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Stop Hunting using Sentiment and Market Structure

  • #21
  • Aug 29, 2019 10:11am Aug 29, 2019 10:11am
I have a problem with an apparent contradiction in your first post. You indicated that support and resistance levels don't work as expected yet you indicated the potency of market structure. Technically, a key aspect of market structure trading is the potency of support and resistance zones.

KP
Do your homework, follow the footprints of smart money
  • #22
  • Aug 29, 2019 10:16am Aug 29, 2019 10:16am
As I was posting the previous post, there was a spike up in EURUSD. This pair has SLOWLY been moving to target and to continue to take out stops below, retail had to be cleared out first to create a double selling pressure.

This is why I usually take some off at structure and also trail by two swings, the first swing is usually retail stops. MM's can get in at a better price before moving lower and take out the weak hands.

Taking some off the table is good practice, and if you had the balls you could have had orders to sell at the first swing high where price spiked too before continuing down. I often do this but did not on this trade. I still have a sell position on.

Will price take out liquidity below? It's still high probability unless news, or a Trump Tweet changes that

I may make a video going over these concepts a bit more. In the meantime, let's see what happens.
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  • #23
  • Aug 29, 2019 10:37am Aug 29, 2019 10:37am
Quoting KeenPips
I have a problem with an apparent contradiction in your first post. You indicated that support and resistance levels don't work as expected yet you indicated the potency of market structure. Technically, a key aspect of market structure trading is the potency of support and resistance zones. KP
There is no contradiction. I said the traditional concept of support and resistance is a lie.

Using the concept of Support and Resistance can be futile because when someone says "Support" they are assuming that price will hold because there are a lot of buy orders or buyers at that zone and price will go long from there. By saying "Resistance" then there is an assumption that there are a lot of sell orders at that area that will make the area a great place to sell. Typically this is just a single line where price seems to bounce from. How many times have you tried this only to have your stops blown through after?

If futures, you could gauge the buying and selling pressure because you can see the bids, offers, limit orders, and the buying/selling pressure.

In Forex, we do not have that luxury but there are concepts that can be exploited instead.

I have found that immediate, short term behavioral trading psychology and sentiment steer price in a direction that will likely continue in that direction unless something changes that. And all we are looking for as traders is direction and probabilities that it will work out. Then we manager our risk and let it play out.

Are there value areas that price gets attracted to time and time again because buyers and sellers can agree that a zone is a fair value? Yes.

But are those areas guaranteed support or resistance? No.

Do those areas make for good targets or to take some off the table? Yes.

If price blows through those areas and pulls back, is it a good entry point for continuation? Yes.

Do Banks and MM's know where the liquidity is - just like a price ladder in futures? Yes.

Hope this helps clarify.
  • #24
  • Aug 29, 2019 10:39am Aug 29, 2019 10:39am
Wonderful thread. As AUDUSD is currently 80% long, do you expect a move down to the red line?

Apologies if I am misunderstanding - but you seem to be joining the 'stop hunt' but aren't MMs/etc looking for liquidity because the retail traders are actually correct, just highly levered? Effectively you are trading into an expected bounce, otherwise you aren't participating in a stop hunt but an actual move.

Wouldn't it be safer to buy the dip, i.e. to buy EURUSD at 1030-40?

https://www.tradingview.com/x/CP6dKlbJ/
Hypocrite lecteur, mon semblable, mon frere!
  • #25
  • Aug 29, 2019 10:50am Aug 29, 2019 10:50am
Where are traders trapped?

Where is the pain?

Where are their stops?
  • #26
  • Aug 29, 2019 11:00am Aug 29, 2019 11:00am
If this was what you wrote and stated in your first post, I would have made a totally different comment. From what you wrote below it is clear that the problem is your concept of 'traditional' support and resistance. And also your idea of how it is traded or beng traded. Only novices will trade a support or resistance the way you stated and I hope your thread makes it clear and help its followers know how to trade support and resistance.

Trafe safe.

KP

Quoting SentiFX
{quote} There is no contradiction. I said the traditional concept of support and resistance is a lie. Using the concept of Support and Resistance can be futile because when someone says "Support" they are assuming that price will hold because there are a lot of buy orders or buyers at that zone and price will go long from there. By saying "Resistance" then there is an assumption that there are a lot of sell orders at that area that will make the area a great place to sell. Typically this is just a single line where price seems to bounce from....
Do your homework, follow the footprints of smart money
  • #27
  • Aug 29, 2019 11:03am Aug 29, 2019 11:03am
Is the liquidity area support or resistance? If we call it support, then we are choosing the top arrow. If we are calling it resistance, we think sellers will sell there. But the bottom line is we do not know at this time and for this trade it does NOT matter. We already have a target area.

