Once you can identify simple key areas of support and resistance on the chart you’re well on your way. mark the MAIN areas close to current price, then WAIT for price to reach them - set an alert on your platform.
When price reaches that area, WAIT for price action, don’t make it complicated. You can buy OR sell at these areas, let price show you the way.
GBPCHF 4 Hour
GBPJPY 4 Hour
GOLD Daily
I respect that these lines/zones do help some profitable traders - fair play to them I say - but I find if I add one or two horizontal lines to any chart, I find more and more and more significant price levels and add more and more and more lines until I’ve got support or resistance every 2 millimetres up and down the page. I can look at the GBP/JPY chart above and add at least another 6-10, but that won’t improve the trading.
Are there objective rules for determining which lines to draw and which to leave off any chart?
Hi tommor, you’re absolutely right and that’s where a lot of people come undone. For trading purposes mark the ones which are closest to current price, what also helps is zooming out the chart and look for the areas (because they are areas although I use lines) which have made the biggest impact.
Look at the GBPCHF those two lines define the range that price is in, set alerts close to them. In between, there are other levels, drop down a time frame, zoom out and again find the MAIN areas, there’s always one or two that stand out like the GBPJPY chart, look how that line has defined how price has moved, it stands out at you and once you put it on it completely changes how you look at the chart. As with the GOLD chart, the top area has again defined the movement of price, look at all the moves which have started off of that area. The lower area is a simple price flip area, look how price respected it twice before the recent move above it, this to me adds strength to that area, now you can look for a retrace and continuation of upward move or a rejection back down.
A bit long winded, hope it makes sense, try to keep lines on one time frame as much as you can, don’t put 4 Hour levels on weekly charts, it may sound dumb, but it only takes a second to scan through the time frames on any chart.
Why not? If I’m looking at a 4-hour chart, and the price is approaching this week’s (or last week’s) high (or low), why wouldn’t I want that displayed on the chart I’m looking at?
Well, that sort of sums up my problem alphac, and thanks for the input. The GBP base charts look good but I’m, not on the same page on Gold - looks as near the famous random walk as I can imagine.
Yes, this is pretty much how I identify potential entry points. Basically horizontal zones of support and resistance. It is tricky at first to find these zones; you can end up with lines all over the place as tommor said, and end up not being able to see the wood for the trees. I start on the longer timeframes and look for those areas that really stand out, where price has reacted strongly to the upside or downside. alphac’s charts illustrate this well. To me, the levels should be obvious. They should leap off the chart. It sounds simple enough, but took an awful lot of screen time to even begin to get it down. I also bear in mind that price has a tendency to follow a path of least resistance.
Personally I wait for price to react at these levels rather than predict that they will. That’s nothing more complicated than waiting for a simple 1-2-3 pattern to form on a lower timeframe before hitting the button.
My mistake, corrected.
I understand your theory but the key is how to enter at the levels. Simply waiting for price action once at these levels is very ambiguous. Do you wait for a break then enter, wait for a pull back once price breaks the levels, if price doesn’t break wait until it hits another level?
In my personal experience there are a lot of fake outs at these levels, usually institutions manipulating the market. Further insight into your strategy I feel is needed.
Thanks
Rich
Well put Rich.
I don’t get what all other traders seem to find is obvious. I thought maybe its me, but maybe its not just me, its you as well.
But it would be really good to learn another way to trade when I can’t find a trend to ride.
Thanks Rich, yes, knowing these levels is all well and good and there is no doubt that price gets attracted to and reacts at these levels, but there’s not always ‘trades’ there, far from it. Yes it’s true they are a stop hunters paradise, but that can also work in your favour, myself, I like price to break through then come back (often stops are taken then price returns, after all you need buy orders to sell etc…) Institutions aren’t manipulating as such, they’re doing what they do to make profit.
Price action to me means, pinbars, outside bars, long wicks, a compilation of wicks etc Obviously there are good and bad and you have to be aware of what’s around the trade to, is price heading to a trouble area (another price flip area, a low/high, trendline etc…) Many people I’ve seen see a pinbar and hit the trade button, but there are other factors you have to be aware of.
I’ll post a few charts, I’m no expert, but I trade for a living, I hope the pictures may be helpful.
Regards
Nice commentaries alphac.
