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  • #661
  • May 24, 2012 1:36am May 24, 2012 1:36am
Quoting Dariusz
How do you set your SL and do you expose your SL to the broker ?

It is common that most of traders expose SL to broker and set just below/above particular TF swing which is obvious for most of traders, so defence is visable for most of brokers and frequently tested.

Do you have any more sophisticated defence strategies ?

Stop orders not directly on servers, but then delay risk .

What is your opinion ?

Regards.
If you use a broker that performs SL hunting you should definitely change broker!

But, the huge majority of the "SL hunts" actually are not that. Price performs a process called "price discovery". This proces will make price follow a seemingly random path that will fill every price level and every price gap. In particular, the price level discovery involves testing all the available support and resistance zones till price hits the underlying or overlying "price box" (an advanced concept FXGroup might explain one day). Boxes are formed so that price will really hit them both above and below and this is the typical "SL hunting" that traders believe to see.
  • #662
  • May 24, 2012 2:52am May 24, 2012 2:52am
Hello livindaylite and welcome !

I will posts some charts about stops and areas to watch once I have found something good and educational for all.

If I go through various threads and books I have read, the main problem is that people learning need more visual explanations to make things clear.

This is why fxgroup´s way of looking at charts is so helpful.

dfumagalli`s post is excellent, I think it is a huge topic, because it refers to market flow / order flow, which is just another word for " what is really happening behind the candles we see ".

We have to understand then that there are different participants in FX, and we small retailers are just the fleas on the back of an elephant.

Imagine you trade with 100`s of lots - you might have to split your orders. Some are entered at the time of day when liquidity is highest ( London open, NY open ), which means the spread is tightest and your execution cost is best.

Also, you can, by taking in the stop orders, add to the buying/selling power behind your actual directional move.

But here comes the good part : most of this brain-mushing analysis is not necessary when we trade Daily charts. Some basic knowledge comes automatically over time.

I personally have studied a lot about all of the intraday " intentions ", stacked demand and supply levels etc. and tried to make sense of it all. But then I discovered that my really successful trades were those taken on daily charts, involving nothing much except a basic understanding of WPD + WPG, and the most obvious patterns that form again and again.

More to come......have a good day !

michael
Attached Image (click to enlarge)
Click to Enlarge Name: 2012-05-24_0903_audjpy_D.jpg Size: 159 KB
Be like water.
  • #663
  • May 24, 2012 7:41am May 24, 2012 7:41am
Thank you everyone for words of welcome.


I like the science of differentiation. It enables learning and through clear(er) seeing and thus,thereby, come into correct relationship with [charts in this case].

Before I didn't have the language, but the distinction of STATIC and DYNAMIC levels helped me a lot already. Before they were all just lines.

To sum up there are three ways of identifying each type of Level [static and dynamic] and please, correct me if I'm wrong, so, far one of each has been explored so far?

So, to my Homework on S/R level based on swing high/low close method:

I've attached two charts of EURGPB ''A'' and ''B'' with two lines in proximity of each other where I think they might both equally correctly /usefully go, to illustrate the common dilemma I find myself when having to decide on Levels

My question is: is there a formula for identifying the correct S/R level?

Right now my method is to seek important S/R levels only [otherwise I end up with more lines than people with indicators and I do not see PRICE anymore, nvm knowing which level to trade]. I gauge and determine by judging which level, on balance, has more confluence and cluster of price at that level. I look at swing lows/highs.

Sometimes it is picture perfect and clear-cut. Other times I am faced with dilemma. Apart from extreme scenario, in which case abort that chart, how do I settle on one over another S/R level? Do, I for e.g. place more emphasis on recent swing high/lows or overall balance across the chart?

Sometimes, if not often so, important levels appear not on swing high/lows and it is not straightforward.

One thing I would like to get away from, as much as possible, is subjectivity in Forex. I hear that Trading is as much, if not more an art than a science, so, I don't know if it is possible to teach the ''fee'' for the right level or not, but that is my question.

Thanks in advance,
livindaylite
Attached Image(s) (click to enlarge)
Click to Enlarge Name: EURGBP-A.jpg Size: 120 KB
Click to Enlarge Name: EURGBP-B.jpg Size: 76 KB
  • #664
  • May 24, 2012 9:49am May 24, 2012 9:49am
Quoting livindaylite
My question is: is there a formula for identifying the correct S/R level?

