KeyToTheCastle

GM traders! The same 2 catch zones are still in effect having contained price through out the overnight session. I will update the zones when need be.

I will try and post charts all throughout tomorrow...let's see how it goes. The attached chart shows the 2 current catch zones on an intraday basis in ES...1 above the market and 1 below. Both of these zones have been in play since late morning and have held up into the overnight session (currently 2am EST) First thing in the morning I will update them if need be.

I apologize for temporarily abandoning this thread...this past week has been insanely busy and I just have not had the time to post charts here ahead of time like I wanted to. For those of you who pm'd me I hope that I have sufficiently answered your questions. I plan on posting again and throwing up some charts of longer time frame situations in the next day or few.

IMHO you have it backwards sir. The more accurate statement is" learn to trade effectively by developing, understanding the underlying dynamics behind and capitalizing on your edge and then your psychology can be reorganized." Unfortunately motivation alone is simply not enough to change someone's psychology in order to mold them into a successful trader. The market is chock full of unsuccessful motivated traders. Only after one experiences consistent profitability utilizing their edge in the market can they begin to learn, act, feel, and think like a successful trader. Only after the experience of trading with an edge can one develop the confidence to accept risk...until then all the motivation in the world might not be enough.

Already quite busy so I don't imagine that I'll be able to post very often today but I did want to follow up with how zones 4 & 5 played out over night. Both zones were tested and continued to catch price well. From here I want to start showing some examples of longer term catch zones and then perhaps we can see how powerful it is when we have zones lining up on both the short and long term views. Monitoring the longer term background is an integral part of my trading plan and helps to filter out losing trades that are based solely on the shorter term foreground. Ultimately this leads to upgraded opportunities in the market. Earlier on I mentioned that monitoring areas of value (support & resistance) as being one of the legs that help to form the base of my trading plan. Well monitoring value on both the back ground and the fore ground help to form 2 more of the 4 legs. Lets call them legs 1 & 2 and value will be leg 3. Attached chart shows how catch zones 4 & 5 continued to hold up over night.

ES wrap up: after testing zone 5 price was rejected back down towards zone 4. Today I touched on the idea of forming these zones on an intra day time frame. I also watch zones formed on a higher time frame . As stated earlier utilizing these zones is an integral part of my trading plan. What they do for me is to highlight areas where I am interested in doing business in the market. Maybe to initiate or add to a position or maybe to take some profit. They also serve as reference areas to gauge market strength or weakness. One thing is for certain...they let you know where you are on the playing field of price.

ES update: Zone 4 has supported price as the market has become range bound for almost 3 hours now. Zones 4 & 5 are the current zones in play. Trade em as you see em.

Yes, blue bars = poc (high volume). Where they cluster would definitely be an area of interest but you have to be cautious about starting to draw lines all over the place. Some zones are much more important then others and those zones are where I shade out the pricing in green.

ES update: since zone 3 was fully breached and no longer valid I remove it and can now add zone 5 which is a resistance zone formed off todays morning trade.

ES Update: after catching price for 90 minutes zone 3 has been breached and we are now coming down to zone 4. Zone 4 is an based on intraday volume as well but dates back to 7/20/10.

Here is a chart showing today's intraday zones on the ES. Zones 1 & 3 are based on previous days information. Zone 2 is based on todays action. Not getting into technique as far as trading at these zones just yet but I did want to point them out ahead of time.

Follow up to the usd/jpy zone: market has reacted to the resistance zone. These zones are used for different purposes depending on the background condition of the market. Sometimes as an entry zone, sometimes a target zone to take partial profit, or maybe just as a line in the sand used to gauge the strength of the current auction. At the very least we expect to see a reaction at these zones although quite frequently a zone can hold price up and be the transition spot for the beginning of a new auction in the opposite direction. Again...it's all relative to the longer time frame condition. Next time we'll look at some more real time charts showing both shorter time frame as well as some longer time frame zones.

As I made that 1st post I noticed price currently reacting at a short term intra day resistance zone on the usd/jpy. I use these zones on both long and short time frames on many different instruments. On the usd/jpy you will also notice a zone from this morning that supported the market even after several attempts to break through. Sometimes the zones are wider then others.

