Well, close but not exactly like that. I know the levels that interest me way ahead of time, but i never place blind trades far away (ie 5+ points ES).
Instead, you need to watch the level closely to see if the absorption you want is happening or not before placing the trade.
This is why simple support/resistance levels by themselves cannot be acted on without knowing the context. That either comes in real time, or can be viewed in the not so helpful hindsight, but can not be determined or predicted ahead of time.
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The following 3 users say Thank You to Big Mike for this post:
Since that's how i place the majority of my trades you need to make sure your risk/reward is strongly biased in your favor. As i aim to place less trades but watch more instruments to get more free time this method of entering fits the bill. Think about it, if the location where you usually trade offers a risk/reward equal or superior to 1:3 then you could flip a coin to select a direction at your price level and still make money. Of course, if you are in front of the computer when price approaches your level then you can fine-tune your entry via whatever tool but that's not usually what i prefer to do.
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Yes... In TF, I call the areas of common price "edges" because if you put a horitontal line on your chart
and look left, there should be at least one previous swing where price consolidated at that exact price - like LOTS of bars lined up at that EXACT price.
I like to find a good strong area that I know will have some type of reaction and just plop a limit order on
it and keep trading. I like this to be a good ways off from the current PA. Then, sometimes, like news,
Price will just send spikes in both directions. These never land randomly. They are always testing the areas
Most times I am not filled, But when I am, the PB is so violent, I can be up 20 in a second.
Kinda like fishin'.... Sometimes you lose your bait, sometimes you catch a whopper.
mostly, it's just sittin'
Damn, My north Florida roots came out
"Life On The Edge of SR"
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I use daily and hourly pivots as entry points for almost every trade I make. Although that does not mean I enter a trade every time price touches a pivot. Many other factors are taken into account before I place a limit. Volume being number one. With lower volume there is heavy exhaustion beyond S/R points making them perfect for picking relative highs and lows. I am not sure why some people would blindly trust a S/R point to be steadfast. The change in volume at a time is not really something that is very predictable (besides during news releases) and with higher volume it is quite possible price will continue past S/R.
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If I have understood well, you appreciate low volume at S/R for a possible reversal.
But don't you think that heavy volume (with no follow-through) could also be an interesting sign (absorption)?
For instance... price is moving up to potential resistance. When reaching the level, there is a heavy buying (not selling) through market orders, but without follow-through. This shows that there is a well-capitalized seller in the DOM. Afterwards, sellers step in.
EDIT: This heavy buying at resistance could be:
- longs playing a breakout --> they are trapped in
- shorts covering their losses --> they are trapped out
When price will finally move down, both may fuel the move:
- longs trapped in will bail out
- shorts trapped out may re-enter.
I'm not contradicting. Just discussing.
On my side, I am currently working on the two scenarios (lack of buying interest OR absorption of heavy buying).
Last edited by Nicolas11; August 25th, 2012 at 12:35 PM.
Reason: addition (visible)
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