LJ Forex Group

One trade today (well two but cut Bund for around BE as had to pop out and caught a poor entry anwyay). AU short based on FTB @ H1/30min fresh SD Zone.

50% off at FLS, rest off at the lower demand zone.

Whilst we were in this trade we looked at M1 and M5 TF - not for trade management cos that would be illogical but just as a lesson in watching price action.

Here was a good example of firstly compression (supply consumption) into a demand zone and then demand consumption into a supply zone - on M1.

It is an extremely important part of price action trading and it's very powerful knowledge, why, because it tells us what is very likely to happen before the event - most retail price action traders look at patterns that happen after the event. In this case the consumption of demand up to the supply told us that price was very likely to drop hard from here...up the stairs down the lift so to speak.

Recap of my GU-trade posted on another forum, today price revisited a decision point in 16th of march, entered on a 1H-PB, closed all @ floorpivot Piv, love these floorpivots for intraday targets

I've had some emails this week about determining entries on SR FTB setups - in particular with reference to two specific setups - Bund and UCAD. It seems a fair number of people missed the initial long in Bund and missed the move completely in UCAD because their entry orders were lower than where price reached.

I have to admit I nearly fell of my chair when I learned how some people determine how to plot an SR and how they determine where to enter a trade.

When plotting an SR zone people to need to remember what an SR is...it's merely a common price rejection zone and what causes these rejections - a supply / demand imbalance. So we can conclude that an SR is a collection of SD zones - but remember an SR is a zone it is very rarely a to the pip line.

So how do I approach an entry to a H1/H4 FTB SR setup. This is a two step process:

Step 1:

Firstly I'm looking to plot the SR at the the common rejection point i.e. the zone that represents where the market has rejected price in the past - this shouldn't be a mechanical process it should be objective and logical as each situation is different. There is no place for being mechanical in price action trading (yes you did read that right), you need to be objective and logical NOT mechanical.

Step 2:

Next I'm zooming in to assess whether I can spot a clear SD zone at the scene of the breakout i.e. where the decision was made for price to move higher and breakout of the SR zone. Sometimes this won't be clear as price is moving so fast it doesn't pause, but more often than not there will be an SD zone within the SR zone. So why is this important? Because it tells us where (for a breakout long) demand came into the market to take price higher and cause the breakout...and thus it is logical to conclude that this is where we expect demand again on the FTB.

Okay so applying that to the UCAD and Bund FTB setup this week....

1. Bund

First you can see the setup on H1 - I'm looking to take a long on the FIRST reaction back to the SR zone.

Next I'm zooming in until I can see if there is a clear SD zone - the M5 shows a clear zone where the decision was made to breakout of the SR zone - we even have an 'immediate retest' to confirm this is where demand is sitting - thus it is this zone that we would expect price to meed demand again when looking for the FTB entry. This is why my order went at 143.05 on Bund - the first possible price that we should expect demand to overcome supply.

Note that the second arrow is to highlight a false breakout setup. The FTB went to the FLR, price came back and had a false break of the SR zone - this is the indication that price is heading higher again and this time it breaks through the FLR and reaches the previous all time highs.

2. UCAD

We can apply the same principle to the UCAD setup. It's a similar setup i.e. a H1 SR FTB and again after plotting the SR I would zoom in to see if I can spot a clear SD zone where the decision was made for price to break higher.

Just like the Bund setup we can see a clear SD zone on M5 within the H1 SR zone and thus this is where we expect demand on the FTB. So any order should be going at 1.0057 as this is the top of the zone where we expect demand.

Folks need to remember that a) you need a thorough understanding of supply/demand and support/resistance and how these are represented on a chart and b) how to use this knowledge in a logical and objective manner. Far to many people are missing entries because their approach is too mechanical and thus logic is largely absent.

Stopped out at 1.3020 for -50 pips (2 X -25). But ended this week with some profits (about 150 pips).

Nice trade - but why wait for a pin bar , you're just paying a higher price for a trade which has materially the same probability of success...

Yes, you're right, I did scroll down to the much lower TF's to look for a reversal formation but didn't see any, so I waited for the 1H-bar close to look for an entry on a rejection PA-bar and this turned out to be a 1H-PB.

Regards,

My point was you don't need a reversal formation to take such a trade...the setup itself and the order-flow dynamics that we know should be occurring tells us all we need to know about what is very likely to happen to price when it hits this area.

Just like the AU trade I took on Friday...I don't need to wait for reversal signs because I know there is a high probability of price reversing from that zone, why, because I know what happened when price had the initial breakout of this zone and what is occurring when price retraced back to the zone.

Waiting for a reversal pattern destroys more value in the trade than it does increase it's probability.

EU long @ 1.2727, SL @ 1.2710.

I thought you might be in this. I passed on it, but was bidding higher up at the SR FTB with the SD zone just below the breakout...price came within <1pip and moved to my FLR so cancelled the order (was looking for a quick 1R move into 1.2750's).

Currently waiting for Gold to hit 1579 area

UCAD short @ 1.0230, SL @ 1.0250.

Closed 1/2 at 1.2757 for +30 pips and SL to BE +1

Closed 1/2 at 1.0200 for +20 pips and SL to BE+1.

Tempted to close but just moved SL to 1.2753

Moved SL to 1.02323 to give a little more room.

EDIT: moved SL back to BE+1 because it is falling down now.

USD/CAD 5M

Closed the rest at 1.2785 for +58 pips (+88 pips in total). My final target was 1.2795 but closed it a bit early because it looked like some correction started.

Closed the rest @ 1.0205 for +25 pips (+45 pips in total). My final target was 1.0140 level because a massive drop follows a bull trap more often than not. Just closed it because I need to go to bed. I'm not a full time trader....