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  • #321
  • Jul 17, 2017 10:04am Jul 17, 2017 10:04am
Quoting ZeleniCaj
Don, thanks! This was golden! I actually bailed on that position pretty early for a modest ~30 pip loss, but it was more of an intuition. After having read your previous posts and explanations, and as I was writing that post above, I HAVE looked and studied the retest on this trade - something I have never done before - and I'm currently studying retests on my previous trades, both successful and not so, and it is very interesting indeed. Thank you. Learning to "see" the change. This also makes this simple fact really sink in - losses will happen...
It was worth a shot in my book Zelen, if you look back you can see it was an area buyers came in before. It turns out it was just a fake-out breakout. Never fun to get caught in but always a good learning lesson. The key here is to keep trading with your rules. Most traders get hit on this trade then freeze up. Normally when I'm stopped out it's because the market is heading the other direction, there's going to be a structure shift. So take the stop and be ready to head the opposite direction. I'm not looking for shorts quite yet, want to see a clear structure change on daily.

You summed it up quite well, losses happen, embrace them, learn from them, and move on.

Keep at it!
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  • #322
  • Jul 17, 2017 12:30pm Jul 17, 2017 12:30pm
Thanks, SW, mate! Sometimes even a AAA trade will fail, and there would hardly be a fault in judgement to find (not this particular case) - those are the toughest to accept. But those are also the best at stressing the importance of proper money management, you are right. One other thing I have found over time, is that you should generally trade those markets you "know" and can "feel". Markets you've been following for a while, maybe know a thing or two fundamentally about. Like getting to know a person before you apply some general psychological observations on them. But that's my personal rule.

Anyway, I've been following AUD/USD and GBP/USD, since they offer a great opportunity to put some of our thinking into practice. Let's see Cable! Last week ended with a beautiful stop run (admittedly less fun for the sellers), which had closed squarely into the post-Brexit balance zone. Could this be the same case as with the EUR/GBP trade discussed above? A retest of the "last buyers push higher"? I would consider those two consecutive highs marked by blue circles also retests of the same zone, but let's hear what others say.

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In any case, no new buying seem to have ensued following the stop hunt, and the price have since retreated slightly - I take it, those are profit takers from way below, and their liquidation orders "struggle" to find many buyers, thus price slowly descends. Anyway, this could possibly be a beginning of a retest, and whether it's true or not, I would like to test my understanding of what has been discussed here, to try and identify the "target area", where we should watch to "see" the change in the order flow:

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Before, I would consider that area to be directly above the highest high of the broken-out-of balance zone (marked by the blue line, more or less where the price is right now). This is also where I would throw my order "into space". But this thread made me reconsider. So, would I be remotely correct by seeing that boxed-in area as the sellers "last stand", and thus - the more probable scenario? I'll explain my reasoning:

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H1 is particularly revealing about Friday's action, as we can see how each of the three massive bullish candles formed by taking out cluster of buy stops above successive previous swings high. The only stop hunt which had resulted in an exhaustion and balancing, and where the sellers last came in to give it a fight is the one I've boxed in. This is also where I would expect the price to come back to in case of a retest?

It's also interesting to note that after those three massive stop hunt candles on Friday the price did manage to advance slightly, probably on a very light volume - those are the late buyers, who tried to catch the hype train, and who are slowly getting squeezed to liquidate today.

Geez, I'm hoping I'm not spamming here too much. You guys tell me!
  • #323
  • Jul 17, 2017 1:50pm Jul 17, 2017 1:50pm
You guys surprise me how fast you catch on...I am humbled and gratified...WOW...

