Insightful post on Trade Journaling here.
Hi Guys and Gals,
This is going to be a reasonably long post so those of you that can bear with me through to the end I thank you in advance.
I think Iâve finally solved a problem with what I have been seeing in the charts posted lately and I want to explain why.
Before I dig into this I think Johnathon if he had the chance again would have probably in hindsight called this thread âTrading A+ Price Action Set-Upsâ because that is fundamentally the genesis of what he is trying to teach here. Not just how to spot a Price Action set-up but how to spot an A+ set-up as opposed to a B/B+ type set-up.
I have been seeing a lot of B set-ups here and not many A+'s and I think I see where people are potentially falling a little bit short.
We need 3 key ingredients to bake the A+ cake.
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Be able to recognize relevant horizontal Support and Resistance Zones. This I think is being done pretty well.
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Identify relevant Price Action. This is also being done correctly (although I think the 2 bar reversal has been overdone and abused somewhat in this thread.)
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To ensure that the PA at the KHL is being played from a swing high or swing low. This is being done horribly or in some cases not even being done at all.
Where we are falling a little short in here in this thread is where are seeing price reach a nice level, form a nice PA signal and thatâs it! Trades away!! If we really want to define a trade as A+ then making sure we are trading from swing highâs and lowâs is essential.
Otherwise it is like trying to bake a cake without putting in the baking powder and wondering why it wonât rise.
So I know Johnathon has put this example in repeatedly but I am also going to post one right now. A swing high:
Now I want you to really keep this example in mind as we scroll through the next few charts. See how price has pulled back nicely in this down trend and formed a reversal. If we are going short at the swing high illustrated we are trading away from a level and really stacking the odds in our favour.
Now lets analyze some of the recent charts posted up.
OK lets start with a trade that actually went on to become a nice winner, the NZD/USD 4 hour. Yes price did get near recent short term lows and PA did form in the shape of a BUEB. But really letâs be honest did this form at a swing low similar to the swing point example I just gave above? No way! And because of this look at all the traffic it had to fight through to become a winner.
This is a perfect example of what I said earlier. Ingredients 1 & 2 are present but certainly not ingredient 3. Yes in this case we got away with it but over time if your goal is really to learn how to trade only A+ set-ups these B type set-ups will not cut the mustard.
Now in the next example we could still be in the trade and it may go on to form a winner. This is getting closer to a swing low but price is not really trending in the way that we would want and price has been rejected in a very choppy area not really creating a nice clean swing point that we could trade. Ideally weâd want the PB looking candle to âstick outâ some more.
Now on a positive note lets look at one that was a good example and was posted up in this thread. The USD/CAD 4 hour had all the ingredients we want to bake the cake.
Trading with the trend (especially as a beginner) is a good start, so thatâs a tick right there. Now letâs look at our âcakeâ ingrediants:
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Price came back to test former support as resistance.
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Formed a BEEB.
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Formed at a nice clean swing high.
See how different and cleaner looking it is to the previous 2 charts?
And boom, a winner.
Now one quickie that some people ask regarding the number of pips a PA signal should have. As Johnathon is always saying, there is no right or wrong in Forex. Here is what I personally look for. Some traders I know like a PA signal to have a minimum number of pips, ie âI wont trade a PB unless it is 100 pips etc.â
For me (and this is just my personal POV) as each pair has different levels of volume and liquidity I donât get so hung up on how many pips a bar has, for me it is more how large does it look in relation to the other bars around it?
In the case of the USD/CAD it was a fairly dominant looking BEEB so I was happy to take it. I hope that clears that up, although as I say others will have a different point of view.
As to the trade selection part I do know a big part of the original purpose of this thread from the OP was to really get traders sitting back and plucking the A+ trades.
Frankly if you are taking over 20 trades a month then you probably arenât adhering to what Johnathon would deem to be A+ set-ups, simply because we are very unlikely to get 20 A+ set-ups in a month! I mean on average that is 5 a week and it simply doesnât happen! Well not according to the principles but forth in this thread.
In closing I hope I havenât come off as too grumpy or picky but in the upcoming weeks I really hope to see you guys become super selective about what you are looking to trade and maybe just grasping the swing high/low concept a little better.
The improvement in the trading of the regular contributors to this thread has been amazing and some of you are soooo close to putting it all together. I hope other longtime and new readers of this thread post up some more and we can keep this discussion rolling.
As always safe trading everyone and thanks for seeing this post through to the end!
Cheers,
Bryce.
3 Likes
See this is what I see when I look at my New York close Daily chart. Unfortunately the signal did not close strong enough for me to trade it.
As I always stick to my plan and look for my â3 ingredientsâ I will have to take a pass, which at times can be super frustrating.
However just on a side note if the PA was large enough for me this would be a PERFECT example of trading from a swing point, so a really nice spot in that regard.
Hopefully we get something else of a similar vein this week.
That was great point. Just wondering why we dont have the same NY close. Using Fxdd for NY close and IBFX london close. Both showed pin bar. It is still great to hear that 2 out of 3 met your criteria.
Cool cool I use Peppertsone to spot trades and I have a different broker which I only use to execute trades.
Forgetting the actual PA for a second and just looking at both the KHL and the swing high doesnât it look so much cleaner to [I]you?[/I] Thatâs the most important thing. Look at that really nice âVâ shape that the pullback forms and at very close to 50% pullback from this current move down.
Iâm hoping most of all itâs starting to make sense to your eyes. :22:
/ It is tempting to trade just for the 2 criteria. However I am trading PA, should the main ingredient be the PA. Anyway can someone post what you see in your chart. This newbie is getting confused. Thanks
Iâm not sure what there is to get confused about as Iâve already posted up a couple of charts but Iâll post up again and hopefully it will become a bit clearer.
I understand the thread is called âPrice Actionâ but the OP of the thread has made it pretty clear that it is also important that we trade PA at the right places on the chart and from swing points.
He has also stressed the importance of using New York close charts, particularly on the Daily.
Now the first thing I would ask looking at my NY Close charts (Pepperstone) is is the Price Action large and compelling? The answer is no it is not.
However on a separate issue and probably following on from my post earlier today I wanted to say good job on spotting a nice level from which to play from and also identifying what a swing high looks like.
Can I also add that if you are intending to play this on Monday please donât change your plan due to anything that I or someo else says on this thread. It may go on to be a winner! After all you have several things in your favour,
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Trading with the trend
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Nice pullback
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Playing price from a good zone
If this also had the accompanying large PA signal trust me I would be all over this, but that is just me. In fact over at the private forum we were all over this chart on Friday and also the 4 hour because we knew how good this level looked for shorts. At the end of the day we just couldnât find a PA signal to get us into the trade and had to pass (at this point.) I guess that is the discipline, waiting for all the stars to align in your favour.
Anyhoo here are a couple more charts of the same pair.
Thanks bhops.
No worries mate. For what itâs worth I think you are so close to nailing this concept itâs not funny. It probably feels a bit foggy to you but I reckon you are closer to getting your head around it than you think,
Cheers,
Bryce.
Bryce and Johno
You guys are the real deal! I challenge anyone to find a better thread. :35:
Thanks Agg,
ok so as I said the other day I was travelling hence why I have not been in here the last few days.
So Bryce has already touched on it but I want to highlight the USDCAD and why it was A+ setup. And for the record I missed this setup due to travelling.
DAILY CHART
Pretty simple area to mark of. You could clearly see this area had broken lower on the daily as price had broken and closed below.
4HR CHART
Price pulled back to this very obvious area and gave a bearish engulfing bar confirming we had a trade. Price had clear recent lows where we would have expected price to fall into.
Greetings!
I found babypips.com a month or two ago and Iâm a brand new newbie, although Iâve read a bit about Ken Robertsâ style chart patterns as they relate to the futures market. I went through the School of Pipsology and have been lurking around the forum. I found this thread a few days ago and itâs so fantastic I need to delurk and join in the conversation.
Thanks to Johnathon and everyone that has contributed to this thread! This is a trading method that seems to fit with the way my brain is wired, so this is the method with which I will start my demo trading. The plan is to demo trade from now until the end of the year and then fund an account and begin live trading beginning in January, 2013.
