Compression
CP; moving/expanding CP-Flag; CP against each other
Compression
Touch
trading a Supply/Demand zone can be a very daunting prospect, as
price doesn't always react as we'd like it to.
But,
we're very often shown that the big money is getting ready to turn price at the
next zone.
As price
is rising, they sart selling down to pockets of demand on the way, consuming
the orders, so that when they put their big orders in at Supply, all those buy
orders are gone and price can slide through to the origin of the compression or
beyond.
It's
exectly the same principle for price compressing down to Demand
In the example below,
price compresses up to a certain point, above which there is no Supply left
before the origin, so it shoots up to there before reversing and cutting
through the CP. THis is called Compression and Liquidity (CPLQ)
Here is a video about
Compression by Ifmyante
http://youtu.be/bOhGwkXMG1k
COMPRESSION
http://readthemarket.com/index.php/en/forum/homework-compression/26-about-compression?start=350#6391
I'm
reading the Red explanation of what compression is, and its difference from a
flag. This is what I understand, on a bull trend:
1.-
Compression is price rising to supply, but spiking south to fill small pockets
of demand orders. Why? because:
1.1.-
This small pockets of demand helps price to reach supply
1.2.-
The way down is cleared of demand orders allowing price to make a fast big drop
when it reaches supply. This clearing of orders is what we call consumption.
1.3.-
Big money starts to sell slowly to this demand orders. So through compression
big money finds also liquidity to fill their big orders. (?)
2.-
Compression is a reversal signal, because is showing that price is clearing the
way for this reversal ("PRICES THINK AHEAD OF TIME").
3.-
Flag is price going down, stopping momentum on a bull trend, but spiking north
for:
3.1.-
Clean the supply orders so price could continue its way up. Consumption again.
3.2.-
Take the price to a better demand level to have cheaper price before continue
the move up. (?)
4.-
Flag is a continuation pattern, as it tell us with their cleaning of supply,
that wants to continue on its way up.
So
the essence of both, compression and flag, is the consumption of orders. It
seems that this concept is very important. Why price needs to consume the
orders?
1.-
Because there is the need to consume the orders for find a counterpart, so to
reach liquidity, other fundamental concept.
2.-
And because to price move further and faster, there is the need to have no
orders stopping the movement.
http://readthemarket.com/index.php/en/forum/trading-articles-discussions/1708-engulf?start=100#26613
Compression
itself is PAZ. Decision to break away from it is DP and CPLQ
Compression
1.
PRICE THINK AHEAD OF TIME, when price want to turn from demand to supply, there
is "spike south happening" - a clue for price turn. and Vise Versa. A
price normally will turn, or it might breakout.
2.
Compression when price taking out last decision point and the orders that where
left there.
3.
TG is at the origin start of compression.
4.
Breakout of Compression, price compress up/down then pullback from
resis/sup|suppy/demand and balance before advance in compress direction.
the
res/supp|supp/demand are actually come from higher TF, which bias toward
reversal. But as always watch the PA . Keep in mind where the price comes from
In higher time frame. If price just left the 4H demand zone, and hit 30 Min
resistance, than 4H demand is more powerful.
5.
A note of Ifmyante about Breakout Compression: If price flags atop a cp zone,
nothing is valid 'til the flag breaks, one way or the other.
6.
A CP down on each attempts at D give you a clue that it want to go higher.
**BullFlag
DIP - A dip that to consume sellers at a level, once consumed price can advance
UP, Or consume buyer to go south..Not to confused with Compression. Its a price
continuation sign.
i.
Price moves from a PAZ limit to another PAZ limit.
ii.
PAZ limits are FTRs
iii.
PAZ limits are fresh demand/supply where price reacts.
iv.
Every CP is PAZ and hence they have these limits/FTRs, so before entering PAZ
price first bounces a couple of times and then falls hard into the CP. PAZ
limits are created by ITs to fill their remaining orders.
In
compression towards S/D tg, don't expect engulf at mid-range. When confused at
mid-range, check if CP is happening at HTF. Compression is filling/consuming
MPLs and catching SLs breaking S/Ds towards turning-point. CP makes sure MPLs
are out on its way. ITs breaking highs, turn from longs to shorts, and
viceversa. when high gets broken, start to wonder if it is time for price
to go down, and vice versa. CP is moving forward from MPL (so be careful on
identifying MPL). Expected PA when CP hits turning point is: Price
hit/break/eng the approaching flag. when breaks price will go/tg the mpl of the
next flag, so long as the next flag's mpl is still clean. the best cp is where
mpl to break is near at the turning point. TG is in the other end of CPAZ limit.
