Forex Price Action

[FTC]

Hi Johnathon,

I must say that this is one of the best threads/topics on babypips. I really like PA trading, I have been using indicators from quite some time but gave up all of them as they are not what can actually take you anywhere. With due respect to all the people who use indicators and are successful, I dont trust the indicators any more … After reading alot about PA , I came to this post and it is really really good.

Yesterday I tried my first trade which I believe is with PA. Please let me know what do you think if it was right trade or I was lucky

I traded Gold after the break of the pin bar and sold my half of the lot at the first support mentioned in the chart. I put the other lot to break even and thought I will let it run but Gold went down to my break even. I dont have any issues in that as I didnt loose any money for that . But if you can put some light that what you think about the trade.

Graph attached :

Thanks
Hemant

[Forex_School_Online]

Just want to give you guys an example of a textbook trade.

This was on the 4hr chart of the EURAUD. Note very simple, very obvious and formed at a key level.

This Pin Bar is large and stands out.

These are what we want to be watching for. The really obvious and simple setups.

When you have to look really hard to find a trade you should not be trading.

[Forex_School_Online]

Possible setup to watch for the coming week is the USDCHF 2 bar reversal that has closed higher from support.

I have not had time to go right through the market as yet.

This pair has broken resistance and held as support. Price has now tested this support and closed above strongly.

Please see chart:

Safe trading,

Johnathon

[Forex_School_Online]

@lucariga

Just to make you an example those 2 candles blended forms a Bullish PIN Bar, but as an inside bar, they would have to be to be considered Bullish or Bearish? (of course independently of where the market has gone after that 2 bars)

I am unsure of your question or if there is one? If there is please ask again and I will answer ASAP.

As I said previously yes an inside bar and the previous bar can form pin bar, however this is rare and more often than not they do not and it is for this reason I advise not to look at inside bars as two bar pins.

This is why we have the 2 bar reversals as they tell us more of the story.

I have taken your charts and circled the first 7 IB’s I saw that would not have been pin bars had they been blended together.

I am sorry if I have not answered your question. If this is the case I will try to next time,

Johnathon

[Forex_School_Online]

Hi Johnathon,

I must say that this is one of the best threads/topics on babypips. I really like PA trading, I have been using indicators from quite some time but gave up all of them as they are not what can actually take you anywhere. With due respect to all the people who use indicators and are successful, I dont trust the indicators any more … After reading alot about PA , I came to this post and it is really really good.

Yesterday I tried my first trade which I believe is with PA. Please let me know what do you think if it was right trade or I was lucky

I traded Gold after the break of the pin bar and sold my half of the lot at the first support mentioned in the chart. I put the other lot to break even and thought I will let it run but Gold went down to my break even. I dont have any issues in that as I didnt loose any money for that . But if you can put some light that what you think about the trade.

Graph attached :

Thanks
Hemant

Hello Hemant,

thanks for the nice comments. Yes Price Action is a definitely the way to go. When trading PA all you have to do is learn to read price. Indicators are lagging and built of what price has done in the past.

As for your trade on gold I can’t really comment as the charts you use are different to mine and on mine there is no pin. I use New York close charts.

From what I can see in your chart this was not a true pin. For it to be classed as a pin it must open and close within the previous candle which this didn’t do.

What you did have in your favour was the solid support level you were trading from and he momentum from the latest upmove.

If I was you I would be happy that you managed to take profit and protect your capital. For me break evens go in the win column as I have placed a trade and let it have a chance and not lost a cent.

If you have been watching this thread for a while you will have noticed I tend to ramble on about only trading the best of setups where my edge is extremely strong. If you can stick to doing this and only trading when you have big and obvious setups you will do fine.

Safe trading and I look forward to seeing some more posts from you,

Johnathon

[Forex_School_Online]

@dudest

Heads-up:

Bearish pin-bar on NZDUSD H4:

This did go lower in the end into an area I would call the first support area.

