Greetings, In our HotComm chat room (Relay1: KWIKPOP) we discuss the use of the KP indicators for targeting a trade with greater than average probabilities of success. We hold these sessions every Monday/Tuesday/Wednesday at 11:30 AM (Eastern US). The training is FREE, so stop by anytime.
A STRONG SET UP What is a strong set up pattern? A 'strong' set up pattern is a chart structure that suggests a much better than average probability of producing a reasonable profit.
How many 'strong' set up patterns do we get every day? When trading the ES contracts we get between 4-6 every day. With the Euro Currency contract we get between 3-5 on average.
What is a 'strong' set up pattern?
Let's examine a buy signal. A HIGHER LOW BUY SIGNAL. All trading opportunities are created when the market reverses from a SELLING CYCLE to a BUYING CYCLE or vice-versa. When the price bars crossover KPAUTOSTOP and change color a cycle change is unfolding. In a selling cycle the price bars are red and below KPAUTOSTOP. When the price bars cross back UP ABOVE KP AUTOSTOP and change colors a cycle reversal is forming. The cross above KPAUTOSTOP with a change in the color of the price bars tells us that a buying cycle is forming.
Study that chart for a moment.
On the candlesticks there is a RED LINE (KPTriggerlineVMA) and an Aqua line (KPAUTOSTOP). All momentum reversals occur when the price bars close above or below KPAUTOSTOP and the candlestick changes colors. When a selling cycle terminates the candlesticks CLOSE back above KPAUTOSTOP and change to a color other than RED. Study that YELLOW candlestick that is circled on the chart. That was the first candlestick that closed back above the aqua blue line KPAUTOSTOP since the selling cycle began. NOTE: A selling cycle is in play when the candlesticks are RED and below KPAUTOSTOP (Aqua blue line) Once the candlesticks close back above KPAUTOSTOP and change color ... the selling cycle is terminating.
A BUYING CYCLE is in place when the candlesticks are BLUE and above KPAUTOSTOP. At 15:35 we were still in a selling cycle. At 15:43 we had blue candlesticks ABOVE KPAUTOSTOP so we were into a BUYING CYCLE. Look at the time on the bottom of that chart above.
Let's focus on that yellow candlestick that is circled on that chart. That is the TRANSITION candlestick. BLUE candlesticks are BULLISH and RED candlesticks are BEARISH. YELLOW candlesticks are neutral. When a yellow candlestick closes back above KPAUTOSTOP from a selling cycle ... what are the odds that a blue candlestick will form (confirming a buy cycle) ? Pay attention here because we are playing the odds and the chart pattern tells us how strong the odds are that a buying cycle will unfold.
If certain momentum patterns align when a yellow candlestick crosses KPAUTOSTOP we say the yellow candlestick is a Q BAR, or qualifying bar. A Q Bar tells us that the odds of a blue candlestick appearing above KPAUTOSTOP are extremely high. A blue candlestick above KPAUTOSTOP confirms a BUYING CYCLE. If you are going to trade, you BUY in a BUYING CYCLE. A blue candlestick above KPAUTOSTOP confirms a BUYING CYCLE.
So here is how we define the odds that a blue candlestick will form above KPAUTOSTOP confirming a BUYING CYCLE/BUY SIGNAL. 1) Is there a BLUE DOT underneath the candlestick? The BLUE dot tells us that short term momentum is positive. 2) Is KPTriggerlineVMA (RedLine) above KPAUTOSTOP(Aqua Line)? That tells us that the TONE is bullish. 3) Are the candlesticks closing above KPTriggerlineVMA (Red Line)? That tells us upside price velocity is accelerating. 4) Is KPSNAPBACK above it's whiteline? That tells us that long term price momentum is accelerating to the upside. 5) Is KPVS above it's white line? That tells us that long term VOLUME momentum is accelerating to the upside.
When those conditions are present, there is a 95% probability that a BLUE candlestick will appear within one or two bars. Please take a moment to study the 5 conditions mentioned above. Now study that chart again in light of the momentum profile just described.
A Q BAR needs those 5 conditions present to confirm a price rally. When those 5 conditions are aligned there is a 95% probability that prices will rally. If you are going to BUY ... YOU WANT THE ODDS IN YOUR FAVOR. That chart pattern is a STRONG SIGNAL. In order to trade successfully you need to define the odds of success before you commit to the trade. You BUY when the odds of success are extemely high.
Want to learn some more trading tips? ATTEND OUR FREE TRAINING SESSIONS EVERY MON/TUES/WEDS
Knowledge is POWER! Regards, WDH
THE
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