Price Action, Candlesticks, and the Story They Tell

Hey everyone, my name is Dale and I’ve never really gotten deeply involved in forums or web-based discussion.

You may know me as Graham - which is my middle name I was using before, but decided to be a grown up and use my first name.

My trading journey started here at babypips - it’s a great, welcoming place for the Forex newbie to get their bearings. I’ve met some interesting people here, some which I am still friends with - the others were just a circus act we all used to enjoy watching.

Thought it was time to give back to the trading community by sharing some of my analysis for those who are passionate and want to learn.

I trade using a combination of price action & swing trading methodologies, leveraging it all with positive geared money management.

Basically, I ‘read’ a price chart and make my trading decisions based off what the candlesticks are communicating. I do this using higher time frames like the daily and weekly charts, where the data, signals and patterns are much more reliable.

I know a lot of you probably are very over enthusiastic about learning as much as you can about trading to try find a statistical edge that works for you - but be careful of “analysis paralysis”, which is a fancy term for information overload.

This often occurs when traders overload their charts with so many indicators that make the price chart look like a nuclear control panel…

If indicators and other chart ‘aids’ are frustrating you, then you’ve stopped by the right place - here I will talk about reading longer term time frames to make accurate forecasts for future price movements.

A lot traders ask about the news. Fundamental news like major bank policy changes are obviously major drivers of market trends. But don’t be one of those guys who gets addicted to volatility created off the economic calendar.

You will never be quick enough to react to data releases that come from unemployment data, GDP updates etc.

By the time you click your buy and sell button, the market will have made it’s move and you will either get re-quoted, or a really sh*tty entry price - so I don’t really pay much attention to the news calendar.

You will actually find that a lot of price action signals will align up to the pending news volatility anyway, and give you a frame work to build a position before the news is released.

Although price action trading can be applied can be applied to the lower time frames easily - but I can tell you nothing ever good comes out of it.

If you’ve been getting slaughtered on the lower time frames, and getting butchered by using high frequency trading strategies, try move to the higher time frames where price charts have more clarity, are less ‘choppy’, and just all round paints a better, clearer picture to what the market is doing.

The daily chart is my number one base of operations for my market analysis…

Some of you might be hesitant and think that higher time frames like this might be boring but they aren’t - It’s actually less stressful, you place one trade let it evolve and by using positive geared risk/reward ratios in your money management, you can easily get a return of 6%+ on a higher time frame trade.

A lot of scalpers and day traders are out there flogging the charts with market orders trying to achieve the same results - now that’s stress.

Don’t view the market like a pigeon would a crowded area, hoping to pickup food scraps and breadcrumbs.

I generally like to stick with using end of day trading strategies because of the many advantages it brings into your trading, and your life.

I don’t want this thread to be viewed as some sort of ‘signal service’ - if I wanted to be a signal provider I would have done so a long time ago. In fact, have tried it on a smaller scale and it’s not for me.

Managing other peoples money, and being responsible for it is a whole level higher than the challenges of trading profitably with your own money.

A lot of signal providers have a low ‘shelf life’, as the pressure and psychological strain eventually breaks them. You see this all the time on sites like zulutrade, where someone will reach the top - do well for a while then suffer a massive psychological meltdown and lose months of gains in days.

So in this thread I am happy to share with you my swing trading/price action analysis and talk about some of the setups that I use to anticipate nice moves in the market.

Don’t trade anything you don’t understand please. You’ve got to be accountable for your own account - so if you pull the trigger on something and it doesn’t work out, then you bare the responsibility.

Now lets get one with it :slight_smile:

2 Likes

First off I just wanted to post a setup that I took earlier today on the GBPAUD. The Inside bar setup is probably the most commonly out of all the price action/candlestick based setups


The GBPAUD is a bit of an out there pair to be playing with I know, but the setup was good so I jumped in. The trend is clearly up, a nice swing line (resistance turned support) which the inside bar is resting on, also the inside bar was resting on mean value (the Emas I have marked on the chart).

