Price Action 101

Trading Systems
1

Hello amigos:

First some introduction. I been on and off a trader for a couple of years, a very bad trader I might add. You can even find some posts I made here back in 2009 with some misconceived scalping strategy. Needless to say I lost all my money back then mainly cuz in simple words I sucked at trading. A few months after that I decided an EA was the solution, I researched for long time, decided on a apparently solid EA spend 300 USD on it. It seemed to work for a few months, but at the end it happened the same thing, “bye bye account”. I am not talking of thousands of dollars account I don’t have the money to risk that much, but nevertheless I had to make an effort to fund those mini-accounts.

I could see one common factor in my many attempts. A lot of small wins 75% of them and few but HUGE losses. I decided that THIS was nor for me and worked harder at my normal job, never to look back … YEA RIGHT!!!.
A long time passed and then I got an email from the EA I had purchased earlier with the new and redesigned version 3.0, so I decided to give a try on demo, 2 moths with consecutive small wins and small loses. Then I passed it to a real account and after 2 weeks of good days, three consecutively BIG losses… turned it off intermediately.

But the trading bug had bitten me again. So I opened an account at Zulutrade since I was sure that anybody could do it better than me. Demo it for a few months, studying and demoing the traders first… It has not been that bad really, but … what you gain on one week its taken by the same trader’s bad choices of the next one. At the end of the month there are small profits some times. I have a small account and set only small 0.01 lots anyways. But now I am convinced that I could do it better myself.

I started to research and self teaching. Finally I decided that the most profitable traders out there are [B]Price Action[/B] Swing Traders. This is good especially for me because back in my scalping days, it was to stressful … to much market movement, I smoked half a pack in each trade. Looking everything at 1D charts its more relaxed and stable, I like the “set and forget” modo. I read a lot of James16 thread at FF, Jhon’s thread here at BBP, and many many other info about price action.

[B]YOU SHOULD DO IT TOO !!! NOW[/B] then come back :slight_smile: …

Ok enough about the past, now comes the good stuff.
Here’s how I have come to understand the art of trading:

“[B]Its like learning to ride a bike[/B]”

No one can tell you exactly how it’s done, people/mentors/teachers can only give advice … and the [B]one and only way to learn it’s by experiencing it yourself[/B]. This is not a mind blowing discovery, but new eager traders (like I was) seem to constantly overlook it, after a few days/weeks at the most we/they believe that we are ready for the real thing… WRONG.

So I came up with the idea of this thread representing a classroom.
I won’t be the teacher, far from it. The idea is for a bunch of us [B]PRICE ACTION ROOKIES[/B] to learn together, treating a demo account as real for a few months (as james16 suggest’s to have at least 3 consecutively profitable months in order to pass on to the next level).

All of the traders that decide to join the thread will benefit from the collective wisdom generated here, commenting on possible upcoming setups or “what went wrong” trades. Experienced traders might come in from time to time to help (at least I hope some of them do).

The way I see it, is creating something like the payed memberships some good traders have created on their sites but FREE. I know in those sites there are good mentors to guide you, but think about it, unless you ONLY join in to benefit from signals why pay a fee, join zulutrade or the mql4 community instead.

The majority of rookie traders join in to LEARN but the mentors guide you with info which in reality is free to get, there are a LOT of sites teaching about pin bars, support and resistance levels, money management, etc, … remember that they themselves always say that there is no SECRET HOLLY GRAIL strategy. So like the bike learning example at the end it’s not the info or the signals that help to make you a better trader but the EXPERIENCE of doing it, like pilots amounting flight hours on the simulator till they are ready.

So the best way to start earning some real trading hours is with FAKE money. Open up a demo account (or two/three I will explain later) with any broker, [B]set it up with the amount of money you plan to invest when you go live[/B] (this part is extremely important in order to work on your money management and for the account to FEEL real)

So if you were patience enough to read through the all thing and like the idea stay tuned, shortly I will make another post with more info (this post it’s too big as it is).

Class dismissed !!

