Characteristics of the Vegas Tunnel Trading Method
Trend Following Trading: The Vegas Tunnel Trading Method is a trend-following trading approach suitable for use when the market trend is clear.
Clear Exit Points: This method has a clear exit point, allowing you to accurately determine when to exit a trade, lock in profits, or cut losses.
Filtering False Breakouts: The Vegas Tunnel Trading Method has the rule of filtering out false breakout signals in the market, helping you avoid common traps and increase the success rate of trades.
Easy to Learn: The rules and operational steps of this method are very clear, making it easy for beginners to learn and master.
In this session, we will comprehensively introduce the Vegas Tunnel Trading Method, covering the following aspects:
Introduction to the Vegas Tunnel Trading Method: A detailed introduction to the basic concepts and historical background of this method.
Characteristics of the Trading Method: Discussing the main characteristics and advantages of the Vegas Tunnel Trading Method.
Principles of Trend Judgment: Explaining how to accurately judge market trends using this method.
Practical Application: Demonstrating through specific cases how to effectively use the Vegas Tunnel Trading Method in actual trading.
1. Two Tunnels
The first set is 144EMA and 169EMA,
The second set is 576EMA and 676EMA.
Two sets of exponential moving averages will each form a tunnel during the price trend; this tunnel is called the Vegas Tunnel. The Vegas Tunnel has significant guiding meaning for the medium- to long-term price trends.
The Vegas Tunnel (144, 169) is a watershed for mid-term and short-term trends in the market. It can guide direction and serve as support and resistance.
Composition of the Vegas Tunnel
2. Filtering Signals
When defining the Tunnel Trading Method, Vegas proposed the concept of breakouts. What is the concept of breakouts?
We need to look for entry and exit signals, always operating after the price breaks through the tunnel. Introduce the concept of a filtering line—the EMA moving average with a period of 12.
The orange moving average is EMA12, which is the filtering signal line.
Role of the EMA12 Filtering Line
EMA12 is a filtering line used to filter out false breakouts in the market. Specific applications are as follows:
Conditions for Going Long:
The price and EMA12 must simultaneously break upwards through EMA144 and EMA169 to consider going long.
Conditions for Shorting:
The price and EMA12 must simultaneously break downwards through EMA144 and EMA169 to consider shorting.
Through this filtering mechanism, not only the price break is considered, but also the EMA12 signal, ensuring the reliability of the signal. Only when the price and EMA12 signals are consistent should a trade be made; otherwise, it is regarded as a false signal.
Application Examples of Filtering Mechanisms
Here is a case study to help better understand the application of the filtering mechanism:
Bullish Signal Filtering:
Assuming that at a certain point in time, the candlestick price has temporarily broken through the short- to medium-term Vegas Tunnel (EMA144 and EMA169).
If at this moment, EMA12 does not simultaneously break upwards through the tunnel, it is regarded as a false signal, and one should not enter long.
Bearish Signal Filtering:
At another point in time, the candlestick price has temporarily broken below the short- to medium-term Vegas Tunnel (EMA144 and EMA169).
If at this moment, EMA12 does not simultaneously break downwards through the tunnel, it is regarded as a false signal, and one should not enter short.
For example, at the two positions indicated by the arrows in the above chart, although the candlestick price has temporarily broken through the short- to medium-term Vegas Tunnel, EMA12 has failed to simultaneously break downwards. Both of these positions are false signals, and according to the Vegas Tunnel Trading Method, one should avoid entering short. This filtering mechanism can effectively reduce false signals and increase the success rate of trades.
3. The Rules of Vegas Moving Averages
Fibonacci
The 144 in the tunnel comes from the Fibonacci sequence. Fibonacci is not artificially created but is a natural law that universally exists in the physical world, discovered and summarized by mathematicians. In the trading market, no single individual or institution can absolutely control the trend. The market is a combined force of countless powers, and this combined force presents a natural state. Therefore, Fibonacci has the ability to predict the market. For more knowledge about Fibonacci, you can refer to this article: What is Fibonacci? Why is its success rate in trading so high?.
Digital Cycles and Square Relationships
The 144 and 169 digital cycles used in the Vegas Tunnel Trading Method actually stem from square relationships:
144 is the square of 12 (12²=144)
169 is the square of 13 (13²=169)
The existence of this relationship allows the Vegas Tunnel Trading Method to not only consider the natural laws of the Fibonacci sequence when choosing cycles but also to integrate its unique internal multiple relationships, thus forming a more stable and scientific cycle system.
