This is a journal of my market beliefs regarding what I have learned from a number of sources. This has led me to read price and create a methodology that is dependant upon listening to the market instead of forcing trades.
I have being trading for close to 3 years, spending on average around 40 hours per week. reading charts. This has been a tough ride looking for a full proof system. It doesn’t exist. One needs to be in tune with the market and only make decisions when the market provides us with a rationale to make a trade. If its unclear move on. I was trying for a while to understand the rationale of S/D trading. Than it just clicked recently.
Orderflow in the context I trade does not mean some fancy program, indicator or other formula. (not to discredit other methods, Im sure they work for many). For me it simply means identifying areas where stacks of orders reside or are likely to reside. Due to
- Institutional buying/selling (accumulation and distribution) RPs and PTP’s
- Perceived value on current sentiment and value curves and the range
- Greed and fear (sentiment mixed with stops and option barriers being attacked or defended (this is a secondary strategy, that can be taken or left)
- Understanding that macro news/economic forces will often slice through S/D levels. (This is why smaller TF levels are often less reliable, but are still valid if used correctly)
- Using volume as a filter and proxy for exhaustion, strength and weakness (only a small factor in my analysis)
This is a journal where I can put my market thoughts in a place where others can chime in with their thoughts or analysis. All I ask is everyone be respectful to each other and there be no personal attacks on anyone, or unfounded claims. No abuse or disrespect of any members at all. There will be no warnings.
S/D and S/R levels
S/D and S/R do differ. S/R will have pockets of S/D levels within it. Encased on LTF's. Once these are used up or are being ignored without a reaction, this is when I consider it used up and don't use it as my structural TF
When I find my ETF, it must be fresh S/D not S/R. S/D for me is a decision to enter a area followed by a base (no more than 7/8 candles) followed by a good departure showing a imbalance. for RP's it needs to take out an opposing historical price barrier and the departure needs to be the size of the base. RP's are often momentum trades and are injections of orders followed by a brief retrace back to the base again. Often the stronger the move the less likely it will return to the base, due to the nature of momentum and RPs. Often price will move out of the base, come back quickly for the retest than power on.
structural points, otherwise known as pivots (caveat - rarely do I trade a pivot without a LTF RP level with confluence ie: flip, HTF S/R or S/D, sentiment etc) these are how we see trends with a pullback. Often unlike the RP's we can see a strong departure followed by a retracement. Although they can be momentum as well, we rely on buyers/sellers entering as price retraces back to the beginning of the leg. For these, again departure needs to be at least the size of the base (this is to identify the level for analysis, if using it as a potential trade on LTF, needs to be at least double).
Analysis
The MVC is my foundation. I can see where the ultimate highs and lows are, than we can look for opportunities (if they exist). Once this is complete, I than apply what is determined as trump or trumped analysis on S/D or S/R levels where the range is located (range differs to the curve) to determine which levels are likely to stay in control or cause a possible PTP
I am currently acquiring a indicator from a programmer similar to ones that exist on other threads but based on MM (Month to Minute) analysis if required. Its quite similar to others however tweaked slightly. It will be programmed from scratch and I will not be using the existing scripting of other indicators because it would not be fair. I may make this indicator available for others in the future for free via this journal thread.
I will endeavor to keep this up to date, by posting at least once a week. Always remember that any rules should be tested using a simulator. TEST TEST TEST!!!
Terminology and acronyms
Encased level: an S/D or S/R within a HTF S/D or S/R level
ETF: Entry Time Frame, levels we use to execute trades
HTF: Higher Time Frame, any TF higher than the range TF
ITF: Intermediate Time Frame, any TF higher than the ETF
MM: Monthly to Minute analysis.
MVC: Market Value Curve. The overall value in the market. (or as far as data goes). Often seen best with monthly or weekly time frame. This is taken from the lowest low to the highest high. This is our benchmark.
PTP: Potential Turning Point. If a trend line and S/D or S/R level has been taken out, this signifies a shift and a possible reversal or turning point on that particular TF.
Range: The area between supply and demand levels or S/R on the RTF.
RTF: Range Time Frame, any TF higher than the ITF and used to assess the range. ( ie: the room between opposing levels to trade)
RP: Reload Point. Pause or minor retrace followed by a move away (S/D or S/R)
S/D: Supply Demand levels
S/R: Support or resistance differ to S/D, if they are not a qualified level as per our definition (ie: multiple touches or choppy). However can still be used (not on ETF).
Tap in: being able to use a lower TF to reduce risk and find a good setup
TF: Time Frame
Trumped: The analysis of opposing levels PTP’s RP’s TL’s to establish which levels will likely hold, break and shift direction.
