JÄWÄ's Price Action Trading Method

Trading Systems Free Forex Trading Systems
41

Kimonz,

simple answer to your question:
if you have a day job - trade daily candles, on my broker the daily candle closes at around 12pm NZ Time which is about 1am GMT, the volume between 12pm NZT and about 6pm NZT barely moves (or it hasn’t in the last month at least from what i noticed), which means you can just look at your charts after work and you shouldn’t have missed out on good trades

if you don’t have a job - do what sith does and go to your PC every 4 hours.

systems that i have found work for me (i have tested quite a few)
Price Action @ S/R lines
S/R Lines by itself --> elliot wave theory
Inside Bars in a trend… doesn’t really work when the market is ranging like it has in the past month

i tried looking at Gartley 222’s / Crabs / bats / Butterflies but these things take up more time than i have… (or rather i’m just not experienced enough)

there are other methods that can still net you a profit in the long run - just using MA crossovers and Stochs are usually good indicators - infact pip surfer has proven that his system works (dont know his recent results but i saw some years he had like 4000+ pip gains)

42

Thank you Jangez,

I tried different things in the past and found EMA crossovers is reliable to some extent but most of the action occur during the US time when we are asleep in NZ. Daily charts are a good idea but risk:reward is greater and you need to have deep pockets for it. I am currently testing a daily range breakout system in combination with pivot points (Sort of price action related) … any one here tried something similar?

What broker do you use?

43

SithJawa,

Yesterday I traded your system and made +80 pips … I think it is a good start but I find it difficult to pull the trigger and enter into a trade … is this normal for starters or I am not reading the charts right?

44

I use CMC… (simply because i dont have a SWIFT account)

let me know how the range breakout system works - i’m also backtesting someother breakout systems when i have time

45

Hi SithJawa,

Congratulations on starting a new thread and sharing your trading system with us all. I an trying to learn all I can about price action using higher timeframes. I am done with all those indicators trying to scalp a pip are and a pip there… only winners there are the brokers with their pip robbing spreads!

I’m trying to understand your system and have the following 4 hour and 1 hour charts on the USDJPY pair. So to my understanding so far, we look for a reversal bar forming above the middle BB for a short in the 4H chart as it has here:

02-05-2012 11-46-56 USDJPY 4H.jpg493×507 48.5 KB

Now price is above the ema so I need to look at the 1H chart to see what is going on:


As we can clearly see price in below the ema with little wicks rejecting the ema. So my question to you is would we wait for price to break below the 4H ema (blue) to take a short or would we already be short using the 1H chart?

If we wait for price to break the 4H ema, would we go short on the close of the breaking candle?

Looking back at the first page it looks like we would short at or just above the middle BB.

46

uhmmmm… is this thread dead already??? :33:

47

Do not think so … I believe SithJawa may be not feeling well.

48

Hey Kimonz thanks for the head’s up… SithJawa hope you’re feeling well soon :slight_smile:

49

@ Kimonz: yeah i think it works that way for everyone until you have consistent profits, the uncertainty of losing your real money takes a huge affect, thats why emotional management is one of the most important parts of trading :3

trizone13: :3 i think you were looking at the wrong candles when you zoomed in, make sure if the candle is at 12PM lets say that when you zoom into the 1 hour charts the candles that you look at are the 12, 1, 2, and 3 candles, as the 4 hour candle is the 12-4 candle, here is the 4 hour candle you are talking about:


i (think i) clarified this before, but ideally you want your pin bar to be atleast 50% wick, the body to be no more than 25%, and the nose to be no more than 25%, as you can see the body of the candle is around 35% of the total candle so right off the bat we have to be weary of trading this candle, im not saying its untradeable, we just have to be extra certain, now zooming into the 1 hour to get a better look


we can see that the price isnt really rejecting anything, its teetering around the edge of the ema’s, but hasnt made any breakthroughs, and the next 4 hour candle you can see that all the 1 hour candles within it are trapped between the ema’s not really making any breaks, you want to make sure that the candles break through ON the pin bar, not afterwards, we are looking for the highest probability trades here, i hope that helps :3

price action in itself is a method of trading that when you learn it, you can combine it with all of your other methods, fib levels, S/R, the great thing about price action is it gets you in right as the action is happening, and not later like an EMA cross would get you lets say, not to say those things arent profitable, but they are less profitable, that being said price action trading is more difficult and takes alot of work where as anyone can read an EMA cross

sorry for the late responses i was sick

50

Hi SithJawa,

Glad to see you back here, hope you are feeling better now :slight_smile:

Thank you for your explanation. I think we all run into these problems now and again because of using different broker’s mt4. I am using FXPro for the NY daily closing times. If you look at my 4H pin bar it is a lot different to yours.


