Hi RickGone are the days when I would jump straight in with...

  1. 8,527 Posts.
    lightbulb Created with Sketch. 64
    Hi Rick

    Gone are the days when I would jump straight in with money on a new strategy (only took me 10 years to learn that lesson).

    I can see the power in your strategy though as I have an EA already running that is based on the same principle (of testing liquidity) - albeit without taking into account the background liquidity zones that you do (by necessity - because I wanted to be able to code the concept).

    I can illustrate the concept using the following chart, on which I have drawn several examples (buy side only shown):

    https://hotcopper.com.au/data/attachments/1484/1484430-f6126146a400520646c515478fae364f.jpg

    So this concept starts with a Spike (Low or High - Spike Low examples only shown) - where I define a Spike Low as a bar with a lower low than the bar before it and a lower low than the bar after it - so you can actually only confirm that a bar is a spike low 2 bars later when the last bar closes with a higher low.

    From the Spike Low you then look for an unbroken sequence (of at least 1) higher lows, and then you are looking for the first bar to form a lower low without breaking the highest high since the spike low - this is essentially is a test of liquidity or test of trailing stops following the sequence of higher lows - and then at the break of the highest high since the spike low is my buy entry (with the stoploss at the low of the lowest low since the sequence of higher lows was broken - and without breaking the low of the spike low). I have a simple trade management of entering multiple orders at the entry point and closing one at the close of each of the next bars, which could be 1, 2 or 3 bars (or all 3 if I want to diversify the exits over time, but I have found 2 bars tends to work best with this strategy).

    So this strategy is looking for what I think is that deliberate lower low that trips up trailing stops, and triggering an entry if momentum proves itself by then breaking the most recent high. Hence it is a shorter term perspective (and hence only good imo for 1-3 bars) versus your approach where you manually identify the liquidity zones (both source and target) - and hence typically a longer term trade or able to target zones manually identified.

    And it works on all timeframes (but you guessed it, my EA is built for H12, but easily convertible to other timeframes).

    Cheers, Sharks
 
arrow-down-2 Created with Sketch. arrow-down-2 Created with Sketch.