Anatomy of a trade- dissected and laid bare ( short Corn H12 CFD)

OK, I have put together this presentation to show not only the power of the reaction line but my overall entry /thought processes etc. There's a lot to show you so I am going to try to keep my words as brief as possible.
Background:
Corn is a market i follow closely and is the largest grain traded in terms of world volume. It has complex fundamentals but for the purpose of this trade I am looking only at the technical perspective. Here is a daily continious chart ( Esignal) of Corn ECBOT. The near month is March
The lines on that charts are either REACTION LINES ( red) or historical long term pitchforks/Median lines ( coloured pink, blue etc). Recent price behaviour since tha Autumn is sideways within a range of 575 to 675. I have no view to call the long term future direction but suspect it will be up.


Here is a 60 min chart showing the recent gap down ( limit down) on the back of fundamentals USDA report. We have found support at just under 600 and rallied to close the gap. It was my view that we may turn here and make another wave down. So as price approached the phycological 650-00 area and the reaction line bang on/at that price, i waited to see the opening yesterday.

Now we drop down to a lower TF and the Metatrader CFD for March 12 below. I never leave resting orders ahead of the grain opening which can whipsaw so I was waiting to see if price would open up above 650 or break up above 650 in the opening 15 mins.Remeber we have rallied nearly 50C and as yet have had no retracement. For sure I had my reaction line at this level plus price was getting fatigued after a near 50c rally plus there are a band of long term RL's from the daily chart that have worked superbly on price. I anticipated that price would at least retrace .25 to.382 even if it was going to break up out of this range( which is a possibility) or it would return down to restest 600 again,but we would see some reaction before price broke above this important level at 650. Either way i was looking for a minimum 10 cent fall and was prepared to risk just under 1 3/4C. I trade CFD's on corn as I can use fractional MM and always commit a propotion of any trade as a 'keeper' to try to catch more than an intraday move. Usually i take 30-40% profit when my short term objective is reached.Please remember the spread is a whopping whole 1 cent on the CFD PLUS there is a 15$ RT commision. For this reason i never trade the CFD unless there is a good R:R ratio. Here below is the opening. You can see the thin red horizontal RL just below the thin blue ML. I went short .5 lot at 648.50 and 5 mins later another 1 lot at 647.25. Stops at 649.00 and 648.50 respectively.

After 15 mins price had fallen away but jumped off the lower red reaction line at 644.30. but had resistance above from the reaction line just above at 645.50 I watched with baited breath to see if we would hold and rally up towards my stop.

Price shows me that it has not YET got the strength to go higher as it failed to break above the RL but this is only a 4C move down so anything could happen.
Price now breaks under the lower RL at 644.30 and I know we are approaching support at
the RL seen rising from the bottom left hand side to the mid upper right hand side of the chart. Its time to add a fork to see where the objective/support/resistance is.

Here below we see price hit the RL. I have added an unorthadox GPF fork which uses the 'before' and 'after' pivots and always shows you the relationship between current price and more importantly the current reaction lines.

Next I add the custom indicator to the pink fork and hey presto it automatically draws the reaction lines ( it changes colour to teal green). You can see the RL from this fork bisects the middle of the fork and also the next RL shows up at 648.00 at the top of the screen near the entry. This adds yet another RL at the 650 area which is really what i search for..grouping of reaction lines at a certain level and angle which show organic resistance/support and have a higher probabitlity of affecting price.. the more RL's above the rising market the higher the probability that price will struggle at that level.

Now we wait to see if the diagnonal RL will suppress or support price...heres the 1 min chart below at which time we have taken partial profits at the green LMLP at 640.00 and moved stop to B/e on the remaining 1 lot.

Now a quick word on this type of fork. Have a look below. It uses the first high ( before any retracement) and the last low. It always works- try it yourself. Now i add a sideways fork( black) to see the first objective( below)

Price bounces off the LMLP ofthe green fork ( above) and is still short of the black horizontal CL at 638.00. If price goes above the two down sloping reaction lines then the outloook would be uncertain for the trade but we have taken equity out and are in for the long haul.

