Beyond the Candles

Welcome!

Some suggestions:

- The WPD process should be made on the M chart, then on the W chart. If concording, WPG should be made on the D chart.

- "P is breaking out of M RM, (M candle not finished yet )" is not entirely correct. As of now, price is still at the liquidity level of the Nov 2011 bar. Technically the bar pushed above the RM but if you would want to trade at the M level, it'd not be safe. The Nov 2011 bar has to be broken before the sellers sitting at that level may be safely declared as defeated.
Until then and then a subsequent RET on the RM former resistance, the double bottom is unsafe to trade.

- About your drawn DB target: DBs and general RM targets are not as reliable as triangles / head and shoulders so beware expecting a reliable prediction.
Moreover, for static RMs (including DBs), the target is calculated with the RM height. Therefore the green diagonal segment is misplaced. It has to go from the RM support to RM resistance (the red-ish rectangle you drawn) and then be projected directly above the RM itself.
That is, you calculate it on the effective levels.

- About WPG: you will probably never be able to trade monthly bars. WPG is used to find entries on the D chart and has to be performed on the D chart. Rarely on the W.
If you open the D chart you will see how what you typed for WPG won't apply. On D you will find a different situation.

Dfumagalli, thanks a lot for your valuable comments, I am definitely going to get hooked to this thread !

Do you remember this post....let's take a look...today and what I'm looking for this pair for now on...in order to add on !

It is not so hard to do it...I just read beyond the candle and see buyers and sellers..from a personal point of view...the WPD+ WPG are the most important questions in trading !

EURSGD and how to identify the most important S/R levels .

Hello,

just a short update on WPG regarding GBPCAD ( see my previous post ).

Looking at many pairs in general, I hope no-one is jumping on board these intraday counter-trend moves.

This is the hardest part in trading daily charts, we are more or less paid for waiting and watching.

Best wishes.....

Michael

[quote=msmarple;5715937] If someone ask why the P reached this level...the answer is VERY simple.... PB W !

GBPUSD

Thank you fxgroup, just as in GBPUSD, other pairs such as AUDJPY seem to be at the bottom of a RM - and now trying to rise again.

AUDJPY M attached - we see how P took off AGAIN from this 79.50 level. I missed it unfortunately.

Michael

First of all I apologize for not posting as often as I'd wish. My time is very limited and analyzing (the charts) and writing a post like this easily takes 3-4 hours.

I take this post because it's very very important to understand a key, foundation concept of this method.

If you used "straight" James 16 and generally other price action tecniques, then you'd indeed have missed an opportunity. We call this "first chance trading". It's profitable but risky, since you can't know if price really inverted or is just going to keep going and engulf your pin bar (transforming it into an inverted pin bar).

WPD-WPG is not this.
WPD-WPG is a conservative method.
Whereas in James 16 they tell you to seek for the "Class AAA" pin bar, on WPD-WPG they tell you to wait for the price confirmation.

Unlike James 16, confirmation is an exact filter. You can use WPD-WPG to enter into horribly looking pin bars because you can be sure that if they are confirmed, they will work, even in a "Class B-" setup.

I invite to re-read this difference, because it's an apparently small yet huge difference in trading approach.


Let's use exactly your example to see the difference.

Let's assume now it's not Friday afternoon GMT but it's week end already and the candles are final for this week.


Monthly graph (Attachment 1)

WPD
Bullish biased RM after bullish inversion => seek mainly for long entries.
Bullish biased RM = advanced concept one day FXGroup might explain.
It's also possible to see how the price has formed a massively huge triangle, whose apex is focused on BRN 80.


Weekly graph (Attachment 2)

WPD
This is useful to show what this method is about: entering on confirmed signals, not just on class AAA subjectively deemed bar patterns.

First part: the past
A classic PA trader would probably have entered on the Oct 9, 2011 bar (after the PB closed), indicated as "1 - 1st chance".
This would have posed three risks:

1) Sellers in the previous bar and even on the PB show strong.
2) The PB closed below BRN 75 and not above.
3) Price could just decide to just go thru and engulf the whole PB with a subsequent marubozu ("fat" candle).

A WPD-WPG trader could also accept the risk but if he strictly followed the safest way, he'd wait for a retracement. The retracement would confirm that price stopped falling for real and we are at least in a RM (and not in a falling swing). In this case we have an hybrid of upswing / RM.

See the bar "2 - Confirmed swing up / RM".

