Forex Price Action

Forex_School_Online · January 6, 2012, 5:52am

Hello my name is Johnathon Fox.

I am a professional trader and trade solely using high probability Price Action signals from very good levels along with strict money management and a few techniques to protect capital at all times. Most of my trading is done of the 4hr, 8hr and daily charts.

The Price Action trading method I use is very clear and simple and something others can learn very easily. This method is not about adding every single thing you can find and throwing it on your charts or into your trading. That simply does not work. I have not invented this method and everything I teach is something I have learned from someone else and have perfected to suit myself. I am a very straight forward and simple person and have tweaked my trading technique to reflect that.

For some reason the vast majority of traders way over complicate trading and think they have to just keep adding more and more and more. It just is not the case. The more they lose, the more they think they need to add, but adding more and more does not increase profitability. Keep it simple and start reading the price. If you truly understand price and the price action story, including what it is doing and why, you will have no need for [B]ANY[/B] indicators whatsoever. Indicators are built from old price action information where as raw price is being printed live on your charts as you watch it live and this is why indicators lag and are completely useless to the trader who truly understand price action.

Price Action trading has been around for a long time and will be around for a long time to come. Unlike other indicators and black box systems Price Action trading does not stop working when the markets change! Traders who learn this method will have a trading method for life!

I have now committed myself to helping other traders learn how to trade Price Action and how they can drag themselves out of the indicator hole! Nearly everyone starts with indicators until they work out that they simply do not work and learning to read price action and how it behaves is the key to successful trading.

I hope everyone enjoys this thread. This thread is for anybody who wants to trade successfully using nothing but raw price! Please read the instructions below and please feel free to comment and ask questions. I started this thread for everyone to join and get involved so please don’t worry about asking any questions at all! We have all been new traders once and I will make sure everybody is treated fairly and in an friendly environment where people can learn and feel safe to ask any questions.

[B]INSTRUCTIONS FOR FOREX PRICE ACTION THREAD. PLEASE READ BEFORE POSTING.[/B]

Please read the first 50 pages minimum before posting. A ton of information can be found in these first few pages that will show you what we do and how we do it. There is also videos in the first few pages that will explain clearly the simple price action setups we look for and how to trade them. Below in the next few posts is the [B]“thread guide”[/B]. This is a very handy guide for traders and has a ton of quick links that will help you with most price action topics you need to more than get you started trading price action. You can come back to this guide whenever you need. Please make sure you still read the first 50 pages though as this will still help you.

This thread is for Price Action discussions only. Please do not post about indicators or news. There are plenty of other threads where traders can discuss this info.

We are only concerned with high probabily Price Action setups that form at great levels. If you are after a thread that simply enters inside bars and hopes to make money this is not it. There are other threads for that.

We are not about making a million trades but making a few really great ones that have a really high probability with low risk!
[B]
Using New York Close Charts[/B]

When posting please include charts to explain what you are looking at as this really helps (if you need any help with this please just ask). The charting equipment we use is [U][B]New York close 5 day charts charts[/B][/U]. If you need a link to open a free MT4 broker please just message me as this is very easy. A few MT4 providers with these charts in demo are IC markets, Pepperstone, Axi Trader, MYFXchoice and HotForex to name only a few…

If you have any questions that can’t be answered in this thread you can either PM me or email me direct.

Safe trading and all the success in your price action trading journey,

Johnathon Fox
Forex School Online

Haley12 · January 6, 2012, 5:59am

Johnathon, it is good that you are going to start new conversation about “price action”. It is a hot topic for forex traders.

Forex_School_Online · January 6, 2012, 6:04am

What is Price Action?

A lot of traders have a lot of different ideas about what price action actually is. Most traders think that the method they are trading is price action, but the truth is price action is everything on the raw price action chart.

Very basically; Price Action is everything that traders are doing and how they are behaving placed on to a chart for other traders to analyse.

Price Action is everything that price is doing and has done on a Forex pair or trading instrument for a trader to see on a chart. All price represents on a chart is what traders have done and how they have behaved given a certain situation. For example price gets to a support area and price bounces higher. This is traders buying up at a level in the market where they think support is.

