it is an application used to see bids and offers from the various banks.

The second tier of the market exists essential within each bank. By calling your local Bank of America branch you can exchange any foreign currency you would like. More then likely they will just move some excess currency from one branch to another. Since this is a micro-exchange with a single counterparty, you are basically at their mercy as to what exchange rate they will quote you. Your choice is to accept their offer or shop a different bank. Everyone who trades the forex market should visit their bank at least once to get a few quotes. It would be very enlightening to see how lucrative these transactions really are.

Branching off of this second tier is the third tier retail market. When brokers like Oanda, Forex.com, FXCM, etc. desire to establish a retail operation the first thing they need is a liquidity provider. Nine in ten of these brokers will sign an agreement with just one bank. This bank will agree to provide liquidity if and only if they can hedge it on EBS inclusive of their desired spread. Because the volume will be significantly higher a single bank patron will transact, the spreads will be much more competitive. By no means should it be expected these tier 3 providers will be quoted precisely what exists on the Interbank. Remember the bank is in the business of collecting spreads and no agreement is going to suspend that priority.

Retail forex is almost akin to running a casino. The majority of its participants have zero understanding how to trade effectively and as a result are consistent losers. The spread system combined with a standard probability distribution of returns gives the broker a built in house advantage of a few percentage points. As a result, they have all built internal order matching systems that play one loser off against a winner and collect the spread. On the occasions when disequilibrium exists within the internal order book, the broker hedges any exposure with their tier 2 liquidity provider.

As bad as this may sound, there are some significant advantages for speculators that deal with them. Because it is an internal order book, many features can be provided which are otherwise unavailable through other means. Non-standard contract sizes, high leverage on tiny account balances, and the ability to transact in a commission free environment are just a few of them…

An ECN operates similar to a Tier 2 bank, but still exists on the third tier. An ECN will generally establish agreements with several tier 2 banks for liquidity. However instead of matching orders internally, it will just pass through the quotes from the banks, as is, to be traded on. It’s sort of an EBS for little guys. There are many advantages to the model, but it is still not the Interbank. The banks are going to make their spread or their not go to waste their time. Depending on the bank this will take the form of price shading or widened spreads depending on market conditions. The ECN, for its trouble, collects a commission on each transaction.

Aside from the commission factor, there are some other disadvantages a speculator should consider before making the leap to an ECN. Most offer much lower leverage and only allow full lot transactions. During certain market conditions, the banks may also pull their liquidity leaving traders without an opportunity to enter or exit positions at their desired price.

Trade Mechanics:

It is convenient to believe that in a $2tril per day market there is always enough liquidity to do what needs to be done. Unfortunately belief does not negate the reality that for every buyer there MUST be a seller or no transaction can occur. When an order is too large to transact at the current price, the price moves to the point where open interest is abundant enough to cover it. Every time you see price move a single pip, it means that an order was executed that consumed (or otherwise removed) the open interest at the current price. There is no other way that prices can move.

As we covered earlier, each bank lists on EBS how much and at what price they are willing to transact a currency. It is important to note that no Interbank participant is under any obligation to make a transaction if they do not feel it is in their best interest. There are no “market makers” on the Interbank; only speculators and hedgers.

Looking at an ECN platform or Level II data on the stock market, one can get a feel for what the orders on EBS look like. The following is a sample representation:

You’ll notice that there is open interest (Level II Vol figures) of various sizes at different price points. Each one of those units represents existing limit orders and in this example, each unit is $1mil in currency.

Using this information, if a market sell order was placed for 38.4mil, the spread would instantly widen from 2.5 pips to 4.5 pips because there would no longer be any orders between 1.56300 and 1.56345. No broker, market maker, bank, or thief in the night widened the spread; it was the natural byproduct of the order that was placed. If no additional orders entered the market, the spread would remain this large forever. Fortunately, someone somewhere will deem a price point between those 2 figures an appropriate opportunity to do something and place an order. That order will either consume more interest or add to it, depending whether it is a market or limit order respectively.

What would have happened if someone placed a market sell order for 2mil just 1 millisecond after that 38.4 mil order hit? They would have been filled at 1.5630 Why were they “slipped”? Because there was no one to take the other side of the transaction at 1.56320 any longer. Again, nobody was out screwing the trader; it was the natural byproduct of the order flow.

A more interesting question is, what would happen if all the listed orders where suddenly canceled? The spread would widen to a point at which there were existing bids and offers. That may be 5,7,9, or even 100 pips; it is going to widen to whatever the difference between a bid and an offer are. Notice that nobody came in and “set” the spread, they just refused to transact at anything between it.

