4hr mommentum tunnel

8/13/2019 4Hr Mommentum Tunnel

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FORWARD

Over the last couple of weeks I have received many e-mails, and questions/comments onForexnews.com chat/forum, about the hour tunnel method we use. I want to thank allwho have been kind enou!h to contribute their ideas re!ardin! the tunnel method. "our

questions and comments have helped considerably in creatin! the new # hour tunnelmethod. I received an e-mail a few days a!o from someone who commented, $I don%t understand.If I had a system that made me tons of money I wouldn%t even consider tinkerin! with it.&re you nuts' (hy are you even botherin! with a # hour timeframe') I answered him by askin! if he knew what the cockroach said to a !roup of dinosaurs. *esaid, $&dapt or die.) +nable to adapt well you know what happened to the dinosaurs.any times throu!hout the years as we have tried to adapt, the chan!es have been mostlyin the timeframe, or the addition of a filter. he lon!er I live away from the tradin! floor,

the trend has been towards lon!er timeframes. ach time, knew ideas and new methodsare implemented to help us achieve !reater profitability in our tradin!. his is nodifferent. he development of the new # *our omentum unnel is a si!nificant departure for the0e!as team. (e are chan!in! our definition of what a $tunnel) is, and then focusin! onmedium-term market momentum to !uide us in tradin! the $ri!ht) 1profitable2 side of themarket. he lower fib numbers of 33 and 45 are eliminated from consideration in takin!

profits. (ith lon!er timeframes above hour, you 6ust !ive up way to many profitableunits, representin! hundreds of pips, when the trade moves.

(e ultimately decided to make this file short and sweet. herefore, it does not containany charts. (e could have easily put in about 788 charts coverin! many years, but wewill leave it up to you to !o back and !et chart data from your data provider. (e have

provided a rou!h profit analysis since /8 /988#, to !ive you an idea of profitability ofeach of the six ma6or dollar pairs. (e will talk more about this later, but let me 6ust saynow that, !iven the assumptions we used in calculatin! profits/losses on trades, this isabout as bad as you can do.

I. I. INTRODUCTION

I would like to start by sayin! that there is nothin! wron! with our hour tunnel method.(ith the proper risk model it produces excellent profits in forex. :ut, we believe it%s timeto move on in a sli!htly different, more profitable direction. One that uses tunnelseffectively, but without the chop at the tunnel. *avin! said that, we are attemptin! tothink $outside the box) and look at our technical indicators in a sli!htly different way. &bout a week after I first introduced the hour tunnel method on forexnews.comchat/forum, 0e!as ;r. and I went down to < casino, on the =as 0e!as strip, to play>7/>? exas *old%em poker. It was on a @aturday afternoon, a typical weekend here in


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I am, of course, referrin! to chop around the ##ema/ ?5ema tunnel.


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Aow, look at the difference between the two. &s a market rises over time on the weeklychart, the 3 will rise faster relative to the 9 . &s the market !oes down, the 3 will losefaster relative to the 9 . he difference, in pips between the two, measures relativemomentum of the market in real time. ach week, as lon! as the number of pips keepsrisin! 1@ & 3 C & 9 2 from the previous week, the market continues in a bull run.

Once a bull run loses pips 1@ & 3 C & 9 2 from the previous week, it si!nals amedium-term top in the market. Donversely, once a bear run loses pips 1 & 9 C @ &32 from the previous week, it si!nals a medium-term bottom in the market. his now !ives us 1with only one week la!2 a positive probabilistic model in determinin!which side 1lon! or short2 to initiate trades in a defined time period. (e are identifyin!market momentum. @tep 9.Dreate a # hour chart 1bar or candle2 of the same currency pair. On this chart overlay a 33@ & 1J* K =H/92, and an 4 @ & 1Dlose only2.

