There are some levels that are clearly defined. A single price, highly visible to all market participants.

The prior day’s high and low are obvious examples of this type of S/R.

<image: An often simpler method of trading s/r>

And then… there are others that are not so easy to define.

Primarily because there are multiple levels of interest, all forming one larger zone of potential S/R.

<image: An often simpler method of trading s/r>

<image: An often simpler method of trading s/r>

The reason for my general bias long… it’s one of those “70% situations” discussed last week.

But the S/R level…

<image: An often simpler method of trading s/r>

<image: An often simpler method of trading s/r>

<image: An often simpler method of trading s/r>

<image: An often simpler method of trading s/r>

<image: An often simpler method of trading s/r>

The most common way I trade this type of congestion is to limit opportunity to the edges of the zone only.

<image: An often simpler method of trading s/r>

But even that can involve a little chop at times.

And so there is another way. Not my usual way. But useful at times and often simpler.

That is… DON’T trade the level.

Wait for clear expansion from the level. And THEN trade the first PB/CPB entry in this new trend direction.

<image: An often simpler method of trading s/r>

On this day, I chose option 2. Just stand aside and wait.

It’s early in the session. Daily ranges at the moment are quite large, so there is no hurry and plenty of opportunity still to come.

And more importantly, I was concerned about the potential for dull conditions and maybe even sideways chop to continue into the next day’s FOMC event.

Step back. Assess the trading conditions. Avoid any chop. Let the winner become obvious. And THEN trade.

<image: An often simpler method of trading s/r>

<image: An often simpler method of trading s/r>

You can structure some great trades from S/R levels. Low risk, higher potential reward.

But it’s not always that easy.

Some can chop you to pieces, if you’re not quick to recognise the conditions and stand aside.

So when you market structure has you starting off with a poorly defined “area”, when fundamental factors or current “bigger picture” sentiment has you expecting potentially dull conditions, or even when you’re just not reading the market well, consider taking an easier approach.

Define your area. Let the battle happen without you. And once price trades from the area and holds, THEN look for opportunity.

You don’t have to trade every sequence. Pick and choose your battles.

Happy trading,

Lance Beggs

 


 

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