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  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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  2. #21
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    Gap on Limit Level

    Quite often, especially in the stock market, there are gaps right on the LL,forex is no exception. The causes of this "gap" can be googled, and I have already described it in detail in my other topic on false breakdowns.
    Here we will talk about how to look at this situation, about the gaps precisely on LL. Everything is pretty simple - we consider them in such a way as if instead of emptiness there is a bar with an opening at the closing price of the last day, and closing as it should be.
    This means, if we have a gap through a level, we will look at it as a full-fledged complex false breakdown, only in the form of one bar.
    The setup itself is very strong, and it is easy to enter it, because the rollback in most cases will be, and the gap zone is a strong demand or supply.
    This applies both to trade with a working only timeframe, but also when trading with additional smaller timeframes.
    Examples of both options



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  3. #22
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    Bar chart

    If you pay attention, I constantly use the monotonous bar chart, and this is not just a matter of habit. There are reasons for this, although I understand that this is a subjective personal opinion.


    1. I have been trading for a relatively long time, and, accordingly, the knowledge base of various methods is not so small. Especially earlier I used to pay a lot of attention to Price Action patterns, candle analysis, and now, as a result, when working with LL, this knowledge very often interferes, contradicts my system. At first, I’ve filtered setups this way additionally, but it led to no good. But getting rid of knowledge is not possible, you know, this is not an indicator which can simply be turned off. But on a monotonous bar chart you do not immediately pay attention to these moments, and you focus more on the price movement itself.
    2. On the bar chart it is much easier to find the exact point-to-point touches even in the most hidden places, by type of and hidden LL. And I tend to such more than to those that everyone has in mind, because it is less likely to fall victim along with the majority.
    3. On the bar chart the overall picture looks more clearly, especially because I look at it based on the views on the market according to the descriptions of Joe Ross and his definitions of trend reversal, accumulation and distribution. Some will understand what I mean (I recommend to read some in your free time). As a result, for this system at Limit Levels, you can even remove the opening price, because it is not necessary.

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  4. #23
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    Selection of the best LL to trade

    Quite often, if you make a complete layout of all LL then the graph will look like this:

    This will have a bad impact on the final result. From this "mess" it is necessary to select the strongest LL for us, and only look at trading opportunities of them. Yes, according to probability, those LL that we count as "weak" might work, but the chart should consist of the price and not only the levels, and we should not count on probability, but should rely on understanding of what is happening.

    In order to select the "best of the best", we use a set of criteria of a good LL:
    1. There is a local confirmation as close as possible to the current price (this parameter is monitored daily, because otherwise it will not work). This is the most important point.
    2. More than 2 touches point to point
    3. From the level there was a trend break
    4. A new extremum has been updated from the level relative to the last one
    5. Movement from a level earlier, occurred in impulse bars, or small ones, but without rollbacks
    6. Great distance, (relative concept) after interaction with the level (of course, this moment can be viewed only in history). The further the departure was from LL, the better
    7. It is desirable that at the very LL there is no “cut” (it looks like the level of middle of a trade). Not to be confused with the boundaries of trade, where it can be easily many false breakdowns. "Cut", "saw", "fence" - is when each subsequent bar (or through one) closes on the other side of the level, especially for a long time.
    As a result, after manipulating using these steps, we get the following working picture. It only remains to monitor point number 1.
    It is desirable, but not necessary, that LL would correspond to absolutely every parameter, in reality, it will not be so, but they need to be taken into account until
    an "experienced habit" will be developed


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  5. #24
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    Results to the main part, on trading methods based on Limit Levels.
    The main base for fully trading Limit Levels is set out, including not only the technical side, but as the causal explanations (strongly I recommend not to ignore them) as well, and money management too.
    These trading methods are calculated not so much on the quality of profitable / losing trades i.e. on the direction prediction, but on the high risk to profit PL ratio, in a relatively short period of time, math and literate money management. This is achieved through exact entry points and the minimum size of the initial stop loss, while the working timeframe does not affect these moments, despite the fact that minimum is 1D, even if you do not use the add. small one.
    Regarding the quality, it all depends on the selection of traded LL, by their strength, and options for the trade itself, for example, hang up or through a kind of false breakdown, with or without an additional smaller timeframe, because there are some options that are more risky and some require more time to trade, than the other. But the number of the deals themselves depends directly on this. As a result, the average quality of profitable/losing trades is about 50%, and you can change it by choosing these moments, as for the better due to less number of setups, and vice versa.
    Anyway, due to the risk-to-profit ratio, it is impossible to get a negative outcome, when you strictly follow the rules of trading LL, money management, understanding of own actions, and partly of actions taking place on the market (see posts about "market mechanics" and the formation mechanism of Limit Levels).
    Further posts will be about additional, deeper, "thin" technical details of this TS, examples of potential trade opportunities (within the rules of this section), new developments, since the "process is not standing still", and today in my personal trading I use only methods based on Limit Levels. Of course, it is always possible, even necessary, to ask about incomprehensible moments (especially considering my way of presenting information). I will answer with pleasure whenever possible.
    And also, if there are ideas, developments, regarding this particular topic and method feel free to tell them.

