--------- Section 3 - Trade Types (overview) ---------- I trade an overall methodology I call the roadmap. I have various trade types at my disposal. The two basic strategies are: 1. Channel Cross - When the EMA channel fully crosses to the other side of the SMA. 2. Channel Failure - When the EMA channel gets partially across the SMA but then returns to the previous side. The four advanced strategies are: 1. ADR Failures - When the EMA channel gets partially across the ADR line but then returns to the previous side. 2. Previous Day High/Low Failures - When the EMA channel gets partially across the high/low line but then returns to the previous side. 3. ADR Counters - When an instrument has completed the Average Daily Range I consider entering to capture a reversion to centre ground. 4. Previous Day High/Low Counters - When an instrument has reached the high or low of the previous trading day I consider entering to capture a reversal. The decisions about whether to take a trade opportunity or not are primarily based upon my analysis of the chart structure. I also make use of the CompositeRSI and SMA Dashboard. ---------- Section 4 - Trade Management (Example) --------- Step 1: Establish the percentage of theoretical risk per trade. (We will use 1% in this example). Step 2: Establish where the emergency stop is going to be in any one trade. (It is assumed EURUSD stop to be 50 pips and GBPUSD stop to be 100 pips for the purposes of this example). *Take note that your emergency stop is NOT going to be triggered in the majority of cases, if the trade is actively managed. It simply allows the trade to breathe until proven wrong by the market* Step 3: Calculate position size. In this example, risking 1% of a $10,000 account would be $100 risk. EURUSD (standard lot = $10/pip) would permit a 0.2 lot position trade on a 50 pips emergency stop GBPUSD (standard lot = $10/pip) would permit a 0.1 lot position trade on a 100 pips emergency stop As the actual risk for each trade will be much less than the theoretical risk the emergency stop provides, it is helpful to think in terms of Profit Factor. This is calculated simply by dividing Gross Profits by Gross Losses. If gross profit is 50,000 and gross loss is 10,000 our Profit Factor will be 5. Using this calculation allows for completed trades to be analysed in suitable sample sizes to help determine the edge present. ------- Trade Management #2 (Using Emergency Stop) ------- Step 1: Figure out your the percentage you are willing to ultimately risk per trade. (We will use 1% in this example) Step 2: Figure out where your emergency stop is going to be in any one trade (We assume EURUSD to be 50 pips and GBPUSD to be 100 pips in this example) *Take note that your emergency stop is going to be mostly out of reach, such as on the other end of the of the channel where you can allow your trade to breathe until proven wrong* Step 3: Calculate your position size.In this example, risking 1% of a $10,000 account would be $100 risk. EURUSD (standard lot = $10/pip) would give you a 0.2 lot position trade on a 50 pips emergency stop GBPUSD (standard lot = $10/pip) would give you a 0.1 lot position trade on a 100 pips emergency stop Do note that even if you do win a trade, you probably would not get 1% profit while risking 1% of your account. But the bottom line is that by doing so and not placing tight stops in your trades, you disallow the broker from taking you out of your trades due to tight stops, giving you the freedom and sole responsibility to manually exit trades and be proven wrong by your strategy instead of your broker.So start to think of trading in Profit Factor,Gross Profits / Gross Losses. Remember, your true risk is different to your theoretical risk. Getting into the habit of using Profit Factor to evaluate your results will be worthwhile. I have two types of entries at my disposal. A single bullet entry and a multi-bullet entry. I always decide in advance which type of entry technique I am going to apply to a trade and size my position accordingly. A multi-bullet entry involves me splitting my trade size into 3 segments. The aim of the strategy is to achieve a blended price. This is very different to the sub-optimal technique of 'adding to losers'. I would never recommend making the decision to add to a position when you are already in a trade. This should be planned in advance. I exit a position with a loss when the market tells me I am wrong. This is why 99.8% of my exits are manual. I never sit and wait for a stop loss to be hit. I never sit and hope that a position will turn around once I have been proven wrong. I exit a position with a profit in one of two ways. I either take the whole position off or I take partial profits. This is usually half of my position although occasionally I will take my position off in 3 segments. My preferred exit method is to take partial profits at a logical point on a chart. My methodology highlights these logical points in the form of previous day's high or low, ADR high or low, daily open line or Simple Moving Average line. I prefer to take partial profits as I know that a position can turn into a 'runner' that far exceeds a logical exit point. Trading this way means I have either half or one third of my position still in play to capture the large moves. In addition to this I occasionally use a global trade manager to automatically close all open positions once a certain percentage of profit comparable to my account value is reached. This is particularly useful in times or