Did anyone take my lovely engulfing pin bar I posted earlier on the GBPAUD earlier today? Some very easy pips there, just taken my profit. If so you can pay me back in kind when your rich.
You got it BA, and you drew the bottom trend line of the wedge correctly also. While you didnāt draw the upper trend line of the pattern here I want to point out itās importance. If you drawn the upper trend line of this pattern you have an ascending trend line also, but at a less sharp of an angle as the bottom trend line. So in an ascending wedge you essentially have 2 converging ascending trend lines. With the bottom trend line being the same, you can change the top trend line and end up with 3 more patterns, all with different biasā. If the upper trend line was completely horizontal you would have an ascending triangle which is a bullish pattern. If the upper trend line was descending you would have a pennant, which is a neutral pattern. If the upper trend line was ascending at an angle equal or great than the bottom trend line you end up with a channel pattern or a widening wedge pattern respectively, both can have either bullish or bearish bias depending on the previous price action. All of the patterns mentioned also have varying success rate with the ascending/descending triangles being the highest and pennant and widening wedges being the lowest.
ā¦all about GBP strength todayā¦good trading all!
Nice work krugman! I look forward to learning more in your upcoming lessons. Would it be possible to also express your winnings in pips as % profit is subjective to amount invested? Thanks again for the thread, Iām doing much better so far this year.
I dig into all of the detail in my full analysis, R:R, % win, Pips won. The problem with measuring in pips is that not all pips are equal measurement among pairs. I posted a while back that in an exotic I like to trade, 10 pips on that pair is equal to over 100 pips on the EURUSD. So an pip to pip comparison among difference pairs is apples to oranges. Probably the purest form of measuring profit is in RR.
I will be posting that trade shortly.
[QUOTE=ākrugman25;592199ā]
You got it BA, and you drew the bottom trend line of the wedge correctly also. While you didnāt draw the upper trend line of the pattern here I want to point out itās importance. If you drawn the upper trend line of this pattern you have an ascending trend line also, but at a less sharp of an angle as the bottom trend line. So in an ascending wedge you essentially have 2 converging ascending trend lines. With the bottom trend line being the same, you can change the top trend line and end up with 3 more patterns, all with different biasā. If the upper trend line was completely horizontal you would have an ascending triangle which is a bullish pattern. If the upper trend line was descending you would have a pennant, which is a neutral pattern. If the upper trend line was ascending at an angle equal or great than the bottom trend line you end up with a channel pattern or a widening wedge pattern respectively, both can have either bullish or bearish bias depending on the previous price action. All of the patterns mentioned also have varying success rate with the ascending/descending triangles being the highest and pennant and widening wedges being the lowest.[/QUOTE]
Thanks Aaron, I think I understand what you mean, I should have had another descending line above. How do you decide to enter, do you wait for a pull back after the wedge is broken or take it as soon as a candle closes outside the wedge?
This rising wedge pattern was absolute gold. It has just about every possible characteristic you could want in this type of pattern, which is why I gave it a 4.5/5 star rating. The only thing that kept me from giving it a perfect 5 star rating is a more extreme slant would have been desired. That would have increased the bearish bias of the pattern more and also increased the potential RR. This is a text book rising wedge in the sense that it perfectly fit all of the criteria for this type of pattern. A rising wedge is a considered a bearish reversal pattern, where you have price rising and looking as though there is strong bullish momentum, but price ultimately breaks lower and continues to bear trend. I really have no negatives to say about this pattern, so I will just go through the list of positives that I saw.
- Price leading into pattern is strong down - While this isnāt a requirement, have a downtrend in price leading into this pattern helps improve the chance of a bearish breakout and strengthens the case for future bearish movement.
- This setup had 3 touches to both the top and the bottom trend line before the breakout occurred - while only 2 touches are required for a valid trend line, a 3 touch of the trend line with rejection helps solidify and bolster the pattern.
- Declining volume on rising price gave us good volume/price divergence - This type of divergence isnāt required for a valid rising wedge, but it can be used as an additional indicator for the quality of the pattern and when volume/price divergence occurs it increases the chance of a successful breakout.