Another example of price action at work on a chart is a Pin Bar. Price gets to a certain level in the market before rejecting that level and snapping back the other way. On a chart we see a Pin Bar but that Pin Bar was made up of traders all around the world buying or selling at the same area and rejecting higher or lower prices.

This is a method that has been around for a long time and will be around for a long time to come. Unlike other rubbish indicators or black box systems Price Action trading does not stop working when the market dynamics change.

How can we use Price Action to profit?

Price action trading is the skill of being able to read the price and make trades on any chart, in any market, in any time frame and without the use of any indicators at all.

Traders and humans are very habitual and will do the same given the same circumstances. As traders we can begin to recognise patterns that form on the chart. These patterns will tend to repeat themselves and have the same outcomes. No two trades will ever be the same and no outcomes will ever match a previous trades, but by perfecting these high probability price action patterns we can begin to place trades that over time will give us an edge in the market!

Traders can learn and perfect these trading patterns and begin to implement strategies that will over time give them an edge on the market. An edge is simply something that gives a trader a better chance than 50/50 of placing a winning trade.

What is needed to learn trade Price Action?

Clean charts-

If you want to learn how to trade Price Action you need to take of all the rubbish on your charts. Strip all the indicators of your charts and just have the plain price left. The only thing that is needed to trade the Forex markets successfully is raw price action. The price has all the information that you will need to begin making price action trades. Indicators and other rubbish just confuse and hide what is really going on!

Think of it this way if all indicators are based of what price has done, why not get rid of them and learn to trade the price yourself!

Continual education and practise-

Learning to trade Price Action successfully takes continual practice and commitment to perfecting your craft! The more screen time you put in the better and quicker you will pick up price action trading and begin to perfect your method.

An Edge on the market-

As a Price Action trader your edge on the market is going to be the Price Action signals you use to enter trades. These can be found all through this thread. Take your time to learn them and then perfecting them!

Below are two charts showing the type of clear and obvious Price Action setups this thread will help traders learn. One chart is showing two obvious pin bars and the other chart shows a clear and obvious bearish engulfing bar.

Here is a video of how I look to trade the intraday charts such as the 4hr charts. This pattern is a false break pattern that forms over and over again. This is a level that we look to find on the daily charts and then we can trade it on our intraday charts such as the 8hr, 4hr or even the 1hr charts. The 4hr price action in this video is making a false break and then has snapped back lower creating a bearish engulfing bar (BEEB) giving us the signal that price is looking to move lower.

Price Action can be a very rewarding and successful trading method if carried out correctly. Commit to learning the correct processes and then go about perfecting you method!

Safe trading,

Johnathon Fox

Forex_School_Online · January 6, 2012, 6:14am

[B][U]Forex Price Action Thread Guide | Quick Links[/U][/B]

[U][B]

The level comes first![/B][/U]

[B]# S/R concepts and how to mark S/Rs on charts[/B]

> Keeping it simple - drawing only the two lines closest to price
> Ex:: How far back to zoom out when marking S/R
> Article :: PA Holy Grail - Support and Resistance
> Importance of marking levels from Daily timeframe (even for lower timeframe trades) #1
> Importance of marking levels from Daily timeframe (even for lower timeframe trades) #2
> Use of Fibonacci Retracement levels
> Clues given by price failing to close above/below a given area
> Importance of marking levels from Daily timeframe (even for lower timeframe trades) #3
> Mark S/Rs on Daily but manage trades on the timeframe you found the setup on #1
> Mark S/Rs on Daily but manage trades on the timeframe you found the setup on #2
> Connection between price gaps and S/R
> Using BRNs and VBRNs to help mark S/Rs
> Tips on marking S/R when price is where it’s not been before
> What is a Key Horizontal Level (KHL)?
> Video :: The Secrets Traders Can Learn From Candlesticks & Price Action
> Do S/R’s really exist?

