1D charts - Trend channels & Price Action

Hi all,

Just making a thread here to continue from another thread where a few of us have been discussing the use of trend channels and price action to swing trade the dialy charts. I’m not posting up a new system here as all these methods are widely used and there’s nothing new or revolutionary in this method. It’s not really a ‘system’ as such either, more of a way of learning how to determine what price is doing and headed based on looking at the charts.

Over in the other thread some of us have moved from using MA crossovers and relying on other tecnnical signals to looking at price action and using certain candle formations for entry confirmation. This post is really just to beak away from the other thread which is about an indicator but gone off on different tangents and got quite confusing.

If you are interested in price action and pivot zones for swing trading the daily charts then please feel free to discuss your trading methods here. I’ll start with mine which is very much work in progress. My goal is to trade profitable without having to take excessive risks, spend lots of time in front of the screen, be awake at antisocial hours, get stressed out with split second timings etc. My trading plan ‘mission statement’ is as follows:

[B]“To consistently capture substantial profits from the FX markets with minimal time spent trading, minimal risk and minimal stress” [/B]

So - to achieve the above…

The [B]indicators[/B] I’m currently using are:

[B]NONE :D[/B]

For an [B]entry set up[/B] I’ll look for a long trade if the price is trending up and it’s just bounced off a lower trend line/Fib level/S/R/pivot - preferably a confluence of more than one on a corrective move, ‘buy the dips’

A short trade is the reverse – the price is trending down and the price has bounced off the upper trend line on a corrective move, ‘sell the rallies’

For entry I now wait for confirmation. I want to see that the move is confirmed before jumping in, that means missing the beginning but I prefer a confirmed move to a bad trade

[B]The entry triggers[/B] I now use are specific candle formations:

Bearish Engulfing candle - BEEC
Bullish engulfing candle - BUEC
Hanging man
Pin bar
shooting star

If the price has bounced off the upper trend line for a short trade I want to see a red bearish candle that is one of the above, the reverse for a long trade. Using price action instead of indicators I find far more interesting and also profitable. It also stands the test of time. It’s a massive subject that I’m only starting to learn fully.

For hammers/shooting stars/hanging men it’s not so important whether they are are bullish or bearish.

For inside bars the more there are the better

[B]Support/Resistance[/B]

It’s essential to be aware of important S/R levels to prevent trading into them and picking the better set ups [B]that have just bounced off of them.[/B]

I will draw S/R lines on the weekly as well as the daily chart and use those as major levels.

[B]Fibs[/B]

Fib levels I like to draw when zoomed right out, sometimes I’ll draw more than one set of fibs if there is more than 1 recent extreme swing high/low

[B]Confluence[/B]

Trend lines, S/R levels and fib levels can sometimes all come together in a [I][B]confluence[/B][/I] which can indicate very strong pivot levels. The more the better

[B]So in summary[/B] - trade in the direction of the trend, wait for PA candles for entry triggers that occur at S/R, trend lines, fib levels and preferably a confluence of as many of these as possible.

[B]Money management[/B] – 2% always, the less risk the better. S/L x pip value = risk. If risk > 2% of account then no trade

[B]Stop losses[/B] – a few pips (about 10 or so) above/below the most recent S/R or pivit, but far away enough that it doesn’t get triggered by stop hunters.

[B]Profit targets[/B] – The next trouble area level be it a S/R line, fib ret or confluence. basically where you can see that price has stalled recently.

Currently I am only using 1 profit target per trade and closing the entire position at the first trouble area. This makes for a lot of 40-50-60-70-80 pip trades. In time I will add more T/P levels and add to positions and bank profits along the way of large trending moves.

R:R - The signal could be a huge hammer/shooting star and the next pivot level only 1/3 of the length of the PA candle away. Would I pass on this trade because of R:R? - Would you?

Those are my money management, profit/loss, risk/reward rules. If a safe stop is above 2% - no trade.

When my account is large enough so that I can take out more than 1 micro lot per trade I’ll put 2 positions and go for more pips with the second position using trailing stops etc.

[B]Trade management[/B]

When the price reaches + 40 pips move the stop to B/E. Never let a winner turn into a loser and protect your capital at all time

I’d love to hear some opinions of more experienced traders who use similar methods.

30 Likes

Read “Price Action Hero”, you’ll get some good ideas along similar lines that you discuss.

do u scan all pairs with this method or only a selected few ?

you mentioned the SL will be near the trendline, but the trendline will be sloping up or down. initial SL can be known based on the current low or high of the trendline, but thus could move up/down tomorrow, so you keep moving your SL everyday after entry ?

after the channel, stochs suggest the trade, you will wait for the confirmation from

Bearish Engulfing candle - BEEC
Bullish engulfing candle - BUEC
Hanging man
Pin bar
shooting star

how long will you wait ? what happens when you get the confirmation, your MM rules may rule out the trade since some juice is already taken out.

do you consider sunday bar also for this ?

do u scan all pairs with this method or only a selected few ?

All pairs at the moment

you mentioned the SL will be near the trendline, but the trendline will be sloping up or down. initial SL can be known based on the current low or high of the trendline, but thus could move up/down tomorrow, so you keep moving your SL everyday after entry ?

I put it below the trend line at the time I put on the trade and don’t move it

how long will you wait ? what happens when you get the confirmation, your MM rules may rule out the trade since some juice is already taken out.

I wait until the previous day’s candle is closed. if MM means no trade - then no trade.

do you consider sunday bar also for this ?

Sunday bar?

USD/CAD hit SL for -40 pips. Although i still think that this a viable trade. Maybe the SL was too tight. I am thinking of re entering and maybe using a 75 TS, any thoughts?

I’m watching it as well - that was an expensive (1 maybe 2 beers) lesson on waiting for confirmation. I keep reading about this ‘big move’ that’s due in USD/CAD. Looks like there’s a bit of a battle going on at the 1.02 level, if it breaks to the downside then could be a big move down, or if it bounces back up for a triple bottom…

I won’t go either way until I see a confirmation candle though as I like beer and I’ve given away too many this week.

Same goes for AUD/USD - strong confirmation needed, as they like beer more than I do!

No idea what heppened to those JPY trades :rolleyes:

USD/CAD buy
AUD/JPY sell
CHF/JPY sell
EUR/JPY sell
NZD/JPY sell

Closest to confirmation I can see is NZD/JPY. If today’s candle closes as a BEEC bearish engulfing I might jump in. BUt it will have to be bigger than it is now as very small/spinning top candles I don’t really think count as decisive PA candles. I may be wrong?

Chart attached.

I’ve also switched back to demo as I’m going to learn Strat’s method on a demo and I’ve seen too many losers this last week. Also if NZD/JPY does look like a good trade my MM rules will invalidate it due to my account size :mad: so I’ll fund it up to 1K over the next few months.



decided to go long again on USD/CAD. Using a 75 pip sl

been reading strats method, i think that this sort of style is what i am looking for

just had a look at nzd/jpy and i think you are correct. candle is forming nicely, looks like one to enter in the morning if nothing changes

i am already in both

USDCAD long +31

NJDJPY short +3

USD/CAD is shaping up nicely. :smiley:

Just been doing the excercise where you draw major S/R lines on the weekly line chart. USD/CAD is at a major line and should hopefully go one way or the other.

I’ve put in an entry order for .0325 on USD/CAD.

Still out of USD/CAD, doesn’t seem to want to go in either direction this week.

I’ve reviewed the JPY trades that went pear shaped and can see 2 reasons why that happened now.

Using the method of drawing major S/R lines on the weekly chart using the line graph I can see that where I entered EUR/JPY it was just above a major support level. I’ve attached my weekly chart with some rough (probably not that accurate) S/R levels drawn on the line chart.

Now looking at the second attachment you can see the trade entry signal.
The trend channel trade I entered looked good with a bounce off the upper line for a short trade in a downward channel. The entry signal was a BEEC that looked pretty solid, stochastic crossing over and heading down out of overbought territory - textbook trade right?

It was until it hit the major support level at around 121.79 (probably inaccurate but close enough ballpark) and headed straight back up.

So in retrospect I should have either:

  1. Banked the 100 or so pips at the support level - or
  2. Never even entered based on risk/reward rules of 1:2

Also this news is probably what triggered the reversal:

Yen Drops to 2-Week Low as Kan Says Intervention Is an Option

So now those bad JPY trades make perfect sense. What I’m taking from this is:

[ol]
[li]Do not double (triple in this case) up on positions with the same currency
[/li][li]Identify support and resistance levels on the weekly line chart
[/li][li]Draw weekly pivot points as well
[/li][li]Don’t trade into major S/R levels!
[/li][/ol]

Those JPY losses are now wins in terms of eduction and a few beers well spent :slight_smile:



1 Like

Lookng back at the EUR/JPY trade - Wednesday’s bullish engulfing (that stopped us all out of our short trades) is actually more like an entry signal to go long all the way up to 129.66.

EDIT - Looking again at the 1D chart in previous post the price seems to be making a reverse head & shoulders around the support level. We like no?

I’m in on the demo :wink:

2 positions of 0.01 (1k account)

entry 124.24
S/L - 123.50
T/P1 - 125.72 (risk x 2)
T/P2 - undecided

It’s Friday - that means beers, let’s make a few! :smiley:

USDCAD - :eek: :eek:

Very glad I waited for confirmation on that one!

Looks like it’s breaking out to the downside. Could just be a news reaction though. If this is a real break to the downside will it go all the way to 1.000?

my SL triggered for this. was in +30 pips, but it went down that major support line. now its even more bleeding

Its always best to wait, I was wondering why the other entered yesterday before the daily bar was closed. On the eurjpy entry you took, it seems you entered after the engulfing bearish pattern on the daily as shown on your chart, but the thing is the bar left of that was a Sunday candle hence it would be a false signal, seen that we only have 2 or so hrs of data within most Sunday candles. Oh, candle formations is apart of my strategy on daily and weekly charts.

EJ stalled at the extension creating all sorts of formations signaling a possible retrace(short term). You mention Wednesday engulfing bar, this was another sign of a possible rally seen that it forms after a retrace.


hi ddinnov,

how did you arrive at the stoploss 123.50 ?

Thanks for your input! I’ve been following your trade ideas as well. :slight_smile:

Yeah - I only saw this when I looked at the support line right below it which I wasn’t looking at before. It makes perfect sense now, it’s like someone turned on the lights - and it’s up >125.00 already

That’s a bit of an experiment of making marginally tighter stops, no particular method yet - work in progress. I’m thinking of putting it around the high/low of the previous candle - or recent swing high/low. Really will be trade dependant.

Set an entry limit order at 1.6080 which got triggered yesterday evening. This was based on the double pins/swing low on the daily chart.

This morning I contacted my broker from work to move the S/L to 1.6110 for a risk free trade + 30 pips. T/P is @ 1.6400