Using Balance and Unbalance to your advantage

Ah...thank you! Of course, you can see the balance and unbalance areas on any time frame...remember it is all order flow, and order flow is most effective on smaller time frames....I use it on tick charts in the futures market when I day trade.

All I am trying to point out here is that instead of driving yourself crazy looking at complicated "delta" and volume profiles (which I've never really got the hang of), just look at how the order flow effects price.

There are only two states to the market...a balanced market and an UNbalanced market...that's it. Whether you see that on a 1 min time frame or a monthly it is still the same. Each of these two states has distinctly different price action, as you can readily see here. There is no need to make it any more complicated than it has to be.

Once one learns to recognize these two distinct states you automatically have direction and levels to trade from. Trend-Schmend...follow the price action.

Another opportunity just showed up on Gold...

I was long on gold trading this back into the large (HUGE) balance zone that had lasted for well over two years. After it broke I took the trade (basically a scalp) on the weekly chart back into the balance zone and have now stopped and reversed looking to take a long ride down.

The long position limited out at 570 pips and lasted two weeks. I'm hoping to get at least that much on the way back down.

Busy day for me today...

Looking intraday at GBP/USD (8 hr chart)...clearly the seller are kicking and biting in this little battle. Buyers are active on the lows of the day but don't seem to have enough to push price higher and the sellers (for now) seem to be keeping the buyers in check.

I have cancelled my pending order and have moved my stop up to basically break even...this may be a bit premature, but I'm not really seeing the buying unbalance the order flow like I anticipated. So I will have a scratch trade if the sellers push price down again to test the lows.

End of day check on USD/JPY:

Not looking too bad. The imbalance continued through out the day. Position is currently 67 pips on in the green. I have cancelled the 2nd pending order and moved the stop down to the top of this week. With only one day left, we may have the start of a good weekly trade, so I don't want the trade to "trip" over the stop. For now we can definitely manage this trade out on the daily chart.

There are still many levels to push through below the current price and each of them may be areas where buyers are waiting to come in. So I'll just have to take it one daily candle at a time.

Update on open trades:

GBP/USD: This pair continues to balance just above the previous (and longer) balance zone. It appears to me like the sellers are not yet willing to give up and are fighting the push prices back. I have the stop at BE here so there is not much else to do. Trade remains positive for now so there is no pressure.


EUR/JPY: This trade is currently 137 pips positive, but is trying to balance in the same area as the previous balance area seen both on daily and weekly charts. I have moved the stop up on this trade to lock 40+ pips in case this comes back on me. Of note here...when I was a "pattern" trader, I would call this a "double top" and try to short it. It is worth saying that I was only correct about 10% of the time. It is very common for the sellers to step back in where they were active before, so it all depends on whether there are enough buyers AT THIS LEVEL to push prices higher...sellers have not yet stopped out


USD/JPY: This trade is currently 140 pips positive. This friends, it what a "liquidation move" looks like. This is the "whoosh" I was talking about in previous posts. Most of the intraweek swing traders who were holding long positions have been stopped out. Their stop orders flooded the market with sell orders and pushed prices down quickly. As you can see from the weekly chart we are going to have a "strong" weekly close - assuming it isn't bought up during the US session. I have moved my stop down to the top of this week's candle. I expect next week will show a retrace back up into the larger weekly balance zone where I will have more orders waiting.

Nice thread here you got going gspajon.....I was wondering if you incorporate the open(monthly,weekly, daily) into your trading?

Hi HiddenGap,

I'm a newbie trader. I understood that statement to be true with futures and options but I thought forex was different because I assumed that banks all around the world are trading real currencies, one for another especially when corporations need to exchange one currency for another; and that the market's demand and supply of limited currencies (unless central banks are printing) moves the exchange rate. Please explain, Thanks.

Good Morning all...here is an update on how we fared over the week end:
EUR/JPY:
This pair appears to be trying to balance again. right in the area where the balance happened last week and also 10 weeks ago. I was almost stopped out this morning but price has retreated again, as new buying came in. The stop locks approximately 40+ pips.


GBP/USD:
FINALLY!! We caught a break on this pair. Prices has moved above the balance area and closed - on an intraday basis. The position is currently 150+ pips positive. I have moved the stop up to the bottom of today's candle to lock just 23 pips. Hopefully this market will continue to be further unbalanced.