[B]# Trading from correct SWING points (correct VALUE areas)[/B]

> We need to trade AWAY from key areas, not INTO them
> Correct sequence :: BUY @ SUPPORT, and SELL @ RESISTANCE
> Correct sequence :: BUY @ SWING LOW, and SELL @ SWING HIGH
> Article :: PA that Sucks Traders In
> Why we need to enter at correct value (swing) areas
> We are only concerned with the short-term momentum ( the 1-2-3 pattern )
> How to identify correct swing points
> Identifying an uptrend and a downtrend ( movements of highs and lows )
> Ex: EB’s are correct and incorrect swing points
> Waiting for price to move to your key levels
> FX pairs RANGE more than TREND
> Using Fibonacci Retracements correctly when identifying swing points
> Brief explananation on the 1-2-3 pattern
> Buy low and Sell high
> Example: Drawing correct support & resistance levels
> Ex: Setup formation at swing points and how it affects space available for the trade to move
> Ex:: Reversal patterns need to form at the correct swing point
> Ex: Need to trade away from levels, not into them
> Ex: Need to trade at correct swing points
> Ex:: Trading reversal signals from correct swing points (engulfing bar)
> Ex: Trading reversal signals from correct swing points (pinbar)
> Ex: Trading from incorrect swings means trading into trouble
> Ex: Setups formed at swing high and swing low
> Ex: Identifying swing point for a reversal trade

[B]# Psychological Levels ( RNs, BRNs, VBRNs )[/B]

> Factoring in psychological levels when setting entries
> BRNs are every 500pips
> Psychological levels are part and parcel of key horizontal zones
> Ex: VBRNs, BRNs and RNs

[U][B]2. Then comes the Price Action setup![/B][/U]

[B]# Overview of the types of setups we trade[/B]

> Summary 1: The Pinbar, The EB and The 2-Bar Reversal
> Summary 2: The Pinbar, The EB and The 2-Bar Reversal
> Summary 3: The Pinbar, The EB and The 2-Bar Reversal
> We do not trade the INDECISION BAR (IB) - we only use it to help read the PA Story
> We do not trade the INVERSE PINBAR aka HANGING MAN - we only use it to help read the PA Story

[B]# The Engulfing Bar (EB, BUEB, BEEB)[/B]

> The EB: Concepts reference #1
> The EB: Concepts reference #2
> Illustration :: Valid vs Invalid Engulfing Bars
> The EB must fully engulf the previous candle
> The EB needs to close strong ( in the last 1/3rd of the candle )
> Example :: The EB needs to close strong ( in the last 1/3rd of the candle )
> Example: EURUSD H1 BEEB
> Ex: EURJPY H4 BEEB at BRN
> Ex: EURGBP H4 BEEB
> Ex: EURAUD H4 BEEB
> Ex: USDCHF D1 BEEB
> Ex: AUDJPY H4 BEEB
> Ex: NZDJPY H4 BUEB
> Ex: BEEB and BUEB
> Ex: USDJPY H4 BUEB
> Ex: EURNZD D1 BUEB
> Ex: AUDUSD D1 Counter-trend BEEB
> Ex: AUDSGD D1 Counter-trend BEEB
> Video :: Live Trade - EURUSD H1 BEEB

Forex_School_Online · January 6, 2012, 6:18am

[U][B]Thread Guide Continued…[/B][/U]

[B]# The Pinbar[/B]

[B]# The 2-Bar Reversal ( 2BR )[/B]

–> Article :: The 2BR Explained
–> The 2BR :: Concept reference #1
–> The 2BR :: Concept reference #2
–> The 2BR :: Concept reference #3
–> Difference between 2BR and Engulfing Bar #1
–> Difference between 2BR and Engulfing Bar #2
–> Difference between 2BR and Engulfing Bar #3
–> Example :: EURCAD H4 2BR
–> Example :: XAUSD H4 & GBPCHF D1 2BRs
–> Example :: AUDJPY W1 2BR
–> Example :: EURNOK H4 2BR
–> Example :: 2BR to avoid ( did not close strong )
–> Example :: NZDUSD D1 2BR

[U][B]3. What makes a setup A+ (high probability)?[/B][/U]

[B]# A+ cake ingredients (CHECKLIST)[/B]