Nice trade!

How did you manage? i,e: Have you taken profit or moved to break even or left on etc? Did you close before the weekend or are you holding?

Once again well done and also I really want to say good on you for having the Ba…s for posting this setup live!

Safe trading,

Johnathon

[lucariga]

@Forex_School_Online

I am unsure of your question or if there is one? If there is please ask again and I will answer ASAP.

As I said previously yes an inside bar and the previous bar can form pin bar, however this is rare and more often than not they do not and it is for this reason I advise not to look at inside bars as two bar pins.

This is why we have the 2 bar reversals as they tell us more of the story.

I have taken your charts and circled the first 7 IB’s I saw that would not have been pin bars had they been blended together.

I am sorry if I have not answered your question. If this is the case I will try to next time,

Johnathon

I’m very sorry for my english… Anyway the question is:

The Inside Bar is a reversal pattern or a continuation pattern?
In my example the IB that i have cyrcled in red (suppose it on a relevant price level) is a buy or sell signal?
In this case the trend was down before the IB so if is a continuation pattern i’ve to sell otherwise i have to buy.

If the question is not clear anymore please tell me and i will explain better with my poor english though…

Cheers

[MikeSPA]

My second post and below my analysis.

BEARISH ENGULFING DOUBLE TOP

PA Checklist Criteria:

• Good size & shape
• Formed at a confluence of the uptrend TL retest, 50% fib of the last wave down, MBRN, EMA 20, UNC WR at 1,57529
• Due to its location, at the bottom of the consolidation box, is considered a breakout price action setup
• Monthly and weekly trend BEARISH
• Direct trend of all timeframes in sync pointing down below the low of the BEEDT
• Good FCL at 1.55820

• Closed above the WS at 1.56679
• Pending internal UNC WR at 1,57529
• Price is against a consolidation box ahead

It is tradeable according to my criteria under some conditions based on how price will behave on the opening of the next trading week.

Ideal scenario to trade the setup is price to open within the range of the BEEDT, retest the UNC WR at 1.57529 where we need to see rejection and price to move down breaking the lows of the setup.

[Ang101]

Dude! Keep it simple stupid (KISS)

Its now at support, wait for obvious PA

[MikeSPA]

Dude! Keep it simple stupid (KISS)

Its now at support, wait for obvious PA

It can not be more simple than this. What do you mean “wait for obvious PA”?

[Forex_School_Online]

@MikeSPA

My second post and below my analysis.

BEARISH ENGULFING DOUBLE TOP

PA Checklist Criteria:

• Good size & shape
• Formed at a confluence of the uptrend TL retest, 50% fib of the last wave down, MBRN, EMA 20, UNC WR at 1,57529
• Due to its location, at the bottom of the consolidation box, is considered a breakout price action setup
• Monthly and weekly trend BEARISH
• Direct trend of all timeframes in sync pointing down below the low of the BEEDT
• Good FCL at 1.55820

• Closed above the WS at 1.56679
• Pending internal UNC WR at 1,57529
• Price is against a consolidation box ahead

It is tradeable according to my criteria under some conditions based on how price will behave on the opening of the next trading week.

Ideal scenario to trade the setup is price to open within the range of the BEEDT, retest the UNC WR at 1.57529 where we need to see rejection and price to move down breaking the lows of the setup.

Hello,

firstly I will say I am short the EURUSD of the weekly chart I posted in here last week so if my trade goes lower this will probably go lower also.

I don’t know which way this will go or have any bias one way or another. This trade you have pointed out is not something I would trade or similar to my trading but you seem certain in your analysis and you seamed to have your head screwed on.

I have a few questions just so I can understand.

You say it is a Bearish Engulfing Double top. What is that? I only trade engulfing bars and am unsure what you mean by this.For me this is not an engulfing bar as it does not engulf any candles.

Your trendline for me looks to have only two points. Trendlines need 3 spots where price has respected it other wise we could put trend lines anywhere if we only needed two. There is a sought of third spot however price did not bounce it only formed one bullish bar which was then broken immediately.

