Price Action Hero

[mastergunner99]

After a year and a half of learning and growing, it's fine time I presented my own methodology of trading the forex market. I don't rely on any set system for entry. Right off the bat I know that's going to turn a lot of readers away. Reason being is that your average forex trader does not want to learn how to trade, but rather be shown how to trade. Frankly, it doesn't work like that.

Indicators do have their value and function. However, failure lies in when one only looks at indicators to make all their entries and exits. We all know that indicators lag. So you'll never be able to perfectly time and entry and exit with your standard set of indicators. Logic dictates that for you.

I do use indicators when trading. However, I keep them minimal and only use them to have a look at the overall picture. My primary concentration is on price. When I do use indicators, I look to see how price is reacting around any indicator I have on my chart.

As this thread develops, I won't fill it with charts of past events. Anyone can look at a chart, toss whatever indicator based system they use, and explain how successful their system is. Hindsight is clear as day, and if we were allowed to trade in the past, the market would be so perfect it wouldn't even exist.

With that said, any chart I do post will be as close as real time as possible. If I happen to be on my laptop when a see a viable entry, I'll take a screenshot and post it on here along with any applicable notes explaining my reasoning for entries and exits.

As I do chart on my phone and call my orders in quite frequently, it's not likely that every single one of my trades will be on here. Besides, that's too time consuming. It's not my intent to turn into any time of signal service for anyone, but rather assist folks in how to trade profitably.

My charts generally consist of RSI (6), trend-lines, and occasionally Fibonacci makes an appearance. While this can be pretty much traded on any timeframe or pair, I'll be sticking to a one hour timeframe.

And lastly, I'll only refer to units here. Lot size is meaningless. Pip size means nothing. If you have a profitable strategy you should even be able to turn the change in your pocket into a size-able amount of money.

Any questions before I continue?

[scorflufus]

I´m so glad that there seems to be someone else out there that wants to get back to true trading.
I have been studying the market ( Forex ) for just over a year now and all of my experience tells me that " Price Action " is the Holy Grail.
The Chart doesn´t lie the truth is there if only you can see it, and that´s the rub--- Seeing the Truth in the Chart is so Difficult.
I know now that there is no quick fix in Forex, Indicators mangle the truth to fit somebodies idea of what the market should be doing, how can a small 30 to 100 kb piece of software possibly match the Human brain. The same applies to EAs.
I want to say that at this time I am a failed Trader as I have relied on Indicators and several EAs and have been rewarded with only losses, Logic tells me that there must be a better way and the Great Traders of the Past didn´t have computers to help them so they must have used a different method. Guess What IT WAS PRICE ACTION ANALYSIS.
So let us all get back to the right way to trade, put in the hours to study and become Great Traders ourselves.

[trading801]

wat exactly is PA analysis

[yfz450bence]

staring at the charts and trying to predict the future..... jk, anyway i like the straight forward approach from this thread

[mastergunner99]

Originally Posted by trading801

wat exactly is PA analysis

Price moves up. Price moves down. These two things are a fact.

Price can move in waves. Price can move in patterns.

PA analysis is short for Price Action Analysis. It's technical trading for the most part where the focal point lies on price and what price is doing. The idea is to watch for the development of patterns that coincide with general trading psychology.

Indicators tell you what happened in the past. So for instance if you're waiting for price to close past a 9EMA before making your entry, you might already be entering too late. Also, people tend to gravitate to hard rules when using indicators. Such as if MACD moves past 0 line upwards sell, and if it moves below 0 line sell. While it make work once and awhile, in the long run it'll prove to not be profitable.

Now everyone knows that you cannot profit trading only one indicator. So what do they do. They toss in another indicator. Then another one. Then another one. It's an endless system of trial and error in search for a Holy Grail that doesn't exist.

There are no hard rules when monitoring price action. It's completely subjective and can adapt to the ever evolving Forex market.

Now, again, I'm not against indicators, as from time to time I use them as well. However, I always look to see what price itself is doing and allow indicators to paint an overall question.

I fear I've over answered your question.

[mastergunner99]

Here's an example of how my chart looks at the moment. The last candle is the close of the weekend. I do not hold trades over the weekend, and very rarely would I open a trade at the start of the next week, but I wanted to show you some analysis. For all purposes of illustration, let's assume this chart represents the middle of the week.

I've drawn a line of support/resistance at 1.3012. That's not a hard number and I wouldn't necessarily open or close a trade specifically on that number, but it does give me an overall picture of how price has been reacting.

On the 22nd, price had a hard time breaking that line of resistance. It hung around the price for a good portion of the day until it finally broke through. Price than retraced and bounced right back off the same area of resistance which is now acting as a line of support.

