In the actual combat of trading, the win rate is a critical factor.

Many people's trading strategies have a low win rate, which leads to frequent stop losses, causing the trade to be unsustainable, and even reaching the point of emotional breakdown, ultimately resulting in severe losses. Therefore, we need to appropriately increase the win rate to meet our human needs.

In today's article, I will explain 4 types of resonant trading techniques that can filter out some invalid signals, increase the certainty of our trading orders, and improve the win rate.

What is resonance in trading?

Resonance is a physical phenomenon with a synergistic effect.

For example, before making decisions in our daily lives, there are many factors that affect us. When all factors point to the same outcome, it increases the certainty of the decision, which is more conducive to making this decision.

Resonance in trading refers to two or more factors pointing in the same direction of the trend, and at this time, the success rate of our position opening will increase.

So resonant trading is very similar to what we call trend-following trading.

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In today's article, I will summarize the more common and useful resonant techniques on the market and explain them in detail to everyone. Without further ado, let's move on.

Technique 1: Cycle ResonanceIn the trading market, market trends are divided into different cycles. Nowadays, it is common to use different cycles of K-lines on charts to define these periods, such as 1-hour, 4-hour, daily, and so on.

Different time cycles correspond to trends of different durations, such as a bullish trend at the daily level, a bearish trend at the 4-hour level, and a bullish trend at the 15-minute level.

On the same asset, using the same technical criteria to judge the direction, the different cycles can lead to different directional judgments of the trend.

For example, we use the crossover of EMA120 and EMA30 as the standard for judging the direction of long and short positions.

The chart shows the K-line chart of spot gold, from left to right are the daily level, 4-hour level, and 1-hour level K-lines.

On the far left at the daily level, gold is in a golden cross with the two moving averages, which is bullish.

In the middle at the 4-hour level, gold is in a death cross with the two moving averages, which is bearish.

On the right at the 1-hour level, gold is in a golden cross with the two moving averages, which is bullish.

The same asset, the same technical indicators, but different cycles have led to completely different judgments on the direction of the trend. Therefore, what we are talking about today is cycle resonance, which means that the trends of different cycles all point in the same direction, creating a resonance.

So, how should we operate specifically?Under normal circumstances, it is the smaller cycles that conform to the larger cycles. For instance, when the larger cycle is in a bullish trend, one should enter trades in the corresponding smaller cycle that resonate with the direction of the larger cycle.

Using the example of gold mentioned earlier, let's say at the daily level, gold formed a golden cross in December 2022, confirming a bullish trend. Then, at the 1-hour level, one would enter a long position after the market forms a golden cross.

The left side of the chart shows the daily candlestick chart of gold, while the right side displays the 1-hour candlestick chart of gold.

In December 2022, gold formed an upward golden cross, confirming a bullish trend at the daily level.

After confirming the bullish trend, one would look for bullish resonance opportunities at the hourly chart level to trade, which corresponds to the red upward arrows in the chart.

Each time the bullish upward movement is quite significant, especially the last long position, where the market rose consecutively by $100, indicating a high success rate for long trades and a favorable risk-reward ratio.

I have also marked the short trading opportunities in the chart, the three downward blue arrows, where each time after the crossover, the market only moved downward a small space before reversing, offering no room for profit, resulting in a low success rate for short trades and a small risk-reward ratio.

By comparing the data, we can see that filtering by the larger cycle has increased the trading success rate.

Notes to consider:

(1) There should be a certain period gap between the resonating cycles. For example, resonance between the daily and 1-hour levels, and between the 4-hour and 15-minute levels, are considered reasonable.(2) Double-period resonance and triple-period resonance are relatively common methods of period resonance. More period resonances will filter the trading signals to a very low level, which is also not conducive to execution.

Technique 2: Indicator Resonance

Indicator resonance refers to the phenomenon where, within a fixed period of a certain instrument, different technical indicators point in the same direction at a certain moment, creating a resonance. After the resonance is formed, one of the indicators is used as the basis for entry to carry out trading operations.

For example, when conducting technical analysis on a chart, multiple indicators all point to the bullish direction at the same time, and a long position entry trading operation is conducted.

In the chart, it is a 1-hour candlestick chart of spot gold, with a total of 3 types of indicator resonances.

1. The market tested the horizontal support band of 1938-1931, which has a supportive effect, and there is an expectation for the market to reverse and move upward.

2. Near the support band, the market formed a MACD bottom divergence. Although the market continued to decline, the MACD energy column did not reach a low point, and there is also an expectation for the market to reverse and move upward.

3. After the market broke through the horizontal support band downward, it formed a long lower shadow line engulfing upward reversal pattern. In addition to the candlestick pattern itself having an expectation of reversing upward, the reversal after breaking through the support also has the technical implication of a fake breakout for a false short position, which is also a signal of reversing upward.

In practice, the reversal candlestick pattern can be used as the entry signal. After the line is closed, a long position can be entered, and the stop loss can be set at the bottom of the reversal candlestick. Subsequently, the market can rise significantly.

Precautions:(1) Dual-indicator resonance or triple-indicator resonance is a commonly used method for indicator resonance trading. An excessive number of technical indicator resonances can filter the trading signals to a very low level, which is not conducive to the execution of trades.

