How to trade with an oscillator
- Thread starter Smart_trade
- Start date
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This is a pic of the daily on the EUR/AUD. The oval to the west shows the open mouth and OB condition for the pair, and to the east it shows the current open mouth.
It was at the end of the week when that 2nd candle to the west was formed. Someone asked me if he should go long based on what he saw on the hourly. I told him this market he better leave alone because it is headed south, and if he goes long, he could wake up with some bad dreams. The hourly was OS in a huge way. As you can tell the daily was OB at that time. Who do you want to believe-- the daily or hourly?
This is why I think it is absolutely important to cross check other TF's.
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Rangarjan, I'd like to add a comment to your chart.
I've noted with my marks the nature of what is going on with this market. In the past, there was also divergence and several times the market was OB without responding to the oscillator. When it has it ever slight reverse, the oscillator drops rapidly. Price cannot keep up. This is showing on this TF that momentum still heavily favors the UP.
What will eventually happen is this trend will give out, and there will be a hard drop in this TF.
Having said that, this appears to be the 5-min chart. If this is the case, then you may want to look at a higher TF like the hourly or 4-hour. Something tells me those TF's could be freshly OS and opened UP. Therefore, the higher TF would have kept you in the trade the whole ride north.
In a heavy trend on the higher TF's, the doors will get blown off the lower TF's.
To the point,bullet reply.
But the trouble with yr posts for people like me(we call Tubelight),is yr jargons forcing me to refer dictionary often(which i should have done in my school days)
I had to read thrice before i could grasp & i compare u to TM
But like TM,your knowledge is powerful.Thanks for sharing yr experience & knowledge without hesitation.
Coming back,u r 100% correct.It was a 5min chart & as i had mentioned in my post,the metal was in up trend in one hr TF.It went upto 407.4 & kudos to yr prediction.
But,the chart was intraday & the intention was to grab a few pips! or paise as the lot size is 1000.So,one is compelled to exploit the divergence inspite of its limitations since this the first chart where as i am seeing where divergence never worked continuously.
I recall some where Smart replied that when the stock is in O/B for more than 5bars repeatedly(twice in that case),third time in O/B 5 bars, it may fail to go up as the buying pressure got exhausted.That gave me confidence to short.I agree trading with tech is only probablities & not science.
Invariably,i had shorted/bought with divergence & made profits only.
This time,it is another lesson.
Quote:
'What will eventually happen is this trend will give out, and there will be a hard drop in this TF'
unquote:
Can u pl elaborate.Which trend,TF,hard drop you r discussing,5mt or higher.,
Quote:
'In a heavy trend on the higher TF's, the doors will get blown off the lower TF's'
u mean to say the s/l would be triggered in lower TF.
And last,when we r trading intraday divergences,if i have to look at 4hr/one hr time frames, cabn i get an opportunities at all?
This chart is from MCX India for commodities,copper.
Though i address my posts to Smart,i welcome comments from experts like you & other friends here since it is learning process ever.
Dear 4xpipcounter,
Yr reply to 'Open mouth".
My understanding is that when one goes in the Shorter TF against the explicitly shown trend in the higher TF,they would get swallowed by the open mouth.
This could be seen from the oscillator movement range as depicted by oval(why u r not referring as circle) in yr chart.
Am i right or as usual wrong.
Yr reply to 'Open mouth".
My understanding is that when one goes in the Shorter TF against the explicitly shown trend in the higher TF,they would get swallowed by the open mouth.
This could be seen from the oscillator movement range as depicted by oval(why u r not referring as circle) in yr chart.
Am i right or as usual wrong.
"This time,it is another lesson.
Quote:
'What will eventually happen is this trend will give out, and there will be a hard drop in this TF'
unquote:
Can u pl elaborate.Which trend,TF,hard drop you r discussing,5mt or higher.,
Even strong trends will not make a straight line. There are corrective processes in the trend. When that happens, it will look like a small glitch on your screen on the 4-hour, but it will look like the bottom dropped out on the 5-min. In terms of the 5-min, that is what is meant by, "trend will give out, and there will be a hard drop in this TF"
Also, when the trend on the 4-hour is over, there will be a sharp reversal on the 4-hour. That reversal will be even more evident on the 5-min.
