Question:
I finished reading the book Time Compression by Jason Alan Jankovsoky.
Wow great stuff.
Some questions I have about it and wish to discuss with you further. I can see how you have applied much of the principles taught here.
1) He uses multiple time frame and favors the higher one to tell the direction to determine if you should close your entry yet or not. For you, you mentioned that if your in the 1 hr zone you should trade based on that zone only since it can be different than the higher time frame.. What’s your thoughts on that?
2) Why use S&D?
Why is it successful?
It seems to me that the professional traders aren’t using these as THEIR own entry/exit points right?
I would say they are most focused on making sure there is enough orders coming through or who is going to lose today…
In my trading experience, I have never had entries this accurate as S&D so I’m just wondering what your thoughts are on this. For me, I think they are a great setup to use for us retail traders because they are clues as to where the imbalance actually occurred.
Because the imbalance occurred there, we have two things working out for us there, a) The losing retail traders entered there and currently are losing due to market going the different way. b) Since there is a possibility that banks placed trades here, they might still want more positions so when it comes here again, they will place it more.
c) Also, when it gets near here again, another thing I thought of that works in our favor is that the loser trader might want to get out so they exit which will cause price to move, or they might double down if they feeling lucky, thus more positions for the banks.
3) How do you know banks likes to place position near each other? Any source to back that up?
4) Any good reference as to how banks would like to trade?
5) Here is my observation on how you applied the principles taught in this book. The most profitable way to win is to find where the imbalance of the order flow will happen.
I see three main ways:
a. Figuring out where banks have their positions placed… they will protect it and you can flow along
b. Figuring out where the stops are.. we can use oandas order book
c. Figure out where retail traders may have entered due to impulse..this is a great opportunity for banks to place orders or a good way to know where they ordered because if price goes against them and returns, they might want to close it due to time being too long.
Use oanda order book “open position” for this too, your article “Finding True s/d zones”
I also know you use other things such as pin bar which is another way of understanding order flow and MA to determine when a trader might enter.
Kudos to you for figuring these out.
Do you have any other ways or strategies I might have missed that would apply these principles?
Response:
Apologies for the delay… I didn’t spot your second email before sending my earlier response.
The idea of determining the trend based on your specific trading timeframe is pretty straightforward. If you’re trading on a 1-hour chart, but use the daily chart to gauge the trend, you might find yourself late to the party when it comes to recognizing trend changes.
Let’s say the market has already made a higher high or lower low (indicating a new trend) on the 1-hour chart.
If you’re getting the trend off the daily chart, you won’t see this higher high/lower until one forms on the daily —by which time, you’ve aleady missed the early signs of a trend change.
Now, onto Supply and Demand (S+D).
It’s not that banks use these zones for placing their trades.
Rather, these zones often coincide with the banks’ preferred entry points.
This is why I often suggest focusing on the rally base drop or drop base rally zones.
These zones are the outcomes of banks placing major trades, significantly larger than those leading to the formation of rally base rally or drop base drop zones.
The banks have far more opposing orders they can use to enter with, unlike RBR/DBD zones where only a few traders are entering in the opposite direction, due to the zone forming with the current move/trend.
Regarding the three points you’ve mentioned—spot on!
When the market zips past and forms a zone, traders who misjudged the market direction often find themselves caught in a trap. As the market swings back to the zone, these trapped traders scramble to exit their trades, inadvertently providing the banks with additional orders to enter their own trades.
The proximity of bank trades to each other is a grey area.
Logically, it seems plausible they’d place their trades near one another.
Given the scale of their trades, they can’t fill their entire position at one price due to lack of orders. The next best thing?
Get them placed at similar prices.
It’s essentially like having them all entered at the same price, without actually having them at a single price.
As for understanding how banks trade—it’s a combination of understanding market dynamics and reverse-engineering their approach. Unfortunately, I don’t have a list of resources to point you towards. Most of my understanding is built on observation and thought.
Your grasp of the principles seems pretty solid, however!
When it comes to additional strategies, I believe I’ve covered most of them on the site. But keep digging, keep questioning… That’s the way to truly own your trading journey.
Hope this clarifies things for you!
Cheers,
PAN.
