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Trading spike against the strong trend

Discussion in 'General Forex Talk' started by Dennuise, Oct 3, 2007.

  1. Dennuise

    Dennuise Private, 1st Class

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    Need some advise, is it possible to make some pips if we trade the spike which move against the strong trend ? Because sometimes when i trade it, it finished with the bad result.
     
  2. Cyclon

    Cyclon Company Representative

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    this will depend on scale and approach

    It would seem that you have already identified the technicals of such a trend. So if there is sufficient room to make a good risk/reward ratio with proper position sizing and stoploss, it would be like any other real estate on the chart. You would also then want the busride in the other direction at the area of the reclaimed trend, no?

    An approach to knowing what to expect in this area would involve observing the breakdown of the trend. This "spike" thing is a strong move and happens because the breakdown was tested and has been confirmed in the eyes of traders who are now pulling trend-following orders and reversing. My only point here is that the spike is a result of something else.

    For this you may try using a setup like this:
    EMA 466, 356, 108, 13
    SMA 68, 52
    Williams %R 89

    Select a timeframe in which the following is seen:

    Significant pullback spikes will usually come when these moving averages are aligned in their period relative positions (uptrend has price above shortest period MA and next shortest MA period below that, continuing on to the longest; the opposite for downtrend).

    There is little if any recent crossovers of these MAs. Price has recently recovered from a move off of the 52 SMA and new ground has been made in the trend.

    Now more recent is a similar break and recovery at the 13 EMA. Following this will be the confirming breakdown. The 13 EMA will be breached again and a retry to break new ground fails.

    This is the sign that will create a systematic unwinding of enough trend following positions to get a pullback. The actual spike is after even more have spotted it.

    The use of the Williams%R for help in picking a spot to Stop-And-Reverse:
    Set it to 89. It will work at 0 and 100 and can of course only be counted on for major reversals at the correct timeframe to match trend on a pullback. Try 356 and 466 ema pairs for that. 356 can at times be a bounce and at others just passing thru to a violation at a zone beyond the 466.

    Or you can try going to a smaller timeframe to look for these same setups at a smaller scale and in reverse.

    There are other spikey trend-pullback setups and so caution as always.
     
  3. Dennuise

    Dennuise Private, 1st Class

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    Thanks a lot cyclone. wanna try it soonest.
     
  4. 3BlackCrows

    3BlackCrows Corporal

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    Sounds like a good setup Cyclon :)

    Would just like to add that trading against the trend is quite dangerous as usually price is extremly volatile while it resists all urges to pullback.

    Also the pips you make trading against the trend pale in comparison to the pips made trading with the trend
     
  5. rpaco

    rpaco Sergeant

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    Interesting choice of EMA and SMA periods only one of which is a Fibonacci sequence number (13) Can you give any clue as to why those particular numbers?

    I am reminded of the MA cross technique by Mark McRae where you use two long and two short pairs of MAs separated by a few periods only eg 400, 395 and 12, 13. He sometimes threw in a mid pair too. (which I also note from your SMA 68, 52) The mail problem here is to keep abreast of which MA is which on the chart
    Interesting use of long Williams, I will try that, my normal period is set at 21.

    Do you use long Bollys? Since FX pairs often oscillate between the 200 or 400 Bolly and an MA
     
  6. FrankTheTank

    FrankTheTank Private

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    Sure. The technique you are describing has been used by traders for centuries. Its called buying or selling at a discount. Sometimes the spike allows for a good entry and its a smart trade provided the news report is not a big one (like NFP or rate decisions) and the deviation is not that large.

    I am making a speadsheet that analyzis the past 90 days of news trades and this strategy (plus a few others) are some of the best "after spike" ways to trade news reports.
     