I'd like to dedicate this thread to support & resistance zones that are based solely on volume. More specifically volume based profiles. These profiles are formed with market profile influences but use volume instead of time to frame value on different time frames. Market profile was a subject I came across early on in my trading career. Although it was when I first started reading about MP that it became obvious to me that tracking value in the market was very important it still took me a long time before I was able to organize the information in such a way that provided any sort of edge. My trading methodology goes deeper then just blindly using these zones to place trades but the ability to accurately pin point these zones of value is one of the four legs that form the table or foundation of my trading technique. For now I am posting an after the fact chart of today's ES action to show where my shorter time frame zones were located today. In the future I will post charts before hand showing where current zones are located and then we can see how the market reacts to them. I use static zones that are formed from previous day's volume, that could be from yesterday or maybe from 3 weeks ago, as well as dynamic zones that develop as the day goes forward. We can delve deeper into technique as we go along. I welcome all comments as we progress.

Ok here's my opinion as to what facilitated the euro sell off. Evidence in the order flow would suggest that demand caused by shorts capitulating fueled the move up to 13000 in July. Smart $$ used that range extension above 1.3000 level to cover longs deep in the money as well as to begin establishing short positions. On the subsequent push up to 13300 levels this past week smart sellers, seeing weak demand, defended their newly initiated shorts as well as adding new shorts. Then throw in late to the party weak longs selling to cover and we have a nice sell off. Once the initial heavy demand caused by shorts getting squeezed was taken out of the mix the whole dynamic of the order flow changes which set the stage for this sell off. My anyway.

ahh...my dear old friend Mr Wyckoff. Wycoff theory was one of the 1st things I tried to absorb as a young, newbie trader. Although my understanding of underlying market dynamics has evolved quite a bit since my early days I have found that Wyckoff definitely helped to form a basis for my understanding of market structure and the underlying forces that drive the market. Demand in the mark up phase is coming from a mix of short covering and initiating longs. Let me break down the sequence of events that typically occur during the transition from sellers to buyers at market swing lows: As range extension lower brings in heavy selling from long capitulation , smart money sellers who are deep in the $$ with shorts from above start to buy to cover. This brings in more short covering which in turn brings in other smart $$ participants buying to go long. Then late chasing sellers (those who went short late in the down move) start to cover. All of this buying mixes to form ample fuel/demand for the ensuing rally. Hope that helps to further your understanding!

I look at volume based support and resistance mainly on 2 time frames. One is short, on an intra day basis. The other is longer...over a span of multiple days or weeks depending on where value has formed.

I agree with your statement but probably not in the manner you suggested sir. Boldness...maybe, but born out of experience. Certainty of my edge...yes, absolutely! How can a speculator comfortably accept risk without a sense of certainty that his methodology serves him well by putting probability in his favor? We all have access to the same market generated information but it's how we chose to organize, present, and read that information that provides an edge. Personally I trade in a non-predictive fashion. My goal as a trader is to understand the underlying processes and dynamics that drive the market in the present rather then predicting where price will go in the future. If my understanding of the current price action or certainty of my edge is lacking then I don't conduct business in the market.

"Most of the "Market Wizards" that we all aspire to be were longer term trend traders who built positions as the trend developed." Adding to a winner, what a novel concept! Probably one of the hardest things to learn how to do in trading (at least it was for me). Think about it...there are a couple of aspects to doing this that make it difficult for most to accomplish. You're in the market, price has moved in your favor...now you're going to add more to your position? #1 Most people look to hop out and book profit never mind add more to their position. #2 Psychologically it's hard for most to add at a price that is worse then their original entry. The key is scaling in and out of positions dynamically rather then using static entry, stop, and target prices. Once I began to trade dynamically not only did it became much easier to add to winners...it also became easier to let the market work for me and produce bigger winning trades.

There is no method more effective for locating intra day ( or longer time frame) zones of support and resistance then using previous areas of high volume to frame value zones.