Trading Levels

Trading Levels is a little different than traditional support and resistance.  It is sometimes referred to as supply / demand, but for the most part you are looking for consolidations of price in a particular time frame that will likely hold and reverse.

There are no set rules in what to look for and how to implement levels trading.  Remember you are trying to anticipate other people making buying and selling decisions in the future and that is inherently unknowable.  Some general guidelines to follow are this:

1.  Only look at the last few legs of price rotations.  
1. Most volume is day trading volume that is closed by the end of the day.  Participants may not be active at older prices anymore and responses occur when people want to act.
2. Look for consolidations on a candlestick chart that have at least 1 bar of above average volume.  
1. There is a chance some volume is still invested around those prices.  However, big funds don't get filled in a narrow range of prices in the open market like retail traders do.  It takes a few days or weeks over a range of prices, so when you see directional moves that are interrupted you can invariably assume an opposing order was being executed around that price area.
3. Stick to a few time frames
1. The more information you look at the worse you will do.  If you're trading a strategy that is overly complex, it is hard to execute and recognize patterns consistently.  Start off with a weekly and hourly chart.
4. Indicators have a specific purpose
1. If you're looking for unusual circumstances you need something to compare it against.  Average volume lets you compare a candlestick volume against the past.  Similarly Range, ATR, Bollinger Bands, Stochastics, RSI...the list goes on and on.  Pick one and familiarize yourself.  The less math, the better, depending on what you're trying to quantify.
5. Use the same chart setup on different timeframes. 
1. You will see similarities and differences in patterns you identify.  They might have no edge, but being consistent is more important.
6. Regime for the timeframe
1. For the most part you don't want to fade the regime.  If you're in a market one time framing up on the weekly, don't expect it to go down a lot on your hourly.  Money is flowing in, and you're more likely to find buyers at levels, into levels and consolidate around levels.  Similarly a market consolidating is less likely to break higher or lower, ect.
7. Control risk with size
1. If you're not sure what is going on, get in very small.  When you're more confident that you recognizing something familiar go bigger.  You will be wrong a lot, and you're going to lose even more than you imagined.
8. News is mostly garbage.
1. Funds don't change their thesis everyday.  There are very few events that actually matter.  If you were running a business and someone broke your storefront window, you'd have an immediate emotional reaction, but the whole outlook doesn't change.

Examples of levels:

Supply / Demand Levels usually originate from a leg w/ a relatively clear trend.  Assume that there is some volume at the level that originally opposed the trend.  If that volume is still there they are likely to close the position in the direction of the original trend.

Supply / Demand Level

HVN SoC Level - high volume node, scene of the crime level usually occur when there is a strong break from some consolidating prices.  HVN refers to a build up of volume that will cause one side to liquidate upon a break.  SoC refers to a news based event where once the reaction to the news subsides prices return back to the price / time when the news broke.

HVN SoC Level