Strategy Description
The Crush SRC Strategy is being traded on the 4-hour and 1-hour charts. It focuses on reversal setups from support & resistance. First, we must identify the market condition as being with the trend, in consolidation, or countertrend. Once the condition is confirmed, trades can be taken from established support & resistance areas clearly marked on the chart. See Market Conditions and timeframe topics below for more info.
Support & Resistance
Support & resistance is a horizontal level (area) on the chart where a lot of market participants are making trading decisions. Many buy/sell orders are waiting in these areas and the result will be a break of the level or a successful test and reversal of price (bounce from the level).
Important note: SR levels are areas and not a specific price. It is simply easier to represent the level with the horizontal line.
We identify these levels on the daily and the 4-hour timeframes. In order to keep the charts as clean as possible we will focus on 2 resistance areas above the current price and 2 support levels below the current price. As the price moves through these levels, be aware that support can become resistance and resistance becomes support. Levels that have be tested (reversed from the level) more than once increases the probability that it will happen again.
It is important to note that we are looking for higher probability setups which will come from SR levels that have been touched 2 or more times. We don’t want to pick tops or bottoms. We want to trade from SR levels which have proven in the past to be major levels of support, resistance or both. Common Numbers are levels which have been touched from both sides created a major level for price to react with.
The Setup
If price reverses from an SR area, a trade can be taken based on defined candlestick reversal patterns or simple patterns such as flags, triangles or pennants. This will increase the probability that a reversal has been confirmed. These patterns will be used as our reason for entry in a market from a major support & resistance level and discussed in detail in the Entry part of the plan.
H4 timeframe: Engulfing candle; Kangaroo Tail; Trendy Kangaroo Tail
H1 timeframe: Double top/bottom and engulfing candle; Flags; Pennants; triangles
Trader’s Mindset:
Learn to focus on the information that helps you spot opportunities to make a profit, rather than focusing on the information that reinforces your fears. Being prepared and gaining a thorough understanding through experience will help you to overcome your fears and the problem with the way you think.