Entries and scaling

I will in some way answer some emails and questions about this which has been a hot topic over the past few weeks.

What I will cover is generic in nature and is applicable to everything that is traded and all time frames.

Lets look at a bare chart free from indicators and other distractions.

Given that this is a long term perspective there is much we can draw from this. But the main reason is to see where is price with respect to historic major turning points and what is price action like in the very recent past.
 

Now it is time to mark the chart gradually until we see something useful appear.

Tow blue lines show price entering into supply and on each attempt to push higher we saw sellers coming in and the bulls putting up practically no fight. This is proof enough for shorting and the market sentiment is now bearish.

Now that we have the big picture established it is time to go down to time frames more useful to gaining information on entries and targets.

Taking our lead from the weekly time frame I have marked where supply has been coming into the market and where the clear signs of bearish sentiment firmly now in control.

The two white boxes are places where pro money was positioning for the down move. In retrospect it is easy to say this, but simple analysis will allow you see this on any time frame and any market. A big part of getting it right is patience and the willingness to wait and be on the same side as pro money.

As the price continued its march to the right of the chart I have drawn blue lines to show where you would have gained new or additional entries if you had not already been short from a few weeks back. This scaling in and same idea for scaling out is visible on all charts, pro money wont hold for an entire more because they are the market makers and need to act long before you will, and in the opposite direction. This means trading against the main trend while their positions are filled, or close to, and then comes their major push.

These small pull backs are signs of profit taking and new orders coming in. On smaller time frames they will look like a long trend coming from retail day traders. As you can see, it is nothing but cannon fodder in the greater scheme of things.

Next we drop down to the 4hr chart and I have zoomed out a little just to show you the move from the top down i.e where it originated on this time frame and where the new entries, profiting taking and and results from pure supply and demand traders getting it wrong. Taking touch trades this close to the unwind of a major time frame is a dumb move. Price action will play out in the hands of pro money and they clearly have chosen a direction long before now.

Next we put more notes on the 4hr chart and see what pops out at you. In time you wont have to draw any of these because they will become so obvious that it only takes seconds to tell what is happening on any time frame. Its a good skill to learn from drawing and taken as a top down approach.

We know we are in bearish mode and just for this time frame we will consider that the move down from the top of the chart is the main move and not at a later time. It makes no difference but it is useful for me to get a single chart to get the message across to you.

The white box is the break where the decision was taken to turn bearish and it was a clean strong break and only a brief look back where I have the first tick mark. If you were not short prior to the tick, this was a clear sign the bulls have been beaten. If in doubt, let one more candle close and if the reaction is not in the same direction as the previous candle, then clearly you have more information about the intention of the bears.

The blue lines are pointing to candles where new short entries came in and on their close was your opportunity. Price action of all the blue candles which are mainly bullish shows lack of interest and again, this is profit taking, scaling in and smaller time frame longs that are nothing more than pull backs into supply over head.

On lower time frames is where you will have gotten in but I wont show them here because the method is no different to here. A 1, 5 or 15min will get you good entries timing during a day session and where you wont miss as much of the move. Keep flicking between time frames as each successive time frame candle closes, multiple monitors are invaluable for this.

Here is a 1hr chart that shows the above charts white box in more detail. Can you now see how the break can be seen tested here very quickly and what the reaction to this test was?

A superb place to enter which is where the majority of smart traders will have to waiting to see tested. All the chop you see on the left of the chart can be very common when the market is turning. You can avoid all that mess if you use a very basic method to show you when there is a clear direction.

Note the other tick marks, all show nice price action for impending shorts.

This is the same 1hr chart of the same area, but this time I have drawn two red lines. If you guessed these are support and resistance you would be correct. What we want to see is a break and test of these lines with a clear commitment to a direction. Given we knew for some time the higher time frames were showing historic supply, we have been biased to looking for shorts when the time came. Look how long we had to wait?...but that's okay because patience is ingrained on all we do.

There is a tick mark here above a bullish candle. But the candle is far from bullish and all it done was trap day traders who entered long and later on took out their stops which hands cheap short entries to pro money. This happens every day and on every time frame. You will see these by the dozen every day. Higher time frame info is your lead, always.

With regards to targets, the major two are on the first chart. As a day trader you want to know where these are before you short in case you are trying to short into an area where profit taking on a big scale will come in and can lead to a minor long market.

