Steo great question, this is one of the toughest parts of trading. Anyone can get into a winning trade but plenty of us can end up turning it into a loser as well!
Let me post an example. In this case the trade we are taking is a counter trend trade but just ignore that for now and look at the example of how we might manage this trade.
So lets say we have decided to take this Pin Bar on the AUD/USD. I have pulled back the chart to show the range we might speculate price will travel between. I have simply picked out 2 major zones where price has found support & Resistence.
Now without tooting his horn too much this is where I have found Johnathon’s guidance and course invaluable. And that is to start becoming away of other minor levels where price may struggle and turn around on us.
Taking a closer look at the chart I can see the first point where price may struggle.
I can do one of a couple of things. I can either take some profit and move to Break Even or I can simply move to Break Even and let the trade play out. Either way I have protected my capital which is something that Johnathon teaches first and foremost.
It is a fine line between giving a trade room to breath and knowing/understanding where a trade might struggle and turn against us. Johnathon may have more to add (will probably have more to add and say it better than me!) But I hope my example gives you an idea of how we can manage our trades more effectively.
this is where all the skill and knowledge come in. Even a monkey can place a winning trade but only a skiiled trader can manege their trade and make money consistently. I don’t want to go into it too much in here as:
1: It can be quite difficult to learn and people still don’t quite have basics down yet,
2: I would prefer to help people first learn the basics of how to find the right trades and what areas they should trade from,
3: Not fair to my members
As Bhops said though using the price is what we can do. As I am always saying price is always telling us something and we as traders have to open our eyes to realise this.
So this trap will sound familiar to a lot of people: Trader enters trade and the trade goes onto be a nice winner. This trade hasn’t reached a risk reward that the trader wants to achieve such as 2/1 RR so they hold onto this trade. What then happens? the trade turns around and the trader watches this trade go back to become a loss and the trader gets stopped out.
The trader in the above example is left stunned, in fear mode and thinking that some sought of magic just turned the market.RUBBISH!
When we enter a trade price will go to an first area of what we is a possible stall or reversal area. I call these first support and first resistance area or FSA and FRA. When price gets to this area traders can do a few things:
Move to break even
Take full profit
Take partial profit and move remainder to BE
Do nothing
Now these first areas are everywhere. What has happened to the trader in the example above is price has gone into them being a winner and hit the first area where price will stall or reverse. These are not big support and resistance levels but rather bar highs and lows that make a small support or resistance area. The hard part for the trader is beginning to recognise these and the PA story, but the even harder thing for the new trader to do is do something when price does reach these areas.
Okay so stay with me, as I said this can be hard to learn as most people have heard of PA but not actually how to manage trades…
I am going to use a chart below as an example. In the chart below we have a pin bar. When we know we are going to enter we look now for the first supprort area. Notice how the recent bar highs and lows make this area up for us? What happens then? Price goes straight to it and respects it. Now for reading the PA story. Notice the last bar on the chart. When price broke above this FSA we know old resistance should hold as new support and look exactly where the bottom of the last bar went to… Yep that’s right, nearly to the pip to this same area. We could use this knowledge by knowing once price broke above this level we could move our stop up knowing that price would have to break this new support to go lower again.
I hope this helps you out. I am going to stick to helping people in here work out the basics before moving onto this subject. there is so much else to learn about first about finding and entering setups before people need to worry about trade management.
hi bhops, thanks for the lesson. i actually had difficulty understanding the FSA/RA. i realized i been having a hard time identifying these areas so keep taking positions but w/o considering these areas. appreciate your kind help
anyway, the SL shd b just behind the tail of the PB right?
hi johnathon, thanks a million for your explanation given that you have your own students to take care of first. I am one of those who stuck too closely to the RR ratio that keep holding on to the trades and not see the FSA/RA to protect the trade.
so if the FSA/RA doesn’t give a reasonable RR (1:1) we should move on?
Long answer: If I see a trade on a daily time frame that has a stop of 100 pips and I can see the first support area is only 30 pips away but I know this setup is from a very solid area and the price action is very large and obvious I will take it.
I know the chances of price getting to the first area are extremely high. So I enter the trade and when price moves the 30 pips I move to break even and have a free trade! Forget about the risk reward.
