The Concept Of Compression And Some Trades

I really want to talk about this concept called Compression. In fact this blog entry has been long overdue. First of all read about compression here as it is too much to explain in detail. In summary, it is a way to spot how the professional money is preparing for the next move. If price is compressing down to a demand zone, go long, if it is compressing up to a supply zone, go short. Really good traders will touch trade at these zones, but I'm still relatively new and so am combining this concept with the James16 PA setups. Here are some trades I took recently based on this combination.

AUDNZD 12H

EURGBP 1H

GBPCAD 1H

CP stands for Compression. There are more reasons as to why I took those trades, but the gist is that they formed a PA setup at a demand or supply zone (not shown in pics) and were compressing before that. Now notice one thing, if the analysis is correct, price can shoot to the profit target very very quickly. Why is this so? I'll try to explain using the EURGBP chart above. As price is moving up, notice that it keeps spiking back down before moving up again? This is because the professional money is deliberately spiking price down to consume the buy orders from any prior demand zones. They're trying to remove demand to prepare for a big move down. When price finally hits a supply zone and they get their sell orders filled, there is no more demand below to hold price up. As a result price will often just shoot through the entire area very quickly.

Isn't Compression amazing? I only posted three charts but trust me I've seen tonnes of examples on all time frames. And think about it, I made the above trades using conservative PA setups, which means my stop loss is a lot wider and position size smaller. Now imagine top notch traders (Many of them in ReadTheMarket) who are so confident in their levels that they touch trade using a small 20-30 pip stop. The above setups would have netted them more than 10R easily. On 2% per R, that is already a 20% increase on the account. Sounds ridiculous? I'm beginning to think more and more that it is highly possible. I mean, how does a person trade actively for >5 years and not get better and better at identifying the best zones/levels? He would also have a much better feel for the markets and know which are the best setups and which are the ones to avoid.

I'm really going to aim for the sky, yes I want to keep improving until I can consistently make a double digit % increase on my account monthly. I just need to fully understand and get comfortable with the supply/demand concepts so that I can start touch trading with a very tight stop. That I believe, will be the next level of my trading.