Because the trend was up I only was looking for a longs, so I set an order to go long on the break of the inside bar high. Thanks to the RBA news today this trade got a real nice boost.

Sometimes I trade off exotic pairs like the GBPAUD when the USD majors aren’t giving me anything to work off. The only real difference is you have to pay a higher spread, which I don’t mind because I like to trade off the higher time frames.

Did anybody else get in on this move by any chance, surely some of you caught the AUDUSD short?

Howdy DnB

Nice to meet a fellow PA trader. Welcome to babypips and good to see you helping new peeps.

Cheers for now.

Thanks for the welcome bob,

Glad to be here, you all seem like a real friendly bunch so I’d love to help out any way I can.

I am active in the other price action thread by forex school online. I love naked PA and anything relating to it is of interest to me. You do get allot of S… though! :slight_smile:

Are you going to be talking about live setups as they happen?

Hey Spongy,

I won’t be giving out any ‘signals’, purely because I think that is illegal.

But yes I will post setups that I think are good and talk about them before they trigger, for -educational purposes- of course.

There does seem to be a lot of price action talk going around, more than I originally thought, I am glad that everybody is into it!

You kill me sponge,

Here is something I noticed at the start of the session that hasn’t triggered yet. It is the daily chart of WTI Crude Oil. Just keep in mind crude oil is a tough beast to tame but I think setup has some points in it’s favor.


The chart is looking bullish here, price is resting on this swing level which has acted as support, resistance and now support again. I am using the EMA’s here as mean value for price, which also acts as dynamic support and resistance for price in general. Price is closing on the bullish side of the EMA and the last few days has been respecting their values as support.

Secondly the actual candle stick signal is what I call a bullish rejection candle, most people call them pin bars, but the candle shows bullish rejection of lower prices, leaving that long lower tail, so that’s why I’ve always called them that name. The area that the candle rejected was the mean value + that nice swing line I’ve drawn through there.

I am not trading this one personally , but I wouldn’t be surprised to see an explosive move higher here. Crude oil doesn’t hardly move until the CME opens during the new york session, then it really gets going, and can whip around a bit, so if I trade oil , I always make sure I have a sensible stop loss placed.

Well that’s enough rambling from me haha. Information overload? I told you I was passionate about this!

Hey DnB,

Interesting thread, love PA and looking forward to more lessons from you… in particular the higher time frames you use (1 hour, 4 hour or/and daily?), the settings of the ema… stop loss placement, targets, which candle patterns you look for…etc. Basically, I would like to know what your methodology is in trading PA. Subscribed to your thread :slight_smile:

Hey trizone, thanks for joining in.

I pretty much souly trade off the daily time frame. Sometimes I do dip down to the h4 but very rarely now, I much prefere to trade the daily’s because the candles have so much more price action data inside them, it is 24 hours worth. When you trade off the h4 you’re only getting 1/6th of that data. I often refer to the weekly chart, gotta pay attention to them strong weekly levels.

The 2 EMAs on the chart are the 10 & 20 day EMA’s. Good tools to get a reference to the mean value of price, especially the 20EMA. These are the only indicators I will ever put on the chart and I don’t use them in the traditional way.

The price action system I work with is dynamic with entries & stops. There are ways to get into these setups at very good prices with a nice tight stop. We will take it slow and stick with talking about the standard safe entry and stop methods to start off with.

The candle stick setups I work with are the rejection candles I’ve talked about already, 2day or 2bar reversals, outside bars. The typical consolidation breakout patterns like inside bars and indecision candles ( like a doji ). Consolidation patterns from price squeezing up into a wedge, or support/ resistance. Also false breakouts of the major S/R lines, I find the false break signals exceptionally powerful, one of my favorites actually.

I was just looking through the charts then, the crude oil setup I was showing sponge has pushed up nicely. Most people here probably don’t touch crude oil, but it is still fun to watch anyway.