Your graphics are pretty much spot on. I would only add one small "added" notion to your 12 hr chart. There are a couple of zones here that come into play, where sellers were able to get the upper hand before the big "woosh" upward. I have drawn them in here below:
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Note there is a large area where they overlap...I am inclined to look in that area for the exhaustion. Experience tells me that it will probably be something like, deep enough to stop out the most recent longs, and encourage (read "sucker in") new shorts, but not so deep as to trigger the majority of new longs...just my personal thoughts...so I have moved these zones over to the right and have colored in the overlapping area.
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Keep in mind too that this is the area where I look for the exhaustion to give me a "heads up". This is a very wide area so anything could happen, but if price plows right though with nothing more than an end of day "wiggle" then down again, I will have prevented an unnecessary loss...

We'll all watch this one together...good set up.
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  • #324
  • Jul 17, 2017 2:36pm Jul 17, 2017 2:36pm
I was long gbpUSD off my first zone last week, since been closed out. As far as where I'd look to get short if you look off to the left there's an area a little ways down where buyers came in before. I'd be looking in this area, it also coincides with some of those tops where sellers had control before, buyers know if prices get back down below there sellers could take over.

Much of the time I have key areas that are clear, so I'm comfortable with a set and forget trade. These areas are messy, I'll wait and see what we get.

It looks like we'd all be interested in taking action in the same general area. I'm not sure if price will get all the way there...time to wait and see!
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  • #325
  • Jul 18, 2017 4:35am Jul 18, 2017 4:35am
Good! I'm starting to learn something Also looking at the price today, I cannot but ponder on the unpleasantness that would ensue should I have entered my order like I did before, out in space. I am grateful for the education.

One of the things I indulge in from time to time, is to check out trading forums for the umm.. "crowd" perspective. The noobier the better, because I can relate to that perspective from my past. Looks like quite a few people got long GBP/USD on that little push higher post the stop hunt, just like I suspected. Maybe their liquidation really can push the price into the ~1.295 area, we shall see.

And here's AUD/USD. I didn't post about the Aussie yesterday, since I wanted to see whether or not it would take out the last bastion of buy stops on top of this balance area's highest high from April last year. It did, with a bang.

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So far this doesn't look like just a stop hunt, could we be in for a real breakthrough and a real long term bottom? Doesn't matter! Since we observe, not evaluate, right?

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If we look at H12, what do we see? I see a small selling attempt, which happens, unsurprisingly, right around the level of that mentioned highest high from April. This would be a very tempting place to look for a buy opportunity, should the order flow give us the clues. But it is so small! There's a bigger area down below, but it is quite well inside the borders of the balance zone, and - from what I've seen at least - price rarely penetrates so far back once a convincing breakthrough is achieved.

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What do you guys think, Don? SW, I think you would say that, similarly to GBP, that bottom area is where the buyers have come in before? I've marked it below on a weekly:

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Excellent discussion, thanks to everyone!
  • #326
  • Jul 18, 2017 9:18am Jul 18, 2017 9:18am
ZeleniCaj...I wanted to just point out a few things about where you are looking for your zones. First of all I want to say you are correct in the fact that you are looking for the point where the opposing order flow is being overcome. In this case buying is overcoming selling. I want to point out that your zones are encompassing a great deal of price action that may end up confusing you if price comes down into these areas again. I am hoping to focus your attention a little more precisely. I am using your 12 hr chart to make my point but the point applies to any time frame you choose to look at.

Of you are of a mind to enter at the best possible point in a retrace, you must focus your observation in that area. This then brings up the question, "...are we at the end of this retrace?" This is where you will need to find the area of "last stand" and order flow change from balance to dominance, and from there you can more accurately draw in a retrace zone.

On your 12 hr chart the higher zone you have draw is correct and may serve as a stall or reversal point in the future. However the lower box appears to capture the entire last retrace...which might be OK if you are looking at that on a weekly or higher chart, but I would more accurately draw these areas as you see here below.
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Note how in these lower areas, you were given several opportunities to buy at the bottom of a retrace after this chart showed a clear bullish trend had developed. and this might have positioned you for the eventual break out...again "hind sight is 20/20". However, even if you were of a mind to take profit at the top of the larger (weekly) range, and keep a smaller part to run, this would've also worked.