Nothing can be done to force orders into existence that don’t exist. Regardless what market is being examined or what broker is facilitating transactions, it is impossible to avoid spreads and slippage. They are a fact of life in the realm of trading.

Implications for speculators:

Trading has been characterized as a zero sum game, and rightly so. If trader A sells a security to trader B and the price goes up, trader A lost money that they otherwise could have made. If it goes down, Trader A made money from trader B’s mistake. Even in a huge market like the Forex, each transaction must have a buyer and a seller to make a trade and one of them is going to lose. In the general realm of trading, this is materially irrelevant to each participant. But there are certain situations where it becomes of significant importance. One of those situations is a news event.

Much has been made of late about how it is immoral, illegal, or downright evil for a broker, bank, or other liquidity provider to withdraw their order (increasing the spread) and slip orders (as though it was a conscious decision on their part to do so) more then normal during these events. These things occur for very specific reasons which have nothing to do with screwing anyone. Let us examine why:

Leading up to an economic report for example, certain traders will enter into positions expecting the news to go a certain way. As the event becomes immanent, the banks on the Interbank will remove their speculative orders for fear of taking unnecessary losses. Technical traders will pull their orders as well since it is common practice for them to avoid the news. Hedge funds and other macro traders are either already positioned or waiting until after the news hits to make decisions dependent on the result.

Knowing what we now know, where is the liquidity necessary to maintain a tight spread coming from?

Moving down the food chain to Tier 2; a bank will only provide liquidity to an ECN or retail broker if they can instantly hedge (plus their requisite spread) the positions on Interbank. If the Interbank spreads are widening due to lower liquidity, the bank is going to have to widen the spreads on the downstream players as well.

At tier 3 the ECN’s are simply passing the banks offers on, so spreads widen up to their customers. The retailers that guarantee spreads of 2 to 5 pips have just opened a gaping hole in their risk profile since they can no longer hedge their net exposure (ever wonder why they always seem to shut down or requote until its over?). The variable spread retailers in turn open up their spreads to match what is happening at the bank or they run into the same problems fixed spreads broker are dealing with.

Now think about this situation for a second. What is going to happen when a number misses expectations? How many traders going into the event with positions chose wrong and need to get out ASAP? How many hedge funds are going to instantly drop their macro orders? How many retail traders’ straddle orders just executed? How many of them were waiting to hear a miss and executed market orders?

With the technical traders on the sidelines, who is going to be stupid enough to take the other side of all these orders?

The answer is no one. Between 1 and 5 seconds after the news hits it is a purely a 1 way market. That big long pin bar that occurs is a grand total of 2 prices; the one before the news hit and the one after. The 10, 20, or 30 pips between them is called a gap.

Is it any wonder that slippage is in evidence at this time?

Conclusions:

Each tier of the Forex market has its own inherent advantages and disadvantages. Depending on your priorities you have to make a choice between what restrictions you can live with and those you cant. Unfortunately, you can’t always get what you want.

By focusing on slippage and spreads, which are the natural byproduct of order flow, one is not only pursuing a futile ideal, they are passing up an enormous opportunity to capitalize on true inefficiencies. News events are one of the few times where a large number of players are positioned inappropriately and it is fairly easy to profit from their foolishness. If a trader truly wants to make the leap to the next level of profitability they should be spending their time figuring out how identify these positions and trading with the goal of capturing the price movement they inevitably will cause.

Nobody is going to make the argument that a broker is a trader’s best friend, but they still provide a valuable service and should be compensated for their efforts. By accepting a broker for what it is and learning how to work within the limitations of the relationship, traders have access to a world of opportunity that they otherwise could never dream of capturing. Let us all remember that simple truth.

---end of originial copy and beginning of my commentary---

Seriously, I found this incredibly illuminating. ECN is not always the true solution, it depends on the type of trading you are engaged in. Market making brokers actually do have some beneficial usages. It sounds bad but ultimately, knowledgeable traders can actually make money off of less skilled retail traders in a market making brokerage.

Things to contemplate.... ;)

Re: TRIAD FORMULA EA

I'm having a blast with this EA!

I'm using the minimum trailing stop allowed by broker and 30 pip take profit on daily tf. It just keeps winning.

At times you'll be negative for a bit if you attach the chart late and get into a trend on the tail end or late breakout however it's staying on the right side of the market.

Again thank you to xpertadvisor!

Only thing is the fixed TP doesnt seem to work so i'm basically having to close out manually or trail out.

Ciao!

Re: TRIAD FORMULA EA

Just wanted to say thanks to xpertadvisor for coding this up!

Nice job indeed!

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