I have also put a vertical line on the pin bar I was talking about on the 4H chart, notice the low highlighted:

04-05-2012 07-54-52 USDJPY $H.jpg700×482 50.9 KB

Finally here is the 1H chart, again I have highlighted the low and 4H pin:

04-05-2012 07-56-53 USDJPY H1.jpg553×700 60.6 KB

So hopefully I am looking at the same four 1H bars to form the pin bar on the 4H chart. Anyway, I look forward to more lessons from you and more live or past set-ups so I can be on the same page as you are :smiley:

51

Sorry for beginner question and thanks for the great thread.

When you say you take profits after 50 pips how does that work?

I can’t find anywhere in any of my software’s for setting that up. Do you set up two orders of equal value or is there some way to take profit on half that I’m missing?

52

SJ, what is the significance of the 5 and 10 EMAs? It would seem that the 10 by itself would act as enough of a support/resistance line, wouldn’t it? I’m not sure how you came to them as your default.

53

@trizone: ahhh i feel like an idiot now :open_mouth: well regardless i would wait for the price to break through a dynamic support that isnt being touched by the other candles in the formation, for instance if all of the candles bodies and wicks are touching both EMA’s that would be a no go as that shows too much indecision and we cant be certain where the price will go, in that setup the price bounced off the top bollinger band and got stuck between the 5 and 10 EMA, so i probably would’ve waited to enter till it broke through the 10 EMA with a price action signal wether it was on the 1 hour or the 4 hour

@slipp3ryWhippit: do you use mt4? on most softwares you have the option to close out half the position manually, all you have to do is click on close position and choose how much you want to close out (the default is %100 of the position), when i am sleeping however and i dont get price alerts to my phone i use an EA to manage my take profits, it automatically closes out half positions at predesignated prices

@Merchantprince: to be honest i first came to them by testing out an MA cross strategy and i never took them off of my chart when i started learning price action, but i did re evaluate their usefulness and i really like them, first of all the EMA cross in itself is a very profitable trading system (if you have good take profits in place) so that helps as a good confluence point to see where the price could break out into a trend, and looking at the charts i use the area between the 5 and 10 ENA as almost like a no zone, where there is indecision, and to see price bouncing in and out of this area is interesting, although the 10 EMA is more significant i like the little 5 guy too :smiley: although i think alot of swing traders also like the 20 EMA

54

Can you explain how you detect the difference between a reversal pin bar and a continuation pin bar using the 4 hr and 1 hr charts together. Thanks

55

@Kimonz: it really has to do with the 1 hour price action, looking at a pin bar or reverse pin bar the only thing you know for sure is that there was indecision in the market, when you zoom into the 1 hour you can get a closer look, typically the best way is to see what way the candles are bouncing off the EMA’s or BB’s, as an example, lets say that there is a strong downtrend and a pin bar forms signalling a bullish reversal, by looking at the one hour we can see that the price has yet to break through an EMA and is infact surfing down the EMA’s as the trend continues still, this would nullify this signal and either get us in the trade or keep us in the trade, this type of thing happens regularly (atleast a few times a week), so it is an amazing filter

actually i just took the time to find an example :smiley:


oh look a pin bar at the bottom of this huge down move! lets zoom in and see whats up :[


hmm… the price is still on the underside of the EMA’s, bouncing off dynamic supports, from these things i will assume that the downtrend will continue! time to up my stake!


sweet, sweet victory :[

56

Hi SithJawa,
I was wondering if you could pls tell me the nameth the broker you using, if thats ok with you?
Thanks

57

@Kimonz: another thing to note is the strength of the EMA’s, if it can’t even break through the 5 EMA which is very close to the actual price then you can safely assume it is not a strong enough signal to be a reversal, even I’d it breaks the 5 EMA and gets caught between the 5 and 10 EMA. I still wouldn’t consider it strong enough to be a reversal

@kbforex: I use forex.com as my broker, and I use their meta trader account :slight_smile: I’m not saying they are the best but they have relatively low spreads and 24/7 customer support that is extremely friendly and knowledgeable, I’ve never had a problem with them :slight_smile:

58

@SithJawa: Thanks, does the position of the pin bar in relation to BB play any role in such situation? Do you get more of reversal pin bars or continuation pin bars usually?

59

I have also noticed a third EMA on your chart … What is that one?

60

It just adds an extra level of confluence, normally you only want to buy when price is below the center BB and sell only when it is above the center BB, this gives you the highest probability trade setups, for instance even though you could sell in the bottom half of a BB it would be a much riskier trade as some of the bears strength will have already been exhausted because it is in the lower half of the extreme, so that is the safe way to trade HOWEVER, there are two types of markets, ranging and trending, in a ranging market the week will have a couple or more waves of up and Down movement, during that time continuation bars are not only rare but very risky, however in a trending market like this past week where price falls or rises predominantly the whole week you can see tons of continuation cars as the bulls tried and failed numerous times to even get a retracement swing, the most common pin bar is the trend reversal bar

Also if the market breaks last the too or bottom BB that shows a very strong trend, in those times continuation bars are more likely

As you can see my chart doesn’t have any BB, I was just fiddling with some different settings for fun :smiley: the EMA is the 20 EMA, a lot of swing traders like that as a more medium term market direction indicator