Third wave of new ideas for I. Cloud Strat. - more refined...
See chart.
Comments:
Regardless of whether there's a price swing that allows for the base or conversion line to be within the major fibs levels or "ideal fib range", if all or the majority of that price swing is outside of the pre-defined 60 MA price channel (blue lines and background), the trade is a no go - we expect a deep pull-back to the mean (towards the 200 MA).
Trading into the cloud is lower probability, but also highest reward potential in the case of a buy (short) and hold strategy. Speaking of which, breaking up the trade into two parts: 1.) half using the normal target (now 1:1 payback on the stop) 2.) half being held until price breaks below a spinning top candle for the H. Ashi candles of the same, or one level higher, time-frame, may allow us to capture a lot of any major trend changes.
When both the 200 MA and 1600 MA favor the direction of the conversion over base line cross, look to enter mostly on "shallow" corrections between the 30% and 33.4% range. When only the 1600 MA favors, look to enter between the 50% and 61.8% range. When the direction of both MAs don't favor the trade, but a cross happens, study the situation, see how many legs of price appreciation/ depreciation have occurred into the cross, where price sits relative to the 60 MA channel, whether there's any change of pattern in recent price action, etc., but try to favor situations that allow for an entry with confluence of supports and preferably a retrace of 50% or better.
Know the situation! The more support we can get between the entry and stop the better. If it allows for a 2 to 1 reward, or better, and conditions seem to allow enough pull-back to trigger entry, placing a stop above the cloud (part of the cloud) is a good idea. Watch the 200 MA for signs of how deep of a pullback to expect. For the short with the thumbs up above it, entry should not have happened any lower than 0.618 (with 0 at top). An entry at 0.5 would allow for both a "safer" stop and high r:r. Of course, it also has less of a chance to trigger a short, but the flat-to-rising 200 MA says "expect deep correction" (possible retest of 200 MA, which usually wicks above), so the odds really aren't that bad that the 0.5 would be tested, which just so happens to be in confluence with the base line in this case. The point is to get into as high of a probability trade as possible, especially when trading against the longer-term trend (1600 MA). Also consider that the plan can change as the market makes its reactions. If the price were to range long enough under the 200 MA to start curling it down, then a shallower correction could be expected. We would then have the choice to move short entry to 0.618.
Comments:
Regardless of whether there's a price swing that allows for the base or conversion line to be within the major fibs levels or "ideal fib range", if all or the majority of that price swing is outside of the pre-defined 60 MA price channel (blue lines and background), the trade is a no go - we expect a deep pull-back to the mean (towards the 200 MA).
Trading into the cloud is lower probability, but also highest reward potential in the case of a buy (short) and hold strategy. Speaking of which, breaking up the trade into two parts: 1.) half using the normal target (now 1:1 payback on the stop) 2.) half being held until price breaks below a spinning top candle for the H. Ashi candles of the same, or one level higher, time-frame, may allow us to capture a lot of any major trend changes.
When both the 200 MA and 1600 MA favor the direction of the conversion over base line cross, look to enter mostly on "shallow" corrections between the 30% and 33.4% range. When only the 1600 MA favors, look to enter between the 50% and 61.8% range. When the direction of both MAs don't favor the trade, but a cross happens, study the situation, see how many legs of price appreciation/ depreciation have occurred into the cross, where price sits relative to the 60 MA channel, whether there's any change of pattern in recent price action, etc., but try to favor situations that allow for an entry with confluence of supports and preferably a retrace of 50% or better.
Know the situation! The more support we can get between the entry and stop the better. If it allows for a 2 to 1 reward, or better, and conditions seem to allow enough pull-back to trigger entry, placing a stop above the cloud (part of the cloud) is a good idea. Watch the 200 MA for signs of how deep of a pullback to expect. For the short with the thumbs up above it, entry should not have happened any lower than 0.618 (with 0 at top). An entry at 0.5 would allow for both a "safer" stop and high r:r. Of course, it also has less of a chance to trigger a short, but the flat-to-rising 200 MA says "expect deep correction" (possible retest of 200 MA, which usually wicks above), so the odds really aren't that bad that the 0.5 would be tested, which just so happens to be in confluence with the base line in this case. The point is to get into as high of a probability trade as possible, especially when trading against the longer-term trend (1600 MA). Also consider that the plan can change as the market makes its reactions. If the price were to range long enough under the 200 MA to start curling it down, then a shallower correction could be expected. We would then have the choice to move short entry to 0.618.