Hey DnB,

Looking forward to more good stuff from you and like you I have my preference to the daily charts. It will be nice to see how you draw your support/resistance lines although I think it will be like most do… keep up the good work and more charts like the crude oil which btw, looks good :wink:

Just looking over the charts and spotted this Inside Bar on the silver daily chart. A breakdown lower could be seen here, a good location for a short signal to form IMO. Right under a major resistance line, under a major trend line, at mean value with the overall trend being down here. The inside bar itself has a bit of an upper tail and a nice bearish close to the body, all the ingredients are here for a nice drop.

Hey DnB,

I’ve never considered using inside bars as trade triggers so interesting to see how you use them. I see this move would run into a bit of support if it breaks from this level.


Also false breakouts of the major S/R lines, I find the false break signals exceptionally powerful, one of my favorites actually.

I would like to learn this of you. Are you going to teach your pa methods here or give chart examples as and when they present themselves?.. either way I’m good, but I know for others coming to a new thread like yours they would probably like some kind of structure on what you have to teach them. Just a heads up :slight_smile:

I’ve never considered using inside bars as trade triggers so interesting to see how you use them. I see this move would run into a bit of support if it breaks from this level.

I am surprised you have never heard of inside bar breakout trading, I’ve seen it many times around the forums and other corners of the internet. The basic idea is that an inside bar is a period of consolidation, and you basically take the breakout from the inside bar / consolidation period. The general rule is you go long on a breakout of the inside bar high or short the breakout of a low, stop placed on the other side of the inside bar. Now that’s the basic Idea with inside bars, problem is if you try trade every single inside bar you see like that you are going to lose money

So you have to be smart about it, I don’t trade the candlestick signals just because they’re there, you’ll destroy your account like that, you’ve got to line up the candlestick signals with other factors, is it in line with trend?, the trend is your friend remember. Is the market even trending?, or just moving sideways, or maybe just stuck in heavy consolidation, how far away is price from its mean value?

The silver chart is in an obvious downtrend (from the daily chart point of view , not the 15 min charts :stuck_out_tongue: ), price is nice and close to the mean value, price is resting under that nice level + just under the trendline. So I am going to be looking to short, now there is an inside bar setup, it has a nice bearish close to it and a bit of an upper tail or wick.

These are the sort of things I check when I am looking at trade setups, now the inside bar breaks its lows, that is my que to get short and enter in with the bearish momentum, or my confirmation the setup is unfolding the way I want. But this is forex and anything can happy, if the trade turns around and stops me out I am not going to feel down about it because I entered for good reasons and nobody as a 100% win rate :stuck_out_tongue:

Just a little bit of light reading for you :wink:

Hey DnB,

Thanks for your insights to the way you approach your trading, it helps a lot. How would you manage your trade ie. stops, targets… etc. ?

Btw, I do know what IB are… just never used them for trade triggers as like you said if used on their own can lead to more trouble then they are worth. :18:

How would you manage your trade ie. stops, targets… etc. ?

I try to do as little managing as possible, I like to set my trade and be able to walk away from the computer knowing I am either going to be stopped out, or the target gets hit. With inside bars most of the time I place my stop on the other side of the setup. That is really best and most logical place for your stop to be with any of the price action setups. At a bare minimum, I only ever move my stop to break even after the market has made its first retrace.

Targets, well with any system your returns should out weight your risks right?, so I usually aim for about 3x what I risked ,or in other words a 300% return on the trade. Every now and again when the conditions are right, I don’t set a target and go in for the long haul. You have to play the market candle by candle, if I can only get 200% return on the trade because there is a strong S/R level in the way for example, then Ill just set my target just above or below that S/R.

The trades I really cash in on, are the ones that I leave open for weeks.

Hey DnB, nice thread…
I trade almost like yourself and love PA trading.
Which daily closing time do you use? I use 5 pm New York close

Which daily closing time do you use? I use 5 pm New York close

Right on lucariga, I think most people who trade with daily candles use brokers whose candles close when New York closes.

It gives you a true representation of what happened during that last Forex 24 hour session. Sydney Open -> New York Close

The trades I really cash in on, are the ones that I leave open for weeks.

Now those are the trades I want to be on :slight_smile:

Enjoying the thread and insights… keep them coming :35:

nice thread so far welcome to babypips