I agree with the box you have that price is currently in.

You say the weekly and monthly charts are bearish. For me the weekly chart is completely sideways and in chop. When looking at the trend we need to keep in mind how long we are looking to trade. If I was looking to trade for 3 or 4 years I would zoom this chart right out and try to get in on one of the major swings in the market. But if you are looking to trade for days or weeks for me it doesn’t matter what is happening over the last 10 years. Does this make sense? When I trade I only use the one time frame I spot the setup on so if I see a setup on the daily it doesn’t matter what the weekly is doing. The reason for me I do this is as you know every time frame chart has a different trend. I don’t care what is happeneing on the weekly if I am trading on the daily as I am trying to trade with the momentum on the daily chart.

WEEKLY CHART

Can I please ask what is: FCL, WS and UNCR?

Just to clarify on your last points. You are wanting to open a trade before the support or your box is broken?

For me all I see on this chart is price sitting just above a major support it has to break.For me to trade before this is broken would be dangerous. In saying that if it breaks it could be a large break out lower and could go onto test the recent lows.

Safe trading and I hope this goes lower this week!

Johnathon

[Forex_School_Online]

@Forex_School_Online

Possible setup to watch for the coming week is the USDCHF 2 bar reversal that has closed higher from support.

I have not had time to go right through the market as yet.

This pair has broken resistance and held as support. Price has now tested this support and closed above strongly.

Please see chart:

Safe trading,

Johnathon

Just to clarify. I am not trading this 2 bar on the USDCHF. I just wanted to post it to get people thinking.

I will say however the area I have marked is critical. Whilst price stays above this I am a bull and if it falls below I will be a bear. Price gave us a pretty good clue by going above and closing above this level on Friday.

[Forex_School_Online]

@lucariga

I’m very sorry for my english… Anyway the question is:

The Inside Bar is a reversal pattern or a continuation pattern?
In my example the IB that i have cyrcled in red (suppose it on a relevant price level) is a buy or sell signal?
In this case the trend was down before the IB so if is a continuation pattern i’ve to sell otherwise i have to buy.

If the question is not clear anymore please tell me and i will explain better with my poor english though…

Cheers

The inside bar can be either a reversal signal or a continuation setup.

IB’s are best to trade when there is a strong trend and as breakouts.

If you are learning Price Action I would suggest you stay well away from them and learn the more obvious and easier setups.

Inside bars stop a lot of traders out because of the fake moves they tend to create. In other words breaking out before returning.

Stick to the really obvious and large setups and just watch and practice on demo IB’s. The setup I trade the very least is inside bars.

Hope this helps,

Johnathon

[Forex_School_Online]

The Pin Bar discussed in here previously on the daily AUDNZD has now fallen lower…

I am already out of this trade however others that stayed on will now be sitting on a handy profit.

Please note just how simple and obvious this setup was.

It formed at a swing high and at a major resistance level. Price was rejecting the big round number of 1.300 and also rejecting the 50% level of the last swing.

Basically though it just stood out and was simple and obvious. As I always say when a trade slaps you in the face then take it. If you have to look really hard to find a trade you probably shouldn’t be in it.

Johnathon

[MikeSPA]

Johnathon,

I will try to answer all your questions as clear as possible.

Can I please ask what is: FCL, WS and UNCR?

I will start with the abbreviation of the FCL which stands for FIRST CONCERN LEVEL. This vital for trade management and is basically the first static or dynamic S/R level that price might find trouble to run after a valid price action.

WS stands for WEEKLY SUPPORT

UNC stands for unconfirmed. Confirmed or unconfirmed S/R is very simple tool when evaluating a potential PA setup. I will explain this concept with examples in the future since I need to refer to some additional concepts.

You say it is a Bearish Engulfing Double top. What is that? I only trade engulfing bars and am unsure what you mean by this.For me this is not an engulfing bar as it does not engulf any candles.