Unless something is obvious, don't trade it. This applies equally to entries, stops and exits. With stops put them beyond the obvious. A recent high or low needs to be passed by some amount of points within your risk appetite in order to stay in the trade and not get stopped out by pro money gunning for the usual places where stops will be hiding.

Hard reality check to retail traders

Some time ago I posted how Gold and Silver were being sold by the media as the safe haven and a commodity that was touted for a major rise in value. My own analysis was this was nothing more than a male cow manure.

The truth came to the charts last week and see how both metals broke major numbers and in grand style. The retail traders who were loading up on both the ETF and physical holdings got burned bad.

I plotted a line at 1200 dollars which again the media said was strong support. Way over on the left of the chart you can barely see where historic buying came in, but the run is over and the real sentiment has finally dawned on the retailer.

Here is silver.

I commented where the red line is some time ago, about the guy on TV saying silver is at bargain prices and its a great time to buy. Hmm, more like a great time for him to sell into your long orders.

A reality check is the media are not your friends, wont ever be your friend and their cleverly worded shows further program the retail trader into making poor decisions. We know the chart doesnt lie and neither does history.

And just to make the point of major moves. Look at the Euro against GBP and USD.

Here the Euro fell hard over the past few weeks and the retail traders will be shorting like crazy. Look at the red line and what can you see?...look left. This is an S/R area and any break is best left go and wait for its return. Many pairs are now into high time frame areas of interest. I did say on my last post that we would soon see significant trading opportunities and here they come.

Here is the Euro and the Dollar.

It looks a lot like the above chart and is no fluke that a currency will hit high time potential turns at the same time against many other majors. Same red line with the same meaning. For the Euro to go against the long drop down, the ECB will have to come out with some major news.

I have some entry and scaling information to post up and I will try and get it done soon after this is posted.

EUR/CAD

A view on EUR/CAD from the higher time frames down to the 4hr.

Monthly chart.

This is my ten mile high view and we can clearly see price has reached into high time frame significant supply and the shorts clearly visible. The reaction was clean and swift on this time frame and no hesitation. A nice spike formed at the top where the previous bullish move trapped many longs. If you look at enough higher time frames you will see this is very common place, yet people get taken in by their greed.

Below I have a demand box where we expect buyers to step in. No rocket science in any of this and simple observation of price history. One question I have for is, do you have the patience to wait for this and can you see the turn happening in real time. Or maybe your brain is wired to tell you, the turn I see is not real but a fake move because has been in such a strong up move.

Take a glance at my other posts, pro money sells into higher prices and buys into lower prices. The higher the time frame the more money will be involved, thus the move will be greater.

Weekly chart.

Here the short selling is very obvious after the fact, but how long does it take for you to accept price is in bearish mode?...how many pull backs will you wait for an entry?

Can you see how the price candles close with longer real bodies and the bullish pull backs are small candles?

Price is currently at the spot where old supply was broken, and broken supply becomes resistance in the classic sense. But we are uninterested in classic book teachings and more in actual fact shown on a price chart. It helps to think as pro money thinks, look at the last few candles, there is a lot of selling in there and a lot of opportunity to pull the price back until it gets closer to the point where it fell. Why leave easy money laying around when the herd who will happily follow any bullish activity for a few days?

The blue lines are to guide your eye to where tests came in to see will the move up hold and get better long prices if it does hold. On the way back down price can often seek to weed out remaining orders and those areas are only broken quickly is supply outweighs demand.

Daily chart.


Top line shows supply and bottom line shows where nearer term supply was broken. If you look carefully you will see price has touched the level where the broken supply was last tested and given it was end of day/week and ideal place to close out.

The left most tick mark was a test of broken supply, and the lack of sellers tell the story for taking this long soon after. Given we know on the higher time frames there is significant supply over head we have to be careful with long orders held. In fact if you look at the blue lines you can see how deep price had to retrace in order to keep the bullish move going. The middle blue line and above is where pro money was changing course and the periods of consolidation was getting longer. On the top most blue line we hit over head supply and price fell off sharply and when it retracted the change in sentiment is very clear.

There is one future unknown which will cause some frustration when trading the Euro. The ECB have taken to buying more debt and will also print money. How deep they will allow the Euro to fall is anyone's guess and where they will step in. I am sure it will happen totally by accident at some major level!

