How to create Limit Levels. - Page 4
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Thread: How to create Limit Levels.

  1. #1
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    How to create Limit Levels.

    Limit Level, hereinafter abbreviated as LL are not mentioned anywhere in the classical description of trading strategies. There are levels of support and resistance, they can also be in the form of zones, can be built on the extremes of shadows, closures, etc. The main feature of LL is their accuracy.
    construction, with little or no subjectivity.
    For example, if you ask several traders to do level markup of support and resistance, then most likely they will all be different, and if done with LL - the result will most likely be the opposite, the levels will be the same, maybe their number can differ, but the osculation will be the same.

    Also, LL is quite simple to understand from the point of view of "market mechanics" (more on this later), and accordingly, trade is conducted not according to a pattern made up from history, but from real actions of market players at a specific time, giving the opportunity to readjust to the market with the convenient risk and trade options for themselves. Also, one of the benefits is accuracy, and it’s not
    just because of the selection of ideal entry points. The fact is that in most systems built on graphical analysis and price movement the closing price is very important, if it is above or below the level. And how then to determine where it is, if in one and the same area a few points in the level difference play a key role let's say the direction of the trade generally depends on it. I think many have come across this problem. But LL can only be drawn there - where he can
    be, and not elsewhere
    , i.e. you can not get confused. Yes, you can miss it (you will understand later why), but if it is already determined, it will be accurate.
    Similarly, one of the LL trade options - through false breakdown - false breakdown is either there or not, and will not be confusing. But this is not
    the only option, LL are traded on both breakdown and reversal, as with a false breakdown, and without it
    . Each of these options has its own nuances, which will be described in this topic.
    And the most important thing is that this approach works on both history and in real time, while in the future, is unlikely to change too. The reason for this is the "nature" of the LL, without which virtually no market can exist today nor in the near future. Accordingly, the range of instruments in the markets is not limited, if only there was liquidity and volatility in the instrument.
    This may be a currency pair, cryptocurrency, oil, corn, equity, other indices, etc ...
    Again, Limit Levels are the basis of a trading system, its "spine", but there are several trade options.

    Strategy Description:
    • System - breakdown and reversal (trend is a relative concept, the same rollback after a breakdown, can be seen as a reversal, both at the beginning and at the end)
    • Difficulty - medium (IMHO)
    • The main timeframe is 1D | 1W | 1MN (daily is optimal, but no way under)
    • Additional timeframe (optional) - 1Н | 15М
    • Markets - any tools
    • Features - the system involves strictly trade with a stop loss order at in this respect, they are minimal relative to the working timeframe. The main focus is on money management mathematics due to high risk ratios to profit (PL).

    In more detail, in detail, all the moments about LL, their construction methods, their variants, understanding in terms of market processes - will be further in topic because one post is not enough.
    For general clarity, an example from the LL markup, and an example of one of the options LL trading, through his false breakdown.



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    SCENARIO 7

    This time, let's take the hidden limit level, and even with the 1W timeframe for the pair USDCAD

    As you can see, there is LL 1.3319 and not at first a clear picture, where the false. Breakdown is, where a complex false breakdown is, what is a rollback, what is the trend. But we don’t need it that much. For us it’s important that we are now under LL and accordingly we will short while we are there. Whence to short - from the LL prices of course. Where to put a stop? Here you can already look up the last closest false level breakdown, and accordingly the technical stop behind him. But since h1 too big, it is better to put the calculated 0.25% of the price level, i.e. 33 points. If we go down to the daily timeframe, then absolutely nothing changes, only that we can see more point-to-point reactions on our LL, with both in history, and most importantly locally. And also, instead of a simple false breakdown, we see a complex false break that adds confidence.


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    SCENARIO 8

    This time we will consider not the best setup, but the ideal ones are not found everywhere. For the EURUSD instrument there is an excellent limit level, hidden right in the middle of the trade. There is also a complex false breakdown. This begs the question why the setup is not perfect, because LL is excellent, complex false breakdown, what else do we need? The problem is that the size of a complex false breakdown is far beyond acceptable. And accordingly, you can trade in long with either a calculated Stop Loss, or wait for price interaction with LL. The whole problem is with the size of the stop, although when using the calculated - the picture is really perfect. To be or not to be? I think "to be", but do not rely on a successful entrance on the first time.


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    SCENARIO 9

    Now we look at the setup with a complex false breakdown of the mirrored LL on GBPNZD. There is a LL 1.9288, which in the history looks like a mirrored one. There is his local confirmation point to point. There is a good complex false breakdown of three bars. You can go to the short from the LL itself. The only thing - technical stop loss does not fit into the frames of the calculated 0.25%, therefore we use the calculated one. Given the nature of the tool itself and a quality setup – as a goal you can consider the option with more than 1: 5.

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    SCENARIO 10

    And lastly, because in this section there is a limit on the number of "online" forecasts, let's take a look at a good setup from the stock market for CSCO paper. In this setup there is a large part of the small important details disclosed in this topic, because of this it is complicated, but nevertheless it can be traded.
    There is a mirrored LL 45.94. Local level confirmation, not like everywhere, but from the reverse side, but as I said earlier, this is normal. Also, there is a complex false breakdown of this LL, but it is in the form of gaps, about which there is also a separate description in the subject. Entry in short - of course from the LL itself, but the stop loss, - technical, for a false breakdown, but it's a bit too much. As an option we could use the calculated one, but because I used to say in the subject - the calculated one does not fit all the tools, and in such cases, we take into account 1/4 of average volatility. Specifically here, I would put a stop 1/4 of the size of the bar above the level.
    And in addition, preferably on the opening of the stock market is to wait 5-10 minutes, until everything calms down, and then place your order, if the overall situation is not going to change during this time.


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    PS

    Overall, as of today, I have nothing more to add, regarding my view


    on the trade, as well as on the Limit Levels themselves, and their definitions on the chart and setups for their trade. I tried to explain everything up to the smallest details, but still, there is vision of the chart as I see it.
    Unfortunately, I can’t convey it in words, because this can be achieved only through personal experience, reviewing thousands of charts, LL, setups and outcomes. Other in words - you need to ACT independently, the base for this TS I did as I promised at the very beginning, and IMHO – it looks to be not bad. If, after a while, I have something to add, I will try to share it with you.
    And also, if there are "right" questions regarding the topic - I will try answer them. By the word "right" I mean those that are specific to the TS itself, and on the approach to trading.
    Although the market is one for all, everyone has the full right to see it in their own way, and only the final result of the work done can be judged on this, and the rest is a waste of time.
    Thank you all for your attention, wish you all the benefits and large profits.

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