Trading with Deadly Accuracy

Hi WMD informative and interesting thread.

Have got some good tips from the first 4 pages s looking forward to the rest.

While I can see this working well on the higher t/fs can the same be said of the lower t/fs

ST

This setup works on every time frame. The smaller time frames require more discretion. Sometimes it can difficult to spot the break out. I'm sure that there are some skilled traders following this who have an eye for it. I prefer the bigger picture.

I was looking at a reversal pattern today and had this untested level as my target...I missed some of it as it happend so quickly but could have made money down and up....Thanks WMD..keep it coming please...

Yeah can't wait for the diagonal stuff, intriguing topic. Thanks wmd

Nice work 007.

I'll be posting more chart setups soon. I'm not the most eloquent of people and my spelling often leaves a lot to be desired aswell; so i'm putting together a catalogue images which i'll be using to explain various setups.

Currently looking to long at market on gbp/chf. Based on daily chart pullback to support. 16880. small risk, huge reward.

Sorry i couldn't update earlier, i'm not really a multi-tasker (Windows 7 was not my idea).

I stumbled accross the trade while flicking through the charts so couldn't give much notice.

Heres what i was looking at with the cable swissy trade. The level was picked from the daily.

I'm a little apprehensive about how far this one can go; you'll understand from the hourly. I've exited 60% of my positions for between 25 to 30 pips and now moved my stop to 6860 so i can sleep easy tonight.

I'll check in again tomorrow.

Thanks wmd, really appreciate your posts. I'll be taking more notice of S/R levels in future. Will watch this thread with interest.....

One of the best threads I've come across by the way.

Very informative indeed. It would be very nice if you can describe your exit strategy.

I usually look to close half of my positions when my r & r is 1 to 1. So if i set a 50 pip sl, then i will close half the position at 50 pips and ride the rest as far as it can go.

My usual expectation is for atleast 60-100% retrace. I mark potential targets on the way up and use those for exits.

Although this style of trading has positive expectancy i try to remain flexible on tp targets. Some times i will close out positions for just 10 pips because the chart indicates that my level will not hold. Dont get stuck on the idea that the exit needs to be such and such pips and nothing else. You have to take whatever the market gives.

I never move move my sl above the entry level. I will have closed out all my position long before the price ever reaches there. My sl is more of a fail safe against extreme price movment. This does not mean that you can't move your sl. Locking in some element of profit is always worth it. This depends more on your style.

I hope this doesn't sound wishy washy. But in a word, be flexible. A few pips in the hand is worth several in the bush.

I've recieved a whole bunch of emails and pm's since starting this thread. Just wanted to say thanks for your support.

If you have questions about the method, i would prefer you to post it on to the thread so that every one can gain.

Also feel free to contribute to the discussion. I'd especially like to see potential setups your eyeing. That way i dont have to do all the hard work.

Question:

I saw your recent posts regarding the resistance, breakout and failed parabola pattern. I have been trading these patterns for some time along with 50%Fib levels and resistance/support levels. My question is how do you know when you have a top and trend reversal such as the current Euro. Right now we have a resistance level of 1.5062. Currently price is at 1.5000. Does one look at the prior level of resistance and assume it is a top and place a sell order there along with a stop approx. 20pips above? Or do we wait to see how price reacts to that level and if resistance holds, meaning price starts dropping on the smaller TF's and showing tweezer candles on 1H and 15M - only then do we enter our short? I used to be a momentum trader in the past, however I'm now looking at setting my trap and letting the market come to me, instead of chasing the market.

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What we are trading is a parabola or arc shaped pullbacks or corrections to the break out level.

The direction of the breakout defines the trend. When we see downward breakout on the longer time frames we can determine the overall trend to be down.

If we see upward breakouts then we determine the overall trend to be up.

This method is a trend follower, not contrarian.

Take care not to second guess the market where you have immediate highs or lows. Never asume tops and bottoms. Its a sure recipe for getting burnt. Just wait for the breakout, when you get a pull back, trade it.

Some thoughts. This theory of SR not being tested before is very interesting. Seiden identifies supply and demand of clusters of price at extreme levels. The current GU has a cluster at 662 for a long. Seiden also suggests clusters (dips) at extremes that have not been tested before have greater probability of trend continuation. However according to your rules if we go to the left a few bars we see that this level was ignored before and therefore does not constitute an entry level.

I've boxed the breakout zone from the 15 min time frame. I'm not keen on an aggressive entry here. We'll need to watch the pa around the lower trend line.

The horizontal line is taken from the hourly.

Hi,

Do you also use trendlines that arent flat lines on support and resistant lines?

Im trying to understand the method, I trade naked charts trendlines etc, but you trade it when the resistance has not been met?

Sorry for sounding stupid just want to understand more.

Oz

I'm not familiar with Seiden, but sounds interesting. Do you have any good links i can follow it up on.

What i've seen is that you can get a good bounce from the bottom of a cluster. Usually atleast to the top of that cluster. I've also noticed that when the price moves straight through a cluster, ignoring it completely with a long bar, a new cluster forms beneath it from which you get a reversal.

Its all part of the 'what should have happened but didn't' school of thought.

I believe you can answer your own question.
What is support and resistance?
Why do you think price has a tendency to find support and resistance at these areas in particular?
Why was price unable to retest the S/R line in the first place?
What implications might this have when price does retest this level in the future?
Where's the buyers?
Where's the sellers?
Where's the value?
Where does the loser get in and where is his pain threshold?

I'm not messing you about answering your question with a bunch of abstract questions, but these are the basic questions I ask myself and I believe you should ask yourself every time an order is placed. The market is comprised of orders which have been placed by participants in the hope of gain and in the fear of pain. Figure out where the orders are.

I'm a big fan of trendlines, my approach may not be orthadox, but i doubt its unique.

On a downward diagonal move the orthadoxy are looking for a breach of the upper trend line.

I pay more attention to the lower trendline with the assumption its going to hold. If your a scalper or intraday trader these ltl's can present a lot of opportunity's and when the reversal comes, you will have caught it at the beggining.

For the purpose of trading the breakout pullback, it adds strength to the horizontal level if coincides with a diagonal support.

What if there are several hooks that approach the s/r level but don't hit it? does that make the level void because there is no longer a smooth parabola approaching the level?
You can see in my attached chart.

wmd:

Regarding "diagonal trading", in your post #33 you stated that you
were going to explain diagonal trading further. I look forward to
reading your explanation of it.

thanks

hi porky,

we are looking for chart patterns in a particular order.

firstly, a breakout
secondly, a hook
thirdly, for the price to fly away it should go and make higher high or a significant move above the hook, some kind of lasting vertical/diagonal move. (see the gbp/usd chart from earlier post)

then we can place our entry at the price where the breakout began. The breakout candle will be long and vertical.

i have posted some charts earlier in the thread with very clear examples. i struggle myself on smaller timeframes as the pa is not always clear. what i would say though is that you should always look for the obvious. if its there everyone should see, if everyone can see it everyone will trade it.

I also want to mention something about identifying s/r levels. The s/r level is not always the most extreme point price went to before retracing. Usually it is the tip of the candle preceding it or the one after it. Sometimes you can get multiple failed attemps at breaching it. One of the things i think about when i am looking for the s/r is to say 'the price couldn't hold above there'. Take a look at the gpb/chf daily chart from earlier post to get an idea of what i mean.