My point here is, from experience I know that on what ever time frame you are viewing the market, you need to try and be as close to the last opposing order flow as possible so you can take advantage of the closest possible entry into the prevailing order flow...that is usually where no one wants to enter, because the price is moving erratically and appears to be failing...this is where you have your best shot at a profitable trade with little exposure to risk.

I hope this helps you fine tune your skills a little more. You are understanding quite well and I congratulate you. I hope you don't think this is being to "picky" but I see some real skill here, and am hoping to foster it with a little adjustment in your thought process.
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  • #327
  • Jul 18, 2017 9:37am Jul 18, 2017 9:37am
Update on USD/MXN:
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Price continues to move in my direction but I have noted these last couple of days that there is a diminishing "exuberance" for selling. While price continues to drop these might be the start of some serious balancing of order flow. My opinion is that at this point, the selling order flow is mostly made up of new buyer's stops being hit. I don't see any real push in the selling order flow and it appears to exhaust as soon as it establishes some dominance on the intraday time frame. I will be curious to see if we get another "whoosh" downward as the new buyers are stopped out at the bottom of this week's low. If that does NOT happen it will tell me that no new shorts are interested, and I might need to tighten stops further.
For now, I have moved my stop down to just above the top of the current balance zone that can now be clearly seen on the 12 hr chart. (in the middle). I would imagine that anyone still holding shorts (with a similar profit time frame) have also moved their stops into this area. Thus I'm thinking the more likely "whoosh" to occur will be buyers (shorts stopping out in profit). This stop locks approx 730 pips.
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  • #328
  • Jul 18, 2017 11:37am Jul 18, 2017 11:37am
Quoting ZeleniCaj
Good! I'm starting to learn something Also looking at the price today, I cannot but ponder on the unpleasantness that would ensue should I have entered my order like I did before, out in space. I am grateful for the education. One of the things I indulge in from time to time, is to check out trading forums for the umm.. "crowd" perspective. The noobier the better, because I can relate to that perspective from my past. Looks like quite a few people got long GBP/USD on that little push higher post the stop hunt, just like I suspected. Maybe...
Zelen that would be an area potentially, but my guess is there will be opportunities before they market gets all the way back there. On this on you had to zoom out on the weekly to find the most recent area where buyers came in. I've marked them. As you can see the top one already gave you an ok trade, I wasn't watching this market so missed it. I'm on a wait and see for this pair.
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  • #329
  • Jul 18, 2017 11:42am Jul 18, 2017 11:42am
Couple trade updates. This missed my entry by a pip.

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Missed entry be a larger margin, worked out well.

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Caught this one, nice 3:1.

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Stopped on this one.

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  • #330
  • Jul 19, 2017 5:46am Jul 19, 2017 5:46am
Hey SW! Could you please explain your reasoning for entering your GBP/CAD and GBP/CHF trades?

Am I understanding correctly that on GBP/CAD you have entered at the top of that last balance zone? What made you take that decision? To me it looks like this last balance are was sitting right beneath the previous, smaller balance zone, so it's definitely good thinking. But why did you enter at the top of that area? Was it where you were expecting sellers to come in? Also, were you caught in that stop run, that quickly reversed and went the other way? If so, was it, like - tough to sit it out? Psychological aspects are very important for me to know

Also, could you explain your GBP/CHF trade?



Quoting DonPato
I hope you don't think this is being to "picky" but I see some real skill here, and am hoping to foster it with a little adjustment in your thought process.
Don, quite on the contrary! Adjustment in my thought process is all I'm looking for, thanks so much for putting the effort into this. I really am very grateful.