Right now my method is to seek important S/R levels only [otherwise I end up with more lines than people with indicators and I do not see PRICE anymore, nvm knowing which level to trade]. I gauge and determine by judging which level, on balance, has more confluence and cluster of price at that level. I look at swing lows/highs.

Sometimes it is picture perfect and clear-cut. Other times I am faced with dilemma. Apart from extreme scenario, in which case abort that chart,...
Hi livindaylite, welcome to the forum.

If fxgroup dosn't mind I would like to show how I tend to approach this... (see attached graphs) hopefully they will show what I am trying to convey.

Monthly and weekly support are very important levels, and defining them can be subjective, but gets easier with practice

 

  1. First I draw monthly support lines first - nca /ncb - I start with a line chart... this removes noise for me, I look to position resistance lines at large round numbers - obviously not always possible, but seems a more mechanical approach.

  1. Change to monthly candle chart and refine nca /ncb

  1. Move down to weekly line chart - draw support lines - nca /ncb different colour if you whish.

  1. Change to weekly candle chart and again refine nca /ncb.

I use a round numbers indicator on my chart to show on the weekly and daily for first glances.


Peter.

Attached Image(s) (click to enlarge)
Click to Enlarge Name: eurgbp monthly 2.png Size: 28 KB
Click to Enlarge Name: eurgbp monthly 3.png Size: 29 KB
Click to Enlarge Name: eurgbp weekly 4.png Size: 24 KB
Click to Enlarge Name: eurgbp weekly 5.png Size: 32 KB
“A setback is a setup for a comeback.”
  • #665
  • May 24, 2012 10:01am May 24, 2012 10:01am
Forgot to attach

You can change the setting to suit time frame.

Cheers
Peter.
Attached Image (click to enlarge)
Click to Enlarge Name: eurgbp weekly R Numbers.png Size: 28 KB
Attached File(s)
File Type: ex4 Round numbers for Daily.ex4   3 KB | 529 downloads
“A setback is a setup for a comeback.”
  • #666
  • May 24, 2012 2:12pm May 24, 2012 2:12pm
Quoting marshy
Hi livindaylite, welcome to the forum.

If fxgroup dosn't mind I would like to show how I tend to approach this... (see attached graphs) hopefully they will show what I am trying to convey.

Monthly and weekly support are very important levels, and defining them can be subjective, but gets easier with practice
[list][*]First I draw monthly support lines first - nca /ncb - I start with a line chart... this removes noise for me, I look to position resistance lines at large round numbers - obviously not always possible, but seems a more mechanical...
Hi Peter,

Thank you for very much for stepping forward and showing me how you approach the drawing of S/R levels.

I followed dfumagalli's link to Strat's stress-free trading who demonstates similar way of starting off on a chart with line chart before switching to candles.

Certainly what would remain as an issue is:
a) which levels to take [not sure the reduction of noise on line chart resolves this]

and/or
b) the adjustment you refer to when switching to candles, both remain apparently subjective.

Maybe it does just get easier with time somehow as you suggest.
Thank you also for the round numbers indy

much appreciated,
livindaylite
  • #667
  • May 24, 2012 2:52pm May 24, 2012 2:52pm
Quoting livindaylite
Hi Peter,

Thank you for very much for stepping forward and showing me how you approach the drawing of S/R levels.

I followed dfumagalli's link to Strat's stress-free trading who demonstates similar way of starting off on a chart with line chart before switching to candles.

Certainly what would remain as an issue is:
a) which levels to take [not sure the reduction of noise on line chart resolves this]

and/or
b) the adjustment you refer to when switching to candles, both remain apparently subjective.

Maybe it does just get easier with time...

About price levels, please also re-read the "WPD-WPG method in a nutshell" post I have made some pages ago.

Notice that price loves to switch between effective and liquidity levels. That is, it's normal to have a price level passing thru bars opens / closes and later touching bars tops / bottoms at the same level and then back again to opens / closes etc.
  • #668
  • May 24, 2012 3:02pm May 24, 2012 3:02pm
Quoting msmarple
Hello livindaylite and welcome !

I will posts some charts about stops and areas to watch once I have found something good and educational for all.

If I go through various threads and books I have read, the main problem is that people learning need more visual explanations to make things clear.

