Forex Price Action

Forex_School_Online · February 26, 2012, 6:14am

Hey Ang,

nope just me and Bhops. Hey thanks for reminding me I was meaning to reply to spongy trade also so thanks!

Johnathon

Forex_School_Online · February 26, 2012, 6:38am

Hey all just going through the thread quickly. It looks like some people have some pre conceived ideas they have gained from other places such as risk reward etc that we can start discussing this week whilst waiting for Price Action setups. Some of these ideas are myths and are only telling one side of the story.

I will just say this though and you will hear me repeat it over and over:

There are literally thousands of Price Action traders out there and so few who actually make money consistently. That’s the truth. One of the main differences is in the trades they select to play. It all comes back to just how selective you are in your trade selection. Pin bars, 2br’s, EB’s and IB’s form everyday on all the time fames yet I still only trade anywhere from 4-10 setups per month. I also trade small time frames. The trader that can sit on their hands whilst all the average, small and rubbish setups pass and save their money for the big and obvious price action at clear levels is the trader who will make consistent gains.

Simply think of it this way: When putting on a trade we must risk our money to see if that trade will work out in out favour. Why would you ever risk money on something that you don’t have a large edge your way? You must learn to sit and wait for the obvious price action to form that shows you have a large edge and then jump aboard. Small pins and IB’s can be addictive and like gambling but in the end will all end the same over time and that is in losses. Yes traders do get away with rubbish setups sometime but over time they do not as overtime the edge that they have in the market is no where near as good as the trader who only trades when the odds are stacked in their favour.

Talk soon and safe trading this week,

Johnathon

Ang101 · February 26, 2012, 6:49am

Makes sence! So was Spongybobs trade on GBP too risky?

Forex_School_Online:

Hey all just going through the thread quickly. It looks like some people have some pre conceived ideas they have gained from other places such as risk reward etc that we can start discussing this week whilst waiting for Price Action setups. Some of these ideas are myths and are only telling one side of the story.

I will just say this though and you will hear me repeat it over and over:

There are literally thousands of Price Action traders out there and so few who actually make money consistently. That’s the truth. One of the main differences is in the trades they select to play. It all comes back to just how selective you are in your trade selection. Pin bars, 2br’s, EB’s and IB’s form everyday on all the time fames yet I still only trade anywhere from 4-10 setups per month. I also trade small time frames. The trader that can sit on their hands whilst all the average, small and rubbish setups pass and save their money for the big and obvious price action at clear levels is the trader who will make consistent gains.

Simply think of it this way: When putting on a trade we must risk our money to see if that trade will work out in out favour. Why would you ever risk money on something that you don’t have a large edge your way? You must learn to sit and wait for the obvious price action to form that shows you have a large edge and then jump aboard. Small pins and IB’s can be addictive and like gambling but in the end will all end the same over time and that is in losses. Yes traders do get away with rubbish setups sometime but over time they do not as overtime the edge that they have in the market is no where near as good as the trader who only trades when the odds are stacked in their favour.

Talk soon and safe trading this week,

Johnathon

Forex_School_Online · February 26, 2012, 6:55am

Hey, no I wasn’t referring to anyone trade. Just a general thought going into this trading week tomoz! If we expect to make money where other’s don’t we need to do something different from what the others do. So if all the others are taking average setups we have to do the opposite and only take the best!

Night,

Johnathon

Ang101 · February 26, 2012, 7:01am

Oh I see, ok thanks for that

Well I just hope you three keep posting, I know im loving it!!

jayjonbeach · February 26, 2012, 12:17pm

Forex_School_Online:

There are literally thousands of Price Action traders out there and so few who actually make money consistently. That’s the truth. One of the main differences is in the trades they select to play. It all comes back to just how selective you are in your trade selection. The trader that can sit on their hands whilst all the average, small and rubbish setups pass and save their money for the [B]big and obvious [/B]price action at clear levels is the trader who will make consistent gains.

Simply think of it this way: When putting on a trade we must risk our money to see if that trade will work out in out favour. Why would you ever risk money on something that you don’t have a [B]large[/B] edge your way? You must learn to sit and wait for the [B]obvious [/B]price action to form that shows you have a large edge and then jump aboard.

Johnathon

Nicely said Johnathon and very true.

(Emphasis mine, relating directly to H&S)

jayjonbeach · February 26, 2012, 12:21pm

No worries and definitely none taken, was just trying to help people see what is a VERY similar setup (actually its the SAME setup, just with different implications) and what I also think is equally as simple.

I guess I am forgetting that Johnathon is directing this thread mostly to fresh beginners in trading and thus wants to stick with the absolute simplest method possible only, which I whole-heartedly agree his method is, about as pure as trading gets and that is a good thing, especially for beginners, and I see you and Tom are completely new registered new users.

