Price Action Observations

I use three constructions to provide price perspective and bias.

The first is the daily opening price, which I use as the 6am UK opening price. Above the open I imagine we are in an up day, so I want to have a 'preference' for long positions and to stick with the daily momentum. It does not stop me going short, but it makes me aware that I am going against the daily bar. If price crosses through the 6am open I imagine the day has reversed. Pullbacks to the 6am open is a great places to look for entry if you have confluence with a trend line , s/r level, etc.

The second is the Monday range, which is the Monday daily bar high and low. I think of this as more of a break out area. Breaks above usually indicate an up week and breaks below a down week. I do not trade a break out of the Monday range, but a pullback to the Monday High / Low is a great places to look for entry if you have confluence with a trend line , s/r level, etc.

The third is the monthly opening price. Above the monthly open I imagine we are in an up month, so I want to have a 'preference' for long positions and to stick with the monthly momentum. It does not stop me going short. If price crosses through the monthly open I imagine the month has reversed. Pullbacks to the monthly open is a great places to look for entry if you have confluence with a trend line , s/r level, etc.

d

Tess1, I did not get an entry short on AU as I have been awaiting a pullback that has not happened yet. If I get one I will still consider an entry short.

However, I was able to find a well risk defined, clean, tight entry entry on GBPAUD instead (to take advantage of the same AU weakness).

d

Hi R,

Above, you asked about the Monday range and I gave you an answer. I also mentioned the monthly open and the daily open. CAD right now provides a good example to place a picture on the words.

Pic 1

A: In this region, the CAD fundamentals was calling very strongly for a bullish rally. So even though the trend is down, I was already expecting a reversal, followed by a bullish move north.

B: Shows that price has breached the Monday range with some gusto. I am therefore expecting an up week and bias continues north. More on this in Pic 2.

C: Even though I am expecting further CAD weakness, the last significant place of S/R is here. So, from a technical S/R level, the price really needs to breach this level to 'prove' she wants to move up. Until this happens, from a technical perspective, the longer term trend is still down all we have is a pullback, not a confirmed reversal.

D: This trend line also is just like the S/R level. Price really needs to breach this line to 'prove' she wants to move up. Until this happens, from a technical perspective, the longer term trend is still down all we have is a pullback, not a confirmed reversal.

Pic 2

E: This more clearly shows the break of the Monday range. Refer to point B above. I do not trade the break out, but rather wait patiently for a pullback to a place where I can define risk and bias very clearly. Otherwise, I do nothing. I know that a pullback to the Monday high is a good place to consider an entry, as long as I get something else to back the trade.

F: This is the daily open. I use 6am UK opening price. Above this price, I am leaning towards long entries as I consider the day is up, until proven otherwise. I know that a pullback to the daily open is a good place to consider an entry, as long as I get something else to back the trade. I have the Monday high and the daily open at around the same price. That is great.

Pic 3

G: This is the monthly open. Above this price, I am 'loosely' leaning towards long entries as I consider the month is up, until proven otherwise. I know that a pullback to the monthly open is a good place to consider an entry, as long as I get something else to back the trade.

I have the monthly open, Monday high and the daily open at around the same price. That is great. I pullback to this level is looking good. I also have a fundamental bias north (CAD weakness).

In addition to this, CAD breached a significant S/R level and what was previously resistance is now hopefully going to act as support. Also, CAD breached a clear trend line, and I am big fan of the trend line retest as an entry. I also know that the trend line break price is a good place for entry.

In summary, to support a CAD long, I have

Daily open
Monday range
Monthly open
Trend line retest/break
S/R level

All coming in a roughly the same price. For this reason, I will take CAD long on the pullback. If the trade fails, I am OK with that. The trade my fail, but my analysis was a success.

d

Hi Darren,
Thank you for the great examples of the opening price daily,Monday Range and Monthly open. I'm attaching my pic but can't workout the 6am London Opening price. I trade with AlpariUK, but it does not correspond with your examples. Need to find out and make sure what is my 6am London candle.

We are now in an up trend as to your charting?

Best Regards

Roger

Yes Roger, while the conditions are met, bias is long. Break below month open, monday high, trend line and s/r level would mean stand aside (unless something special catches your eye).

Roger,

Monday range high broken.

I have marked the Monday range for the last two weeks. Look at what happens when price breaks out and breaks into the Monday range. This happens on every pair, over and over.

Of course, the market will not behave the same way every week, but if behaves the same way often enough to provide a significant statistical edge, especially when you start overlaying the basic concepts.

