Great explanation about breakouts. I'm gonna read it a few times so it really sinks in. Another scenario I was thinking about when I wrote the original post is when price breaks through R and then retraces to test that former R as new S. If my goal was to enter long as soon as I became convinced that the new S was in fact holding, what would I want to see before doing it? And a happy new year to you too!
Steve, I looked at that guy's videos on YouTube but there are over 150 and they all have the same title! Any chance you can give me a link to the specific video you're talking about? Or maybe another source explaining the two bar break? Thanks.
John, I've read a bit of stuff on order flow here on ET and it does seem like it could be useful. The thing I'm trying to get help on is when a level looks like it's holding, and then price trades through it. In the original example, price is trading higher toward an expected R level. It gets to the level and stalls out for a bar or two, and maybe even trades a bit lower making me think that the level held and that it's cool to enter short. Then it reverses and rallys up through the R. If I was watching order flow, it doesn't seem like it would help any in this situation. I would see the patterns in the order flow exactly as you described, but after the mkt traded lower a few ticks, then a bunch of buy volume would come in and cause the market to continue higher through the level. I might be able to see the demand coming into the market a couple of seconds sooner by watching the order flow but it doesn't seem like it would really tell me anything that I wasn't already seeing in price. But I'll be the first to admit that I know very little about reading the flow. Does my analysis make sense or am I missing something? Thanks.
First of all, s/r levels are not trade signals themselves. Simply, you need to have a trade signal that's independent of the s/r analysis to prevent having an ambiguous trading plan. Another way to look at it...if your trade signal doesn't appear when the price action reaches a s/r level... No trade. Therefore, what your asking is for trade signals. To answer your question now...look around EliteTrader.com because there are hundreds of threads where traders discuss trade signals (e.g. price action only, indicators et cetera). Mark
I know it's tough to do a search on his stuff, but here is one I found: http://www.youtube.com/watch?v=76Y8dxY1Q4E&feature=channel_page&fmt=18 He goes into more detail in some of his other videos, but I found this one to get ya jump started. If you have the opportunity to participate in his chat room, some of the traders in there are pretty good at spotting these indications. Steve