4hr chart.


I zoomed out just to show some well defined trading. Given we know we are in a down trend now and price fell sharply and more money can be made by getting back closer to the origin of a move, we can see a nice drop off from new supply and price is then bought into to force a move back up. It reached the new supply with highly emotional strong bullish candles that will have the herd throwing buy orders in the market. All this done was allow pro money sell into those and let price fall back into bearish mode which is where it was all along. After that supply area was hit you can see how price had no trouble in breaking support because the support is not valid when the bigger picture comes into play, as it has to.

Another 4hr chart.

This is a small addition to the above chart to show you what happened. The bullish push on the left was the false move to help get price back to near term new supply. Price hits supply over head and the move away was clean and unobstructed. As price hits the bottom of our fake support, there was a small bullish move which was nothing more than supply/demand traders getting in and ultimately getting taken out. These reactions are common place all over the charts and on all time frames. If you dont keep the high time frame picture in mind, this will also happen to you.

As price broke the fake support there was not as much as a glance back to test, a clear sign of over whelming selling and it took some time for the pros to slow the sell off. This is seen in candles with tails indication buying, but the buying is only designed to slow and not reverse. Once price is slowed enough and lower time frame day traders now see a bullish opportunity at least into the nearest supply area over head, and this is perfectly fine as long as you are aware that when the bears return they will come back with great force and you will not get much if any warning.

Some profits will have been taken in that area too and additional short orders placed.

In all the euro gave a great weeks trading which multiplied accounts far and wide. To those who emailed me and asked about help on getting taken out, only to see price go where they expected it to. There is only one thing I can add.

You have to understand that the pull backs can go deep, the Euro used have a 66 point pull back which was close on a good days move. If you want to soak all that up you have to trade much smaller lot size. A standard lot with a 66 point pull back is a loss of 660 plus the spread.You dont need to trade a full lot to make money, even .2 of a lot gives a good income once you learn to apply it correctly and let the lower time frames roll over and get in as a pull back ends. You wont get the entire move, but all you need is a good piece of it and set a stop to where you can afford it.

The pull backs on lower time frames will either show there is support for the move you see, or they will break it. If they break it this doesnt help pro money either and so you have better chances when an area holds. It should also be crystal clear that price is moving again. When a 5 or 15min chart is showing a move, it wont trouble me to wait for half a day or longer to get in on the next pull back once the larger time frame supply or demand is far enough away.

eur/gbp

An overview of eur/gbp and a sign of things to come.

First up we look at the monthly chart.

I placed three red horizontal lines to show support and resistance areas. All look good to my eye and as seen with the upper line, there has been one touch on this as price fell. The reaction was a lower time frame bullish move and the message to keep in mind is that it was a reaction to unfilled orders and not a change in trend or sentiment.

I have a blue line showing the strong bullish intent taken off the base of the lowest S/R line and the cheapest price for pro money to push this. The box is where the retest came in and was early and unclear until the tiny red doji candle closed. To most traders that showed more upside and potential for breaking through the mid red line, and after a short retracement price pushed strongly up through and it was only a matter of waiting patiently while the pro's shot for the moon and the herd as you can clearly see responded. The pro's had all their work dont and the target was hit hard and the profit taking and closed positions came in rather violently.

 

Weekly chart.

I have drawn a red line to show near term price reaction and a place where further shorts may be possible. The lowest line is from our above chart and given the mess price made when it left that area, there was no intention to push higher and the long game is over.

The blue line again shows the rush of emotion fed to retail traders to get more longs for the pro's to sell against. Any time you see price in this parabolic move, get ready to bail!

Daily chart.

A few more red lines to help concentrate your brain. Of note is how price blew right through the candle where I have placed a tick. With so many short orders flooding in, and at the end of the day/week and month, we can get strong moves happening and positioning for the next week/month/quarter.

The blue line would be a good place to get traders into short lived longs, it has been untested and it is not unknown for price to get pushed to where it gives best effect to sell into. There are no signs of any additional bullish activity coming in and the unwind and new positions take time to get itno the market when major market turns are happening. We wont know for sure if this is so until we can see clearly breaks of major support and no buyers stepping in where any up move is sold into either by absorbing the buyers quickly, or over time. It is a matter of how much short orders remain to be filled before the big push.

4hr chart.


