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HCR-LCS + SFP Research thread

  • #281
  • Jul 14, 2013 2:46am Jul 14, 2013 2:46am
some food for thought. Markets usally follow a random walk. A traders job is it to find patterns that make these random moves less random and play the probabilities accordingly.

How random are Support&Resistance levels? Check this video and try it YOURSELF. You will be amazed and puzlled for sure.

Inserted Video
Price is what you pay. Value is what you get.
  • #282
  • Jul 14, 2013 5:01am Jul 14, 2013 5:01am
Quoting Helius
some food for thought. Markets usally follow a random walk. A traders job is it to find patterns that make these random moves less random and play the probabilities accordingly. How random are Support&Resistance levels? Check this video and try it YOURSELF. You will be amazed and puzlled for sure. http://www.youtube.com/watch?v=5mPp7_fajvo
Interesting but i dont get the point???
I doubt theres much randomness in a company/bank spending 10 million euros!!?? (however it might look on a 5min chart)
i havnt tried but i wonder if the random lines look the same on a daily chart??

jus my thoughts


jon
PATIENCE... DISCIPLINE
  • #283
  • Jul 14, 2013 6:31am Jul 14, 2013 6:31am
valid. I tried it on all timeframes and it "works". However, as often as level hold they will fail. Research suggests the eye is naturally drawn to the areas where a level worked and we tend to put more focus on a level that held in previous history.


The main message of the video and the exercise (which I highly recommend doing) is in my eyes:

You will always find examples when levels worked. No matter how random they area. The real trading decisions are made on the hard right edge of the chart. Just a line drawn in the sand alone will never be enough to enter a trade and there are endless factors to be considered when trading off of levels.

- how did price react last time we were at the level
- why are we back at the level in the first place? obviously the demand (or supply) wasn't strong enough last time (one of the most critical aspects to consider)
- this leads to: the more often we are at the same level the weaker the level becomes !!! (contarry to conventional believe)
- how are we trading into the level
- what are my rules for entry, what is the kind of confirmation that gets me in the trade
...
Price is what you pay. Value is what you get.
  • #284
  • Jul 14, 2013 8:17am Jul 14, 2013 8:17am
Nice Idea,
But I don't agree with the conclusion of your little exercise.What this shows in my oppinion is just that S/R is everywhere.No matter where on your chart you mark an area there will be a price flip or some S/R area in the vicinity,especially in a ranging market.Try randomly marking areas in a strong trending market and you will see less of them look valid.
  • #285
  • Jul 14, 2013 3:40pm Jul 14, 2013 3:40pm
Hi guys - on EURCAD 07.9 07.10 i saw a fakeout was it a possible fakout trade? Though we trade right into another PPZ but still - that next day bar did its job
(But due to the FTA and the length of the fakout our R/Rn would have been bad so i think it was a no, right guys?)

GBPNZD the same... It seems it worked out... These fakout things are nothing but 2 day pinbars - so the underlying order flow is the same In this case we had a bit more space...

Thanks for your feedback
Stephen
It's all psychology...
  • #286
  • Edited Jul 15, 2013 3:07am Jul 14, 2013 11:10pm | Edited Jul 15, 2013 3:07am
Ghous

Just wondering if you have any criteria you use to validate a swing point in terms of strength or size?

It appears from your example of the long setup that, you are looking for swing points that are off a significant former PPZ area, as in the consolidation box I drew.

Do you use any other validation method based on the size of the swing or possibly something else?

I realize that space to the FTA is going to be an important factor.


Thanks in advance
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  • #287
  • Jul 15, 2013 4:38am Jul 15, 2013 4:38am
Quoting LamerTrader
Hi guys - on EURCAD 07.9 07.10 i saw a fakeout was it a possible fakout trade? Though we trade right into another PPZ but still - that next day bar did its job (But due to the FTA and the length of the fakout our R/Rn would have been bad so i think it was a no, right guys?) GBPNZD the same... It seems it worked out... These fakout things are nothing but 2 day pinbars - so the underlying order flow is the same In this case we had a bit more space... Thanks for your feedback Stephen
That's a very minor swing low Stephen. I need them to be deeper then that.

And GBP/NZD...I see no fake out setup (maybe you can show us via a chart what you are looking at)

g.
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I believe . . .
  • #288
  • Edited 6:07am Jul 15, 2013 4:57am | Edited 6:07am
Hey Ghous. here was a beauty.

