Romik, is this a new method of trading for you? How long have you traded this strategy? Also, which chart service is that?( currently I don't trade forex)
I reference various sources, it is cash FX after all. The one you are looking at is Metatrader. I don't think there is anything new about the method, S/R terminology has been around probably since charts came about. I'll be frank, I do use oscillators to see a broader picture. I use RSI and MACD paying attention to failure swings and divergences. For example daily EUR/USD displays an RSI failure swing, MACD cross, just these 2 patterns and proximity to next support level on the weekly chart suggests a possibility of increasing volatility in an effort to hold/break that level. It is a new method to me personally, as I have started daytrading in Feb 06 and I want to be able to not sit at the desk for 12 hours a day. I prefer to program the levels, stops and have the flexibility of being able to get away.
Okay, I'll try to keep up with this tread. I remember really getting into intraday S/R on the ES. I made some progress, but I couldn't develop anything to the level of consistency I was looking for. Good Luck
Very nice. But the higher the timeframe , the larger the stop has to be, so the money management is the crux of the trade.
Yes, there could be 2 problems there. Firstly where were S/R levels taken? From last 5-10 trading sessions? Secondly if R:R was 1:1 then, unless a tested pattern is being used providing higher %age win rate, this way of trading can result in the end result being either breakeven and/or net loss. This method relies on key S/R levels, that are important not just to shorter term traders, but to position trading entities. And that is where this method's principle is - a possible key S/R level break. Price has already travelled a fair bit to get to that important level. A break of an important level will always offer more than trading intraday S/R, which is also quite a bit more complicated if one is to achieve good R:R IMO. BTW this thread might grow if others contribute their opinions/criticise, otherwise I've made a suggestion, you can either take it or leave it. If you are to think about using it, as apex82's suggested in light of possible multiple failure breaks, it would be a sensible thing to do to research first
Relevance of entering same level and not altering it is crucial to this method, perhaps could even be applied to any method. To me, it's common sense NOT to alter the entry level, if the signal is still pointing to a weakness in the market, shorting same major support level warrants that eventually that level will be broken and price will not return to that level until the time initial bearish signal starts showing signs of a potential reversal. And then, I am going to borrow B1S2's profit taking methodology here, adjusting a trailing stop to the next reaction high. IMO traders that end up quiting due to consecutive losses and frustration, one of the fundamental mistakes they commit is altering their entries, especially if these changes are within the intraday 'noise'. Finding a major level of S/R and observing current price action together with a bit of TA AND entering same major level upon break while keeping tight stops is one of THE best ways to go about it. It is simple, rewarding and frees up a hell of a lot of time.
What you describe is extremely profitable. It's just that most traders cannot sit still while waiting for the trade to come in. The reason for this is that they feel that have to make money NOW and are missing opportunities right and left. You are on to something quite large here Romik. When it comes in , you'll make money wicked fast! Very very very rewarding!.
Only one thing to add: Increased position sizing on repeated attempts will bring in the real big winners.
Thanks B1, you can probably sense quite a bit of your own teachings in this. I am not quite sure when and how to add size, perhaps you can make a suggestion. You see, I am looking at entering same position size and keeping stops exactly the same, so increasing size upon failure break/s would make stop even smaller, perhaps too small. So I think I would be interested it learning WHEN to add size while already in a trade, thanks a lot, much appreciated.