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What is very misunderstood is that all price action traders are the same and trade the same ways. If two traders are looking at the same price action and at the same time, then that is the same price action, however; the price action strategies that are used to enter, manage, take profit, and everything in between can be vastly different.
Price action is price that is forming every moment of the day and the information it is continually giving you is information you can use to form a strategy and trade with. The strategies and methods you use to make money from this price action are up to you. There is a lot to learn when it comes to trading price action trading and it can be quite overwhelming. It can be hard to know whether you need to use support and resistance levels first or at all, how the trend first in, how important trigger signals like the pin bar and engulfing bar are and how you should put it altogether.
That is why we have created a Free PDF Introduction to Price Action Trading that will take you through and show you exactly to get started with price action that you can get below. Johnathon is a Forex and Futures trader with over ten years trading experience who also acts as a mentor and coach to thousands and has written for some of the biggest finance and trading sites in the world. Forex Trading for Beginners.
Price Action Trading. Forex Charts. Forex Trading Strategies. Money Management. My losses were well, little compared to all the account I blowed up before. This is probably the longest time my real account have ever withstand! Anyway just asking, during a high-impact news like yesterday FOMC about stops.
Do you modify your stops? Also, what is your counter measure for events like the interest rates? Would love to hear about that. Thanks once again. Keep up the positivity on your side! Hi Rayner, Thank you for your time and effort to share your trading experiences. I have attended paid courses but were not as informative as yours.
I am lucky to find your blog. You are doing a very kind act. I regularly watch your weekly videos which are highly educative. This guide is excellent and of great value. I have a small query. When we use inside bar strategy as mentioned on page 52 of your pdf book, you said we should place sell stop order below the previous bar. Could you please let me know as a fulltime trader, how many currency pairs scrips we will be looking for and how many trades will be taken on a monthly basis.
So I have a confusion, some advise to look for 1 -2 scrips and have a focus attention and look for price action setups occur in those 1 or 2 pairs. But for law of averages to work, we need more pairs and look for these price action patterns. Pls clarify? For day traders, they could focus on a few pairs and have plenty of trading setups by adopting different trading strategies for different market conditions.
I have just come across your site and BANG! But putting it into practice will be a different thing. Definitely a good base to start from though. Halo Reyner. Thank you for all the concentrated effort you put in for us. I appreciate it sincerely. Best regards. Harry West South Africa. I have been blowing my account for quite some time now, but with this kind of information shared by the man i wish to call CAPTAIN, im feeling confident for the first time in my trading carreer…thanks Rayner, you are indeed a man I will recommend to my fellow countrymen as trading is something new in my country- Lesotho.
Thank You Ray.. As for pinbar, you should pay attention to the wick relative to the body. Hi ray! I thank you for your responds,It was greatly i have learn a lot of things from your blog. Well i will train again to make my trades goes perfect with the demo. Is it about the movement of the price where its heading? Is that what all about the price action? Thanks again. I have spents thousands of Pounds on trading education and I have been trading for about a year, I was not making any progress then I decided to take a break and educate my self I would like to express my gratitude for sharing your trading strategies…..
Thank you. It is really a nice Technical Analysis Website and more than that the way you explain the things is really awesome. Keep it Up Buddy. Learning a lot from your posts and as a newbie I think from what I have learned from you I am going to enjoy the markets. Thank Teo for the priceless information you are just giving away.
So are making a killing from useless strategies but you are just taking everyone on board for free. My you be blessed and continue to share your valuable knowledge with us. Trading is still in its in my country Zim such that you rarely find mentors, and thank for being one to many of us.
High quality content as the majority of your posts! Thank you very much for taking the time to share your skills and help others. Thank you for your generous sharing! It is going to take me a while to absorb all the golden nuggets here. How can we tell if the consolidation after a price move up is accumulation or distribution? Is there any way to tell before the price break down or break out? Hi Rayner, I am following your website from last 20 days or so.. Must say your style of imparting the knowledge has been very useful for me.
I could learn a lot from your videos. I want to know whether one need to keep the overall market in mind before getting long or short in a Stock. Tomm whether it is wise to take bearish bet if the Overall Index remains bullish. Request Clarity. Regards Nasir. Looks like this scammer forgot to take your name of your work before directly copy and pasting as his own.
Truly big help for us trader. Thank you Mr. Rayner for sharing your technical knowhow. A mark of a true unselfish educator and trader. Thank you Rayner this was a brilliant lesson on Price Action trading and I am most grateful to you. Thank you very much for sush a detail illustrations provide by you. I have learn good strategy to make profits and reduce losses. Really appreciate this one!! Thank you very much!! Sir you are a god sender. Can you teach us about events sir.
The curriculum contents worth thousands of dollars and yet you gave them all out for FREE. Just to let you know that you are the BEST of your kinds!!! Rayner, please I face difficulties downloading the book. Please help me out. Hey Rayner, thanks for all your posts all great usefull material without nonsens! You usually talk about trading on trends , but what do you do when the market changes from trending to a non-directional type of market?
I personally have a hard time trading these markets , do you have a take on this or perhaps a suggestion? Thanks a lot!! Alternatively, you can also trade strategies with no correlation to trend following to smoothen out your equity curve. Thanks a lot Rayner you are really a blessing to me your trading lessons have improved my understanding in trade thanks a lot once again may God bless you. Good day rayner..
I truly appreciate it. Keep up the work. As always, your sharing of trading knowledge and concern for the traders is highly appreciable. Yours is simplfied price action course for all levels. Your way of presentation is within the reach of any type of trader. God bless for your gift to us.
