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Old Jan 14, 2011 12:24pm
msmarple's Avatar
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Default How do I trade this ?

Great thread, thanks for bringing this up. And I especially like your second chart. I am studying this topic ( although with less ambition than you ) for quite some time and then always thinking : how can I trade this effectively ?

As a basic reference I too found Darkstar very good, more even so Domino`s posts. But all of that is already on a very high and sophisticated level.

In the " Swimming with the current " thread you will find a discussion of how to trade " the move of the day " and its W and M pattern formations.

In the " Price is everything " thread you will find extremely helpful posts from redsword11, who shows how to trade inside these orderflow / demand and supply patterns. Most notably he teaches you to see how certain candles show rejection of levels, his best and valid teaching is how he trades " compression into supply ", followed by an engulfing candle. See also DroppedOnion`s posts there.

I basically am quite happy to wait for shift candles taking out stops signalling a turn is coming, and then watching out for classic Wyckoff patterns showing low volume up bars, upthrusts without follow through etc.

Also notice the 3 drive up pattern before your circled consolidation. For me this is how market players " test " how much supply/distribution is left before their final strong up move. Remember once this strong trend gets going, they want to have as little obstruction from sellers as possible. So they absorb supply even to extremes below your support line. But yet again, we have the W pattern, the shift candles luring sellers in and taking out stops, before then the fast and strong move up occurs.

But I am only an amateur studying this, see how Domino, Darkstar, redsword11 are trading this. Also, the success from J16 price formations will surely come from " being on the right side of order flow ".

Last not least, traderathome shows in the Sonic thread, how broker tick volume CAN in fact be used to gauge the pump and dump activity going on, and although top notch Futures traders will scoff at this, more than 2000 pips since November and demonstrations of trades every single day are speaking " volumes " ( pun intended ).

But I prefer and recommend nothing below 1 h....you can see everything clearly on your 2 charts. Since I trade 1h, 4h and above mainly, I additionally study the $VIX, which in fact is a sentiment and " fear " barometer having direct influence on the major US indices, and then in turn correlates with major moves in the USD majors and also Yen pairs.

If you study raczekfx`posts, you will see how he applies this.

Best of luck, I`m subscribed !


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