Notice how so far I have talked like you could trade weekly bars like they were daily bars (for the sake of example). Now let's get "real" and talk about the whole process.

After bar 2 there's a triangle (not drawn) that causes price to break through BRN 80.
It's possible to see a W PB (3 - Confirmed inversion (PB)) retracing down to somewhat above BRN 80 (did not close below).
These are the golden trades, those that can bring in the thousands pips.

If you go to the daily chart and look what happened after that pin bar closed, you'll find a BUOB. This is the final confirmation. IMPORTANT: bars must always be closed, else you are at great risk of false signals!

Not PA only but:

- Price behavior study (WPD)
- Price retracement / pullback to confirm its intentions
- Price gives PA pattern to enter a trade to a target (WPG)

Second part: the present
Fictionally assuming the market has closed (so the bars are final), we see a 2 weeks bullish PB, with the last bar closing above the monthly price level 78.21.

Due to more elements of advanced trading, we can see we should get a double bottom / swing inversion and not a pure, first chance inversion.

We may decide to take the risk (actually, it's often a certainty) that price will come back again and form a double bottom, so our money and position management will be stricter accordingly.

The safest way would be to wait for the double bottom (read: weeks) and only then enter. Of course safer means many less trades, so it's left to your personal risk profile to accept them or not.

Let's assume we accept the possible consequences of entering early.
To do so we have to go on the daily graph.


Daily graph (Attachment 3)

WPG
We see once again the difference between this method and others.
A pure pattern trader would have entered on June 2nd bar.

A WPD-WPG trader would have waited for price to break the trend line and the triangle first. There are additional tecniques to safely enter earlier than that, but they don't belong to the classic WPD-WPG method.

Assuming the market closed with the situation shown in the graph, we have a last bar closed above the monthly price level 78.21.

Now, once again, a (newbie) pure price action trader could go long and be done with it.

However, we are not such trader. We look at what price did on Dec 2011 and find out that it did a RM exactly in this range. We look at what price did yesterday and we see a bearish PB. The two opposed PBs mean fight between buyers and sellers. This means we have to stay out or accept the risk of being beaten by the market.

Due to the small bullish market bias (see M analysis) and how BRN 80 attracts price (more avanced trading concepts sorry), price will hit 80 at a certain point. We just can't know when, it might be on Monday itself or after 2 weeks of tight RM.
"Clean" opportunities will show if price falls back to BRN 75 or closes above BRN 80 and then retraces back to it and makes it a support (that is, the whole WPD-WPG method in a nutshell).


Hope this helped and was not too much of a wall of text to bear with.

Dfumagalli, great piece of work ! Thank you ! Starting to put pieces together from such very helpful inputs.

More pointers hints, and examples of how this WPD/WPG method works; helpful indeed - thx, Dmfumagalli.

I thought I'd mind map this method to try and get an overview and handle of this method and thereby get clearer in the process. It's by no means complete but thought I'd share it here in case anyone might find it useful or indeed wish to contribute to it and ameliorate it further.

fxgroup would love to know whether you think this could be a useful reference and summary of this method much like pdf's that people often have at the beginning of their thread before going into illustrative charts examples and further studies.

http://www.xmind.net/share/livingday...yond-clouds-1/

Regards,
livindaylite

Thank you for your effort. I don't know when FXGroup will be able to reply to you as he posted (in a non english forum) that he's going to vacations till to the end of the month.

Oh, I see! thanks for informing me, Dfumagalli. That would explain why he's been quiet of late. Also, managing two threads... ai karamba!

Italian?

regards,
livindaylite

Great post dfumagalli, thank you very much for putting in the time and effort, rearly apreciated.

I Just spent a whole hour going through that one post alone.....need to read it again and again until the penny drops.

Peter.

Thanks for sharing livindaylite I have copied it,

Peter.

Thx, Peter,

It should in fact be "Beyond Candles", not ''clouds''! Here it is updated:

http://www.xmind.net/share/livingday...ond-candles-2/

Btw. did you dl it and find that various nodes expanded as they should?

peace,
livindaylite

Hi livindaylite

I downloaded the software onto my computer and then downloaded your mindmap - all the various nodes expanded, very nice job.


Peter.

Excellent. Thank you for confirming that. It was fun to do and hopefully also useful in clarifying and outlining both the method and its component elements.
Conrad

A possible evolution of price for USDJPY

Anyone feels like to explain the WPD-WPG process behind it?

Would shorting at a price action pattern at 80 be safe? Why?

What is the other important pattern to see, that I omitted?