I’d like to outline how I adapt the amazing NB10.2A (thanks, Bob & Steve) to trade lower TFs & ranging markets, borrowing from ExtremeTMA also (thanks, Alorente!) - with some surprising results!
Before introducing it to other members for widespread consideration, I think the system can benefit from some automation (either with an indy or an ea, or both) so I'm posting it here first, hoping you'll take a look. Please do. I hope you find it interesting. I call it the 10.2A CTS (Coolncalm Trading System)
Why trade lower TFs? Well, the swings that appear there which can't be seen on higher TFs (like H4/D1) present good profit opps - if they can be mastered.
Why trade ranging markets? Well you know markets range 2/3rds of the time and do have a bias, even if not strongly defined, which can also be traded profitably just as trending markets are, thus increasing traders' profit opportunities.
10.2A CTS Philosophy:
1. If we always trade with the bias (just like NB10.2A), we will be more right than wrong. If the bias can be defined also in "ranging" periods and we trade with it, we will also be more right than wrong.
2. If we always trade with an edge, we can be consistently profitable (my min. risk reward ratio is 2). If we can enter a trade early & SL distance can be safely low, we can always aim for an edge.
Strategy:
1A) Determine the market bias in every DWM pivot formation and then always trade with that bias.
1B) Since pivots are lagging indys, adopt a more current emerging bias wherever price/DP action and extreme highs/lows on higher TFs suggest that a new bias is emerging & trade with the emerging bias
2A) Ensure the minimum edge by always entering trades early i.e. as a price nears an entry point (e.g. a retrace to DP) & its momentum is weakening before turning away from the point (called a high probability turning point/HPTP) to strengthen & trend.
2B) Ensure trading with the edge also by placing the trade where the SL distance can be safely small and the TP distance realistically high i.e. near FastTMALines
Main Indys:
- DWM Pivots for determining bias
- NT TMA-CSS-SP in histo mode (NRP) for determining momentum strength/weakness
- FastTMALines (from ExtremeTMA w/ SEMA4X) for informing an emerging bias & HPTP
- (Optional) SMA(20)/ SMA(240) for entry filters; SMA(240) emulates higher TF SMA(20)
How it works:
1. First define every pivot formation so that every scenario has a bias (UT/DT) to be traded in:
- DP>WP>MP: Uptrend (UT) ↑
- DP<WP<MP: Downtrend (DT) ↓
Ranging Market (RM) pivot formations sub-categorised as follows:
• DP<WP & DP<MP but WP>MP: Uptrend Retracement (UT-RR↓/DT↓)*
• DP>WP & DP>MP but WP<MP: Downtrend Retracement (DT-RR↑/UT↑)*
With DP between WP & MP:
- DP<WP & upward but DP>MP & WP>MP: Uptrend Resumption (UT-R) ↑
- DP<WP & downward but DP>MP & WP>MP: Uptrend Retracement (UT-RR) ↓
- DP>WP & upward but DP<MP & WP<MP: Downtrend Retracement (DT-RR) ↑
- DP>WP & downward but DP<MP & WP<MP: Downtrend Resumption (DT-R) ↓
Note:
A UT-RR↓ becomes a DT↓ if WP<MP
A DT-RR↑ becomes a UT↑ if WP>MP
A UT-RR↓ becomes a UT-R↑ if DP turns upward
A DT-RR↑ becomes a DT-R↓ if DP turns downward
2) Next, use TMATrue Slope indy for momentum (movement speed); I define H1 strength changing levels as +/- 0.55 to +/-0.8 (based on my H1 experience; should differ for other TFs), so
• Momentum is weakening: if sloping downward <0.8 or upward >-0.8
• Momentum is strengthening: if sloping upward >0.55 or downward <-0.55
In effect, this is an earlier level than the one set by NB10.2A (think of a pushed-down "S" with 10.2ACTS cutting the earlier trough and NB10.2A the later peak), so trade entry is a little earlier for an edge. It sounds brave and counter-intuitive until you recall that the trade entered is always taken in the current market bias’ direction. Also the histo colours are reversed to remind us what comes next, so >0 is red & <0 is green. I go long when green is >-0.8 to -0.55 & short when red is <0.8 to 0.55, other conditions permitting.
3) Finally, in place of TMATrue bands, use FastTMALines (see ExtremeTMA thread on FF) to outline the trading range, entry points and extremes. HPTPs are where the momentum has weakened & range room is low, so prices oscillate backwards (like pendulums); so:
• For long entry: price is near a lower FastTMALine with an upward >-0.8 TMATrue Slope
• For short entry: price is near an upper FastTMALine with a downward <0.8 TMATrue Slope
When a high/low alert occurs on a higher TF's FastTMALines, price often bounces strongly back to pivot as it temporarily runs out of range & momentum. This bounce can lead to a change in the bias, creating a new emerging bias. Since pivots are lagging indys and the alerts are current, at such a bias transition alert, adjust trading to the emerging bias (e.g. UT↑ to UT-RR↓). An emerging bias is also formed (and adjusted to) if price action & DP moves very far from MP as WP will then have to adjust accordingly when next it updates weekly (e.g. from UT-RR↓ to DT↓). Why wait till next week to know what is clear today? If pivot info is current, it can provide reliable signals.