In fact, the 144 and 169 moving averages on the 4-hour chart are the 576 and 676 of the 1-hour level. The 144 and 169 moving averages on the 1-hour chart are the 576 and 676 of the 15-minute level. Vegas believes: regardless of the time, always operate along the 576 and 676 moving averages. Abandon trading opportunities that do not align with the 576 and 676 direction and only take advantage of trend-following trading opportunities.
Basic Usage
After understanding the concept of the Vegas Tunnel Trading Method, we can more clearly recognize its characteristics and application methods. The Vegas Tunnel Trading Method mainly relies on four moving averages to form two tunnels, thereby judging market trends.
The Vegas Tunnel uses exponential moving averages (EMA) to judge and track market trends. Four moving averages form two tunnels, guiding trading strategies through golden crosses, dead crosses, bullish alignments, and bearish alignments.
During the practical process of Vegas, there are three points to pay attention to. These are:
Choose Core Levels
Defining Trends
Verifying Support and Resistance
Next, we will elaborate on the three operational cores.
1. Choose Core Levels
The levels recommended by Vegas himself are 1-4 hours. However, when using, if you want to trade ultra-short-term, 5 or 10 minutes is also fine; if you want to trade larger cycles such as daily trading, that is also fine.
It is recommended to choose a few levels that suit you, based on your personal character, patience, and practical habits; for example, you can choose the 15-minute, 1-hour, and 4-hour tunnels, as they happen to form a 4-fold relationship. The next level of 576 and 676 can serve as a principle reference for the previous level.
BTC 15-minute Bearish Trend
BTC Daily Bullish Trend
Different levels of timeframes respond at different speeds; the smaller the timeframe, the quicker the response. By looking back at historical candlesticks, it can be easily found that the bullish and bearish conversion trends in larger timeframes appear earlier in smaller timeframes. At the same time, the trend volatility of smaller timeframes is also stronger and may contradict larger timeframe trends. If trading short-term, focus on the trends of smaller timeframes and lock in your core level based on your operation cycle.
The larger trend is upwards, while the smaller trend is volatile.
2. Defining Trends
With the help of Vegas's EMA moving averages, we can clearly see the direction of the trend through the tunnel.
In smaller timeframes, such as 15 minutes to 3 hours, the golden dead cross can mark the beginning of a trend reversal.
In large timeframe cycles, due to the significant lag of the golden dead cross, you may be entering when the bearish trend has already begun. Therefore, the daily level is more suitable for observing the EMA inclination angle.
Taking daily candlesticks as an example, if the candlestick is above the moving average and the moving average is inclined upwards, it can generally be considered that a bullish trend at the 12-hour level has begun. One can consider entering when it retraces to the moving average, and the greater the inclination angle, the stronger the trend.
Bullish Alignment and Bearish Alignment:
Case Study
For example, in the situation shown in the chart below, the green area forms a bullish alignment, while the red area is in a consolidation state.
Entry Timing:
In the green area, the short- and medium-term tunnel and the long-term tunnel are aligned upwards, and the price is above the tunnel, this is the time to go long.
Waiting for Opportunities:
In the yellow area, the short- to medium-term tunnel is trending downwards while the long-term tunnel is trending upwards; the two directions are inconsistent. At this time, it is not suitable to enter a trade, and patience is required.
Golden Cross and Dead Cross:
Characteristics of Moving Averages: Golden Cross and Dead Cross can serve as signals for reversals in bullish and bearish situations.
Long-Term Trend Judgment
Do not go against the 4-fold principle.
Long-Term Trend Moving Averages:
EMA576 and EMA676 are 4-fold cycles of the short- to medium-term moving averages, used to judge long-term trends.
Following the Major Trend:
Regardless, always operate along the major trend. If the direction of the short- to medium-term moving averages is inconsistent with the long-term trend direction of EMA576 and EMA676, one should abandon the operation and wait for the best opportunity to strike.
Only trade when the short- to medium-term trend is consistent with the long-term trend. Otherwise, the market may be in a state of oscillation and disorder, requiring patience to wait.
Some final personal suggestions
Locking the Cycle
It is possible that at the weekly or daily level, the overall price is in a downward trend, but there are several upward waves in the short to medium term. Based on your trading frequency and time cycle, lock in your chart cycle. For example, for day trading, you can lock in minute, 15-minute, and 30-minute levels; for weekly trading, lock in the 1-hour and 4-hour levels.
If you do not lock in, switching back and forth between large and small cycles may face conflicts between the large and small cycles.
Trend Following Between Small and Large Cycles
The 5-minute chart should follow the trends of the 15-minute and 30-minute charts. If they are opposite, do not trade. Only participate in trend-following, high-success-rate trades.
Follow Yuanbao@分析师元寶 for more information