This is why fxgroup´s way of looking at charts is so helpful.

dfumagalli`s post is excellent, I think it is a huge topic, because it refers to market flow / order flow, which is just another word for " what is really happening behind the candles we see...
Very nice graph, I'd like to add a comment though.

The formation at end of 2011 where you state "fake", it's seen by WPD-WPG traders as a component of a "double bottom". Those patterns are extremely valuable and profitable, they don't really have fake "spots" inside them. Price just needs to take a big, big run up in order to invert a trend and a double bottom is one of the most common ways to do that.
  • #669
  • May 24, 2012 3:26pm May 24, 2012 3:26pm
Quoting Dariusz
How do you set your SL and do you expose your SL to the broker ?

It is common that most of traders expose SL to broker and set just below/above particular TF swing which is obvious for most of traders, so defence is visable for most of brokers and frequently tested.

Do you have any more sophisticated defence strategies ?

Stop orders not directly on servers, but then delay risk .

What is your opinion ?

Regards.
Hi Dariusz
I have many ways to put my SL: TL, behind the last SW or RM, behind the last PA candle, etc and of course behind the S/R levels.
Nothing personal,just business
  • #670
  • May 24, 2012 3:39pm May 24, 2012 3:39pm
Quoting livindaylite
Hi Peter,

Thank you for very much for stepping forward and showing me how you approach the drawing of S/R levels.

I followed dfumagalli's link to Strat's stress-free trading who demonstates similar way of starting off on a chart with line chart before switching to candles.

Certainly what would remain as an issue is:
a) which levels to take [not sure the reduction of noise on line chart resolves this]

and/or
b) the adjustment you refer to when switching to candles, both remain apparently subjective.

Maybe it does just get easier with time...
Hi livindaylite, what I’m trying to do is remove the subjective doubts that I have when trying to decide on the best support and resistance for price levels, and if possible, taking that level to a large round number.

Also in deciding in the above if I am marking out an area on the chart for a monthly support level, I find the line chart is immediately indicative of monthly and weekly closes and gives me a starting point.

Levels, how many times has price touched, nca/ncb and the close of the candle rests on the level identified will always carry weight to its positional placement?

It’s placement will not fit all, when price is closing for the monthly or weekly candle, but if I can get a reasonable collection of candle closes on or near in relation to my chosen level and that level is at a major round number, then I consider the job to be done, that levels placement stopped price and changed the trend direction be it 2 days or more repeatedly.

Our chosen levels are one of the tools, used to identify an area marked out on the chart that will help us in our market study to identify what price is doing and allow us to react.

If we are expecting price to react at our level, we wait for the weekly bar to close before a trading decision is made on the daily following a price action set up and eventual decision to enter a trade, this could be 50, 100, 150 pips away from our level that gave us the initial guidance that a trade was looming.

I hope this makes sense, this is how I see it, but what do I know...

Peter.
“A setback is a setup for a comeback.”
  • #671
  • May 24, 2012 4:11pm May 24, 2012 4:11pm
Quoting dfumagalli
Very nice graph, I'd like to add a comment though.

The formation at end of 2011 where you state "fake", it's seen by WPD-WPG traders as a component of a "double bottom". Those patterns are extremely valuable and profitable, they don't really have fake "spots" inside them. Price just needs to take a big, big run up in order to invert a trend and a double bottom is one of the most common ways to do that.
Hi dfumagalli

Could you please expand on this, how you would of traded that or similar set up?

Cheers
Peter.
“A setback is a setup for a comeback.”
  • #672
  • May 24, 2012 4:31pm May 24, 2012 4:31pm
Quoting dfumagalli
About price levels, please also re-read the "WPD-WPG method in a nutshell" post I have made some pages ago.
Hi dfumagalli,

Thanks for pointing me to that post. I did read before and remember thinking what a useful contribution that summation was. Should print it out as a checklist to refer to.


Quoting dfumagalli
Notice that price loves to switch between effective and liquidity levels. That is, it's normal to have a price level passing thru bars opens / closes and later touching bars tops / bottoms at the same level and then back again to opens / closes etc.
I don't know what you mean by ''effective and liquidity levels''
You mentioned liquidity level before somewhere on this thread, I recall? I don't know what it means. Perhaps, you could shed some more light on that at some point.

