17 the wow trade and how to trade a trendline break at higher timeframes zones

5/28/2016 The WoW trade and how to trade a Trendline break at higher timeframes zones http://www.setandforget.com/forum/maincategory/supplyanddemandclassroom/theclassroom/17042t

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5/28/2016 The WoW trade and how to trade a Trendline break at higher timeframes zones

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The WoW trade and how to trade a Trendline break at higher

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alfonso

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Join Date: Sep 2013

Posts: 8882 Location: Spain

#1

The WoW trade and how to trade a Trendline break

at higher timeframes zones

16th May 2014, 01:41 PM

The WoW trade is one of the most important additions to Set and Forget's set of rules. You must understand the Realignment lesson

before adding it to your trading plan since nesting and realignment concepts go hand in hand.

WoW is an acronym for the way this type of pattern looks. It's essentially a W or inverted W (a M shape) formed once a Higher Timeframe has been hit, price is overextended and/or a trendline has

been solidly broken. I could have named it WoM trade but it didn't

sound as good as WoW The WoW trade is the brand new imbalance created at the break of the trendline. It's one of the two methods we use to locate new

imbalances on a price chart. The new imbalance can be a swing (valley/peak) or a CP, it can happen before the TL is broken or at the TL confluence.

The WoW trade is a high probability confirmation setup that if done correctly with the support of the bigger picture trend, can yield great results. Be careful with this pattern though because when you start looking for them, you will start seeing WoW trades "everywhere", pay attention to where the pattern occurs and follow the rules laid out below, otherwise you will have unnecessary losses.

The WoW trade bar is perhaps the most powerful trade setup that has

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been introduced to the strategy together with the PCP breakout setup

If I could pick only one supply and demand pattern to trade with for the rest of my life, I would probably pick the WoW trade. However, despite its simple structure, the WoW trade can be very tricky to trade if you don’t know how to distinguish a good WoW from a bad one.

I see many traders making the same mistakes over and over with WoW trades; many trade every WoW they see, they give no consideration to the market context the WoW formed within, they constantly try trading countertrend WoW trades and many other mistakes.

The fact of the matter, is that there are many subtleties to trading WoW trades that you must understand if you ever hope to trade them

successfully. So, without further ado, let’s start with the WoW trades.

Any price action setup is going to have a better chance of working out with the power and momentum of a market trend behind it. There are numerous reasons why markets trend, but the exact reasons don’t really matter. All we care about is that a market is or isn't trending and whether or not we can jump aboard that trend to take advantage of its strength. To ignore the power and weight behind a trend and think that you will begin making money trading WoW trades against the trend before you've learned to trade with the trend, is simply ignorant.

WHAT ESSENTIALLY HAPPENS WHEN A WOW TRADE OCCURS?

Watch this short video explaining WoW basics:

1. Price is testing a bigger timeframe zone or flip zone

2. Price is overextended on the bigger timeframes. Price starts to lose steam and act like a spring. The more you pull from both ends, the bigger the snap back into place will be. Price tends to

be in equilibrium (balance), reversals and take profits occur at HTF imbalances (the footprint of dinosaurs professional traders and institutions), it is at this moment where waiting for a WoW trade is high odds

3. More than 3 CP patterns will most likely have been formed

This goes hand in hand with price overextension. For instance, the lower the CP supply pattern is in the curve (its altitude), the lower its odds to hold price, the higher the odds to be removed once a HTF demand zone has taken control

4. Big rallies and drops are not sustainable. At some moment, the market will revert to the mean and traders/institutions will

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take profit. Where will this normally happen? At bigger timeframe supply and demand zones or flip zones

5. Price reacts to the bigger timeframe and creates a brand new imbalance

6. At the origin of these trendline breaks we'll probably see classic patterns like double and triple tops and bottoms, 123, etc. We won't be trading these patterns, we will only be trading supply and demand imbalances. By the time a double top is completed

or the 123 neck line is tested, we should have already been triggered short way higher after the TL break

7. Price needs to test 1 timeframe HIGHER than the one where the trendline break has occurred. If we see a descending D1

TL solidly broken but no WK demand area or a clear HTF flip zone is being tested, the WoW trade won't be a valid setup

HIGH ODDS WoW TRADE SCENARIOS Find below a list of scenarios where we will be looking for potential high odds WoW trades.