===

If there is anyone else in the thread, browsing the thread in the future etc that IS interested and ready to learn about a Price Action Pattern Technique such as the “Head and Shoulders”, they can always learn more about here:

Head and Shoulders Top (Reversal) - ChartSchool - StockCharts.com

I actually haven’t visited this area of the site for many many years and when grabbing the link I found this quote near the bottom of the page interesting which emphasises the important of the pattern and difference between trading just a normal support break with one of this stature (and note as I mentioned before, many of these are also [I]not[/I] important, the size, location, thing being traded, etc all play a role)

Quote: [I]“The support break indicates a new willingness to sell at lower prices. Lower prices combined with an increase in volume indicate an increase in supply. The combination can be lethal, and sometimes, there is no second chance return to the support break.”[/I]

===

Anyway Johnathon has made it clear he wants to stick to one strict method only in this thread and not entertain similar ideas so I won’t be posting anymore about this method since its his thread.

There is also nothing to really add to the method Johnathon is using, it is very simple overall (in trading terms things that are simple don’t equate directly to being “easy”, simple and easy are too different things especially in trading) and he has also done a great job outlining the method and how to trade with it.

Happy trading to you all and as Johnathon says, be safe (ALWAYS use a stop-loss, always or don’t trade)

bhops · February 26, 2012, 5:18pm

Hi guys,

I thought I would post up a couple of charts on the AUD/CHF pair and show you how I use Support & Resistance to plot my charts and plan my trades.

Firstly I have no idea how this pair is going to turn out but this is the kind of thought process I go through when I’m trying to see how I would trade a pair.

I might also add that this pair has been bullish recently and I would be looking to go short so I guess it would be considered counter trend trading which Johnathon doesn’t really advise for beginners but I thought it is worth posting up more so you can see my thought process than anything else.

Generally we consider price in an uptrend when it is making higher highs and higher lows. In this case price looks to be stalling out a little and has pushed down below the last higher low and subsequently breaking an important support zone.

This is a hint that the uptrend may be running out of steam. However being a conservative trader rather than playing the breakout I would like to see price rotate down some more before moving back up and testing to see if that former support has now become resistance. I would also need to see a BIG PA signal to consider going short.

You never know price may just be taking a breather before continuing to head long and in order to be short we need to make sure the odds are really stacked in our favor.

As I say this is more just for exercise purposes and showing you how I would plot an important zone and wait to see what price does when it gets back to that zone. More than anything I try to keep my charts as clean as possible which is something Johnathon is also really keen on.

I will try and find some more examples that are WITH the trend and areas I would be looking for pullbacks to play Price Action.

bhops · February 26, 2012, 5:28pm

OK so here is one on retrospect that is WITH the trend. Price moving nicely upward. Price gets to a relevant Resistance zone and breaks through. Price then pushes up further and rotates back down to test former Resistance now becomes Support.

Personally I would’ve liked to have seen a bigger PB but it is these push up and pullback continuation patterns that we mostly want to be trading.

Stick to these and you will win more than you lose.

Vahagn · February 26, 2012, 5:32pm

Forex_School_Online:

Hey all just going through the thread quickly. It looks like some people have some pre conceived ideas they have gained from other places such as risk reward etc that we can start discussing this week whilst waiting for Price Action setups. Some of these ideas are myths and are only telling one side of the story.

I will just say this though and you will hear me repeat it over and over:

There are literally thousands of Price Action traders out there and so few who actually make money consistently. That’s the truth. One of the main differences is in the trades they select to play. It all comes back to just how selective you are in your trade selection. Pin bars, 2br’s, EB’s and IB’s form everyday on all the time fames yet I still only trade anywhere from 4-10 setups per month. I also trade small time frames. The trader that can sit on their hands whilst all the average, small and rubbish setups pass and save their money for the big and obvious price action at clear levels is the trader who will make consistent gains.

Simply think of it this way: When putting on a trade we must risk our money to see if that trade will work out in out favour. Why would you ever risk money on something that you don’t have a large edge your way? You must learn to sit and wait for the obvious price action to form that shows you have a large edge and then jump aboard. Small pins and IB’s can be addictive and like gambling but in the end will all end the same over time and that is in losses. Yes traders do get away with rubbish setups sometime but over time they do not as overtime the edge that they have in the market is no where near as good as the trader who only trades when the odds are stacked in their favour.

Talk soon and safe trading this week,

Johnathon

Hi Johnathon,

Could you, please, clarify what are 2br’s, EB’s and IB’s !?

Thanks

bhops · February 26, 2012, 5:34pm

Hi Vahagn,

I can answer this for you if you like.

2br’s are 2 bar reversals.

EB’s are Engulfing Bars and IB’s are Inside Bars.

Cheers,

Bryce.

Vahagn · February 26, 2012, 6:00pm

Thanks bhops!

Could you post some examples of 2br, please!?

bhops · February 26, 2012, 6:09pm

I’ve attached a couple on the AUD/JPY 4 hour. These particular examples could also qualify as Bullish Engulfing Bars but they don’t always have to be engulfing bars to qualify.