Spotting a high TF high/low that can cause a new emerging bias while trading a lower TF can be tough. If the SEMA4X alert (or any indy) can be made to signal it on any TF (maybe with different colours depending on where a high/low occurred e.g. D1 - red, H4 - orange) it will help make lower TF trading safer. For now, I check high TFs manually for SEMA4X high/low alerts & adjust my trading accordingly
We always trade with the bias in any scenario. An indy on the main window of any TF that clearly spells out the current and emerging bias, if any (e.g. “Bias: UT-RR↓/UT-R↑ Ahead” or “Bias: UT-RR↓/DT↓ Ahead”) and its trade guidance (in this case “Trade: Buy Weak HPTP Greens Only” or “Trade: Sell Weak HPTP Reds Only” respectively), will make trading any TF safer & more profitable.
ENTRY CONDITIONS:
• In a UT↑: only buy weak greens (countertrade UTs at your own risk e.g. sell a UT dip!)
• In a DT↓: only sell weak reds (countertrade DTs at your own risk e.g. buy a DT rally!)
• In a RM: for UT-R↑/UT-RR↓, buy weak greens and for DT-R↓/DT-RR↑, sell weak reds (note: RRs are traded in the bias direction only after the retrace reaches MP and weakens as retracements can be strong soon after a higher TF high/low & bias alert emerges. RRs are tricky formations & a retrace beyond MP is the first sign of a possible bias reversal, so I trade the "DP<WP & DP<MP but WP>MP" and "DP>WP & DP>MP but WP<MP" formations carefully, staying with the old bias the first time it occurs and changing to the emerging bias if it occurs a scond time.
BUY GREENS WHEN:
• Price retraces to/below a pivot;
• TMATrue Slope weakens upwards to between -0.8 and -0.55;
• Price is at/near/below the lower FastTMALine (& should be under SMA(20) & (240))
SELL REDS WHEN:
• Price retraces to/above to a pivot;
• TMATrue Slope weakens downwards to between 0.8 and 0.55;
• Price is at/near/above the upper FastTMALine (& should be over SMA(20) & (240))
Entry must be after a slope weakens, placing pending orders where entry conditions will be met best and flexibly moving them to better points whenever possible (I split the lot size, using both a limit to anticipate and a stop to assure trade entry).
STOPLOSS (SL) SETTINGS:
• Place SL some pips below/above the lower/upper FastTMALine (for a long/short trade)
• Place SL some pips below/above pivots, if near (for a long/short trade)
While ensuring the minimum edge, make allowance for the volatility of the pair as some volatile pairs significantly exceed their trading ranges frequently before retracing (see NB10.2 notes on currency pair volatility groups).
Of course, before sending an order, I use the SL distance to get the risk-based lot size (Lot size = $Account * Risk% / SL pips * 0.1), keeping account risk pre-determined and rarely >2% so my risk of ruin is low (we want rapid loss-avoiding growth, not rapid account loss!). If SL will be placed too far away to get an edge, I take another trade given the trade’s low profit probability. Also, if a SL is hit, I move on to the next trade opportunity instead of trying to even out the loss - no DCA temptations.
TAKEPROFIT (TP) SETTINGS:
• Place the TP within the two FastTMALine bands at 2 - 3 times the SL distance or
• Place the TP near the opposite FastLine of the TF traded (whichever is nearer)
When a TP target is reached, my TP options are (i) close a portion of the trade and trail the rest, (ii) move SL to some close enough distance to lock in profits and trail the whole trade or (ii) close the entire trade. My choice depends on market volatility. Other order management practices apply – SL to breakeven, jumping/trailing stops etc. Once profit is locked in at BE, I can take another trade.
EXIT CONDITIONS:
• Market bias changes, requiring new trading conditions
• A new high/low SEMA4X alert on the H4/D1/W1 TF (indicating a transition bounce)
• A new high/low SEMA4X alert before TP is reached
A retracement traded in the bias direction yields high profits if it turns into a resumption; at other times, a retracing price may not reach TP due to high pressure in the reverse direction, especially shortly after a high TF transition alert. Here, order management helps me stay profitable (BE, JS, etc.). Other trade types tend to behave as expected.
That’s it. Just a straightforward “trade with the bias, trade with an edge, in any market, on any TF” system. No indicator-based system can be 100% accurate, simply because indys need data to compute and so will always lag the changing current events that generate the data, even if slightly. Pivot-based trading is no exception, but with emerging bias alerts, its accuracy can be improved.
Given 10.2A CTS’s fairly mechanical nature, maybe it can be reduced to a profitable ea for all members. Even if it can't, if any of the indys mentioned above can be created, we may have something interesting to share with other members in the forum.
Please see attached for template and indys.
EDIT: Added a CTS-compliant mod of Baluda's Slope Values indy. Its great for filtering down the pairs to watch.
MAJOR UPDATE:
The following attachments have now been added to Post#1:
- A CTS template that uses non-repainting indicators (FastTMAlines, TMASlope, Alerts)
- Baluda's Emerging Pivots indicator has been added to the template (read about it here http://www.stevehopwoodforex.com/phpBB3 ... 111#p16111
- A Clarification Appendix to the Original CTS Notes to make understanding the concepts easier
IMPORTANT NOTE - PLEASE READ:
The system and attachments have been presented as-is and without charge or warranties. The author(s) shall not be liable for their (mis)use under any circumstances.
DONATIONS:
I do not have a charity but if you find the system profitable, a donation to Nanningbob's charity and/or Steve's PayPal account won't be a bad idea ...where would this system be without them, eh?
Cheers,
CC