When you get price hammering away at a resistance level, does that indicate bulls are strong and price wants to move up or is that where there are sell orders and I should be looking to go short? See my chart below. If you had a short bias, where would you enter and where would you place your stop?
I wrote a reply that, for some reason or another, didn’t post so this is the concentrated, shortened version.
Looking at your supplied chart & your post, I get the impression that you know what you’re talking about but have an element of doubt.
I don’t have charts in front of me & can’t make out the levels but as you’ve stated that you’ve got a short bias & think that support has turned resistance, your entry should be around that exact level. A general rule of thumb is price breaks support, comes back to retest it & you then short from that level with the previous low as your first target & then an extension there after. Confirmation at resistance helps (pin-bar, engulfing bar etc) but it isn’t necessary with some strategies.
Going on the information in your chart alone, my personal entry would be at resistance & my stop would be above small consolidation before support broke so the bottom of the letters in “now resistance” (I can’t make out the price levels). Just eye-balling this, it would give just over 1R to the previous low & obviously more if it extended. A safer stop would be the previous support/resistance so the very top of the letter “O” in “Old support is”.
You need to have an idea of where you think price would move down to in order to decide whether the risk/reward justifies actually taking the trade.
I’d need to look at a higher timeframe as well before I was confident in my statement but using only the information in your chart, this is how I personally see it. Going down to lower timeframe for an entry (eg. 15mins) can help tighten up stops too.
Well that wasn’t much shorter than my initial post but it’ll do the job.
Thanks for your feedback. My confusion comes when price is trending in a direction on the daily but a completely different direction on the hourly.
Another bit of confusion is when price gets to a level I have identified, do I wait for a candle signal (pinbar, engulfing,evening star etc) or just enter in the direction of my bias? So in other words what has priority: wait for candle action, or enter because price reached a level Ive identified?
I use market news and sentiment and personal judgement to make a decision on direction but you just never know how far these pullbacks or short squeezes last. I do believe that big money seek out liquidity by stop hunting and looking at the chart I posted, a million other traders can see exactly the same price action and levels forming, so I guess my question becomes: is there a more refined way, or clever way of getting into this trade that is not so obvious?
Your post helped. thank you.
[QUOTE=“grantx;777821”]My confusion comes when price is trending in a direction on the daily but a completely different direction on the hourly.[/QUOTE]
The answer to “What is the trend?” is always “What is your time-frame?”.
Another rule of thumb (not written in stone) is to look at the timeframe above the one that you’re looking to trade for the trend.
15mins -> 1hr
1hr -> 4hr
4hr -> Daily
If you’re trading the 5mins chart, looking at the Daily won’t help much as there’s so much disconnect between the timeframes. There could easily be a strong downtrend on the 5mins & a strong up-trend on the daily.
The easiest edge in the market is the trend. If you’re trading the 1hr chart, go to the 4hr chart & establish the direction of the trend (assuming there is one) & only look to trade in the same direction as the trend.
[QUOTE=“grantx;777821”]Another bit of confusion is when price gets to a level I have identified, do I wait for a candle signal (pinbar, engulfing,evening star etc) or just enter in the direction of my bias?[/QUOTE]
This is dependent on your system etc & your belief that price is going to keep moving. I’ve had blind entries off a Fib level where I’ve placed an order & it’s been filled overnight & I’ve also waited for confirmation. The latter usually gets you in to a trade at a worse price so the risk/reward isn’t as good but you’ve got the benefit of confirmation that it’s more likely (nothing is guaranteed) to move in the expected direction. Appreciation of this will come with practise & experience.
[QUOTE=“grantx;777821”]I do believe that big money seek out liquidity by stop hunting and looking at the chart I posted, a million other traders can see exactly the same price action and levels forming, so I guess my question becomes: is there a more refined way, or clever way of getting into this trade that is not so obvious?[/QUOTE]
When you answer this one, be sure to let me know the answer as well.
I see that bears try to break support level a couple of times and price should proceed downwards after the bounce.
Very relevant chart you attached there! Thanks a lot for your contribution! Yes, if a trader can identify actual support and resistant levels, market pattern like impulsive or corrective and market flow rate then obviously, we will be success in his trading! Although these are basic but very important to understand Forex trading market nature. Novice traders should start their learning tough these lessons!
It is very productive method of trading. Almost all of the big traders and players use this type of method in their trading. Marking these support and resistance levels on higher time frame and then trading them from lower time frame is a great method of trading.