We have to see how it plays out if liquidity is taken. The trade will have to develop. The traders who become trapped by picking a side at that point will help determine future direction.

When you can clearly see one side being trapped more than another, you'll have a clue at which direction price is likely to go to create more and more pain until they add to the short term directional move.

Someone will say, aha, see it is support, or resistance. But really it is just behavioral psychology playing out by trapped traders who chose the wrong direction.

When price gets there again in the future, there will be different players and psychology at play.

This is why I do not think of it like "support or resistance." It is trapped traders exiting their positions at close to breakeven as possible at a small loss instead of a large loss... and momentum traders jumping in on the pullback.
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  • #28
  • Aug 29, 2019 11:13am Aug 29, 2019 11:13am
Quoting KeenPips
If this was what you wrote and stated in your first post, I would have made a totally different comment. From what you wrote below it is clear that the problem is your concept of 'traditional' support and resistance. And also your idea of how it is traded or beng traded. Only novices will trade a support or resistance the way you stated and I hope your thread makes it clear and help its followers know how to trade support and resistance. Trafe safe. KP {quote}
I appreciate your comments, but I am not trying to teach how to trade "support or resistance." Even trading value areas would need some sort of understanding of how price moves.

If you were what I'd prefer to call a value area trader - from one value area zone to the next... you need your directional information from somewhere. Either price action, actual price ladder information, sentiment, news figures, etc.

What I am trying to show is that retail positioning is typically wrong and their liquidity is a great target for entries and exits using the most recent market structure.

You could trade any style and take advantage of these concepts and ideas to incorporate into your style.

I am simply aiming at retail stops and using their positioning and market structure for bias, entries, and exits.
  • #29
  • Aug 29, 2019 11:17am Aug 29, 2019 11:17am
Noted.

Trade safe.

KP

Quoting SentiFX
{quote} I appreciate your comments, but I am not trying to teach how to trade "support or resistance." Even trading value areas would need some sort of understanding of how price moves. If you were what I'd prefer to call a value area trader - from one value area zone to the next... you need your directional information from somewhere. Either price action, actual price ladder information, sentiment, news figures, etc. What I am trying to show is that retail positioning is typically wrong and their liquidity is a great target for entries and exits...
Do your homework, follow the footprints of smart money
  • #30
  • Aug 29, 2019 11:19am Aug 29, 2019 11:19am
Quoting SentiFX
{quote} I appreciate your comments, but I am not trying to teach how to trade "support or resistance." Even trading value areas would need some sort of understanding of how price moves. If you were what I'd prefer to call a value area trader - from one value area zone to the next... you need your directional information from somewhere. Either price action, actual price ladder information, sentiment, news figures, etc. What I am trying to show is that retail positioning is typically wrong and their liquidity is a great target for entries and exits...
You can't show a system but can you show me an example of how would you best enter the last EURUSD downswing from 1.1165 and not what you really did, or how you trade.
Looking for profitable short term trades ...|
  • #31
  • Aug 29, 2019 11:23am Aug 29, 2019 11:23am
My thoughts on support and resistance or levels are that price often comes well below or above before turning. If support and resistance worked it would be easy and everyone would be making money. And as far as stop hunts I believe the market sometimes has to go to stop locations to get orders filled. Here’s a example of a level or support on USDCHF. There was a double bottom then price went below before coming back above this double bottom
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ex nihilo
  • #32
  • Aug 29, 2019 11:30am Aug 29, 2019 11:30am
Quoting Js3mwtRc
{quote} You can't show a system but can you show me an example of how would you best enter the last EURUSD downswing from 1.1165 and not what you really did, or how you trade.
I saw the sentiment was heavily long and getting heavier when price was below the red line so I put sell orders in at the red line and got filled there.

That's where understanding market structure and how price typically behaves comes in.

Did price HAVE to hit my sell limit order? No.

But I trade the probabilities, and adapt as the information unfolds.
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  • #33
  • Aug 29, 2019 11:40am Aug 29, 2019 11:40am
Good pont there mate. Let me add that there is no certainty that any S/R zone will hold. The issue is probability. Any S/R zone that sees a setup price action and other confluence factors is more likely to produce a better result than one without such confluence factors. So a trader has to look for such a zone and such factors, offering a confirmation, before entering a trade. And that is where structure-based price action trading comes into play.

Trade safe and prosper.

