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the interpretation and application of price action concepts

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We all share a similar path in Trading. Even though you may not be a consistently profitable trader now, you can chose to enjoy the path. This alone may make the difference in your success.

 

SLINGSHOT  Trade Setup 

 

from  Buffy and  Jimmer   

examples from  Jimmer  1  2  3  7  8    from 2x on daCharts archives more here    Sling chart examples on dacharts

more Slingshot chart examples  1      

Slingshot Trade by Buffy

The Slingshot is a high percentage trend trade. It is work to catch the bottoms and tops. It is fun to trade the middle of a trend.

Just like
MOF, It is just a fancy name for a pure price action trade.

The differences in the setup are:
The LT Stochastic in the 2X Study Window are flat usually with no or very little space between %K and %D.
The Bline will be flat usually above 80 or below 20 and the ribbons will create the sling often clearer than the 2X signal.

The purpose of a slingshot is to:
Catch a continuation trade off a retracements/flags/consolidation in an uptrend
Catch a continuation trade off a retracements/flags/consolidation in a downtrend.

Please refer to the chart (The color references are to the black background chart) A white background chart is also attached.


click here for printer friendly chart


1. In price window - (Circles 1 and 2):
Price is making a lower high after making a lower low - trend is still down.
Bars have tagged the upper Bollinger Band.
Bar colors are changing back and forth between red and green.
This is common when the long term Stochastic in the 2X Study Window and the Bline in the Bline Study Window are so flat either above 80 or below 20.

2. In the 2X Study Window note the following (A and D):
The long term stochastic - two red/green lines - are flat and very little or no space between %K and %D..
The short term stochastic - the red/yellow and green line - have pulled back along with price.
We are looking for a short continuation trade which is in the direction of the trend.
It is not necessary for the short term stochastic to pull back into the sell zone.

3. In the Bline Study Window-(B-E):
The Bline is the white line with the colored circles.
The other 4 lines are referred to as ribbons.
Their relationship to the Bline and their direction is what sets up trades.
The Bline is flat and below 20 .
The Ribbons have pulled back up to the sell zone here, although this is not necessary for slingshots.
Often the 5/3/3 (Cyan and Red lines) do tag the sell zone.
It is common to have a
ribbon divergence, which is when the 5/3/3 and 9/3/3 do not stay together, to occur with Bline slings..
We are looking for a short continuation trade which is in the direction of the trend.

4. MACD Study Window (C and F)
This is the 3rd signal -
Hidden Divergence-HD (May also be called Reverse or Continuation Divergence)
Price has made a lower high while the MACD histogram has made a higher or equal high.
Note the HD on C gave you plenty of warning this might be a 3 signal trade as the divergence was present on the completion of the fourth retracement bar.
You also want the MACD histogram falling if you are going short and rising if you are going long.
Now it is just a matter of patience until confirmed by price taking out the low of previous bar.
Note that F does not have HD. The first trade is referred to as a 3 signal trade and the second one as a 2 signal trade.

When these three signals are present, it is a very high percentage winning trade.
With 2X and Bline signals only, it is still a high percentage trade but you need to be more aware of what is going on in the higher and lower time frames.

One way to trade this would be to enter a sell stop below the low of the bar two bars ago . Generally this is called "Stalking the Retracement".
Ask yourself - What does price have to do to make these indicators confirm this trade for me and that is where you want your sell stop.

The most common places for the long term Stochastic in the 2x window to go flat is as follows:
1. Above 80 and below 20
2. Close to the midpoint of the Stochastic. This often results in a measured move also referred to as an equal length continuation trade.

While this is on a 550 constant tick chart, the setup is the same on any time frame. As with all indicators, the larger moves are on the higher time frames.

The following is an excerpt from Jimmer's Bollinger Band Discussion when teaching 2X complete and might help you if you have never used BB before.
The entire discussion can be found here.

Examples:

1. If price touches a rising lower BB (long) or a falling upper BB (short) in the traded time frame, that is a safe entry point.

2. If price touches a lateral (flat) BB and is also touching (or nearly touching) a lateral BB in a higher time frame, that is safe entry for trade in opposite direction.

3. If price touches lateral lower BB (for long) and lower BB on higher time frame is distinctly rising, that is a safe long entry (reverse for short).

4. If price touches lower BB and MACD and/or stochastic on higher time frame is showing long, that is safe long entry.

 

 

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