4rXal-ghul H4 Trendline-Supply/Demand Zone Combo

To simply state the obvious, this is going to be a trading journal (my first trading journal) to help me follow up on a recent strategy I have developed for myself.

There is the added advantage of having other traders around to check/look-in. This I hope should keep me in check so I do not deviate from my strategy and my goal for creating this thread going foward.

What is the strategy?

It is about analyzing and trading from higher-timeframe TRENDLINES; the lowest being the H4 time-frame. However my entries will be from the point a Supply or Demand zone intersects with the trendline.

Why this strategy?

It is simple and effective. For some reason I have found trendline trading to be a little bit more straightforward and easy to follow. This is mostly down to the way I draw my trendlines. It tells the story better and clearer than any other technical tools out there.

Also, In the past 1 year I have traded price action, I have learnt first-hand that higher timeframe analysis are best for my trading style. I love to trade very often, so to strike a balance I have opted to frequently using H4 timeframe for my analysis.

Supply and Demand zones help me find key levels on the price chart for high probability trade entries.

Key point:

Supply and demand zones are best traded fresh and untouched. Trendlines help me a great deal in trading from fresh zones, while i avoid the used up zones.

Confirmation:

For me the market SENTIMENT and FUNDAMENTALS serve as the first confirmation for my trades. Though they help me form my initial bias in the analysis phase, they are the last factors I must check to see if they confirm the direction of my entry. Other than that I may consider candlestick formations (Engulfs and pinbars) or lower timeframe (M5, M15) price action at confluence point.


ANY CONTRIBUTIONS IN WHATEVER FORM WILL BE APPRECIATED.

As an example and as a start to the thread, here is a trade I am watching out for



The confluence of where the red rectangle (supply zone) meets the downtrend line is where I watch to take a sell. My sell bias is supported by bearish sentiment and bullish sentiment around the Euro and US dollar respectively.

The Euro has been well supported today by news data. The rally should give sellers a better entry ahead of December 3rd ECB event. Even if the outcome of the ECB events dissapoints market expectations, I will still look to take a sell on rally at points such as the next higher supply zone-trendline confluence..



...As Euro fundamentally remains a sell on rally.

Hi 4rXal;

Have you checked out this thread http://www.forexfactory.com/showthread.php?t=565188 ? It might help with what you are doing.

I really appreciate the recommendation. I have started to take a look already and so far I am finding stuffs that interest me. I've still got a long way to go in catching up though.

EG setup got triggered on a sell limit order..



Has a similar configuration to EU I was watching. Now I just wait to see if this trade is truly high-probability as I intend to leave the target open going into ECB event tommorow.

Ok got stopped out on EURGBP...


And with EURUSD not giving me any signal as of yet, I have decided to trade on the signal provided me by USDCHF...

Fundamentally this is such an unfavorable time to trade for me with the volatility and little bit of uncertainty that comes with the upcoming news events.

Though the USDCHF sell makes little sense fundamentally, it fulfills my criteria for a valid trade signal technically.

....OK that was fast!

I didn't intend to catch the spike because obviously I didn't think there was going to be a spike before the ECB press conference at-least.

Obviously the no-cut stance has proven to be a miss for market expectations. Remains to see if the same will happen during the press conference.

If it does, then I may begin to regret using such a small target for my TP on the USDCHF trade. LOL

OK, this is way off the strategy I'm using but...



...In my earlier thoughts about the Euro, I opined that a significant rally would present further opportunity for shorts as the Euro remains fundamentally weak.

It is a super risky trade considering again the volatility and uncertainty around the news events. Let it be started that neither did I plan or pick a level for this trade before-hand. I merely stumbled upon it.


PS: USDCHF moved further quite well after I exited, now I'm almost regretting. But this is no time for regrets -I followed my strategy and that's what counts the most.

OK..

Got stopped out on break-even for the last EU trade. My entire +50 pips profit on it was reversed totally... Don't quite know what to make of that!
Someone needs to learn more about risk/trade management, maybe?

Anyways that's gone. I am deciding to steer clear off the markets for today as i would like to see how it will digest the events of yesterday and today by Monday next week.

In the heat of the Euro craziness, I almost missed this sell signal on the EURAUD...



Again, the sentiment around the Euro makes this sell look little unattractive. However it moved about 150+ pips from the point of intersection!

Technically, it looks superb for a sell (and good profit potential as well)! Except that the risk on it if I am to jump in immediately would be too much for me. I am hoping for a nice little pullback upwards so I may enter with a lower risk. In the meantime, I will activate a sell on my demo account by Monday's open.

Yeah so the EURAUD setup did not workout as expected..



Technically it was spot on, and the AUD was backed by positive sentiment at the time. However, sentiment did change on the AUD as a result of weakness in commodity prices (oil, gold) and a weak Chinese economic data.