Quoting DonPato
Note how in these lower areas, you were given several opportunities to buy at the bottom of a retrace after this chart showed a clear bullish trend had developed. and this might have positioned you for the eventual break out...again "hind sight is 20/20". However, even if you were of a mind to take profit at the top of the larger (weekly) range,
I have taken good notes of the zones you've highlighted, but let me ask you this - would you enter at those opportunities you mention? Do you consider them valid? I mean, bullish order flow dominance aside, this IS a top of a larger balance zone. Just for the sake of the discussion, of course. Because here, I would think: "okay, dominance is building, but even if it results in a whoosh, there is no evidence that buyers will step in to take it any further".
  • #331
  • Jul 19, 2017 9:56am Jul 19, 2017 9:56am
Quoting ZeleniCaj
... I have taken good notes of the zones you've highlighted, but let me ask you this - would you enter at those opportunities you mention? Do you consider them valid? I mean, bullish order flow dominance aside, this IS a top of a larger balance zone. Just for the sake of the discussion, of course. Because here, I would think: "okay, dominance is building, but even if it results in a whoosh, there is no evidence that buyers will step in to take it any further".
First of all thank you for your compliment. If you remember, I said, it was "hind sight" meaning of course this is easy to say NOW, that we know what already happened. However, If I had been looking for a long opportunity, I would've been looking from the bottom of that larger range. And as soon as it was clear that a bullish trend had developed on the smaller time frame, I would enter and target the top of that range, with at least a portion of my position. If I thought or suspect, or even if I just was curious to see if a break might occur, I would hold the remaining portion of the trade (like I did with the USD/MXN) to see if any further potential existed in this move. So yes I would've traded those opportunities.

This is a double edged sword. Sometimes the top holds and you realize only 1/2 of the potential profit available if you had taken the entire position at the target. So it is individual both to the trader, and the circumstance. I usually judge it like this: If there is an immediate "whoosh" I will hold further. If it starts bouncing around...I exit and deal with what comes next, or just move on to another trade somewhere else.
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  • #332
  • Jul 19, 2017 10:01am Jul 19, 2017 10:01am
Update on USD/MXN - short:
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The weekly low set at the beginning of the week seems to want to hold, and the intraday charts are showing some peak volume buying. I am now tightening stops along the intraday charts to preserve profit. This stop locks 800+ pips, which is almost double what the first target gave. Usually when the market gets this far out of balance, some retrace (or re balancing) occurs before the next major move down...so we'll see what happens.
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  • #333
  • Jul 19, 2017 10:13am Jul 19, 2017 10:13am
GBP/USD looks like it has now stalled and late buyers are being absorbed. This is causing the price to move sideways, a balancing act that now extends out to the 12 hr chart. Price has not yet retraced into my target zone, so even if we get a buying dominance move out of this zone, I will most likely NOT participate. I half expect a "fake break" higher, to sucker in more buys, so larger longs can liquidate. Then price may come down in to my target zone, and I will have to watch and see if it reverses or pushes through
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  • #334
  • Jul 19, 2017 10:23am Jul 19, 2017 10:23am
Quoting DonPato
{quote} And as soon as it was clear that a bullish trend had developed on the smaller time frame
Ah, the million dollar issue So far this clear vision of a trend/dominance developing on a smaller time frame evades me. Even in hindsight, even on the successful trades I've taken.
  • #335
  • Jul 19, 2017 11:28am Jul 19, 2017 11:28am
Quoting ZeleniCaj
Hey SW! Could you please explain your reasoning for entering your GBP/CAD and GBP/CHF trades? Am I understanding correctly that on GBP/CAD you have entered at the top of that last balance zone? What made you take that decision? To me it looks like this last balance are was sitting right beneath the previous, smaller balance zone, so it's definitely good thinking. But why did you enter at the top of that area? Was it where you were expecting sellers to come in? Also, were you caught in that stop run, that quickly reversed and went the other way?...
Zelen,

I've attached a couple charts that hopefully give a better idea of what I was thinking.

You'll see that typically when I'm wrong it's typically a structure change, a really big move, I don't typically get stopped out by a couple pips.