Basically a 2 bar reversal pattern is 2 candles which are very similar in size. And in fact if you blended them both together they would form a Pin Bar.

In this case price has gone down and the very next candle it has moved all the way back-hence the reversal part.

Forex_School_Online · February 27, 2012, 4:23am

jayjonbeach:

No worries and definitely none taken, was just trying to help people see what is a VERY similar setup (actually its the SAME setup, just with different implications) and what I also think is equally as simple.

I guess I am forgetting that Johnathon is directing this thread mostly to fresh beginners in trading and thus wants to stick with the absolute simplest method possible only, which I whole-heartedly agree his method is, about as pure as trading gets and that is a good thing, especially for beginners, and I see you and Tom are completely new registered new users.

===

If there is anyone else in the thread, browsing the thread in the future etc that IS interested and ready to learn about a Price Action Pattern Technique such as the “Head and Shoulders”, they can always learn more about here:

Head and Shoulders Top (Reversal) - ChartSchool - StockCharts.com

I actually haven’t visited this area of the site for many many years and when grabbing the link I found this quote near the bottom of the page interesting which emphasises the important of the pattern and difference between trading just a normal support break with one of this stature (and note as I mentioned before, many of these are also [I]not[/I] important, the size, location, thing being traded, etc all play a role)

Quote: [I]“The support break indicates a new willingness to sell at lower prices. Lower prices combined with an increase in volume indicate an increase in supply. The combination can be lethal, and sometimes, there is no second chance return to the support break.”[/I]

===

Anyway Johnathon has made it clear he wants to stick to one strict method only in this thread and not entertain similar ideas so I won’t be posting anymore about this method since its his thread.

There is also nothing to really add to the method Johnathon is using, it is very simple overall (in trading terms things that are simple don’t equate directly to being “easy”, simple and easy are too different things especially in trading) and he has also done a great job outlining the method and how to trade with it.

Happy trading to you all and as Johnathon says, be safe (ALWAYS use a stop-loss, always or don’t trade)

Thanks so much Jayjonbeach,

we definitely don’t want to lose you from this thread as you clearly have a lot of knowledge of the markets and price action.

I am just trying to help people with my particular method adn whilst I know what head and shoulder and pennants etc are I don’t use these or advise others to. I do hope you possibly (as well as posting in here) start a new thread and begin outlining your method of trading using price.

Thanks again for your posts and I look forward to more of your knowledge in this thread.

Johnathon

Forex_School_Online · February 27, 2012, 4:39am

bhops:

Hi guys,

I thought I would post up a couple of charts on the AUD/CHF pair and show you how I use Support & Resistance to plot my charts and plan my trades.

Firstly I have no idea how this pair is going to turn out but this is the kind of thought process I go through when I’m trying to see how I would trade a pair.

I might also add that this pair has been bullish recently and I would be looking to go short so I guess it would be considered counter trend trading which Johnathon doesn’t really advise for beginners but I thought it is worth posting up more so you can see my thought process than anything else.

Generally we consider price in an uptrend when it is making higher highs and higher lows. In this case price looks to be stalling out a little and has pushed down below the last higher low and subsequently breaking an important support zone.

This is a hint that the uptrend may be running out of steam. However being a conservative trader rather than playing the breakout I would like to see price rotate down some more before moving back up and testing to see if that former support has now become resistance. I would also need to see a BIG PA signal to consider going short.

You never know price may just be taking a breather before continuing to head long and in order to be short we need to make sure the odds are really stacked in our favor.

As I say this is more just for exercise purposes and showing you how I would plot an important zone and wait to see what price does when it gets back to that zone. More than anything I try to keep my charts as clean as possible which is something Johnathon is also really keen on.

I will try and find some more examples that are WITH the trend and areas I would be looking for pullbacks to play Price Action.

Great post here!

Take note all this is how we can use our eyes and knowledge to see how the market is turning and possibly starting a new trend. We do not need indicators to see the trend is one way or the other we can spot easy patterns and major levels being broken or rejected.

Great post!

Johnathon

Forex_School_Online · February 27, 2012, 4:50am

So here is one I am watching of the daily chart.

I am always first looking to trade WITH the trend.

The GBPAUD has formed a BUEB (Bullish Engulfing Bar) at a swing low. Some traders could take this trade long. The reason I did not is because I would rather trade with this down move in my favour.

I have highlighted on the chart where I would look to get short either on 1hr/4hr/1day chart to get short:

Safe trading,

Johnathon

Forex_School_Online · February 27, 2012, 5:09am

I have just finished a new article some may like to read which can be found here: [B]How To Start You Price Action Trading Career
[/B]
Safe trading,

Johnathon

dudest · February 27, 2012, 6:31am

Insightful article Johnathon, thanks!

Vahagn · February 27, 2012, 6:49am

bhops,

thanks for explanation !

Vahagn

Ang101 · February 27, 2012, 7:17am

Dudest, how long have you been a member of Johnathon? I want to do his course but not sure