Bearish Engulfing Double Top (BEEDT)

The BEEDT pattern consists of two candlesticks with approximately similar highs (+/- spread). The body of the second candle engulfs the body of the first candle (+/- spread). Also, the second candle must close lower than the low of the first candle. The role of a BEEDT is very delicate and varies according to its location on the price chart. It can be either a reversal, continuation, breakout pattern or nothing at all.

Similar to all candle pattern, the BEEDT is not valid until the low is violated by price the next day.

For me all I see on this chart is price sitting just above a major support it has to break. For me to trade before this is brokenwould be dangerous. In saying that if it breaks it could be a large break out lower and could go onto test the recent lows.

If you read my analysis I include the weak closing of the BEEDT as a weakness of the setup so we are saying the same thing. However, due to the location of the setup, at the bottom of the consolidation box, is considered a breakout price action setup with WEAK close.

Your trendline for me looks to have only two points. Trendlines need 3 spots where price has respected it other wise we could put trend lines anywhere if we only needed two. There is a sought of third spot however price did not bounce it only formed one bullish bar which was then broken immediately.

Dynamic S/R like TLs and moving averages are secondary tools of my toolbox when analyzing an instrument. However, if the give value on my trading decision process I will utilize them.
The trend or no trend chapter is big and I will try also in the future to explain how I use the trend factor concerning my trading decision procedure. BUT, PA has an edge since we can trade the sideways situations.

M.

[MikeSPA]

I always check a PA setup in other platforms. Below the story with the body engulfs body is different.

[Forex_School_Online]

Johnathon,

I will try to answer all your questions as clear as possible.

[B]Can I please ask what is: FCL, WS and UNCR?[/B]

I will start with the abbreviation of the FCL which stands for FIRST CONCERN LEVEL. This vital for trade management and is basically the first static or dynamic S/R level that price might find trouble to run after a valid price action.

WS stands for WEEKLY SUPPORT

UNC stands for unconfirmed. Confirmed or unconfirmed S/R is very simple tool when evaluating a potential PA setup. I will explain this concept with examples in the future since I need to refer to some additional concepts.

[B]You say it is a Bearish Engulfing Double top. What is that? I only trade engulfing bars and am unsure what you mean by this.For me this is not an engulfing bar as it does not engulf any candles.[/B]

Bearish Engulfing Double Top (BEEDT)

The BEEDT pattern consists of two candlesticks with approximately similar highs (+/- spread). The body of the second candle engulfs the body of the first candle (+/- spread). Also, the second candle must close lower than the low of the first candle. The role of a BEEDT is very delicate and varies according to its location on the price chart. It can be either a reversal, continuation, breakout pattern or nothing at all.

Similar to all candle pattern, the BEEDT is not valid until the low is violated by price the next day.

[B]For me all I see on this chart is price sitting just above a major support it has to break. For me to trade before this is brokenwould be dangerous. In saying that if it breaks it could be a large break out lower and could go onto test the recent lows.[/B]

If you read my analysis I include the weak closing of the BEEDT as a weakness of the setup so we are saying the same thing. However, due to the location of the setup, at the bottom of the consolidation box, is considered a breakout price action setup with WEAK close.

[B]Your trendline for me looks to have only two points. Trendlines need 3 spots where price has respected it other wise we could put trend lines anywhere if we only needed two. There is a sought of third spot however price did not bounce it only formed one bullish bar which was then broken immediately.[/B]

Dynamic S/R like TLs and moving averages are secondary tools from my toolbox when analyzing an instrument. However, if the give value on my trading decision process I will utilize them.
The trend or no trend chapter is big and I will try also in the future to explain how I use the trend factor concerning my trading decision procedure. BUT, PA has an edge since we can trade the sideways situations.

M.

Hey Mike thanks for your reply,

So what your saying is this is a double bar high with lower close? But not an engulfing bar? Obviously it can’t be an engulfing bar unless it engulfs a bar so I can see where you going.

