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| Silver 1H |
I am posting this because I learned a few things from this trade.
- When price is moving sharply towards a demand/supply zone, DO NOT chase the move!!! Just because a zone is no longer fresh doesn't mean it will not hold! A sharp move towards a zone is usually a trap by the professionals to suck in retailers and fill their orders. In this case you can really see how the pros happily accumulate at the demand zone. Once they've filled sufficient buy orders, price shot up like a rocket. You can really see this on tonnes of charts yesterday (Gold, Crude, NZDUSD, EURUSD, GBPUSD etc).
- The 5 mins basing pattern in the inset above is also ingrained deeper in my mind. I've seen it a couple of times; I don't know what to call this pattern, neither do I see it in books, but you can really observe the decreasing momentum even as price was attempting to make new lows. This would appear as a bullish divergence on indicators. Price was also slowly rounding up, and in fact there was compression on the upside (price kept spiking up to remove supply in preparation for the big move up). These factors led me to close the trade for whatever profits I had. Indeed my stop loss was still far and the trade could still work out in my favor, but I hate draw downs and the risk over the week ends was not worth it.
The 5 minute pattern seems something similar to a shake out. But looking closely, one can see that price was wedged and then broke out sharply.
ReplyDeleteAs for the pattern on the hourly chart, Al Brooks has written about it. It roughly equates to algorithms entering orders into the market, but pausing to allow price to return back to the equilibrium state. On the last batch, they don't pause, and price just shoots away. Its also known by the term high frequency trading in some circles.
Hey Jerry, thanks for the visit and comments, appreciate it! Ya it was the wedge that led me to take this trade, but I soon realized that the wedge wasn't very clear (many ways to draw it), and the location it happened wasn't optimal either. I think the best kind of rising wedge would be one that is compressing up to a supply zone (Can can pattern)? That way prior demand has been spiked and there is nothing to stop price from collapsing fast, I've seen that many times. Correct me if I'm wrong!
DeleteBtw I do read Al Brooks too but gave up after a while because I felt more inclined towards the J16 and S/D way of trading. Could you point me to the topic/pattern name that you were referring to so I can read more about it? Thanks!
Btw I added you on my circles, perhaps can chat more there ;)
Sure thing mate. I'd love to chat
ReplyDeleteAs for demand being spiked, it sure was. However, with Buffet shorting the Aussie last week, it was sure to send ripples throughout the entire financial industry. As a result, and with failing faith in the US dollar, instability in the EU, CAD being influenced by the instability of oil and political uncertainty in Venezuela and middle east (OPEC), gold and silver seem to where most investors would put their faith. Keep that in mind for any long term decisions.
I did read Al Brooks, I'll be sure to dig out my dusty copy and start researching. However, his experience stems mainly from non liquid markets vs the extreme liquidity of Forex. Hence I moved on to Pring. Much simpler to understand.
As for me, compression on a lower time frame chart can be subjective, due to low liquidity periods. High volatility periods, and you can be sure that you can have wicks and shadows galore, but what happens during the Asia Session? you have more " full bodied" candles, where there are less orders to push price around and its allowed to close near to its high.
Yes, the H1 demand was spiked, but how do you know if a demand/supply zone was consumed? You wait for positive confirmation i.e J16 PA. Well at least that's my take on it. Of course, you are always late to the party, but it means less opportunity to get stopped out as happens a lot in touch trading. You never know if that one single wick just consumed all the orders. Its not about missed opportunity, its about minimizing and controlling risk. Ask yourself this if a pip is worth $1000US, would you be following every trade or looking at the ones that offered minimal risk?
I never look at the pips count, in terms of 50 pips vs 75 0r 90. I look at the trading opportunity. In that way, my risk of 2% can be either 50 pips or 150 pips. If stop is hit, my account is down 2%. Thats all.
Keep reading, researching and learning.
Sorry for spamming and rambling.