Hi As Xmas is coming up I wanted to share something that will hopefully be of value to unprofitable traders. I have nothing to sell, I don't mentor. I am sure 50% of unprofitable traders can use this material to find a solid edge in the markets. My own personal belief is that around 50% of people will never be able to trade profitable. This is because they do not have the patience, discipline and ability to think objectively whilst trading. To the naysayers beforehand - Write all you want, troll away, carry on, chart haters, mentally deficient, psychologically damaged just know I don't care, the only thing that matters to me with regard to trading is that I bank. _______________________________________________________________ See weekly candlestick chart attached below. Note there is no price shown, the instrument is not shown (it is irrelevant). The central concept here is that markets move towards liquidity and they are always hungry for the liquidity of weaker hands. I am using the concept of support becomes resistance to identify liquidity pools in the market but not in the classical sense. We know the majority of traders are losers, so we use their typical behaviour to give us opportunities. The weaker traders leave their tracks in the market and become the institutional traders 'play thing'. I call this the trader metagame or the 'game within the game'. Price moves down to point 1 and reverses. Classical Support becomes Resistance is above point 1, and I have marked this out with the blue box. The blue box denotes the area that weaker hands will likely enter short. They think price will react here and move south, the most amateur of these traders will think that price is going to much lower, take out the point 1 low and steam further south. On the rare occasion this will happen, however what is of interest to me is what happens when the weaker hand go underwater. At point 2 lots of weaker hand get short using the blue box as an area of classical support becomes resistance. There is a small reaction at point 2 where it may have been possible to bank a small profit for people who have good trade management skills. For the rest (the majority) price drives through them, some of them puke their position which contributes to price moving higher. Many of them will hold hoping it will turn around. Price moves to point 3 and by the end of that week the traders who sold at point 2 are heavily underwater. It's the end of the week and some of these traders will have puked during the week in disgust taking a big loss. Some weaker hand traders will have entered long as they can see 'momentum' and they have seen their classical S/R has failed. The following weekly candle close I have labelled 'opportunity bar'. Once this candle is closed (end of week) you can see price has pushed up a tiny amount above last weeks candle (weaker breakout traders are now trapped), price has search out the liquidity stops above of the weaker traders going holding short and then immediately rejected, this has also caused some weaker breakout traders to be trapped. The opportunity here (at the green line weekly close) is that price is now likely to move to the next area of liquidity. The next areas of liquidity are the blue lines. Top blue line - Low of the week, stops of weaker late longs and long breakout traders Middle blue line - The lowest price the weaker hands started shorting. It will target all their break even stops Bottom blue line - Last major swing low. You can see what happened to price. So the process here is: 1. Identify opportunity represented by weaker hands behaviour 2. Identify liquidity targets based on weaker hands behaviour 3. Refine entry and risk manage trade properly. There are many ways to enter at the opportunity point and use the liquidity points as targets. The obvious one is to enter at the green line. I prefer to go to a lower timeframe (in this case it would be daily) and then look for shorter time frame traders to be trapped. It then becomes a shorter time frame setup within a longer time fame setup. Couple of points to note: Naysayers will say, patterns don't work and you cherry picked this example. I say that all moments in the market are unique and I am looking the the behaviour of losing traders to create opportunity, it's not the pattern I am interested in, just the behaviour. Also anyone who uses this example chart and try's to find similar 'patterns' is going to fail. The analysis of the behaviour is key. If you want to use this info you need to go through historical and live example where you identify the behaviour. This method will not work for a minimum of 50% of people. The reason being at least this % of people and more lack patience, discipline and cannot follow an objective plan OR they cannot find ways to change their behaviour in this regard. People generally find ways to mess up. Pro traders wait for opportunity they do not react to the market, they don't let themselves become the markets bitch. If you sell at the blue box in some ways you are reacting and being the markets bitch. If you just wait for these traders to go underwater then imo the markets movement becomes more predictable. Remember in this negative sum game it's kill or be killed. Think about it the larger players do the bulk of the volume and their mission is liquidate the retail traders and take their stops. It also means the MMs and dealers get paid and boy do they love getting paid. Enjoy. Be patient and disciplined. Learn to love watching others lose and you bank. GL
Fairly elementary but well written and presented, although I was ready to hit "like" at the first evidence of no indicators. Good helpful post to noobs.
"I am looking the the behaviour of losing traders to create opportunity, it's not the pattern I am interested in, just the behaviour." Can't agree more.
I don't see the example as any more than the usual random price action....no trend....reversion-to-mean price movement.
that's cool syswizard. There are 100s of ways to trade. All that matters is that you bank the green. GL
Listen ? Why doesn't he show the prices and then write down his strategy ? Talk is cheap....let's "see it" !!
I purposely didn't show prices because that introduces potential bias to the reader. The material is applicable to all outright instruments however I would suggest applying them to markets where retail traders like to trade, there are plenty of losing hands there. Why don't I write down the strategy? err because I am not mentally retarded. I don't care what you want or need, that is quite long down the list of my priorities. As for the talk is cheap comment, go for it dude, knock yourself out on the trolling, negativity. I just don't care. You should have read the original post in full where I addressed your type.