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Trade Examples 1

 

GBPAUD - 4th June 2021

On 4th June there was a Double Top on H1 and a V-Power sell signal on GBPAUD. Also the STME-system gave a great sell signal on M1 on that day.

The following screenshot shows the position of the entry signals of each system. But why were these signals so especially good? Please read on...

 

The signals were especially good because the bigger picture gave you many edges. If many edges exist at the same time when a signal is generated then that signal is of highest quality.

I will now explain which edges existed.

The following screenshot shows the time frame H4. You can clearly see that there was a long lasting (matured) upward trend during the past weeks. Especially the beginning of the upward trend was explosive and steep.

Such a steep trend (the left green arrow) produces an overbought condition with a lot of free space (ellipse) where the price can return to the mean. So the price can drop a lot after the trend reverses to the downside.

Also visible on the time frame H4 is that the price went above the recent high (resistance = red horizontal line) before the sell signals occurred. This move above a recent high produces a lot of buy orders in the herd. The smart money sells (at a very good price) into that liquidity and then reverses the price. This fakeout reversal also adds to the probability of the signal.

 

On the time frame H1 you can see that there was a classical 3 level/day push by the smart money to the upside which lead the price above the resistance level.

Especially level 2 was very big and steep (level 2 is usually the biggest level in the 3 day cycle) and produced a lot of free space where the price can move after the change of the direction of the trend from upward to downward trend.

The level 3 upward move produced a regular bearish divergence between the price and the MACD, which is also a great additional edge.

 

Therefore, there were multiple edges available in the moment when the entry signals occurred. Each edge adds to the probability (success rate) of the signal.

The edges were:

- extreme overbought condition on H4

- extreme overbought condition on H1

- classical 3 day upward cycle before reversal

- fakeout at resistance

- bearish divergence on H1 at resistance

 

Additional hint:

- the free space on H1 can be an orientation for short-term holders (e.g. intraday) to time the exit

- the free space on H4 can be an orientation for those traders who want to hold the trade multiple days

 

 

 

 

About Me

I'm Mike Semlitsch the owner of PerfectTrendSystem.com. My trading career started in 2007. Since 2013 I have helped thousands of traders to take their trading to the next level. Many of them are now constantly profitable traders. 

The following performance was achieved by me while trading live in front of hundreds of my clients:

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