markets of high volatility as the global trade manager can react quicker than I can to close out positions. My methodology does allow take profit entries to be placed in advance but the stop loss cannot be defined in advance, hence the use of a disaster stop. I began the thread by advising that, for long entries, the entry point should be on the lower side of the channel. Conversely, short entries should be at the upper side of the channel. This was always intended to be a temporary exercise in discipline. I later relaxed the advice, stating that entries could take place inside the channel. With hanover's query, I have examined again the entry criteria and have concluded my advice remains as before. My preference is not to chase price up the outside of the channel and I therefore prefer to find an entry inside it. However, traders must take responsibility for their own criteria, even if following my methodology. The point hanover makes about entries outside the channel has merit. It is true that many uptrends begin with a candle closing above the channel. If a visual backtest leads to the conclusion this should be an entry trigger, by all means act on that basis. I am of course interested to hear other conclusions based on testing/experience (in my main thread please, not here). ------ Use of Simple Trendlines ------ I was talking to traders today about difficulties they were having in telling when a channel cross or failure was likely to succeed. In some cases I noticed they were fighting against momentum. This served as a reminder that I have neglected to mention a very simple 'technique' that can be used to give you more information on whether the momentum is going to be with or against you. The humble trendline. For our purposes, we can ignore the technical definition of a trendline having to join at least 3 points and simply draw them joining two peaks or valleys. Let's look at a few chart examples.....Post 1517 In the above example (First Picture), we draw our first trendline joining the declining highs. We do this in order that we might be able to tell when the momentum is becoming more bullish. This warns us not to take the channel failure to the short side. We then are able to add a second trendline, joining the advancing lows. This tells us the channel cross is a good option for a trade when it happens. In the above example (Second Picture), we had been enjoying a downtrend. By drawing a simple trendline, we could be alerted to the likelihood that we should not aim to go short when the channel started to approach the SMA. In the above example (Third Picture), we were faced with a channel failure and a simple trendline told us the momentum was down and it was a viable trade. However, a lower trendline suggested there was short-term bullish momentum. The more conservative option was therefore to wait until that trendline was broken to get short. If you're following this methodology and having problems finding the right trades, please do try this simple idea of drawing rudimentary trendlines to establish momentum. One thing I forgot to mention about trendlines..... When a supporting trendline is broken (especially one that has had 3 touches) it sometimes pays not to immediately discard it. What was once support becomes resistance, as per this example. Post 1570 "Your original trendline is fine but, once price starts going up and making new lows, draw new trendlines (at a steeper angle) to reflect the increasing momentum. Some people call them speedlines and they are useful for being alerted to a weakening of momentum." Further to my posts about trendlines, it can also be useful to draw 'retracement lines' when you want to time your entries or additions. --------- Anatomy of a Trade (2) ------- Picture in Post 1786 As people seemed to find the process of walking through a trade helpful, I'll try to do so again using this Dax position I just closed. I'll attempt to explain my thought process as the trade progressed. I've labelled the lines in the order they were drawn. Line 1 is a retracement line. Channel was under SMA and CompRSISelect was negative. I wanted to get short as soon as the short-term retracement was over. After I entered, I waited for a couple of highs to be formed and drew line 2. This was to be my 'master' trendline and stop me from being shaken out of the trade too early. However, I knew it wouldn't be the trendline which got me out of the trade. It was too shallow and would allow the trade a little too much breathing room. Once price started accelerating in my favour, I drew line 3 (a speed line). I then had a decision to make when 3 was broken. I could have banked my profit and walked away but I felt the trade would benefit from a little more breathing room. Price rallied and then fell again, allowing me to quickly draw in line 4. This would now replace line 2 as my 'master' trendline. I made a conscious decision at that point not to allow price to break line 2 without banking my profit. The acceleration in decline permitted me to add line 5 (a speed line). When that was broken, I again had a decision to make. Do I take my profits or see how it reacts to line 4? I decided to wait, as a break of 4 would still allow me a decent profit and it allowed the trade to breathe a bit, with the potential to fall further. As it turns out, 4 was then broken and I exited with 47 points profit. With hindsight, the optimal place to exit would have been the break of 5. However, we must be prepared to give up a little profit if we are to allow