If you start marking of the Monday range on every pair you and follow and observe how price behaves, you will see, after a few months of forward testing (of you can back test), the there are consistent and repeating patterns.

CAD shows a good example. In this example, red arrows shows how price behaved on the Monday Range break out, white arrows shows how price behaved on the break in. I would encourage you to spend some time studying this behaviour.

Roger,

Also start observing the Monday open as well - as already discussed. As you can see in the previous pictures, I mark off the Monday open price for the last current week. You want to go with the market flow.

On up days, you want to (have a preference for) being long. On down days, you want to (have a preference for) being short. Combine this with the other concepts.

E.g. CAD. Once we broke back into the Monday range, my expectation would be a likely retest of the Monday low. See previous post. In addition, price runs away from the Monday open, going down. Down day.

Its not a trading system, nor an entry technique. Its only a bias, providing perspective and clues on market sentiment. If I was long an price done this, it would indicate the market sentiment has changed and I should close and switch to a short bias.

Each concept is quite easy, but what IS hard and does take Time and Experience, is the ability to overlay the various pieces of information.

Edit: Fall back down from my perspective is good as I think CAD is going up from this level....so provides opportunity for entry at a better price.

I hope this helps.

d

and look at what happened..... the monday range is important

Hi Darren,

Just got back to my computer after a few days away, Thanks for the enormous inside concerning your postings above. I will spend time now on the subject of the different opening ranges and test the same. USDCAD broke out of the up-channel, surprise surprise, just as you intimated.

Best Regd

Roger

Hi Darren,

The suspense is building for Monday Opening......
Enjoy your projections and observations on the Weekend

Roger

extracting maximum risk/reward. part 1.

As per our discussion over PM and other stuff...basically, i replicated the higher time frame methods on the lower time frame....of course, there is the issue of noise...and the way i have managed to reduced the noise level is to eliminate candles...if you recall 1 year ago or so...i look for pinbar...now, i dont at all. To the extent that i use candle consists simply of this: i look for a minimum of two bars/candles pullback on 5mins before i consider it a valid pullback...the pullback has to be part of a B-P-C...as in breakout, pullback, continuation.

i have attached charts with annotations...when i live trade develop, i will inform you. to provide a live demonstration of what i mean.

in the charts below, i have tried to accomplish a set of things:

#1. how i select my S/R zones on charts...i use the line chart(i found that line chart smooths out things better than candles or bars).

#2. Consideration for entry: confluence zone of TL and s/r. NO EXCEPTIONS...

#3. When the confluence zone requirement has been met, i will then switch to 15 time frame and draw a channel that slams directly into the confluence. I am very particular about the requirement for a channel(it needs 4 points in a specific way. see charts #3 below). If the channel is not present, i wont use this method to enter a trade.

#4. Switch from 15mins to 5mins and look for BPC off the channel skin.... B = BREAKOUT.... P = PULLBACK..... C = continuation.....wait for a pullback of minimum of two bars/candles....when the C happens...then enter...setting SL below the P. The closer the 5mins BPC to the channel skin, the better.

#5. Profit target is your standard H4 or daily profit target.....whatever that is....basically, you use the 5mins for entry, then turn around and use the daily or h4 for TP...

#6. BREAKEVEN CONDITIONS: depends on you, my preference: when price is 2x my risk or price is running into some h4 s/r. you can sell 1/2 or move SL to entry point...which ever one you like.

#7. Of course, keep a mindful eye on geo-economic news that may disrupt things.

hopefully the charts below will explain things more:

extracting maximum risk/reward,part 2.

here is more, mr. dazzdude.

here is another sets of chart annotations i did with EUR/HKD.....

i casually posted the trade here...i didnt bother going into details of how i took that trade...that was on a live account...as you can see the trade was taken on the 30th of september....or 1st of october(depending on where you are in the world)...entry was at 9.93684...the risk rreward was sweeeet.

the principles are simple:

determine trend direction.
find a retracement into a solid area of confluence.
go to 15mins and draw a solid channel(if not clear channel, no trade)
go to 5mins, look for BPC off channel skin.
enter if BPC is close to channel and P has at least two bars pullback.
SET STOP loss beneath BPC...enter at completion of BPC...BREAKEVEN the trade at 2x risk....
TP = your usual daily targets or h4.

