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Confluence of Pullback Failure + B&R

A manual trade break down on 26 Nov 24

Price action analysis

The price dipped below the $2,687 support level but couldn’t sustain the downward momentum. It repeatedly attempted to break lower, forming long wicks on the candles, indicating strong buying pressure. This “pullback failure” signaled a potential bullish reversal.

We identified $2,692 as a potential stop-loss level, based on the previous high point of the wick.

The target profit was set at $2,661, where the price had previously faced resistance.

This trade ended with a favorable risk-reward ratio of 4.2:1.


This is not our usual post as most of our trades are algo generated.

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“Support and Resistance” for 1 RR

I recently capitalized on a significant price dip in the Asian market. The price briefly breached the strong support level of $2,663.2 but quickly rebounded, signaling a potential bullish reversal.

To manage risk, I strategically placed my stop-loss order below the 200-EMA. To make it safer, SL can be placed further below 200-EMA. This risk management technique has consistently proven its effectiveness in various market conditions.

Chart Mapping

Profit Statement

Just FYI, I’ve blocked out entries entered by my algo.

Hindsight Bias

Although I could have potentially extended my position to capture a larger profit, I opted to secure my gains early. This disciplined approach is crucial in trading, especially when market conditions are volatile. The price eventually moved beyond 3 RR.

These days, I tend to take fewer manual trades as I’m letting my algo do the heavy lifting as it should. My partner and I are making steady progress.

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[Algo] Sep 2024 Results

Our algorithm is continually improving as we feed it more data. It’s becoming more reliable.

While it’s usable in its current form already, we enhanced it further and devised more entries. Our algo worked the way we wanted now, it’s becoming more disciplined, and it survived some brutal sideway market conditions.

August to late September 2024 (MT4 account, Raw spread)

Indicators:

  • Modified version of moving averages
  • Certain filters to detect the overall trends to filter out sideways markets

The setup:

  • Patterns with high success rates were kept, and lower-performing ones discarded
  • Runs on a server close to our brokers, using an MT4 setup
  • Strict stop-loss, no dollar-cost averaging
  • Trades across Asia, London, and New York sessions.
  • Instead of aiming for higher RR of 2 – 3x, the same result can be achieved by having 3 successful trades of 1 RR.

We primarily developed this algorithm for our own use, we’re considering sharing it with a limited number of users. We’re excited to further refine this algorithm in the coming weeks.

Lots of brain power and computing resources required ahead!

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Classic “Support and Resistance” Entries

Support Line / Demand Zone = price reaches these key level, it tends to bounce back UP

Resistance Line / Supply Zone = price reaches these key level, it tends to bounce back DOWN

What makes a valid support line / resistance line?

  1. The key mistake is most traders look at 5M – 15M timeframe (TF). Those lines tend to be noisy and untested. The minimum you shoud look at it 1H timeframe.
  2. Find a level with most rejection or contact points. When you have more than 3 contact points, the more valid it is.

3. To initiate a position, you need to ensure your SL is placed appropriately. You do not want a scenario where place comes, touches your SL and bounce back up fiercely. In the second image, there is a potential of 3 – 4 RR. I tend not to stretch my RR too much.

Extras:

  1. There is no right or wrong on how you can draw resistance / support lines. Personally, I focus on the true bodies of the candles, this is where the battle is happening.
  2. You would also like to see whether price rejections quickly or continues to stay around the region. If it’s the latter, the rejection is not fierce enough and it increased the odds of your trade idea not working out.

The key is to be patient and do not overtrade or take subpar trade ideas.

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[Algo] May 2024 Results

Almost one month of results is in… here are snippets of our baby funded account for demonstration:

For the period between April to May 2024, BluFX grew the account from $1,468.88 to $5,549.83 — representing a gain of $2,877.68.

Non-exhaustive list of enhancements to our algorithms (total >20)

  • Enhanced our algorithm’s pattern recognition capabilities, allowing it to detect and act upon candlestick patterns with greater accuracy and timeliness.
  • Multiple adjustments to our adaptive sell loss function. These changes are designed to safeguard profits and minimize losses.
  • Improved our order flow to reduce slippage
  • Fine-tuned our algorithm to avoid poor entry points during directionless market conditions. This adjustment minimizes the likelihood of unprofitable trades.
  • Developed a comprehensive performance tracking dashboard to provide transparency and insights into algorithm performance.
  • …. and others.

The work never stops!