  7. Cyclon

    Cyclon Company Representative

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    MA setup choices


    rpaco you are right about 13 being a fibbo but they are ALL related by factors to fibbo but not in any obvious way. In fact the 13 is not derived from the fibbo series but by factoring others. Which, if I discuss, y'all would certify me to the looneybin.
    :eek:
    Actually doing so would unravel the secret mysteries of the king and queen of trend, the elliott wave key built by each wave to identify timeframe and internals, the factors by which to multiply stock (unleveraged) technicals to get commodity (leveraged) technicals, the new elliott rule, and the erroneous elliott wave rule.
    nutherwords
    I could tell ya but
    then I'd have ta kill ya.... :eek:
     
    #7 Cyclon, Oct 8, 2007
    Last edited: Oct 8, 2007
  8. rpaco

    rpaco Sergeant

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    Again I am very interested that you mention Elliot both in your text and signature. Obviously in theory the fluidity of FX is an ideal application for Elliot.
    I was thinking of starting an Elliot thread for discussion of where we are in the wave set for any given FX pair. But in other forums I have found that no one seems to use Elliot in FX trading. Of course my problem is always judging where we are in the sequence, it seems so easy to cheat in Elliot, if it doesn't fit then its an "extension or a flat" I have spent many hours looking at waveforms, but cannot honestly say I can use them with confidence, because even when you have convinced yourself that we are definitely at 5 and the next MUST be "A" then the damn thing goes in the motive direction some more. Please advise if you actively use Elliot, it sounds like you do. If ya have to kill me so be it, BUT I must know the secret before I die! :eek: (Oh yes and do you have a foolproof triangle exit direction strategy, it never resumes the trend for me)

    I am trying Williams at 89 today, mmm, not sure yet if it gives any better indication than it did at 21.
     
  9. Cyclon

    Cyclon Company Representative

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    that's why he's smilin'

    Hi rpaco,

    You describe so well just some of the reasons for his shiteatingrin.

    Yes I use Elliott - and only Elliott. Because it is perfect - yep, perfect.

    (the Williams%R is really insignificant -even though it works deadballson at the bounce levels of 0 and 100 when set to 89 -for at least a bounce - and weird that it is the one setting that is the same for stocks and commodities)

    Which is why Elliott isn't used much for forex. The waves overlap each other so much more than with stocks so you need a key. But without the factors to translate the key from stocks, the timeframes can't be used and without the timeframe the key is not right. So even if you get the wave right, if the control is in a different degree then it won't help.


    but for the first time in almost a century - because you asked...
    I will reveal the erroneous elliott wave rule (or is it an add-on, dunno but she broke!)

    Here it is: THERE ARE NOT EVER ANY EXTENSIONS TO A WAVE.
    no 6-7-8, no triangles, no W,X,Y or D,E,F, no so called flats, - just 5 motive, 3 corrective. Always - all the time - only.

    This is slightly controversial. The reason it is is because without the extensions "they" cannot make sense of actual events on the chart and so "they" form-fit these events into a loosened set of rules. This goes all the way back to Elliott himself. Consequently you get these "alternate counts".

    But the waves are there ignoring the oversight and implementing the "unknown" rule like clockwork.

    For the rest you will have to wait for the book. :)
     
  10. rpaco

    rpaco Sergeant

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    Well thanks for that small crumb even though it was well mashed into the old carpet and someone has nailed it down, laid another carpet on top and put the settee right over it. :(

    I have spent many hours timing cycles and know that they are not linear. I am reminded of my days at college doing AC Voltage/current calculations where you get the V leading the I in two sine waves, this is affected by the power factor of the load (how inductive or capacitive it is causing reactance/ reluctance) Still that was 40 years ago and I could never do it right then. Obviously a 3 dimensional sine wave. (or not) come to think of it i saw this 3D wave theory somewhere else recently. :confused:

    The other thing that occurred to me was reversal days, in part of Elliot or additional to it there is a geometric construction on the chart to predict when the next reversal day is going to be. Using a type of Andrews pitch fork plus a parallelogram. Again it works in the book but in practice I am still effectively making VW Beetles etc out of clouds. :eek:

    So I guess more study. Or rely on Felix.
    Since we are here ostensibly trading the news, I wonder if you believe in the socio-economic cycle driving the events which in turn drive the markets. Is the cart here driving the horse? Can the cart see the pothole round the next bend?
    Is there anybody out there? just nod if you can hear me. (Comfortably numb- Pink Floyd) Sorry your mind sometimes overflows when you get old. (And sometimes it wont start at all on cold mornings) :D
     

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