Slowkeys Syndicate or Four Hour and Daily Swing Trades

[slowkey]

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Teaser
Have you ever wished you could be in one long beautiful trend trade like EURNZD is in above ?

So it is in this thread I suggest we start to take advantage of these very cool moves. The idea of a syndicate came from my love for horse racing and handicapping. A group of very good handicappers will go together to put their collective brain power into winning the pick six in horse racing. They might have a paddock guy who is expert on knowing when a horse is live in the paddock by visual confirmation. A track guy who knows the trainers inside out. A guy who is a genius at structuring the ticket. But everyone works together to identify the best horses to include on their ticket.


First a definition. For the purposes of this thread I am considering both swing and position trades the same except for duration and time period.

So I have been analyzing all 26 pairs that the Cowboy IBFX criminal offers except EURCHF which is totally useless to trade because of Swiss National Bank not allowing it to strengthen. I am using a top down approach and taking chart pics of all the pairs and am going to put them all in a PDF. Sort of to get things started. The nice thing about Swing trading is that your analysis can last longer. From here I am hoping collectively we can start to identify some excellent entry points for both positions trades and swing trades. Understanding my intraday approach will help in understanding my approach to larger time period. I have not been technically trading these larger periods but I think larger time periods can be more forgiving. It is hoped that others will lend their expertise to the thread. These trades do not happen every day so it is my hope that we can see them forming and get into them in a timely manner. The SDC indicator will be a central player in how I look at the pairs. I will sum up my strategy approach in the next few post. It is a work in progress.

I will continue to trade intraday and add trades to my other thread.

A micro-account is a great way to trade a lot of pairs and to manage them precisely. Also the only sane way to run bots live. One thing people say about position trading is that it requires large stops. I do not think that is true. However a micro-account can be a relaxed way to trade larger moves. It allows for very precise position sizing.

I hope to get the PDF up in the next few days.

I have a laundry list of Heath issues so if I take leave for a few days from here it is probably to take a Nap.

(It is a cool 102 degrees outside and the heat index is 107 in the Mountains of Maryland)

[slowkey]

nzdusd m.gif

Above it can be observed that nzdusd has possibly topped on the Monthly chart after a long uptrend from about November of 2008.

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Above the SDC on the monthly chart is setup to look back about 3 years and it can be observed to reflect an uptrend over that period of time. It appears on the weekly chart that the pair is probably going to reverse but the SDC does not reflect that on such a large look back. The 100 and 200 week moving averages are not much help here showing still an uptrend. However every smaller time period would cross down before the weekly would cross downwards. It is just too large of an average to be informative yet.

nzdusd d.gif

I think it is important in looking at the Daily to see how it fits into higher time periods. It is on this chart we can see the daily is in a down trend. We can see a Daily top and a Fib drawn off of it. We can see that the 100 and 200 day average are in confluence at the moment with the red 100 ready to pass through the 200. Clearly they also will show a down trend. I drew a trend line on the Daily to show a possible resistance level to trade short from. The SMI indicator shows overbought on the daily chart. It is also showing negative divergence with price. The 61.8 Fibonacci level is a likely area of strong resistance.

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The Four Hour chart shows the pair in a different light. The SMI is reaching over sold. Price has retraced some its progress after finding support at the 50 percent retrace of the Fib. There is a dome of resistance just below the trend line. Conclusion is that price could move up and break the resistance but the resistance has repeatedly been upheld. A pull back and a retest of the 50 percent level of the Fib is more likely.

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On the houly it would appear that the SMI is over sold paralleling the view on the 4 hour. So it is likely that there will be a pull back intraday possibly.

The conclusion I reach here is that the pair could possibly be entered either on a pull back or a clear break of the 50 percent fib level. The clear invalidation of a trade would be the break of the trend line and upper 61.2 Fib level. So above this level would be a good stop level. So the Daily would seem to telling us that there is a decent position trade forming and the four hour certainly indicates a possible four hour entry for a swing trade of possibly a day or two. Understanding intraday trading can help with a more precise entry. A possible problem with the plan would be strong risk on trading that would cause the pair to move past its upper resistance level. Second NZD has been a strong performer over the last few months. So all that is needed is for the markets to open back up and see how the plan fits reality.

The SMI stands for Stochastic Momentum Index. It was invented by a guy named William Blau in 1993. It is basically a smoothed stochastic. This makes it perfect on longer time periods for swing trading. I am using settings of 14 5 3 and 5. The last 5 is the difference from the regular stochastic. If you put a stochasitc set to 14 5 3 on a chart with the SMI they would look the same except the SMI is smoother. In the reserved space below I will be adding a PDF and a Template indicator package once I it is ready.

[slowkey]

Ok the setup I will be using for my own trading is outlined below in the PDF. The template and indicators are in the package. You may well have a successful strategy you are using already. One of the purposes of the thread is to be able to alert others following this thread of possible position trades. They do not start every day so if someone spots one it is nice if they would share. I will be trading and sharing what I think are good entries for position trades as I discover them. Four hour trades I hope to take and just illustrate if I find my strategy is working. I would call my strategy untested but hopeful. It is built on my intraday setup to some extent so I am hopeful that it will be effective. I have thought of my intraday setup as a way of doing analysis that I could develop trades from not so much a strategy. This has some of that quality to but will probably end up being more of a strategy than just a setup.

