My Basic Chart Analysis Method

People keep asking me how I do my chart analysis, and I keep saying I’d have to write a book to explain it all. Well… Here’s that book! :slight_smile:

Calling it a book may be a bit of a stretch, it’s only 12 pages, but I think it’s a good entry point into the world of trading “without rules.”

I’m happy to answer any questions you have, but I just spent the better part of a Saturday writing this, so at least read the whole thing before you ask! Your question may be answered later in the ebook. :smiley:

Phil’s Basic Chart Analysis Method.pdf (233 KB)

Thank you for the hard work - I have read your posts and appreciate your demeanor - The system that I use is very similar to what you have posted - I use the 4 hr (and 1hr if ranging) to establish overall direction than look for PA setups on the lower TFs to enter in the direction of the current trend - taking note of S+R levels.
I have found that patience to wait for your setup is the key!

Good read phil. I’m indicator free as well.

Shame that most won’t learn from it as they’re off looking for the holy grail.

Hi phil, I read elsewhere you said you’ve stopped using cowabunga. could you comment on indicator intensive cowabunga, and NickB’s method and yours? I thought you used NickB’s, but seems you’ve added diagonal trendlines also.


I haven’t traded the Cowabunga system for over a year now. It was the very first forex system I traded, and I made money with it, but I stopped because I found a better way to trade that took less time and made more money. :slight_smile:

I’d advise any newbie to throw out their indicators and learn to trade without them, but I do understand the psychological need that indicators fill. So if a person insists on using indicators I think the Cowabunga system is the way to go!

I do trade the scalp line part of the NickB method, but I don’t trade reversals and S+R breaks by Nick’s method anymore… I started doing them my own way late last year. You can definitely see similarities in our methods because I learned the NickB method before I developed my own trading style, and because neither one of us came up with our methods on our own. They are both based on time-tested trading strategies that have been around for decades.

There are some major differences between Nick’s method and mine. The use of trends is a big one, Nick’s method completely ignores trends. Figuring stoplosses and profit targets would be another big difference. Nick goes for set numbers like 50, 70, or 100, while I use chart analysis to figure mine.

Whether someone trades Nick’s way or my way they will still be successful. I think mine’s better, of course, or I’d still be doing it Nick’s way, but they’re both great trading methods!

Phil great book. I do my analysis the same way but i look for ob’s and breakouts to.

the ob is almost always going to show you the direction of the pending movement (just look for it)

also consolidations always break out so it is easy to catcha good move using that. but the ib i love because it is breakout trading and it has alot of opportunity 80% of the time the markets are ranging.

heres a consolidation im looking at.

Thanks Johnny,

I’m one step ahead of you… I’m already working on Part 2 of my method that covers breakouts. I wanted to keep the first part pretty short and not overwhelm any new traders trying to understand it. :slight_smile:

I’m watching that consolidation as well. I do it a little differently though. I use trendlines on a 4 hour chart and then trade the breakout of the triangle. We’re pretty much watching for the same thing, just doing it in different ways.

I’ve never really paid much attention it OBs, but I’ll start keeping an eye on them now. :slight_smile:

in your chart every single “qualifying ob” was a success. there bullish or bearish nature showed the way the market moved, the only 1 that failed was a long wick ob which i would not have traded. the only thing is an ob trade can cause serious drawdown because of the size. the safe thing to do is wait for the ob to break to enter (big drawdown) or wait if price will retrace for a better entry. Like everything it takes time and confidence to imp-lement. its hard to watcha drawdown grow unless your experience shows you that the trade will work out.

I must give james16 credit for alot of my priceaction analysis. He is a tremendous trader and his methods, IMO are the best around period.

of course if I were to give everybody credit for my style the list would be quite long, Im even stealing a little from you phil :smiley:

tess and co, and tony
jacko (a little)
robert borowski
im sure im missing some…

HI Phil,

Great to see your new book. I can’t wait to read it and I know it must be a good one. Personally, I like your style of answering questions…details,patience and most important is humble.

Do you have any blogs for people like me to learn more from you… I am just started to throw away all the indicators after I found NickB’s method and I am glad that I also have found an experience trader like you, thank you for being there whenever I have those funny funny questions inside my head.

Wish you all the best in your trading journey.

HI Phil,

I have just finished reading your ebook. It’s a good one. Thanks for sharing.

I have few questions, hope you can help:-

(1) Can you explain Stop loss on mini lot?
(2) Ref to IB, does the colour of candles matter? let say, red & green…the price will move up and green & red…the price will move down?
can you show more example on IB?

Thanks for your great help.

hey mumpips all the arrows point to inside bars

*note the 4th arrow is an ib but for some reason when i take the picture it doesn’t show the wick of the candle before it.