I have read few books and seen quite a few videos.. Nice article though i cant rely on price action alone.. Can you please write an article about rsi trading…advance one like divergence trading…also how can i know that trend is about to reverse so as i can exit my position or enter.. Rayner thanks for taking your time to put something great like this , Im a newbie in trading US Stock , based on your own opinion, what time frame would you suggest, is it daily or 4 hr and so on , thanks in anticipation.
Hi Rayner. Thank you very much for sharing your knowledge, skills and talent in trading.. I am just in about a year in trading forex and still learning new strategies and techniques to say that i am progressing. I would like to ask a few questions and I hope you do not mind answering and hopefully you can give more insights and advise. I notice in your examples you use 1day chart. If i am not mistaken you prefer to trade as swing trader rather than in lower TF.
If that is the case atleast on average how many trades do you take in a month? Is trading in lower TF not that profitable or shall i say not giving much risk reward ratio? How often and what particular time of the day do you recommend to trade if you want to get more positive result? Again thank you for your time and i look forward or your response.. God bless. Very nice article bro, appreciate all your efforts you take to make all understand how market works with beautiful examples and wonderful explanation, great work bro.
Lots of Love-Peter From India. Thank you Rayner for very informative article. I am learning a lot from you. You are the only trader that I understand when explaining about trading strategies. I am very glad that I bumped into your YouTube channel.
More and more blessings to you. I am grateful to your forex education expo. I have been a subscriber to your YouTube videos and I have gained a lot from it. I noticed for sometime that I have been trading on demo,as I make money I have been losing as well. Im glad to find your web today, Im looking for Price Action Trading Strategy to improve my knowledge and sharpen my analyzing on chart. Well, finally i find a good mentor, that is You. Wishing you always health and success.
Rayner, you the best, i read many of your note and they are very good. However, I want to know if you are in Whatsap so that you can share your signals with us as well. Atleast one trade in a week is enough for me. Great explanation with systematic flow of information to make the reader feel the logic of every step coming after another in a harmony of knowledge stream. Thanks Rayner. Thank you Rayner Teo, you are a great teacher and supporter of beginners of trading community.
It is a great self less service. God bless you. Wish you a very happy new year I have no doubt there is cue of traders waiting to buy and sell, they are the ones the move the market up or down. Thank you sir!!!! Rayner I really appreciate your openness to teach us the babies what price action is all about and how to apply it but my question is must I use all this strategy all the time to be a successful trade or can just one work for me , because too many strategy and methodology get one confuse ,please which price action strategy and methodology is ok to use than all those.
Your are true mentor Rayner! Thanks alot Your student Sanjeev from india Lots of Love bro. Sir I thank you so much for this great eye opening lecture on price action. Help me on how to read my atr indicator. May grace to You Sir. This is such valuable information for anybody who wishes to become a successful trader and without paying a cent. Thank you so much, Rayner. Hello Rayner, Thank you for all the resources, it is helping me become a better trader, I didnt get the PDF, Plz can you send to my email… xerozbaba gmail.
Valuable content about price action trading withoutcharging any fee and provided free great sir. Please log in again. The login page will open in a new tab.
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Because you are completely unaware of what is forming on the charts and you end up taking a trade that is not in line with what the chart pattern is signalling or telling you! These are the 9 chart patterns you will learn about today: 1. Triangle chart patterns-symmetrical, ascending and descending 3 patterns 2. Head and shoulders and Inverse Head and Shoulders 2 patterns 3. Double Bottom and Double Top 2 patterns 4.
Tripple Bottom and Tripple Top 2 patterns But first up, I am going to talk about triangle chart patterns. Symmetrical Triangle There are 3 types of triangle chart patterns and the chart below shows the differences between each very clearly: Now, lets starts with the symmetrical triangle pattern first.
The Symmetrical triangle chart pattern is a continuation pattern therefore it can be both a bullish or bearish pattern. What does this mean then? Well, if you see this pattern in an uptrend, expect a breakout to the upside. I then switch to the 1hr chart to wait for the breakout to happen. This is what tends to happened with such long breakout candlesticks. So if you entered a buy order using that long breakout candlestick above, you would have to wait a while for your trade to turn profitable.
Stop loss Placement Options. Here are 3 ways on how to place stop loss on triangle patterns, which include symmetrical, ascending and descending triangle patterns which you will learn next. The stop loss placement techniques here are applicable to all triangle patterns so take note of that. It is considered a bullish continuation pattern in an existing uptrend.
So when you see this forming in an uptrend, expect a breakout to the upside. However, it can also be a strong reversal signal bullish when you see it form in a downtrend. Stop Loss Placement Options You can use the strategies given in symmetrical triangle. Take Profit Options I prefer to target previous resistance levels as my take profit target. That should give you your profit target level s. It is a bearish chart pattern that forms in a downtrend as a continuation pattern.
However, this pattern can also form as a bearish reversal pattern at the end of an uptrend. How to Trade The Descending Triangle Formation Similar to the other 2 triangle patterns, you can either trade the initial breakout or wait to see if price reverses back to test the broken support level and then sell. This helps to reduce false breakout signals. But there will be times when I will just trade the breakout with a pending sell stop order just a few pips under the support level to catch the breakout when it happens but when I do that, I sit and watch the close of the 1hr candlestick to make sure that it does not close above the support line if that happens, it may mean a false breakout.
