Beyond the Candles

I fing this chart very useful !

M-bullish channel
W-triangle

hello , this is what i call a good thread, you keep the trading simple and profit. I trade for a living but use a totally different method to trade with so i wont mention it again. But for the last 3 weeks i have been trading something very similar to your method and i have been very successful.I often look into these sites looking for ideas or different trading ways but they have to be simple. I shall post charts and trades i make here to keep you in the picture. Happy trading and take care.

Wellcome billy and thanks for your kind words.
The simplicity is the most important factor for my trading.

Be my guest !

Thanks to all who've posted the good info here.

FX Group, sinse most traders suffer from inconsistency- the best solution is often a weekly / daily routine. I was wondering if you could give a bit of insight into your routine. When do you look at charts / for how long / often etc? You seem to cover a lot of products- do you have a filter or watchlist etc?

I know we're all in different timeframes- so anyone else who wants to share I think would be useful to all.

Thanks,
JTD

[quote=jerrythedurst;5511255]

Thanks for the question, very interesting....at every end of the month, I make an analyse of what I watch and put down some conclusions...at every week-end, I do exactly the same thing, planning my trades (directions, levels, entries, MM, targets, etc)..at this point all I have to do is to wait the D candle to close and read the price every single day. Yes I have (make) a watchlist based on my analyses (depend on the methodology applied). The best filters I know are the patience and a lot of hard work..reading the price again and again and again !

Hi Fxgroup,

Thanks for the hints.
Will you please give more explanation on the following topics:

- Stop Loss (Fixed points/money or swing long, etc),

- MM, How to handle when T1/T2 reached (BE, take partial profit, etc),

BTW, thanks FXgroup, DF and others, i learned pretty much from you guys.

B.R.
Raymond
[quote=fxgroup;5516720]

[quote=szpowerx;5517408] I don't use fixed points as SL. My SL are always bellow/ above the PA candle and protected by the first D level.

At the first target, personally, I always make MM (a profitable trade that becomes a loss, is the only thing that it piss me off ) with partial profit at safety SL (not always @BE !).
I have many ways to trail a trade and we will talk about it later in this thread !
The final target is according to my plan and my analyse on higher TF. When the trade reaches my final target, as a personal style, I close the trade, because I want to be within the market as long as I know what the P is doing, when the P respects my plan, I take my profit and the P could do anything it wants !

Do you remember this post ?
Let's see it today and to explain why the 18 is became my final target !

And




This will be a tangent talk about the pure tecnique shown by FXGroup but is very relevant both to the thread and to your success in trading.

1) First Law Of Trading: Capital Preservation.

Live for tomorrow, else you'll be soon out. This means, don't headbutt your way into trading, don't overtrade, get an iron strong discipline.

These are common concepts, they even sound obvious and boring but without putting them into your daily routine, you WILL end up losing all.

You are meant to plan a trade and then trade the plan.

If you go to check your daily bars trade every hour you will get an abusive belly ache, you'll be very insecure, you'll show you don't have respect for your own analysis, the normal market ups and down will make you psychologically sick until you'll break down.

I will even suggest you and the other traders to get the *1* book that certainly every trader should read: Trading in the Zone. The link contains a brief personal review of it and its author.


2) Consequence of the above, be patient. Markets existed before we were born, they will exist after we will pass to better life. There are thousands of markets. There's no need to enter every single little pattern you see.

The market demands respect or it will burn you. If the market decides to follow your plan, then GOOD, it's time to trade your plan.
If it does not, no biggie and no need to chase it at all costs.

Inexperienced traders try and find all the reasons to open the trade they spotted.
Professional traders try and find all the reasons to NOT open the trade they spotted.


3) Be consistent. This method is simple (yet not easy!) and profitable. You need to follow it. You cannot plan a trade on the weekly chart (which you should) with its various take profits and then decide to enter / exit on a 1 hour chart, exit "because this half formed candle looks bad", exit "because there's a resistance". There are dozens of resistances everywhere, if you started from a WEEKLY retracement you'll find daily strong resistances on the way but the WEEKLY propulsive strength will break them even if they seem to turn in your face.