–> Reference #1
–> Reference #2
–> Reference #3
–> Reference #4
–> Reference #5
–> Reference #6
–> Reference #7
–> Reference #8
–> Reference #9
–> Why size of PA setup matters
–> Example of A+ checklist application #1
–> Example of A+ checklist application #2
–> Example of A+ checklist application #3
–> Example of A+ checklist application #4
–> Example of A+ trades

[B]# What to do when confronted with several A+ trades[/B]

–> Reference #1
–> Reference #2
–> Reference #3
–> Reference #4
–> Reference #5

[B]# How many A+ setups (on average) can we expect per month?[/B]

–> Reference #1
–> Reference #2
–> Reference #3
–> Reference #4
–> Reference #5
–> Reference #6
–> Reference #7
–> Reference #8

Forex_School_Online · January 6, 2012, 6:23am

[B][U]Thread Guide Continued…[/U][/B]

[B]

Other factors to consider when looking for & selecting A+ and High Probability Trades[/B]

–> Trades with the trend have higher probability
–> PA formed after a deeper pullback / retrace is preferred
–> When it comes to how many pairs to watch: the more the merrier
–> No system in the world is 100% correct; don’t stress over individual trades
–> It’s all about WAITING, and then POUNCING on A+ trades
–> Treat each timeframe independent from the other
–> Watch out not to trade into key levels
–> Watch out not to trade into traffic
–> Avoid indecisive setups
–> Never trade the last H4/intra-day candle of the week
–> If you are unsure, hesitating or not entirely convinced about a setup, your gut is telling you avoid it
–> Better to be out of a trade and wishing you were in it
–> How do you define ‘big’ PA?
–> How do you define ‘big’ PA? #2 ( BIG is OBVIOUS )
–> We have to be careful not to CHASE TRADES
–> Avoid taking RETRACE ENTRIES
–> The 1-2-3 pattern can be used to identify swing/trend reversals
–> The 1-2-3 pattern can be used to identify swing/trend reversals #2
–> The S/R level comes first, then the PA signal ( which should SCREAM at you to take it due to its obviousness )
–> The area comes first, then the signal
–> The best trades will always be found with the trend, but on occasions you will get great opportunities to enter against the trend
–> 80% win rate does not equate to a sequence of 8 wins every 10 trades
–> What to do when the Daily is not presenting us with any major pullback opportunities
–> Price story analysis to determine whether or not to take a trade
–> We are only concerned with the most recent swing/momentum
–> It is a myth that you need R:R of 1:1 or 1:2 to take a trade
–> Low win rate + higher R:R, OR, High win rate + Lower R:R
–> Find an obvious trend, wait for rotation into value, find a PA confirmation to enter the trade
–> There are better and more optimum times to trade than others
–> Manage a trade setup FULLY on the timeframe you spotted it on
–> Look at each chart and their separate trends individually
–> On questions regarding: Traffic, Pinbars, Relevant S/R Levels and Trend (swing/momentum)
–> We can enter D1 Friday PA on Monday but careful to let market spreads settle down before setting entries
–> Swing highs and lows are places where we look to find PA
–> The key to counter-trend signals is HUGE PA
–> Look to stack as many factors in your favour when looking for A+ trades
–> Regarding strict rules: You have to draw a line somewhere, and once you have drawn it you have to strictly stick to it

[B]

Price Action and news/fundamentals[/B]

> Ref #1
> Ref #2
> Ref #3
> Ref #4
> Ref #5
> Ref #6
> Non Farm Pay Roll & Price Action

Forex_School_Online · January 6, 2012, 6:27am

[B][U]Thread Guide Continued…[/U][/B]