How To Take Profit I prefer to use previous support levels, lows or troughs and use those as my take profit target level. This last top is considered the right shoulder. Your trendline for this pattern should be drawn from the beginning neckline to the continuing neckline. The following chart below makes it much clearer. The inverse head and shoulder pattern is bullish reversal candlestick pattern and just the opposite of head and shoulders pattern. Use bullish reversal candlesticks for trade entry confirmation if you are waiting to buy on re-test.
I often tend to place my profit target on previous highs. One method of calculating profit target is to measure from the head up to the trendline and what the distance in pips is your profit target. See the two blue vertical lines in the chart above. Double Bottom Chart Pattern A double bottom chart pattern is bullish reversal chart pattern and when it forms in an existing downtrend, it signals a possible upward trend. Once it hits that neckline level they buy. In this way, you have the potential to ride the trade all the way up if the neckline is intercepted.
You should consider buying on bottom 2 as buying on a support level…as a matter of fact, that it what is is! Look for bullish reversal candlestick patterns for trade entry signals. Double Top Chart Pattern A double top chart pattern is a bearish reversal chart pattern and when found in an uptrend and once the neckline is broken, that confirms a downtrend.
The double tops are very powerful patterns and if you get into a trade at the right time, you stand to make a lot of profits when the breakout happens to the downside. And if price moves down and intersects the neckline and continues to do down further, your profits are dramatically increased.
Use previous low support levels to set take profit targets. Or another option would be to measure the distance between the neckline and the highest peak the range and use that difference in pips as take profit target if you are trading the breakout from the neckline. If I see a bullish reversal candlestick pattern, I buy.
Why do I do that? Well, if price goes up and breaks the neckline and goes upward, I would be in a lot more profit than if I bought the breakout of the neckline. The Triple Top Chart Pattern Triple tops are the opposite of triple bottoms and they are bearish chart patterns. They rarely occur but its good to know what they look like. Triple tops when found in an uptrend, it signals the end of the uptrend when the neckline is broken and price heads down.
These are your signals to go short. Or you can use a previous low and use that as your take profit target level as well. Because there are very popular are really powerful so why waste time with the rest? When these candlesticks form at support and resistance levels or Fibonacci levels they are great trade entry signals. The doji candlesticks are single individual candlestick patterns. There are 4 types of doji candlesticks as shown below: a The doji cross can be both considered a bullish or bearish signal depending on where it forms.
For a bullish engulfing pattern, you will see that the first candle is bearish followed by the second candle which is very bullish and this 2nd candle completely engulfs a Bullish Engulfing-when formed in a support level or in a downtrend, this can signal that the downtrend is potentially ending. The harami is a 2 candlestick pattern and can be bullish or bearish. The first candlestick is a very bearish candlestick followed by a bullish candle, which is quite short and is completely covered by the shadow of first candle.
When you see this in a downtrend or in an area of support, this will be your bullish buy signal. When you see this pattern form in a resistance level or in an uptrend, this is a bearish reversal signal and may indicate that the uptrend is ending and you should go short sell.
The first one is a bullish candlestick showing a strong upward momentum but when the second candle forms, it shows a completely different story…its bearish and it closes at about the mindway point of the first candlestick. You may see this in a downtrend or forming at a support level. This tells you that the bears are losing steam and that the bulls are gaining strength to potentially move the market price up. The second bullish candlestick should close somewhere up the mind-point of the first candlestick.
So when you see the piercing line pattern forming at support levels or in a downtrend market, take note as this is a potential bullish reversal signal so you should be thinking of going long buying. The shooting star is single candlestick pattern and when it forms in an uptrend or in a resistance level, then it is considered as a bearish reversal pattern and so you should be looking to sell.
Note: the shooting star is sometimes called the bearish hammer, inverse hammer, inverted hammer or bearish pin bar. They all mean the same and refer to the shooting star candlestick pattern. It has a very long tail and a short upper wick or none at all. When it forms in a downtrend or at support levels, you should take note…this is a very high probability bullish reversal candlestick pattern and you should be looking to go long buy.
Is it still a bullish signal? Well, in that case, this candlestick is a hanging man and its not a bullish signal. When it forms in an uptrend or in resistance levels, it tells you that there is a possibility that the uptrend is ending so you should be looking to go short sell.
This tells you that bulls are losing ground and bears have gained controlled. So when you see the bearish railway track pattern in an uptrend, or in an area of resistance, this is a signal that the downtrend may be starting so you should be looking to sell. When you see this in a downtred or in an area of support, take note because the market may be heading up and this is your signal to buy.
Spinning tops have small bodies with upper and lower shadows that exceed the length of the body. Spinning tops signal indecision. A spinning top is a single candlestick pattern and it can be both bullish or bearish. Similarly, a bullish spinning stop in a resistance level or in an uptrend can be considered a bearish signal as soon as the low is broken to the downside.
Example below shows what I mean: Spinning tops are faily short in length commpared to other candlesticks and their body length is a few steps wider than that of doji candlesticks which actually have none or very tiny bodies. Another notebale feauture of spinning tops is that the wicks on both sides should be almost the same length. When I see spinning tops form on support or resitance levels, all it tells me the bears and bulls do not really know where to push the market and so when a breakout of the low or high of a spinning top by the next candle that forms usually signals the move in that direction of breakout!
So what do you think the candlestick pattern would be in the two minute candlesticks to give you a bullish hammer candlestick pattern in the 1hr timeframe? Or if you see a shooting start bearish candlestick in the 1hr timeframe, what do you think would be the candlestick pattern in the two- 30minute candlesticks that gave that 1hr candlestick a shooting star? Similarly, there is no 2hr timeframe to go with 4hr timeframe and no 8hr timeframe to go with the existing 4hr timeframe. But unfortunately, no hammer forms in the 1hr timeframe and even though you see a bullish engulfing pattern formed, you did not enter a buy trade.
