I wouldn’t trade this, if you entered at the break of the morning star you would be trading right into a resistance area. I think for this setup to be better quality the morning star would have needed to form higher up. Being that the candle formed inside of the area where you would expect to take profit, I would pass.
Hello Everyone
Getting ready to warm up the Trader 3000 Buttock Clencher for the week. I have taken this BUEB on the GBPCAD 4hr:
Pros:
With trend
At a point of support
Engulfs a number of bars
Cons:
None that I can see other than pair is currently reaching high of 2010.
It depends on who is teaching, but if you go back and read my article about S/R you can see I only use the 8/21 EMA’s in trends or swings with very string momentum, and only on the daily. In conditions where price is ranging or just meandering around, they provide little to no benefit to the trader. The 8 and 21 EMAs are considered short term settings.
The 50 and up settings are used considered long term and used more like horizontal support. Until I have ample time to teach the difference between the various settings I would suggest people use the 8/21 EMAs to find S/R areas in trend/momentum.
Nice SS and pro/con list but please also rate the setup based on your understanding of the dynamics of the trade.
Without pulling up the charts myself the setup looks nice, the only problem I see with this is the same I have been seeing with other trades and that is the PA candle is up in the area where you would take profit. You would rather see it protruding down past all of the candles of that swing low. Only time it makes sense to break this rule is on a trend line as the candles will continue to move higher and higher or lower and lower and may not protrude down past the previous candles.
Great statement, you just summed up the entire reason for me starting this thread and my other beginners thread over at newbie island.
For me it’s in the middle of nowhere. I place my SR lines on the Daily TF and my support is way lower. Also, it’s kinda against the recent tend, the recent momentum.
Hi Aaron
Thank you again for your feedback, I would have probably rated it a 4 star trade but after reading your feedback I am guessing it would actually be much lower :). I am definitely learning something new from your post Aaron, especially when it comes to the close of an engulfing bar and also trading into a take profit area. Is there any chance you have any visual examples of this so I can get a better understanding?
Thanks again!!
BA
Hi Gmatav
I also draw my S/R lines on the daily and have it on a point of resistance now support if I’m not mistaken? It has also been in a massive up trend recently.
I can see the thread is starting to find a good groove and we are getting into the best part which is discussing trade setups. I looked back and noticed quite a few setups posted here recently. First I want to say everyone is doing a great job in their setup posting, almost everyone has a clear screenshot and pro/con list. For those who posted actual trades they are including their SL,Entry and TP levels. The trades posted here are by far the best quality of any of the threads around here, so keep up the great posts guys. You never know, if you have a great quality setup and it becomes a big winner, I may link it to the “Quick Nav” area on the homepage to help new members learn how to identify good setups.
The one thing most posted setups are missing are a quality rating. I am giving a little slack on it because I still have a lot of information to put out there to help you guys/gals understand the market dynamics better, but I want to get people into the habit of doing it. One big thing I hit on that most teachers don’t are the many dynamics of a trade that determine its chance of success and potentially the amount of risk you may want to put into the trade. Rating your setups help get you out of viewing every trade as either A+ or not A+, and looking at trade as they are, all different and of different qualities. Trades are not just black and white, but many different degrees of quality. This is also to help you as a trader. If you keep track of each trade you take, your pros and cons, and what quality you are giving the setup, down the road you can look back on your winners and losers and figure out the areas you may be missing it, or where you need to grow in learning a certain dynamic of the market.
If the rating system doesn’t make sense, shoot me a private message or hit me up on Skype. Essentially a 1 star trade is merely meeting the base requirements for a valid setup, up to a 5 star quality trade which is a near perfect setup, one with a very high chance of success. Don’t worry, there is no wrong answer here. We want to know and you need to know how you view a trades quality.
I will begin posting 1 and 2 star trades to help traders identify trades that may qualify, but shouldn’t be taken due to the higher risk, lower quality dynamics of the trade.
Agree with B A, nice resistance level. From 2009 -2010 was a really strong level. But is this too far back? id say it is still significant since price is again to sticking to this level.
