About Jennifer’s Trading Strategies and Terms
Combo Trading Strategy
This is a method for defining trends and ranges in price action. Two moving averages give context to price movements so that we can anticipate the repeatable patterns of trends and ranges.
The 2 moving averages used in the Combo Trading Strategy are the 50 and 100 simple moving averages. These moving averages give context to price action, allowing us to define the current market condition as either trend or range; as well as anticipate their respective market behaviors.
When price has been on one side of both of the Combo Lines for 30 bars or more, it is in a trend.
Up-Trend: When price has been above both lines for 30 bars or more, expectation is that the market is seeking higher highs in an up-trending pattern.
Down-Trend: When price has been below both lines for 30 bars or more, expectation is that the market is seeking lower lows in a down-trending pattern.
When price is in between the Combo Lines – that is, in between the 50 and 100 simple moving averages – it is in the Inside Range. When there is no decision for direction, price always returns to this neutral zone.
When price swings above and below the moving averages within about 30 bars of time, it is working the Outside Range pattern.
The MACD Hopper
MACD stands for moving average convergence divergence. This is a technical indicator that was created in the 1970s by Gerald Appel, originally designed for stock chart analysis.
The MACD is an unbound oscillator that displays 2 lines moving over a zero level plane. The faster Line is the MACD Line, and the slower line is the Signal line.
The MACD Line demonstrates momentum and direction by comparing current price with historical price. When current price is unchanged from historical price, there is no momentum and no direction. But, when the market takes off in one direction, there is a growing difference between current price and historical price, which is illustrated with the MACD Line climbing away from zero.
The Signal Line is keeping track of the MACD Line. When there has been no change in momentum or direction for a length of time, the Signal Line catches up to the MACD Line, demonstrating lack of decision for direction and lack of momentum.
The Hopper is a strategy for interpreting the MACD (Moving Average Convergence Divergence) indicator. The MACD is an indicator that compares present market activity with past market activity. The significance of the MACD movements is to identify change. Sometimes “change” means a new move is starting. Sometimes change means the current market movement is ending. Sometimes change refers to momentum, and sometimes it refers to direction. The Hopper Strategy gives relevance to these MACD signals.
“The Hopper” is a term used to mark the point in time when the MACD Line is “hopping” over zero. When the MACD Line crosses zero it changes polarity in reference to market direction; above zero signifies an up-market, and below zero signifies a down-market.
When the MACD Line crosses zero, it’s a “Hopper,” and it might be a good time to enter or exit a trade.
The MACD is made up of 3 lines: the MACD Line, the signal line, and the zero level line. When the MACD line crosses the signal line going in a direction away from zero, it’s a “Trigger Finger” and it signals continuation of direction.
A Trigger Finger signal that happens above zero signals continuation of the up-market movement.
A Trigger Finger signal that happens below zero signals continuation of the down-market movement.
A “Trigger Finger” is a signal for timing, producing an expectation about direction and momentum continuing.
Reverse Trigger Finger
The MACD is made up of 3 lines: the MACD Line, the signal line, and the zero level line. When the MACD line crosses the signal line going in a direction towards zero, it’s a “Reverse Trigger Finger.” This is the counter-trend signal.
A Reverse Trigger Finger signal that happens above zero signals a reversal or pause of the current up-market movement.
A Reverse Trigger Finger signal that happens below zero signals a reversal or pause of the current down-market movement.
A “Reverse Trigger Finger” is a counter-trend signal producing an expectation that the current market direction and momentum are about to change.
The Combo-Hopper is a setup that puts together information from 2 strategies.
The Combo Strategy identifies trend and range activity, and the Hopper Strategy identifies timing and change in momentum and direction.
Combo-Hopper is a point in time when price is making a move away from both the moving averages at the same time that MACD is making a move away from zero.
MACD Close means closing your trade when the MACD Line crosses the zero level.
For example, in a trending market, the MACD Line stays above zero as long as momentum in the trend continues. When the MACD Line crosses the zero level, there is indication for an end in momentum or even a reversal in market direction.
Conversely, when the market is ranging, MACD returning to zero identifies the middle of the range. In trading any kind of pull-back, the MACD Close produces a good profit target signal.
Monday Trade Hopper
The Monday Trade is a Hopper that happens at the beginning of the week (Monday or Tuesday) on a 4Hour chart. As long as MACD holds this new position above or below zero, expectation is that the market will continue moving in that direction for at least 100 pips before the end of the week.
Seeing the MACD Line roll back over zero is a signal to close out of the trade.
Trading and Analysis
Short-term trading and analysis is done on the 1Minute, 5Minute, and 15Minute time frame charts. The strategy for planning and trading using the Combo and Hopper techniques is exactly the same on the short-time frames, as the longer time frame charts.
Trading from short-time frame charts involves spaces of 6 to 30 pips, with an expectation that the market will move during the active trading session. We limit our trade planning and analysis of short-time frame charts to the first few hours of the active trading session. Outside of “business hours” the 5 Minute time frame charts continue producing price bars, but their significance is random at best, and we ignore them.
Highly repeatable trading patterns are produced across the major currencies between 8:00 a.m. London time, and 12:00 p.m. New York time. Do business during “business hours.”
Medium-term trading and analysis is done on the 4Hour time frame charts. The medium-term trades can be identified 1 to 7 days before the trade opens, and they require about that same amount of time to complete. Tradable spaces on the 4Hour charts are typically 30 to 150 pips. We expect to see the patterns of trends and ranges move within 30 to 40 bars of time, which gives us clues about timing for trade planning and management of open positions.
Long-term trading and analysis refers to trades that are planned from the 1Day and higher time frame charts. Trading patterns can take weeks or months to complete, and sometimes the spaces involve hundreds of pips. Trades placed from the long-term charts are expected to be held for long periods of time. This is not our preferred strategy for trading Forex because currency market volatility can change quickly over that period of time. However, the long-term charts offer analysis benefit with big picture views of the patterns, and can help us identify long-term targets, support and resistance levels, as well as expectation about momentum.
Active Trading Sessions
There are 3 active trading sessions when the currency market is most active.
The European session – 8:00 AM London time
The U.S. Session – 8:00 AM New York time
The Asian Session – 8:00 AM Sydney/Tokyo
“The Majors” are the currencies that are the most commonly traded in the world. The major currencies we trade are EUR, GBP, AUD, NZD, JPY, and CAD.
Trading can be automated with programs that will automatically open and close trades based on mathematically repeatable trade criteria. Automated programs have no intuition, but they can “sense” changes in market conditions based on price and technical indicators.
Technical indicators are programs that run on the charting platform. Indicators run mathematical formulas based on historical and current price, and relativity to other technical indicators. Indicators give context to current price, comparing things like change, momentum, relative loss or gain, and length of time markets hold directional bias.
The term “Fundamentals” refers to information such as news, events and economic calendar data that is systemically released. Fundamental analysis is a strategy for anticipating market reaction to news, world economic events, and calendar events. The most significant market moving news announcements in Forex come from the central banks.