trades to play out. So, i'm happy enough with the decision. As it happens, price went on to break 2 so I'm comfortable with my process. I hope this trade anatomy helps. We consciously and unconsciously make a lot of decisions when a trade is running and I think it's useful to sometimes set these out from start to finish. ======================================================================================================================================================================= Q). I'm just trying to figure out which of the indicators or trendlines or anything else used in the arsenal is more important than others when it comes to exiting a trade. There are a lot of moving parts when you put them all together.....knowing the level of importance of each would be nice. I know it's not black and white, probably hard to do. Thanks Laura. A). You're right, it's a difficult thing to answer. However, if I had to get rid of everything except two or three elements, I'd keep the channel, the SMA and trendlines. I believe those 3 things alone would enable you to make appropriate decisions. Unfortunately we can never know in advance if we are headed for choppy waters, but we can stack the odds more in our favour by taking a conservative approach as follows: 1. Only take entries where RSI is over 60 (for longs) or under 40 (for shorts). 2. Only take channel trades or channel failures. 3. For continuation trades, we can wait until price is closer to the SMA (more likely to find support there). I intend to share all elements of the methodology but some are riskier than others and it's perfectly possible to make a living only trading the conservative signals. The market proves us wrong when our setup is invalidated. So, if you were trading a channel cross, it would be invalidated when the channel crossed back to the other side of the SMA. If you were trading a channel failure, it would be invalidated when the channel fully crossed the SMA. As you can hopefully imagine, that means your potential loss is smaller when trading a channel failure. This is based upon only exiting when you know you are wrong but I acknowledge that some people will not have the stomach for taking those sorts of losses. They could experiment with a fixed stop loss of X pips but I think it would be less effective as the trades wouldn't have as much 'wiggle room'. This all, again, reinforces the importance of trading small size in relation to account size. Let's first look at SMA200. This tells me, based upon where price is in relation to it, a lot about what an instrument has been doing and what it's doing now. I chose SMA200 for two reasons. It's widely used and traded with and it's got a good track record of stopping price. In addition to the SMA200 being on our chosen timeframe chart, we also can see at a glance whether price is above or below SMA200 thanks to the multi-timeframe dashboard in the bottom right corner. Green means price is above, red means below. I would advise against ignoring this bias, especially the 4 timeframes most relevant to your trading style. ***If you trade short timeframes, you particularly want to pay attention to the M1-M30. If you are a longer term trader, pay most attention to the H1-W1 timeframes.**** Next we have a channel created by using the High and Low of EMA8. We pay attention to two things with the channel. Where price is in relation to it and where the channel is in relation to SMA200. I originally used Raghee Horner's 34EMA channel but I have altered to 8EMA as it provides much faster confirmation of bias. I will talk a bit about bias during the thread and this provides us with our first one. If the channel is below SMA200 the bias is short and vice versa for long. There is also a slightly more advanced way to use the channel, which is to seek out 'channel failures' where the channel tried but failed to get above/below SMA200. We also have the previous day's High and Low marked on the chart. These levels will often act as support/resistance so it's worthwhile being aware of them. The Daily Open Line is also on the chart. I time this to begin at Midnight each day based on my broker's time, which is Central European. This is on the chart because it's quite common for price to seek a route back to the Daily Open Line after it has travelled far from it. The line can also cause price to stop and reverse. There is also the projected ADR High and Low lines on the chart. These are dynamic and will change throughout the day until they become 'locked'. These are not used for forecasting but they become relevant once locked. This happens when an instrument has completed the Average Daily Range. When this happens, the lines turn a solid red and will not change again that day. A more advanced element of the roadmap is using ADR to find potential reversal points but I will wait a while before getting into that. I'd rather the focus was initially on the trend-following elements of the strategy. We also have a composite RSI figure on screen. This, together with the MTF Dashboard, provides an at-a-glance idea of the bias. Above 50 is bullish, below 50 is bearish. EXAMPLE: Here's a quick chart showing a trade opportunity I took that has just finished. Was first alerted to potential entry when price bounced off Yesterday's High. I then waited until channel was above SMA and price was near bottom of channel. Eventually got in and took profit at Daily Open Line. In my first post I had mentioned that price often likes to return there after a journey away. Channel failure........ The first rectangle gives the entry point as we wait for the channel to be fully below SMA200 and then for price to move to the upper side of the channel. The second rectangle gives a logical take profit area at the previous day's low. The MTF Dashboard and Composite RSI reading told us the bias was short. So, we'd patiently wait for channel to dip below SMA and for price to go to top of channel. I find that a key element of trade management is to take advantage of spikes in your favour and take profit. Here you can see there were two such spikes which would allow us good exit points. Personally, I trade 1m for indices and oil and 5m/15m for currencies but I also place trades using the 4H/Daily timeframes. The same principles apply across any timeframe though. The primary difference will be potential targets and stop losses will be bigger on longer timeframes. When I'm trading currencies it will either be with a short-term view (5m or 15m charts) or with a long-term view (4H or Daily charts). This brings me to another point though. Runaway trains. Part of the discipline required to successfully trade this methodology is being able to avoid chasing price. Yes, there will be cases where we just never get a chance to get in and that's okay. There are so many opportunities each day, spread across markets, that we don't have to dive into such strong-moving markets and risk buying at the top/selling at the bottom. Notice how the decline was originally halted by a 'locked' ADR low. Today I'd watch for a break of that ADR low, then perhaps a re-test before price falls further. Alternative scenario is that ADR low holds and price rises. Due to bias though, I wouldn't be looking to take any long trades. Notice how the decline was originally halted by a 'locked' ADR low. Today I'd watch for a break of that ADR low, then perhaps a re-test before price falls further. Alternative scenario is that ADR low holds and price rises. Due to bias though, I wouldn't be looking to take any long trades. Your SL and TP makes sense but I would set them and then manage the trade on a manual basis, allowing price action to take you out. In assessing your risk, you should think 'where does price have to go to prove me wrong?' - in theory, as long as the channel stays below SMA200 the bias is still short but consider whether you can mentally and financially take that type of heat If you are trading the 5m chart, the bias should be taken from the M1-M30 timeframes on the MTF Dashboard. Plus the Composite RSI which is currently 58. So yes, bias is long for EU now. Ordinarily I'd say you could look for a long entry when price goes to lower band but look how far EU has travelled away from the SMA already. It could be that ship has sailed. Also, be aware that the previous day's high is now being flirted with and that could halt any bullish moves. The aim for shorts is to enter when price is at or near the upper band so we get a 'good' price. The trade actually follows a slightly more advanced concept around how I trade the previous day high/low, which I'll explain. Primarily though, I wanted to make sure people were keeping those dotted lines in their minds When a previous day high/low is punctured, it often then becomes 'turncoat' support/resistance, which is what I envisaged. Q.......I thought, we can use channel trading just one time and after channel crossing the 200sma and in direction of the trend (if all of the other parameters such as MTF dashboard and RSI confirm the bias) and after that we just looking for channel failure for entering the market again. but I think now if all of the parameters (MTF dashboard, RSI and channel location according to the 200sma) confirm the bias, and the channel, after moving away from 200sma, approaches the 200sma we can use channel trading again (according to the bias and price location inside channel as you said before). A.......You are absolutely correct A channel trade doesn't have to be a 'once per turn' event. As long as price is close enough to SMA200 (in order that you will know you are wrong without too much cost) you can make the type of entry you highlighted. the concept of using the previous day low as turncoat resistance is a good one. So, we now have 3 types of entries in our toolbox. Channel entries, channel failures and now previous day high/low acting as turncoat resistance/support. try to get into longs at the bottom of the channel and shorts at the top of the channel (or close to) where possible. It'll give you a few more pips. The strategy is effective on longer timeframes. I myself have 4H and Daily based trades running. To answer what I think was your question - I advise people to begin with trades where the MTF Dashboard and Composite RSI agree with the direction. So, if going long on the 4H chart, you'd want at least 2 of the MTF Dashboard timeframes from H1 to W1 to be green and for the Composite RSI to be above 50. Take profit areas depend on the price action and the wishes of the individual. Some might prefer shooting for a logical take profit area (support/daily open line/previous day low etc) whereas some prefer to bank after a certain pip value or monetary value is reached. Sometimes a position you will open on a short timeframe will turn into a longer term trade. Catching these kind of runs will be the icing on the cake alongside the day to day trades. It's important not to be shaken out of a position too easily if it has legs so consider the benefits of getting into the habit of taking partial profits along