Thanks again,
livindaylite
  • #673
  • May 25, 2012 8:23am May 25, 2012 8:23am
Just a quick post about GBPUSD, we see 1.5600 and even lower as possible targets.

At the moment I stay out, all these corrective bounces in EURUSD, GBPUSD, AUDUSD etc. are often NOT supported by big funds. They are counter-trend and can crumble with any news headlines.

Safe trading and everyone a good weekend !

Michael
Attached Image (click to enlarge)
Click to Enlarge Name: 2012-05-25_1517_GU_M.jpg Size: 171 KB
Be like water.
  • #674
  • May 26, 2012 12:58pm May 26, 2012 12:58pm
Quoting marshy
Hi dfumagalli

Could you please expand on this, how you would of traded that or similar set up?

Cheers
Peter.

Let's start from the beginning, that is monthly graph. I will refer to your specific RM as "topic's RM".

First attachment: M
Price on M was in RM after uptrend, this makes shorting in the RM more counter trend and dangerous than going long, and this is why I would not have searched for a short setup.
Moreover, before the topic's RM appeared, price formed a massive BUOB right at the RM support, this means the next market sentiment would be bullish, possibly bringing P up to the RM resistance. You may also notice a triangle encasing the RM.


Second attachment: W
The W chart is where the topic's RM may be seen for the first time. Due to the fractal nature of the market, when you see patterns in higher time frames, they appear as single bars or double bars. A little head and shoulder will appear (and is) a Pin Bar (PB) on higher time frames. A double top / bottom will appear (and are) a two bars PB on higher time frames. If you zoom out more that two bars PB becomes a simple PB as well.
So, the topic's RM is the 2 W PB with white outline around it. It's in trend (bullish) but dangerous to trade, as it closes below a W resistance plus it is also the tip of the triangle I described on the M chart.
As you can see, it's a PB, no particular "stop loss hunting" in there.


Third attachment: D
Now the topic's RM begins to shape up for what it is: a "W" shaped pattern well known as double bottom. It's usually a trend inversion pattern (inversion that is also what it does as PB on the higher time frame).
I have drawn the swings to show where the "W" shaped definition comes from.
This specific double bottom is very small and does not show any tradable price action bars. In fact, RMs are traded in the direction of the trend, from the support to resistance (or vice versa in case of bearish trend).
Traders want bigger double bottoms to make some sensible profit, you will see them in any time frame, the bigger they are the better.
Since I did not want to let you out of seeing your topic's RM in detail I have made an exception and attached a 4 hours chart that shows it very well.


Fourth attachment: 4h
Finally we may see the topic's RM zoomed in enough to show all it's double bottom splendor.
I have outlined the tradable PB that hits both the RM support and the longer term triangle trend line (confluence of factors = stronger signal).
The trade would have had take profit at the W resistance 77.88 and not higher, because a W price level is massively stronger than the power of 4h bars can usually muster to try break it.
Next buy opportunity would have been the BUOB sitting on top of the monthly support 78.21 but that would have been risky, since trading close to triangles center meet very high traffic and thus for very hard money management.
Attached Image(s) (click to enlarge)
Click to Enlarge Name: 2012-05-26_AUDJPY_M_01.png Size: 43 KB
Click to Enlarge Name: 2012-05-26_AUDJPY_W_01.png Size: 43 KB
Click to Enlarge Name: 2012-05-26_AUDJPY_D_01.png Size: 43 KB
Click to Enlarge Name: 2012-05-26_AUDJPY_4_01.png Size: 22 KB
  • #675
  • May 26, 2012 2:20pm May 26, 2012 2:20pm
dfumagalli`s posts are simply wonderful.

I find it a real eye-opener if you pick a chart and start on M, then W, D, 4H....and start " to see " what is really behind the well-known candle formations in a broader market context.

This is extremely valuable and truly " beyond " the Candles.

Wishing a good weekend to all !

Michael

P.S. Please avoid trading from the 4 Hour if possible.....only Daily here :-)
Attached Image(s) (click to enlarge)
Click to Enlarge Name: 2012-05-26_2108_AUDJPY_W.png Size: 50 KB
Click to Enlarge Name: 2012-05-26_2110_AUDJPY_D.jpg Size: 85 KB
Click to Enlarge Name: 2012-05-26_2112_AUDJPY_4H.jpg Size: 81 KB
Be like water.
  • #676
  • May 26, 2012 3:25pm May 26, 2012 3:25pm
Quoting dfumagalli
Let's start from the beginning, that is monthly graph. I will refer to your specific RM as "topic's RM".