Hey presto! we have a pin prick touch on the CL...now what?..

We are through the green LMLP but bounce! ( as you would expect)

what will happen next?

here we see price has rallied back upto 644-25 and then fallen again to the confluence of the green LMLP and the reaction line. Think about what the candle in a higher time frame would look like?A classic dead bounce.


As price plays out it's merry dance you can see how i trust the RL's and what price does at them indicates its intentions.

So here below we are the following morning and we are still short and price is at 635.75

There were infact two other reaction line templates in use at the same time in multiple TF's plus the 2x and Bline indicators but i have specifically followed through on one chart from begining to end.
What will happen today Thursday 2nd February? Any rally above 642 to 644 would indicate to me we are going back up to restest 650 but i will close this position before the ECBOTclose later this lunchtime and make sure I am flat ahead of the 4.30 PM euro opening ( CET).

Another historical fork..cont

This is about as good as it gets and although there was no planned trade set-up here to share with you, I hope it illustrates the power of historical PF's/ML's and more importantly their reaction lines- a study of which has lead to the development of a encouragingly profitable system.
Price may well rally to gain enough energy to pass down through the line- so watch for an exhausted uptrend- or fundemantal news to take us lower.

Another historical fork

Try this yourself...price has already previously bounced off it like a pin at 1.3026...perhaps it will again. P0 1.0614 1991,P1 1.4535 March 95 & P2 .8225 Oct 2000)

EURUSD...It's magic!!...log vs arith and DAX H12

Ive talked about this fork so many times and yes, it predates the euro and is compiled using the ECU which is calculated largely by the DM value

This is is a bit of fun but have a look at this one simple fork in monthly EURUSD
P0 sept 1975
P1 oct 1978 (or you can use the right hand high pivot of 1980..it makes no difference).
p2 Feb 1985

Here it is in all it's glory using arithmetic scaling.



and here is the same fork using Log scaling.........Impressive ehhh!! If you revert to Arith scale & then replace each of the three lines ( 4 if you connect the B to C) that make up this fork with single trend line segments or rays and then switch back to log scale you do not get the same result.



and heres the detail of the same log daily chart below!!!!



This is obviously astounding stuff but has an alltogether more important application in my trading charts.....truely where is the true location of any line...trend, median,reaction etc? The answer is that any one line has more than one location and yet will quite possibly have more than one reaction.
here below is my DAX CFD March 12 15 min chart ( arith scale) from this morning. Look where the black ML line is and where the reaction lines are.


Here is the same chart/template (same arith scaling) but 5 min TF. I have drawn a small black line where price was on the 15 min. My long entry is on the poke bar through the D-sloping RL.

Gold...OK it looks strong enough to get to 1770$ & soon!

...Thats enough for me. After yesterdays posting whiel price was at the crucial level of $ 1650 we saw classic price rejection of lower levels. It has intersted me so much that i reproduce some of the the charts here again in the light that I learn something from it as I was considering a short on a break below the reaction line at $1648 as it turned out I did not trade Gold as I am 'margined out' on other positions ( + Corn) but I was shocked to see such a strong market and have looked at a possible entry. In the chart below/above we see price had sold off from 1670$ in the European/London session and quite sharply. We hit the green ML and then cycled sideways and price was giving all the signs of going lower. After 5 trys - each time being supported by the green line and resisted above by the reaction line we basically made a pennant/flag pattern ( in the 1 & 5 min TF) and broke lower. The reaction line and the big psycho 1650$ level was being tested at the very moment i was writing the post. What happened next took me by surprise (as the Fed news hit). We spent a few seconds at 1648.50 and then bar by bar we rose immediately above 1650 then above the green CL to 1655 and then a retouch on the green CL then a 'poke' bar which took out the previous high an then another long range bar. I think the second bar ( highlighted) at 1657$ should have been an entry. But there no point looking back....Where is gold going? The daily chart shows us that 1775-1785 is where the current Andrews fork objective lies and this usually proves to be a good yardstick of trend moves and this ccan be seen in the top left hand small chart...however if you use the 20th October low of 1608.40 as P0 (instead of 1626 on 26th Sept) then you get a simple Andrews fork that has a centre line time/price target of 1764$....allmost where we are now. Sadly I would not consider a long until after a pullback but this market has refused to do so since we touched this target a few weeks ago. So with Gold i will watch and see.

