this will make for some good weekend reading!
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DislikedJon, I'd somehow managed not to notice this thread until today, and am only really posting to thank you very much for starting it, and to say "watching with interest". Threads on this subject always interest me, because what you're covering here fits in well with my own style of trading. Usually, though, I find these threads full of charts with "strange, subjective, hindsight-influenced trendlines" which I iknow I wouldn't have drawn, myself, and that always put me off. Not so on this occasion: your charts are clear, instructive, interesting...Ignored
I just want to clear up a bit of stuff......
First, why Price Pivot Zones (PPZs) are important to me.
There is plenty of advice out there about finding the PPZs, especially on the Great J16 thread so I won’t go into it here, except to say I draw in my own and do not use floor pivots.
· Number one for me is simply to find the important areas on the chart. Areas where the orders are likely to be stacked up. These are the areas where we can expect price to react strongest. It is these orders that can turn price on a dime, and if that is going to happen we need to know about it. If price is running into one of these areas and the order stack (OS) is large enough it will reverse price in a breath. Now that reversal does not want to be confused for the type of short term retracement I am looking for, I am looking to trade a continuation of a previous move. I don’t want to be left guessing whether or not price is reversing or consolidating. I just want an excuse to get in a move and trade some pips while the momentum is strong. This why it is important to only take the shorter retracement moves and why I don’t personally like the long dragged out affairs. Don’t get me wrong price might continue just the same but I personally think it becomes less and less likely to get a strong move as time goes on.
· Secondly I want to know if price has just moved through a PPZ. If it has we can assume it has eaten the OS around that area. If this is so we can expect some kind of retracement as they run out and the smart money is looking for value bid/asks. Let’s assume we get a big drop in price and it dropped right through a good PPZ, we can expect to see the bears still in control of the market, that means to me that I can have more confidence that price is simply retracing (usually back to the PPZ....time and time again!) and not reversing or stalling. Again It may well be, but imho i think it’s a bigger probability that the retrace will result in another move down. Not only that but we now have a clear price that we can plan to trade from. Now imagine if price dropped into a PPZ but didn’t close below, what do we get? Well if we are lucky we might get a Pin Bar showing signs that price is reversing and the bears have lost control and the downward momentum I want to trade is gone.
· Lastly I want to know if price is between PPZs. As we know price tends to move in the direction of least resistance so that means there probably won’t be enough orders coming on the market (obviously there will be times, news etc) to change the direction of the trend until price reaches a PPZ. So now I know if price gives a small retracement it is probable it will continue further after the retracement, giving me a good trade opportunity if I can catch the break of the retracement.