This is probably on the risk of not trading in line with the over-all big fundamental picture. The AUD still remains weak in the long term fundamentally. In hoping to buy into short term bullish sentiment around the AUD, I was trading against it's long-term bearish fundamentals -And that's really really risky.

Well for some reason not too different from why I considered the EURAUD setup, I entered the EURJPY....



There is a line of thought that made me enter the EURJPY trade without even minding the fact that my signal wasn't 100% complete technically! I really think that the Euro is way overbought and that it should have reversed far more than it has at this time. But apparently the market has a different opinion about that. And it is the market's opinion that matters.

Yes, there was no clear visible confluence of supply zone with the down trendline touch. Meaning I entered only on the "touch", thereby neglecting a major part of my strategy (I've been a bad boy ).

Obviously the trade hasn't worked against me yet (and I'm grateful for that ). In fact I was up 50+ pips one time -but since I was greedy and wanted it to hit my target of 200+ pips, I still left it to run.

The trade has been supported by positive sentiment around the JPY. The Japanese have posted series of good data so far (including positve GDP data) and the bank governor Kuroda's last speech was nothing near dovish with his previous speech mildly hawkish.

However, this seems not to be enough for the Euro to back down as it itself is enjoying some positive sentiment too! Hence i have decided to step out of the EURJPY trade for this reason majorly. Not because of technical reasons, but for fundamental reasons.

In hindsight, a better trade would have been this CADJPY...



I spotted this opportunity around the blue circled area yesterday. A tiny reason I may not have entered for a sell was that I didn't see it retrace to a clearly visible supply zone that meets my criteria.

However it was 50-70% spot on technically and 100% percent spot on fundamentally.

Technically, there was a break and pullback up to touch the back of the uptrend line. The previous demand zones on the left had just been absorbed. However, I thought that the pullback was to deep into the uptrend line with too much spikes and that it wasn't hitting any clear supply zone.

Fundamentally, the reasons to enter a sell were perfect. From my preparations over the weekend, I became aware that Oil prices would weaken as it did. And the plan was to take advantage of the CAD as it is the currency most linked to that commodity. Common sense suggests that the JPY would have been the best currency (apart from the USD) to pair against the CAD for two reasons:

1. Japan is one of Canada's biggest trade partner in Oil.
2. The JPY is enjoying positive sentiments of it's own owing to mildly bullish comments and positive data from Japan.

If I had carefully considered the fundamental's as reasons for the trade, maybe I would have entered in spite of the technical reasons being 50-30% incomplete!

For the reason of the above-stated observation, I am seriously considering adding to this journal a "REASON FOR THE TRADE" caption for any trade setup I intend to consider.

It is going to be purely based on prevailing sentiments and fundamentals around the currency pair involved.

The best "REASON FOR THE TRADE" would consider such things as inter-market and trade relations between the economies of the individual currencies involved.

Reason for the trade:

Buy - EUR/CHF

REASON FOR THE TRADE:
The SNB (central bank for the CHF) has a notorious history in recent past of buying up the Euro with the aim of weakening the CHF. Hence the CHF remains fundamentally weak especially against the Euro. Current sentiment around the CHF may back up this bias as the SNB governor reiterated over this past weekend the desire of the SNB to make sure the CHF weakens against the Euro.

the problem with TL is that there are drawn in Linear-Chart whereas the perfect einvironment for a TL is a Logarithmic -Chart.
Everytime when I draw a TL in the Daily-Tf I have to be aware of adjust the TL's from time to time.
How do you handle this?
I am very interested about your idea for a solution.
Regards Zack

Thanks for your contribution to the thread Zackery. And I'll like to apologize for the fact that it took me this long to reply.

There's been a reason for my long hiatus -and it is one not too far from the question/challenge you speak about. In a way I share the same view on TLs, though I find TLs and it's underlying principle to be more reliable than most tools out there.

To answer your question first and foremost, let me state that the way I use TL analysis in this strategy is "simplistic" at best. Yes it is a core part of the strategy. but it's use doesn't exceed the primary goal - to help me track new lows and highs as they are formed on the price chart.

And this is one thing I have been studying in the time of my absence from this thread. I may as well not need to draw the TLs on the chart for me to spot new Lows and Highs. I don't need the TLs to show me high-probability entry zones. The areas of supply and demand as represented on the chart serves that purpose well enough. However, like we've been taught about trading, adding a little confluence of signals (e.g intersection with a TL) here and there doesn't hurt.

But I need the strategy to be as KISS (keep it simple stupid) as I can get it to be. I seek to do that every time. The idea is straight-forward:

Identify prevailing sentiment from they way the Market processes/react to information from news events and data releases. Look for opportunities where the market is making new High(s)/Low(s) in the direction of prevailing Market sentiment and then enter on pullbacks to areas of supply/demand situated around the previous H/L of the newly created H/L.