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    SCENARIO 1

    Practical examples-opportunities we will start to look at from one of the non-standard ones, exactly where you need to think, using all the knowledge laid out in this topic. I understand that USDTRY is not very interesting for trading, but nevertheless, if there is an excellent setup, the opportunity to earn, why not take advantage of it. To begin with, because weekly is taken as a working TF and being in a deal assumes not one day, let's pay attention to the short situation, because on the shorts is a good positive swap on this instrument. So, at 1W there is an excellent limit level of 5.540, which is already falsely breakdown.

    Going down to the daily timeframe we see that same level, but we are not very happy with the size of the technical stop loss for false breakdown, and the calculated at 0.25% of the price level is not the best option for this pair. So "use your head", and look for the best option. Find LL on which we will exit the deal and it will be LL 5.220. In consequence, between the planned point of entry and exit the distance is about ≈300 points. We are interested in the minimum PL ratio of 1: 5. So the estimated stop loss can be 300/5 = 60 points. Now look at the average daily ATR of this tool and we understand that this stop loss is significantly more than 25% of it and completely suits us.
    So we set a limit order to sell at a price LL, with a stop loss of +60 pips from the level and purpose of the ratio PL 1: 5, which will be just on the counter strong LL, and even on the spread a small gap remains at the exit.

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    SCENARIO 2

    Lets have a look at the example of the GBPCAD currency pair in a complex with two timeframes - working 1D + additional 1H. There is a good LL 1.7138 with a lot of tests point to point (within the limits of permissible backlash 0.02% of the price level), while there was a local confirmation and a complex false breakdown on a working timeframe.

    Since the closure of the false breakdown was below the level, we consider a short position, but the size of the technical stop loss is much higher than the allowable calculated 0.25% from the price level.
    Going down to the hour timeframe, we also see a confirmation of the level point to point already today (we don’t look at the past, because of course they will be there, because they were on days) After that - a complex false breakdown LL and now theprice closed again below the level, only on this basis, the technical stop loss is will suit us.

    So we set a limit order to sell with a stop loss for the maximum of the complex false breakdown on the 1H timeframe. We take a fixed take profit with a ratio of PL either 1: 5 or 1:10 as a goal. Given that based on the working timeframe 1D we are at the top of the borders of a wide flat it makes sense to take 1:10, because the reserve to the lower part of the procurement is abundant.

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    SCENARIO 3

    Now we’ll have a look at the situation with a true breakdown of LL followed by its false breakdown as a mirror. In this case, this trade is the easiest using only one working timeframe. SimpIt is simple enough to open the terminal once a day in the evening, place orders and goals and wait (as practice shows, preferably with a closed terminal)
    And so, we have a clear LL 0.8839. Why "clear" - because there is a local level confirmation point to point. Initially, the level was broken with closing day under it, so we look only short option positions. Yesterday was a false breakdown of this level and the size of the technical stop loss absolutely fits into
    framework of the calculated one. Accordingly, we put our limit order for sale on the level itself, with stop loss for a maximum of false breakdown.
    For the goal we take a fixed take profit in the amount of 1: 5, since if it is more then we face a strong zone of demand, and to think to easy overcome it is easy not worth it.



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  9. #28
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    SCENARIO 4

    The easiest option to trade LL, but not very frequent. So, we see a classic LL, i.e. just an extremum, from which there was a strong movement, in our case 1.5085. The other day, locally, there was a confirmation of the level point to point, followed by its complex false breakdown, on the working timeframe 1D.
    There was no rollback to level for a retest yet, so we place our pending order for purchase, and we put a technical stop, under a minimum of false breakdown, since he is almost corresponds to the calculated (slightly more). For the goal we take a fixed take profit in standard size 1: 5

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  10. #29
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    SCENARIO 5

    Tool - GOLD.

    We look first, we analyze the actions of market participants, based on the knowledge of the price movement mechanism: gold recoillessly went up, and judging from this the "gasoline" ended, we gain and unload positions. Where further - who knows, someone will tell by the trend, someone will say you need a rollback, we do not care, because most likely they themselves do not know, BUT !! in this trade appeared two LL, just at the borders. Between them is enough space to make money, and you can safely put as in a long (from the bottom), and short (from the top), in case of out of range. Longer lasts trade - the stronger the output will be, and it will not become worse.
    Now, each of these LL is falsely broken, i.e. there are places for stop loss, while they fully fit in terms of power reserve and desired PL from 1: 5. They also locally confirmed point to point. And in size - within the estimated. That means "everything is OK". For more confidence, you can trade with additional smaller timeframe to avoid early entries, according to the rules described in this topic.

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    SCENARIO 6

    As promised in the previous post (gold), on a 15M timeframe something looms out.

    So we take the judgment from scenario 5 for the day timeframe. We see the first false breakdown at 15M, and then again. Accordingly, on closing the first bar 15M above the level, you can go at the same. Stop loss at the minimum of the largest false breakdown, i.e. first in our case. And yes, more strong entries will be after a complex false breakdown at 15M, but the essence of the entrance is absolutely the same. The technical stop, if calculated, is within the limits of admissible from usual calculated one at 0.25% (it is less, so we take a technical one), even considering a higher entry point, at the closing of the bar, and not on the level. If this moment is not fit into the numbers, then the entrance would be, but strictly at the price of the LL itself. And lastly, on this setup, if after a simple false breakdown there will be a stop loss, then the next attempt will be only through a complex false breakdown. The level we trade through 15M before the first close on the working timeframe (on 1D respectively) out of range, i.e. in our case, under LL, or if the size technical stop loss will greatly go beyond the calculated.

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