Making Money Trading

Which market do you want to learn to trade?


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trader_dante

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#91
The puzzle pieces

When I am sitting on the sidelines watching the market, it is important to me to be able to see the potential pivot areas that price might turn at.

The price action is the turning point itself and as a result of this, it is the final piece that you slot into the puzzle.

I will soon talk about price action (and principally pin bars which are the foundation of my strategy) but before we look at them, I want to show you how I initially approach the market before attempting to trade it.

I am going to use Crude Oil as an example. Let's assume I have just logged onto my broker and opened a clean chart for this market on the daily timeframe.
 

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firewalker99

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#92
Support and resistance zones - still something I have a problem with. Firewalker, do you use volume bars (ie X cards per bar) to establish S/R levels? Have you considered paying attention to volume around key S/R points, and how do you go about this?

T_D - just so we are all on the same page when you show us some of your setups, could you show us how you draw support and resistance lines?
Hi Lurker, not my place here to tell you what I do or don't. This thread is about t_d, not about somebody else's system or rules, let alone mine.

But for the record, yes I do take into account volume and I posted dozens of charts with annotations and comments in the DOW 2007 thread (the When to Sell thread, the Tape Reading thread, The S/R: Mirror of Erised thread, etc...) where I explained what I saw and why I saw that. If you have any questions surrounding those, feel free to ask them in the respective threads.

I'll leave it up to t_d to answer your other question.
 

firewalker99

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#93
About the journey as a trader

The second reason is slightly more egotistical. It has taken me seven years to find my way in this game. And now I am having success, I want to tell everyone about it. I will tell you now I've had many detractors in my life. Colleagues, friends, sometimes even close family that have told me I will never make it. To stop trading - to stop gambling and to pursue a "worthwhile career". This is my way of showing that I am making it and that I can help others make it too. Perhaps the irony of all this is that the people I want to prove myself the most too, will never see this.
Although the following can be about anything you want, for me it very accurately describes the trader's journey. I don't mean to distract you any further, but reading the above and knowing all to well what this game can do to a person, I hope you don't mind me posting this...:


and then it all
opened before me
like a great and brilliant
light
and all was before me
as it seemed
that i could go anywhere
and as i looked down
both of the roads
i chose once again
to take the one
not traveled
for the road was exciting
and unfounded
and mysterious
and i being once afraid
looked down the road
with great determination
and joy
for i determined the path
that this road would follow
this one, not traveled by many
and the view
is spectacular
there are no road signs
no paved paths
there are no cut away trees
it's simply lovely,
and is just as it was before
except now, i travel it
and stop and marvel
and get tangled in it's mess
and admire it's beauty
for it is a road that i have
chosen
and for the first time
my eyes see it
for all the beauty that is
with in it.
and still, and ever so much
glad that i took this road
less traveled by.
it will make
and has made
all the difference

 

trader_dante

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#94
The first thing that stands out to me is the clear trend up so I draw in a trend line. I am not worried about getting the drawing of this line perfect. I don't spend ages wondering whether I have connected the right lows. I just want to get an idea of where that TL support will be coming in.
 

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trader_dante

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#95
Secondly, I look for other possible trend lines. The one I have drawn on the chart is, in my opinion, not valid yet.

It is generally accepted that a TL needs three touches to be valid. I subscribe to that rule.

In this case, I am drawing it on the chart because it connects the most recent swing lows and I want to see if the market will react to it at a later stage.
 

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trader_dante

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#96
Next I want to identify areas of support/resistance.

Now this is a KEY part of my strategy. Everyone draws S/R differently. I will show you the way that I have found works for me.

What I am looking for is obvious pivot areas where previous resistance has now become support and vice versa.

These should stand out as clear as day when you get used to looking for them.

Here is the first one that draws my eye.
 

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trader_dante

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#97
Here is another area. This was significant resistance for several months before a breakout occured and the market then tested it and the level became support.

This area stands out very clearly to me.