You just watched as price shoots up and you wished you could have bought at the bullish engulfing signal that was given but you are only interested in trading hammers. Here are few more examples: Notice also that a piercing line pattern when blended forms a hammer.
A Dark cloud cover when blended also forms a shooting star. The trick is to use Fibonacci and combine it with price action by using reversal candlesticks. This tool is a series or sequence of numbers identified by a guy called Leonardo Fibonacci in the 13th Century.
So what actually is a Fibonacci Retracement? In technical analysis Fibonacci retracement is created by taking two extreme points usually a major peak and trough on your forex chart and dividing the vertical distance by the key Fibonacci ratios of Once these levels are identified, horizontal lines are drawn and used to identify possible support and resistance levels. I really do not focus at all on the others.
In a downtrend, after price has been going down for some time, it will move back up upswing…remember? The Fibonacci retracement tool can help you estimate or predict potential price reversal areas or levels. Similarly, in an uptrend, price will make minor downtrend moves downswings and the Fibonacci retracement tool will help you predict potential reversals areas or price levels. If used in conjunction with support and resistance levels and combined with price action, they do really form a powerful combination and do give highly profitable trading signals.
I will talk more on that later. Step 3b: In an uptrend market, click and drag first on the trough up to the peak and release. You can also see the bearish spinning top candlestick which could have been used as a signal to go short sell. Well, I think that there are traders out there that do that and you can do that. But personally, I do not like that approach. Very simple trade setups.
Your risks are small compared to the profits you potentially can make. Similarly, when the market is in an uptrend, it will form upswings and downswings as it continues to move up. The peaks that are formed by the up swings and the troughs that are formed by the down swings can be used to draw trendlines. Downtrend Trendlines Now, for a market in a downtrend, you can connect the peaks with a line and that forms you downward trendline.
What you are waiting for is for price to come back up and touch that trendline and when it does, this could mean that a down swing will start and it may be the best time to enter a short trade. The use of bearish reversal candlesticks as trade confirmation is highly recommended with this trading method.
When price comes to touch it later, you have a potential buy setup. Obviously, this trade was taken based on the setup in the daily timeframe which means it may be a week or two before the profit target is hit if the market makes a nice move up or the opposite can happen, price breaks the trendline and I get stopped out or I can walk away with some profits when my trailing stop gets hit.
But the next day, price broke that upward trendline and I got stopped out with a loss. What happens if the trendline gets intersected? There are a couple of things you need to be aware when a trendline gets intersected: 1 The first is that it could mean the trend has now changed.
There can be 2 or more downward trendlines or 2 or more upward trendlines at any one time on any chart in any timeframe. So if price breaks the first trendline, it still has yet to head to the 2nd and the third etc… So if you take a sell trade on the first trendline but price intersects it and you are stopped out with a loss and now price is heading to the 2nd trendline above, you should also look to sell if you get bearish reversal candlestick signal.
See chart below: enlarge if you cannot see clearly. I saw a shooting star so I took another short trade. Obviously, you can see how the price reacted to the trendline by forming a shooting star. That was enough signal for me to short this pair. You need to be aware of these kinds of trendlines not only on the sell side buy ton the buy side as well.
This is much more advanced trendline trading system you can ever find on the internet. Well, now we are at it! Many new traders that find it difficult to define the structure of a trending market, therefore they rely on moving averages for trend detection or identification. The only thing I see useful in moving averages is for dynamic support and resistance levels. I will explain this concept shortly. As a matter of fact moving averages do a terrible job of predicting trends in that they only do that after that trend has already started already and price has moved a great deal already.
But notice that the moving averages have not crossed yet. So you have two conflicting signals. And by the time moving average confirms what the price action has indicated, price has already made a great deal of move downward already as shown by this chart on the left. So which are you really going to pick?
Depend on moving average to tell you that a trend has changed or depend on price action? When the market is in a downtrend, you will notice that price moves up to the moving average lines upswing and then bounces back down from them downswing. That is if you put moving average lines on your charts. For those that love moving averages, what you can do is to look reversal candlesticks as price starts to go back to touch the moving average lines and these are used as your confirmation signal to buy or sell.
So you have 3 things lining up for you, here they are again: 1. Have a good and close look at it. I first drew a downward trendline and was waiting to see if price would come up to touch the trendline. And I also noticed that the previous support level that was broken could potentially act as a resistance level causing price to reverse.
Therefore now I have two things coming together. Next thing I did was to check what the fib retracement level to see if price came and hit that resistance level what the ratio would be. Surprisingly, it was So now I have 3 things coming together. So how did I take the trade then? I switched to the 1hr timeframe and waited for price to come and hit the confluence zone and saw a shooting star, a bearish reversal Candlestick pattern also sometimes called a bearish pin bar.
That was my clue to execute a short trade right there. Update: Good thing as I was stilling writing this guide this trade played out so I can show you what happened: As you can see, I managed to make pips on the first trade. Note also that I also made a 2nd trade which made pips as well. First is to spend hours over your charts analysing what happened in the past and asking these types of questions: Why did price make a big upward move from here and why did price make a big downward move from here?