[B][U]4. Basic Trade and Money Management

[/U][/B]> The fine line between giving a trade room to breath and understanding where it might struggle
> Remember Risk/Reward is only half the equation
> We set PENDING orders in order to enter into trades when price is moving in the direction we want
> Where do we set Take Profit (TPs)?
> All reveal PA is confirmed when price breaks it (in the direction of the trade)
> Stick to the same chart (TIMEFRAME) you took the trade from
> Keep it simple & manage your trade from ONE timeframe (the one you spotted it on)
> Bearish setups - entry is below the low : Bullish setups - entry is above the high
> AlertFx.com - Forex Alerts for Free
> Round Numbers can act as psychological S/R levels
> Work out your risk first, then split a trade as many ways as you want
> Keep it simple: see a trade and manage on the same timeframe
> PRE-TRADE MANAGEMENT PLAN
> How to work out RISK and TRADE LOTS before each trade ( POSITION SIZING )
> Article: Start Thinking in Money, Not Pips
> Round Numbers can act as psychological S/R levels
> Work out your risk first, then split a trade f or management
> Keep it simple: see a trade and manage on the same timeframe
> How to work out RISK and TRADE LOTS before each trade ( POSITION SIZING )
> Article: Start Thinking in Money, Not Pips
> Placing multiple orders and targets
> Position Sizing Calculator
> Leverage explanation + links for further reading
> Live trade management call (insightful)
> What to do when we can not find a recent S/R to base trades off of
> More on position sizing and using a trade manager to move SL’s to BE
> Caution on taking Fibonacci or random retrace entries
> Take entry at the break of the setup!
> Getting burnt for not taking entry at the break of the setup
> Example of profitable trade management
> Work out how much you are prepared to lose BEFORE entering a trade
> Brief TRADE ENTRY process breakdown
> Using buffers for entry and stoploss
> We are ONLY concerned with the timeframe in which we have spotted the setup
> A buffered stop is a well-placed stop
> Let the market tell you where to place your stop
> Trades shouldn’t be entered before the break of the signal
> Define your risk in $ BEFORE entry!! > Article: Forex Money Management that Actually Works
> Article: The Myth of Risk:Reward
> Brief on creating trade plan + Journalling
> More on trade entry buffers
> Article: Are You Over Managing & Micro Managing Your Forex Trades Into Losers?
> Live trade enry management example
> More on R:R and Win Rate
> Example of fixed $ risk per trade
> An personal insight into trade management and targets
> Live trade entry and FTA example
> You don’t need a pull-back when price is at an extreme high or low
> Overview of Trade Management concepts using live trade as basis
> Trade entry is via pending order set after the setup candle has closed
> 3 words: PRE-TRADE PLAN and HERE
> We are swing trades looking to get on the correct side of the next swing
> Trading less but making more money
> Don’t be afraid of breakeven trades!

Forex_School_Online · January 7, 2012, 5:18am

Thread Guide Continued…

5. Broker and Charting Info

# Providers of 5-DAY New-York Close Charts

–> MT4: Pepperstone, GoMarkets, AxiTrader, HotForex, TradingView.com, FXDD, FXpro, Traders Way, FXCM TS2
–> MT5: RoboForex, GoMarkets, InstaForex, LiteForex
–> Indices/Futures: AxiTrader, GoMarkets, HotForex, InstaForex

Note: You can have a different broker where you place your trades. The above recommendations are purely for CHARTING platform.

# Tips on posting up clear charts

–> Tip #1: MT4 Save Picture + Paint.NET
–> Tip #2: JING Screen Capture
–> Tip #3: THREAD RULE: Remove ALL indicators ( MAs, Oscillators, etc ) and Trendlines from your chart!!

6. Daily Routine, Pairs Watchlist, Trading Plans & Journalling

# Daily Routine

–> Very quick to scan through charts when the levels have been marked in advance
–> Simply flick through charts to see whether any PA has formed at your levels
–> Times of the day one can check charts (corresponding to market sessions)
–> Looking for PA at other timeframes from Daily levels
–> Breakdown of daily approach
–> Video :: Daily Routine (+ other goodies)

# Pairs Watchlist

–> Most avoid EURCHF as it is heavily manipulated by the Swiss National Bank (SNB)
–> I watch all majors, all crosses, indices, oil & metals & a few exotics
–> Any instrument with HIGH LIQUIDITY is game for trading (e.g corn, soya, wheat futures)
–> I watch about 35 pairs and the major Indices
–> PA works the same with Indices as with Forex pairs
–> Best intra-day setups are during London / NY overlap (lots of liquidity)
–> Bigger markets and pairs are easier to trade (more stable)