Anyways, here is a chart breakdown of how the EUR/HKD trade happened:

DAZZDUDE, remember your EURGBP trading setup?...

i tried to enter it using the 15mins channel break, 5mins bpc approach...however, i didnt because the way the channel was destroyed..did it work? yes, it did. however, it is not optimal setup, so i didnt enter the trade using that method.

i took that trade using another entry method.

anyways, i just want to point this out to show what i am looking for and what i am not looking for.

chart of EUR/GBP 15MINS on sept 27th, 2012...with annotations below:

another example, using your chart, mr. dazzdude.

your NZD/USD...i am sure, you remember from our PM exchange...that i didnt like it.

you know the point of confluence where you wanted to enter the long NZD/USD trade?....here is a 15mins channel look at it...and at 5mins look.

if the 5mins BPC had a two bar pullback, it will be okay. (there are other additional reasons why i didnt like the nzdusd...)
chart attached with annotations

if that 5mins had a two candles pullback...that sl was only what? 7 pips...let us be generous and make it 10pips in length...the current level of NZDUSD now is +108 pips from that level...that is 1:10 r/r....

anyways, charts with annotations attached

ONE LAST THING:

It is obviously, that if the 5mins bpc happens off the skin of 15mins channel, especially, if the BPC is happening DIRECTLY off the skin of the 15mins channel....a person can go to a 1min timeframe and draw a channel on the 5mins "P" and look for 1MIN bpc off that "p" channel on 1min time frame, and then turn around to enter, riding the "C" up as it completes the 5mins "C" of the BPC....In essence, what is done for 15mins channel/5mins bpc...do the same as 5mins channel /1min bpc. like a fractal within itself within itself...within itself...

the spread limits this strategy. we are talking -3 to -5 pips SL here(spread included).

anyways, when a live one shows up, i will do a demonstration.

basically, i swapped the candles for channels...instead of looking for the right kind of candle formations at the right spot(like i previously does)...instead, i look for channel formation at exactly the right spot. the channels enforce a pattern/order on the noisy lower time frames....it ordered things....Besides, as you well know...i think candles are differently expressed classic chart patterns to begin with(a bearish channel is basically a three black crowscandle pattern or vice versa).

that is my trick for high r/r in a nutshell, mr dazzdude.

if anything is not clear, please, ask.

Thanks Skynet.

That makes sense. That only part I do not understand is the importance of the requirement for the pull-back being at least two bars.

Yes, a live set up would be great to look at.

In the same way that you use the channel on the 15min, you could also use a wolf wave on the 15min with similar (or even better) results. That would provide an additional way to validate a potential entry, if the channel construction did not meet your rules.

Example of using an alternative to channel on 15 min. Should work well.

Again, not sure about the 2 bars for pull-back on the 5min entry.

d

my peace of mind. the smaller time frame is soo noisy....and the data feed can be different from broker to broker that i just prefer a two bar pullback. that is basically it: it is more conservative than a one bar pullback. of course, you can use a one bar pullback is you like, especially, when combined with a conservative entry method you illustrated here.
(personally, that is my preference: two bar pullback.)
http://www.forexfactory.com/attachme...7&d=1351508701


THere is one slowing getting ready now in GBP/AUD...bullish position....of course, i dont want any interference from USD, GBP, or AUD red-labeled news.

i dont disagree that i can use a wolfe wave...a little overshoot here and there, is not the end of the world...also, the channel can look a little bit like a forming, developing, halfway equilateral triangle(or a reverse megaphone)...things doesnt have to be exactly perfect...except for those 4 touches inside the channel....On wolfe wave, i am not sure wolfe wave provides additional confirmation...i understand the concept of the overthrow...to me...the fact that the channel slams into the s/r and tl confluence, and turn around to test and breach the other side of line of the channel is indication enough. Of course, these little things are subject to interpretations.

Use wolfe wave if you like...in fact, here was my eur/hkd trade(attached below)...there were two channels(1 is a channel, the other is a wolfe wave)....i didnt go with the wolfe wave because it didnt have my two bar pullback on 5mins. If the wolve wave had exhibited the 2 bar pullback on 5mins, i would have used it to enter....

Methods are subject to interpretation...if you can nail it with a 1 bar pullback, excellent(perhaps, you can teach me.). My tolerant level is the 2 bar pullback.

once again, there is one setting up in GBP/AUD right now...almost there...GBP fundie is not bad(+4.1%) gdp growth...could be due to the queen's jubilee..could be due to the olympics...could be due to the QE...could be all 3...who knows...PMI comes out on thursday...of course, red-labeled news of USD, GBP, AUD, can nullify trade...especially, since entry is on 5mins...TREND IS UP, that is also nice....

***if my 15 channels didnt form....i have other method of entry....although, it doesn give as high a r/r as the 15mins/5mins.***