What price action signals that formed there that could have given anybody an indication that this massive move was about to happen? You will be bloody surprised at what type of reversal candlesticks and chart patterns you will find!!! Then with that knowledge, get back to the present and see if you can see these patterns unfolding in the current market. This short trade setup had 4 factors of confluence supporting it: 1. The doji had confluence with the dominant downtrend, as it formed telling you to sell the market with the trend.
The doji showed a clear indecision by the sellers and the buyers therefore the breakout of the low of doji candlestick was what the sellers were waiting for to push the market down. The doji candlestick also formed between The moving averages providing dynamic resistance. All this information here is providing you the foundation; the basic framework you need to trade price action, the learning comes from observing and doing.
For getting better trade entries 2. For reducing stop loss distance so I have better risk:reward ratio which means I can also increase the amount of contracts I trade without risking more of my trading account…so if my trade direction is right, I make a lot more money! Now, I will explain both in detail… How To Get Better Trade Entries And So Reduce Your Stop Loss Distance With Multi-Timeframe Analysis And Trading If you are trading strictly using the large timeframes like the daily chart, your stop loss distance will be huge and the issue with that is your risk:reward ratio can be reduced no necessarily all the time : Risk to Reward Ratio Explained: Simply put, investing money into the investment markets has a high degree of risk, and if you're going to take the risk, the amount of money you stand to gain needs to be big.
So in that case your risk:reward ratio will be But what if you decided that you want to minimize your stop loss distance? And even though you are trading with a setup in the daily chart, for your trade entry, you are actually switching to the smaller timeframe and watching for a sell signal in the 1hr timeframe? Price has been pushed down twice from this level and when the third time it price reaches this level, it was pushed down again.
Now, you can see the bearish harami reversal candlestick pattern and you could have used this as your sell signal by placing a pending sell stop order just a few pips under the low. And placed your stop loss outside of the resistance line as shown on the chart above. Which means that the risk:reward of the 1hr timeframe trade is a lot better than what you would get in the daily.
Now, you can do this with daily timeframe and 4hrs or even down to the 30 and 15 minute timeframes. Or you can watch trade setups in the 4hr but switch to either the 1hr, 30mins, 15min and 5mins for your trade entries. I often use the 1hr for my trade entries and can even go down to 5min timeframe for my entries. If you are new trader, stick to 1hr or 4hr timeframe for your trade entries. So when you trade in the 1hr timeframe or much smaller timeframe you can actually trade a lot more contracts without risking more because your stop loss distance are very small compared to the larger timeframe trade.
For example, the stop loss for the 1hr timeframe trade is 20 pips but for the daily timeframe trade is 80 pips. This simple example explains why I wait patiently for trade setups to happen in the monthly, weekly, daily, 4hr timeframes and then use smaller timeframes to get good trade entries. This is the beauty of multi-timeframe trading using price action. Two things can happen here: 1. Price is going to hit the resistance level and head back down and I will be waiting for a bearish reversal candlestick there to sell when I see one.
I will be waiting for a pullback to buy, if that happens. Now, not all trading setups you see will become winners. When you are watching the chart for trading setups, you need see and trade the obvious. What do I mean by that? The most likely outcome of that is that as soon as the high of the hammer candlestick is broken, price will shoot up! I should have taken a trade here and look at how the market moved after that bearish shooting star candlestick was formed after hitting the resistance level.
And then you see a bullish Piercing line reversal candlestick form right at the area of confluence. Are you going to be undecided about this price signal and pull up stochasticks or CCI indicator to really make sure give you confidence you need to buy??? NO need for that…Just Trade the obvious! You see, the more a level is tested multiple times, sooner or later it will get broken. From my observations, times is the average, after that, expect a breakout of the level.
They can stuff up your decision making process and cloud your judgement. Later, I check the chart and see that If I had sold, I would have made money. So use your own independent judgment based on what you see on your charts. Your personality, work circumstances etc may dictate what timeframe you can use.
Take a week off from trading to clear up your mind then come back with a clear mind to trade. You streaks of losses may be just around the corner. Related Papers. By Sidik Prihantoro. The Art of Japanese Candlestick Charting. By Luis Trujillo. By Javier Rivera. The 10 Essentials of Forex Trading -free-ebook-download.
By Channa Khieng. Range Chart Range 2. How do we know if a market has reversed? We need to decide on a reversal amount. The standard reversal amount is 3- box. This means that for a rising column to end and a falling column to start, the market must drop by 12 ticks 3 box times 4-tick box size.
Our examples are based on the closes of 5-minute bars. It means that we update the chart using the closing price of 5-minute bars. While they are simple break-out patterns, you will need some practice before you can pick them out. Refer to the following books to learn more. To begin, we must choose a brick size.
The chart prints a new brick when the market moves more than the brick size away from the preceding brick. This means that a Renko chart does not display the exact price action. It filters away whipsaws that are smaller than the brick size. Hence, we can use Renko charts for two purposes. Renko Chart Range 2.
However, a Kagi chart does not need a box size. All it needs is the reversal amount that you can specify in absolute price range or percentage change. Once price heads in the opposite direction by the specified reversal amount, the chart will change direction. A distinguishing feature of a Kagi chart is the different line width. When price breaks below a previous swing low waist , the line thins Yin line.
Hence, it is unwise to rely on it in a sideways market in which most break-outs fail. Refer to example below. However, it is especially useful for tracking the market structure of swing highs and lows. These lines are plotted according to the closing prices of the underlying time chart. In the first example, the underlying chart is the 5-minute chart. A new line in the same direction is made when the underlying time- based chart closes beyond the preceding line in the same direction.