Have you not found more success with trading reversal signals from swing points? i,e: To pick a reversal to go short trade it from a swing high and vice versa for longs? I guess this is where we differ as I will only trade reversals from swings and look to pick a reversal in the market.

Two last questions I have of your method is why the need for unconfirmed support and resistance? Why not use what the chart is already showing in the S/R that has been confirmed? And also why the need to use different platforms? Looking at the two different charts you have posted they have the same close time and are showing the exact same candles but just with a different look to the chart.

As I said previously I don’t have a particular bias on this pair and it wouldn’t surprise me for this to go either way. You seen to have you analysis worked out and I must say regardless of what happens, god on you for having the guts to post up your ideas real time!!

I will lastly just say however please for the sake of this thread stick to the basics and concepts already discussed.

There is tons of other price action threads in babypips where extra analysis could be added and other terms, but in here for the sake of people trying to get a firm grip of Price Action we are keeping it simple and with the principles already discussed.

Thanks for your setup and analysis and good luck!

[MikeSPA]

Johnathon,

[B]I will lastly just say however please for the sake of this thread stick to the basics and concepts already discussed.
There is tons of other price action threads in babypips where extra analysis could be added and other terms, but in here for the sake of people trying to get a firm grip of Price Action we are keeping it simple and with the principles already discussed.[/B]

I will not complicate things and I really don’t. My concepts are so simple but also valuable when evaluating a possible price action setup. They are criteria included on my trading plan vital to filter and identify FASLE setups. Anyway I will respect your nice thread and keep it as you teach, KISS, which mean I have to go to post no.1 and start reading.

[B]As I said previously I don’t have a particular bias on this pair and it wouldn’t surprise me for this to go either way. You seen to have you analysis worked out and I must say regardless of what happens, god on you for having the guts to post up yourideas real time!![/B]

The confirmed/unconfirmed S/R and the trend concept (which are based on facts) when mixed together can give you a clue as to what price most probably will do. Of course I know that at the end price will do whatever she wants. As you see on my analysis I mentioned the internal unconfirmed weekly resistance at 1.57529. That and only will keep me away of placing a sell stop below the setup. I need to see more data in my chart. I would like to see the unfinished job at the INT UNC WR finished.

[B]Two last questions I have of your method is why the need for unconfirmed support and resistance? Why not use what the chart is already showing in the S/R that has been confirmed? And also why the need to use different platforms? Looking at the two different charts you have posted they have the same close time and are showing the exact same candles but just with a different look to the chart. [/B]

At the second chart (different feed provider) the body of the second candle engulfs the body of the first. You know that forex is not centralized so what was on my first data provider a non-candle engulfing on the second the story was different. I will never take a bearish setup when above or internally are unconfirmed resistances or I will never trade a bullish PA setup when below and internally are UNC supports.

[B]Have you not found more success with trading reversal signals from swing points? i,e: To pick a reversal to go short trade it from a swing high and vice versa for longs? I guess this is where we differ as I will only trade reversals from swings and look to pick a reversal in the market.[/B]

But this is what I mostly DO, reversal signals at swing high or low.
Anyway, I will keep it dead simple.

M.

[dudest]

This did go lower in the end into an area I would call the first support area.

Nice trade!

How did you manage? i,e: Have you taken profit or moved to break even or left on etc? Did you close before the weekend or are you holding?

Once again well done and also I really want to say good on you for having the Ba…s for posting this setup live!

Safe trading,

Johnathon

Thanks Johnathon for your kind comments
Actually, for this trade, i took the opportunity to test the Trailing Stop function of MT4
Entered (using sell stop entry) 10pips below the low of the pin-bar, 4 entries in all, and set the trailing stops to different values. All in all, all got stopped on 9th Friday in profit.

PS: when not using trailing stops, i follow what you and Bryce posted sometime back (i.e, when first TP is hit, move other position to break even)

Cheers!