My point is that in the case of the 4-hour when it is at the beginning of a powerful move, and the 5-min is showing an OB condition, the better thing to do is wait for a pullback on the 5-min in order to get in on the uptrend. The pullback on the 5-min, when at the beginning of a strong trend on the 4-hour is when it will display many of the properties Smartrade elaborated on. In other words, the 5-min stochs will not hit the OS territory you might look for in an entry
Quote:
'In a heavy trend on the higher TF's, the doors will get blown off the lower TF's'
u mean to say the s/l would be triggered in lower TF.
I use many analogies, metaphors and even slang without thinking about it, so as always, I don't mind being called on it.
"Doors blown off" is another slang term. It simply means if the trend is fresh on the 4-hour, then whatever you see on the 5-min will have total disregard. There are going to be extreme OB/OS conditions and divergences that are going to suggest it is time to enter going the opposite direction. Let the 4-hour run its cycle, then concentrate no an entry going the other way.
And last,when we r trading intraday divergences,if i have to look at 4hr/one hr time frames, cabn i get an opportunities at all?
Opportunities in the markets will always abound. After all, they go up or down. As long as you are going the right way, then you will make money on any market of your choice.
Having said, the total picture is what needs to be evaluated. Getting back to you market, if momentum still favors the UP on the 4-hour, then wait to get a sufficient pullback in order to take advantage of the rest of the trend. If it is showing the trend is still strong on the 4-hour, then you may still want to look at the daily and weekly to see what they say. As long as those TF's are not strong pointing the opposite direction, then you should be okay riding the 4-hour the rest of the way.
This chart is from MCX India for commodities,copper.
Though i address my posts to Smart,i welcome comments from experts like you & other friends here since it is learning process ever."
I think Smart will agree with me here. There has never been a time when we have disagreed. I think when our views are collaborated you get just a bit of a different perspective.
OTOH, he does have a better way with words, so you probably can put your dictionary away when you are reading his posts--lol.
Quote:
'What will eventually happen is this trend will give out, and there will be a hard drop in this TF'
unquote:
Can u pl elaborate.Which trend,TF,hard drop you r discussing,5mt or higher.,
Even strong trends will not make a straight line. There are corrective processes in the trend. When that happens, it will look like a small glitch on your screen on the 4-hour, but it will look like the bottom dropped out on the 5-min. In terms of the 5-min, that is what is meant by, "trend will give out, and there will be a hard drop in this TF"
Also, when the trend on the 4-hour is over, there will be a sharp reversal on the 4-hour. That reversal will be even more evident on the 5-min.
My point is that in the case of the 4-hour when it is at the beginning of a powerful move, and the 5-min is showing an OB condition, the better thing to do is wait for a pullback on the 5-min in order to get in on the uptrend. The pullback on the 5-min, when at the beginning of a strong trend on the 4-hour is when it will display many of the properties Smartrade elaborated on. In other words, the 5-min stochs will not hit the OS territory you might look for in an entry
Quote:
'In a heavy trend on the higher TF's, the doors will get blown off the lower TF's'
u mean to say the s/l would be triggered in lower TF.
I use many analogies, metaphors and even slang without thinking about it, so as always, I don't mind being called on it.
"Doors blown off" is another slang term. It simply means if the trend is fresh on the 4-hour, then whatever you see on the 5-min will have total disregard. There are going to be extreme OB/OS conditions and divergences that are going to suggest it is time to enter going the opposite direction. Let the 4-hour run its cycle, then concentrate no an entry going the other way.
And last,when we r trading intraday divergences,if i have to look at 4hr/one hr time frames, cabn i get an opportunities at all?
Opportunities in the markets will always abound. After all, they go up or down. As long as you are going the right way, then you will make money on any market of your choice.
Having said, the total picture is what needs to be evaluated. Getting back to you market, if momentum still favors the UP on the 4-hour, then wait to get a sufficient pullback in order to take advantage of the rest of the trend. If it is showing the trend is still strong on the 4-hour, then you may still want to look at the daily and weekly to see what they say. As long as those TF's are not strong pointing the opposite direction, then you should be okay riding the 4-hour the rest of the way.
This chart is from MCX India for commodities,copper.
Though i address my posts to Smart,i welcome comments from experts like you & other friends here since it is learning process ever."