A new line in the opposing direction is made when the underlying time-based chart closes beyond the last three lines in the opposing direction. This is where it got its name from. While bar and candlestick patterns are not applicable, Three-Line Break charts offer a unique trading signal made up of three lines black shoes, suits, and necks.
A white suit means buy, and a black suit means sell. Look at the chart below for examples. We had to change the underlying time base to 1-minute for the trading signals to surface. It explains how to construct each chart type in detail together with practice examples. Make sure that you understand the consequences of fac- toring it into your market analysis. Remember that the bulk of technical analysis was, and still is, designed with time-based charts in mind.
This means that their effectiveness might be undermined in alternative chart types. Of course, you might also find pleasant surprises as you try them out. A sound way to start exploring a new price chart is to use it as a complement to your current chart type. In addition to getting a second opinion, you are able to compare their efficacy.
Initially, it might even look like a promising candidate for the Holy Grail. However, eventually, you will realise that every chart type has its drawbacks. Check the Implementation of Alternative Price Charts in Your Charting Platform While most charting platforms offer time-based charts, the avail- ability of other chart types differs among platforms.
Furthermore, the implementation of these alternative chart types might not be consistent, given their relative obscurity. Ensure that you understand how your charting platform builds the chart and are comfortable with the formula that goes behind the chart plot. Have fun! It is the rising tide that lifts all. For day traders, the intraday trend makes the difference between a session of windfall profits and one of major losses.
By trading along with the intraday trend, we are following the path of least resistance to day trading profits. As the trend is the big picture, it seems removed from current price action. Hence, many traders are tempted to leave price action out of the trend equation. They rely on a distant moving average to define the market trend and do not factor in price action.
These traders are missing an important confirmation tool. Using indicators to identify the intraday trend is reasonable. How- ever, if we link them up with price action, we are able to enhance their prowess. Hence, in the first part of this two-part series, we will focus on using indicators with price action to track the intraday trend.
In the second part, we will discuss two other methods to find the intraday trend. Essentially, we are looking for a shallow pullback followed by a new high low to confirm a bull bear trend. To confirm a bullish intraday trend, look out for the following conditions.
The rationale for each condition is in brackets. Price touches the moving average. Establishes baseline. Use- ful for sessions that open with a gap. Price stays above the moving average for at least one bar. Bullishness 3. Price retraces down towards the moving average without making any bar high below the moving average.
Lack of bearish commitment 4. Bull trend confirmed when price rises above the last extreme high. Confirmation of bullish market structure To confirm a bearish intraday trend, look out for the following. Price stays below the moving average for at least one bar.
Bearishness 3. Price retraces up towards the moving average without mak- ing any bar low above the moving average. Lack of bullish strength 4. Bear trend confirmed when price falls below the last extreme low. Instead of guessing if the gap would start a new bull trend or close the gap, we waited for price to return to our benchmark SMA. Price touched the SMA. This bar stayed below the SMA, confirming the bearish momentum, 4. This bar made a higher bar high but could not even rise to test the SMA.
As the market fell past the last extreme low below the SMA, we confirmed a bear trend. Trading with just a period moving average is an excellent starting point for any trader. The resulting lines form a price channel to help us clarify the intraday trend. Since the indicator in this case is more complex, the interpretation rules are simpler.
When two price bars stay completely above the channel, we define a bull trend. Intraday Trend - Price Channel with Price Action The example above shows how the price channel helped to define a change of intraday trend. Although the market has risen sharply since this session opened, according to this method, we could only define a bull trend at this point. These two bars changed the intraday trend to bearish. Other than using moving averages of bar highs and lows, you can also use Keltner Bands and Bollinger Bands.
As these price channels are constructed differently, you will need to adapt the rules for defining the intraday trend. By comparing them, we are able to understand both methods better. The SMA method focuses on finding lack of momentum on pullback to identify new trends. The price channel method finds powerful moves that lift the market beyond the price envelope to start new trends. How do these two methods compare with the next two pure price action methods?
Read the next chapter to find out. We also looked at two ways to define the intraday trend by combining simple indicators with price action. Now, in this second and final part, we will look at the next two methods to decipher the intraday trend. These techniques focus on only price action.
It is a higher level perspective of the market. Hence, one popular method to determine the intraday trend is to look at the price action of a higher time-frame. This hourly bar made a lower low and confirmed a bearish intraday trend. This bar made a higher bar high and turned the intraday trend bullish.
It is a classic example of using a higher time-frame for intraday trading. It uses the hourly chart to assess the intraday trend before trading in the five-minute time-frame. In his solid system, he recommends a factor of five when considering higher-frames. An example would include the 1- minute, 5-minute, and minute time-frames.
It is useful for both intraday and longer term analysis. By linking up swing pivots, we get trend lines of varying slopes and importance. Trend lines highlight the market structure of swings and project their momentum and speed. The basic interpretation of a trend line is that the trend reverses after it is broken. The example below shows how a broken bear trend line hinted at the later bull trend. Intraday Trend - Trend Lines This method is simpler in the sense that it does not use any indicators and focuses on one time-frame.
However, to make it work, you will need to master the skill of drawing trend lines. There will always be cases when we confirm a trend only when it starts reversing. Such instances are unavoidable. This is why we have trading setups to pinpoint entries and limit our risk. Each of the four methods above has its specific drawbacks.
For the two methods that rely partly on indicators discussed in part one , we need to decide on the look-back period of the indicators. Without a sensible look-back period, the indicators will add little value to our trend analysis. The suitable value depends on the market volatility which is ever-changing. The higher time-time method then depends on our choice of the higher time-frame. Which higher time-frame reflects the intraday trend? The half-hourly and hourly charts are popular among day traders.
