HCR-LCS + SFP Research thread

THIS THREAD IS NOW ON HOLD.
Ghous opened his own thread and I am over there learning with him.
The order flow is what all these methods are about so, if anyone wants to learn further, please visit the "Mastering The Art of Trading" thread and read from post 1.
Here is the link. http://www.forexfactory.com/showthread.php?t=444115





This Thread is without doubt, not for people new to trading.

If you do not know the basics of S&R & Price action you are only going to confuse yourself as, the concepts and entries discussed in this thread are rather advanced. To say the least.
Any people really new to trading should go to baby pips
Babypips.com and do the free, full trading education you can get there.
It is a great site and I spent a month doing the course myself years ago.
Then study the J16 thread from page 1. The people in the J16 thread, are great people and will help anyone learn PA without a personal agenda.
Sure, I would recommend the J16 private forum for those that need to learn at a quicker pace. But, everything is already in the J16 thread.
It just takes some time to find it. Also, take special note of Jarroo's HCR-LCS posts in the J16 thread. As, if you do not know what they are & how to find them, you will not understand what we are doing in this thread.

This thread is not intended to give people trade setups, it is for studying the theory and practice of these methodologies.
Anyone who takes trade setups that are shown in this thread, do so at their own risk & responsibility.
Be smart & safe, open a demo account to practice any and all things you have learned in this thread or any other.

I opened this thread, not to teach Jaroo's methodology of the HCR-LCS, nor the SFP but, to further my own and possibly other people's research, into Jarroo's HCR & LCS methodology along with Tom's (The Wizard) Swing Failure Pattern. Basically, this means we are studying the Order Flow. Without an understanding of this, we may as well flush our money down the toilet &, we don't want to do that. Forex & trading is a hard business and that is why 95% of people trading, fail.

Think about it, if you have a shop and sell dead parrots, like the Monty python sketch. You are going to have to be very clever to sell them.
How many people will buy a dead parrot? None in reality but, basically that is what the big corporations are doing, they are making something look appealing to the masses, for their own agenda. Looks good till after they buy it or sell it. By which time it is too late.

Why open a new thread you may ask?

This thread sprang from the J16 thread & has been opened because, I have realized how almost inseparable the HCR-LCS combined with the SFP is.
I felt that posting SFP setups in the J16 thread is and, will only confuse a lot of new people who join the J16 thread to learn Price Action.
This is because, new people tend to see a post about an H1 setup being posted & then want to trade an hourly or even M5 chart, without having the base of knowledge of Support & Resistance on the higher time frames. It is simply not possible to trade a small Time Frame, without the understanding of Support & Resistance on the Monthly, Weekly & Daily charts.

Also as Tom's thread does not utilize the HCR & LCS in the same manner that we do, I do not want to take his great thread off track, either.
Link to The Wizard's Fail Better Thread which is not really about failing at all but, the Swing Failure Pattern.

Link to the J16 Price Action Thread

Hopefully, Jarroo will pop in from time to time and give us guidance from his watchful eye.


You may well see Hourly or even lower time frame setups being taken with the above two mentioned methodologies. However, and this is important, so read it twice.
Most of these setups mentioned will utilize Monthly, Weekly & Daily Levels.


Please keep this thread specific to PA, HCR-LCS, SFP & Ghous'es Fake Out which is actually a very logical way to spot false breakouts.
Also, please do not post links to threads outside FF, advertize your own thread or spam this thread.
We don't want any flame wars and if anyone starts flaming, or does not observe the above, there will be no choice other than to remove the person.
Let's keep this friendly, informative & on track & mostly indicator free.

Pairs to be discussed.

The basic pattern we are looking for is, a former resistance or support area, that price breaks through and closes above or below on the Daily time frame.

Here is the terminology that will be used in this thread & also a few basic Price Action descriptions.
-------------------------------------------------------------------------------------------------------------------

FTA = first trouble area
PPZ = price pivot zone
BEOB = bearish engulfing outside bar
BUEOB = bullish Engulfing outside bar
PB = pin bar
DBLHC = double Bar low higher close
DBHLC = double Bar high lower close
IB = inside bar
Ib4 = inside 4 bar that is the smallest bar of the previous 3 bars
S/R = support/resistance
PA = price action
RN = round number
BRN = big round number
MA = moving average
TL = trend line
BO = breakout
BO + PB = breakout + pullback
RET = retracement
DIV = divergence
CT = counter trend
SL = stop loss
TP = take profit
BE = break even
FTB = First time back ( often used to denote the first time back to an EMA)
RT= retest
WIPG= Where is price going
(This is an exercise designed by J16, in working out where the initial push of any given PA setup is likely to stall at, before it even breaks. In other words the FTA)
WDPG= Where did price go ( This is the conclusion of WIPG)

Jarroo's Methodology Terminology
------------------------------------ --------------
PBT&CA= price breaks through & closes above
PBT&CB= price breaks through & closes below

LCS= lowest close of support
HCR=highest close of resistance
SFP = Swing Failure Pattern
DCC= Daily Close Confirmation

Daily Close Confirmation of Support or Daily Close Confirmation of Resistance is an indication by the Daily Close to confirm that Support level has flipped to Resistance and vise vie .


