JÄWÄ's Price Action Trading Method

[SithJawa]

Hello, and welcome.. to Jurassic Park :D but in all seriousness this is my 4 hour price action strategy, i make a very comfortable living off of it so please check it out and feel free to comment on it or ask questions so we can all continue to learn and become better traders :)

The first link I included is a quick template of the actual strategy, and the second file is an in depth explanation worth reading

Now, here are some picture explanations and examples of trades made:



Looking at this chart we can see an obvious Pin Bar forming on the 4 hour chart, noticing that it is also above the center line of the Bollinger Band we can see it is in a prime selling zone and therefore a pretty good probability trade, but wait! there is still one more filter we have to use, the 1 hour chart.



These four 1 hour candles are all the candles that are contained within that one 4 hour pin bar, by looking at these 4 candles we can see how the price was moving within that pin bar, the reason we use the hour as a filter is to see if the price is truly heading in the direction we want it, or if this is just a temporary pause in the trend. Notice how all 4 candles completely reject the top bollinger band, the buyers tried and failed four times to bring the price up, also notice how they broke through the EMA's, that is a great confirmation.



and look! the price moved after the pin bar

*in case the files aren't working*

Official Forex Strategy

Currency Pair: GBP/JPY, AUD/JPY, EUR/JPY, GBP/NZD, EUR/NZD
(Any pair that has high volatility and daily pip ranges)

Explanation: When you choose which charts you are going to trade there are a number of things you must look for when considering a chart

1 High Volatility: the more volatile the market the more entry and exit points there will be as price reaches its extremes much faster, another great thing about high volatility is that the market will normally be trending, and when it isn't the ranges are big enough to trade off of profitably.

1 Confluence: look for charts that trade with confluence to one another to maximize how many entry signals appear a week

1 Number of Charts: make sure you only keep a manageable amount of charts, otherwise every time you go to your computer to look for signals you'll be trapped their sifting through dozens of high risk/low reward charts for no reason, just like a trading method, you want to get to know each and every chart before you even consider moving on to another one (I myself only trade 5 charts), this will allow you to get a feel for the way that market moves, how wide your stops can be, and how far each price move will go on average




Time Frame: 4 Hour

Explanation: Because this method of trading uses the pure Price to determine signals, it can be used on any time frame, that being said you should pick a time frame that suits how often you want to trade, I myself enjoy being able to only have to be at my computer every 4 hours and by using the 4 hour charts I never miss a single candle. Some considerations before picking your time frame are:

1 Profit Goals: obviously you wont make 80 pips a trade on the 5 minute charts, the lower the time frame the smaller the moves, and the smaller the take profits will have to be,

1 Quantity vs. Quality: The smaller the time frame the more trades you will have to make to achieve a certain amount of pips gained, this causes increases in spread and swap costs, that being said however there is much more money to be gained by trading smaller time frames (if you trade 24/7), every candle on the 4 hour chart has a few or more 15 minute chart moves on it that all could have been profited from where as on the higher time frame it is translated to a slow price move.

1 Amount of time spent on Forex: Although the lower time frames contain more money to be made you must realize the unrealizable of being at your computer every 1, 5, 15 minutes, or even every hour of every day, whereas if you trade the 4 hour or daily charts you will never miss a candle (provided you dont mind waking up once at a godforsaken hour in the middle of the night to check the market for five minutes)


The lowest I would ever go from using 4 hour charts with 1 hour charts as confirmation, would be using 1 hour charts with 15 minutes as confirmation.


Indicators: Bollinger Bands, EMA (5), EMA (10), 1 Hour Chart

Explanation: I have tried literally EVERY SINGLE indicator (extensively might I add..) on MT4 as well as numerous custom indicators, IN MY OPINION indicators are dumb :P all indicators are lagging indicators by nature, meaning they can only tell you what has already happened, where as by using just price action you can see where the price will go before it goes there, that being said I use these indicators for the following reasons:

1 Bollinger Bands: This is used to determine price extremes and buying and selling zones, you don’t want to be trading an evening star at the bottom of a move now do you? This helps filter the direction you want to be trading in an obvious and simple way

1 EMA's: I use these as dynamic supports, if you plot them on your charts you will see that price often bounces off of the EMA's, and this is a very useful piece of information to use, to be able to see the buyers and sellers fighting back and forth with clarity

1 1 Hour Chart: Being able to see inside every candle within the 4 hour candle you are about to enter into a trade because of is an amazing filter, to see the price moving, see why the 4 hour candle has formed in the way it has, is extremely awesome



