INTRODUCING CCFp: the hidden structure of price placement you can't otherwise see
* I have been intrigued with the notion of currency slope strength since quite early in my self-guided study of forex trading, enamored with how the lines moved in response to price and what expansion / contraction / crossing of the lines meant for trading. I wondered how it would be possible to exploit market opportunities when certain currencies dominated in strength over others, or how to use the CCFp indicator in single-pair mode in a trade plan. Then the epiphany hit me to replicate this indicator multiple times on the chart and use its MTF capability to display the current timeframe and the next several timeframes above it as lines of varying thicknesses. The MANY hours that I've spent studying how they move in relation to each other because of price has become almost a way to view the market under ultraviolet light - it leads to seeing things that cannot be seen any other way. The problem that remains though is knowing exactly when to act on a trade based on CCFp lines. I knew I wanted to use them somehow, but was getting mixed results trying to trade them alone. So I've concluded: CCFp lines should never be taken alone as trade entry signals. Anytime I've won money by trying to predict them I was lucky, and more often I've lost money entering trades by trying to guess their future movement. This is because they don't pinpoint any clear candle on which to take entry, and the nature of MTF calculations causes their repainting-till-MTF-candle-close action in the present which doesn't exist in backtesting. Instead, CCFp lines are used to understand whether the market is gathering potential energy or springing forth with kinetic energy. The sum of their signals explains why price is where it is, and explains why trending or ranging is currently happening - but they alone won't tell you when to get into the market. If anything, they may suggest when NOT to trade, or they will inform your mindset over a trade you're already in and foreshadow conditions to suggest a trade exit.
* I prefer M1 as a scalping trader, so on my chart M1 appears as the thinnest line, M5 is thicker, M15 is the second boldest, and the H1 is the boldest line. Asian / Oceanian currencies use orange/yellow colors (AUD = orange, JPY = yellow, NZD = tan), European currencies use blue / green colors (EUR = cyan, GBP = blue, CHF = green), and American currencies use reddish colors (USD = red, CAD = pink). They operate on settings that compare slopes and differences based on moving averages.
* The sum of the CCFp lines is what makes them useful to find strength of movement in the market. If all the various CCFp lines' colors are moving the same direction, that results in strong trending. If a medium timeframe's pair of lines are positioned one way but the next higher timeframe's lines are positioned in inversion to those of the lower timeframe, that indicates phase-cancellation where the sum of positive and negative "energy" translates to price stammering in a rangey sideways chop. The benefit of seeing this is that it reveals when not to trade, because it is accompanied by signals on which your algorithm of other qualifying indicators might conflict without greenlighting entry (keeping you out of bad trades), or if they do agree, will lead to price movements that are shallow and offer poor risk-to-reward ratio.
* The CCFp window will have dotted lines running at +0.0005 and -0.0005 levels above and below the center, which forms a "doldrums" zone. Weak movements happen when the lower-timeframe lines vacillate within the bounds of these lines, but bigger moves happen when CCFp lines of any timeframe arc up and outside these lines and travel back into them. Crossings will always happen at the center (0.000 value). Each of the 4 instances of CCFp lines have centerlines and because they scale based on the size of their moves away from center, the doldrums lines will not line up. (I've experimented with adding properties to the code of each CCFp to declare a fixed height for the subwindow, but that forced scale causes lines to arc out of view in very strong market moves and makes the quiet market almost look like flatline which makes seeing their interaction too difficult, so we'll tolerate the fact that each CCFp will scale to the window height as it likes and not align the doldrums lines.)
Example of CCFp lines set with no fixed min / max values (lines are allowed to "float" / calculate based on whatever price does on the chart):
Example of all CCFp lines with indicator "common" tab settings of min = -0.002 and max = 0.002; this constrains the heights of all the CCFp lines to a fixed height but permits the lines to leave the view out of the bounds of the window depending on overall trend strength (it's nice to see them in equal scale, but not to see the lines "clipped" / disappear from view vertically):
* The start and end of a whole price run as reflected by CCFp lines is a run from their farthest expanded distance apart (one is mountain peak and the other is valley floor), through their crossing, all the way to the farthest expansion in the opposite positions as mountain peak and valley floor. If the non-MTF CCFp lines of the chart had a way to actually tell you the earliest possible point of trend entry, it would be when the lines appear to be their farthest apart and have begun their turn to contract back together. The exit which captures the majority of the run is the widest opposite movement of the CCFp lines. Yet this is too simplistic a view of how they work, because the lines do not move in perfect sinewave shapes. Instead they move with varying slope changes, with hesitations and re-expansions. The M1 and M5 CCFps will therefore reflect the harmonic noise of price action, the M15 will more closely mirror the general shape of the trends from a more zoomed-out view, and the H1 will indeed correspond to the higher-altitude view of the market across days.
* The meanings of CCFp crossings are tricky to interpret (part of why I couldn't reliably trade them in early trade plan attempts). M1 crosses quite often, M5 crosses the next most often, then M15, and H1 crossings happen the least often, and higher timeframe CCFp crosses matter more than lower timeframe CCFp crossings. Does a crossing mean the halfway mark of a trend? No, because crossings will prove to often correspond to eccentric / asynchronous trend movements on the price chart. For example, you'll see an M15 crossing and think that means not to bet against it. But then not an hour later it will cross back based on price action. If you look at what happened before the crossing, it will appear that price was trending one way for a while, then the crossing happened suggesting eventual reversal, then it will recross to resume its direction, and the minor counter-trend price action might have gone merely sideways. Sometimes, however, a crossing happens and then the CCFp lines will stay separated for quite a bit longer than they were apart before the crossing, meaning the crossing you saw was the start of a trend that was not so obvious before the crossing. Add to that the sum of the various CCFp lines crossing at different times and there's no way to know what to make of the meaning of the crossings. That's the asymmetry I speak of - a crossing is never actually the exact middle of a trend. So it's not a great idea to trade one CCFp crossing to the next CCFp crossing as if those were trade signals, because these often produce parity or losing runs where the exit is equal to or worse than the entry, and when you factor the broker's spread at entry, this will erode an account. Sometimes one higher timeframe CCFp crossing to another will be a great winner, but the crossings are not great entry points to trade because of their asymmetry compared to actual price trending on the charts. What you CAN take away from crossings: if all the CCFp lines cross in low timeframe to high timeframe sequence with aligned color and expand in the same direction, that confluence pushes a trade vertically.
Soon I'll post some observations about how the lines move in response to price to affirm either trending or ranging.