Scenarios ordered from higher to lower probability. The first 4 scenarios are the highest odds ones

1. Momentum and location scenarios. WoW trades play out really well in momentum and location scenarios, that is, with the bigger picture in a trend paired with the Sequence and

Realignment scenarios. For instance, MN and WK up, D1 loses momentum and retests a fresh WK DZ > Descending D1 TL is broken which provides a momentum and location D1 WoW long

Watch this short video to learn more about Momentum and Location WoW trades

2. A HTF zone is being tested,bigger picture is trending. WoW trades need support from a bigger timeframe. For instance a D1 WoW long will be valid if at least a WK demand zone has gained control. It will be even better if the WK and/or Monthly charts are trending (momentum and location)

3. HTF Trendline confluence. There are no HTF zones to lean on but price starts to react at a MN or WK TL. WoW trades can occur at TL confluences. Watch this short video to learn more about this WoW setup

4. Flip zone at HTF zones (D1, WK and MN). WoW trades are very common at HTF flip zones. Flip zones tend to be ample, so waiting for a WoW trade to happen within the flip area is a high probability scenario, even better if we are still clearly trending in the bigger picture

5. At HTF 20 EMA. High odds if there is bigger picture's trend. HTF

20 EMAs will only be used if the TF we're analysing has got a clear trend. 20 EMAs work with trending markets, else they are useless. Watch this video to learn more about this WOW setup

6. PCP WoW setup. This is a new setup based on PCPs. It's the potential CP created at the break or after the break of a TL occurring with a clear bigger picture trend. Watch the video on PCP WoW here

7. HTF zone countertrend. If the HTF is at a very extreme, it is high odds. Else it will be too aggressive. For instance, MN and

WK are up and we hit a MN SZ. The MN SZ is in the middle of the charts not at an extreme and imbalance is not that great

That's not the best scenario to try shorts Most scenarios are covered in more detailed lower in sublessons.

LOWER ODDS WoW TRADE SCENARIOS

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1. HTF has been overshot but no candle close. If a HTF imbalance is taken out, we should wait for the opposing area to

be taken out, a clear new imbalance with at least 2 ERC

candles, ideally you want to wait for a new D1 trend. I need to

perform further tests on this scenario since there are many times that it yields great results

2. Lower TF WoW against bigger TF zone in control. For instance, taking D1 WoW longs against a WK or HTF zone in control is not a good idea. The bigger TF normally wins over the lower TF. As a rule of thumb, a big TF will win over a lower TF (not always but we're talking about odds here, we must play high odds scenarios not the exceptions)

1. D1 WoW long against valid WK SZ > WK normally wins over D1

2. D1 WoW long against opposing WK or MN TL and/or

20 EMA confluence (bigger picture trend down)

3. D1 WoW long against valid WK SZ and WK downtrend. Maybe price is even bouncing from MN DZ but we must respect the WK downtrend and WK SZ

4. The same applies if you swap the TFs by 1 level and /or change long for shorts, that is, change D1 for H4 and WK for D1

3. At all time highs/lows. For better odds we should wait for an opposing zone to be taken out, not just the TL break

4. If entry TF has got a new opposing trend against the original WoW and opposing zone is in control. If the WoW entry does not trigger soon we run the risk of having a new opposing HTF trend against us and even a HTF opposing zone in control, when that happens, we need to wait for further confirmation (new WoW). If we are holding an opposing trade against that WoW, hold it since the WoW is lower odds

5. An opposing HTF takes control and WoW is nested within tested opposing zone. For instance, price dropped from WK

SZ, now WK SZ is considered tested. As it drops a D1 WoW short is created but price keeps on dropping and tests a fresh

WK DZ with a WK uptrend intact. When price rallies into the D1 WoW short, we'll have a D1 WoW short with opposing fresh WK

DZ in control and a nested tested WK SZ. The whole confirmation process is needed again for a new short The following attachment is a Coggle mind map created by Nathanael,

it summarizes really well the WoW trades odds.