As far as sitting through it that's where proper money management comes in, you need to be at peace with losing the amount you're trading. Psychology is key for sure, you need to be in your comfort zone so that whether you lose or win you can think clearly.
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  • #336
  • Jul 19, 2017 11:29am Jul 19, 2017 11:29am
2:1 on this one
couple more trades
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At BE on this one, we'll see

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  • #337
  • Jul 19, 2017 11:45am Jul 19, 2017 11:45am
I've been thinking some on trend. Time frames are relative, depends on which you chose, it's just a snapshot of the market flow. But really trend is relative too. I say I trade with the trend, with the market structure, but that's only based on the time frame I chose. Most traders are against buying tops and bottoms but really a top/bottom of a "trend" could just be a pull back of a larger time frame.

I don't really know what applying this thought process looks like systematically. I've taken this USDJPY trade against daily structure BUT it's really just a weekly pullback.
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  • #338
  • Jul 19, 2017 12:37pm Jul 19, 2017 12:37pm
Quoting DonPato
GBP/USD looks like it has now stalled and late buyers are being absorbed. This is causing the price to move sideways, a balancing act that now extends out to the 12 hr chart. Price has not yet retraced into my target zone, so even if we get a buying dominance move out of this zone, I will most likely NOT participate. I half expect a "fake break" higher, to sucker in more buys, so larger longs can liquidate. Then price may come down in to my target zone, and I will have to watch and see if it reverses or pushes through {image}
agreed don. I think we may get a snap back to a lower level. price is at the top of those highs which often would bring buyers in, which it has to a point. but I'll be looking for lower.
  • #339
  • Jul 19, 2017 3:52pm Jul 19, 2017 3:52pm
Hey SW! Thanks for your explanations. I will study them in detail.

Quoting swTrue
I've been thinking some on trend.
I've been thinking about that alot, too. One could say that monthly/weekly is the "true" trend, because that's the largest TF, but it's still inaccurate. To me it looks something like this:

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So I've found that it's better to replace the concept of the trend with the search for the overall order flow picture. Even if that picture does include "trends" in different directions. The order flow perspective give those trends meaning, and thus it no longer matters so much if you trade with or against them. It's like being strictly contrarian and going against the crowd no matter what - soon you'll find out that the crowd is wrong just about 50% of the time, and not 100% as contrarians will have you believe. Not great odds. I've found that it's much the same with the trend, who is supposedly your friend.

That being said, I've always wondered if it's possible to trade order flow balance/unbalance on real small TFs (1min/5min) by disregarding the larger picture? Not that I would like to try, at this point at least.
  • #340
  • Edited Jul 20, 2017 2:24am Jul 19, 2017 10:43pm | Edited Jul 20, 2017 2:24am
Hi,

I'm usually more of an occasional silent browser on FF but I wanted to take a few seconds to post in here to say thank you to DonPato for taking the time to share your knowledge with strangers. By reading through your thread, it is very obvious that you know what you are doing and it translates into clear explications.

I've been trading order flow for about a year and it's been going pretty well but while I was going through the thread it made me go through my journal to realize that I often get caught trying to pick the top or bottoms with good zones but they often end up getting busted. I see from your trades that you don't rush to get in, as you said 85% of the time price will come back to the "break".

I plan on reading gspajon's thread and Alan's book to be able to contribute to the conversation in a meaningful way and I'm convinced that I'll be able to fine tune my technique with all the material you guys are providing. So I might not be very active for a bit but I'll be reading for sure.

I guess I'd have a question for you guys and hopefully, it's not too basic.

Regarding the entries how wide do you usually consider a zone for entries?

For example, Would you guys have entered on this trade at the top? Because the way I was trained my Sell limit would've been too tight to be able to get back in this trade


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Thank you for your help and keep up the good work, I really appreciate it and I'm sure a lot of other more silent traders do too!
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