Market Structure, Support and Resistance

I’ve traded forex/futures altogether for about 5 years. I started out in forex and eventually transitioned to futures after a couple of years as the flow of the intraday futures market better fit my personality. I traded futures for several years and eventually shut the charts down to focus on my day job due to the lack of consistent profitability.

This paragraph would be the part where I list of the endless hours of screen time I put in, systems I tried, accounts I blew up, systems I purchased, endless free and paid rooms I subscribed too and on and on. And like pretty much every trader out there never found success.

When I closed the charts down I always knew that I’d return to trading, even if it was just to paper/demo trade. There’s just something about it.
About 6 months ago I launched MT4 and looked at a chart for the first time in years. I wanted to pursue end of day trading as opposed to intraday as I had in the past to accommodate my day job. I had always liked price action, naked trading and the idea of not spending endless hours in front of the screen watching the market tick around.

After a month or two of looking at completely naked charts I had an “AH HA” moment, almost as if a veil or filter had been removed from my eyes. I think all the indicators cluttering up my charts for all those years drew my eyes away from what really mattered, the top half of the chart. The top half contains all the important “stuff”, market structure, support, resistance etc.

My trading is now more of a “method” as opposed to a system, based on market structure and support/resistance.

Rules are pretty simple:

1. A swing is broken
2. Stochastic confirms by crossing the 50 line
3. Buy/Sell previous support/resistance, where buyers and sellers were before

There’s a few other rules but I’ll lay those out on the charts to follow…

This is a picture perfect setup, the levels to sell/buy from aren't always so clear...

As you can see from the chart below there's not always just one level where buyers/sellers may come in. Sometimes you'll get a nice full pullback, sometimes a quick touch and go. If you take the more aggressive entry take a small position knowing that it may pull back further and be willing to add at more conservative level. This is not averaging a loser as there's a reason for the levels you are entering at. Your money management rules wouldn't change at all.

GBPNZD trade I'm in currently, at BE...we'll see what happens

The first entry level on this trade is a little different. Most of the time when a level has held for a period of time it will flip and hold first time back. I was too aggressive on my first entry, the true level was the second one...at BE currently

EUR/CAD

USD/TRY

EUR/MXN

Missed this entry by a few pips. A great example on how the market will touch and go at times and not give you much of a pull back. This is the reason behind aggressive entries.

This order will now be canceled as the market has already done what it was supposed to do without me. IF this candle doesn't CLOSE higher I'll leave my second entry position in play as we'd expect a reaction there as well.

EUR/NZD

I miss clicked on this. Typically I'll close out 75-80% of conservative entry plus close out my aggressive entry at BE-ish. Due to this miss-click I closed out the full conservative position...so I just moved my stop to BE on the aggressive entry.

USD/PLN

I knew this trade would be a little higher risk before I entered. Rules require a swing to be broken to trigger shorts. As you can see from the chart a VERY minor swing was broken, the real swing was the level the market reacted PERFECTLY off of. But as you can see, there were some decent sellers at my first entry, if you drop down to a smaller time frame you'll see we got a reaction from 8400 down to 8100, 300 pips, but keep in mind that's very minimal for this pair. I was a little off on my conservative entry as well.

Normally when it's a more aggressive trade I would pass on the aggressive entry and only look to go conservative...but as I stated above, I liked that first sell level.

EUR/ZAR

Stopped at BE on 1st/aggressive entry. I've attached the 4HR as well where buyers came in strong and sellers came back where we'd expect them too. As stated in the first post I trade end of day, review a couple times a day, so I didn't get a chance to place my take profit.

Normally on the 1st/aggressive entry you'd be looking for pretty quick profits as you're expecting the momentum to carry on before the true pullback.

Notice that the daily candle didn't CLOSE higher. Since there is no new candle close high the conservative entry is still in play.

EUR/JPY UPDATE - Target Hit

GBPNZD UPDATE - Target Hit

EURSEK

Aggressive entry target hit. If we don't get a new candle close high the conservative entry order will stay in place. Once the market closes a bar higher than this current level I'll cancel the order.

EUR/NZD target hit on conservative entry and aggressive entry BE

nice analysis brother. well execution. but where is your sl?

Your risk looks higher than your reward.. Are you ok with that?

Appreciate it Juisen. My initial stop loss isn't a hard stop but just a protective stop against any drastic market moves. I typically use two times the daily range, you'll see that number in the top right hand corner of my charts. Again, this is a dynamic stop, not static, or hard.

Attached is my GBPNZD from this week, initial stop was about 400 pips, 2x daily range, buyers came in where you'd expect them to so stop is moved under that swing. The next bar pushed a little bit higher and stalled, I would never let this turn into a loser so move to BE. Market pulled back for a retest then went to target. So the initial R/R was 400/280 or 1/.7, but with dynamic stop 170/280 or .6/1.

Hope this helps!

Seth

Hey Focus,

Check out my response to Juisen above as it relates to your question. Also, my win ratio is about 85%, so even if my R/R is 2/1, worst case, I'm still coming out ahead. But again, it's a dynamic stop, so average R/R is about 1/1 which is great at an 85% win rate.

Risk/Rewards is hugely misunderstood and miss used...or maybe I should say over emphasized. And I'm talking about R/R, not money management, money management can't be over emphasized. I could snap my fingers and change my R/R to 1/3, but my win rate goes down to 50%. Is that bad? No, just not my preference, in the end you would still be profitable.

Look at most of the "systems" on FF, almost all of them are losers even though they have such "great risk/reward"! They get in and out because a couple lines on a chart cross...does that make sense? Do you think big money is looking at a 5 minute EMA? So with their reason for entry being wrong they're management of the trade moving forward will be wrong. They set a 30 pip stop with a 150 pip target, 1/5 ratio, that's awesome, but why those numbers, is that what the market was offering?

Look at my TP on this GBPNZD, the market ticked 13 pips through it then dropped 160 pips. I didn't manually close this trade, that TP was set the day before, think this was a coincidence?

In the last several months I took ONE full stop on my initial stop. And guess what, it wasn't even a valid trade, I got impatient and paid the price.

Seth