USD/JPY:
This trade has been the "star of the show" so far. The position is over 400 pips positive. Clearly a selling route has occurred bringing price down into the last serious balance zone (as seen on the weekly chart). I expect some push back in this are and think it would be a place where buyers might come in. Thus, I have moved my stop down to lock 200 pips and will wait to see if a balance area forms here...I will most likely be watching for that balance on an intraday chart


Gold:
This market has started to stall and hint of a balance area. This is not too big a surprise considering this balance area took 9 weeks to form. I have left me position as is so far and added another pending order near the top of the balance area in case we get a test higher. So for now this is just a wait and see.


So that's it for now...the larger market is clearly unbalanced right now, so at this point one must sit on their hands and watch and wait...wait for another balance area to form and then take appropriate action.

Another quick update...

Stopped out of EUR/JPY as an unbalanced yen continues to strengthen. The position was stopped out at 43 pips profit...

Thing are really moving today...just another quick update on GBP/USD.

Now that intraday prices have closed above (significantly) the last balance zone, I have place another pending order to add into the position to see if we get a retest. Stop stays where it is

These updates have been coming more more frequently than I imagined, but then again, the market has been unusual to say the least over the last week. So updating the trades I have been outlining here:
EUR/JPY: Flat - I was stopped out yesterday with about 40+ pips...not the best trade but profitable none-the-less.

GBP/USD: Still holding with a small profit of 23 pips locked. I was anticipating a pull back into the last smaller balance zone (as seen on the daily chart) to add to my position, but it looks like this market may be back to noncommittal sideways trading. I have left all positions as is for now.


USD/JPY: Holding short with 270 pips locked in. Buyers are now starting to threaten my stop and the intraday charts have shown a 'V' bottom near weekly low shown on the charts. Price is currently right in the middle of a substantial weekly balance zone and as I anticipated there is buying going on... I believe that all the selling took place yesterday and seller, like me, are simply holding their shorts. Thus, there is no new selling coming in to balance the current buying taking place. This may cause price to rise back up into my stop...unless new selling occurs OR the buying fizzles out.


Gold: The short entry his is positive if only slightly. You can see the daily price "dancing" along a downward sloping trendline. On all commodities I use large chart as I want to ride weekly and/or monthly trends. Again to explain this trade. Price broke out of a long standing monthly balance area and has come back to test the area where the sellers overwhelmed the buyers. It appears as though the sellers are starting to step up and balance the buying the brought price back into the retest area...we will see if more selling ensues.

Update on GBP/USD:

This intraday chart shows I was filled on my second order on a retrace back into the most recent balance zone. The actual order line (0.15 lots) shows the aggregated position of all entries. The little blue arrows show the entry points. My stop remains as placed.

hi gspajon,

what a good thread,very clear informative and refreshing to follow along.

Thank you diceman...I hope you find some value here. I am very glad you posted...I was beginning to think I was talking to myself. Its been almost a week since anyone but myself commented.

Well im not surprised by the lack of response.The simpleness is in most cases ignored and people tend to look for the complicated .

I trade in a similar way only on small t/f,s .i trade the gaps in price interest between the levels of balance across t/frames.

regards

As well, I trade this method on small volume charts in the futures market. 500 contract size. Mostly it works but the last two days have been difficult to say the least...still positive though.

Hi gspajon

I've been following your thread and love reading your posts.

Really simple method and seems to be highly reliable, I've been looking back at historical charts just to get an idea on how to spot the patterns.

Hope to keep learning from you

Martin

Well I don't post but I do read Very interesting and simple yet complete method, and very informative thread. I'll try and implement your way of reading the charts as soon as I get back to trading. Still waiting for everything to settle a bit... Take care

Hello Martin, I'm very pleased you are getting something out of this thread. I will try to help out if I can, please feel free to post any questions.

Pataouer I hope you (or anyone else) didn't take offense...I am glad you are finding something worth looking at. The methodized approach to finding opportunities should (in my opinion) always be as simple as possible.

I am very please to know that although you don't post that you find something of value here. As with everything in trading all things simple do not equate to "easy" it is difficult to enter a trade that seems contrarian at the time, but well worth it when the pay off comes.