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THE BIGGER THE TIMEFRAME IN CONTROL, THE BIGGER THE TIMEFRAME WE SHOULD USE FOR A WOW SETUP

WoW setups are high odds if they are taken with the bigger picture trend and the bigger timeframes of your sequence are aligned. If you choose to trade WoW setups without that condition, you are going to see many fakeouts before price takes off of the level you are

expecting.

The bigger the time frame in control we are using for our bigger picture, the bigger the time frame we should use for WoW set up. With MN as your bigger picture, D1 WoW will have a greater probability than H4.

As a rule of thumb:

For instance:

MN DZ is in control, taking a H4 or lower timeframe WoW long is not a good idea, opposing D1 and WK supply zones hold quite well for a first retest so taking lower TF WoW longs with quality lower TF's SZ in control is not a good idea

Price doesn't usually take off from MN DZ until there is a WK WoW long, in the meantime, shorts can still happen on D1 and

WK SZs, even with the MN chart in an uptrend

If H4 WoW longs are used as confirmation, we have WK out of alignment, and D1 downtrend, odds are H4 WoW longs won't have much success, you will experience lots of fakeouts and stop losses hit

Guidelines on what would be the minimum TF to wait for a high odds setup

MN DZ in control and in an UP trend> D1 WoW long minimum. If there is a valid WK SZ above MN SZ, it usually holds well on a first retest, price usually takes off the MN DZ until there is a WK WoW long. We''ll see nested D1 and H4 WoW longs when that happens. Check out this WK WoW long at MN

DZ on GBP/NZD to see a live example of this scenario

WK DZ in control and bigger picture in an UP trend> D1 WoW long minimum. H4 WoW longs can work but make sure there is no D1 SZ, flip zone, HTF TL or HTF 20 EMA in control D1 DZ in control and bigger picture in an UP trend> H4 WoW long minimum. Rationale from previous two scenarios apply here as well

COUNTERTREND WoW SETUPS WoW setups can occur under many scenarios, they are best when they

go with the bigger picture's trend or bouncing off of a strong HTF SD zone, as detailed in the high odds scenarios above.

WoW setups will also happen on countertrend like any other pattern,

The bigger the TF in control, the bigger the WoW TF you should use for high odds. Imagine MN DZ in control

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however we need to know when a valid WoW countertrend can be taken.

There are a couple of rules:

It must hit and be supported by a HTF opposing zone. A D1 WoW short countertrend will require as minimum a WK SZ taking control

It must take out and opposing zone with a candle close, if price is bouncing off of a WK SZ and our entry TF is the D1, we need D1 DZ taken out with at least a D1 candle close

Ideally what we want to see is tested levels to the left, over

extension and/or compression, read about it on the counter

trend lesson. This gives price a path of least resistance to play through, unobstructed

HOW TO DEAL WITH THE FRESHNESS OF A LEVEL

IN A WOW TRADE

Follow the guidelines below to deal with the freshness of a HTF level:

1. Fresh HTF zone in control and bigger picture trend? No need to take out opposing zone

Most of the time, the opposing zone will be removed anyway, you can always wait for it to be removed and deal with it as a higher probability entry

If the opposing zone we want to see removed is not well formed (too wicky, too much trading, compressed, etc),

we can be a little bit more aggressive and "expect" the zone to be removed

Recommendation: always wait for the opposing zone to

be taken out (you will not have to think when to wait or not for the opposing zone to be taken out), or at least there should be a lot of room to the next opposing zone

