Common Pitfalls and Lessons From S/D Trading

Kinda in a blogging mood again so just gonna attempt to list them common pitfalls and lessons I've learned from observing the trades of myself and other S/D traders. I'm kinda lazy to look for example charts though so hope the following points are easily visualizable.

1. Trading a lower time frame zone which is just before a higher time frame zone. This may sound basic but I committed this a lot when I first started touch trading. For example we may have a nice looking Drop Base Drop (DBD) M30 supply zone, however there is actually a H4 supply zone right above it. The higher time frames represent the biggest institutions, so think about it. If you're a big market maker, there is a M30 supply zone but you also know that there is another bigger H4 supply zone just above. Greed is your nature, what do you do? You'll simply shoot price through the M30 zone to fill your sell orders at the H4 zone right? That way you not only get more sell orders filled (hence more commissions), you also benefit from the extra liquidity provided from the M30 bears getting stopped out. The same concept is also applicable to stacked zones (one zone on top of another), it is similar but I think the perils of trading a LTF zone which is not in a HTF zone is higher than that of trading a lower stacked supply zone.


2. When I first started touch trading a few weeks ago, I felt like a fish on land. Seriously it was very alien to me as I used to trade PA bars. My win rate was horrendous (thankfully on demo), but it also prompted me to dig deeper into my own trades and the trades of others. I started watching Sam Seiden's webinars all over again, and I studied Kenneth Lee's famous supply/demand thread thoroughly. I learned so much that I actually felt thankful for the losing streaks I encountered. I realized that it is absolutely important to be able to identify the best zones and be very familiar with Sam's odds enhancers. Now the term "odds enhancers" may suggest that those are just additional strengtheners of something that already works. I realized that it is not so. Trading supply/demand without the odds enhancers is account suicide. Just try touch trading every single zone out there, I believe you'll end up with a win rate of 30% or less. I see so many traders trying to touch trade zones that have been tested multiple times, others that treat every swing high/low as a S/D zone, and yet others who try to short every DBD speed bump supply zone in an uptrend. I've tried all that and had my ass handed to me. There are just so many nuances in S/D trading that makes all the difference.


3. I dare say that my ability to identify the best zones have improved a lot since I first started touch trading. There are two main price structures that I feel most comfortable touch trading. First of all is that tiny supply zone that forms just before the break of an obvious S/R flip level. If price breaks down and comes back to retest it, there is a high chance that this zone will hold. The second is simply shorting the previous DBD zone in a downtrend. If the zone is well defined, we really get a high odds and low risk way to join the trend. However once price starts breaking supply zones and is making higher lows, I'll no longer take any touch trade shorts as a trend reversal could have happened. This is a more conservative way of trading which I picked from up Alfonso in his thread. As with every trade, it is absolutely important to check where price is coming from. If price has already hit a HTF demand zone and is bouncing off it, I'll also refrain from shorting.


4. There are many ways of trading S/D concepts. The two main branches are touch trading zones and waiting for some form of price confirmation at the zones before taking a trade. After trying out both, I came up with a hybrid which I feel makes total logical sense. If a zone fits my criteria for a touch trade, I'll touch trade it. Otherwise, I'll wait for price confirmation first. So for etc if a zone is not fresh, very wicky, or it is a lower stacked supply zone, I'll wait for some PA bars or a LTF pattern like Quasimodo before taking the trade. Yes it will increase my risk, but it'll also increase my win rate. 

In the end, I just want to say that it is very very important to first be able to identify good zones. Even pro traders who wait for PA bars at zones are able to do so. I restudied the Price Is Everything thread, Redsword makes it look easy but seriously, the zones he points out are actually really good ones. The same goes for another legendary trader Julexo. I'm always a student of the market. Loving trading more and more still and really hope to be able to achieve my goals soon. :)