B.S. Trading with Kenneth Lee

Dear Kenneth,

The 4H levels i draw was from 16th november 2012. If you look at the first chart, it is a daily chart showing a daily demand zone. The 4H shows old demand zones in that daily level. Today price was meandering above this daily deman level.

So, my question was where we would you trig our long entry when prices visited this daily level today? Would you wait for a new demand level to be build and enter a long today? Or would you wait the price visit our upper old 4H demand level, Or lower 4H demand level from 2012 to go long ?

Took this short on the 30M Supply Level..You can see this level better on the 60M.




Took profit @ 30 pips ( TP ) 2:1 R/R...as I was not willing to stay up all night to manage the trade. This is the difficult part about trading the Yen at night/Asian session. Cut short a good move to be sure.

The interesting thing about this trade is we are trading inside the Base of a Drop-Base-Rise pattern on the 30M and 4HR. Look @ the 95.87 fresh Supply Area on the 4HR.. Previous to that we had the 95.98 that is no longer fresh. See how price left the 95.87 level sharply dropped and now is forming a base.

1) If we have some strong HL's inside this base we will look to get long in the smaller TF and trade back into the Supply @ 95.87.What I call Magnet trades as these levels tend to act like price magnets. The other nice thing about the possibility of a long is that we are trading with the larger trend...UP.
** See daily.. Resistance turned Support.. If Support holds??.. Look at the 3/25 candle on the daily..High volume PIN at support.. Things that make you go mmmm???

2) The reason for waiting on the HL's is that we have established a 30M Demand and price has nearly hit it twice before. ( Price created this level back on 3/25 ) I am looking for price to commit itself inside the base for a possible long Demand set up. Why?? As price has nearly touched level twice before there may not be enough demand to take price higher.... Think in terms of probabilities.. not absolutes

3) If price forms range within this base, drops farther back down to lets say 93.80 ( a 50% FIB level ) .. Notice the 94.00..(94.01 on my chart) has been hit coming on 3 times. (KL likes to fade these round numbers) ... Something to always pay attention to !!! There can be some good pipage on the round number set ups.

Anyway I would look to get long from a Demand Level at the extreme of range ( if we get there? ) when we have S/D levels in confluence... These can be excellent trades.....probabilities, putting the odds in your favor as best you can.

The point in all this -- I talk about Patterns w/in Patterns. This will help you see where trades may be possible. Either way you can see Patterns w/in Patterns whether you trade "KL's classic 30M" or you go a hunting.

One cannot argue with KL's success on the 30M.. Without a doubt, you see "exceptional trading" by KL in this TF.


Many pips to you

TSD

Hi Ken,

May I know how many pips is your typical SL like? And do you only take trades that offer at least 1:2 risk reward ratio? or you take trades that have the potential of RR 1:2, but your SL:TP ratio may be only 1:1?

Hope you understand my question.

Thanks.

Ken,

no doubt HH & HL

We cannot count them all, we would be chopped up in pieces.

Maybe just the first flip over from a down trend and first turn from an uptrend ?

AND....

How to define swings ? Some are more important than others....

because using TSD chart just above, why sell there since we have a HL HH pattern ???

how do we define ?

I am not a computer that I can post a chart but, I can give some food for thought. First let look at the 4HR TF. See the high on March 11. Then a LH on Mar 14, then another LH Mar 20. We have LH's and LL's. Larger TF down trend.

Now move down to the March 25 Large down candle. See the 3 candles before it.. They are moving sideway.. Now move to the 1HR..See how this down move was the start of the pattern Drop-Base-Rise. We would trade in this direction as the 4hr indicates a Downward trend..Now lets look at the Daily for a moment. See the overall trend is up on the Daily and it would appear that price is currently in a pull back to test Resistance now Support at about this same area. So.... Those who use the 4HR would consider the trend down...Some, like me would consider this to be a pull back in up trend... In the end we are essentially saying the same thing...Because you are trading a smaller TF = 30M the 4HR is a barometer for trend ( most of the time)...But lets say we have the Daily and 4HR heading in the same direction. One would think the preasure would be stronger in that direction.

Now lets address the HH's and HL's specifically...Going back to our original down move on the 4HR / Mar 25..Now move to the 30M.. See where the move started from around 94.92 and fell to a low around 93.53..130 plus pips drop ( nearly straight down ) and the spread of the candles was significant compared to the previous going back a couple of day...Think in term of context... So what do we see.? The SM's are very active in this move.. Look at the previous day on the 30M.. price was sideways.. SM building their position ( Supply ) to take it down.. How do we know that.. look what happened. .. So price drop with force and a good distance ( this is the potential drop in the Drop-Base-Rise Pattern)

Now price begins to move sideways ( see 30M middle of candle 93.92 ) Now we see price take a slow drift essentially sideways with a slight bias upwards indicated by.. Yep .. you guessed it !!! HH's and HL's.. this is a good sign .. Why??? Price potentially starting to form the BASE in the Drop-Base-Rise pattern. The added bonus is we have a slow drift upwards in this base. ( not always that way ). Price eventuallu break resistance around the 94.42 area but not with any real strength..I like to see some strength comeing out of the base heading back to the level..So we wait to see if price may pick up some steam moving back into our SUPPLY level. We are now in the RISE of the Drop-Base-Rise pattern.

Now here comes pne of the neat part of this method. Remeber how price moved so sharply away from the supply level. We would expect price to do the same once it returned to this level. We also have several other reasons ( as mentioned in my post ) as to why we would take this short at this Supply level.