2. Nonfresh HTF zone? Wait for a brand new imbalance to be created, one that takes out an opposing zone. If there is no zone

to be removed and there is a lot of profit margin to the closest opposing zone, then there will be no need to remove any zone, it's advisable that bigger timeframes are with you. For instance a H4 demand zone nested within a D1 demand zone, nested within a WK demand zone with the WK chart in an uptrend

3. Usedup HTF zone? Do nothing since they are not high odds, ideally we want to wait for at least a new D1 trend in the direction

we want to trade, not just a CP or WoW trade, but a confirmed D1 trend connecting two clear valleys/peaks

4. Countertrend WoW? We must wait for the opposing zone to be taken out. Watch HTF 20 EMA and flip zones, make sure price action to the left is ideal for countertrend trading (compression, overextension, tested levels, etc)

It is very difficult to cover all possible scenarios in trading, there is no perfect recipe for a WoW trade. Try to apply common sense and logic here as well. Don't try to outsmart the markets, play your odds and look for the next high probability trade. Deal with each scenario as if it was the only one, think in probabilities. If you want to tweak some of the rules or scenarios, make sure you've thoroughly tested it and

it works.

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HOW TO PLAN A WoW TRADE When price starts reacting to the bigger timeframe, it usually creates a brand new imbalance. We must be aware that many times there is more than one imbalance created:

1. A valley/peak at the extreme, right where the whole imbalance was originally created at the origin of the move

2. A CP (Continuation Pattern) or valley/peak right at the area where the Trendline is solidly broken (breakout spot) or just after the TL break

If both setups are valid. Which one should you take? The CP? The extreme? Both?

Both entries will be valid, however we have the core strategy rules to help us make that decision, trendline breaks and freshness of a level

1. Take the extreme if no valid CP pattern or if another valley/peak is formed above, take that. We might have no CP formed, only valleys/peaks, so we will trade what we see

2. Take the CP at or near the retest of the trendline break if the

CP has been validated as per the core strategy rules

3. Once the TL is solidly broken on our entry timeframe (let's say H4 entry TF trading a WoW trade at a D1 fresh Demand), we will wait for a bigger pullback right at the extreme valley/peak that originally created the new imbalance on H4 within the D1 zone

This is part of the core strategy

AT WHICH TIMEFRAME SHOULD I WAIT FOR THE IMBALANCE?

If the HTF which is being tested is a D1 level, then we will wait for minimum H4 WoW trade

If WK is being tested, then we wait for a brand new D1 zone to

be formed. H4 is also ok if there is compression and over

extension to the left It's all related to the TF you specified as your entry TF on your trading plan and under which circumstances you might drill down the WoW trade to a smaller TF

NESTED WoW TRADES There are scenarios where we'll see several nested WoW trades. A nested zone is a zone which is located within a bigger timeframe than the one where we have located the first zone.

An example of this could be this scenario:

D1 WoW long nested within a WK WoW long at a Monthly demand zone

The Monthly demand is fresh and WK is overextended to the down side

The descending WK TL is solidly broken and provides a WK demand zone at the extreme or at the retest of the TL break When a new WK demand is formed, the descending D1 TL will most likely be solidly broken and might have provided us with an earlier entry of the sort of a D1 WoW long trade, nested within

The more nested WoW trades we find in any given scenario, the higher the odds. That does not mean you should tweak or break the rules of imbalance/departure, quality of the levels, nonfresh and/or usedup zones however

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the WK demand zone where we are originally waiting for price to drop before we go long

Remember that at a HTF zone like the WK or Monthly, price will take longer to move, accumulation and distribution stages need more time at these bigger TFs, and price will probably range for some time. So if you move your SL to breakeven too soon you will miss the big move and might get kicked out early

You need to practice and forward test these scenarios on your favourite testing software for quite some time before you gain confidence in the rules for the WoW trade