Actually, it's normal, expected and needed that the price swings against you, otherwise price could not build up the liquidity and pressure to finally go in your planned direction.

Example: You go long at a BUOB. The next day expect for price to go down and almost touch its minimum. If you were disciplined, you'll never bother about that, because you did not even check that price went down during the day. You'll just open the platform at the end of the day and see a big candle that went low but then pushed all the way up and gave you those 100 pips.
If you were weak and went to rabidly check the market every 15 minutes, you'd have spent half the day sweating cold because price went so hard against you (before turning back to bullish). That's psychologically unhealthy and WILL ultimately drive you out of the profession.


I hope this wall of text will help you. It's all proven and lived on my skin and personally paid experience.

I am going to post a GBPUSD analysis to show the concepts I stated in my post above. I will also show how a conservative (capital preservation) trader would pass on it.
It will be VERY verbose because I really wish to "brain dump" the very steps one by one.


Monthly graph

First attachment shows the GBPUSD monthly graph.
Why? Because we don't act in a vacuum, the market trends influence every trading plans we may create.


WPD

After a massive downtrend (red arrow) price formed a dynamic RM called triangle. That triangle is not exactly symmetrical, it shows the lower side as being more inclined than the upper side. This often means it's a bearish, continuity triangle but remember, price decides what to do regardless of our beliefs.

If we check the candles inside the triangle, we may notice how the first swing shows big, volatile bullish candles and shorter, less nervous bearish candles. This is a further suggestion of the first swing being bearish.
Later on, things "calm down", which is one of the reasons why we see a triangle and not a regular RM.

Another concept: like for every RM, we shall seek for trading opportunities only at the extremes of the time frame we'll use for our plan and concording with the general long term trend.
I.e. if we planned a trade on the monthly chart, we'd only seek trades at Aug 2009, Nov 2009 and May 2011. Luckily enough we usually plan on the weekly or daily charts so the opportunities will come more often than that.

Since it's a triangle, we get more tips:

- Avoid at all costs trading in the middle, since price will form a massive congestion making money management a chore.

- Towards the end the long term trend influence lessens (see how the swings candles become similar) so it's a bit less important to trand with or against the trend. At the same time, since we lack help from the long term trend, every trade becomes more dangerous.

First trading conclusion: do not trade this currency now, it's right at the middle and right below the super important BRN 1.6 acting as triangle pivot.


Weekly Graph

The second attachment shows how price at the end of the past year formed a RM (in blue) which is also a double bottom. It's also a dynamic pattern but I did not draw additional lines because the graph is so much cluttered already.


WPD

Price exited the RM and broke the bearish red trend line then it retraced above it. This means the local downtrend is over.
Another RM forms above it. As seen in the monthly chart, we are close to the middle of the M triangle, therefore congestion is heavy, buyers and sellers forming abundant opposite "combat pin bars".

Second trading conclusion: do not trade this currency now

The new RM is tight and between the blue RM resistance and BRN 1.6.

In the last weeks a 2 Weeks PB forms. Considering we are in a local uptrend and close to the end of the M triangle, a trader really willing to engage in short term trading could use the general rule: "First target for PB is the extreme of the previous candle". The candle before the 2 W PB goes from about BRN 1.6 to RN 1.58 so if you go long at the 2 W PB you have about BRN 1.6 as TP. Since 1.6 is so pivotal long term, it's extremely dangerous to try and leave the trade running in hope to push through such resistance.

Now, "go long at the 2 W PB" does not mean "put a buy order above the 2 W PB" because W candles stop losses tend to be way too huge.

Therefore we pick the "idea" of going long because of the 2 W PB and then "draft" the idea of going long but we will actually go and find an entry point on the daily chart, where stop losses are viable.
I picked this example just to show how to "take" the approach: plan a trade on W (or even M) and then go seek the actual signal on the D chart.

If you plan directly on D, you really risk finding too small RMs and trends to have "breathing" room for your trade.