the way and leaving a little to run. Also ensure you are trading small enough size compared to your trading account. you can always re-enter when the conditions are right Unfortunately there are days when the Composite RSI flips around near the 50 level and those can make for some messy trades. In an ideal world, we'd seek out the opportunities where the RSI bias was clearer (above 60 and below 40) but some days they can be harder to find. It's been a real grind trading currencies today with the RSI values so close to 50. Q.........Do you guys only enter the trade once the current bar is closed or do you enter the trade as soon as the price hits the channel? A.........No need to wait for bar close. Time to introduce you all to the next trading tool in our toolbox - the ADR trade. I've just opened a short on oil as price has reached ADR high and, importantly, RSI is still under 50. These trades are riskier and I advise not giving them too much wiggle room but they are an option alongside the usual trend trades. I cannot answer where I would have gotten out in price terms because I don't know. I would have exited with a loss when the market proved me wrong. That would be when the EMA channel fully crossed the SMA. As I've said previously, I do have a disaster stop in place but I am then manually managing the trade with no intention of allowing the disaster stop to be hit. 99.8% of my losses are taken manually once I'm proved wrong. Couple of things though, firstly try to get slightly better entry prices than you did. On those higher timeframes, managing to get in a little further up the channel can make a big difference. Secondly, as you identified, the trade is still valid despite you being stopped out. It would require the channel to fully get above the SMA to invalidate your trade. Q.......Hi Laura, Do you ride the major news events or do you close your trade prior to the event or wait until after the event to find your entries? A.......If I'm in a long-term trade I don't worry about individual pieces of red news but for my short-term trades (which the majority here seem to favour) I would either close or protect profit. It's too much of a lottery with news. This time I got short because price had previously broken Yesterday's Low and then returned to it. I expected it to become turncoat resistance. Took profit just before news. Q.............Do you solely focus on the EMA channel to cross the SMA to prove you wrong)? A.............It can also be used to make a price-action based exit, yes. It really depends on the individual trade. I always start with the question "where will price have to go to prove me wrong" - on some trades that will involve the channel crossing the SMA, on some it will be related to ADR or yesterday's high/low and on others it will be price closing on wrong side of channel as per example. Sorry, I know that was an 'it depends' type of answer but... it does depend It's a logical exit point but consider taking half off and letting price action dictate when you close the remainder. The momentum was strong so there were more pips on the table. This was a trade where I was targeting the previous day low. You'll notice that it didn't quite make it. I got out after a bar closed above the channel. It shouldn't be closing above the channel if it's going to keep going down, so I could smell a rat. Sometimes you'll find price initially goes in your favour but then turns. Don't be afraid to take a few pips if so. In the end I only took 7 pips from the move but I was happy with how I managed it. The reason I mention M1-M30 for short-term trading and H1-W1 for long-term trading is in relation to the dashboard. The probabilities are higher of a successful trade if the group of timeframes is at least 50% in agreement. So, if you saw a short setup on the M1 chart but M5,M15 and M30 were all green on the dashboard (bullish), you would know this is not a high probability trade to take. I tend to trade Dow, Dax, S&P, Oil, Gold, AU, EU, GU, UJ, UC. In general 5m or 15m charts are better for forex. The slope direction of SMA200 isn't so important. It turns pretty slowly. When faced with a chart like that, where price action is messy, it's worth taking a look at the next highest timeframe to see if the picture becomes any clearer. If it doesn't, move on and find clearer opportunities. Exited beyond Yesterday's High after bar printed below channel. Wait for channel to cross SMA200, yes. Or, if trading a channel failure, wait for channel to partially cross SMA200 and then go back under/over. Once you have the entry criteria, you don't have to wait for price to touch other side of channel. You can enter when price goes inside the channel. MTF dashboard doesn't have to be all green for longs. Aim for at least 2 of the timeframes relevant to your trading timeframe to be in agreement with your bias. So, M1-M30 for short-term trades and H1-W1 for longer term trades. The four advanced strategies are: 1. ADR Failures - When the EMA channel gets partially across the ADR line but then returns to the previous side. 2. Previous Day High/Low Failures - When the EMA channel gets partially across the high/low line but then returns to the previous side. 3. ADR Counters - When an instrument has completed the Average Daily Range I consider entering to capture a reversion to centre ground. 