- Breakout occurs at around the 2/3 mark from the pattern start to apex - This rule applies to pretty much all wedge/triangle patterns. The close price breaks out at the 2/3 mark, the higher chance price will make it to the take profit target, and the stronger the price movement following the breakout. A breakout close to the apex has a higher chance of failure and the breakout is usually weaker.
- The pattern formed in āno mans landā - With the pattern forming in a price region that it hasnāt been in for years, there is very little noise and minor resistances for price to get hung up on. Which previous candles to create a mess on the chart, price can move between major S/R areas more freely.
That covers the pattern quality itself. As for the entry, I entered what would be considered the typical entry for this type of setup. For wedge patterns you want price to break out of the trend line and hold outside for a minimum of 1 candle. I caught this wedge on the hourly, so I waited for at least 1 hour to pass. This helps lower the chance of a false break and price pulling back up into the wedge. You can enter as soon as a candle breaks and closes, or you can wait for the breakout and failed pull-back to the trend line. In this case about 10-12 candles after the breakout price had fallen away, and then made a failed attempt to pull back into the trend line about 16 candles later. An entry could have been made at that point also. While this is safer, price doesnāt always pull back so you have a chance of missing out on the trade. In this case the pattern had so many positive qualities, I felt the risk of entering right after the breakout was mitigated so i entered just a few candles after breakout. In a rising wedge pattern I will put my stop loss above the last swing that touched the upper trend line. If price were to pull back into the pattern, that would be the next likely area where price would find resistance. There are multiple ways to calculate take profit on this type of pattern, but the most straightforward method is the take profit at the lowest point of the start of the pattern.
Where to go from here
The bottom point of that pattern will now serve as the most recent and most significant S/R area. If price is able to break through that area(around .8230), what we could watch for are price pullback and that previous support to serve as resistance. If a pullback to that area presented us with a nice high quality PA candlestick or full pattern setup, then we could potentially get short again on the new/fresh price action.
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Great trade, I also wanted to point out that the mother candle of the IB you traded was also an engulfing bar and the 3rd candle in a morning star pattern. Overall lots of bullish signals firing off their. Certainly taking profit from the last swing high and also the price high for the past couple years is a good logical place. You could easily take profit at that level, and if price breaks through that level to reach new highs, wait for the pullback to that level and go long again. If you are comfortable with trading in āno mans landā, and being a little more active as your trade continues, you could move to BE and shoot for the next major resistance, or not set a TP at all and just hold the trade until you see clear bearish price action. Lots of options there!
I would say though, if you are taking profit at a swing points, donāt shoot for very farthest possible pip in the swing. Take a 5 or so pip loss and move your TP into the swing a little bit. Price will start to get resistance before it reaches the very tip top of that last swing high, it would be a bummer to hand back 100+ pips just trying to take profit at squeeze out an extra 5 or 10 pips from the trade.
Thanks for joining the community here! First I want to say thank you for the kind comments and itās a blessing to me to see people benefiting from this thread. I ultimately hope from each member here that the material translates as real dollars and real profit increase since that is the ultimate goal for tradersā¦ Based on what you described what you are looking for āmarket dynamics, analyzing the trade step by stepā, you came to the right place. Since I donāt make any money from this, I donāt have anything to lose by being honest about the market! haha. I try to take the market place which is dynamic, complex and messy at times and try to lay it out in as simple terms as possible. The great thing about the price action approach is you can decide how deep you want to delve into the market. You may want to keep it simple, learn just a few basics of the market, trade only a few patterns and use just 1 or 2 S/R tools and find success as a trader. When you are comfortable and ready you can begin approaching the market on itās own terms and learning about the more complex aspects of price action, and grow your success and profits even more. Essentially the market can be as simple or complex as you are comfortable with, but there is always room to grow in understanding and profits.
You hit on something important in your post, you donāt believe you have good understanding of price action but are still achieving profits because of strict money management. You are proof of just how important MM is. I can take the flip side of that statement and point out that numerous people I have met have tried price action and say it doesnāt work. I would venture to say that the majority of those people were losing because of poor or loose money management techniques. The method will never work without proper MM application.