Aow, look at the difference between the two on your # hour chart. @ince we are usin!different types of &%s and a shorter time period with a relatively lon!er period, the twowill cross many times. (e call these O A + tunnels. @o, we now take a look at the weekly chart a!ain and determine that we are in a bull run.(e then take a look at the # hour chart. (e now know that we are lookin! to lon! themarket, and that short positions will not be taken because they have been predeterminedto be low probability events for lar!e profits. (e now are lookin! for the 4 @ & to move lower throu!h the 33 @ &. (hen it does,we carefully watch and notice when the @=OM of the 4 @ & chan!es from ne!ative to

positive. It will do this when the 4 @ & stops losin! value in one # hour bar and !ains inthe next. his is the # hour bar to initiate new lon! positions with 7 units 1rememberGunits are whatever tradin! si e you can handle. (hen you trade bi!!er, 6ust ad6ust thesi e of the unit, not the number of units2. @tops can be placed usin! technicals1support/res/trendline2 of the most recent # hour bars. &ssumin! the market starts to !o up, we stay lon! until H at some point in time the 4@ & chan!es slope from positive to ne!ative, at which point we exit the entire 7 unittrade, 9H the market moves up, there is no slope chan!e, and !oes to the ## or 977 fibnumber from the 33 @ & line, where unit is taken off, 7H the market moves up to thenext fib number 1977 or 7BB2, a!ain with no slope chan!e, and the 9 nd unit is booked. =et%s now assume that the weekly chart determines we are in a bear run. (e will now belookin! to initiate new short positions only. (e are lookin! for the 4 @ & to move hi!her throu!h the 33 @ &. (hen it does, wecarefully watch and notice when the @=OM of the 4 @ & chan!es from positive tone!ative. It will do this when the 4 @ & stops !ainin! value in one # hour bar and loses


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in the next. his is the # hour bar to initiate new short positions with 7 units. &!ain, stop placement depends on technicals of the most recent # hour bars. &ssumin! the market starts to !o down, we stay short until H at some point in time the 4@ & chan!es slope from ne!ative to positive, at which point we exit the entire 7 unit

trade, 9H the market moves down, there is no slope chan!e, and !oes to the ## or 977 fibnumber from the 33 @ & line, where unit is taken off, 7H the market moves down tothe next fib number 1977 or 7BB2, a!ain with no slope chan!e, and the 9 nd unit is booked. here will be times when the slopes will chan!e and the 4 @ & will not be above/belowthe 33 @ & line. In these circumstances we use only N units to initiate a trade with thesame rules above. (e are implementin! this new # hour method with only 9 filters. he first is on theweekly chart. If the difference between the 9 & and the 3 & is 388 pips, thenthe pip difference from the prior week must chan!e by more than 8 pips, or 6ust !o

lower over 9 consecutive weeks, to si!nal a trend chan!e. he second filter is on the # hour chart. If the 4 @ & and the 33 @ & and the market

price are all within 38 pips or so of each other, we !o to technicals 1breakout2 to continuethe trade. (e do this because, at this 6uncture, you are more likely to !et the 4 @ &

6umpin! up and down 9 or 7 pips every few bars, thus !eneratin! a false trade si!nal. Itdoesn%t happen very often, but when it does, usin! this filter can save us money, and themarket isn%t really movin! anywhere anyway. herefore, a breakout of the techs makessense to initiate a trade, if it%s in the direction you are supposed to be tradin!. If you now !o ahead and make the charts and take a cursory look at the weekly, youshould be ama ed. he weekly criteria hits every sin!le turn in the market within acouple of weeks. he fact of the matter is that the weekly difference of the &%sTRENDS . It doesn%t chan!e !ainin!/losin! unless the trend chan!es. he # hour chart is equally powerful. & more careful look at the # hour will show lar!e #hour bar spikes that often chan!e the slope of the 4 @ &. he reason we chose the 4@ & with close only, is so that we can better estimate in the next # hour bar period the

price needed to chan!e the slope before the period is over. any times this will !ive us ahu!e profit advanta!e over waitin! until the period is over.

IV. IV. ANALYSIS

he followin! spreadsheet !ives a rou!h idea of what kind of profitability you arelookin! at usin! the # *our omentum unnel ethod. It is very important to reali ewhat assumptions we used in calculatin! these numbers. he criteria was as followsG

H H &ny trade that looked like less than 88 pips profit we totally i!nored,9H 9H (hen takin! profits we i!nored fib numbers from the market price and

instead used the 4 @ & line if it hit a fib number. (e did this because it wasmuch easier to calculate and took far less time than analy in! each bar on


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every chart with every pair. Aote thou!h, that this REDUCES profitabilitytremendously over time. he market is much more likely to hit fib numbersthan the 4 @ &.

