Looking at SD on 5 min charts | Forex Factory

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Looking at SD on 5 min charts

  • #1
  • First Post: Jan 8, 2013 12:31am Jan 8, 2013 12:31am
Hi,

I've created this thread in order to continue asking questions around SD, mainly on the 5 min charts, but also on other timeframes. The thread format will provide a easily readable format to look back on, which will be a better record than PM's.

I'll start posting my questions soon.
  • #2
  • Jan 8, 2013 12:44am Jan 8, 2013 12:44am
Hi Good Lookin,

I wanted to give you an idea of what I know in case you can spot major gaps in my knowledge. I am still in early days with SD and will continue the education process. I’ll post charts for commentary by you and that will hopefully show up my weaknesses in a visual environment.

For now I’m looking at 5m charts. I’ve been looking at various currencies, mostly the majors. EU and AU are my favourites.

I look for these things:
Small area of consolidation (3 – 6 bars) followed by Sharp drop or climb out of the consolidation
Last candle in opposite direction to drop / climb is used for S/D zone
Make sure it is not just a visit / confirmation to a previous S/D zone
Make sure no interference in the TP area, like today’s open, recent peaks and valleys
If zone lines up with Fib on recent significant H and L or yesterday’s H&L, then that is bonus
Once a zone has been visited 3 times, I stop using it, since S/D might be running out

I’m trying to have 1.5 : 1 ratio TP : SL, but sometimes I have 1 : 1. I’m not very sure where to set SL yet. If I go beyond the next zone, then often that is just too much, 30+ pips, and I don’t want to use stops that big. So I’ve been doing a maximum of 20 pips, but usually between 8 and 15 pips.

The charts you posted around SD in the other thread had lines, not rectangles, based on line charts not candle charts. Was that so it looked more like S&R and would be more relevant in that thread? Or is that how you mark your charts? I’ve seen that Sam Seiden and Dean Kenny both use rectangles on candles. Do you use that too? I have not got around to the other reading you recommended yet.

Here is the AU chart for yesterday and this morning. I identified 3 zones: 1. Supply, 2. Demand and 3. Demand. None of them held. I'd appreciate criticism. If you had traded these, where would your SL have been on each? Thank you.
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  • #3
  • Jan 8, 2013 10:51am Jan 8, 2013 10:51am
I use single or double lines because overtime that's where i've been seeing price turn. I'll eventually get around to posting more about this on my thread.

Here's your chart
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The top 2 zones that you marked were a result of other zones.
The bottom one was fresh but already had a reaction there.
I placed the 2 zones above the one you placed too show that area had stacked zones and price turned at the top of the highest zone.

Always look to the left too see if there are any other zones behind the ones you've chosen. Finding fresh zones is very important.

For now i suggest you check out Ken Lee's thread and read that pdf if you haven't already and also read C-12's thread. Ken Lee has posted a lot of charts with his explanations written on them so you can just go to his profile and just check out all the pictures he's posted to catch up. There are a lot of valuable posts in that thread made by him and other members. Definitely a good thread to check out.
  • #4
  • Jan 8, 2013 6:44pm Jan 8, 2013 6:44pm
Okay, thank you. I see what you mean about the non-fresh zones. With the 3rd one I had an order deeper into the zone, so that triggered after the reaction, resulting in a loss.

I'll stop trading for a few days and just do some more reading. Chat soon.
  • #5
  • Jan 10, 2013 12:33am Jan 10, 2013 12:33am
Hi good Lookin,

I've been working through the material you suggested. I see different people looking at different timeframes, which makes sense, but I wanted to ask this: assuming one is trading on 5 min and 15 min SD levels, how far back should one look if a level is not found. For example, on USDJPY there is a weak level (been visited a few times) at 4 Jan 2012. After that, looking for S levels, there is nothing until June and July 2010. I'm thinking one should not look that far back. Is that right?

In that case, should one just wait for NEW S level to form and then short them on the first visit there?

Thank you.
  • #6
  • Jan 14, 2013 8:37am Jan 14, 2013 8:37am
Hi,

Please can you help with this query?

I have looked at a particular demand level on EUR on 5min, 15min and 30min (approx. 1.3265). I can see the level on all three time frames. It's even present to a lesser extent on the 1H. My question is this: How do I decide which chart to use to set my entry and SL, since all of them show different levels?

Related to my question: on the 30min, the level has many bars, would that be reason to exclude the 30 min from my decision?

You'll see the lines for my current PO, but I'm not sure they're right... also thinking too early to put the order in since I should see how the level is approached.

Please also see my previous post. Thanks.
G
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  • #7
  • Jan 14, 2013 8:43am Jan 14, 2013 8:43am
PS: Thanks for the great the series of charts you posted on Friday. Some people thought a train had hit them and others were waiting for it to pass. I have one or two questions around how to handle significant levels like that, on both sides of the level, but some other time.
  • #8
  • Jan 14, 2013 9:40am Jan 14, 2013 9:40am
Quoting Gerry
Hi good Lookin,

I've been working through the material you suggested. I see different people looking at different timeframes, which makes sense, but I wanted to ask this: assuming one is trading on 5 min and 15 min SD levels, how far back should one look if a level is not found. For example, on USDJPY there is a weak level (been visited a few times) at 4 Jan 2012. After that, looking for S levels, there is nothing until June and July 2010. I'm thinking one should not look that far back. Is that right?