First attachment: M
Price on M was in RM after uptrend, this makes shorting in the RM more counter trend and dangerous than going long, and this is why I would not have searched for a short setup.
Moreover, before the topic's RM appeared, price formed a massive BUOB right at the RM support, this means the next market sentiment would be bullish, possibly bringing P up to the RM resistance. You may also notice a triangle encasing the...
Thank you very much dfumagalli for an excellent post.

Enjoy the rest of the weekened
Peter.
“A setback is a setup for a comeback.”
  • #677
  • May 26, 2012 4:21pm May 26, 2012 4:21pm
Quoting livindaylite
Hi dfumagalli,

I don't know what you mean by ''effective and liquidity levels''
You mentioned liquidity level before somewhere on this thread, I recall? I don't know what it means. Perhaps, you could shed some more light on that at some point.

Thanks again,
livindaylite
You are welcome!

I will try a brief explanation.


Please show the monthly graph at my previous post.

Now have a look at the monthly RM support.

You'll easily notice how several bars just sit on it.
The RM support is acting as effective level for them. Effective means: "open / close of the bars sit on it".
It's called effective level because the bodies of the candles is where trades effectively happened for that time frame.

Now look at the massive March 2011 pin bar. It's low / tail is hitting the same RM support level. For that bar, the support acted as liquidity level.
Liquidity level means that buyers found massive liquidity down there, liquidity they used to bring price back to the top.

Price levels may act both as effective and liquidity levels and the candles sitting on them are very prone at switching between the two.

Price levels acting as both effective and liquidity levels are stronger than the others, this behavior makes them as priority candidates to be chosen over other levels when you draw your lines. This should also partly answer the other Reader who asked about how to pick the proper lines when there are several close each other.

There are many, many, many more considerations and properties that could be said about liquidity levels and how deep in the market structure candles truly form, but they are better left for a latter stage. I'd hate to bring too much meat on the topic and confuse everybody.

Just consider yourself hooked here until you'll know how the plot will unfold later!
  • #678
  • May 26, 2012 8:53pm May 26, 2012 8:53pm
Another M,W and D example using dfumagalli`s template for easier understanding.....

Take care and thank you for all contributions.

Michael
Attached Image(s) (click to enlarge)
Click to Enlarge Name: 2012-05-27_0319_GBPCAD_M.jpg Size: 95 KB
Click to Enlarge Name: 2012-05-27_0328_GBPCAD_W1.jpg Size: 98 KB
Click to Enlarge Name: 2012-05-27_0335_GBPCAD_W2.jpg Size: 123 KB
Click to Enlarge Name: 2012-05-27_0345_GBPCAD_D.jpg Size: 106 KB
Be like water.
  • #679
  • May 27, 2012 4:41am May 27, 2012 4:41am
Thanks to all great contributors, I am learning a lot !

Potential trade forming on gbpnzd ?

WPD :

- big DB pattern (W pattern) formed at BRN (2.00)
- P is at resistance formed by neckline of W pattern and M level, after strong bullish action
- P is breaking out of M RM, (M candle not finished yet )

WPG :

- wait for close of M candle
- wait for P to pullback to top of M RM (or lower ?)
- wait for P to resume trend up with price action on daily (or weekly ?) towards potential target of the W pattern.

This is tentative approach, I don't yet feel confident enough, so your comments are welcome !
Thanks
Attached Image (click to enlarge)
Click to Enlarge Name: gbpnzd monthly.gif Size: 31 KB
Chance favors the prepared mind (Louis Pasteur)
  • #680
  • May 27, 2012 6:03am May 27, 2012 6:03am
Quoting dfumagalli
You are welcome!

I will try a brief explanation.


Please show the monthly graph at my previous post.

Now have a look at the monthly RM support.

You'll easily notice how several bars just sit on it.
The RM support is acting as effective level for them. Effective means: "open / close of the bars sit on it".
It's called effective level because the bodies of the candles is where trades effectively happened for that time frame.

Now look at the massive...
Still consider myself in the dark as these are concepts I've not heard about before. Definitely hooked though, and look forward to further revelations

peace,
livindaylite
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