When you have spent the last 6 months learning to trade currencies, using a lagging indicator seems archaic and misguided, as evidence by my fun with something called a SHI channel plugin this week. While the channel pivots on the "2" and "3" of the semaphore (and sometimes the "1" on the larger time frames), it usually does so after the fact. It is kinda like that back seat driver who says you should have taken "THAT" left turn..........
So what have I learned this week:
- Wait for the period candle that I am using to judge my entry to close (H1, H4 etc). I don't know why this really matters but it seems to. I suspect that it has to do with market momentuum slowing down (I am essentially trying to catch reversals)
- Look how things line up on the next higher time. If the higher timeframe is showing the same signal, you can go for a longer ride.
- When using H1, enter off the candle that starts after a 2 or 3 forms - this marks a 13 or 34 period high or low (can use either a stop or limit entry - limit entry cuts down your risk, but doesn't guarantee a fill - so you may end up hitting it on a stop entry if your limit doesn't get hit - also depends when you get to the party and when you see the original signal and if an exit has been hit). The stop loss is the low/high of the candle with the original marker.
- You can draw in trendlines connecting highs and lows (2s and 3s) that will often predict how the shi channel will flip - can use this as a confirmation of your entries.
Let's do some prognostication with the EUR/USD for our first trade of next week
First the 1 hour chart
On friday mid afternoon, this chart showed a downward slopping red channel - then the two formed (also made 1 on the H4). Went long in the next candle when price went up
- past 1.2890 - SL for the trade was .2862 - Out in the 2910/20 area. If you look at the H4 chart, I am getting a feeling that price will be heading down after a short run up
On the H4, price made a new 5 period low and is coming back up to my go short signal - So i suspect this bull run is short up to the 1.30 region at the highest