Building an equity millipede

Thanks TRD and whilst I agree it's interesting to understand this stuff, it's in the charts anyway, as you say thats why wicks and IB's are formed.
All of this you can see on the chart as Fakeouts, Engulfing pattern, Quasimodo. I especially love QMs.
It's the guys who are trading single lots and when they get stopped out they think it was DB hunting their stops that I have a problem with. They got stopped out cos they didn't read the chart right.

Sorry guys - every time I post here we seem to go off track - I'll try not to do it again LOL.

Has anybody got any legs on?

I closed two out yesterday on USDJPY.

I didn't get as much profit as I hoped for a number of reasons, those mistakes won't be repeated again.

Currently is a short position on USDJPY, will have to build into new positions now which could be difficult because of the uptick in volatility.

Great way of breaking it down. I was always told, look at swings and try to imagine the number of stops that would be in place there for traders who are protecting there position, or who have put them there because it is what everyone is taught ie Take a long and put your SL below the last SWING LOW.

To add to it also you consider the number of traders who are looking for breaks of swings and who execute trades on the breaks. NOW when you combine those 2, you can build a pretty good picture of where those LIQUIDITY areas are that the big boys target. Why? because they need it to avoid slippage, to allow them to get their positions in at the best price.

To take it even one step further, think like a retail trader who is in that position and think of how easy you can get squeezed, the flip flop revenge style trading that helps fuel the liquidity. Swing points are magnets for liquidity, but then is that really any surprise.

It stimulates constructive conversation so no need to apologise

I got 2 on gold and silver but thats more based on fundis than anything ese - I'm myopic abt PM's too.

None for me as yet, wrong conditions that haven't allowed me much to get in although I am getting interest in the EUR/CHF as we close in on the peg level. Will definitely be an interesting reaction as it gets closer to these lows how the market reacts and whether the SNB does indeed return to holding that level hard.

Edit: Told a fib, have a long on the AUD based on the pin combined with failed break of the previous low. 1/2 off already at 1:1 and looking towards the highs.

Aside of QE ending the world, I like this pair for some reason back into the 90's before we get the main break down to 85 and below. It may not happen but I am keen to see if I can hold this. 2nd long on a pullback to the breakpoint of the pin.



Sorry

Read something the other day abt the referendum in Nov - if it goes through SNB will probly have to abandon the peg.

TRD,
Great post.

I would like to know what is your preferred trading TF? Daily or 4hr TF? Thank you

Catalonia referendum?

so damn close but yet so far. Wasn't watching this chart but have pulled the 2nd order.

Are you using hourly chart for setups?

No Swiss are having a ref to repatriate their gold and mandate 20% gold reserves.

Ok. Thank you.

Hope their gold is not being held at Ft Knox.

Yes, I trade hourly charts and where I can I use daily and sometimes weekly for my setup zones when they appear. Depends on how busy I am going to be for the day but now for instance, its 11.00pm where I live so I can actively trade the end of London/morning of US.

I'm looking to enter long A/U as well. Waiting for my confirmation. GL with your trade.

Been buying OB's since early Oct.

I think the fundies is a perfect way to use this method actually, and if you combine a few technicals by only buy when price is up, and selling when price is down it means your fundie bias will only be triggered when price moves in the direction you want.


I'm not sure if the SNB have the guts to defend the peg... edit - I see ste has other info

Perhaps a Chart example gives a clearer picture for those that are confused. I am not a mind reader but I am quite familiar with your focal intepretation involved. Although hindsight tells us the story after it has occured. It could take traders many years to understand what has actually happend and even longer to understand what could be happening at the time.

I will discuss your OTHER surviving probes as time allows. Feel free to point it out if I misunderstood what you were thinking at the time.
But I believe it may be a good idea to show others why you actually gave out much more information and there is no room for laziness in this game.
Every trader much do their own homework and by doing so you begin to see things little by little over time.

This is a 4H Chart of the third probe that survived the big trend. There seemed to be a weekly downtrend in progress.

The horizontal red line indicates where the buy actually took place and survived. The blue circled area are the places you actually took the trade and the hot pink circled areas are places that you might have placed the trades. I'll get back to the circled areas later.

First, most traders like to wait for confirmation. This is perhaps why chart patterns like "engulfing" and "pinbars" are so popular amongst traders that like to pick tops and bottoms. What they don't tend to realize is that alot of the times they end up taking bigger risks because being late into the move due to the waiting for confirmation only makes their stops much wider if they place their stops several pips away from the other side of the bar.

This is why those who like to trade breakouts as a form of confirmation end up chasing trades as indicated by the red arrows on the picture. Although these are moments where the big boys can setup buy positions at better prices, other problems still remain. Many traders have become evolved and smarter so the momentum traders are willing to place buy when they see a stall from the downward move (lack of momentum to the downside). They trade against the initial herd of sellers because they know sellers will take profits eventually leading the price to go back up again. When this happens you have momentum traders taking the smaller easier profits as well as the momentum traders moving their positions to BE aiming for bigger profits.

