But… Naked Trading!? The Elegant Charts Thread

But.......Naked Trading!!??

The Elegant Charts Thread

I’ve started this thread due to how my Simple Setups To Trade thread developed into me showing how I trade (at least one method).

It has been getting a little interest so I thought it would be beneficial, to me certainly, and maybe a few others, if I started a thread in which I explained fully my methodology. This is not a thread intended to teach people how to trade, it is a thread where I can show what I am doing and discuss it with other traders. (hopefully)

Remember when we all first started to learn about trading? I bet the first thing you did, like me, was to fill your charts with the many and varied indicators now available. And devise a hundred weight of systems that used them? You know MAs, EMAs, Alligator this, Fractal that, right down to the damn Ichimoku voodoo cloud rain dance system!! Yeah you did....I know!? I've seen charts so full of cr#p I couldn’t even see the price!! you only have to visit the Charts on Drugs or Works of Art thread to see that. Now I know indicators can have their place, some more than others imho, but as time goes by the more I learn about actual PRICE ACTION (if that is the right phrase) the less I find I need them. I might still use the odd one if only to find a bit of confluence, which I will come back to. What has become important to me now is SUPPORT (S) and RESISTANCE (R) and more so PRICE PIVOT ZONES (PPZs)

So what is a level of support or resistance? It is simply a price where the stack of waiting limit orders is large enough to stop price in its tracks and even change the direction of its movement, them and the market orders that follow. Simply put they are places of perceived value in the market. PPZs are simply areas where price has flipped around an area of support which then becomes an area of resistance, or visa-versa. These often occur around the round numbers, (RNs) 1.21, 1.22 etc and more so at big round numbers (BRN), 1.2000, 1.3000 etc. but this happens all over the charts in every time frame.

If these ideas are new to you I would highly recommend the James16 Chart Thread. It is run by profitable traders who go out of their way to help newbie’s. That thread taught me much. (Thanks to you all).

The other element important to me is trying to identify the general market sentiment from the candle sticks, and the general way in which price is moving. Or as a mbqb11 would say "the story". I am not going to go into that here, i am still learning and there are better places to learn about that than here. It basically comes down to chart time.

The first thing I will try to do is outline how I identify my PPZs

After a bit of chart time it will take you literally moments to notice them. A little later you will begin to see how to identify the more important (stronger) ones.

Firstly I start on the higher time frames (TFs) daily or above and draw in a line where I can see price has reacted to multiple times, preferably from both sides of the line, always taking note if the price is a RN or a BRN. Check out the vid to see what I mean. You might want to take a little more care than I did on the vid! It is for e.g. purposes only.

http://www.screencast.com/users/Jonnyfx

EUGBfindingPPZs

Then I move down to the 4H TF and firstly check if I need to refine the ones I drew on the 1D TF, then draw in any lesser PPZs I can see on that TF. I draw these lesser levels in a different way so I can see easily their relevant importance. You can see how price flips around these levels giving us lots of opportunity for trades. I will post a chart or two to try and demonstrate.

I keep on moving down from TF to TF right down to the 15min chart, (which is what I mostly use for the retrace breakout method on this thread)Each peak and trough can have value as a PPZ, on all TFs. A good tip so that you don’t end up with levels all over the place is to just let them run out when drawn on the smaller TFs. When price moves away from them just leave the level to go away as time goes by, this is one of the reasons why I use the rectangle tool and not horizontal lines. The small TF PPZs are usually only relevant to that TF and don’t carry too much weight on the higher TFs, BUT the PPZs drawn from the higher TFs WILL have an affect on price on all TFs. What you will see is just how closely price flips around the levels found on the higher TFs.

Check out the second video for a basic look at how I draw in the intraday levels and how price reacts to them. If you notice some are also RNs though not marked on the chart. It also shows the basic idea of the breakout and retest setup I am currently trying to master.

http://www.screencast.com/users/Jonnyfx

usd/jpy 1 hour

Using these ideas to get an angle on price movement the first set up I use has been shown in the original thread.

http://www.forexfactory.com/showthre...22#post6755922

The Second set up I am currently trying to master is a simple breakthrough and retest touch trade, out lined in the second video. I like the fact that we can often get high probability trades with small stops, (notice how little price moves through the breakout price when it does retest it!)When price breaks through PPZs or SUP/RES it very often swings back to the breakout price or a close PPZ (the retest) before continuing on its way. Sometimes the level might not hold price and it ploughs right through giving us a looser , or it there might be too much momentum for it to even reach and so we have no setup , but it does hold up enough times for it to be a high probability set up . This is nothing new and is used in many ways by many traders. Wizards thread Fail Better shows a great method pretty similar, and a lot better researched.

jon

PATIENCE... DISCIPLINE