In that case, should one just wait for NEW...
If price is going places it hasn't been in a very long time then i'm sure price is trending in that direction. Most of the really old levels will serve as stopping points as price trends past them. Bounces from higher time frame levels sometimes form short term trends on the lower time frames. You can always find fresh levels in the direction of the most recent trend. I prefer looking for the more current levels on the 5-15min while using the daily/4h/1h for direction.

Let me know if this answers your question.
  • #9
  • Jan 14, 2013 10:04am Jan 14, 2013 10:04am
Quoting Gerry
Hi,

Please can you help with this query?

I have looked at a particular demand level on EUR on 5min, 15min and 30min (approx. 1.3265). I can see the level on all three time frames. It's even present to a lesser extent on the 1H. My question is this: How do I decide which chart to use to set my entry and SL, since all of them show different levels?

Related to my question: on the 30min, the level has many bars, would that be reason to exclude the 30 min from my decision?

You'll see the lines for my current PO, but I'm not sure they're right......
Generally, use whatever time frame you can see your entries and profit targets the clearest with the most success. Different people like different time frames and have varying level of success (or non at all).

Now, you have yet to gain success with this so just use whatever time frame seems to give you the clearest entries and profit targets. I can't say what works for you. I use the 5-15 because I’ve become accustom to using it. I used to use the 4h-1h/30min with success but eventually moved onto the 5-15. There was no real reason why I moved on but it works and I’m comfortable taking a 5 or 15 minute trade.

It takes chart and entry time to find what works for you. For now just stick to taking trades off of 1 or 2 time frames and using all others to help in understanding the general direction the market is moving.
  • #10
  • Edited 10:20am Jan 14, 2013 10:08am | Edited 10:20am
Quoting Good Lookin
If price is going places it hasn't been in a very long time then i'm sure price is trending in that direction. Most of the really old levels will serve as stopping points as price trends past them. Bounces from higher time frame levels sometimes form short term trends on the lower time frames. You can always find fresh levels in the direction of the most recent trend. I prefer looking for the more current levels on the 5-15min while using the daily/4h/1h for direction.
I think I understand. Please confirm that I'm applying the above correctly here:

EUR
Daily shows me uptrend, supply near 1.3406, from where one could expect a pullback, potentially to 1.3231 - or see 1H demand below.

1H shows short downtrend in bigger uptrend. Demand near 1.3266.

5 min shows new supply forming, having just taken out the previous level you shorted at. Not sure... if new level is so close to previous level, does it still count? Nice structure I believe, if it leaves the zone in the right fashion.

Also on 5min, demand near 1.3342

Tell me if in future it is easier if I post my charts for questions rather than mention levels.
  • #11
  • Jan 14, 2013 10:13am Jan 14, 2013 10:13am
Quoting Good Lookin

It takes chart and entry time to find what works for you. For now just stick to taking trades off of 1 or 2 time frames and using all others to help in understanding the general direction the market is moving.
Thanks. I'll do that.
  • #12
  • Jan 14, 2013 10:41am Jan 14, 2013 10:41am
Quoting Gerry
I think I understand. Please confirm that I'm applying the above correctly here:

EUR
Daily shows me uptrend, supply near 1.3406, from where one could expect a pullback, potentially to 1.3231 - or see 1H demand below.

1H shows short downtrend in bigger uptrend. Demand near 1.3266.

5 min shows new supply forming, having just taken out the previous level you shorted at. Not sure... if new level is so close to previous level, does it still count? Nice structure I believe, if it leaves the zone in the right fashion.

Also on 5min, demand near...
I prefer the charts. I see what you mean when you speak of the supply near 1.3406 but i don't see the significance of 1.3231.
  • #13
  • Jan 14, 2013 10:53am Jan 14, 2013 10:53am
Quoting Gerry
Hi,

I've created this thread in order to continue asking questions around SD, mainly on the 5 min charts, but also on other timeframes. The thread format will provide a easily readable format to look back on, which will be a better record than PM's.

I'll start posting my questions soon.
Ask yourself why M5? Is it because you've mastered SD trading and are ready to print money with a money machine?

There's a reason that pro SD traders will nearly always recommend you start with higher time frames. The urge to trade M5 is likely because you think you'll make more money from the increased number of trades. Perhaps you justify this greed by saying it suits your personality. Your "personality", so you may believe, lends itself to shorter trades where you're in and out. I'd propose to you that this is your mind tricking you, hiding your greedy motivations.

If you really want to trade M5, papertrade 100 trades USING IDENTICAL TACTICS each time. If you made money without losing a huge % of your account, then do it live.

