Can Peak of AO be Misleading?

[Pall_Singh]

Hi there,

My question is regarding on how to really determine peak of AO and AO Close to ZL

I have posted a screenshot with 2 attached charts from the same timeframe and time period.

If you look at the chart on the right the actual peak of AO occured only aftter setup 2 and while setup 2 was occuring, the AO was also closer to ZL.

However if you look at the chart on the left, just when setup 2 was occuring, The AO seemed to have already peaked even before we could enter on setup 2.
Also note that the AO also appears further away from ZL.

I you look at the end movement on the right-side chart, both the setup 1 and setup 2 appeared to be a good move with all the rules for entry intact. (IE: AO relatively closer to ZL and not yet peaked)

But looking on the left-side chart just at the time of setup 2, it tells a different picture (IE: AO further from ZL and appears to have already peaked)
This might prevent us from entering a good setup 2 trade and those who had entered on setup 1 could have exited on blue dot with a loss and not re-entered the market as AO appears further from ZL.

Can Imran or some experienced AIMSter kindly address this issue and advise us accordingly.

Thanks.

Best of Reagrds,
Pall

[Grant]

hi there,

in the left chart AO has peaked but we can see no divergence so we can reasonably expect there to be another wave (potential wave 5) down that will either make AO either diverge or create a new lower peak (as in right chart), so the set up 2 that you see in the left chart is valid as long as rules are met.

as for the right chart the AO makes a new lower peak thus indicating that this wave is a wave 3 and the peak in the left chart is a wave 1 of this cycle....

for me if AO peaks but has not diverged and returns close to the 0 line then as long as all the other entry rules are met then its a tradeable set up. Only when AO is diverging do i say no trade...

i hope that makes sense

cheers

Grant

[Pall_Singh]

Dear Grant,

Thanks for the reply.

So we can safely say that its ok to trade a setup as long as there is no divergence yet.

And once a divergence has occured, we wait for the AO to cross over ZL before considering any further setups right?

Pall

[Grant]

if a divergence hasnt happened then there is a higher probabilty of a successful trade, no trades are safe mate as mother forex is in charge.... if AO has diveregd then yes i would wait for a fresh cross of 0 line before placing pending orders...

i am very conservative in my approach and i like as many factors as possible on my side when i place pending orders....

cheers

Grant

[pmanisha77]

Hi Pall .
I have a point to submit that, In setup 1 on chart, the alligator mouth is open upwards and we are trading in its mouth. So I feel that alligator's in Setup 2are well formed and in setup 1 , its against rule. It would have been good to pass over this setup 1 and tahe setup 2 in this situation.
I request , If Grant and Pall may comment on this observation??
regards
jeewesh

[immy]

Jeewesh,

Point to note, Alligator lines are shifter in to future. e.g. at the time of red dot at setup 1, the blue would have been 8 bars to the right, the red 5 bars and the green 3 bars. IMO it was sleeping. (backtesting is crap)

cheers

Immy