Anyway, to the cost of sounding repetitive, the location for this example is not the best, a real trade should not be initiated here unless you may read price like a pro.


Daily Graph

The third attachment shows the daily price.


WPG

Since we have to wait for the W candle to be closed before taking any trading decision, we may only enter at or past the bar marked as "Monday".
Since we lost the momentum bar coming off the small triangle shown at the bottom, it's not worth seeking for trading opportunities, we are way too close the BRN 1.6.

The trade could have been done by some advanced tecniques not explained yet or by taking a too large risk and going long at the W chart, with an order placed over the maximum of the 2 W PB.

Third trading conclusion: do not trade this currency now

Finally, look at the last days bars (or the last 2 weeks on the W chart): all dojis and indecision bars. Another sign that in these times the best way to do with this market is to stay out of it.

Fourth trading conclusion: do not trade this currency now

Hi dfumagalli, Thanks so much!

I now know in the GBPUSD trade, i have several issues:

1) Monthly, in the Middle of the RM (Triangle RM), no defend from the trend

2) Weekly, there is an uptrend ongoing and not reach the 2WPB's target yet, this is also very dangerous

3) Daily, too close to the BRN 1.6, it would be possible price going there again

Eventually, this should be a passing on trading, it is an error to take it.

After all, better going with the trend at the minimal/maximal point, not in the middle of the RM, too much congestion.

Thanks Dfumagalli, thank you very much.

B.R.
Raymond

Thanks Dfumagalli, and the following learned

1) First of all, preserve the capital

2) With strong discipline, not to be overtrading

3) Be patient, and be consistently. Don't change my plan on the fly.

And trying to find the opportunity from the monthly and weekly candle, but take the entry and SL from the daily candle.

Thanks very much, Dfumagalli

B.R.
Raymond

Indeed a good thread.

p.s. So this "lah" friend sounds like my neighbor

malaysia boleh!

This is another wall of text that will try detailing what goes on in a price reading trader head. While it's obviously done after the price did its course I find it may be of value to show the intermediate passages of what price did, its little hints of what's about to come, the trail of thought surrounding the whole process. Somebody might find it useful and apply it when he'll find similar patterns in the future. This analysis is also an introduction to a concept abundantly covered in the James16 thread: the powerful RNs and BRNs (Round Numbers and Big Round Numbers). I'll leave to FXGroup the explanation about how to use them. Not all the RNs were drawn, as the graphs are very cluttered as is.


Monthly graph
Attachment 1

WPD

Price (P) is in a bullish channel since several years. There are "sub-channels" inside the main channel as well. I had drawn them months ago yet they keep being respected with fair precision.

In the last months P stopped creating higher highs and this means we are in a congestion phase (market structure congestion) and possible change for the trend if it'll be confirmed.

The current trend within the bullish channel is bearish (see the swing slope).


Weekly Graph
Attachment 2

WPD

P is in downtrend and formed a PB in confluence with one of the above mentioned sub-channels's trend line (TL). Moreover it's in confluence with Big Round Number 1.3.
Later on, a second PB closes below (cb, see chart) Round Number 1.28, confirming the bearish momentum even if it did not close below the swing (a boon if it'd happen).
Past this, a bearish bar forms and takes P down to the confluence of:

-another monthly bullish sub-channel TL (see Attachment 1)
- Weekly Support (W S) 1.2617
- RN 1.26.

P did not close below (ncb, see graph) that confluence.

The above is the whole purpose of this post: to show you the elements that a trained trader will see at a glance with months and months of diligent practice. In particular this bearish bar was just... obvious, you'll see this same behavior of Price going to seek similar confluences again and again and again! Yes, you too will see them.


Daily Graph
Attachment 3

WPD and WPG

Starting Feb 19, the market forms a double bottom bringing P from RN 1.28 to BRN 1.3, in confluence with one of the above mentioned bullish channel TL.

March 6th PB was safely tradable, because it did not close above BRN 1.3 and it RETraced inside the Daily RM starting Jan 10 and having BRN 1.3 as R itself.