But forex traders might prefer the 4-hour time-frame. As for the trend line method, the clear challenge is in drawing meaningful trend lines. If we draw trend lines indiscriminately, we will find more whipsaws than trends. The crux is to draw consistent and relevant trend lines.
With dozens of step-by-step examples, you will learn to read market swings and build them up to draw the trend lines that matter. It is best to keep your trading method simple for effective trading. For traders looking for simplicity, using only a period moving average to day trade is a great option.
Basically, any intermediate period is useful for day trading. A long period moving average lags too much and does not help day traders. A short 3-period moving average is almost like price itself and is mostly redundant. As for the choice of moving average type, we are using exponential. But a simple moving average will work fine too. The key is consis- tency and do not keep changing the period or type of your moving average.
A moving average can help to clarify the price action. These are some questions to help you clarify the context using a moving average. Are prices above or below the moving average now? How did prices get there? Have prices been overlapping with the moving average? What is the slope of the moving average?
Has the slope been changing often? The answers to these questions cannot be interpreted in isolation. We need to integrate them to form an analysis. It shows the first 20 bars of the session. Price is now above the moving average. It got there after a bounce off the moving average. However, it has not exceeded the last swing high. The bars that overlapped mainly had long bottom tails. The slope of the moving average is positive but not overly steep.
The slope of the moving average turned down momentarily at two instances. Integration and analysis of trading context Prices were mostly above the moving average and bounced from the moving average. These signs show that the day has been bullish.
However, the slope of the moving average is not steep and had turned negative at two instances. So, despite the bullishness, the market is not in a strong trend. What are the implications of our analysis on our day trading? We should only take long trades until there are bearish signs. But due to the lack of a strong trend, we should aim for nearer targets. In a bull trend, buy when prices retrace to the period moving average.
In a bear trend, sell when prices pullback up to the period moving average. This chart shows the price action after our price context analysis. As the context was bullish, we took the trade. However, as implied by our context analysis, we should not press for large gains. We can also usecandlestick patterns with the moving average to pinpoint entries.
The moving average follows the price trend but lags behind it. Hence, a trailing stop based on a moving average locks in profit and at the same time gives enough room for whipsaw action. It is a valuable tool for traders learning price action. When we look at a moving average, we have to look at price as well. Open a chart now and put on a period moving average. If you practice enough, a period moving average is possibly the only indicator you need. How to Enter the Market as a Price Action Trader Imagine that the market just formed a bullish two-bar reversal at a support area.
Your assessment of the market is bullish. You decide to enter the market. Market order b. Stop order c. Limit order d. Is there a difference? But most gloss over the technical aspect of exactly how to enter the market. Market Order A market order is executed immediately. But you do not know what price your order will be executed at. Its execution is guaranteed, but the price is not. You can only place a buy limit order below the market price. Placing a limit order above the market price turns it into a market order.
Similarly, you can only place a sell limit order above the market price. If the market lets you in at the limit price, your limit order will be filled. If the market does not hit your limit price, your order will not be executed. The implication of a limit order is the opposite of a market order. While you know the price your order will be filled at if it does , you have no assurance that it will be filled. Stop Order Once you understand the difference between a market order and a limit order, you will find it easy to learn what is a stop order.
A stop order is a conditional market order. A buy stop order is placed at a price level above the market price. A sell stop order is placed below the market price. When the market hits that price level, the stop order becomes a market order to be executed immediately. Note that a stop order becomes a market order when triggered.
This means that the fill price is not guaranteed. Bearish inside bar. We expected the market to fall further after breaking below the inside bar. Placed a sell stop order a tick below the bearish inside bar 3. Sell stop order triggered as the market breaks down below the inside bar. In this case, we are using a sell stop order to trade the break-out of an inside bar. We can also use stop orders for trading the break-out of any other price action formations. Stop orders offer the advantages of confirmation and efficient execution.
Stop orders are only triggered on break-outs. The break-out serves to confirm our market assessment. If the confirmation break- out does not occur, we will not enter the trade. Moreover, it is the most efficient way to trade break-outs.
If we waited for the break-out before entering a market order manually, we might suffer great slippage. However, with a stop order, the break-out automatically turns the stop order into a market order to be executed right away. Although we might still suffer slippage, using stop orders still beats manual entry of market orders.
When I trade price patterns, I prefer to use stop orders. This is because price patterns are break-out signals. Price patterns are hints that price would break-out and continue in a direction. Bullish patterns point up and bearish patterns point down. Unless, I expect that they will fail and want to fade them. Fade Trades - Limit Orders If you think that price will reverse its direction after a break-out, use limit orders. There are two typical scenarios.
You might want to fade break-outs of a price range. Or, you might want to fade a counter-trend move. The example below shows the first scenario. This trading session has moved nowhere since it began, forming a tight trading range. As we expected break-outs of this tight trading range to fail, we placed a sell limit order just above the session high. As price surged up, our limit order was triggered. Having our order filled just above the trading range, we had plenty of profit potential.
When trading a tight trading range, limit orders are ideal. If not, your profit potential might be severely handicapped. Entering the market with limit orders is an advanced technique. This is because, at its core, limit orders represent a bet against the most recent market movement.
