Three Zone-Trading Tips
Let’s talk about that big blue rectangle on my daily chart. We call them support zones (or resistance zones).
The upper and lower lines of the rectangle are independent support/resistance lines that you can see have rejected price multiple times.
When two of these S/R lines are very close together, we fill the space and refer to the whole area as a support zone!
Three Zone-Trading Tips:
1. Avoid trading within zones. Eg. Don’t go long on the lower line to take profit before the upper line. Note that whenever the market is trading within the zone, price becomes choppy, indecisive and unpredictable.
2. When the market decelerates within a zone from a previous pull back from outside the zone, get ready! It could be a high probability entry point. Since a zone area isn’t as “crisp” as when working with straight up S/R lines, we recommend accumulating extra confluence factors before trading a zone bounce. Two things we look for: phase line breaks + multiple timeframe confluence.
3. The safest stop losses you can place are on the other side of a zone. Eg. On the recent short entry (which was an IP Bounces entry) here on GBPCHF… the safest stop was a few pips beyond the upper zone line. Yes, this means you sacrifice trade size with the higher pip risk… but the pay off is a much higher strike rate in the long term. Having a clear understanding of the strike rate/pip risk pay off helps a lot when it comes to advanced entries!
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