The setups I include on this blog are used in conjunction with the 3/10macd and the criteria I ascribe to it as a way to alert me to an existing condition of price. The key concept to take away from this blog is that I try to anticipate what will happen on the higher time frame by using a faster time frame to trigger the trade setup. I do not trade a "system" I use two indicators to clue me in to price conditions. Please read the Disclaimer located in the sidebar of this site. I can be contacted via email at
I am always open to questions, comments, or suggestions on how to improve this blog.

Saturday, April 26, 2014

Fast Line < Slow Line

     The following weekly charts have two indicators in the subset.  The top is meant to reflect a 3/10macd as it would appear on a chart which is 3 times "slower" (so, approximately 3-weeks).  The bottom indicator is the 3/10macd for the weekly time frame.  The upper 3/10macd then is the "traded" time frame, while the lower 3/10macd is the "trigger" time frame.
      A typical warning sign for long positions, and possible impending corrections, comes in an environment where the traded time frame 3/10macd Fast Line goes below (is less than) the Slow Line.  So, looking at a chart of the SPY I've highlighted instances where this has occurred.
The thing is, this Fast Line/Slow Line cross on the traded time frame comes late, both in crossing below and crossing back above.  That is what the "trigger" indicator is for, as a way to anticipate this occurrence.
So, when the "traded" time frame shows a FL < SL you can draw a box (Darvas?) around the range and wait for a breakout, or build some sort of similar strategy that you prefer.

This isn't to say that when the FL < SL that price can't go higher, because it CAN.  If nothing else it should/could just serve as a conditional warning for more stringent risk control allowances.
Here in XLF the fast line has been less than the slow line on the "traded" time frame for 35 weeks now and is up approximately 4.5% since breaking out of a range to higher highs.  As an aside, that 4.5% has been a choppy ride.
The anticipated trades were for the Fast Line on the "traded" (higher) time frame to tick back up (i.e. fast line moving down to fast line moving back up).  You can't know whether this fast line moving back up will have anough momentum to create the condition where the fast line goes back over the slow line, but it's a trade you have to consider.  In the chart of XLF above, the "trigger" time frame (weekly) shows a bullish orientation of the 3/10macd right up until the big red bar that happened in January.  Overall, this trade orientation may have resulted in a scratch trade after keeping your money in it for 15-weeks.  So, though price went higher with a FL < SL it has behaved in a sloppy (choppy) manner.

So, with that in mind, here are the rest of the weekly majors with their higher "traded" indicators :




Again, the Fast Line crossing below the slow line indicates a bearish/corrective warning.  Anticipating the potential for the fast and slow line to either become bearish OR re-orient in a bullish position is what you have to look to trade (by use of the trigger element).

No comments: