Im completely overwhelmed by the price action mechanism. i have taken a few trades based on the rules of hammer, harami and engulfing candlestick patterns. they all worked against me. now im wondering if i actually understand what its all about, or is it that it operates on a probability of 50/50. how can i effectively trade with price action, which other indicators
can i use to confirm my candlesticks before entering a trade
Hi there Prince. There are quite a number of Threads that are run by PA experts here. They are excellent sources of Information and on PA. Please check them out
That should not be! Have you completed learning price action? There is a situation where you need to be patience despite of seeing a signal from the candle stick! I think you are taking decisions at that time!
See the picture and the green zone, if you take decision before seeing the bearish candle that will be wrong!
While I will echo the sentiment that is expressed that there are a few in-depth threads on the subject already which you should definitely checkout… let me address what may be a couple specifics for you.
Confirmation is typically determined by seeing an actual break in the direction. You enter not on the signal candlestick, but you want to see price moving in the respective direction after that. Traders will often place a limit order like five or so pips above the top (or bottom… depending on if you are shorting or long) to trigger off when price breaks the plane.
You also want to make sure you are only trading signals that are off of clear S/R levels, or if you are trend trading, signals that have pulled back and then had a reversal pattern display. If the price does not pull back then it is not a very strong signal. But if you’re trading off of a level of S/R as depicted in the picture the person above me posted; then you wait for price to break in your direction. That would be range trading versus trend trading.
ignore them, 90% of traders follow that nonsence and loose money. When you buy a car they make it all shiny so you buy it, forget the bling see the big picture. Ignore everything you have learned then you can become one of the 10%.
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Clear S/R does that exist? do you mean a cluster of candles that formed a support or resistance? forget that stuff everyone does that.
Being overwhelmed is a natural reaction to trying to solve a complex problem. Price action is a large body of knowledge with many opinions. While we could debate the merits in this thread of which method is best, we should recognize many people use these methods. That means we should be as educated as possible on them because other people are using these methods. BP has some excellent threads here on price action. Money management is another important aspect to trading. You mentioned wondering if this was a 50/50 chance outcome. I don’t believe so but even if we did assume that for a moment, you can still make money at that level. Search for a thread here titled something like, “A real trading edge quantified, stop loss management” by MeiHau. There he takes a random 50/50 entry and shows how it can be profitable. There are other traders here who are only right 30% of the time and still make money. Start working through the BP school as well. It is excellent. Best of luck.
You should really attach some charts with examples of your trades, then others will be able to advise you.
As already mentioned you should trade the break of the high or low of the signal candle.
Harami is just an indication of a trend change, it could lead to a reversal or a period of ranging. IMO it is best to wait for the next candle to confirm that the market direction has changed and if that is a strong candle, you can enter on the break of the mother candle.
Hammer also needs confirmation with the following candle. But if the hammer is also a strong pin bar with a long lower shadow and small body, it can be traded on the break of the high.
All candle stick patterns are usually best traded in a strong trend when appearing at what could be the end of a counter-trend retracement, so in the direction of the main trend.
The higher the time-frame the more reliable the signals
What have you been reading/following for your price action training?
hello Prince,
I back with some more information:
Reading price action is all about the context in which it occurs. For example in a price consolidation, we can only take signals off regional edges, marked as zones.
You must learn not only how the setups look, but also when to take or ignore these.
grix
OBV indicator?
I am a newbie here. trying to learn Candlesticks and price action chart patterns. Can you tell me how do i identify that after this green zone, price will be bearish? I think your assistance can help me to learn it properly.
@Tanvirbd: If you look at his graphic with all the candles in the green zone; you’ll note that towards the right, one candlestick completely falls out and closes well beyond the former point of Support. Between the spike up and the spike down, you have about nine candlesticks that are in a pretty tight consolidation pattern with a pretty clear ceiling and floor to them.
Now, it is likely that price wants to move down if we look at the four candles before the actual breakout. Note how three of the four candlesticks have long wicks on the top? That means price has tried to ascend but been rejected. Multiple tests have failed- so it is likely price isn’t going to move that way.
But we still need to wait that price is ready to cut loose and go. We don’t actually enter into a trade until that candlestick that drops and closes below the support level. It is very important to wait until it moves cleanly past the support level and closes otherwise there is a decent probability it may be a false break out and retrace back up to the consolidation level. My personal rule of thumb on daily charts is that it has to close at least 50 pips past the point of S/R.
This is a clear breakout after that candlestick has closed. Now, I would enter a trade and put my Stop just behind the former Support level because it is very likely to become a Resistance level now.
If I had placed a trade before getting that confirmation candle of which way it was going to go; I’m pretty much just guessing. Consolidations can go either way but they often have a slightly higher chance to stick with trend.
Does this clarify things more?
It’s is all in the context of the chart and where the confirmation ncandle occurred.
- Did the candle occur at the beginning of a move or during a long move?
- Did the candle occur in a box range or was it a trending market?
- Did the candle you took actually close or is it still open?
- Was the candle at support or a resistance level?
- Did you level yourself a nice profit margin between the next support and resistance level , because more then likely that is where price will reverse again on you so you’ll want to give your trade a nice risk reward level or don’t take it, you have to remember these markets have been here for many years and they aren’t going away move on and find a better set-up if the set-up your looking at now doesn’t have proper risk=reward ratio.
Hello…
Can you tell me which is the bearish candle??
I’m always gone wrong if i trade using technical analysis…
It so difficult to be analyze…
Many traders think that price action is about hammers and engulfing candles etc etc, when in actual fact this is the most basic element of price action.
Price action is about a complete understanding of price movements on any time frame. Only when you have this complete understanding can you call yourself a price action trader.
Hi
Any candle that is opened below the open of the previous candle and closed below the close of the previous candle is a bearish candle. I am a fan of price action and we discuss our charts at the price action thread here in this forum. Join the price action thread with me…
Sorry to reply late tanvirbd
I hope you got the answer from stonecoldmichael. However, I follow a price action thread here in this forum and share my charts with others. You are welcome to join that thread. The expert is Chris Carpe there to help us getting right…
Hi there guys,
Do you think it would be a good idea to use Fibonacci so that you can have a better picture, or that wouldnt be PA at all?
I am personally a fan of price action and do not use fib.