As with all other trading systems, the goal for my Moo River Trading System is to identify High Probability Low Risk High profit Margin (HPLRHPM) moo river bank trades where we would try to ride it out to cross the river, either half way or full length.
Moo Rivers
I tend to look at the correlated directions across the chart, rsi graph and macd graph (not histogram). The correlation among these three indicators help to reduce risk and increase probability of a successful trade. What we are looking for is whether the trend is up (upstream) or down (downstream) and how deep is a moo river so that we know our profit margin.
Once we have identified the rivers by drawing on the price chart, RSI and MACD graph, we may follow the following moo river trading principles:
1. upstream
Correlated upstream moo rivers, lowerbank trades are the HPLRHPM trades;
2. down stream
Correlated downstream moo rivers, upperbank trades are the HPLRHPM trade;
if you look at the daily chart, 17th June, the trade that you wanted a waterfall and rode to the full length was really one such HPLRHPM trade, the moo rivers were correlated and it was an upperbank trade too. There, you got it spot on.
We are always on the lookout for this kind of HPLRHPM trades. These are tier 1 trades.
And there are tier 2 scalping trading, in terms of the crossing of the rivers. This means short scalping in a CD moo river and long scalping in a CU moo river. They are actually quite high probability and low risk trades, though their profit targets are often uncertain or limited.
What about third tier trades, with slightly lower probability and higher risks, such as lowerbank trade in a correlated downstream moo river and upperbank trade in a CU (correlated upstream) moo river. The problem with lowerbank in a CD moo river or upperbank in a CU moo river is that it is likely to burst sometimes as the moment could go into overdrive. Still, bank trades are always higher probability and lower risk ones. These are obviously tier 3 trades.
I think as moo river traders, we should avoid any other trades altogether, such as long scalping in a CD moo river and short scalping in a CU moo river. And if we can, we should avoild tier 3 trades as much as possible as well, as their risks are higher than the other two tiers.
On a given day, our main tasks are the following:
1. upstream or downstream?
2. CU or CD?
3. CB(correlated banks);
4. tier 1, 2, or 3?
In the process of all that, we thrown in CWM (correlated WMs) as well. Obviously, my main ''discovery'' is the C word.
In terms of non-correlated moo rivers, there is one group which might be worth considering, this is when one of the moo rivers is coming to an end, this potentially could be a HPLRHPM trade as well, if bank, then tier 1 trade.
In terms of trading triggers, we are looking for correlated W's for lowerbank trades and correlated M's for upperbank trades.
Successful trading involves finding your own trading system, be disciplined and manage your capital.==========================
On the use of RSI:
In term of the use of the value of RSI, I now use this in this way
1. let's say the norm range is between 30 and 70
2. in a downstream moo river, you are more likely to see the range between sub-60 and sub-30; in an upstream moo river, you will be more likely to see a range between above-40 and above-70;
3. for reversals, from a downstream to an upstream, we watch out for the first breach of 70; for reversal from upstream to downstream, we watch out for the first breach of 30;
4. the values at 40 or 60 are important, because in a downstream, 60 provides a strong resistance, in an upstream, 40 provides a strong support;
5. the points at value 40 and 60 are important only in relation to the above as well as in terms of the moo rivers I draw on the rsi itself (haha, something you don't like that much); hence, it all depends whether they happen in the upstream there or downstream there, on the way up or down.