In my opinion this was a Counter Trend trade. I would have loved to stay in this trade ( as we saw what we would have expected.. another strong move short ) but... I did not want to stay up all night So I took the quick scalp

Looking at PA from a conventional aspect ( within the context of S/D trading patterns )... one has to look at PA from a different perspective. The concept of HH's and HL's ,, Support/Resistance ( my add ) still apply, as I have indicated.. We just need to look at it within the context of our trading method... S/D Patterns of Rise-Base-Drop or Drop-Base-Rise.. The beauty of this method ( I have stated previously ) is you can trade both Trending and Range markets.. most other methods are either one or the other.

As KL had stated previously, we all trade a bit differently. Others may or may not have taken this trade?? but this is what I look at.

If I may suggest when starting out stay with KL's teachings.. This will give you a SOLID foundation to trade..As you will see throughout this thread KL is exceptional with this method. As you begin to grow within this method your trading style may??, or may not ??, change. We all walk our own path.

Hope this helps

Many pips to ya !!

TSD

Trend view on the higher TF 30M. You can see the same trend on the 4HR as well.



We got short with 3 lots @ Supply on the 1M.. We set our @ stop at 5 pips each position or 15 pips



Price is underway in our direction.



I really did not see a strong push from 94.02.. Price bounce into 94.01 or basically a round number area. KL tends to fade these round numbers. We took our exit early on the 3 lot short.



As we can see this was the right TP


Total pipage 27 = 1.8:1 R/R


Good trading to all

TSD

Hi Ken,

Another example of a high risk SL, which turned in your favor.

May I know how you actually choose your SL levels? As your "romancing the stop" pdf suggested that you WANT to be stopped out above the supply area where you could SEE on the 30 min chart...

Of course, it turned out well, but it would've made more sense if you were stopped out the first time (if you placed the SL above the 30min supply zone), and re-entered short based on the 4hr supply to get that winning trade...

I'm puzzled...

Hi Ken,

1 question:

HI Ken,

Just out of curiosity, these 2 losing trades totaled up for a 50 pips loss. Does that mean you lost 10% of your account here? since 100 pips = 20%? Or you lowered the trading size to accomodate the larger stop size?

Just wondering...

Regards,
K

yes it would have . But not everything is black and white . I do adjust my position size on many trades. I tend to jump in a bit to early at times. I am accustom to stops of 30 to 35 which was normal in my other types of trading. I also still use other methods to trade. yes I have experienced 10% draw downs in my account, If you go for high increases you may also have large losses . it is the knowledge you have that it is short lived and you will make it back that matters. I have said many times That the way I describe trading is a very good way to approach it . I still have many tools or ways that i trade. i might hold for a 4hr level seeing if it enters it or turns just before it. especially after minor news. I like most people find it easier to stay in a trade then get back in right after a loss. Plus in that example would I have gotten back in as it missed the 4hr level ?


Trading is a lonely personal way to try and make money. You have to be happy with your choices and live with them i never have doubts about my trades, do i mess up yes at times very badly , which is more a control issue than a system one.

I only try and show a simple way to look at things . yes maybe now and again I throwout a bit of a older style of irrelevances . But it is what it is. If you trade a 4hr chart what is a bit before the level ?

These are questions we must all ask ourselves . How many times do your trades get missed by a few pips or 10 before you really take a bad risk.

May not be the answers your looking for then again maybe the validation some need to go elsewhere.

Cheers Ken

No it isn't .. I have never varied how I draw my levels. On every chart. Always where price crosses the bodies and doesn't turn back.

http://www.forexfactory.com/attachme...1&d=1355314392

Not sure what your talking about here . I scaled out of this trade twice then took the final bit at the top..

He enters where the bodies cross, not the wicks. When risk is too high for my tastes though I tend to lower my time frame to see if there's an obvious RBD/RBR/DBR/DBD pattern though to tighten it up. Downside is you may miss out on some entries, so I use that method sparingly.

Edit: God I wish they would stop screwing around with the thread navigation....

Understood and agreed. Thanks for the reply. I really like the way you interpret things, and make it really simple and logical.

Perhaps I will follow your layed out system in the PDF, and the way you trade, before understanding the more abstract/higher risks trades that you showed us in the thread.

Nevertheless, I'm always amazed by how you interpret the PA accurately!

Great job!

Perhaps I mistake the "pointing downwards triangle" as sell entries rather than manual closing your long positions.

Oh well, this tells me "MORE SCREEN TIME".

We got short a on a 2 lot @ 95190.. PIN bar rejection and no follow through.



We took profit a bit early @ 94958. Basically I got a case of cold feet an exited. Not the best decision from a trade management point of view... I had originally set my trade to 3:1 R/R. As we can see price went on to hit my original TP.



Here is a larger TF showing why I took this short.

1) I am trading out of the Base as a Supply Level set up for the short.

2) As stated before, larger TF S/D levels tend to act as Price Magnets that can cause price to move back toward these higher TF levels.

What is very distinctive about these types of trade is how price Originally leaves the level at the bottom. Look back on 3/25 on the 1HR. See how price moved up sharply. This is what I look for. This price movement indicates to me that price has strong reason to return. See how price originally came down to that 1HR level. It did not spend a lot of time ( relative ) then shot back up SHARPLY.

Now lets look at our base. We had two LH's preceding our entry. We had a Supply Level set up close to the top of the base ( think in terms of trading range ) You always want to trade from the extreme of the range. See how price moved short on 3/28 from our Supply level on the 15M. Now look closely at price preceding our Supply level and price when it left our Supply level. Price was stronger in its push down ( wide spreads all the way down ) compare that to the preceding price. To me the SM's are significantly move active. This is why I chose this level.

Many pips to all

TSD

Nothing beats live practice.

Does demo practice count?