Technical Templates Continued

[jjay]

What do you guys have as near-term resistance on Cable?

I have to admit I've not been able to take any trades on this pair over the last 48 hours - it's just not been clear enough for me.

Ok, so now that price has edged along a little further over the past couple days, you simply run through the same procedure again, tick boxing the upside & downside zones where the orders are beginning to stack.

Unless & until the price begins displaying clear reversal behavior, then the odds are that it will attract continued sell order flow bias.
Knowing that, you can plot the likely upside zones where the stops (trailing profit, continuation sell & tiered buy orders) will be stacking well ahead of time & then wait for the action to offer you your usual trigger set up signals to take it on (either way).

1.5050 has drawn it in & the big 50 figure waits a spits distance below. That will be a level harbouring Options & large stop activity, attracting heavy traffic. A clear bust there opens up a trip to 48 which I'd imagine will be aggressive & rapid.


Upside steps are pretty obvious & well lit. They'll be all sorts of candidates looking to get a hold of those levels, particularly (buy orders) bargain hunters seeking rapid breaks up the ladder as they piggy back short covering, whilst trailing stops get fired off.

[jjay]

I've highlighted on the chart a small yellow box from yesterday which is one of the areas I'm struggling with.

my question is, what part of price analysis was I missing that would have suggested a short in that yellow box was not wise? Or was it simply a case of price is unpredictable and you might have entered there for a loss?

I'm not sure how you plan your trades or what your considerations are when setting up trade opportunities, but that time of the day isn't a big favorite of mine to be honest.
The types of set ups & triggers one uses could have a dependency on time of day/level/percentage of the usual days range already covered etc. Well mine do anyhow, I don't know about anyone else.

I've found through experience that the optimum set ups I use for fast trips to the market usually present the cleaner & better value opportunities during the early-mid session London action.
That's not to say I won’t consider trades later into the day, but they would be different strategy plays.
In order to consider taking on an intraday trade, the conditions would have to be pretty impressive to lay that kind of risk at that hour on the clock.

At that point around your yellow box, price had covered, & was retreating from, 70% of it’s normal range coverage. It had also tagged a level I'd flagged up already as a probable support/defense zone where likely 2 way activity was building.

Price rarely shifts through one or more levels of prior support or defensive zones in rapid succession.
What generally happens is a quick move down (or up), to test the strength of the bid (or offer) activity & then an evaluation of the level by scale outs/profit taking/order shuffling etc. That can take a little time to unfold & gather pace.

Around the time of your yellow box highlight the London market was getting ready to close up shop + we were half a click above a very important & busy level (1.50). It would have been surprising (to me anyway) for price to have been herded aggressively below that 1st defensive line without taking stock of events first.

That hour of the business day might attract other players to the market, but I’m usually well home & hosed by then, unless I’m managing positions on a longer range book, but that’s a different ball game.

[jjay]

Below I've attached a chart showing where I would look to get in short based on a pullback -

it's the red ellipse on the lower boundary of the recent consolidation - would that be a likely location?

It might be if you got/get a familiar signal to begin preparing for a continuation short entry.

What if price doesn't get back up there?
What else will you be considering to get you seated short if it fails to agree with your analysis?

Where else will you be considering a short from?
What needs to happen to get your short bias triggered?

[jjay]

There's no clever stuff to my signals.

It's pure candle plays, such as pin-bars, inside bars and outside bars and although I will risk taking them on their own merit if I feel confident, I'd prefer to see combinations, such as a couple of pinbars, or a pin and an inside bar, IB and OB etc. - basically general signs of exhaustion and a disinclination to continue upwards.

The only way you're going to become familiar with how any of those potential triggers play out on & around your favored set up locations (in tandem with specific market environments/behavior types), is to thoroughly test them out.

If I were you I wouldn't pick too many triggers at the stage you’re at.

Unless you test them out solidly & thoroughly across a range of market behavior styles, you won't know whether they're suited to your particular trading style or if they're actually worth more than a damn in live conditions.

All you really require is one (2 at most) solid trigger(s) to match up with a specific set up at a favored location or zone.
If it's simple enough & you test it out sufficiently in live conditions, it ought to see you ok on both the short & long side.

Obviously, you got to decide what type of market environment (short range or long range) you're more suited to, but again that will come from testing & familiarity.
Same as if you have an affinity with a particular currency pair. Some set ups & styles will be more suited to lower or higher volatility instruments.

It's all mostly a trial & error exercise.
Just don't try to cover too much ground at once. It'll merely serve to confuse & frustrate.

A good example of the above would be to take a look at Carll's posts on here.
He's managed to test out, establish & manage a style, set up & trigger to work across a specific market environment.

One template, one set up & one set of criteria that he's becoming very familiar with that sits alongside a repetitive & consistent market style.

If the price action fails to exhibit a definite bias and/or lacks sufficient momentum then it's left alone.
Only when it sits up & winks does he engage.

He'll fully admit he's still only a rookie, but he's way ahead of the curve as far as establishing a clear agenda & a very minimal, yet effective set of rules to keep him on track.

That's the kind of gig you want to be aiming for.
Lightweight, easy & efficient to operate.
You should be able to open up your template, get your seat comfy, turn the key & be ready to gun the gears.

Leave the complicated analysis to the geniuses & seminar salesmen.

[TalonD]

The yellow box wouldn't have been such a bad entry. It only retraced around 30 pips before heading on down. I'm not too crazy about that time of day either though.

I won't offer any advice because JJ's insights are far superior to mine, I just got my intrest piqued cause you guys were talkin about the cable.

[Jocelyn]

The yellow box wouldn't have been such a bad entry. It only retraced around 30 pips before heading on down. I'm not too crazy about that time of day either though.

Traders have different styles & different strategy plays that they grind out & perfect over a period of time.

Some prefer to execute during the high volume periods of a particular shift, because the set-up/trigger combination fits that type of price activity & dovetails with their aims & objectives.

Others will possess certain triggers that they can flick on & off dependant on market conditions. They might have another couple of triggers in their back pocket that they know offers them higher potential odds of a positive outcome at a very specific market turn or event.

What suits one, won’t necessarily suit another.
Although I totally agree with Jay’s comments about the discipline aspects of engineering trades & opportunities to suit a strategy style & execution play, each person has got to explore & filter their own set of preferred circumstances. What you don't see or appreciate is the fact Jay works to very specific parameters & knows his way around a technical chart blindfold.

To some short-range participants, there has been plenty of opportunity to take Cable on during both major (London & NY) shifts today. To others, the London shift will have legged them in & kept them in all day long.

By all means absorb & digest the helpful information & commentary, but don’t unnecessarily close doors because of someone else’s influence or preference.

It’s your money & your time. Use both assets sensibly & intelligently

[Jocelyn]

That's half my trouble I guess. I can see loads of potential resistance areas but I cannot distinguish between which will be the turning point and which will be losses before the turning point.

Don't overcomplicate it. If you're plotting potential support & resistance zones as part of your analysis package then you don't need any more than a couple of levels north & a couple of levels south of the current price.

Remember, they're only guides.

You're looking for, & seeking out area's where traders have either agreed a fair value trade-off (consolidation), or disagreed on a level where one set of players have very visibly overwhelmed the other set of players.

If you have a clear bias (short or long) & that bias is obeying the peak-trough behavior patterns (signifying buying dips in upshifts or selling pullbacks in downshifts), then until something happens that reverses that behavior pattern, the lowest risk/highest odds ratio is to continue betting with the dominant flow.

In most cases, these clearly identified levels of prior support/resistance will offer up excellent confirmatory opportunities, & they will also assist in determining whether or not a particular level or zone holds interest for your trade objectives & strategy plays.

I've pinched one of Sean's charts from late yesterday to illustrate my point. He was highlighting initial & secondary decision area's where the higher odds were likely to offer add-ins to existing short positions on the Cable.