Not too much space to the FTA but it rocked right through both of the nearest ones.
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  • #289
  • Jul 15, 2013 5:07am Jul 15, 2013 5:07am
Quoting Pinbar
Hey Ghous. here was a beauty. Not to much space to the FTA but it rocked right through both of the nearest ones. {image}
I entered this trade. I clearly remember that I said "Okay - double bar high, that is supposed to hold - im taking the risk" so SL was above the left eye (its something that im testing recently - with that i try to maximize my R/R) and the funny thing is that at alpari my SL was hit... It's weird to see that at FxPro that would have been a winner trade.
And what a winner trade... (With that small SL)

And imo it was not a bad trade. I mean We had divergence, swing high, pinbar, SFP, and we had some space (that bullish bar) - so i though if it breaks at least i can manage it to BE before it would kick back...)
It's all psychology...
  • #290
  • Jul 15, 2013 5:24am Jul 15, 2013 5:24am
Quoting Pinbar
Ghous Just wondering if you have any criteria you use to validate a swing point in terms of strength or size? It appears from your example of the long setup that, you are looking for swing points that are off a significant former PPZ area, as in the consolidation box I drew. Do you use any other validation method based on the size of the swing or possibly something else? I realize that space to the FTA is going to be an important factor. Thanks in advance {image}
Hey Steve,

Great question and post.

Once again its all visual for me but the swing points have to deep. And by deep I mean there must be space for you to play around in. Being off a major PPZ or Round number isn't always a requirement (for instance when you have deep swing point and adequate space) but when you do get all these confluences it ensures you are lined up with the bigger story and that is what qualifies for A+ setups.

I am not sure if this would make sense but you've got three scenarios. Either the bigger story is bullish, or bearish or neutral. For a long setup you've got an A+ trade if the story is bullish an average setup if the story is neutral (or not bearish) and a bad trade if the story is bearish. That's far too general I know but to just give you an idea of how I am looking at things when I am scanning charts.

g.
I believe . . .
  • #291
  • Jul 15, 2013 5:27am Jul 15, 2013 5:27am
Quoting LamerTrader
{quote} I entered this trade. I clearly remember that I said "Okay - double bar high, that is supposed to hold - im taking the risk" so SL was above the left eye (its something that im testing recently - with that i try to maximize my R/R) and the funny thing is that at alpari my SL was hit... It's weird to see that at FxPro that would have been a winner trade. And what a winner trade... (With that small SL) And imo it was not a bad trade. I mean We had divergence, swing high, pinbar, SFP, and we had some space (that bullish bar) - so i though...
It was probably the widening spread.

I think Ghous would have probably entered on the pullback to the HHR.
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  • #292
  • Jul 15, 2013 5:45am Jul 15, 2013 5:45am
Quoting Pinbar
Hey Ghous. here was a beauty. Not to much space to the FTA but it rocked right through both of the nearest ones. {image}
Hey Steve,

remember we discussed this here:

Quoting Pinbar
Would this be a setup with the way you trade? I know the FTA is too close, just an example. {image}
and here:

Quoting ghous
{quote} Hey Steve, Yes that's pretty much it. And the FTA is normally how you see Mike spot them, previous bar close may be the case depending on the situation, but its not something I am looking at every time. g.
We also discussed how setups can start off as average and then become really tradable based on the unfolding action here:

Quoting ghous
{quote} One of my major research projects these days revolves around the idea of potentially considering setups that initially don't appeal but due to the unfolding action gain strength. So we know when we see a Nice big bearish pin bar and if it doesn't break soon it weakens the setup and some people actually even pull off their orders if the pin bar doesn't break on the next bar. We know this from our James16 methods. Can subsequent action after a mediocre setup actually provide it some strength? Price slowly "but surely" ticking in favor of...
This setup was pretty mediocre to start off with only because of the lack of space. (I liked the swing point and loved the pin bar plus we had a RN in confluence with the HHR too) We discussed how it was headed into former bar lows and was a pass for now.

What I was eager to see was how price had to react at those bar highs forming the FTA. The knee jerk reaction came in and we straight away saw a bounce (nail biting time if one was in a trade). But then the HHR held true and price actually closed back within the HHR and that too on a bearish note.

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Up above you have an HHR lining up with a RN and a beautiful pin bar. Dow below you have a close by FTA that has proven once that it may not be rock solid. Notice how the bar after the pin bar left a little wick to the downside. The initial expectation was to see price fill that in and then use that momentum to attack the FTA again.