At a micro level, using limit orders is reversal trading. And reversal trading is always tricky. But if you are able to use limit orders wisely, they offer a great timing advantage with little adverse movement. With a well-placed limit order, you need not suffer more than a couple of ticks of paper loss throughout your trade. But the overriding principle is to use what is consistent with your trading strategy. If your trading strategy dictates a certain entry method, follow it unless there are reasons to tweak.
Entry methods, like any other parts of a trading strategy, can never be perfect. Do not seek the perfect entry method. Simply understand their implications and trade-offs. What are trapped traders? We want to find trapped traders because trapped traders lose money. If we find them and take advantage of the order flow they create, we can take their money from them. There are two types of trapped traders.
We can easily empathize with them because at some point in our trading, we were trapped traders as well. What do they have to do eventually? They must exit their positions as dictated by their stop-loss orders. Trapped out of Winning Positions The second type of trapped traders are trapped out of winning positions.
For instance, you are in a long position and prices dropped and hit your stop-loss order. What would you have done? Probably, you would chase after the market and try to get into the move. In fact, there are many trading patterns that rely on trapped traders. We have reviewed the follow trading strategies before. Here, we will point out the trapped traders in each trading setup. This will allow you to focus on the high quality trading setups with a healthy amount of trapped traders.
Hikkake Trading Strategy Hikkake is an inside bar failure trading strategy. It waits for a break- out of an inside bar to fail. Then, Hikkake traders enter as the breakout traders are getting out of their positions. This diagram shows the different perspectives of the trapped traders and the Hikkake traders. Inside bars are narrow bars which means less trade risk. Traders love to lower their risk, and will not give up a low-risk inside bar break-out trading setup.
What does this mean for the Hikkake trader? It means more trapped traders, and higher chance of success. So what is the first step to find high probability Hikkake setups? Find the best inside bar trading setups. Then wait for them to fail. Two-legged Pullback in a Trend Another well-known price action trading strategy is the two-legged pullback in a trend.
The diagram below shows the perspective of trapped traders. The two-legged pullback starts from the low of a down trend. This diagram shows only one group. You can try to figure out where the other group of trapped traders are and how they went into the trap. Hint: They went against the down trend. Pin Bar Trading Strategy The pin bar really goes the distance to trap traders by poking up above a swing high or below a swing low. Not only that, its long tail confirms that a nice trap is present.
This is because many traders enter or exit their trades at major swing highs and lows. These traders, if trapped, will fuel our blast to profits. Trend Bar Failure Earlier, I shared a simple price action trading setup based on trapped traders with our newsletter subscribers. Its simplicity makes it one of the most versatile and effective price action pattern.
Think like trapped traders but do not act like them. It is not that difficult because all traders, including you and me, were once trapped. It is a simple but powerful concept that works in all markets. In this article, I will explain it with price action patterns in the forex futures markets. Does the following experience sound familiar? Stopped Out and Trapped Out 1. Accordingly, you placed a pattern stop just below the Pin Bar. Shortly after, the market fell and hit your stop-loss order.
Almost immediately after you got stopped out, the market leapt up again. If you were nimble and alert, you might have re-entered the position. If not, you might have been left standing in the dust while the market blazed ahead without you. A re- entry opportunity often offers a higher probability of success. Essentially, while our trading premise is the same, we delay our trade entry. A re-entry trading strategy takes the following form: 1. Find a trading setup with any price pattern. Original setup 2.
Do not take the original setup. Wait for the traders of the original setup to be stopped out. Enter as the market reverses and moves in the direction of the original setup. As the traders of the original setup were stopped out, they would need to seek a re-entry.
In other words, they were trapped out of their positions and had to re-enter. Their re-entries would help to push the market in our favour. You can replace it with any other price action pattern. Long Re-Entry Trading Setup 1. Look for a bullish Pin Bar 2. The market must fall below the low of the Pin Bar but not too far below 4. Look for a bearish Pin Bar 2. The next bar must move below the low of the Pin Bar 3. The market must rise above the high of the Pin Bar but not too far above 4. Look to buy when price breaks below any bearish bar Explanation of Trading Rules 1.
Original setup do not take 2. Original setup triggered 3. Original setup stopped out 4.
None of the services or investments referred to in this thus telling you a story these dips lower and then over a certain time period or investments would be contrary makes its next swing back. These are graphical and visual would be watching this trend a retrieval system or transmitted on repeated price patterns that word bar to refer to candlestick pattern as well so market is most likely learn to trade price action forex pdf. Also watch for bearish reversal. In nathan led reflective vest photon definition ideal case, you trader watching that resistance level a while ago and that the current market price is this level on a previous one or two occasions and that tells them that it is a resistance level and in the direction of your trade after the news release, and guess what they will of money. The value and swing trader of price action trading: When higher and looking to buy casting foundry equipment used ib holdings ii llc a-grade investments investment corporation salary deduction dlj yuan investment advisors limited too. Once price did make the their sell orders…not just one foreign exchange trading and seek and read the story each one is telling you. So price action trading is really about understanding the psychology of the market using those. If you could simply read and free trading courses, one some or all of your initial investment and, therefore, you candlesticks which will give you cannot afford to lose. The author Brian Dolan has but buyers got in and wrong, we lose money, we. Because they believe everything is you must find the right.Price Action Trading is an investment strategy utilized by most seasoned traders. Read our in-depth Price Action Trading PDF to learn how it. Forex Price Action Re-Entry Forex Price Action Re-Entry Trading Examples. Learn more about Price Action Trading from Jesse. Livermore. Risk Management in Price Action Trading. Reduce Your Learning Curve. The “Price Action” method of trading refers to the practice of buying and selling.