BUY:

Entry: Place buy order on pin bar (or reverse pin bar) or morning star that forms on the 4 hour chart (on or below the center line of the Bollinger Bands) and is confirmed by price movement on the 1 hour




SELL:

Entry: Place sell order on pin bar (or reverse pin bar) or evening star that forms on the 4 hour chart (on or above the center line of the Bollinger Bands) and is confirmed by price movement on the 1 hour





EXIT: take half profit at 50 pips, and let the rest run till next opposing signal

STOP: place stop 40 pips away, at first take profit move stop to breakeven, trail stop manually by 50 pips after that

Explanation: These are just some hard numbers to use, it should be different for every chart as every chart moves differently, but these are some good safe guidelines to go by for entering and exiting.

[SithJawa]

this is a perfect example of a trade filtered out by looking at the 1 hour, look at this pin bar at the tip of this movement, it looks like it might be a reversal right? well lets look at the one hour



as we can see from these 4 one hour candles that make up the 4 hour pin bar, price is bouncing off the dynamic support and cant seem to break through, it tries but fails four times, so im going to just ignore this signal.



and look! the trend continued had we have sold there we would be very, very sad right now..

[medisoft]

Hi thanks for sharing. What is the periods for your bands and ema?

Thanks.

[SithJawa]

The EMA's are 5 (blue) and 10 (yellow), and the bollinger bands have standard settings period:20, deviation: 2)

[sgpilot]

I just started to learn Price Action and I have to say I really like they way you describe your method on this thread. May I know how often this set-up occurs in a week please? Really cool method and very simple!

[medisoft]

<img src="http://forums.babypips.com/attachment.php?attachmentid=24868"/>

this is a perfect example of a trade filtered out by looking at the 1 hour, look at this pin bar at the tip of this movement, it looks like it might be a reversal right? well lets look at the one hour

<img src="http://forums.babypips.com/attachment.php?attachmentid=24869"/>

as we can see from these 4 one hour candles that make up the 4 hour pin bar, price is bouncing off the dynamic support and cant seem to break through, it tries but fails four times, so im going to just ignore this signal.

<img src="http://forums.babypips.com/attachment.php?attachmentid=24870"/>

and look! the trend continued had we have sold there we would be very, very sad right now..

I don't see the pinbar here. Can you circle it please?

[SithJawa]

i circled it :3



these were a few of the trades i made in the past couple weeks on the GBP/JPY 4 hour chart, i only included the signals that were filtered and confirmed



here are a couple pictures that might help, i trade pin bars and reverse pin bars the key obviously isnt so much looking for the signals as much as it is looking at where they are located in a move

Although most people might say a pin bar or a reverse pin bar needs to have the long end of the wick be at least 50% of the candle, the body no more than 25%, and the nose no more then 25%, by definition a pin bar is simply the visual representation of the indecision in the market, so for instance if you see a bullish trend in place and then you see one candle has a longer than normal wick, investigate! see why its acting that way by zooming into the one hour and even further if you want, see what happened in that candle, if you see for instance the bears had gained power and pulled the bears back down through a support line, perfect buying opportunity even though it might be a sloppy pin bar you have to remember what makes the pin bar itself a pin bar, the indecision in the market :3

Also a side note on trading evening and morning stars, too be valid all they need to be a good signal is:

1. A current trend in place
2. A candle signifying indecision or possible trend change (doji's, pin bars, hammers etc.)
3. Confirmation of the change in trend (ie. if the first candle in the pattern is bullish, then the next candle would have to be an indecision candle, and then the last candle would have to be a bearish candle)

[SithJawa]

here is another example, in the middle of a large upward move a possible reversal occurs, so we zoom into the 1 hour to see whats going on



as we can see it takes practice to read the market and determine whats going on, normally i like to prioritize like this

1. Price action on the 1 hour: if we see a confluent price action signal on the 1 hour that is recent that is a great indicator to either get in or out of a trade

2.Bouncing off S/R's: if the market is trying and failing to break through supports that is a good signal as well

[SithJawa]

it obviously depends on the market and which charts you are using, but typically i get ATLEAST 5-6 signals a day, and between 2-300 pips a day

[Kimonz]

What pairs do you trade on this strategy? Or put another way... What pairs give the best results with it?
I heared Nail Fuller once saying that you do not get pin bars on some pairs as good as others.