May the pip be with you

Anakin

2

[QUOTE=“Anakin;544876”]Hello amigos:

First some introduction. I been on and off a trader for a couple of years, a very bad trader I might add. You can even find some posts I made here back in 2009 with some misconceived scalping strategy. Needless to say I lost all my money back then mainly cuz in simple words I sucked at trading. A few months after that I decided an EA was the solution, I researched for long time, decided on a apparently solid EA spend 300 USD on it. It seemed to work for a few months, but at the end it happened the same thing, “bye bye account”. I am not talking of thousands of dollars account I don’t have the money to risk that much, but nevertheless I had to make an effort to fund those mini-accounts.

I could see one common factor in my many attempts. A lot of small wins 75% of them and few but HUGE losses. I decided that THIS was nor for me and worked harder at my normal job, never to look back … YEA RIGHT!!!.
A long time passed and then I got an email from the EA I had purchased earlier with the new and redesigned version 3.0, so I decided to give a try on demo, 2 moths with consecutive small wins and small loses. Then I passed it to a real account and after 2 weeks of good days, three consecutively BIG losses… turned it off intermediately.

But the trading bug had bitten me again. So I opened an account at Zulutrade since I was sure that anybody could do it better than me. Demo it for a few months, studying and demoing the traders first… It has not been that bad really, but … what you gain on one week its taken by the same trader’s bad choices of the next one. At the end of the month there are small profits some times. I have a small account and set only small 0.01 lots anyways. But now I am convinced that I could do it better myself.

I started to research and self teaching. Finally I decided that the most profitable traders out there are Price Action Swing Traders. This is good especially for me because back in my scalping days, it was to stressful … to much market movement, I smoked half a pack in each trade. Looking everything at 1D charts its more relaxed and stable, I like the “set and forget” modo. I read a lot of James16 thread at FF, Jhon’s thread here at BBP, and many many other info about price action.

YOU SHOULD DO IT TOO !!! NOW then come back :slight_smile: …

Ok enough about the past, now comes the good stuff.
Here’s how I have come to understand the art of trading:

“Its like learning to ride a bike”

No one can tell you exactly how it’s done, people/mentors/teachers can only give advice … and the one and only way to learn it’s by experiencing it yourself. This is not a mind blowing discovery, but new eager traders (like I was) seem to constantly overlook it, after a few days/weeks at the most we/they believe that we are ready for the real thing… WRONG.

So I came up with the idea of this thread representing a classroom.
I won’t be the teacher, far from it. The idea is for a bunch of us PRICE ACTION ROOKIES to learn together, treating a demo account as real for a few months (as james16 suggest’s to have at least 3 consecutively profitable months in order to pass on to the next level).

All of the traders that decide to join the thread will benefit from the collective wisdom generated here, commenting on possible upcoming setups or “what went wrong” trades. Experienced traders might come in from time to time to help (at least I hope some of them do).

The way I see it, is creating something like the payed memberships some good traders have created on their sites but FREE. I know in those sites there are good mentors to guide you, but think about it, unless you ONLY join in to benefit from signals why pay a fee, join zulutrade or the mql4 community instead.

The majority of rookie traders join in to LEARN but the mentors guide you with info which in reality is free to get, there are a LOT of sites teaching about pin bars, support and resistance levels, money management, etc, … remember that they themselves always say that there is no SECRET HOLLY GRAIL strategy. So like the bike learning example at the end it’s not the info or the signals that help to make you a better trader but the EXPERIENCE of doing it, like pilots amounting flight hours on the simulator till they are ready.

So the best way to start earning some real trading hours is with FAKE money. Open up a demo account (or two/three I will explain later) with any broker, set it up with the amount of money you plan to invest when you go live (this part is extremely important in order to work on your money management and for the account to FEEL real)

So if you were patience enough to read through the all thing and like the idea stay tuned, shortly I will make another post with more info (this post it’s too big as it is).

Class dismissed !!

May the pip be with you

Anakin[/QUOTE]

Interesting , I’m new and reluctant now!!

3

Ok padawans, let’s begin.

Remember I am not the “teacher” but we have to start with something, so here is some basic stuff.

GUIDELINE RULES

  • Only Price Action (duuuh!).