Donāt worry about the English, the majority of members here donāt have English as a primary language and I can understand everyone just fine. Again welcome and I hope to see you posting here more.
Thanks for the post Juan, I appreciate your eagerness for more articles and your kind words about my teaching! I have a goal of at least getting out 1 article for my Florida trip at the end of February. The articles and videos I produce are about 5th or 6th on my priorities list. The startup company I am trying to help get off the ground takes up a tremendous amount of time. That usually leaves enough for family and a little bit of posting on the threads. When I get a good window of time is when I try to hammer out an article or video. This is the downside for free information, although the upside is I can be brutally honest about the markets and there is not a possible of a conflict of interest between what I teach about trading and trying to sell a simple trading message for memberships.
Prodding me in the forum for more articles doesnāt hurt any though! 
This was a nice catch Aaron!! however how did you mange to enter on the trade? right at the entry point there were important CAD news going onā¦ so you get a lot of slippage entering right at newsā¦ on the other hand if you didnt enter at the news but before, then the trade could have been either a winner or a loser because news can spike Up or Down depending on what the BOC monetary policy. so in that case if you are exposed to this kind of things inst it like rolling the dices? I meanā¦ the SL loss could had been easily hit by opposite news. what do you think? mabe Im missing somethingā¦
anyway congratulations on your trade!
I didnāt enter immediately after the break, price had already broken below the trend line for a few candles before I saw it. The rate decision didnāt happen until this morning, or about 12 hours after I entered the trade, so there was no spread effects on the trade. Trading full patterns is inherently safer than trading individual candlestick setups because you are putting your stop loss at major swing highs/lows as opposed to a individual candle high/low which is riskier. Iām not sure I accept the premise that a different news outcome would have significantly changed the way price moved. The more that I trade the more I am convinced that news and price have little or no correlation. The only part of news that enters my trade setup analysis is if there will be any news releases that will introduce unusually high volatility to my trade, and if so does my setup allow enough breathing room to mitigate the risk. As far as news to price correlation, I believe news is just a vehicle that introduces volatility and helps price move quicker than normal, but the news itself has little correlation with the direction price will go.
There are a couple schools of thought on the news, one is that news lags price and the range of probable outcomes has been accounted for in price. There is even a more extreme version of that idea, which is news lags price so much so that news is actually a result of price action. Then there is the idea that every news outcome can equally be twisted for either a bullish or bearish bias. Or that news has so many hundreds of complex impacts on various facets of economies that it is impossible to for traders to uniformly come to a conclusion about news affect on price. If any of the above are true or partly true that would means price moves regardless of what the news says. Of course this applies to planned events, and not sudden unpredictable events. Although no one is going to be trying to trade rare 1 of events, we trade what is predicatable and repeatable. I personally fall somewhere in between the idea that news lags price a fair amount and the results of news events are too complex for the market to be able to move price in a predictable way.
Hi guys, two question for the exprienced PA traders:
1)I was wondering myselft how to decide what direction is the trade when we trade from H4 charts, do we look in to Daily charts to know hows the trend? or do we look at H4 and detect the trend or ranging from it? I know many of you would tell me that if we are going to take a trade from a H4 chart then we should look at H4 trend to know if we are āāgoing with the trend or against itāā but it seems like the Daily trend is more reliableā¦ althoug Im not sure if its the best to look at it when taking H4 trades.
- I been using a 100 or 200 EMA to see if trend is up or down (if price is above EMA then trend is long, if price is below EMA then trend is short) do you use other method or have a different one?