1. Trade only D1 WoW at the beginning so you can get the feeling and confidence. H4 WoW trades happen more often, buy taking D1 WoW trades is advisable in the beginning

2. Take any pair and start at any year, use the D1, WK and MN charts

3. Use the D1 as the TF where you will be looking for the TL break

4. Use the WK and MN SD zones as areas where price will most likely react, it will lose steam and cause the D1 TL to be broken

5. Be aware of the TL breaks on WK and MN as well, they are even more powerful and those trades will most likely become a longer term trade

In the beginning, if you decide to take WoW trades, it's advisable that you to concentrate on WoW trades that go with the HTF trend

Trade the super clearest setups, don't take countertrend ones or you will see WoW trades everywhere. That is, a D1 TL Buy WoW trade that goes with the WK and MN uptrend, the D1 drop would be realigning with the WK/MN uptrend, those are the ones to start with, and then with practice the countertrend ones and the other scenarios listed above.

The bigger the timeframe, the bigger the WoW TF entry you should look at for having high odds setups. For instance, looking for a H4 WoW at a WK Demand area will probably generate some fakeouts, price normally takes some days to take off from a WK or MN area so it will generate several entry areas normally. If you wait for a D1

imbalance instead of a H4 or H1 you will probably have more success

That does not mean that H4 WoW trades won't work but look at the charts and observe the WoW trades on WK and MN areas of demand, price hits them and a couple of WK or MN candles bouncing off it is the normal thing, that means days of accumulation/distribution, providing several H4 longs. After 13 CPs on the D1 price will most likely take off

By 3 CPs I don't mean overextension, I mean a CP is created, then price retests it, it goes back again to the origin of the imbalance, then rallies again and another CP with higher lows after the 2nd or the 3rd price will most likely take off.

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Watch the following videos on WoW trades and Trendlines, they deal with most of the WoW trades scenarios in more detail

Initial video on WoW trades Second video

Third video Visual Backtest of Monthly WoW trades on NZDUSD Monthly chart

Weekly WoW visual tests results performed by Ivan (Bali Trader)

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alfonso

Administrator

Join Date: Sep 2013

#2

16th May 2014, 02:08 PM HTF FLIP ZONES & WOW TRADES

NZDUSD WK Chart August 2013 to January 2014

Weekly flip zone reached, wait for a D1 WoW long trade to happen before thinking of going long

Price reacts to the WK flip zone, creating new D1 demand zones and breaking the descending D1 TL to form WoW long trades There are several opportunities on the D1 based on the D1 WoW long in this scenario, all described in the attachments below

WK flip zone is hit again, so we wait for confirmation and opposing area to be removed. D1 TL broken and new D1 demand zone formed. Price did not pullback to extreme zone, but it did to the CP at the TL break restet

WEEKLY CHART

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http://www.setandforget.com/forum/maincategory/supplyanddemandclassroom/theclassroom/17042thewowtradeandhowtotradeatrendlin… 10/17

D1 CHART

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alfonso

Administrator

Join Date: Sep 2013

#3

16th May 2014, 02:45 PM WOW TRADES & BIGGER PICTURE COUNTER

TREND

GOLD WK chart 7th July 2013 to 1st March 13

Several trades happened based on WK WoW trades, D1 nested WoW trades will be there almost for sure

Price hits MN demand zone (blue line is the MN proximal line)

WK is overextended, hits MN demand and rallies creating a brand new WK demand

Then it creates a new CP at the TL break, not 2:1 but it works as well, very strong

TL is broken, WK CP is not fresh so we need to wait for the extreme. Price hits it on Dec. 2013

Tiêu đề	The WoW Trade and How to Trade a Trendline Break at Higher Timeframes Zones
Trường học	Set and Forget Trading Strategies
Chuyên ngành	Trading and Market Analysis
Thể loại	essay
Năm xuất bản	2016

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