7H 7H &ny trade that looked like a scratch or a loss, we treated as a loss, and#H #H &fter we summed up all the periods we DOUBLED the losses,

3H 3H (e used 7 units on most trades, except N units on trades where the 4@ & chan!ed slope and did not cross the 33 @ &. his tradin! si!nal issomewhat less powerful than the ori!inal, so we reduced si e accordin!ly.

(hen lookin! at the data, please refer to the notes on each column below the table.

[WEEKLY] [WEEKLY] [WEEKLY]

DATE PIPS SPREADTOP /

BOTTOMTRADING

DATES TEUR/USD

/ ?/988# 3#5 OM /8 /8# - /97/8# :+" OA 3/ #/988# 54 :O O /97/8# - 3/9 /8# @ == OA B/78/988# 43 OM 3/9 /8# - 4/8?/8# :+" O 8/ 3/988# B :O O 4/8?/8# - 8/99/8# @ == OA 9/7 /988# 375 OM 8/99/8# - /8B/83 :+" OA 7/ /9883 47 :O O /8B/83 - 7/84/83 @ == OA 7/93/9883 4# OM 7/84/83 - #/8 /83 :+" O #/8 /83 - B/8 /83 @ =

USD/CHF /5/988# 378 :O O /8 /8# - / ?/8# @ == OA

3/ #/988# 77 OM / ?/8# - 3/9 /8# :+" OA B/97/988# 98? :O O 3/9 /8# - B/78/8# @ == OA 8/99/988# B9 OM B/78/8# - 8/95/8# :+" O

9/ 8/988# 3#7 :O O8/95/8# -9/ B/8# @ =

7/ 4/9883 97 OM 9/ B/8# - 7/ 4/83 :+" OA #/ /9883 83 :O O 7/ 4/83 - #/84/83 @ == OA #/95/9883 48 OM #/84/83 - 3/8?/83 :+" O 3/ 7/9883 B3 :O O 3/8?/83 - 3/98/83 @ == OA 3/98/83 - B/8 /83 :+"


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GBP/USD

7/3/988# B33 OM /8 /8# - 7/ 9/8# :+" OA 3/9 /988# 7B :O O 7/ 9/8# - 3/94/8# @ == OA B/9/988# 98B OM 3/94/8# - B/5/8# :+" B/ ?/988# 5B :O O B/85/8# - B/97/8# @ == OA B/97/988# 99# OM B/97/8# - B/78/8# :+" 5/9#/988# B4 :O O B/78/8# - 8/8 /8# @ == OA 9/7 /988# ?93 OM 8/8 /8# - /8B/83 :+" OA 9/ 4/9883 #3 :O O /8B/83 - 9/93/83 @ == OA 7/93/9883 933 OM 9/93/83 - #/8 /83 :+" O #/8 /83 - B/8 /83 @ =

USD/JPY /5/988# 959 :O O /8 /8# - / ?/8# @ == OA

7/9?/988# ## OM / ?/8# - #/89/8# :+" OA #/97/988# 3# :O O #/89/8# - #/78/8# @ == OA 3/9 /988# 48 OM #/78/8# - 3/94/8# :+" O B/97/988# ? :O O 3/94/8# - B/78/8# @ == OA 4/9B/988# BB OM B/78/8# - 5/87/8# :+" 9/ B/988# 793 :O O 5/87/8# - 9/9#/8# @ == OA

/9 /9883 9 ? OM 9/9#/8# - /94/83 :+" OA /94/9883 9 8 :O O /94/83 - 9/8#/83 @ == OA 3/ 7/9883 #? OM 9/8#/83 - 3/98/83 :+" O ?/7/9883 34 :O O 3/98/83 - ?/ 8/83 @ == OA ?/ 8/83 - B/8 /83 :+" O

AUD/USD /78/988# 74 OM /8 /8# - 9/8B/8# :+" OA

?/ /988# 9B8 :O O 9/8B/8# - ?/ 4/8# @ == OA 5/ B/988# B OM ?/ 4/8# - 5/9#/8# :+" O 8/ /988# 47 :O O 5/9#/8# - 8/84/8# @ == OA

9/7/988# 793 OM8/84/8# -9/ 8/8# :+" O

9/ /9883 9 :O O 9/ 8/8# - 9/ 4/83 @ == OA


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7/ 4/9883 58 OM 9/ 4/83 - 7/93/83 :+" OA ?/ 8/9883 ?B :O O 7/93/83 - ?/ B/83 @ == OA ?/ B/83 - B/8 /83