I put together this outline of the trading method Iâll use, mostly based on this thread. The trade management portion Iâve put together with bits from here and bits that Iâve read elsewhere. Iâll be using this as an outline to build a pre-trade worksheet to complete before placing a trade. Iâm sure Iâll refine and tweak this as I go through my demo trading phase. Please share your thoughts:
- On DAILY CHART, draw one horizontal support line at the significant support level closest to current price.
- On DAILY CHART, draw one horizontal resistance line at the significant resistance level closest to current price.
- On DAILY CHART and 4-HOUR CHART, look for trading opportunities as price approaches these support and resistance levels.
a. Determine trend.
i. UP â only take long positions on pullbacks to support.
ii. DOWN â only take short positions on pullbacks to resistance
iii. SIDEWAYS â take long positions at bottom of range and short positions at top of range.
b. Watch for candlestick reversal patterns.
i. All patterns - Is it large and obvious?
- Is it at a swing high or a swing low?
- Is it at one of the significant support or resistance areas?
- LOOK LEFT â are you trading into traffic that will hinder a move in the correct direction?
ii. Pin Bar - Open and close within previous bar
- Candle wick 3 times length of candle body
- Large nose protruding from all other bars â aka PINNOCHIO BAR
iii. Engulfing Bar - Must consume ENTIRE previous candle (body AND wicks).
- Price must close in the last third of the candle in the direction of the trade.
iv. Two Bar Reversal - Two candles approximately the same size
- First candle closes in the opposite direction of the trade
- Second candle closes in the direction of the trade (preferably above or below the open of the previous bar, depending on direction of trade.)
- Trade Management
a. Stop loss
i. 10 pips above or below candlestick pattern, opposite the direction of trade.
b. Profit targets
i. In a sideways market - Divide position into two equal parts
- Take profit on ½ of total position at midpoint of the range and move stop loss on remaining position to break even.
- Take profit on remaining position near top or bottom of range.
- Never use a trailing stop.
ii. In a trending market - Divide position into three equal parts.
- Take profit on 1/3 of total position at first area of support or resistance. Move stop loss on remaining position to break even.
- Take profit on 1/3 of total position at the next area of support or resistance. Implement trailing stop on remaining open position.
a. Trailing Stop
i. If position is long, place stop 10 pips below the lowest low of the past three days. NEVER MOVE STOP LOWER.
ii. If position is short, place stop 10 pips above the highest high of the past three days. NEVER MOVE STOP HIGHER.
c. Entry on break of candlestick pattern
i. Limit order 10 pips above or below candlestick pattern, in direction of the trade.
Thanks,
Nick
3 Likes
Welcome to the thread Nick.
For someone just new to Forex that is a seriously impressive trading plan, now all you need to do is stick to it! :18: (The hard part.) I have seen people who have been trading for a couple of years not have a trading plan that comprehensive.
And it looks like you understand the concept of PA trading really well. I guess each to their own and there are some traders who love their indicators or playing around on the 5 minute charts and some do really well fro m it.
However if you like to keep your trading as simple as possible, as stress free as possible and not be glued to your charts 24/7 then Price Action trading is the way to go. You are very very lucky (IMHO) to have discovered PA so early in your trading journey and we look forward to seeing you post up in the future.
Hi
Can someone help me out on this? My demo account from Axitrader got expired. Is there any NY close chart that doesnât come with an expiry date on the demo account?
I am asking this as I place my trades with another broker who doesnât supply NY close chart.
Thanks in advance!
Google : FXCM
Many thanks, pal!
Hi ywboo3,
Are you on MT4 with AxiTrader? If yes, just go to âFile -> Open an Accountâ and it will open you a new demo a/c with the same broker. ( Though i guess youâre avoiding have to start from âscratchâ every time⌠). Let us know if FXCM works for you.
Cheers
Hey guys
What you think of NZDUSD 4H?
Just trying to see how you guys are thinking.
Forgot to add, had I not joined FSO I would of been all over this trade.
Cheers
Hi dudest
Yeah, I m on MT4 with Axitrader. Still weighing the pros and cons. If I hop over to FXCM, this will mean I have to create all my charts with the desired settings plus the levels I have marked and the alerts I have set. On the other hand, I can open a live a/c with them for $200.