Fecha de vencimiento y amortización de los valores

We’ve already emphasised (many times!) that the key with this trading system, and with these flowcharts, is to find longer-term trends and then find shorter-term entries either into or against those trends.

With each trade signal, we aim to scale down to the shortest time frame—the 4-hour chart—to find our signals. You will notice that all the way through this flowchart, we are constantly trying to “refine” the entry to our trade. If there’s a re-entry signal on the daily chart, for example, we would look to see if we can refine the entry further by looking across at the 4-hour chart to see if there is a reversal signal. The reason we do this is because a reversal signal on the 4-hour chart will hit its 50% confirmation line long before the daily re-entry signal will.

Using the Flowcharts

158

This is an actual trade setup which occurred in GBP/USD in September 2008.

On the right-hand side of the screen we have a daily chart, while on the left-hand side of the screen we have a 4-hour chart.

The daily chart is showing a bearish standard hidden divergence re-

entry signal, while the 4-hour chart is showing a bearish regular divergence reversal signal.

The high of the market occurred on 25th September. In order to see the bearish hidden divergence signal on the daily chart become confirmed, we would need to see the market fall 50% of the way back towards its previous low. This did not occur until 29th September.

However, we can refine the entry by using the 4-hour signal as our trigger. In order to see that signal confirmed, we need to see the market trade down 50% of the way towards the lowest point in-between the start of the divergence and the end. This occurred on 25th September— the same day as the high, and four days before the daily signal was confirmed!

Not only were we able to get in to the trade sooner, we were also able to get a much safer no-touch level, because the market had not fallen too far yet, allowing us to position our no-touch barrier much higher than we would have been able to if we were trading just the daily chart setup.

In that example, the 4-hour chart is our short-term time frame. That’s the chart that we ideally want to use as our trigger for the trades. Generally, it’s not a good idea to refine the entry any more than that, because once you get into the even shorter time frames, the signals exert less influence over the longer-term direction of the market. For example, you wouldn’t use a 5 minute chart to predict what’s going to happen over the next week—so generally, we stick to the 4-hour chart as our shortest- term time frame, our trigger chart.

The eagle-eyed amongst you will have noticed there is one exception to that rule. With Trade Type #1B we do drop down to the 1-hour chart to look for our trigger. Trade Type #1B is an extension of trade type #1A.

What separates these two trade types from the others is the strength of the trend that we are trading into. These are the only two trades that occur when the market is in an extremely strong trend—when the same trend is present on the daily chart, the weekly chart and the monthly chart.

Binary Options Profit Pipeline

Most of the time, a 1-hour chart is not strong enough to predict what the market will or won’t do over the next seven days—the probability is not high enough. It might be perfectly OK for predicting over 2-3 days, but when it comes to predicting a whole week, which is what we’ll be doing with this type of trading, it’s not enough. It’s too short a time frame.

The one exception is when you have an extremely strong trend behind you. Trade Type #1A occurs when you find a re-entry signal on the 4-hour chart in the direction of a very strong trend that is present on the daily, weekly and monthly chart.

In this case, when you’ve got those factors in your favour, it is acceptable to look for a trigger on the 1-hour chart. That’s the only situation where the probability of a trade with a trigger based on the 1-hour chart being successful is high enough.

Of course, you don’t actually have to remember any of this if you don’t want to! When you come to analyse a market, just follow the process through and you will be led to the correct trade type, if there is a trade present on the market you’re looking at. Naturally though, it is just helpful to understand the background to why we do what we do, and why we take the certain trade types that we do, and when.