First thing to note here is how deep price had to go back down into old buy orders before it had enough push to reach the target. The candle with the tick is now even more obvious in what its function was, it got retail buyers involved for a short period of time and gave pro money four good days to close out.

The candle lower left is where we may see something happen, but given it is so close to short term target below there is the possibility of it being of no interest. The lowest red line is where the real action will likely take place.
 

1hr chart


Depending on how the market moves next week, any pull back in the near term has a small box above current price for adding more orders. Nobody knows how this will play out until it happens and for the moment we make ourselves aware of where are places to look for in the event of a pull back or short term reversal and knowing the higher time frames are showing bearish strength.
 

euro/usd with chart

I have an MT4 client setup and now I can post some charts again.

These are my thoughts on the Euro and how it has played out last week.

Daily time frame showing the significant demand at the bottom of the chart. We have punched into the area to over 50% of its historic orders and there is room for a further push if the bulls wish to take this higher. Such a move would be touted as bearish and nothing more than a continuation, but do keep in mind the view of the herd who blindly follow price when it moves in jumps. We know this is a place where pro money will want to take it long and have to keep an open mind for this.
 
The lower red line is the lowest price made and there is still more more left if they wish to try again and a second dip into or beyond the blue box is possible.

4hr chart.

Starting from the bottom right and working up I can see there was a second attempt to push lower and this resulted in a higher close on what looks to be long bearish candle. This was a test to see were more sellers willing to take it, clearly there were none. Given that the sellers have been removed it now made an easy unobstructed path for price to rise with great ease. The last 4 candles show just how easy price has risen and nailed near term supply to the top of the small range formation. The last candle shows no major sell off.

The two horizontal lines are the two areas most likely to hold price up on its journey. Breaking the lower will be good to see being later tested to see will it hold. The upper line is where we have to wait and see what strength is left in the bulls. The targets I marked up are candles, it is the range of these candles is where the bulk of the profit will be. The lower one has a small bullish candle with a long tail, clearly lots of buyers came in and there are trapped and will only be wishing and hoping for price to come back to them in order to get out at break even or for a small profit, expect a reaction there.

1hr chart.


A few things to point out here. At the bottom of the chart on the left is a long bearish candle which is in reality bullish, we know this based on the tail, reaction and close of the subsequent candles and the same candle range being tested later on. To further seal the deal the test candle was tested, a clear sign pro money want to know if all sellers are worn out or taken out before they go about their real task.

The last few hours really tell the story, a strong move up and beyond near term supply and price being held and all shorts being bought into. Timing is everything and given Asia and Europe will open first next week, dont expect the near term make up of the market to be maintained, it often drifts off until London opens and this is where the major worlds trading is conducted.

And for a last look at where we are, here is the weekly chart. Normally you would look at this time frame first and I have it here so that you can see where the major swings have happened in the past. There are more pockets of demand further down in price, but if we go down, we first must rise and vice versa.

eur/usd

My experimenting with  a web trading platform is coming to an end. This is yet another weekend where I cannot pull up any charts and do some useful work. Needless to say for my sanity I will not continue with it and unfortunately return to a Windows based client.

I cannot post a chart to show you what I want to make you aware of, and instead this brief post is to make you aware of the euro price is now down into November 2013 lows. We can expect a bounce here and there may be some good points in the move. As always, watch for pro money activity and any further leg down will result in a rapid move and may be no more than taking out stops and getting a cheap price on a bullish move.

Draw some lines on the 2013 lows and watch price action around them, if you have a futures account, keep an eye on volume as well.

Keep in mind that pro money buys in strong down moves and sells in strong up moves. The larger time frames are full of this and when approaching those levels pro money will push the price hard to give the illusion of a good run.

web platform testing

Greetings all and my long absence has been one of enjoying the summer outdoors while we have it, and also to test out something I have been wishing to try for a long time. I have ended my Windows based trading and moved to a web platform instead. I will say the charts you see here are not my live charts and I have instead selected a popular company brand to show you what the platform is like.

First thing to note is this is a resource hog and it takes considerable CPU processing time, that came as a surprise. I have filtered my charts down to 2 and sometimes one large monitor. Of late all my trading has been long term and I have had no need for using more monitors to get more time frames in front of me. It is a bonus when you can eliminate lower time frames, providing you have the discipline to set some kind of alarm when price reaches an area you are interested in.