When you look at these charts, you will often find minor areas of support and resistance. I tend to ignore these. You want to find the areas that the major players are going to be looking at. It is these major levels that the price has a high probability of reacting to in the future.
 

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trader_dante

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#99
The final touch I have to make to this timeframe is to add in a level that hasn't been tested yet but which I think may be. This is the top red line in this chart and I have drawn it there because it joins the two recent highs that price broke out of.

So this is what my chart will look like when the market opens.

Rather than try and jump into the market mid-move, I wait for it come to my levels and see if it reacts to them in a way that will give me a high probability setup for entering the market.
 

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trader_dante

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Pin bars

Pin bars are the price action setup I look for at my pre-drawn pivots.

The pin bar is an abbreviation of Pinocchio bar. It was coined by Martin Pring. The reason it is called Pinocchio bar is because it is based on the old European story about the wooden boy, Pinocchio whose nose grew longer the more he lied.

Pin bars lie to you about the direction the market is going in. When we see a pin bar we can take a trade in the opposite direction to one in which the nose is pointing.

Pin bars can occur at market tops. And market bottoms. Once you start looking for them you will see them everywhere. These ones I have circled stand out because our eye is naturally drawn to the highs and lows on a chart. They would have resulted in massive wins.
 

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trader_dante

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Couldn't have said it better myself

I would suggest that its better to try to figure out how the other players in the market see the world and then make sure that you can perceive what they perceive. My rational is that the confluence of support/res fibs and price action (and/or mas) is really you, the trader, looking for situations where as many players as possibly perceive your scenario as a good setup or will do so in a short time as their patterns fill in.

So, FWIW, I attempt to look at the market thru the same lenses as big players, active traders, and other major influences. I try to look at their preferred timeframes; their preferred tools; and think "what will they see now?"
Spot on. This is an incredible post.
 

trader_dante

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Eur/usd

Have a look at the following chart of the EUR/USD. Look at the lower ascending TL. If you had drawn that in (back when it had only touched twice) you would probably have sat up and took note when it came back to it in August.
 

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trader_dante

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This is another A grade setup.

Price pulls back to the ascending TL and forms a pin bar.

Price had retraced a little deeper than any fib level from the last swing low but if you draw fibs from the two prior swing lows you will see that the 61 of the first and the 50 of the second are literally on top of one another. And the nose of the pin bar touches them.

This is confluence. And it is very powerful. Other traders are watching these levels and the pin bar is a heads up on what they are doing.

The psychology behind the pin bar is simple: in this case, price fell and then was met by significant buying support which caused a rapid reversal and a close near the highs.

This validates your pre-drawn lines.

Whenever I see a pin that touches a pre-drawn line almost to the very pip, I get strong confidence in the trade. Why shouldn't I? I have analysed the market and drawn on a pivot and the market has shown me that at least temporarily, I have been proved right. Once the pin is then triggered it means price is still going in my favour.

This is an important part of gaining confidence in your trade.
 

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trader_dante

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As traders there is only one thing we can control in this market and that is our risk.

There are two elements to risk. There is the initial element where you decide on your position size. Once you decide on your position size and take your position you are in charge of managing your risk as it changes with the market movement.

Drawing on your levels before you enter the market is the KEY to managing this risk and being in control.

Being aware of key levels in the market is my way of knowing where it may be the best place to tighten my stop or to look to take profit. It will also tell you where to safely put your stop so that you do not get shaken out of a large trending move.

Don't be caught unaware by the market. React to it.

Drawing these levels is part of planning your trade.

Plan your trade and trade your plan.
 
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trader_dante

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Let's imagine we were going to take this pin live now.

I would go through the chart and mark all the areas where I think price may stall or run into difficulty.

Obviously we are looking to be filled in a long position (when the market breaks the high of the pin) so the areas we are trying to pinpoint are going to be overhead.

Here is the first one based on previous support/resistance areas.

Again remember - look for the most obvious.
 

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