  • NO Indicators. I learned this from Jhon’s thread and I believe he’s right. (I avoid them like the plague, they are REACTORS meaning that they react on the market movement, since none of them are 100% accurate, you begin to use more and more, by the time you are done the candle bars are just tiny red and green dots, and since so many rules come for each indicator it’s impossible to analyze many pairs. When Ian Malcom comes up with some indicator based on the Newton Method for non-linear equations to predict chaos environments let me know, until then NO indicators).

  • We will be ROOKIES until we get 3 consecutive profitable months on our demo accounts. (At the end of each month feel free to share a print of your’s account profit/loss).

  • Setups are basically the ones described by James16 or most PA traders. You can download this summary I found, if you have a better one please share it. For the time being I am on the watch of pin bars, mainly because those are ones that I fully understand the other ones are kind of blurry still. If any of you have info to better understand them, please share it also.
    Poster.pdf (1.32 MB)

  • BE REALLY, REALLY, REALLY PICKY ABOUT THE TRADES WE ENTER - courtesy of James16 also. (On this particular thing I am hoping that we can all contribute to make good decisions).

  • Pairs, ALMOST EVERY ONE IS WELCOME except maybe for gold, silver, goodies and some really estrange ones like the one I saw once, USD/MXN dollar vs mexican peso, all the bars had highs and lows as far as the edge of the screen and tiny bodies, it was like forex twilight zone. The main reason to have a lot of pairs is that if you are going to be picky about your entries, you got to have a big basket of options to chose from, otherwise you will start to blend the rules of entry and start looking with “pretty eyes” to any new candle as a potential entry point. Also on my many years of experience as a looser trader :slight_smile: I have found out that there is no such thing as “get to know your pair, feel it and embrace it”, I am sure that if you show a row of label less pictures of the market from different pairs to one of this PAIR lovers traders, they would never pick the right one, that they supposedly know so well.

For the time being I am currently watching (without any order in particular):
EURJPY, EURUSD, GBPUSD, USDJPY, USDCHF, GBPJPY, EURCHF, AUDUSD, USDCAD, NZDUSD, EURGBP, EURAUD.

Why those? As I researched this pairs hold the big majority of trading market, a.k.a. the most used ones, that’s all. I treat each pair in the same way, no attachments or predilections.

  • Time Frame: D1 always. I occasionally look at W1, but more out of curiosity than any other thing.

  • As any PA trader I begin my week drawing Support and Resistance lines, I zoom out as far 2 years, draw the lines I think will be helpful, zoom in a little and draw more lines, zoom one last time and draw more recent lines. It’s amazing how support lines from 2010 some times look relevant at today’s market. Please lets do this FIRST before we turn our eyes to look for candles, because if we look a candle that we LIKE but has no levels we try to FORCE them on the chart, invalidating the idea of good pin bars at supporting levels in the first place.

If you don’t know much about S&R, you can find this video as a good starting point (it helped me). And be sure that after just couple of days you will get hang of it (if you haven’t already).
Search on youtube for the video: “EYfXyFT6lag” (I cant post links)

  • When I find an entry point I pleased with, before I enter it, I decide my SL and my TP, SL based on the size of the nose of the pin bar, and TP based on the nearest S&R relevant level (PREVIOUSLY DRAWN). The SL and TP ratio should be 1:3, not mathematically perfect but more or less. I found this to be helpful against one of the old time mortal enemies: The evil “PANIC CLOSE”. Back in the scalping days I usually closed trades out of panic, because I was afraid of losing what I have already earned, dropping out of the trade too early or closing trades the moment they started to go the wrong way very rapidly, thus I would close the trade at a big low/high, only to see the price retract. GRRRR!. These days I never ever EVER move the SL farther away, I do however trail stop and I think that I would move farther the TP if it became necessary, but that is still theory. I haven’t had the chance of such a great trade… but we will :slight_smile:

Anyway, knowing beforehand how much I expect to win or lose helps not to PANIC CLOSE the trade, and weather you win or lose take it like a man … or a woman.