I think Smart will agree with me here. There has never been a time when we have disagreed. I think when our views are collaborated you get just a bit of a different perspective.
OTOH, he does have a better way with words, so you probably can put your dictionary away when you are reading his posts--lol.
Rangarajan, that is why I put the oval around the portion of the stochastics where it is opening up. That shows what I mean by "open-mouth". That is a strong indication the trend will continue as it denotes momentum. As always, there are exceptions, but that is the rule.
Dear 4xpipcounter,
Yr reply to 'Open mouth".
My understanding is that when one goes in the Shorter TF against the explicitly shown trend in the higher TF,they would get swallowed by the open mouth.
This could be seen from the oscillator movement range as depicted by oval(why u r not referring as circle) in yr chart.
Am i right or as usual wrong.
Yr reply to 'Open mouth".
My understanding is that when one goes in the Shorter TF against the explicitly shown trend in the higher TF,they would get swallowed by the open mouth.
This could be seen from the oscillator movement range as depicted by oval(why u r not referring as circle) in yr chart.
Am i right or as usual wrong.
Thearofweb, that goes for any oscillator. Regardless of which one we are talking about, they are all going to possess the same properties or qualities (or lack thereof--lol).
I know I'm going to burst a bubble or 2 here, but here goes. There is nothing outstanding about any one oscillator. It is a matter of personal preference. I choose the stochastics because it suits me, personally. Other choose the Williams, CCI, MACD, etc because it is only personal preference. The basic operative is still the same in all of them.
BTW, let me add that traders will use different oscillators for different purposes. Again, Smartrade has pointed that out in his usage of the RSI and stochastics. I wanted to mention that because the basic operative is still the same, but each oscillator is still unique.
I know I'm going to burst a bubble or 2 here, but here goes. There is nothing outstanding about any one oscillator. It is a matter of personal preference. I choose the stochastics because it suits me, personally. Other choose the Williams, CCI, MACD, etc because it is only personal preference. The basic operative is still the same in all of them.
BTW, let me add that traders will use different oscillators for different purposes. Again, Smartrade has pointed that out in his usage of the RSI and stochastics. I wanted to mention that because the basic operative is still the same, but each oscillator is still unique.
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Yes Paul, market in strong uptrend on larger timeframes will take a small 1-2 bars correction and in this correction the smaller timeframe may signal a sell but this sell has very low chances of success an the higher timeframe is in strong uptrend.A car travelling with 140 KMPH does not come to halt immediately, it needs the brakes to be applied, gears shifted down,pressure off the accelerator paddle and then after some time it comes to an halt.
If we are trading 5 min timeframe, one should always see what the highet timeframes like 20 min/30 min or 60 min are doing. Have the brakes been applied on any of the higher timeframes ? Is any timeframe showing signs of reversal ? This is amalgamation of timeframes and amalgamation of trends and if there is any holy grail in trading it is this amalgamation. This amalgamation is difficult to understand and interpret by new traders....but if they can master it, they will go much ahead in trading.
Just to give recent example, we had a sell signal on Nifty Futures 5 min chart after 1:30 on Friday 23-12-2011. This signal worked well...but was there anything to suggest beforehand that this sell signal is likely to succeed ? It is the amalgamation....30 min and 60 min both showing that the brakes have been applied on the upmove and market likely to reverse atleast in short term. And when we had all timeframes speaking in one voice, we had a winning trade.
Smart_trade
If we are trading 5 min timeframe, one should always see what the highet timeframes like 20 min/30 min or 60 min are doing. Have the brakes been applied on any of the higher timeframes ? Is any timeframe showing signs of reversal ? This is amalgamation of timeframes and amalgamation of trends and if there is any holy grail in trading it is this amalgamation. This amalgamation is difficult to understand and interpret by new traders....but if they can master it, they will go much ahead in trading.
Just to give recent example, we had a sell signal on Nifty Futures 5 min chart after 1:30 on Friday 23-12-2011. This signal worked well...but was there anything to suggest beforehand that this sell signal is likely to succeed ? It is the amalgamation....30 min and 60 min both showing that the brakes have been applied on the upmove and market likely to reverse atleast in short term. And when we had all timeframes speaking in one voice, we had a winning trade.
Smart_trade
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