Over the past couple weeks, some very good questions have come in that I think may be on the minds of a few of our readers. Whether they are or aren't, the goal of this piece is to enlighten you through Q&A with key trading nuggets that can help you reach your financial goals.

Sam,

You mapped out today the levels for ES and stated that the level around 1083-1085 wouldn't be a good one and that you are more interested in the 1073-1075, and afterwards, the 1063-1065 levels. As I check the current trading levels, the ES just swooped through the 1083 and is now resting at 1075. Here is my question: What was the logic for you stating/anticipating the 1083 is a 'weak' level?

Thanks in advance.

Mat

Thanks for the email and good question. I see the ES had a 13 point rally off of our Extended Learning Track (XLT) class 1073 – 1075 demand level; hope you were able to profit from that trading opportunity. The reason I was not excited about the 1083 – 1085 area was because if you looked to the left of that level, there was plenty of recent price action already, which means that was likely not a fresh demand level. Also, the 1073 – 1075 demand was lower on the curve which carries higher probability and a greater profit margin. Lastly, the move away from that area (the initial rally) was very strong, stronger than the rally from the 1083 – 1085. Having said all that, the 1073 – 1075 was not a "perfect" demand level either, but remember in trading, we are not looking for perfection, we are looking for better odds and large profit margins. Also, let's say you bought at both those levels and traded like a robot with stops and targets. You would end up with one losing trade and one profitable trade and plenty of profits after both trades are complete. Picking the best levels gives you a big edge but again, you can be very profitable not being right all the time in trading which is great. Hope that was helpful.

Sam,

I have 2 Questions for you if you have a minute. On the last Webinar, I asked you about the way prices return to a level, so thank you again for extending my list with that :-) Is there any other odds enhancers you typically do not talk about? Pointing me in the right direction would be greatly appreciated.

Also, I am struggling a little bit with "how much time did price spend on a level." You do teach "the shorter, the better, s/d is more out-of-balance then". But looking at the last webinar where you talked about "path of least resistance," and also your article where you talk about "motion into mass," I understand it is a big resistance / a big mass if price spends a lot of time at a level. I am a little confused here (actually love being confused; tells me I am learning something new).

Could you clarify?

Thanks again,

Jakob

Thanks for the email and good question. I hope the odds enhancers are helping you in your trading efforts. Another one you can add to the list is "levels on top of levels." Think about this... If you were on a trading desk and you saw the largest stack of sell orders in the market was at 1070 and current price was at 1060, you would obviously be comfortable selling short at 1070 as you have plenty of supply at that level. Is there anything that would make you more comfortable selling short at 1070? How about if there was another even larger stack of sell orders at 1071? Now you are selling short at a strong supply level with another strong supply level one point above it. If this logic makes sense to you, then the only question left is: What does this picture look like on a price chart? The answer is levels on top of levels. So, when you have two supply levels (or demand) on top of each other with a big profit margin, that is better than having one supply level. Next, you asked about "time at the level." Most of the trading books and theories state that the more trading activity at a price level, the stronger that support (demand) or resistance (supply) level is. I would disagree with that statement and suggest that the opposite is true. In a market where price is at a level where supply and demand are out-of-balance in a big way, you get very few transactions at that level. This is because of the extreme imbalance. Few transactions mean few candles on your screen and low volume, yet most people look for many candles and heavy volume when looking for a strong support (demand) or resistance (supply) level. So...the less time price spends at a level, the more out-of-balance supply and demand typically are at the level. Hope this was helpful.

Dear Sam,

Greetings from United Arab Emirates! I am one of the new students of Online Trading Academy here, and finished my Forex Trader's course in July. I am still quite new to this business, and find your articles very helpful. In the last one, you were referring to the rule / definition of "fresh demand level" while explaining your decision on entering the trade with BP shares. Can you please elaborate more on what this rule is about?

Thank you very much in advance for your help.

With best regards,

Olga

Thanks for the email and good question. Also, welcome to the Online Trading Academy community. You will find that we are one giant family, so welcome. The term "fresh level" is very important. At each support (demand) level, for example, there are a certain number of willing buyers. Think of a trade desk and a big stack of buy orders which is what demand really is. Each time price declines to that price level where all those orders are, some of those willing buyers will get to buy as their orders get filled. With each decline in price to that demand level, the number of willing buyers is decreasing as the orders get filled. So, we want to buy when the demand is strongest, which is that first or sometimes second time price declines to that demand level. After that, the level is not "fresh" anymore and the odds of price rallying again from that level are decreasing rapidly. To better your odds, focus on entering a position at a supply or demand level the first time price revisits that level, assuming it has a significant profit margin associated with it. Hope this was helpful.

If there is one thing I notice over the years of writing articles, it's that readers are getting smarter and smarter, so keep the questions and comments coming and I will do my best to get you proper answers.