Levels Reacting

ignored levels are the cause of many WTF moments until you seem them. Nice job! http://readthemarket.com/index.php/forum/journals/1577-les-paul-s-journal?start=25

You just need to look left (and possibly left again) and see if there is any obvious RBR or DBD that was formed after breaking a level, that price is reacting to. That is then the level that you look for the break of, not the swing itself. This way, you can avoid FOs, by being aware of where the actual edge of the important FL is. Sometimes you get a series of stacked FTRs all on top of a FL - this is then compression. Sometimes the levels look insignificant, like the one on GU. But the market tells us it is important, because the last FTR into the top formed after bouncing from it. Therefore the break of this FL (also bearing in mind what we'd bounced from above) was significant. Without the added information of bouncing from a HTF/big FTR/FL above, then it's harder to gauge the importance of a FL breaking. FL break without apparent reason for the break = no trade for me. I will only take the ones where I can clearly see a reason for the bounce and break.

http://readthemarket.com/index.php/forum/journals/2141-smimon-s-journal?start=375#41344

rcmacf: What I can see, though, is that there is a bigger reaction to the right when the DBD/RBD engulfs something of more significance to the left

http://readthemarket.com/index.php/forum/homework-dbr-and-rbd/27-drop-base-rallies-and-rally-base-drops? start=600#24568 les.paul: Exactly! This is exactly what I was talking about when I said the other day that some of them are stronger then others... rcmacf: Cool. To be more precise, it's when the DBD/RBD is a decision point for that engulf to happen. I guess that's the same thing as the "source" of the engulf?

les.paul: Yes ;-)

IF: Every DBR and RBD has its own importance and value, and nearly every one can be traded. For each one that you find, zoom out to the HTFs, and see what historical significance the decision point has.

Perhaps it's a failure to get back into an important PA Zone - these ones are special. Perhaps it's within an HTF compression zone to the left - ask yourself would you take this trade, or wait for the tip of the zone?

The bigger picture will always help you decide on the significance of a DBR/RBD

DECISION POINT!!!! http://readthemarket.com/index.php/forum/homework-dbr-and-rbd/27-drop-base-rallies-and-rallybase-drops?start=350 !!!!!!!!! http://readthemarket.com/index.php/forum/homework-dbr-and-rbd/27-drop-base-ralliesand-rally-base-drops?start=600

The first chart below is is the supply zone of a weekly RBD and I have marked a bar that i am trying to explain with an arrow and have extended it across.

The second chart is a daily chart with 5 candle highlighted in green which makes up the 1 candle on the weekly. nothing major can be seen.

the third chart is a 4 hr chart with 20 candles which makes up the 1 weekly candle. there seems to be some activity

the fourth chart chart is the 1 hr and in here you can see and I have marked it with an arrow where the sellers overcame the buyers. As price shot off so quickly there will still be some unfilled orders in here

have marked on the next chart the place where price shot off with a green line.

If we now go back to the weekly chart you will that price went up to the green line that I placed on the i hr chart and shot back down again.

http://readthemarket.com/index.php/forum/homework-dbr-and-rbd/27-drop-base-rallies-and-rallybase-drops?start=975

Going to LTF inside

we will say a 4h zone can lower your risk or with the same risk be able to reach your 3:1 target sooner.

The charts below show a 4h zone. Then using a 15m to help narrow down the turning point. Technically you could go to a 1m chart. This can work well but as your zone shrinks the likelihood of price hitting it again also shrinks. I have had pending orders miss by 1/10th of a pip.

So sometimes what I will do is get an idea how far price can move for my profit margin. we will say 100 pips. So for a 3:1 R:R I can only risk 33pips. So I have to get the zone smaller. What if you can get this down to a 15 pip risk with the same 100 pip reward. 6:1 R:R.

So getting your zones tightened by going to the smaller time frame can be helpful.

I used to trade with 4 charts of each currency pair. Daily, 4h, 1h, 15m, each marked with zones. Some people may be able to do this for me it was an exercise in futility. Could not keep track of it all. Miss high time frame info while looking at the lower. So to fix this, I now trade with two charts for each. #1 Monthly, weekly, Daily #2 4h, 1h, 15m

Then zones are laid out.

Well I sure got wordy. Forgive me

Understanding these zones and how to shrink them to increase your profit margin to me is an important aspect of trading profitably. I get kind of excited about it.

Hope this is some help. I guess it shows a little of how I see the charts

TRUE SUPPLY AND DEMAND / swap zones http://readthemarket.com/index.php/forum/homework-dbr-and-rbd/27-drop-base-rallies-and-rally-base-drops?start=350 !!!!!!!! http://readthemarket.com/index.php/forum/homework-dbr-and-rbd/27-drop-base-rallies-and-rally-base-drops?start=600

This is my take on how new demand/supply levels are created. Fresh zone are created from an old zone of the opposing type. By that I mean, what was old demand can become fresh supply when price creates a flip zone. On the chart posted lets assume for the purpose of this example that the left hand side of the chart is a price flip zone which means it was previous supply. When price broke thru at (1) it cleared out all the supply so only demand was left at that level. We don't know how strong this is (although how price went thru the level and how far it travelled gives us a clue). There was an initial retest of this level a few bars later which showed there was still plenty of demand. Price came back again at (2) and this is now considered old demand but it was still good enough to hold price again. At point (3) there was a little reaction up consuming the remaining buy orders and so demand was all used up and price fell thru creating a new supply zone at that level. Price moved well below the level quite strongly so we can determine this is a good level to short next time back. Point (4) is the first time back to the new supply level so a good place to short. That level is now considered to be old supply. We don't know if a level will hold or how many times a level will hold so we look to the chart for clues.

Hope this explanation is clear enough to follow.

@MEL: Outapips This is what I wanted you to see! Madwt, I saw that you marked s/d on what actually was a retest of the initial s/d zone. You marked highs or lows. Keep in mind that we want to see a base and then a break of the base , take the RBR, DBD as examples. I remember the time when I first learned about supply and demand... Everyone was talking about fresh zones, so I went to the charts in order to find some zones and everytime I found what I thaught was fresh supply or demand, I saw that it was only a retest of a previous zone... Got lots of headaches from it lol But then I found "broken and engulfed supply and demand , what is also called a swap. This is when I realized that fresh supply can only exists if the demand was cleared and vice versa for demand. Look at it this way... There is a supply zone and then there is a decision to break the supply, so supply is gone and there is only demand left, so now we have fresh demand as long as it doesen't get tested... I hope that this makes sence.. Mel