I personally recommend looking at at least two time frames. I'd suggest looking at daily/m30 combo, you can easily monitor a few pairs and will have more time to trade according to your rules. You will have 1-3 trades per day depending on how many pairs you're looking for, and what quality you insist for your zones.
  • #14
  • Edited 8:17pm Jan 14, 2013 7:38pm | Edited 8:17pm
Quoting Rolland
Ask yourself why M5? Is it because you've mastered SD trading and are ready to print money with a money machine?

There's a reason that pro SD traders will nearly always recommend you start with higher time frames. The urge to trade M5 is likely because you think you'll make more money from the increased number of trades. Perhaps you justify this greed by saying it suits your personality. Your "personality", so you may believe, lends itself to shorter trades where you're in and out. I'd propose to you that this is your mind tricking you,...
I appreciate your input Rolland. I am trying to see the bigger levels on the bigger timeframes and trade with the long or medium term trend, but finetune the entries on the 5 - 30 min. I particularly like it when a smaller timeframe like the 15 or 30 has a level that sits inside a bigger timeframe level. I would really like to avoid overnight positions, so for that reason think I should not take entries based purely on 1H or 4H. Does that make sense?

I don't think one makes more money on bigger timeframes and I don't want to do dozens of trades each week. I think my risk on each trade would be less if I'm in a trade for an hour and not two days. I always have hard stops anyway.

I did start out only wanting to trade on 5m with a bit of reference to 1H for trend, but I'm realizing the value of the other timeframes... not worth ignoring any of them.
  • #15
  • Jan 14, 2013 8:17pm Jan 14, 2013 8:17pm
Quoting Good Lookin
I prefer the charts. I see what you mean when you speak of the supply near 1.3406 but i don't see the significance of 1.3231.
You are right about 3231. I'll use charts next time. Thanks.
  • #16
  • Jan 16, 2013 2:29am Jan 16, 2013 2:29am
I've identified demand levels on the Aussie daily chart. Please can you give me your opinion on these?


The second chart is supply levels. I wasn't sure what to do there. You'll see the one wide level I can see. Then where I have the crosses, I wasn't sure whether anything could be done there... I thought the right hand cross looked good for a level, but I wasn't sure. Thank you.
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  • #17
  • Edited 7:34am Jan 16, 2013 7:15am | Edited 7:34am
Please give me advice on how you would handle this. Right now on the EUR, the 5 min has made what I think is a good supply zone. The 4H chart is however just gone into a strong demand zone. I would like to take the 5m short, but concerned about the strength of the bounce off the 4H chart being too strong and shooting through the 5 min level. Please will you share your opinon. Here are the charts:

By the way, if by the time you've read this price has either bounced off or gone through the 5 min level, I would still like your thoughts so I can learn...

Second question: with the 4H level being so strong, and no demand levels for more than 150 pips... would you consider going short the moment the 4H supply is broken? Thanks.
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  • #18
  • Jan 16, 2013 9:35am Jan 16, 2013 9:35am
Quoting Gerry
I've identified demand levels on the Aussie daily chart. Please can you give me your opinion on these?


The second chart is supply levels. I wasn't sure what to do there. You'll see the one wide level I can see. Then where I have the crosses, I wasn't sure whether anything could be done there... I thought the right hand cross looked good for a level, but I wasn't sure. Thank you.
Top Chart
Left level looks good. Level to the right looks like it could be a result from another level.

Bottom Chart
Top left level looks good. Just make sure it's fresh.
You're unsure about those crosses because you know somethings not right about that area. If we're trading SD then we're trading off the idea that there are unfilled or potential orders that will push price back on it's return. If price bounced once and returned 2 times then there was plenty of time for orders to be filled. This results in less potential. Of course it goes without saying that anything is possible and price may well bounce there on return but we're only trading what our trading plan tells us.
The 4th cross looks more like a bunch of swings that are making lower highs and lower lows. From the daily standpoint i wouldn't trade them.
  • #19
  • Jan 16, 2013 10:46am Jan 16, 2013 10:46am
Quoting Gerry
Please give me advice on how you would handle this. Right now on the EUR, the 5 min has made what I think is a good supply zone. The 4H chart is however just gone into a strong demand zone. I would like to take the 5m short, but concerned about the strength of the bounce off the 4H chart being too strong and shooting through the 5 min level. Please will you share your opinon. Here are the charts:

By the way, if by the time you've read this price has either bounced off or gone through the 5 min level, I would still like your thoughts so I can learn......
This is how i'd manage that 4h trade.
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I have more to say but i don't have the time to say it so i'll continue with this later and also answer your other questions.
  • #20
  • Jan 17, 2013 12:59am Jan 17, 2013 12:59am
WOW! I really felt like I learnt from all that. It's one thing learning all the theory, it's another when someone takes the time to be thorough and point out specifics in the charts I'm looking at and help me to apply the theory.

Trading in the channels is new to me. Thanks for that. I wanted to check: both examples you mention are longs. Is that because of the supply level right below the channel? Or would you actually do longs and shorts in a channel?
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