Later, on March 14th we see a Two Days PB (another concept I leave for FXGroup to explain). That PB was not tradable because it filled the quite small RM it closes within. A trader willing to risk a sizable stop loss could have seen said 2 D PB as RETracing against the M R (purple line) in confluence with RN 1.29. In this point of view, the momentum given by the M R may win against the RN 1.28 RM support. But it's easy to say that after things happened, for me it'd be an unsafe short => pass.

All of the bars described above form an head and shoulders pattern. This is another reason why this post has been made, to show the options you get.

This particular H&S pattern may be seen as:

- static, considering the left shoulder RM as buyers vs sellers fight for RN 1.28. Therefore 1.28 is the neckline. The blue segments show the measurement and final target for such a static H&S (I had to translate the target to the left because I had also to fit the dynamic one). It's easy to see how the target sits on the underlying long term bullish channel TL. This means P will possibly go there (depends on how W S 1.2617 will hold).

- dynamic, the red segments and inclined neckline show the possible target.

On March 26th we see a PB formed under RN 1.28. This PB is the so called H&S "pattern confirmation". That is, somebody seeing that PB 1 week ago plus the W chart PB, could already know the whole bearish local downtrend would happen.
That PB was a class A- trade (would be A+ if it also closed below the left H&S shoulder). Money management (SL trailing) would be performed as P broke through RN 1.27 and then RN 1.26. Take Profit 1 (TP1) would have been RN 1.26 itself and TP2 would have been the H&S target in confluence with the long term bullish channel TL.

Congratulations to whoever made till to the end of this post.

Hi Dfumagalli,

Thanks so much for the teaching.

This is what we are eager to learning. Thanks so much!

B.R.
Raymond

Hi,

Just read DF's fantastic post.

I am learning how to analyze, this is my homework.

Monthly


WPD

From Apr. 2011, until Feb. 2012, price is ranging inside a box

The middle of the box is around 1.0350, which is a big congestion point

Last month,price close below the 1.0350

We now know price is in congestion, close just below the 1.035


Weekly


WPD

Price is in a bullish channel, which exists several years

However the week of March 4th, the price close below a sub channel and below the BRN 1.0500

We even can count a LL, LH, i.e. a bearish trend in the weekly chart

The pinbar of the March 11th, it would bring the price up to the previous low 1.0597, however it didn't.
The next week, price dipped into the 1.035, middle of the box, most congestion point, and made another pinbar
After those two pin bars, no uptrend strength showed, the price even close below the long trend dynamic support line of
1.0416, also RN 1.04
We would consider the pin bar is just to consume the support strength.


Daily

WPD

March 15, price make a big BUOB and bring up to the 1.0500, BRN, make a BEOB there, this bar is a safe trade.
In confluence of BRN and a sub channel line, and make the price dipped to the 1.0350 again.

Then another pinbar, brought the price toward the 1.05, but not even touch the 1.05. and a small BEOB at March 26.
This brougth the price back to 1.035 one more time.

Now, another price brought up, this time it is even lower, resistaned by the 1.04 RN.

We would wait for a close below the 1.035.

And there is a big triangle, the downside line is broken already, target would go for below 1.0.

Thanks to everybody for sharing their trades.

FXGroup- as far as M and W s/r lines. Would you say you use M as your entry and final TP and W as your MM levels? Or do you often enter trades on W and have Final TP on W?

Many thanks!


JTD

Hi jerry,
The target are established in the time frame you make the analyse, for the simple reasons that you identify the patterns and the trend in a certain TF, so in base of all these elements you decide the targets.

I know many people said many times, "patience,patience,patience"

I have another error due to my no patience

As the figure showed, CHFJPY, i can't hold myself, i shorted it at 90.85, although i know 91, 91.17 would be the sound position.
I use 30 pips as SL, the CHFJPY took my SL around 5+ pips, and return, then bang like a iron ball.

I learned one more time, "be patient, be patient"

Here is the figure, i dont write my analysis here, i will use NZDJPY as my analysis. For NZDJPY, i think i hold it, not make the same error.