Nothing fancy or complicated about the upper levels highlighted.
Clear & easily identifiable zones where traders were likely to re-engage short orders, locking back into the clear downside momentum of the past weeks action.

If not, then that initial level at c4950 would be your 1st alarm bell that demand was beginning to overwhelm supply on this aggressive shift down.

5min chart view


If you then shift it forward to the overnight action you can see that the upper tier held firm obeying the markets peak-trough behavior pattern, & if you're struggling for where & how to get aboard a move like this, you could do worse than to plot the additional price aids that jj mentioned yesterday re; Carll.

That opportunity offered up 2 bites of a very juicy cherry to lock back into the dominant bias & momentum for a low risk (re) entry.



In order to change tack & begin to consider longs, something has to happen to influence that decision. In other words, price has to begin printing higher highs & lows, (signifying a change in the momentum shift of the traders) whilst breaking & holding previous swing points along the way, at the very least.

That hasn’t happened yet has it?

[MattW2009]

Jos,

Thanks for those two valuable posts. I think I'll spend a day or so letting what I've been taught this week sink in and let the markets settle and then next week I'll put up a chart with my new analysis / markers (i.e. I'll stop spamming the thread for a couple of days! lol).

Matt

[on the bid]

I do have confidence in the triggers, as they're the same as I already use on the daily charts with good results.

Where I lack confidence at the moment on these frames is picking the correct location. On the dailies I have my S+R marked out and price nicely adheres to it - I had 1.47 and 1.48 marked on my chart and despite the plunge in Cable it still paid close attention to those markers. But on the 15 min there are a lot more choices on where price will pivot.

why not just use the higher timeframe support & resistance levels you've identified as your focal point, & simply transport them down onto the lower timeframes?

that way, you'll have a closer view of the zone as it comes into focus on the sub hourly timeframes. You can then maybe obtain a cleaner entry that perhaps offers up a more beneficial risk deployment.

one tip would be to introduce other/alternative potential s&r levels gradually & see whether they offer you any additional benefits.
don't trade them, just observe their behavior & see if they improve efficiency over & above what you currently use to operate your strategy objectives.

exploration & consideration of any fresh technical tools should be viewed as a helpful & profitable addition to an already successful template.

if it aint broke, it don’t need fixing!

In truth I only really have 3 primary triggers - the IB, OB and pinbar. Location determines if the signal is playable and direction is determined by the overall trend (continuation when downtrend hits a Support level, reversal when a downtrend pullback hits Resistance).

well, like I said above, if that's your preference & one of those triggers pops up on your 4 hour or Daily timeframe preference, then use that as your primary confirmation & drop down to a lower timeframe to see if it offers you a more appropriate timing & risk option.

just because you do your preparation on the higher timeframe charts doesn't mean you can't execute & manage your position via a smaller timeframe chart.
use the combinations to your benefit, if a benefit actually exists.

next week I'll put up a chart with my new analysis / markers (i.e. I'll stop spamming the thread for a couple of days! lol).

questions & comments related to the thread topic aren't viewed as spam Matt
post up as many contributions as you want. someone will get to them at some point.

[jjay]

I'm still open to the suggestion that I should look for wider stops and reduce the return for a safer trade.

Is there such a thing as a safer trade?
As you progress & become ever more familiar with the strengths & weaknesses of your strategies & their relationship with the market environment you choose to interact with, you'll find that your risk will more than take care of itself.

What I mean is (if) when you really get your model(s) down & tight to the point that 'identifying/preparing/executing & managing' your positions becomes a natural function of repetition, you won't even think twice about where your risk is or where it needs to be.

Your trades (should) will be geared & engineered around similar levels, designed around similar set ups, based on similar research & analysis, & triggered automatically, devoid of emotive influence.

That is of course if you're intent on developing a discretionary type model.
The rewards are self explanatory.
The efforts involve time, patience & discipline.