River Theory Trades

dito,

You will not ruin this thread. Keep up with your posting it is excellent.

If you are long, stay long. A move above 2.0523 targets 2.0616.


New longs can be set on a push down to or through River at 2.0430. Risk should be below 2.073. Targets are 2.0523, then 2.0616.


http://www.rivertheory.com/storage/gbpusd10-25.PNG

DRT, realize your busy thanks for the update and the monthly to.

lilpip and others...

I am going to try to keep up with some "position type" trades for those who like to trade this way.

I started a thread in the Trading Room section called RiverTrend Trades if you are interested.

DRT

DRT, I'm not able to reply or post in the trading room.
We took GBPUSD to 2.0616
I assume we are looking to go short back to 2.0523 area then possibly back to river area 2.0430 area.
We've taken EURUSD longs to 1.4405 I'm looking to go short to 1.4307.
Should I be considering any changes?
Also, can you put up a GBPJPY monthly chart for the new month or any other monthly that you have made, they sure help me know where I'm at when were getting bounced around here.
thanks

November Chart static levels on GBP/USD & GBP/JPY (don't forget, level significance = around that price).

Last chart (GBP/USD) is for study purpose only. Black lines from yearly chart, Blue and Red from monthly chart.

Hi Dito

Thanks for the charts. I am doing my best to understand what your levels represent. Applying the PD Dynamics to the GBP/JPY which is what I trade it shows your level 0 to be 237.03, is this the River level or POC ? . It is also an important Fib level, as are your other marked levels.Is there more to there storey that I can read up regarding the indicator and its application.I have a reasonable understanding of river flow and motion.I would like to be able to learn and contribute.

Cheers

1. We can use Level 0 as POC, and other +/- levels as deviation probability over certain period.
2. While the River level / PD dynamics level (this two are different in calculation,but serve the same purpose) can be use as a "dynamic POC" to gauge current price movement relative to dynamic Value. In short, its a trend indicator.
3. As we know, when market has something to speculate, they tend to push the Price away from POC, and when the expectation has been fulfilled, Price tend to return back to value area. This is the part where our understanding of market psychology come into play. The last part is a lifetime education hehe, Usually old experienced traders has this knacks on their sleeves gained by lifetime experience in the market.

cheers

Dito

thanks mate, it certainly make trading so much easier if you can see the big picture.

Cheers

Price development in November levels. Sometimes I got this feeling that someone out there, controlling a certain price level as a floodgate. (plunge protection team maybe?).

Here's a few chart to compare. It clearly shows, no matter what kind of methodology to draw S/R lines, they all can get lucky . Fibs, pivot, murrey math lines, etc. They all have their own edge, if we know how to 'use' them. What left for us, is to measure risk and gain from our own trade setup.

And this chart, even if they looked like a perfect bounce on a dream world, its bad in terms of risk/reward, merely around 1:1.

nice RR on this setup . What do you think lilpip/oztrader?

Ditto,

I would love to be able to contribute, I have attached a chart so you can see what I consider when making a trade and all I get from the PD Dynamics indicator is the POC or River level area, rightly or wrongly, and then add the monthly Fib levels to get my levels 1, 2, 3. DRT lately has been talking on hourly charts , when we hear from him, so I am somewhat confused.I am working on 4 hour charts and mainly cocentrating on price action and fractals. It is nice to have an idea where the market wants to head and the River level helps in that dept. I would love to know more about the PD Dynamics indicator and how best to use it.

Cheers

Ok, I'll try my best to explain my understanding of river theory, and how to apply it. Be warned tho, I have absolutely near zero understanding about economics, so what I write here only based on logic and could be a wrong perception of the river theory.

1. Price always seek equilibrium, a balanced state of supply and demand.

2. No one knows where the exact level of balance ahead of time. But over time, the supply and demand will balance itself when the price has arrived @ equilibrium.

3. Since stability of value is needed to make economy going, the deviation of price within some periods of time is controlled by market participant.

4. Combining point 2 & 3, logically if one does not know where the balanced value are, they will try to probe it, zones by zones, time by time, and observe the price action in those price zone.

5. Just like electron in their quantum state, if the current zone does not make a balanced state of supply and demand, the price will jump to another zone in the process of seeking equilibrium.

6. In river theory, what we try to do is to capture price movement inside these zones as much as possible, while puting the risk as low as possible outside the current zone.

7. In order to do this, we need to define the zone. DRT has his own way to define this zones, and so does other people that use any s/r type in their trades.
question : will the price turn at the edge of any defined zone, or will price break through the zone? the answer is no one knows.

8. So all can we do is, to observe how price reacts at the edge of defined zone. Does it build value? does the orders on the other side of the zone completely sold/bought off?

9. Based on this observation then we can decide which side of the market we want to take.
question: Will it be the right side? no one knows.

10. This is the point where our trade management and risk/reward probability in a trade has to be used. If the zone we define works statistically, then it would be our edge to count risk/reward and trading system expectancy in a long term.


I'll try to explain how I define the zone/levels later, however it is not the same with what DRT zones/price level, since we never got the chance to know how he come up with those levels. But honestly, I think the levels calculation is not what "River Theory" is all about. Its absolutely much more than that.

Example of point 10 above about trade management.

Yesterday, theres a good setup, but the following price action after that shows a candle close under -3 levels, and does not manage to close back above it. Thats the time when I have to admit that I was taking the wrong side of the market, and covered my long position in a loss (B candle). And after that, a good confirmation candle after a pushthrough (that pinbar after B candle) -3 line shows a begining of downward momentum. So I assume we'll be moving in zone (-3, -4). After this, I try to sell as close as possible to -3 levels to get better RR ratio & lessening drawdown possibilities. With mid level between -3 and -4 as place to cover major position & move stop to breakeven, and let the rest "run into -4 level" (which is rare to happen in monthly periods).

And how I come up with those levels/zone is... *drumroll* : its just a simple price projection , nothing special. The mean of distributed price chart, projected to the low/high of the month, and mirror it to the upside/downside (times 1, 2, etc) thus creating the expansion price zone for the next month.

You can backtest it and define some price behaviour within those level, how price act when they near prev month value, how it retest certain level before its expanding etc.

Dito,

I will have a good look at your info over the weekend and get comfortable with the different levels and their assessment. That is the key to understanding this method. Thanks again

Have a good weekend.

nice setup, good rr ratio too.

Bro i have downloaded those two indicators, can you pm how to set up them? i read this thread but i didnt find any rules and any method. would you be able to explain me about this method? Your help is appreciated in this regard.
Regards