3-d
if it is catching mpl, then it is CP. if 3-d is making stacked S/D, then it is
not as guaranteed as CP. We must watch for the MPL being taken. CP is now
becoming known, thus can be manipulated, so that price is CP-ing to a lvl, and
that lvl would break. the break maybe to make PA for a bigger move of the break
direction, or making us doubt the CP. Solution: never take CP trade until P
breaks INTO the CPAZ, or break the last flag on approach, retrace to MPL, entry
to target CPAZ limit.
How
to know this is the last leg to entry? we dont know. It's not about approach,
it is about reaction. CP happens on approach. Our trade happens on reaction.
How
to ID the right MPL? not answered yet, need to investigate. Great mpl is where
a trick played in the past & there s trick being played into it. Find good
MPL lvls, if we get PA reactions at thos PA lvls, then we can take trade (entry
on RT). There is no PA without engulf.
(kruger)
that consumed supply (during move up) is non important, and when price will
reach true supply all demand below will be removed for nice and clear drop.
(IF)
Diagonal flag is CP that makes price easily travel through.
http://readthemarket.com/index.php/en/forum/homework-compression/26-about-compression?start=400#6547
Flag
is a continuation signal. Whereas compression is a reversal. Yes they both chew
up demand in an uptrend. But a flag is often a pocket of orders whereas with
compression you are often taking out multiple layers of demand
http://readthemarket.com/index.php/en/forum/homework-compression/26-about-compression?start=400#6626
(Harry)
it is a Liquidity gap (LQ gap) and it has to do with the lack of liquidity.
IF
explained it once but i cant find where. he said that once price consumes an
S/D area while compressing towards it, it can fall through to the next area
where orders exist, causing this spike.
so
instead of price collapsing on itself through the CP it created it jumps to the
next area where orders await.
the
base of it (that you marked) is a very likely bouncy area.
http://readthemarket.com/index.php/en/forum/homework-compression/26-about-compression?start=400#6635
(mel)
Yes,buying the price compressing into Demand and vice versa for Supply is
right. However, you have to look at the whole picture imo. Deciding to place a
trade based only on Compression is not wise. If you see a fresh, untested
Supply or Demand level but also compression while price arrives at it will add
extra confluence to the trade for sure.
But
if for example you see an unfresh Supply or Demand level and you see
compression while price arrives to it than you'll have to look at price action
too imo.
So
everything has to be seen in it's own context.
http://readthemarket.com/index.php/en/forum/homework-compression/26-about-compression?start=450#7723
(IF)
If all of the D's are spiked, and price breaks the low of the highest D, it
will go to the next D. The whole cp zone can be viewed as a pole, the base of
which is inside the lowest D of the cp.
http://readthemarket.com/index.php/en/forum/homework-compression/26-about-compression?start=475#7795
(Benhur)
A Compression is when price move away from a level (Supply or Demand) while
clearing the orders flows on its way. Exp. if price move away from demand, a
compression price action would be clearing more demand on it way up to supply.
Why should you care about it? Because when price is back to the compressed area
you can assume there are less order flows against the move. so back to the
example, now when price hit supply and turn back toward last demand, you can
assume it will show less buying power against this move.
http://readthemarket.com/index.php/en/forum/homework-compression/26-about-compression?start=475#7849
(IF)
We don't know price will is going to go through the cp zone until it enters it.
A conservative trader can await entry to the zone. But if price cp's into an
HTF level, we can be pretty happy to enter in the level, as price has been
manipulated in such a way as to let the reaction be strong. For a start, I
suggest you only trade CPs into strong, untested HTF zones.
http://readthemarket.com/index.php/en/forum/homework-compression/26-about-compression?start=500#8261
(madwt)
-
An ideal reversal point for a short position is at a strong supply level where
price compressed into the supply.
-
An ideal reversal point for a long position is at a strong demand level where
price compressed into the demand.
By
knowing this, the demand and supply zones can define where you want to bring
out your key plays, and the compression tells you it’s an ideal time to place
your chips on the table. This is why recognising and understanding compression
is important to price action trading.
http://readthemarket.com/index.php/en/forum/homework-compression/26-about-compression?start=550#9144
(mel)
we want to look for PA at important levels. In other words, we don't want to
look for CP where there is no level of intrest. we want to look for compression
and other PA signs at important levels.
So
one or two things to work on would be to identify 2 important levels , 1 supply
& 1 demand and to look for PA signs when price appraches the level and at
price arrival.
(IF)
This is why, when trading CP, we should either await the first engulf, or know
very well where the edge of the next zone is and plan the trade accordingly
(FXY)
Why this trade without any
confirmation?.If anyone tells you compression is a sign of turn, throw that
idea from your mind. I already spoke about this in here long time back. Those
SD traders keeps telling this stupid idea for years. CP is not a sign of turn.
When price CP to a level, either its gonna drop like a rock or break the level
like a rocket. Pleasure or pain will be deep.So be careful on this
MOVING/EXPANDING CP FLAG
BULL/BEAR FLAG in CP
CP way in RANGE against each other
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