(2) Under normal circumstances, among the resonance indicators, there is a standard that can be used simultaneously as an entry signal.

(3) To ensure the consistency of trading, the same indicator resonance should be used as the trading standard. For example, always use the combination of moving averages and MACD for resonance; you cannot randomly grab two indicators for resonance each time and then operate, as this lacks consistency and there is no probabilistic advantage in the trading results.

Technique 3: Combining Period Resonance and Indicator Resonance

In practical trading, there is a widely used and effective resonance operation, which is the combination of period resonance and indicator resonance.

For example, in the resonance of large and small cycles, when entering the market at the small cycle resonance, it is also necessary for the small cycle to form a dual-indicator resonance to enter the market.

Or in the large cycle, when a dual-indicator resonance occurs to confirm the direction, then select the same direction of period resonance at the small level to enter the market.

Let me explain with pictures. First, I will discuss the entry with dual-indicator resonance at the small level in period resonance trading.

The chart shows the k-line of spot gold. The k-line on the left side is at the 4-hour level, and the one on the right is at the 15-minute level.

The 4-hour level on the left is in a death cross of the double moving averages, and at this time, the trend is judged to be bearish. According to the logic of period resonance, select the bearish indicator resonance at the 15-minute level to enter the trade.On the right side of the chart, a 15-minute MACD divergence pattern was formed at the top, and a break in the top rectangle consolidation pattern was formed on the 15-minute chart. Entry was made at the break point (blue circular position in the chart), and the market fell after the entry.

Let's talk about the confirmation of direction by the resonance of dual indicators in the large cycle and the entry in the small cycle. Please see the image below.

The chart on the left is a 1-hour K-line chart of gold, and on the right is a 5-minute K-line chart of gold.

As mentioned above, the multi-indicator resonance is for the same trend. The hourly chart, as a large cycle, has formed a dual indicator resonance of MACD bottom divergence and engulfing reversal pattern, with an expectation of a reversal upward in the market.

On the right, at the 5-minute level, the market forms an upward bullish break cycle resonance entry. The stop loss can be set at the low point of the break pattern, and then the market rises.

Notes:

(1) Combine cycle resonance and indicator resonance for trading, and determine a fixed cycle, while also using the indicators you are most proficient in. This is how you can have a probability and consistency in trading.

(2) Choose a simple entry method. Since there has been multiple resonances before, the trading signals have been filtered, and the entry signals can be simpler, which ensures the frequency of trading.

Technique 4: Fundamental and Technical Resonance

Fundamental analysis and technical analysis are the two main schools in the financial market.The fundamental analysis is more macro in nature, focusing on economic data, economic fundamentals, exchange rate policies, international political events, and so on.

Technical analysis is what we have been discussing all day today, which involves technical indicators and trading cycles.

The resonance between fundamental and technical analysis refers to the situation where the direction derived from fundamental analysis aligns with the direction derived from technical analysis; when both produce resonance, it is time to trade.

For example, consider this month's non-farm payroll data, with the previous value at 294,000 and this month's data at 339,000. The non-farm data is bullish for the US dollar and bearish for gold, so the fundamental analysis has given a bearish trend judgment for gold.

If technical analysis also shows a bearish signal for gold at this time, and resonance occurs, it is possible to enter a short position.

The chart shows the 5-minute candlestick chart of gold.

On the day of the non-farm report, the market formed a standard rectangular consolidation pattern for more than 20 consecutive hours. After the non-farm data was released, it was bearish for gold, and at the same time, the technical analysis also formed a downward break of the rectangular consolidation.

Entering a short position at the time of the break, placing a stop loss above the turning point, and then the market fell significantly.

Precautions:

(1) Fundamental analysis requires a higher level of comprehensive financial quality from traders. If one cannot conduct fundamental analysis professionally and clearly, in practice, choose times when the fundamental trend is clear and combine it with technical analysis for trading.For instance, during times of war, gold tends to be in a clear bull market; as in the example mentioned above, when the non-farm data is evidently bearish, one can combine technical analysis to conduct trades.

(2) In practical trading, sometimes it is the fundamental analysis that waits for the technical analysis. For example, during the Russia-Ukraine war, the fundamental analysis for gold was bullish, and one could enter the market once the technical analysis formed a bullish breakout.

Sometimes it is the technical analysis that waits for the fundamental analysis. For instance, in the example mentioned earlier, the market first formed a rectangle consolidation, and then broke down to the downside with the help of fundamental data.

Some considerations for resonance trading:

The examples discussed above are all illustrated using gold as an example, and some are even the same market trend, using different indicators, and explaining different time frames, all of which can be traded.

In fact, a trading system is like building with blocks; it can be combined using different resonance patterns, and all are feasible.

Additionally, after establishing a resonance trading system, it is imperative to conduct backtesting before applying it to real trading.

Two points should be noted: one is the frequency of trading, whether it is reduced too much due to resonance filtering, as too low a trading frequency is not conducive to execution.

Another point is whether the trading system has become overly complex due to resonance filtering, as too many details are also not conducive to execution.

Just pay attention to these points. Proper use of resonance trading can be very helpful in filtering out ineffective signals and improving the success rate of trades, and everyone can refer to it.