Thoughts On S/D Trading

I was actually writing a reply to a comment I received, and realized that it is better to put it up as a post in case it could be useful to some readers.

I've spent many months trying to understand and trade S/D concepts, and quite honestly have been through the same stage of being overwhelmed, frustrated, and cynical.

If you ask me, I would say the biggest problem is that there are so many ways to trade S/D concepts, and most threads/sites don't have fixed rules, so you might have a rough idea of what an engulf, Quasimodo, compression, bearish engulfing candle is but you don't know when they work and when they don't. So you might see posters who take engulf trades or a bearish engulfing bar and those trades turn out as big winners, but when you try to replicate it you get multiple losses and wonder why. Good thing about AceGazette is, after some time you realize many of these posters only have a 40-50% win rate and their equity curve isn't pretty, which means there is a problem with their trades to begin with. There is no reason to study their trades except to learn from their mistakes. In short, simply taking engulfing bars at any S/D zone will not cut it, taking any engulf or Quasimodo which appears in the middle of no where will not cut it, touch trading a zone just because there is compression leading to it will not cut it.

I realized all that through hundreds of failed trades, and from observation of many other journals. Now this doesn't mean that AceGazette, ReadTheMarket etc are teaching wrong stuff, far from it. But there are many nuances which most traders fail to notice and this makes ALL THE DIFFERENCE. Here are some of them:

1. It is very very important to trade with the higher time frame trend and respect higher time frame zones. So for etc, suppose we see a M30 bullish engulf. We try to long the source of engulf when price comes back to it and it turns out as a loss. A very common reason for this is because the engulf is into a HTF supply zone, say H4. Or it could be because we're too high in the curve and the profit margin for longs is no longer there. I've done this dozens of times and seen many people do it too, it is probably the most common reason why engulf trades fail. 
2. Quasimodos are powerful, but I realized they have to be taken at a HTF zone and not in the middle of no where. So for etc we want to long a M30 Quasimodo in a H4 demand zone, not when it is dangling in the middle of no where.
3. Compression can last longer than expected. Just look at the AUDNZD pair, compression is everywhere and many times it is not filled. Compression works best after an engulf (Can can pattern), or if price is compressing up to an extreme and high quality zone. Do not touch trade a zone just because price is compressing to it. Sometimes we see a M30 demand zone and ecstatically buy it because we see price compressing down to it, but we fail to notice that the zone is weak, and there is a much stronger H4 extreme zone underneath which will act as a magnet to pull price to it. 

There are so many such nuances, and the sad thing about AG and RTM is that many of the pioneers/seniors are no longer that active. The legendary and genuinely good traders often post without explaining the reasons for trade (Julexo, Ken etc), and those that do explain are mostly enthusiastic newcomers. Much of their trades and analysis are wrong (the dangerous thing is these sometimes end up as winners giving the impression that it is right), but few of those posts are corrected by the seniors. There is no one to blame, because the forums are free so the seniors have no obligation to correct the young traders, and most people are more interested in trading than teaching. 

So in conclusion, I really believe the methodology of the various sites is good, but you need to have a lot of practice, really understand all the nuances in order to make it work. Once you really understand the markets, you'll realize why some zones are touch trade worthy and why it is safer to wait for PA on others. I'm still far far from being good at S/D trading, but I've managed to eliminate many recurring mistakes in the past few months. It really takes months and probably years of chart time and experience.

As for reliable sources to study S/D, here are some:

1. PriceIsEverything FF thread. Redsword is the man who started it all. Ifmyante, Ken and many others all spawned from this thread. Here is a man who dares to post before the fact, explains his trades, and is consistently and uncannily accurate. A new reader might not be understand the first few pages, but keep reading and after 100 pages or so, you'll notice some recurring patterns (whipsaw engulfing, pins at zones etc). Coincidentally I'm planning to hardcore study the thread from today onwards, with the aim of completing all 1400+ pages of it.
2. Alfonso's FF thread. Again here is a trader who posts before the fact, is able to explain his trades, and has consistently good results. He has managed to come up with a rule based S/D system, and to be honest it is my bread and butter for now. I'm very active on this thread because after months of filtering and deriving my own rules, I somehow ended up with very similar rules as him so I really agree with his methodology. It is actually nothing new, but his rules help filter most of the mistakes that many RTM and Sam Seiden traders make. I know because I have made those same mistakes hundreds of times.
3. Lovejoy's FF thread and his website. Also check out Balhana's posts on that FF thread, he is really good and his posts are full of explanations that make sense. Lovejoy has some fantastic videos, in my opinion must watch videos for any aspiring S/D trader. 

At the end of it all, I feel it is very important to decide on a certain style (touch trade or trade PA bars) and focus on it. It is very very difficult to try to learn multiple styles at once, so master one before starting on another. I have one account for touch touching (which I've tested and am confident in), and another demo account to practice trading PA patterns and bars. Pen down trading rules and strictly adhere to them. Journal every trade and study them from time to time. It is amazing how often recurring mistakes occur, and we'll be oblivious to them unless we journal our trades. 

Hope this post helps!