USD/CAD /97/988# 944 :O O /8 /8# - /78/8# @ == OA

3/9 /988# 944 OM /78/8# - 3/94/8# :+" O 4/?/988# 48 :O O 3/94/8# - 4/ 7/8# @ == OA 4/9B/988# B9 OM 4/ 7/8# - 5/87/8# :+" O 9/7/988# ?87 :O O 5/87/8# - 9/ 8/8# @ == OA 7/ 4/9883 ?5 OM 9/ 8/8# - 7/93/83 :+" OA

#/ 3/9883 94 :O O 7/93/83 - #/99/83 @ == OA ?/7/9883 #7 OM #/99/83 - ?/ 8/83 :+" OA ?/ 8/83 - B/8 /83 @ ==

Dolumn P currency pair Dolumn 9 P he date on the weekly chart where 3 @ & C 9 & P lar!est value for

bull run, or date on weekly chart where 9 & C 3 @ & P lar!est value for bear run.his date is a Friday, end of week.Dolumn 7 P he actual difference in pips 1either J3 @ & C 9 &H or J9 & C 3@ &H2 between the weekly &%s at the hi!h.Dolumn # P (hether the si!nal was for a top or bottom in market.Dolumn 3 P From the start of 988#, the time periods the weekly si!nals !ive to the #*our omentum unnel ethod. &s you can see, there is a week la! period fromthe weekly hi!h/low to a new tradin! period. his is when the method is most vulnerableto losses.Dolumn ? P he side of the market to initiate trades only.Dolumn B P he profit or loss in pips. he Q= fi!ure after each pair is the doublin! oflosses from the entire period. (e did this 6ust in case we made any stupid errors inanalysis of the profit potential. y partner, as well as 0e!as ;r., think these numbers are way less than what anybodycould achieve tradin! the method. :oth estimate that if we had been usin! this newmethod since /8# we could have approached 98 C 93,888 pips in


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V. V. RISK MODELS

I could write a book on risk models, and it could easily be 388 pa!es and sell for > 88.here are as many models, alon! with their variations, as there are wannabe traders in the

world. Instead of !oin! throu!h conservative and a!!ressive scenarios, I decided 6ust towrite about the model we will initially employ. I am not su!!estin! you use itG I amsimply presentin! it for your information. "ou must come up with your own risk model. +nit valueG unit P 388,888 base currency vs. >+@rade @i eG 7 units per currency pair, except N units when # hour chart filter kicks in.FiltersG Only the 9 mentioned earlier in the file@topsG (ill be based on technicals off of # hour charts.Mairs tradedG Initially only


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O A + tunnel. If the market continues to !o a!ainst the trend, within a very short period of time you will only have 9, possibly 7 losin! trades before the weekly trendwould chan!e. his is a very acceptable tradeoff for the new information bein! !iven toyou by the marketG i.e. a weekly trend chan!e. &t least for us, this means closin! oldoption positions 1at 6ust the ri!ht time2, and creatin! new ones 1at 6ust the ri!ht time2.

emember the old tradin! proverbG price P information. hat%s exactly what%s happenin!when you !et a trend chan!e from the weekly charts. Of course, remember that there is ala! of week from knowin! when the hi!h or low readin! comes, because you won%tknow until Friday%s close if last week%s readin! was the hi!h/low or not. =et me 6ust add, that O A + tunnels should work particularly well with otherfinancial markets. @tock indices, oil, and interest rates should trade very profitably withthe new method. @ome of the currency crosses 1eur/6py, eur/!bp, eur/chf, eur/cad2, intheory, should also work well. 0e!as ;r. is !oin! to look at these particular crosses in afew weeks to check them out, so I%ll withhold my opinions on them until he is finished.

Finally, let me reiterate what I said in the first file 1the hour method2. (e seek nothin!from anyone in re!ards this method. "ou are free to use as much or as little of this as

pleases you. If you want to call it your own that%s OL with us. he entire 0e!as teamonly wants to see you make money tradin! forex, and anythin! we can do towards that!oal makes our effort worthwhile. Mlease feel free to contact us anytime with yourquestions and/or comments via e-mail. (e will answer as quickly as life allows. Our e-mail address for those who may not have it is as followsG

trafficcapRhotmail.com

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