The latter group of momentum traders still poses a problem for the big boys, so they have to exploit another weakness of most traders. This is the test of "patience". Good momentum traders (e.g gregwilson) avoid trading ranges and will close out their positions immediately for a small loss or profit if he realizes that there isn't any more fuel to push the price further. Hence you see a range happening 2~3 days as this frustrates and allows trades to get out at BE or few pips of profits.

Now while the range is forming, you will have other traders that like to draw trendlines and try to antipate those wick bounces and then move their positions to BE once the candle closes an up candle. Those who do this sucessfully will have positions near tip of wick and remain happy until that downward move takes out all their BE stops and close as a bullish pinbar as seen in the hot pink circled area.

This is the kind of pinbar that grabs the attention of both new and experienced traders. The astute traders don't enter blindly by placing a 40~50 pip SL at the other end of wick. Rather they will zoom down the lower timeframe and anticipate a bounce near or at the open price of that pinbar in the next candle and place a much tigher (several pips) SL. Then they may move their position to BE if that very next candle closes as an up candle. However in this case their BE would have got taken out.

Now before this down move takes place. The price could not penetrate the 0.87000 levels. This will attract sellers again as indicated by the red arrow on the chart. Infact some of these sellers might even place their TP on the wick of the pinbar believing that buyer's SL from the wick of the pinbar will get taken out. Instead we have the price ranging for the next 24 hours until the real move take place during the london sesson.

This is the point where I believe TRD would have placed his trade. You will notice an inside bar where the mother candle is the downward move where ALOT of sellers either participated on the basis of resistance at 0.87000 as well as those commited towards taking profits at the wick of pinbar. This inside bar carries alot more meaning than the other typical picture perfect inside bars you see on the charts and get stopped out taking them. You will also notice that this inside bar:

1. Is wedged through the previous week's close and current weekly open. This means if you trade per Peter Crown's approach, theoretically you have opportunities in both direction. Here you also learn about the importance of trading at the right time of the day and why Peter prefers the prelondon session for his breakouts. If you traded during the Asian session, then the BUY position that triggered failed to move further and get stopped out later.

2. Forming a pennant in the lower timeframe which means both buyers and sellers are gaining power, hence when one side gives up then a potential explosive move is due.

During the London session when the inside bar buy trigger from the Asian session gets stopped out, you get a sell trigger at the same time. Although the move didn't follow, it is likely that astute traders would have taken the trade due to its potential to explode down. However instead of letting their SL hit on the other side of the bar. They would close their position on a small loss when the candle failes to close beyond the breakout levels. I believe TRD would have taken this SELL trade on a small loss. (Refer to the "volatility breakout" discussed in this thread to understand how you can manage risk when the breakout fails)

Now is the real breakout to the up side that TRD would have taken as marked with a blue circle. Astute traders would observe that there is minimal and/or almost no retrace before and after the breakout. This one did play out and close above the 0.87000 levels. This is when some would close half their positions to make the free trade or move their positions to BE. I believe TRD did the latter and those who did move to BE will have their postions taken out as marked in the second blue circle.

Calculus makes a good point regarding this in his post http://www.forexfactory.com/showthre...94#post7375694
where he states:

"My bet, and I'd put a lot of money on it, is that if you take two traders of G's strategy, they both take exactly the same entries over a year, but one moves to stops to breakeven after a set move in their favour whereas the other keeps their stop at the original stop price and never moves to breakeven. The one wo never moves will make more money than the one that moves to breakeven."

However there is another concept of THRUST as discussed by Calculus in post http://www.forexfactory.com/showthre...22#post7375722
I am sure TRD is also well aware of this so even if his BE position did get taken out, he would RE enter at the same price.

Lastly the last hot pink circled area is another price area that I believe TRD would have normally taken the trade if he didnt have a commited BE position taken out the very same day. I believe he missed this opportunity because being human, he focused on RE entering at the same place he got taken out.

Some of the best R:R opportunities exist when the price reaches previous day open (PDO) or previous day high/low (PDH/PDL).

In another words:

1. If yesterday was an up day and today the price moves all the way down to either PDO or PDL
2. If yesterday was a down day and today the price moves all the way up to either PDO or PDH

If you have the guts to place a trade in this price area with a small risk, there is a reason why a potential high R:R exists.

In the case of (1) the daily chart would show a bearish engulfing visually before the close and hence if you trade based on noob concepts as taught here:

http://www.forexfactory.com/showthread.php?t=345838

then then traders are more like to sell rather than buy.

In the case of (2) the daily chart would show a bullish engulfing visually before the close and hence traders are more likely to buy.

Now if you trade against what most other traders are thinking, you could be wrong for a small loss. However if you are right, you end up having a position near the wick of a daily candle which could end up becoming a position on the wick of a weekly or monthly. These are the potential long tail positions.

Anyways apologies in advance to TRD if I misrepresented his focial intepretation, and also to those who are further confused with what I have said. To be frank I have no interest in helping other traders because realistically speaking, you can't even if you tried. However I am interested in keeping this thread discussion more meaningful with other more experienced contributors, since it will help those who know how to take hints and do their own homework.

Thanks for posting Y - I now feel totally inadequate Think I need to read that a few times