Price activity on 5/24 in the June S&P500 7-minute bar chart illustrates the power and tradability of the NEW ProfitTrader 6.0™ indicators.
Our analysis and trading is based on a 20-minute chart (not shown) to set the trend for trading the 7-minute chart, which usually has a 16-bar trading cycle as measured from bottom-to-bottom.
First, let's look at the indicators from the bottom up. The 5 and 10DS are in the oscillator panel along with a Timing Band calculated from the first trading cycle low indicated by the blue up arrow.
This Timing Band is point 'n click, which means no date/time has to be entered by hand. Above the oscillators is the HAL OB/OS indicator. The green dots show when the market is overbought, often at a cycle top; the red dots, when the market is oversold, often at a cycle bottom. Notice the correlation between the HAL OB/OS indicator and the tradable tops and bottoms.
The blue buy setup bars and buy signals are also generated by the blue 10DS; the purple sell setup bars and sell signals are generated by the Double Stoc. The white sell setup bar is generated by a new indicater that sometimes generates buy/sell setup bars before the Double Stoc, at other times confirms the Double Stoc, and has buy/sell signals at tops and bottoms missed by the Double Stoc.
The red lines in the price panel are the Short-term Trailing Stop; the blue lines, the Long-term Trailing stop.
Let's review the market from the beginning of the day. Our data server had a glitch and missed the first few bars of the day, but prices dropped into a trading cycle low as indicated by the blue Double Stoc indicator. Approximately 70% of all cycle bottoms occur when a Double Stoc is bottoming. This bottom was not tradable, but used as an "anchor" to anticipate the time period for the next cycle high that occurred when prices were in the green toppingTiming Band plotted in the oscillator panel, and also in the green HAL OB/OS Band.
The 18-bar cycle in the 20-minute chart was moving down at the time, and the trading cycle top of the 16-bar cycle in the 7-minute chart offered a relatively low-risk sell signal. A drop below the white setup bar would confirm the trading cycle top. With a sell stop placed below the setup bar you would have gone short at approximately 1390.30.
From the cycle high the red Short-Term Trail Line follows prices down and is stopped out at A for a disappointing 2 point profit. However, the Long-term Trail, followed prices down, and at X everything was right for a 16-bar cycle bottom. Prices were in the red HAL OB/OS bottoming band, and also in the red Timing Band in the oscillator panel. The oscillator turned up generating a blue buy setup bar, but the market never rose above the high of the setup bar. Nor was the Long-term Trail stop significantly penetrated.
Here's something to write down -- when a trading cycle bottom is due, as indicated by Time Bands and oversold oscillators, and the market does not rise, but moves lower, a waterfall decline can often occur into a longer term cycle bottom. In this down move the cycle extended into the bottom of the 18-bar cycle in the 20-minute chart.
The Long-term Trail followed the market down to the cycle bottom and stopped out at 1370.10 for a 20 point profit as the setup bar was forming. Confirming this low as a significant bottom was the divergence in the 10DS (prices dropped lower than the previous price low as the oscillator bottomed at a higher level than the previous price low).
The HAL OB/OS indicator also showed the market as oversold with two red two dots. But buying new lows is often expensive,so we passed on the buy signal generated by a rise above the blue buy setup bar.
Prices moved higher for one bar, then lower to form a swing low and generate a 2-bar reversal -- which can be a very good stop/entry and is plotted in the new PT Multi-Bar stop indicator. This provided a low-risk buy coming out of the best possible setup, a sharp dive into a low, a move up, a retest of the low to form a swing bottom, and then an upmove. Unfortunately our oscillator based B/S signals seldom occur in this pattern. The Multi-Bar Stop remedies this.
Once long, the Ttrailing Stop is all important. If it is too tight it will stop you out with only a small profit.
From the swing low -- not the price low -- the Short-term and Long-term Trail Stops were plotted using point 'n click (not date/time). The initial protective was placed below the swing low, and the Trail Stops were left at default values. The red Short-term Stop snaked its way up closely below the rising prices to stop out at 1392.50 with a 17 point profit. Prices then dropped into a 16-bar cycle bottom that was a small swing low.
The cyan Long-term Trail gave prices more room for fluctuation and followed prices up until the end of the day. Rather than wait for prices to stop out on the trailing stop the position was liquidated when prices dropped below the sell setup bar at 1402.75 for a 27 point profit.
The green and red dots in the price bars after the move began are 2-bar reversals. The green dot is a downside 2-bar reversal; the red dot, an upside 2-bar reversal. These reversals occur in the normal ebb and flow of the market. They become significant to our trading only when a cycle top or bottom is due.
These Trailing Stops make it easy to trade multi-contract positions. Watching the market throughout the day without these trailing stops it is necessary to make decisions to stay in a position or to get out with each price bar, and the fear of giving back a lot of money on a retracement often results in getting out too soon, then grinding your teeth as the market continues higher. With these trailing stops the need to make decisions with the formation of every price bar is gone... and the pressure of trading is greatly reduced.
Sixty-six points were locked in by entering with the high probability buy/sell entry signals, then having the patience (and confidence) to follow the old and profitable rule of "Let your profits run".
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