Trading with Deadly Accuracy

I shall be following this one, but I will be so upset if it turns out to be only 90% accurate.

Steve.

As price moves it will hit a ceiling (resistance) or a floor (support) which it can not penetrate with ease. At these levels you will see on your charts turning points in the price.

When the price penetrates these levels we have a breakout.

When we have a breakout of the resistance level the price will initially accelarate away from it very quickly. It should then make a parabola type u-turn and retest the resistance level which now acts as support.

Which ever time frame you are viewing this breakout on, is the same time frame on which you will see the parabola. ie If you are looking at the 15 min time frame, you must look for the parabola on the same time frame, or higher. This formation is something that will take place over several candles.

Once the price has accelarated away, many orders are placed at this level in anticipation of resistance turning in to support.

So what happens to all of those orders when what should have happened after a break out did not happen?

Answer: They dont go anywhere. They stay right there for hours, days, weeks and even months, waiting for the level to be tested so that the trend which was initiated by that break out can continue.

(Charts to follow)

Signing up. You are on a roll. Keep it going WMD.

So to summarise this what we are looking for:

1. Resitance
2. Breakout
3. The failed parabola (or hook)
4. The price is moving away from our level

When we see this we have a resistance level that has not been tested as support.

This is our pattern.

Here we have gold. Very clean chart.

This is great! - so kind of obvious once its spelt out, a great insight...more please

Ya it is unfolding nicely. Lets see

gbp/usd live.

Here is Nzd/Usd. Its been in a strong trend, so again very clean chart. Failed to test 6890 as support.

Aggressive entry is by placing a pending order at the level. We have no expectation that this level should be breached. Stops are placed equally aggresively at 10 x the spread.

Conservative entry is by waiting for a bounce from the level. If it holds to the pip, this is considered confirmation. Then long/short with a sl 10 x spread below/above the original level.

Exit half the trade at 1-1 rnr or at the next s/r level which ever comes first. Stops can be tightend at this point but should not be placed in the line of fire and remain on the other side of the level.

Sit on the remaining position looking for a significant retrace of the move that bought price to this level. A complete retrace is not unsual. Only kill the trade if breaches the level.

As you can see from the charts, entering in to these trade requires patience. Sometimes it can take days and weeks for these levels to be tested. So when you are in the trade, excercise equal patience by holding on to it and you shall not fail to be rewarded.

Examine the chart with your eyes wide open. This trade setup is obvious. Everyone can see it. If you have to force yourself, then it is not there.

I have described how i manage my trades, however once you are in it, trade management is your responsibility. Take what the market gives you. Stay in your comfort zone when it comes to taking risk.

Pay more attention to setups on longer timeframes. The levels pretty much always hold. It would have to be a very bad day when they dont.

Most of my trades are based on levels found on the hourly and 4hr charts. The same principles can be applied to smaller time frames but trading them requires more discretion.

Feel free to discuss this method and post potential setups.

If you feel this thread is of merit then give it a rating so that more people can benefit from it.

If you like where its going let me know. It'll give me wings

Once we are familiar with identifying s/r/bo levels, we can advance to the equally deadly strategy for trading diagonal price movement. That should get the day traders excited.

@ wmd

Good job!

Thanks for sharing.

Great stuff wmd. Keep it coming.
Thanks!

Keep it coming, you're doing a fantastic job!

G'day WMD
So this would have been a failed trade or have I got it wrong?
Cheers

A great thread! Certainly a profitable trading. But 100%???

I will be watching this thread closely.

I will try to answer if I am right.

First of all, you are trying to catch a sharp falling knife. As wmd stated, that is an aggressive entry. That was still not a problem. I feel your stop was very small. It should have been below the 1.48202 level.

Next thing I can see is, you haven't drawn your S/R line at the exact tip of bars. If you had entered at the same level later on when price started to come up, there wouldn't have been a problem at all!

Sorry if I am wrong. I am just practicing the wmd method.

I say, the Trend Following setup that you mentioned is classic and practical, but you refere mostly to AUDUSD and Gold, which have been acted like a textbook since March, but you cant see the same nice pattern in EURUSD , I'd say its tradable with this setup but you need to treat it differently than commodity currencies,

Anyways, very nice and simple explanations for new traders, they should appreciate it a lot. BTW, post some of your live trading setups in AUDUSD forums, we can benefit from your thoughts