Replies to post #132383 on Simple's Green Room

[pennies2007]

Morning SG. I've been playing with the setup a lot in the strat tester and I've decided to go back and add candles just to have a reference but I didn't want an intrusive candle. I needed to be able to fully see the smoothed HA candles. So I loaded up the bar candles...standard green for up and red for down. I know there are a lot of folks who can't read those but I can read them just fine since I trained on them a long time ago. And they're very unobtrusive.

I remember you talking about the line chart a while back...very good observation. It sure does take away the tendency to jump around and make hasty decisions like we tend to do with just candles on the screen.

Here's a shot of an AU 15 Minute with everything in place. I did get rid of the M-candles for now just to keep things clean.

One observation I've noted on the HA candles is how they react themselves to zones and the guppy. Typically during a trend, the HA candles with retrace back to the guppy and while price action may move back on the other side of the guppy, it's rare for the smoothed HA candles to do the same unless it's setting up for a larger trend change. Same with the zones. The price action may penetrate further into the zone than just the edge but the smoothed HA candles seldom venture into the zone...they'll scrap along the edge and then the larger trend will kick back in again.

The first chart is with my price action bar candles in place...the 2nd chart shows just the HA candles with rectangles around the areas where the HA candles performed perfectly at the zones. I may still get rid of the candles altogether...haven't decided yet. The smoothed HA candles really do tell a better tale of how price action is likely to react.

[pennies2007]

Smoothed HA Test Example

Here's a perfect example of what I just described Simple. I grabbed a random pair in the strat test just a minute ago for grins and giggles. It was in a downtrend so I fast forwarded a bit to wait on a zone test near the EMA196 in a counter trend move. The more I look at the charts, the more I see where these give the most pips in the least amount of time and they seem to be 100% (or about as close as you can get) accurate.

This is an EA 15 minute chart. Again, this will work on any time frame though.

As price action approached the EMA196, it actually took out an old supply zone but almost immediately it formed a new one that encompassed the EMA196. Then the smoothed HA candles started showing hammer formations...the first signal that price is about to resume the downtrend.

What I've learned is that in cases like this, you don't actually have to wait for the first yellow HA candle to show up. With elongated wicks at the top and very small bodies, I have yet to see a test pair break through this setup.

I took the short near the bottom of the upper newly formed zone and just waited. The arrows mark my exact time and entry. By the time the yellow HA candles showed up, price had already dropped substantially. I spent practically ZERO time in drawdown. When I pulled the trigger and took the strat tester off of pause, my trade immediately went into the green by a couple of pips...basically zero drawdown. It took a bit over an hour to complete. This is one of those setups that you can enter, set your stops and targets, and then just walk away.

My target was set just a hair above the lower demand zone and it went straight to it, almost without hesitation.

As you said with your original setup, we will probably take fewer trades with this setup but they'll be much more profitable trades.

So far, I've found that the combination of the zones and the HA candle test give the best results. The HA candle touch of the guppy gives good results too as long as the trend isn't too long winded but I haven't had nearly as much success with HA candle tests of the guppy as I have with the zones.

EA 15 Minute Test Chart...

[pennies2007]

Smoothed HA Test Example #2

I didn't even get a chance to test trade this one. When I loaded it up in the strat tester, it had already picked a time and date where the trade was already underway.

GU 15 minute chart. In this case, the HA candles made it to the EMA196 itself before rolling over. This is the sheer beauty of the setup...a lot of us would probably have shorted right at the EMA196 just for the heck of it but the price action actually went almost 11 pips above that level to form a new zone above the EMA196. That would have put us in drawdown territory temporarily. But by waiting on the hammer HA candles to form along with the zone, we would have had a perfect entry with almost no drawdown.

Same thing applies...once the zone is formed and the HA candles start exhibiting long wicks and small bodies, it's time for the downtrend to kick back in.

This trade would have yielded 25 to 30 pips depending on how long you held it from the looks of it. I can't tell exactly because there's a lower zone just now forming.

BTW, notice where the smoothed HA candles broke below the guppy and then came back up for a few white reversal HA candles. The price did come back down some after that but we would have only gotten a few pips at best and price spent a long time going back and forth in tight consolidation. This is why I found out that waiting on the zones and rejection at the zones produces the largest number of pips in the shortest time.

GU 15 Minute Chart...

[pennies2007]

Smoothed HA Test Example #3

I took some time and documented this one in more detail so everyone can see how it played out. The trade itself took more time to complete as well so it may have occurred during off hours or something...strat tester just grabbed an arbitrary time when it started. I don't specify dates and times...I take whatever the tester gives me.

UCAD 15 minute charts. First chart is where the trade is headed toward a potential short setup. Second chart shows where I took the short entry. I didn't get a chance to let the white hammer candles play out. It went almost immediately from a single white hammer to a yellow formation so I couldn't get the entry right at the bottom of the supply zone.

Target the whole time was just above the top of the demand zone at the bottom.

All 3 charts showing all 3 phases here from start to finish with chart notes.

I have to confess there was a drawdown on this trade...a whopping 2.4 pips from my entry...LOL! I can live with that though. 23 pips total profit in this trade.

Stop losses in each of these scenarios goes just above the supply zone. So far in all cases, the potential loss has been less than the profit targets so R:R is better than 1:1 and often shows 2 times the reward vs. the risk.

[pennies2007]

Smoothed HA Guppy Test Trade

This one is a bit different...it's a counter trend play but it works just as well and often quickly, too.

Idea is the same. Watch a trend for a potential pullback scenario. In this case, the uptrend has been running for quite a while. Supply zone formation at the top and the HA candles went to a long wick with a small body. I entered at the close of that formation. Target is the top of the guppy.

Only 9 pips but you can do this all day long with several pairs and rack em up quick. :-)

NU 15 Minute Chart...I saw no drawdown on this one. Went straight to profit after pulling the trigger.