Esteban
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I donāt think the answer is quite is straightforward and simple as most would make it seem. The answer is that the timeframe that your price action signal formed from is going to give you the best price targets and stop loss areas. The farther away the TF that the pattern formed in, the less that price information is going to reflect what is going on at your patterns TF. Example, if you have a 1 hour pin bar, that timeframe is going to be the best at looking at the story behind the pin bar and where price might move as a result of the pin bar. The price action in the 4 hour will have a loose correlation to your 1 hour setup. If you get up to the daily, it will have much less correlation, and so on. This is important because you might have a strong bullish trend setup going on in the 1 hour charts, but a strong bearish trend playing out in the daily or weekly. For most beginner/intermediate traders, I would say donāt worry about any other timeframes except for the one the setup formed in. If you are trading with an edge, it wonāt make or break your ability to be profitable. If you have been trading long enough to understand the relationships between the various timeframes and how price over time works, then may want to quickly look at other timeframe price action during your setup analysis. When looking for support and resistance, you are best finding the major daily/weekly S/R lines. Again if you have been trading for a while, you can trade intra day S/R lines but [B]only during strong text book trends[/B].
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Take a look at my quick navigation section on post #2 of this thread and read through the article about finding trends. Here we say price is in 3 states, up trend/down trend/no trend. The rules that I use to determine a trend are pretty strict and if you follow it, it will pretty much guarantee you are always on the right side of the trend. Itās what I call the text book definition of a trend, using only price itself. I suggest not using EMAās to finding a trend. EMAs take a chunk of detailed price action and mashed it up into 1 big bowl of price averaging, there is a lot that is lost going from raw price to EMA. You can actually be in an uptrend and under the 200EMA, if that says anything. Best to just let price tell you the trend.
Good morning everyone. First lugarar I introduce myself . Enter forex by chance , one day I came across a report of a Swiss bank on the behavior of the currency markets when their " countries " sleep . The author wondered if that would be exploitable obsevable pattern in an efficient market . With the help of a friend created a system , after much experimenting and backtesting , and learn things that were new to me (risk control money management ā¦ ) . Like really was a fun start investing with little money, but we were able to get in about a year a 300% return . All this was in 2011 . We close the issue because it had a lot of work . Never quit forex, but since then Iāve searched slowly but surely, all kinds of systems , strategies, etc ā¦
I will not explain in this first message that I have dropped 98% of all ( montecarlo test , backtesting , ā¦) systems until one day I met PRICE ACTION, and so I got to this forum .
I can only have words of gratitude to the author of this forum for their immense generosity and teaching facility .
We decided (my partner and I) put in several āsystemsā march on a weighted basis for 6 months starting planing real . One of them is based on this forum.
Currently 12 % return with this strategy since the beginning of the year, in demo mode.
I will try to contribute and be constructive , even though I have many theoretical knowledge (programming, mathematics, money management , risk monitoring , configuration ā¦ ) I can not say the same at the practical level .
Again congratulations to the author and collaborators.
Best regards
Wecome to the thread jj. First I want to say thank you for all of the kind words. All of the awesome traders here are what makes this worth while for me. It sounds like you went down a road that is pretty common among traders which is trying to find the best automated trading system. Most trading system are optimized for a certain time period. As soon as price behavior changes, a once successful EA will begin losing. Only a very few systems have been built to change with the market, and most of those you wont find for sale online.
It sounds like you have a lot of great experience that we would find valuable here. Welcome to the community!
Thanks Aaron your reply was the type of answer I was waiting for! god bless you!
I decided to take profit at the swing high - since price was so far extended, I thought it likely it would retrace at least a bit and would rather bank profits now. RR was a bit less than 1:1 as a result but I was comfortable with the set up so loaded up and made 3% on this one.
I know it is a nice problem to have - but I really do have difficulty letting my profits run once I do get into a profitable trade. Any chance we could have some articles/materials on trade management, please Aaron. I know you are a busy man, but if you could post something on that topic at some point soon, I would really appreciate it.
Thanks.
I have the same problem with letting winners run, for me the hardest thing about trading. Currently have the USDCHF trade running close to my tp but my instinct is to take the money and run and pretty positive that it can hit my TP but still get the urge to withdraw winningsā¦
Darth
Scratch that TP just got it. Yay! lol. But what a good example. So I guess the lesson here is to have faith in your technical anaylsis. My strong suit where as money management my not so strong suit.
Darth