KP

Quoting Oc6oph
My thoughts on support and resistance or levels are that price often comes well below or above before turning. If support and resistance worked it would be easy and everyone would be making money. And as far as stop hunts I believe the market sometimes has to go to stop locations to get orders filled not. Here’s a example of a level or support on USDCHF. There was a double bottom then price went below before coming back above this double bottom {image}
Do your homework, follow the footprints of smart money
  • #34
  • Aug 29, 2019 11:42am Aug 29, 2019 11:42am
Quoting SentiFX
{quote} I saw the sentiment was heavily long and getting heavier when price was below the red line so I put sell orders in at the red line and got filled there. That's where understanding market structure and how price typically behaves comes in. Did price HAVE to hit my sell limit order? No. But I trade the probabilities, and adapt as the information unfolds. {image}
Thanks for the answer, that spike was too close! Let's see how the price will react at 1.10500, many traders should took profits.
Looking for profitable short term trades ...|
  • #35
  • Aug 29, 2019 11:50am Aug 29, 2019 11:50am
Quoting KeenPips
Good pont there mate. Let me add that there is no certainty that any S/R zone will hold. The issue is probability. Any S/R zone that sees a setup price action and other confluence factors is more likely to produce a better result than one without such confluence factors. So a trader has to look for such a zone and such factors, offering a confirmation, before entering a trade. And that is where structure-based price action trading comes into play. Trade safe and prosper. KP {quote}
I agree and for many years I focused on horizontal zones for magnets to look at entries and exits and used PA for direction as you mention.

I've tried many trading styles over the years and over time began understanding more and more how the market worked and the games that are typically played.

One thing I know for sure is retail traders typically bleed money and that can be found from many brokers articles on the topic.

The day that I decided to find a way to target retail was when I had a shift in the way I thought about trading and how the markets move short term - for any market.
  • #36
  • Aug 29, 2019 11:52am Aug 29, 2019 11:52am
Target Hit.

All positions closed.

What happens next?

I currently don't care. I will monitor sentiment FIRST, then look at market structure, then take a trade.
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  • #37
  • Aug 29, 2019 12:09pm Aug 29, 2019 12:09pm
Quoting KeenPips
Good pont there mate. Let me add that there is no certainty that any S/R zone will hold. The issue is probability. Any S/R zone that sees a setup price action and other confluence factors is more likely to produce a better result than one without such confluence factors. So a trader has to look for such a zone and such factors, offering a confirmation, before entering a trade. And that is where structure-based price action trading comes into play. Trade safe and prosper. KP {quote}
Well there’s certain things one can look for in price action when these supports or resistance breaks. Also these people talking about levels don’t know anything about trading. The market just doesn’t work like that
ex nihilo
  • #38
  • Aug 29, 2019 12:19pm Aug 29, 2019 12:19pm
[quote=SentiFX;12472839]{quote} I agree and for many years I focused on horizontal zones for magnets to look at entries and exits and used PA for direction as you mention. I've tried many trading styles over the years and over time began understanding more and more how the market worked and the games that are typically played. One thing I know for sure is retail traders typically bleed money and that can be found from many brokers articles on the topic.

interesting thread, but didnt you find ur horizontal levels worked? Obviously not every time, but if uve got them in the right spot with added confluence?
from ur chart you post i see a h&s pattern at one of the shoulders of the previous drop, which also looks about the mid-point of the previous swing low. If u missed the best entry (or if adding to first position) then theres a second entry at the previous resistance....which all leads to ur t/p of the low of the most recent swing high. No massive stops needed at any of those levels? Well thats what i see mate - probably missing something!
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  • #39
  • Aug 29, 2019 12:19pm Aug 29, 2019 12:19pm
Quoting tinnitus
Wonderful thread. As AUDUSD is currently 80% long, do you expect a move down to the red line? Apologies if I am misunderstanding - but you seem to be joining the 'stop hunt' but aren't MMs/etc looking for liquidity because the retail traders are actually correct, just highly levered? Effectively you are trading into an expected bounce, otherwise you aren't participating in a stop hunt but an actual move. Wouldn't it be safer to buy the dip, i.e. to buy EURUSD at 1030-40? {image}
AUDUSD and NZDUSD (currently overlapping) are in the strong sell area, and definitely trade-able. If I were to trade them I would just aim for sell side, looking at stops and using market structure to enter/scale in and exit/scale out.

I choose EURUSD because it had retail piling in long over time faster than any other currency. That's why it was such a huge bubble on that graphic I showed.

Current Sentiment
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  • #40
  • Aug 29, 2019 1:34pm Aug 29, 2019 1:34pm
Interesting graphic, is it software based or Freehand drawing ?
It never gets easier, you just get better
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