Note that, the short horizontal line on the PA chart, is the entry point which is usually a 10-15 pip buffer on a daily chart.

Just picked a random chart to attempt to show how the HCR & LCS combined with the SFP work.
Here you can see GU with the Monthly Lowest Close of support Line (Purple) & The Weekly LCS Line (Red)
To apply the Jarroo Level Picker on each time frame, go into navigator on MT4, scrips and drag the Jaroo Level indicator to the area where you want to place the line on the time frame you are using. It will snap to the nearest close of the candle when you drop it on the chart near the close.

Now we are on the Daily time frame and I have added two minor levels on the daily.
I say minor levels because the swing points are not that deep.
However, we can see the consolidation around these levels and price is currently at this area.

Right, let's watch these levels on the H4 & H1 Time frames for a few hours or until the New York Open.

I am editing some of these posts as this plays out in real time, to show what is going on and how we can look at these levels.

H1 bar did not close as a PB we would take and there was no space to the FTA.
We can clearly see why it bounced there.
Let's watch the next H1 bar and see if it can close above the upper weekly minor level or not.

The Game plan is not really to short this at the upper weekly minor level.
We just want to see a push down to the lower Monthly level where we may see some small time frame PA such as, a Pin Bar, Bueob or a Swing Point Failure.

This takes us to the next step and what a Swing Point Failure is and where to look for them.

Price is starting to get rejected, it may move quickly.
But this is not the sort of setup we are looking for, we just want the push down to the lower Monthly level where, we can look for a Long opportunity.
Such as an SFP, which brings us to what an SFP is.

The swing point low of 1.51646 has been broken & also the Monthly LCS has been tested.

Now, we need this hourly bar to close above the 1.51646 by a few pips for an entry.

Target will be the 1.5200 Round Number and the SL will be 18 pips below the entry bar's low according to the Average True Range Stop Loss.

NB: From a SFP perspective, we really do not want this current bar to close as a bullish PA bar such as a PB or BUEOB, we want to get in as close to this level as possible to minimize our SL and maximize our Risk Reward Ratio.

I am in but the slippage was not good.

Important note about SL.
Although the SL is set at 18 pips below the bar low, if we get a hourly close below the low of the SFP bar, we get out of the trade even though our SL has yet to be taken out. The actual SL is the hourly close below the SFP bar, the ATR SL is just a precautionary SL. Just in case the Hourly bar closes 100 pips below our entry, it can happen.

SL almost got taken out because of the widening spread from 1.8 to 2.5 pips.

Let's see how the hourly closes after the smoke from NFP day clears.

Closed out the trade for a loss.
Now you know why this thread is called "The HCR-LCS + SFP Research thread".

Let's see what the next one does.

Hi Pinbar,

I am surprised to see that since 2nd July13 you only have posted the chart and nobody else in FF has posted anything on this thread although this thread contains most of the useful information about trading with PA, demand and supply, I am very happy to see the knowledge from J16 is being shared here, I am a big fan of J16 and learnt about the most of the bar patterns from that thread but for last many months I was searching for a holy grail and messed my charts with so many lagging indicators, tried lots of systems but ended in red, I am not blaming those systems but perhaps those systems did not suit to my personality.
I am subscribed to this thread and will post my charts whenever I get time (I am in a day job so do not get time to trade much).

.. usefull knowledge. hope to see more.

Probably because, the only person I told about the thread is Jarroo.
Just wanted to get some charts up before people started posting.


Now for the Postmortem

There is actually another hard to see Monthly LCS but, it should not have caused this loss as, it is below our entry.

Let's see what USD/CHF can show us.

Hey Pinbar,

I have to say thats a very thorough and structured presentation of the core factors in your method or should I say the subject of your research?Anyway, I commend you for this layout.

But if you allow me the question, what exactly is making an SFP any different from a regular bounce off from an S/R area?Why not wait for a Price action bar to confirm such an SFP?

Back to GU.
It appears that it is now going to test the 1.51230 Weekly Lowest Close of support

Missed this one on AUD/USD yesterday but, it gives you a good idea of what we are looking for.

Explanation of why an SFP works and creates liquidity.
This explanation is for a Bearish SFP, the Bullish SFP is the exact opposite of this.

Regarding why this differs from PA entries.

Well, Tom's SFP is different than PA in as much as, if we get a PA bar the SL goes above the High or Low of the actual bar.
As we know, we want a PB or BUEOB to be large and the former should have a long wick.
This creates a very wide SL, that is why in the SFP we do not like to see bars with long wicks, it makes the stop too wide increasing our risk because we use the close below the SFP bar as an exit for a failed trade, as I inadvertently showed yesterday with that failed hourly GU SFP.
Also as we use the ATR safety stop, putting the SL 20 pips below a large bullish PB is going to created an enormous stop thus minimizing our Reward ratio and maximizing our risk. We want to minimize the risk while maximizing the reward. If you see what I mean.