A little aggressive approach would have been to see if the FTA was to push price back up before killing the trade (which would have meant that the drop lower would have kept you in and hence gotten you more pips) but being the conservative me that I am, I just took the full load off at the FTA.

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g.
I believe . . .
  • #293
  • Jul 15, 2013 5:53am Jul 15, 2013 5:53am
Quoting LamerTrader
{quote} I entered this trade. I clearly remember that I said "Okay - double bar high, that is supposed to hold - im taking the risk" so SL was above the left eye (its something that im testing recently - with that i try to maximize my R/R) and the funny thing is that at alpari my SL was hit... It's weird to see that at FxPro that would have been a winner trade. And what a winner trade... (With that small SL) And imo it was not a bad trade. I mean We had divergence, swing high, pinbar, SFP, and we had some space (that bullish bar) - so i though...
This had to be an aggressive trade because it had quite a few things going in favor but a critical factor (of space) going against it.

It makes sense to be a little more conservative with your trade management if you take on an aggressive/average setup while pumping up the R:R on A+ setups.

King Jarroo says:

"Great setups are very often high momentum setups" - You can use that to your advantage

Think about it. Going tight on average trade means one of two things. Either you're looking for it to really work in your favor straight away or you're worried about taking a bigger/full bar loss on the trade. If that's the trajectory of your thought process why bother getting in, in the first place.

g.
I believe . . .
  • #294
  • Edited 7:40am Jul 15, 2013 6:12am | Edited 7:40am
Quoting ghous
{quote} Hey Steve, Great question and post. Once again its all visual for me but the swing points have to deep. And by deep I mean there must be space for you to play around in. Being off a major PPZ or Round number isn't always a requirement (for instance when you have deep swing point and adequate space) but when you do get all these confluences it ensures you are lined up with the bigger story and that is what qualifies for A+ setups. I am not sure if this would make sense but you've got three scenarios. Either the bigger story is bullish,...

I am going to take some time to get my mind around this.

Thanks for that explanation of the setup, you were in it, I see.

I also need to take some time to get used to how you are playing the bar that is after the Fake out.

Totally agree that the FTA is the first thing to dissect and make sure it is not going to bounce too much.

Got to run

Will read all the above when I get back.

EDIT:
Looks like it could be going to the 1.2500 area.
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  • #295
  • Jul 15, 2013 7:53am Jul 15, 2013 7:53am
This could be sweet it goes down more and opens up some space, before testing this level.
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  • #296
  • Jul 15, 2013 7:59am Jul 15, 2013 7:59am
Quoting ghous
{quote} This had to be an aggressive trade because it had quite a few things going in favor but a critical factor (of space) going against it. It makes sense to be a little more conservative with your trade management if you take on an aggressive/average setup while pumping up the R:R on A+ setups. King Jarroo says: "Great setups are very often high momentum setups" - You can use that to your advantage Think about it. Going tight on average trade means one of two things. Either you're looking for it to really work in your favor straight away...
I got it master!
Just as in this case: The trade didnt have much space as we can see it on the next bar: It tests the (minor) FTA and closes above it. However seeing not a great momentum start I might would think " This is not how it should have been - lets reduce risk" - but bamm my SL is already on the last reasonable level that means something to the market - aka. I cant move my SL down...

Thanks for the feedback- i will do my best

Cheers,
Stephen
It's all psychology...
  • #297
  • Jul 15, 2013 8:04am Jul 15, 2013 8:04am
However, the above setup needs some waiting and space.
The one below has the space & a triple bottom.

Should be plenty of punters, waiting for that to break.

All we need now is price to get there.
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  • #298
  • Jul 15, 2013 8:45am Jul 15, 2013 8:45am
is it cool to post some charts?
I'm watching these levels this week.
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  • #299
  • Jul 15, 2013 11:12am Jul 15, 2013 11:12am
Quoting kerinsp
is it cool to post some charts? I'm watching these levels this week. {image} {image} {image} {image} {image} {image}
Absolutely!

Nice levels there.

g.
I believe . . .
  • #300
  • Jul 15, 2013 12:55pm Jul 15, 2013 12:55pm
Pinbar!

As far as I remember you had some troubles of price breaking through Weekly or monthly levels on lower timeframes i just happened to watch a basic jarroo video and he says "we don't want price to close below on the daily timeframe - on 1H 4H they can but on daily they cant" -> and this just the same what Ghous told us.
Hope this helps something

Cheers,
Stephen
It's all psychology...
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