Phil, this e-book is the best one i have read. Everything has been explained simple and very easy to understand. I had read many articles, forums…before but noone else could have explained it better. After i read your e-book I know how to place trades now.
THANK YOU SO MUCH!:slight_smile:

all the best

p.s. Phil, where are you going to post part 2- breakouts? I’d liketo read it

I’ve thought about doing a blog, or even a whole website, but don’t have one right now. Maybe in the future…

I am trying to get a part-time live trading room started, but I’m still looking at software. I want something that’s cheap enough that I can run a free room, but still does all the things I want, like desktop sharing, whiteboards, etc…

Anyone have any ideas?


Using the same example from the ebook, say you wanted to risk $20 and your trade had a stoploss of 50 pips. That’s $20/50, which is 40 cents per pip. A standard lot is $10 per pip, a mini is $1, and a micro is $0.10. If 1 mini lots is $1, then .4 mini lots is 40 cents.

Some brokers won’t let you trade fractions of a lot though. If that’s the case then you’ll either need to get a new broker or move down to a micro account.

As for IB’s, the color does not matter. Using Johnny’s picture he posted the only IB I would have used to help base a trading decision off of would have been the fourth one where price bounced off the S+R zone. I only use the IB’s to help confirm a reversal and to determine an entry point (a few pips above or below the IB).

Thank for the kind words Bulhata! :slight_smile: I’m glad I could help!

I’ll post part two in this thread when I’m done with it, which should be sometime next week.

HI Phil & Johnny, Thanks for the reply.


(1) I usually having problem to decide my exit point. When I look at the candle moving against me, I will exit prematurely and my profit is always very small even though i got a good entry. Any advice on the Profit take?
How do you get 630pips?(shown in your last page of ebook) How long do you need to stay in that trade? Do you check news for exit? what type of trader are you- intraday or long term?

(2) Correct me if I am wrong, anything falls within S&R zone is in the no man’s land, so, will you attempt to enter trade if the momentum is high?
If not, what will you do then?

(3) What is your win:loss ratio base on your trading method? How many pips you get per week?

(4) Looking forward to your live trading room,btw, where do you located? will you hold it during Asian time or Europe time?

Sorry for all these long winded questions and thanks for your great help:)

(1) You should always have a clear profit target before you enter a trade. My target on reversal trades is usually the next S+R level or an area close to the opposite trendline. That’s not to say I won’t exit a trade early, but you need a [I]reason [/I]to exit early. Saying “Oh crap, that candle is moving the wrong way” isn’t a good reason to exit early. :slight_smile:

I can’t say exactly what a good reason would be, because it all depends on the situation. It just takes experience to be able to see problems with your trade. Practice, practice, practice!!

The trade in the last picture was on a 4H chart and lasted 5 days. That’s pretty much the longest I’ve ever had a trade run. Sometimes my trades are over in a few hours, sometimes a week, but most are 1-2 days.

I picked that particular trade because it was the first one I ever took where I used an IB to enter. If you want to see it on your charts it’s EUR/USD on Oct 14, 2008. I risked 2% on it and gained 7.5%, so it was worth waiting a week for the trade to happen. :slight_smile:

(2) I disagree. I say anything that’s [I]between [/I]S+R zones is no man’s land. If you look closely, you’ll see I’m not really entering in the S+R zone, I’m entering the trade on one side of it, after a bounce, and placing my stoploss on the other side. It’s a very safe way to trade.

(3) Pips per week is meaningless with a system like this, because every trade has a different stoploss and exit point. I keep detailed record of trades for the two systems I use (Sunday Breakout and NickB Scalps) but I don’t for chart analysis trades. Each trade is different so recording that information doesn’t really help me. My account keeps going up, and that’s all I care about. If I had to guess I’d say I get around a 70% win ratio on these types of trades.

(4) I’m located in the US, but I don’t have a normal sleeping schedule like most people. I’m awake when there are trading opportunities, and asleep when there aren’t. :slight_smile:

Since I’m not getting paid it won’t be an 8+ hour per day trading room, more like 1-2 hours per day, and I’ll spread the times around throughout the week so everyone can benefit from it. We’ll go over the upcoming trades for the day, and review the ones that are finished and see how we could have made them better. I’ll have a schedule posted somewhere so people know when it’s open for the week.

Hi Phil,

Million thanks for the details reply. I will keep practising till everything goes right.

You are really someone! Big thanks

Just finished the e-book, Phil. Nice work! I found it very helpful and your timing was perfect for me. I’m looking for ward to the next one.

Thank you Phil. This ebook plus “Price Action Hero” should make me a good intraday trader. Thanks, d.

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