  • LOTS SIZE. This will depend on your money management view. But think of it this way. If you are willing to risk 20 dollars which might be 1% or 2% or 3% or whatever% of your account, divide those 20 bucks by the 500 pips you have already calculated previously as the SL of the trade (if 500 pips seems to much, its because you haven’t seen those daily pin bars, they have really big noses), so 20/500 = 0.04. That’s your lot size. Since this kind of decisions must be made on every trade it is important that your demo account resembles your real account. In those demo accounts with 100,000.00 USD, lot size does not matter, you concentrate on piping, and when the real account with only 500.00 comes up and the “pupu hits the fan”, is when you think about real money management and correct lot sizes. Its better to make this a part of every trade from the beginning.

  • Monthly/Weekly Target Profits. I don’t used them because If I am over my quota, why missing on profitable opportunities that may don’t come up next week/month, remember we are going to be very picky about our trades, so a good one can’t be miss. In the other hand if you are bellow the quota you may face another mortal enemy Overtrading, in order to fulfill the quota. Anyway is really up to you.

  • LOTS and TRADE MANAGEMENT. Well in this part is where I find my self more mmm… lost. I came up with the following idea, given it a lot of thought but at the end, only after a lot of practice and experience I will know if is any good.

  • When I find an entry point I pleased with I open 4 lots at the same time.
  • I set for the four of them the agreed SL. (at the end of pin bar nose or a very near relevant S&R)
  • I set the agrred TP divide it by four and modify my orders according to: 25%, 50%, 75% and 100% of expected TP.

I do this for the trailing stop plan I thought of (maybe its not that unique, or maybe its just dumb, i can’t find much info about this, most guru traders either don’t explain it or explain it vaguely)

After a few analysis of “messing around trades” I have been doing or reviewing while learning PA, I found that a bunch of the good setups at least get to the 25% of the expected big profit. At this point the first lot will close itself with some profit. Then, I take that profit divide it by 3 and use this profit money as SL for the 3 remaining trades in order to break even if the trade fully reverses, but giving it also a little breathing room.

Also if the 2nd trade hits the 50% TP and gets closed, I trail stop the 2 remaining trades to a 15%-20%. At this point its all about winning big. You have secured good profits and you can still ride the trade.

I hasn’t happened to me yet (in a few try outs my trades have only hit 1 and 2 TP’s), but if it hits 75% TP. I would move SL of 4th trade to a 55%-60% of original TP and wait and see if I can move the 4th TP target farther trail stopping on the way, this would be like trade heaven.

I know this sounds complicated, risky and goes against a lot of advice given about keeping it simple. I came up with it because I feel it’s a good way to build yourself a “safety net” under your trade.

The other simple way its to just open 1 trade and vaguely monitor that one setting a lower TP (only 60% of original TP which I believe it’s quite likely, of course given a good entry point), and literally SET and FORGET.

Remember that I mentioned that you should open more than one demo accounts, Its for this part, TRADE MANAGEMENT in this way you can try different management scenarios with the SAME TRADES and check out and the end of the month which got you more profit or less work/stress with similar profits.

I got one demo in which I open 4 positions of 0.01 lots size each and play this all scheme, and another demo account in which I do the same trade but with only one position of 0.04 lot size, lower TP and set and forget.

Ok, that’s it for now.

Please remember that this are just guidelines, that the idea its for all who join to learn and grow, you can have BETTER ideas, so just share them and back them up with some reasons.

In the next post I will be sharing the first trade I just made a few minutes ago while witting this (on 2 fresh new demo accounts for the purpose of this “classroom”).

May the pip be with you.

Anakin

4

Here is the BUY trade I took on EURJPY a few minutes ago, I just mentioned:

It had a text book pin bar, good pre-drawn S&R. I opened 4 positions of 0.01 with 25%, 50% 75% and 100% TP, and SL at lower S&R near the end of the nose. Just like the guidelines. I also took the trade on the demo account#2 with only one position of 0.04. Lets see how it plays out. I will keep you posted.

EURJPY-2013-10-03.jpg700×247 22 KB

May the pip be with you

Anakin

5

132.60 is a big resistance. Be careful.

6

Oh dear, I am seeing that now, the prize retracted a little. Y need to improve my S&R skills.
Thanks

7

You are welcome.

Price Action wise, you could short EJ on H4, there was a bearish engulfing bar. But you watch only D1, right?