Gold...This ($1653) is an important level and we are going lower

It became apparent this morning that we were seeing more than usual activity in the gold market. Price seems very tired and laboured and the effort to touch 1670$ was the tipping point. We fell to the CL of the green fork (P0 1560.06 on 15/Dec2011, P1 1641 21/Dec 2011 and P2 1522.55 on 29Th Dec 2011). Price shows us that it is weak in many ways. A Schiff fork drawn off the pivots along the line was a failure then we see that the energy from the line caused price to bounce but the upwards limit was defined by overhead resistance from the down sloping reaction line you can clearly see.Timne and time over price made wild spikes higher ( just as we have seen in the EURUSD at the recent highs above 1.30) and these sharp moves ( in the 1 min charts) can only mean one thing...Price gathers energy like a coiled spring to push down through the line. I counted 9 cycles before we broke lower and now we are at 1650$.
Will we go lower? I believe so and it is ironic that the last few days we have seen the usual analysts on CNBC/NBlomberg and other newswires all telling us what a safe bet Gold is now it has its familiar steady climbing habit of sucessive days with higher highs and closes etc. There is support at 1649 seen clearly on my chart form a reaction line with two more underneath.A break lower here would mean a return to the low 1600's. Also look at the Ensign template for the futures in a daily chart...the short term stochastic ribbons look ready for a tumble. I am not saying that Gold is finished as it surprised me with the endurance it showed int he recent price rise but we are definately overdone and as yet have seen no retacement or lower low. 1621$ would bring us to the LMLP of the green fork seen above and a .382 Fib RT and that would be a good start.


Heres the 240 min again showing the last few weeks action and look at the 2 x as well as the falling B-line

Multiple historic PF trading... EURUSD...one simple fork

Here are two simple Andrews forks in the EURUSD monthly TF. Part of my trading approach is to give each important monthly/weekly/daily pivot a value which is done using a formula. This is simply to only draw forks that will have the most profound effect on price. This actually depends on more than just the total pivot value for each fork but also variables such as the eventual angle of the fork and reaction lines. In this shot the black fork is rising/up sloping at about 8 degrees above the horizontal and it's reaction lines are shown to effective. The second shot is
EURUSD 15 min and shows the resistance offered by the same black CL which is almost horizontal in this TF - horizontal lines offer the most effective resistance.
Outlook? A break and daily close above this line would mean we are set for another important line at 1.3100but a fail here would mean a return tothe mid to low 1.20's
Here's the weekly of the same chart below showing the D/S reaction line:

My 'Multiple PF' maps have somewhere between 10-15 historical forks( M,W & D) and approx 5 intraday 240 and lower TF 'local' forks plus a reaction line grid/fork off the daily/weekly controlling swings. Here below is a fully completed spot Gold (CFD) chart showing just ( in this case) one or two ML's in green and blue) the rest are all reaction lines plus there are Bolly bands. Onto this I load a indicator template or use a seperate platform.

Will price hold at the 1650$ area on the reaction/Median lines seen here? Can you see the correlation with price/ reaction lines and the symmetry of the lines viz a viz price behaviour?

Gold.... Corn

Corn's ( Maize) having trouble going below 600.00 ( March12). I have been short but am becoming nervous and have closed my short ahead of the Chicago session. Stuck at 599 in the globex session and with multiple stochastics in multiple time frames indicating its very oversold. Perhaps a dip below and then a rally or will we go lower and touch the 580-590 area. Reaction line support is shown here in the Esignal charts. USDA report last week shows just how bearish supply/demand is but fundamentals apart there is a huge gap to be filled from last weeks limit down move....sometime soon we will see this move up.

Gold is still to break above 1670 and seems comfortable in this range with no big retracements as yet. Here are a set of reaction lines from a fork not seen here. I have highlighted the reaction lines in the second shot.