This whole risk reward myth is ruining traders accounts all over the world! Traders believe they have to reach some random amount they heard of someone else such as 2/1 RR or 3/1 RR just because someone else said so. People don’t question anything! People just say " Someone said to be a pro I need to average 3/1 risk reward on my trades" yep and ever since that same trader ha been broke!
Risk Reward is only working out half of the equation. When working out what risk reward we need to average as traders we need to take into account what our average winning rate is. For example if you winning rate is only 40% you are going to need to average much higher risk reward (RR) trades than a trader who average 80% win rate.
If you look at my profile I registered on here last year May, so I couldnt of known Johnathon
Also if you see my first post in this thread, I actually thought he was part of Nial Fullers group.
I hadnt been on babypips for some time, and to be honest didnt expect to read any really good systems, yet I come anyway and saw this thread labled PRICE ACTION, I am a huge fan of PA and have a fair knowledge of it, well thought I did. I read just a few of Johnathons posts on here and boy, he knows his stuff.
I purchased his course last week and I can HONESTLY say im very impressed!
Spongybob, I hope he’s paying you a good referral commission! Haha, joking.
If you don’t mind me asking, what is the time commitment for the training? The cost is reasonable so I wouldn’t object to it. Training worth it for a newb or should I get more under me before I consider it?
Seriously though, I managed to go through it roughly, I have an understanding of PA and S/R so its easier for me to grasps it.
As for newbies, well I started learing forex around 3 years ago, had I started with Johnathon back then I would of saved allot on books, courses, margin calls ect ect.
One of the reasons I bought his course and not Nial Fuller that I have and still do follow on facebook, is that Johnathon put his reputation on the line by being on here. I could of come back on here and told the thousands of people reading here that its a load of RUBBISH
You too could purchase it and then come here and tell me im talking RUBBISH.
This is the bottom line, if you really want to take forex seriously, you wont be sorry joining.
Look it’s pretty simple, Johnathon being on here is good exposure for him and his course. Of course it is. He puts his reputation on the line and for people interested in Price Action it is a great way to sample his methodology and teaching principles without putting any money down.
Naturally he is going to hold certain stuff back for his paying members to be fair to them. There are more advanced techniques in the course and a whole lot around stop setting and money management that is so crucial to trading, and which frankly speaking, a lot of Price Action courses avoid like the plague.
I know he is also in the process of putting together a new section devoted to trading psychology (also much neglected in many trading courses.)
It goes without saying that you also have access to a guy that really does trade for a living which is the kind of access/mentoring that a lot of people are after.
However on the flip side there is tons of free advice he has given away on this thread and I know he is determined to contune providing this advice for Price Action traders here for as long as it’s wanted.
Personally I think it is a win/win for everyone.
If you want a good basic grounding on PA trading for no dollars down you can continue to follow this thread and bounce ideas off of Johnathon.
If you’d like to take it to the next level and go to the more ‘advanced’ stage then obviously you’ll have to pay to get the course.
I think that is a pretty fair compromise, but what do I know? :18:
And no Boston he doesn’t promise to make anyone super rich. That will all be up to you my friend, LOL.
no I will not stop giving info away for free and talking about what I love. Yes I will hold certain things back such as how traders should manage their trades but at the end of the day it is not all about MONEY! This is not the only forum I talk on or am a contributor. I have a few blogs around, do professional contribution for DailyForex.com and also in the process of starting a fund for the public.
There is NO big secret! Also I can not make any one rich! Full stop! You show me someone who claims these two things and I will show you someone that should be put in Jail!
I am going to do a video later if I get time on two trades this week both on daily: GBPCAD and AUDCHF and also the levels to watch for the coming week. I will post in here an on site when I get time.
good to see you posting. Two days ago when we saw that rejection candle I thought the chance for a decent pullback was looking likely. This Pin however has failed to break lower and price is once again testing the recent highs.
The problem price will have trading back lower is all the traffic it will encounter on its way back down.
Now what is important is the box that price is stuck in at the moment. Notice how we have had rejection candles in this box both ways that touch the top and bottom of the box almost to the pip? It is to early to say anything until we have a clear break of this box. Once this happens we will normally break out hard and fast and then price will retrace and test again. It is here will will get our entry.
It is much easier to explain on a chart. So if price break the box higher we would look for price to rotate back lower and for us to get long and if it breaks lower for price to come back up and test lows to get short. make sense?
