Entries over view

A number of recent emails requested I show what I look for on the lead up to taking a trade. So without further delay here is what I do from my ten mile high view on the high time frames down to day trading time frames.

The pair has no relevance and it just a means of demonstrating the approach. Some pairs act in ways where they wont provide the same degree of comfort to the trader in how to look and feel. It may sound odd at first, but each pair has a personality in how they behave. A casual glance will show pairs outside of the majors to have a spiky nature or when their price moves, it moves in large swings.

Monthly chart where I start my analysis each month with a look at last months candle close. And you should only ever trade on a candle close and not when it is forming. Otherwise you risk price looking much different to what you think it will be. So trade what you see as fact i.e a closed candle and not trade what you think.

This is the blank chart and from here you can apply what you feel is necessary to help you paint a picture of what has happened over time. My way is not the right way or only way, just one approach that works for me. Add, remove and modify as you see fit because we all think differently, unless you listen to the media and become one of the herd.

I have drawn in a tick mark on top which shows the climatic price action of the market top. On the bottom of the chart is the lowest price within the charts time. The middle line is a support and resistance line, but in reality it is an area as all price can be. Dont look for price to react to the pixel, it is akin chasing rainbows.

So far we know price in the near term has fallen from the high, bounced off the low, hit resistance and bounced back down from the resistance line/area. We therefore deduce that price is still bearish and we want to be on the side of the market favored by the majority.

If we shorted we need to know where is a good place to take profit. We also need to know where is a good place for a stop and of course, where to enter.

Weekly chart.


A little closer into the price action and we now see more detail. It is still too high a time frame for most to trade and we pull what information we can from the chart. We can see price hitting the resistance area and the strong move away. This clearly shows a lot of sellers and as price moves down the pull backs are relatively mild which shows how strong the selling is and the desire to reach a target. A target is a figure of speech and there is no one target, but a price area.

The white line is near term support and resistance and price slowed as it approached this. The warning sign was the large bullish print a little above the white line. The price was reacting to an area of consolidation on the left of the line.

Ignore the approx 100 points label. It should read 1000 points. If you were pro money, would taking price up to where it has just been make more sense and be easier profit than it would to take it lower where price has not been for a long time and where historic orders are likely lower in value?

The daily bread and butter chart. This is the most viewed time frame for most instruments traded. I zoomed out a little to show more of the price move.

The white S/R line is still here for reference so that we know where we are in the bigger picture. Note price falling from the high and there is one place where price accelerated rapidly. Shortly after this price spiked into that area. This was a means of getting a better price for pro money to continue the move down and was aided by the fact that most traders would have been stopped out, others gone long and subsequently stopped out, which all feed pro money easy profit. If you wanted to hold through that spike you would need deep pockets.

Lastly we see price poke below the S/R line and will have been seen as continuation. But taking that as the market was about to close and close into the end of the week would have been unwise. You are better to enter into an active market.

Now we are down to the 4hr time frame. The white S/R line is here again for reference and also is a large box placed into an area where supply (sellers) are active. You can see the large effort to pull more and more short orders in order to get price down. The previously mentioned consolidation was the most likely reason for this price action.

Towards the end of the market you see the false move down and price closing above S/R. This means the time is not yet here for further bearish moves and a retracement is necessary. I highlighted with two white line places where pull backs into look good. There are sellers waiting in there.

The 1hr time frame wont be of much use at the moment because we do not have activity and I only put it on here to show how lower time frames begin to expand what looks cleaner on higher time frames. Note there are now three white lines showing places where sellers are waiting. Anyone one of those could be the point at which the market turns again, but you now know the turns happen in an area rather than a finite price.

The London close showed the most activity for the session and volume on a futures chart showed that play out. The slow drift up in the NY session was a non event and it never gained enough momentum to trade.

When you finally place a trade and we will assume for the moment that you only trade with a standard lot of one point per 10 dollars. Rather than risk the 10 dollars consider scaling in. Break your trade into .2 of a lot. Now your risk is 2 dollars per entry per point. Less to loose is the market turns of spikes etc.

If you got a good entry and price moves as you had watched it unfold, you can now get in again on a low time frame pull back and doing this a few times will get your full single lot trade in the market with a lot lower risk.

You can scale out on the same basis. Set a target on successive further away prices and move your stops accordingly. I will put up another post of realistic places for a day trader to use on the 1, 5 and 15min time frames.