A word about areas of support/resistance and supply/demand. I don't get to caught up in how these areas are marked or highlighted. What is important is recognizing that a certain area on the price chart is likely to cause selling or buying. How you highlight that area is up to you. Supply/Demand traders love to develop rigid rules on how to mark/highlight these areas. Each individual trader should develop their own criteria for trading in these areas. I am not rigid about this. I spend most of my time looking at H4 charts and mark off s/r or s/d areas on this time frame. But when it comes to executing a trade I may do this on the H1 or the H4 time frame. Nothing super secret about it.
(binned per thread starter’s request) The Engulf Method
- #102
- Feb 9, 2014 2:27am Feb 9, 2014 2:27am
- Joined Dec 2010 | Status: Never Stop Learning | 7,328 Posts
- #106
- Feb 10, 2014 8:07am Feb 10, 2014 8:07am
- Joined Mar 2009 | Status: Hobby Trader | 4,477 Posts
A couple of charts on my watch list.
- #107
- Feb 10, 2014 8:09am Feb 10, 2014 8:09am
- Joined Mar 2009 | Status: Hobby Trader | 4,477 Posts
And a couple more.
- #108
- Feb 10, 2014 8:03pm Feb 10, 2014 8:03pm
- Joined Mar 2009 | Status: Hobby Trader | 4,477 Posts
I should have been looking at the daily chart. An entire zone/area was engulfed. Price came back to the area and BOOM. Sell!!! I missed it.
- #110
- Feb 11, 2014 4:03am Feb 11, 2014 4:03am
I should have been looking at the daily chart. An entire zone/area was engulfed. Price came back to the area and BOOM. Sell!!! I missed it. {image}{image}
- #111
- Feb 11, 2014 7:42am Feb 11, 2014 7:42am
- Joined Mar 2009 | Status: Hobby Trader | 4,477 Posts
Hi Winston, Would you mind giving a little info on your zone area as shown in the CADJPY H4 chart? I see clearly the bearish engulfing candle on the second chart (on Jan 27th), but i am unsure if this zone has been created prior to this point, and the reason for its height. I dont see any convincing reason to create it from the daily, just from the H4 - but then its height and exact positioning is not clear to me. Im also aware (comparing against charts from my broker) that less common pairings have different candles, rendering alot of the zones...
I have spoken several times regarding this issue and I really have nothing else to say about it. Please read the PDF and the posts carefully.
- #113
- Feb 11, 2014 3:09pm Feb 11, 2014 3:09pm
- Joined Mar 2009 | Status: Hobby Trader | 4,477 Posts
I identify "areas" where trading a certain direction will meet with a high probability of success. In the chart below the yellow rectangle highlights an area of consolidation or ranging. A break out occurs with the large bearish candle that is highlighted. The occurrence of this breakout with such force in my view makes this area important. But we do not trade the immediate breakout. We wait until price comes back to this area at some point in the future. I could leave the chart just as it is with no mark at all but this would make it difficult to no when price get back to this area. It may be hours, days, weeks or even months.
Many are obsessed with the "correct" way to mark this area for future trading purposes. Perhaps this is because the supply/demand threads are very anal about how they mark these areas. You can read their threads for this info. In fact marking these areas as they suggest is probably what many of you are looking for. If so by all means do so. But for me the answer is: There is no correct way. You can draw a single horizontal line, a thick line a thin rectangle, a thick rectangle, etc. etc. whatever turns you on and will alert you in the future that price has returned to this area. What is important is how price reacts when price gets anywhere within or around this area.
It is the reaction of price once it gets to this area that is important. As I have explained previously we want to see a vigorous reaction to this area. For me a vigorous reaction is an engulfing candle that bounces away from the area. I like H4 and H1 candles but you may find that m30 or m15 candles work for you. It really is up to you and your trading style. I only trade after the formation of a bouncing engulf. I don't touch trade the area and again maybe this is why some of you want a rigid way of characterizing the area. The supply/demand threads should be able to help you there.
There you go. I don't know of any other way to explain. By the way if my attitude bothers anyone then feel free to move on to another thread. I really don't care.
Many are obsessed with the "correct" way to mark this area for future trading purposes. Perhaps this is because the supply/demand threads are very anal about how they mark these areas. You can read their threads for this info. In fact marking these areas as they suggest is probably what many of you are looking for. If so by all means do so. But for me the answer is: There is no correct way. You can draw a single horizontal line, a thick line a thin rectangle, a thick rectangle, etc. etc. whatever turns you on and will alert you in the future that price has returned to this area. What is important is how price reacts when price gets anywhere within or around this area.
It is the reaction of price once it gets to this area that is important. As I have explained previously we want to see a vigorous reaction to this area. For me a vigorous reaction is an engulfing candle that bounces away from the area. I like H4 and H1 candles but you may find that m30 or m15 candles work for you. It really is up to you and your trading style. I only trade after the formation of a bouncing engulf. I don't touch trade the area and again maybe this is why some of you want a rigid way of characterizing the area. The supply/demand threads should be able to help you there.
There you go. I don't know of any other way to explain. By the way if my attitude bothers anyone then feel free to move on to another thread. I really don't care.
- #114
- Feb 11, 2014 3:18pm Feb 11, 2014 3:18pm
- Joined Mar 2009 | Status: Hobby Trader | 4,477 Posts
Here's AUDUSD. The large bearish candle on the left side of the chart engulfed two prior swings. I highlighted these with horizontal red lines just to show I'm not anal about marking these areas. Price comes back later and touches the lower red line. After a nice H4 engulf occurs one would sell. Really nothing complicated here.
- #115
- Feb 11, 2014 3:24pm Feb 11, 2014 3:24pm
- Joined Mar 2009 | Status: Hobby Trader | 4,477 Posts
Something a little different. The yellow squares highlight areas that were engulfed by the highlighted engulfing candle. This shows that you must be flexible in marking areas of interest. Price came back twice to the area. The first one was a news spike and I avoided. The second time it came back a nice bouncing engulf occurred and was tradeable. I did not trade this. Just another recent example of what I look for.
- #116
- Feb 11, 2014 7:38pm Feb 11, 2014 7:38pm
- Joined Mar 2009 | Status: Hobby Trader | 4,477 Posts
Perfect setup and entry on H1. Sadly I missed it. If the H4 candle close looks good I'll jump in.
- #119
- Feb 12, 2014 7:37am Feb 12, 2014 7:37am
- Joined Mar 2009 | Status: Hobby Trader | 4,477 Posts
Hi winston, Natural gas h1. Howz s/r drawn is it right.{image}
I don't have nat gas chart.
- #120
- Feb 12, 2014 10:20pm Feb 12, 2014 10:20pm
- Joined Mar 2009 | Status: Hobby Trader | 4,477 Posts
Sweet
