zah1231 wrote:Hi Slowkey,
I have few questions, hope you won't mind.
1)When trading H1 chart, only one SDC(With lookback=6 days) is enough, right?
2)Is it advisable to take trades against the SDC slope?
3)Can we take trades from the middle of SDC channel? Or should we wait for the price to go to SDC extremes?
Thanks
1)When trading H1 chart, only one SDC(With lookback=6 days) is enough, right?
More than enough to trade intraday. There is really not much difference between 5 and a 6 day look back. I increased it from 5 some just because criminals are not consistent on there server times. Think of intraday trading as trading with in a Single Daily candle. Even with a trading a period as large as the hourly you get 24 candles in a single Daily candle. With in that Daily candle you are using the SDC to tell you if you are in a position to sell the Rally for instance or buy the Dip. When each day candle occurs it will plot a trend in a specific direction. All the look back is doing is making the SDC sensitive within a trading week to the trend of the Daily. So too long would cause the SDC slope to change to slowly and too short would probably not be long enough to establish proper deviation levels based on an average peek to trough range of a pair and also cause the slope to give false signals. The SDC slope and deviation channel will give you good levels to plan your trades around. When in a retrace for instance and a reversal back into the main trend occrurs on the Daily so will SDC slope on the houly. The difficulty lies in knowing when this reversal may happen. So I draw some Fibs off of the Daily to see where that resistance or support may signal a reversal or a continuation of the main trend. Than I observe if price is consolidating around a certain level. Maybe it is around the 61.8 for instance. I than avoid trading into the support or resistance at this level which ever it is until I have a clear picture of what is happening. This way of trading may seem simple but is not easy because it requires you to think every day about the intraday range.
2) Is it advisable to take trades against the SDC slope?
You have heard of that old adage sell the rallies and buy the dips. Inherent in this concept is that it is safer to Sell a Rally in a Down Trend and Buy the Dips in an uptrend. So right now you may hear Sell rallies in the EURUSD. So the SDC gives you a clear picture of where a Pair is in the intraday range and whether it is in a down trend or uptrend. If it is pulled back to lets say the 1.62 upper outer Channel in a down trend you would be at the top of a Rally most likely. Now if you find out that most of the Offers in the market are slightly higher or lower than the present level that also can give you an idea where most of the players are going to Sell from. Always be aware of news. News includes where the likely bids, offers, and stops are in the market and can give you an idea of what the big players in the market think the intraday range is. News can ruin your plan so make it part of your plan. Even at this level of the 1.62 if a Bad Jobs report comes out in the US for instance the Euro might gain even if it has been in a down trend.
The exception to the rule here is sometimes there will be a big move in the stock markets around the world starting usually in the US or a summit ends with some agreement in the Euro zone for instance that gives short term hope to the outlook there. But something will spur risk on-trading. So Commodities may become really hot and every one hops on the AUDUSD long for instance which has a paying interest rate right now of about 12 US dollars per lot. This can be a nice advanced trade against the trend. Generally I am looking to trade with the trend.
3)Can we take trades from the middle of SDC channel? Or should we wait for the price to go to SDC extremes?
Absolutely, you CAN trade for instance from the middle channel. Sometimes in steep trends price is not going to pull back very far. In fact if the Pair is all the way back to the 1.62 or even 2.62 it may be that the trend is stalling some. So there is a lot of judgement involved with trading and that is why it is easier to trade with the trend. However when the trade is pulled back deep against the trend it does usually suggest a good level for entry. The SDC is a really nice Fibonacci tool. Price will tend to react to it at different deviation channels. That is why it is neat to look back and see what channels price has pull back to before. The SMI and TrueTMA hopefully will confirm price movement to an oversold or overbought reading and with the SDC you might get some good correlation. However this method of trading is not like waiting for a MA cross over of another MA and than an entry after confirmation with a Stochastic for instance. This is really a setup to understand the intraday range and make informed decisions based on the totality of the setup and not just one part of it. I think we can confirm indicators and the SDC but that does not make for as good an entry as also knowing other things like news too. Than properly and artfully placing a pending order at a good location. It may make it simple to do this to some extent but it is not easy. So it requires more trading experience to use. That is why I have resisted calling it a system so far. It is a setup that makes it easier to plan trades intraday. The more systematic I can make it the better but I am not sure that makes it a system. Because what I am shooting for is a consistent way to think about my trades. So if I do not always have a successful trade I can be confident that I always had a well thought out plan and in the long run the odds should be in my favor. You must always listen to price. |