There were some trading opportunities as price rose, but as mentioned by the first post, we're going to focus on the now, and not tell you how you could have gotten rich in the past.

Price finally peaked at 1.3300. It bounced twice off that line and then a bearish evening star appeared. Also, take note at RSI. Just as the evening start pattern was completed it broke the trend-line I had drawn. Finally, I drew a trend-line along the bullish move. Take note that after price dropped below the trend-line, it spiked back up, the bears took over and it closed below the trend-line. There was a final push up and price hit the trend-line and fell back down as the trend-line is looking to now appear as a line of resistance.

To complete this image, I drew Fibs. I drew it from the line of support at 1.3012 all the way up to the line of resistance at 1.3300. As you can see, price hit the 23.6 line and pulled back a bit. However, the candle there after proved to still be a bearish inside bar candle.

So I'm left with three options. I can buy. I can sell. Or I can stay on the sidelines.

There would make no sense for me to buy. Price did not want to head past 1.3300. RSI was already overbought and now the trend-line was broken. And price broke a trend-line and then shown it to act as a line of resistance. I think that if the 23.6 Fib line was going to act as a stronger line of support, the last candle would not have been so easily pushed off by the trend-line.

A sell is looking pretty darn decent at the moment. However, I would want to ensure that price can break through the 23.6 line. A close below it would certainly be of interest and might even cause me to pull the trigger. A sell stop set 5-10 pips below 23.6 wouldn't be a bad idea either. Also if price goes below the 23.6 fib line it would mean it also broke past the low of the bearish inside bar. A stop-loss would be placed above 1.3300. And as far as a profit target is concerned, I would allow price action to determine that at each of the Fib levels moving down to an ideal profit target around 1.3130.

Like I said in my original post. This isn't just a couple indicators splashed together to create a system. Work is involved here. Thinking is involved here. As a result this will not be a popular thread. But I do assure you... it will be a profitable thread.

Any questions?

[PipTiamat]

I like your trading style. clean understandable and thaught through. I do personally use indicators to help make decisions when i trade but more as confirmation of the trend that i am looking at rather than the indicators telling me when and which direction to trade.

I belive that primarily traders should use more of the basic systems set in place when you first start trading such as head and shoulders candle patterns and of course support and resistance to make the best decisions.

best regards

pt~

[profitforextrader]

well done!

great thread!

as you've already said indicators focus on what HAS happened and not what IS happening, now what good is that to a forex trader? if anything it just disheartens us as we see them as missed opportunities and further clouds our trading judgement...

now price action on the other hand, thats where the real profit lies...

i tend to only use rsi, support and resistance, fibonacci and i also look at the tick chart to make my own judgement on the pairs momentum.

i would also just like to add one other thing to your thread

ALL pairs behave diferently which is someting that no indicator can take into consideration where as if you primarily look at price action you can focus on one or two pairs over a period of time and begin to understand how those particular pairs behave, the momentum and speed at which they move, whether they often have definitive trends or constant retracements, their daily range, how they behave at S + R lines and Fib Lines...

learn to interpret the pairs and the market, NOT the indicators

good luck everyone

lee

[o990l6mh]

Excellent thread.

It seems that Tess, Jocelyn and co may get some competition

I quite agree that the evening star, visible on EUR/USD 4H is enticing. However on daily the uptrend is still unbroken although fridays candle does have an upper wick suggesting price may be about to turn back down.

I'm looking at EUR/JPY as a possible long based on daily time frame.
Price has recently bounced off of the lower Bollinger band, it also seems to be turning up again at the 128 level which was resistance back in december 2008.
The lowest it went was to 126, which represent another old resistance level from late jan/ early feb 08.
Peak and trough analysis shows that a higher high has been formed and that we may be watching the higher low right now, but this pattern is therefore only half formed.
Last, but not least, (number one really) is that price on 22-23 april formed a bullish outside bar. Friday 23 was a doji but the lower wick was substantially longer than the upper.

This all together with some fundamental reading suggesting yen may hurt in coming weeks, tell me that going long on EUR/JPY would have the odds in one's favor.

Reading DailyFX's weekly outlook would give the opposite view. They are clearly bearish on the pair. I choose to put faith in my own view. Let's see who's right - me or DailyFX... Sort of David and Goliath huh

Thoughts?

[mastergunner99]

I trade mainly off the 1HR charts. Right now EURJPY too me is looking like it was set to go down. As I see it now, every few hours it would appear that the price is fighting for a reversal. However, it smacks the downward trend-line and keeps going down. I generally only trade at the beginning of what I spy to be a reversal, so I would wait for some more confirmation other than just candlestick patterns.

As it stands, I would need RSI to break the current trend-line I have drawn coupled with a solid candlestick pattern before I would consider a long.