What helps is that the level that it touches is a key level and we can see the market respected it many times through the past couple years. There is bearish price action on the higher timeframes but these candles hold less weight the lower in time you go. I would personally give it a 2 star rating. Remember though, there is no wrong answer, its important for you to understand the process you are going through to rate trades, and as time goes on see if you are analyzing them correctly. The best benefit you will get from rating trades is being able to look back and see if there is anything you were missing. Sometimes you may overrate a trade and sometimes you may underrate a trade, it can happen both ways, but in both cases you realize you missed some important dynamic of the market.
The other con that I picked up on is this that price collapsed through the uptrend that was in play. You may see price struggle to break back up through this trend line as it will now act as a minor resistance.
Thanks jejlennon, I am hoping it is still relevant, you can also see that it has acted as minor resistance more recently (Mid August and early September). I don’t often trade engulfing bars as I have a lot to learn about them, tend to stick mainly to pin bars where possible but I fancy this one to work out. I am aiming for a TP at 1.66944
Yes it is still relevant. The fact that price has recently started reacting to these levels adds to its relevancy. There really isn’t a historical time period that isn’t relevant. The only thing that changes when looking at price action way back in time is we want to find those major swing lows/highs that really stand out, we don’t care about the minor swings that happened on july 1st of 2007, lol. You know if it is a big and obvious swing low/high because they should really stand out and slap you in the face. If you have to really work to find them, they probably aren’t that major. In the case of this trade I think the levels are good, and you can zoom out and very clearly see price swung low, hit those levels, found support and snapped back up, making them very clear support levels.
Thanks again Aaron and great insight, I must admit I haven’t begun using diagonal trend lines yet but after seeing your post now think it’s time I integrate it. I also now see the bearish movements on the longer TF, especially the weekly. I reckon that it will still go back up a little way but can see this trade was not one I should have considered so quickly.
Thank you!
BA
Hey Eternal, I clicked on the link to your flow chart and it just took me to the last page of the thread. When you link to a specific post, there is a number in the upper right hand corner of every post. If you click on it, that is the URL you want to have in your link. It will take the person to the exact page and auto scroll to the exact post. Can you post the link for me and I will check it out.
Here is the latest version Aaron
Thanks in advance
Muahaha, it looks like my evil plan is at work, helping people understand the entire market context. Haha, that was a little tongue in cheek, but I hope people are really starting to believe that there is more to the market structure than simply horizontal lines. I am not picking on just 1 teacher here, from what I can see almost all of them leave out some sort of dynamic, for reasons I can’t understand. I know people were a bit skeptical at first, but this is truly how I view the market, and I hope people are starting to buy into the idea that there are more forces affecting price than most teachers are giving credit for. I think what we are focusing on here covers most of those forces.
I have traded like this for a while and I really don’t find it to be that complex or messy. The statement we are making in this thread is we refuse to sacrifice profit and our understanding of the market for the sake of cleaner charts, or to make things as simple as possible. I would like to hear others opinions but with the extra dynamics we are discussing here I don’t find my charts to be much messier or the method to be that much more difficult.
Wow, that is really impressive. It’s obvious you are treating this like a business, as that is business quality. It’s like signing a contract with your trade, haha. If it doesn’t mess up the formatting, could you copy and paste that as a post here and then add the download link to that word document? I also want people to be able to see the trading plan right here in babypips.
You may still find that price breaks through that level, and if it does it may be fairly explosive. I do hope it works out for you and you are able to take some profit off the table.
[QUOTE=“krugman25;550458”]
You may still find that price breaks through that level, and if it does it may be fairly explosive. I do hope it works out for you and you are able to take some profit off the table.[/QUOTE]
Thank you Aaron, although my order hasn’t been triggered yet I’m going to ride this one out and see what happens. Like you, I tend to manage my orders as they go and don’t completely set and forget especially if I see that they are struggling at any point. I think riding this one out will help me learn and the trader 3000 will appreciate another test run since the original failure.
I also agree that the tools we use aren’t messy, after all we are still only trading using PA. these tools just help create a more informed picture. I’ve been a fan of the ema 200 for a while now and although I don’t use it to place trades, it does help me get a quick and easy view of the overall trend.