4. Previous Day High/Low Counters - When an instrument has reached the high or low of the previous trading day I consider entering to capture a reversal. Q)........Isn't 2&4 the same, and 1&3 the same? A)........Answer is in post 795 Q).........emergency stops. How far away? Beyond opposite ADR, or maybe smaller and beyond the next key level (prev h/l, or open) ? A).........What I'm trying to guard against though, is saying to anyone 'place it just beyond ADR or just beyond yesterday's high' or whatever. Because each trade is different. And what we definitely don't want to do is to fall into the normal trader trap of placing it just beyond S/R because that's what every man and his dog does, and it's why their stops get hunted. Q).......If I'm just starting should I only choose 1 pair to learn on? A).......One pair might be a little extreme as there won't always be a setup. Perhaps choose 3 or 4 markets to begin with and cycle between the charts looking for opportunities I always set out with the aim of being flat at end of day but the one exception is a trade that has developed into a runner. If I am significantly in profit I will move my stop closer to reduce my risk. The key is to not move it so close that it'll take you out on an insignificant retrace. I would simply take fresh channel crosses or channel failures and trade in accordance with the channel and SMA Q).........Do you ever take any notice of big number (00 lines)? A).........I guess I do, subconsciously. I don't put any lines on my charts at big numbers but I'm usually aware of them as potential take profit or reversal areas. Probably not something I'd include as I'm not convinced the success rate is high enough. Could be wrong there though. Q)........Sticking with indices, how important is RSI? Also does same apply with oil? A)........For 1m indices/oil it is less important. The CompositeRSI reading gives us a great indication of the predominant trend but it's focused on higher timeframes. By the time you wait for RSI to change from bearish to bullish, you could have caught a counter-trend move that's huge. I did experiment with shorter timeframe RSI but found it too noisy. I will keep trying though and will release 1m settings if I'm successful. Q).......does the CompRSI have to agree with the channel cross and is the exit based on crossing back only or the change in the compRSI? A).......The CompRSI will never impact your exits. We primarily use it to enter with the dominant trend. As I said above though, we differentiate between 1m indices/oil and 5m/15m currencies. For the currency entries, we want CompRSI to agree with channel cross direction. I originally didn't mention this different approach as I didn't want to muddy the waters but, now that there are people trading the 1m indices/oil, it seems timely to explain. The only thing we really need to be aware of with the ADR figures is how much of the range it has completed today. That gives an indication as to whether there is much more 'juice' in the tank for further moves. I want to share another type of advanced setup that, though quite rare, will occur from time to time. EJ (chart below) hit Yesterday's High earlier but RSI was still below 50. I entered short, expecting that level to act as resistance. As you'll see, I had to close out early due to the upcoming EU news so I haven't had the opportunity to establish how the trade was going to develop. Anyway, keep these setups in mind if you spot them. They are riskier than the standard trade types so I'd suggest a pretty tight stop. --- Example on post 948 --- This was the AU ADR trade I mentioned earlier. Price turned on its heels right at ADR Low. I took the trade because RSI was still above 50 when it hit the line. As always, I'll remind you that ADR trades are advanced and riskier, and shouldn't be attempted before you've mastered the basics. Be careful with entering just below Yesterday's High in general though, price will often turn around there. I'm a big fan of 15m timeframe! ~ Laura ~ Notice how price went below the ADR Low then went back up to re-test it before continuing down. I do not allow my stop loss to be hit in the vast majority of cases because I know I'm wrong and I exit manually with a loss When starting out with the strategy, I do recommend that you only take crosses that are in agreement with the TrendstrengthRSI. Some people will regard 50 as the decision point, others might prefer 55/45 or 60/40. I'd suggest experimenting and seeing what suits you. Regardless of whether you are trading on a 5m chart or a 1H chart, the TrendstrengthRSI will give the same values as it is calculated using set values (4H,1D,1W). It is of course possible to take counter-trend trades (I do so) but I'd only advise this route once the basics of the strategy have been mastered and you understand the extra risk this involves. Stick with the method, it's rock solid, just use something nice and Steady-Eddie like EU ~~ Lem ~~ In general terms, what I fear I've done is been too clever in trying to teach people about the channel. I originally said "buy at lower side of channel" in the hope that a few people following along would create for themselves a sense of discipline. I did not expect the volume of interest the thread has garnered. I later relaxed the guidelines, as I intended to do, saying "buy or sell within the channel" but unfortunately by that time my original message had taken hold. When it comes to momentum and how that looks in relation to the channel, I definitely acknowledge the appeal in seeing a candle close above the upper band of the channel as a call to enter. Way back in the day, I had it drummed into me that I shouldn't chase price and I guess that