Fair warning, the charts I am about to show are full width of my monitors and this could well cause some scroll bars to come into this blog, I will just have to see how it looks and if it need fixing I will depend on some of the web guru's who are here.

A look now at the S&P500. Ah, scroll bar has come. If you all dont like the scroll bar I can reduce the chart size. In fact, let me add the same chart below this one with the reduced size and you can say which you prefer.

The details are all lost on the second file, but for the moment I will continue and find some sense in all this. The two black horizontal lines are near term support and resistance and between them is where a large range setup and held the majority of the trading for a long time. We now have broken out of the range and last week I passed a comment to a friend that this thing is long over due for a deep pull back. Our conversation went further and talk of the real crash being long over due came to the fore. In case some of you dont get that part, the S&P is made up of the top 500 US companies and shows an over all view of that market.

Any company shows a strong share price if the company is doing well, has good sales, hiring new people and expanding etc. But, and here is the real fly in all this. There is no positive economic news from the US and the company share price in my view is being bought into by institutions who are using FED money to get short term gain and the share price is in no way reflected in real economic numbers. Same can be said for Europe.

Keep in the front of your mind all the time, when price is set to collapse, it must first be run up. When price is due to become bullish it must first be marked down. What I see now is price rising with no good reason why it is going up, other than being marked up. Needless to say I would not be long the S&P nor short either, yet.

A closer look on the weekly and see what else we can see. Scroll city again, but at least you can see it.

First thing to pop out is we pretty much hit 2000 and fell back sharply. The last leg looks very weak and taking a long time to get anywhere. Since the break out of the trading range it has taken a lot of effort by the bulls to get prices moving higher. Sensible traders will wait and see where support comes in, if it comes in.

Lastly for the S&P is a daily chart.

Your first glance at a closed candle tends to be your best analysis. What can we see here?

How about the obvious sharp fall followed by break of near term support. Next support is 1900 and the media at that stage will whip up a storm. Our unanswered question is, where will the buyers come back in, or will they come back in at all?

Lets take a look at Oil on the weekly.

With all the mess in the middle east happening the reaction in the price of Oil is.....range bound. There is no panic or interest in Oil trading for higher prices. One reason is Russia, they need a 100 dollar per barrel price and the west is determined to hurt their pocket. But even prior to the mess kicking off, look at the historic price. It has not been rising much and if anything there appears to be potential for more downside coming in. The last two attempts to push price higher failed.

Onto Oil on the daily chart.

We see price gained a little but the reaction by the bears was strong, there is no upside on this chart. At present we are at support and price will dance around here for a while and likely fall further. Look at where the last real buying came in and there is a target pro money will aim for. Getting an entry might be entertaining.

Oil on the 8hr chart. Yes I did say 8hr. One thing I do like about the platform is it has many time frames not seen on MT4 and it is useful to have.

More good information here, note the last attempt by the bulls. It was very strong, sudden and did not have the legs to get anywhere. The bears are clearly in control still and we now see price at near term support, look at current price and then scroll left to see historic demand. I doubt this will hold, but doubts wont make you money and for the moment take note of the price range setup by the buyers and wait.

Last Oil chart on the 15min.

All big moves down and not a bull to be seen. Most commodities need lots of time to get moving and when the move getting in is not easy if you trade near term. The only thing I can add to this chart is price now likely wait for NY open.


Final chart, usd/jpy on the monthly.

Look carefully and you will see current price is at a major support and resistance level. Anything can happen here. In is Japanese policy to reduce the value of their currency against the US Dollar. So far this is working for them and this level is where we may see some big action happen by their central bank. If they dont see price move higher, they may help it on its way. Currencies are manipulated by very deep pockets and dont be under any illusions of countries not acting in their own interests.

There was strong buying off the 80 level here, a possible sign of more upside.

Closing note on the platform, so far I have only used it for live orders, hard stops and manual close. I do not see a take profit setting and it may be that a limit order is used for that purpose instead. The information about the platform and all other web platforms is very sketchy and none I found gave a crystal clear brief breakdown on their use.

The platform is very poor for marking up charts, note all I have posted here do not have anything drawn or written on them. The tools for annotating are poor and do not have enough adjustment. I will have to take a chart pic and use some other program for drawing on them.

I have found the data feed for the web platform is more reliable than MT4. There are also less times when getting and order filled stalls.