The analysis of all 26 pairs and publishing the pics in a PDF is a lot more daunting then I thought at first so I may not get that accomplished. The analysis is not the problem as much as the making of the PDF which would require a huge amount of time. So I have put that idea on hold.

Edit
Changed the template. The Blau SMI now has setting that reflect how Blau used it. -50 50 as overbought and oversold. Zero line added and range fixed between 100 and -100 . Should now be a little more insightful to overbought and oversold. Also now reflects more that it is rotating around a zero line.

7/17/2012
Added the new combined indicator package below. It includes two MTF indicators, one by Baluda and the other by Neotrader. You can read a little more of the description in the Intraday Thread.

7/19/2012
Version 4 of the Combined Template. Huge improvement to the Four Hour SDC and the Daily SDC. Now you will find trading off of those two time periods very much like trading the hourly. I realized that the SDC deviation channel were really not calibrated to the time period. I shortened them up to an 140 period look back on the Daily and a 28 day look back on the Four Hour. The difference is remarkable and now the time periods of 1 hour, four hour and Daily are in sync. It will be a lot easier to trade each time period and compare them. Very beneficial to swing trading and position trading. I thank Zah1231 for getting me thinking about the deviation channel look back and his input in the my intraday thread.

[daveM]

This looks great......

Question.

You are looking at many pairs...... all daily and 4 hour.. are the charts the same for which ever times frames you are using....

re Pdf I think that would be a huge undertaking, people can post charts and ask questions.

Thanks for your insights in this thread

daveM

[slowkey]

Dave the charts are the same all but for the SDC. On the weekly it has a 3 year look back. On the Daily a year look back and on the 1 hour down to 15 minute time frames I am using the 6 day look back. I really do not look below the Hourly but I do in my intraday setup from the other thread. So I left it that way. You may have to adjust the SDC for your criminal. You also might find a different period to work better on the weekly. I am quite happy with the daily and the hourly periods. The weekly though may need to be adjusted.

Thanks for the encouragement. I am sure I will revise some over time. I think it is a good start but I am sure I will see ways to improve it. I just have to trade it a while.

[slowkey]

gbpnzd d.gif

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Just a look at GBPNZD on the Daily and 4 hour. If this is not the start of a larger correction which it could be siince the NZD pair has been in a steep down trend, the Four Hour may be setting up for a Swing trade that could be extended into a Position trade. SMI still moving up. The hourly shows a pull back to the upper 1.62 in a downtrend. The last two closed hours on the hourly have been doji candles. The SMI on the hourly is overbought forming a double top but I am not seeing any divergence. Needs more study but it also could be an intraday trade too.

[slowkey]

gbpnzd h.gif

I drew a Fibonacci expansion on the hourly just over the last 2 days. It is right at the 161.8 expansion. Maybe a good entry forming in what has been a nice long term downtrend. Still not sure yet I want to enter this. Will get some more sleep on it. It is mundane Monday. Probably have time. Also on the 1.62 outer upper Deviation channel. Fibonacci is so cool. The SDC is so cool because it is right on. The upper outer SDC in a downtrend can be considered expansion. It is not so easy to always draw this but it is in the SDC constantly.

[slowkey]

gbpnzd pending h.gif

Notice the pin head candle and SMI.
I am using the Hourly chart to enter a Swing trade I hope will become a Position trade. I have place a pending sell stop below the 1.62 and a stop above the 2.62 deviation channel on the Hourly chart. The white trend line was drawn on the four hour chart so as to reflect where price has pulled back to before. This is on a micro account so I am going to add to it later if it looks profitable.

[slowkey]

One thing I did not bring up regarding longer trades is carry. The Oanda criminal has a calculator that can give you the insight that is needed to know your risk. Make sure you set the calculator to TRADE. Than to your countries currency. Input how many units you will be trading and an estimated duration. Obviously for usd trading the GBPNZD is a positive trade short. You can make up your mind this way as to whether you think the carry is to negative compared to another trade you might want to take.

The other thing I do to reduce risk is to place pending trades. I try to put on a pending trade as oposed to a market. The GPBNZD it is now showing some gains but my sell stop is at 9470 so it will only get triggered if the pair move below the 1.62 deviation channel. I still think this likely but I do not have to watch a market trade that would now be going against me. It could still happen below 1.62 but is less likely.


http://fxtrade.oanda.com/analysis/interest-calculator

[slowkey]

Two other pairs are on my watch list. EURAUD and EURNZD. I am in no hurry to get into either one but they have both been in steep downtrends. I will need to make sure that they are not correcting and may get an opportunity to swing trade these and possibly stay in for a longer position trade. So by the Asian session I might get a feel for what is going on with these pairs.