has stuck with me. Now that I'm questioning myself to answer the post, I can experience dilemma. Perhaps a stubborn adherence to my own rule causes me to miss out on moves I should be capturing. Food for thought. Ultimately we do this to make money and I don't like to miss opportunities so, with everyone's forbearance, I will carry out some further chart work and update both this thread and my journal with more definitive instruction. When it comes to exits, I do agree that a candle closing on the 'wrong' side of the channel is the first sign you should think about taking what's on offer. Again, my instructions have probably been coloured by my own long ago lessons about letting a trade breathe. I happily sit through retracements if the end target still looks achievable. But I recognise that others will prefer to trade differently, getting in and out of positions repeatedly so as not to have to experience the periods of consolidation/retracement. In terms of RSI, I agree that there is likely not a correlation between how high (or low) RSI is and the quality of the opportunity. That being said, I set out with the intention of getting people to not think in traditional RSI terms of overbought or oversold. I've seen plenty of markets stay beyond 85/15 for extended periods, with lots of money to be made during those periods. Now that it has reached ADR High, I'd be tempted to take partial profits while you watch what's left to see if it can run further. I would only take longs due to channel being above SMA Here's just a reminder about how to use Yesterday's Low (or High)....... At 1 you'll see that price respected the line but later broke below. At 2 price went back above but immediately closed back below on the next bar. That told me the line was now acting as resistance and I was, eventually, able to get short (I was late in joining the trade actually). It's important when using Yesterday's High/Low that you see evidence of price supporting or rejecting the line. A chart where price is zig zagging above and below the line actually renders that line useless. Remember, Yesterday's Low starts as support but can later turn into resistance (as per my chart example) and Yesterday's High starts as resistance but can often turn into support. I try to keep stressing that ADR Reversals are advanced and risky, and that traders should stick to the basics until they have mastered those. I want to highlight an ADR Reversal I took today though, in the hope that I might be able to shed some light on why I chose it. Price rose to the ADR High but RSI remained at or below 50. In addition, the MTF Dashboard was showing red for weekly and daily timeframes. Although the markets can do anything, we do try to stack probabilities in our favour. The probability of this turning back down to the SMA was quite high, I decided. Conversely, if you see an instrument at ADR High but RSI is around 70 and one of the two highest timeframes is green, you should hopefully know to step aside and pass on the trade. I personally stand aside for red news (or protect my profits if I'm leaving trade open). Closed a couple of oil shorts after spike in my favour Here's how I see it: 1. Stretched momentum. A good opportunity to exit (I frequently say that exiting on a spike in your favour is a good plan as spikes tend to reverse). However, my thinking at 1 was that price would likely retrace back into the channel before having another push for ADR High (price tends to want to complete the range once very close to it). 2. A lower high is formed. Oh dear. Time to watch action more carefully. 3. A lower low is made. The game is definitely over. Now it's a case of finding a graceful exit. 4. Instead of exiting at 3, I waited for the next high to be formed so I could get out at a slightly better price. For timeframes of 5m+, I'd stick with the TrendStrengthRSI. ADR Reversal trade. Usual health warning about ADR Reversals ... they are riskier than the basic entry types. Reason I took this one is that TrendStrengthRSI was still above 50 (It was 64) despite price being at ADR Low. Exited just above Friday's High. I was hoping price might reach SMA but hoping doesn't move the markets so I've taken what's on the table. Looks to me as if price is ready to roll over now, but if it goes to target without me, that's okay Personally, I prefer to see Frankfurt session before I enter. However, I know that's not possible for some people due to timezones. The only thing I'd mention is that, by the time you entered, two wicks had pierced the trendline. I know price hadn't closed below the trendline but the fact it was pierced twice would probably put me off. Other than that, just one of those things. Q).......What is the difference between ADR failures and ADR counters? A).......The difference is small. An ADR counter is where price reaches ADR High/Low and reverses. An ADR failure is where the channel goes partially above/below ADR High/Low and then returns to the other side (same idea as a normal channel failure, except for ADR line instead of SMA). I don't pay as much attention to ADR for indices/oil/gold - much more meaningful for currencies. Just to remind you of the importance of discipline. Being disciplined in taking those small wins or small losses is super-important. It's what leads to capital preservation. And capital preservation leads to being able to take advantage of the big opportunities that come along. Sometimes, a small loss will be your best trade of the day, regardless of how many winners you hit.