# Trading Plans & Journals

–> Article :: Why You Need a Trading Journal - Example Included
–> Insightful post on Trade Journalling
–> A member’s excellent trading plan #1
–> A member’s excellent trading plan #2
–> A member’s excellent trading plan #3
–> A member’s excellent trading plan #4
–> A member’s excellent trading journal #1
–> A member’s excellent trading journal #2
–> We are all individuals with different trading plans that contain slightly different rules depending on what suits our personalities

7. Glossary

PA = Price Action
KHL = key horizontal level
SR = support and resistance
BE = break even (Place stop at entry price)
TP = take profit
FSA = first support area
FRA= first resistance area
BEEB = bearish engulfing bar
BUEB = bullish engulfing bar
2BR = 2 Bar Reversal
PB = pin bar
FTA = first trouble area
IB = inside bar
RN = round number, e.g 1.2400 for AUDNZD
BRN = big round number, e.g 1.6000 for GBPUSD
VBRN = very big round number, e.g 1.0000 for USDCAD
CT = counter trend
SL = stop loss
RR = Risk Reward
Fib = Fibonacci
SL = Stop Loss
H4 = four hour chart
H1 = one hour chart
D1 = daily chart
TF = time frame

bhops · January 8, 2012, 5:53am

Hi Johnathon,

I do like the PA signals you are advocating. I first found PA trading over here on Babypips but for one reason or another threads on pure PA trading just seemed to die out.

Here is a nice BUEB I am looking at on the NZD/CAD Daily. It has happened at a nice level but I really like to trade pullbacks and this hasn’t quite pulled back enough for me. I will keep an eye on it though.

I’ll chuck a few more up as I see them.

Forex_School_Online · January 8, 2012, 6:59am

Here is a live pin bar trade played on the daily chart of the GBPUSD. The daily time frame is by far my favorite time frame. Price action can be traded and applied on any time frame, however I would highly suggest traders start with the daily time frame and once profitable then begin working their way down from there and not the other way around. So often traders start from the 5 minute time frame and work up to the daily time frame and this is often why they don’t find much success. Once you are profitable you can start moving down time frames and as long as you remain profitable and keep moving down to as low as you like. The key is making profits and the daily time frame is a great time frame to do that on.

Safe trading,

Johnathon Fox

bhops · January 8, 2012, 4:21pm

Here’s one for discussion. I will be looking for some Price Action in the highlighted zone on the EUR/CAD. This pair is strongly Bearish and I’m hoping for a nice pullback to the area highlighted before seeing some nice Price Action to get short.

Forex_School_Online · January 8, 2012, 9:53pm

Heads up on very solid level traders should watch for potential Price Action setups.

Chart is 4hr EURUSD.

Of late the trend has been down in a strong way so trading with this momentum and looking for shorts is definitely preferred to longs!!

Forex_School_Online · January 9, 2012, 3:44am

Two areas to look out for:

bhops · January 9, 2012, 3:47am

Price on many of the Euro pairs does look to be starting to rotate back. I shall keep my eyes peeled.

Forex_School_Online · January 9, 2012, 5:50am

Aussie 12 Hr Pin. With the recent up move and at support.

Will be interesting to see how this plays out if it breaks higher as their is a little resistance close by over head.

bhops · January 9, 2012, 10:50pm

Did you end up taking this trade?

Forex_School_Online · January 9, 2012, 11:26pm

Yes I was entered long when it broke higher.

I will recap when I take profit or get taken out at BE.

Forex_School_Online · January 10, 2012, 8:55am

Hey all just to recap this live trade I posted in here. Price has now shot higher and I have taken 50% profit and moved remainder to break even. This trade is a great example of how powerful Price Action trading can be when played from the right areas and manage corrcetly.

Safe trading to all,

Johnathon Fox

mojo6911 · January 11, 2012, 8:36pm

Good thread. Thanks.

Forex_School_Online · January 11, 2012, 10:57pm

Your very much welcome. As I get more time I will post more and more,

Johnathon