[Forex_School_Online]

Johnathon,

[B]I will lastly just say however please for the sake of this thread stick to the basics and concepts already discussed.
There is tons of other price action threads in babypips where extra analysis could be added and other terms, but in here for the sake of people trying to get a firm grip of Price Action we are keeping it simple and with the principles already discussed.[/B]

I will not complicate things and I really don’t. My concepts are so simple but also valuable when evaluating a possible price action setup. They are criteria included on my trading plan vital to filter and identify FASLE setups. Anyway I will respect your nice thread and keep it as you teach, KISS, which mean I have to go to post no.1 and start reading.

[B]As I said previously I don’t have a particular bias on this pair and it wouldn’t surprise me for this to go either way. You seen to have you analysis worked out and I must say regardless of what happens, god on you for having the guts to post up yourideas real time!![/B]

The confirmed/unconfirmed S/R and the trend concept (which are based on facts) when mixed together can give you a clue as to what price most probably will do. Of course I know that at the end price will do whatever she wants. As you see on my analysis I mentioned the internal unconfirmed weekly resistance at 1.57529. That and only will keep me away of placing a sell stop below the setup. I need to see more data in my chart. I would like to see the unfinished job at the INT UNC WR finished.

[B]Two last questions I have of your method is why the need for unconfirmed support and resistance? Why not use what the chart is already showing in the S/R that has been confirmed? And also why the need to use different platforms? Looking at the two different charts you have posted they have the same close time and are showing the exact same candles but just with a different look to the chart. [/B]

At the second chart (different feed provider) the body of the second candle engulfs the body of the first. You know that forex is not centralized so what was on my first data provider a non-candle engulfing on the second the story was different. I will never take a bearish setup when above or internally are unconfirmed resistances or I will never trade a bullish PA setup when below and internally are UNC supports.

[B]Have you not found more success with trading reversal signals from swing points? i,e: To pick a reversal to go short trade it from a swing high and vice versa for longs? I guess this is where we differ as I will only trade reversals from swings and look to pick a reversal in the market.[/B]

But this is what I mostly DO, reversal signals at swing high or low.
Anyway, I will keep it dead simple.

M.

Hey thanks that would be awesome. You even have the chance to start your own thread if our trading is too boring for you.

I don’t disagree at all that your method is vital and very good, I was more just trying to say that I started this to teach anyone who wanted to listed how I have traded for a long time with a lot of success. In saying that my way is not the only way or the way it must be done. Just in this thread that’s all. it makes it hard for other reading and posting in here unless we stick to the same principles. Also that way over time I can begin to introduce new principles without confusion.

You have answered all of my questions well except I can’t understand just one. Sorry for all the questions, hahah.

I want to know why look at multiple charting times. Why not just the one and if you don’t get a trade you move on. Do you find yourself going through a lot of charting gear just hunting for a setup? Do you do this all the time i,e at the end of every 4 hr or daily session and if so how many charting platforms do you have?

I will confess to you something and get right down of my big moral high horse!!! Hahah. A while ago I used 4 different charting packages. The reason for this was this: I would pre mark areas I was watching for PA setups. I was trading the 4hr time frame. If price got to a level I have pre-marked as an area to trade I would then get a new 4hr candle closing every 1 hour. This way I could trade the 4hr chart which I much prefer to the 1 hour but I don’t think you are doing similar?

I guess the last question I have is, is this area on the chart an apsolutely A+ area for you to trade from. The reason I ask this main questions is this. If you are looking on different platforms it said to me that you like this area to short a lot other wise you wouldn’t be looking for PA on other gear. You say you normally trade from swing but this is not so is this area still an A+ area? even though it is right in a box and heaps of traffic?

If you don’t want to answer these you don’t have to however sometimes the lurkers reading these questions and answeres can be more he than watching trades as it gets them thinking of new ideas and to think for themselves.

Regards,

Johnathon