8

Well yeah, I like monitoring the trades on daily bases every morning and then try to “forget” until next day, concentrating on my “paying” job :slight_smile: otherwise I keep staring at the charts for hours. It’s like my daughters on disney jr.

9

I see. But the bin bar on EJ yesterday wasn’t a good one. It didn’t retrace from a critical level and the shape didn’t promise any bullish move. I am not interested in Price Action trading based on candle bar formations but there are many posts on Johnathan’s thread explaining this kind of false pinbars.

10

Thanks a lot, this kind of input is why I am open this thread :slight_smile:
I will look for more info about it.

11

How about eurgbp is touching the resistance level

12

Are you taking about a different TF than D1?

On the D1 time frame EURGBP has the following chart:

A couple of days back had a bearish pinbar, but it looked like a fake one to me because it was at a really low level already, it did not made any sense to me for the price to go down again.

Right now I don’t know what to make of what’s going on, maybe (it looks like) on a few days it will go down hard, we will be looking for setups then.

13

[QUOTE=“Anakin;545358”]

Are you taking about a different TF than D1?

On the D1 time frame EURGBP has the following chart:
<img src=“301 Moved Permanently”/>

A couple of days back had a bearish pinbar, but it looked like a fake one to me because it was at a really low level already, it did not made any sense to me for the price to go down again.

Right now I don’t know what to make of what’s going on, maybe (it looks like) on a few days it will go down hard, we will be looking for setups then.[/QUOTE]

If you zoom In on a daily chart again you will see the price is testing the resistance that was previously a strong support, fundamentally the pound is strong than euro

14

On the eurgbp weekly you can see clearly that the pair is testing resistance as Mhabib pointed out. I took a short on it @ .8427 and T/P at .8385. Not looking for to much because i want to make sure that i am out before the week end. I do not like to leave anything over the week-end, even though i used the daily T/F .

15

Could you please elaborate on this? Is it a trade management plan you use?

16

Hello Amigos, as metin said this EURJPY.D1 WAS a false pin bar we can see on the chart bellow how its going down, and I don’t see any pattern or S&R that can help this trade (then again I am not very good at this yet).


I would like to hear some suggestions (please explain WHY would you do it, so we all can learn about it).

  1. Let it be and maybe hit the SL and deal with it.
  2. Close it now, losing only 70% of the total original SL.
  3. Take chances and wait for a “gap” miracle over the weekend.
  4. Or … [place your idea here]

Another thing:

metin: Could you help me by explaining this a little further, maybe some graphs or maybe links to the right forum (I searched a lot yesterday, but I could not find it)

May the pip be with you

Anakin

17

Hi, due to the “avalanche” of responses … I tried to figure this one out by myself.

I did an analysis of trends waves and squared the SR zone more graphically, the pin bar was in the [kind of right] zone and it does look like a turning point from the trend wave thingy. I am not 100% sure (maybe 65% sure about this) but I decided to go on with the trade.

EURJPY-2013-10-04-D1.2.jpg700×425 31 KB

If there is some absurd stuff drawn in there, please tell me so.

Well see you on monday.

Anakin

18

Is gbpusd bouncing up

19

Hello fellow traders, well my trade on EURJPY, did got burned yesterday night … live and learn.

On the other hand mhabib, maybe right, it really looks like GBPUSD is bouncing up from a small SR of a few days back. But if you look GBPUSD on the weekly chart it’s bouncing DOWN instead, from a big SR of december 2012. So this bounce up it might be good for a quick trade only.

At the moment in the D1 chart, I don’t see a candle formation that will indicate me a big bounce up anyway or an entry point (maybe in lesser TF). But … in fact the W1-GBPUSD bounce looks kind of a tweezer tops for a really big drop. I will be in the look out for that.

The quick view of various pairs, does not look promising for trading today. I let you know if anything comes up.
Or if any of you are seeing any good possible trade, that I am missing. Post it.

Anakin

20

I just saw a very good possible BUY trade on USDCHF on D1, nice pin forming with the final end of its nose touching a SR. There is also “confirmation” from a pin bar created last week on the W1 chart. I don’t like that it seems to be on a small downtrend thought.

What you guys think?