Just to add further to Rick's comments about "resistance", which is why I added my previous post with the Sun Tzu quote, this is why I look for strategies based on how the big players operate, i.e. trying to think how they think, and about the capabilities that their resources (size) gives them. I totally agree it does not pay to think like "the herd", unless the power is with the herd (eg. baby boomers are an economic herd where it ays to watch what they do, because collectively they have the financial power to drive long term trends) - in the case of the FX markets though the herd is the large number of small traders who despite their number don't have the financial clout.
Probably my favourite strategy, which I have been working on but haven't put into code yet, is to look for those small breaks designed to hit stoplosses and trailing stops. These come in various forms, but I would like to illustrate by showing one particular form that can be seen regularly when combining a high timeframe chart such as the H12 with a small timeframe chart such as the M5.
The following H12 chart shows a run higher on the GBPJPY during January this year. I have highlighted 4 spike lows (bars with a higher low before and a higher low after). You will see that each is followed by a run of unbroken higher lows, until there is a break causing a lower low. These breaks are often only a few pips in size.
The actual size of the break I don't think is important, but there are some common features of each of those breaks. In some cases, the break is caused by a single M5 bar, in others a few more, but the common features are:
1. There is an M5 bar that breaks the low (it might not be the 1st to break the low) that has a range that is 2.5x the M5 ATR(12) at the time
2. There is no bar after that bar and before its high is broken that closes below its low
3. After its high is broken, there is a strong move higher
I imagine in some respects its a bit like the H4 King's box that Rick has often mentioned.
So now let's look in detail at each of rhe 4 examples from the above chart - I have included 2 x M5 charts for each example, one zoomed out to show the break, and the other close up to show the detail:
Example 1:
Example 2:
Example 3:
Example 4:
So these are just 4 low risk high return entries in the space of 2 weeks on a single market - designed to take advantage of the large players taking out stops from other small traders - the best kind of strategies to look for imo and as Rick suggests are to ride on the coat tails of what the big players do.
Cheers, Sharks
