Price Action That Matters

[krugman25]

@dudest

Hey peeps,

Rising wedges on both EURJPY and CHFJPY (very correlated)

See D1 and H4.

Cheers

.

Thanks for the heads up. I like the strength leading into the CHFJPY wedge, but it is getting a little too close to the apex for my comfort. EURJPY on the other hand is right in the perfect 2/3 region if it were to break out no later than monday-tuesday but the trend leading into it is not as large as aggressive as the other. Certainly worth an analysis and consideration!

[Henry9986]

Hi cheva

That sounds creative & interesting. The rationale is sound, too, except that it may not be complete.

The market does not know & does not care what our RR is. As far as the market is concerned where we place our SL based on our own RR is completely our own arbitrary choice that has no significance to the market.

SL must be based on some technical ground for it to make sense, e.g. behind some S/R zone(s).

In the example you posted, if the argument is taken to extreme, say, an RR of 1/20 the SL will most probably get run over more than 20 times, esp if it is within the ATR range!

Just my humble view.

Henry

Hi Guys I found this on a price action website andI found interesting… I need to know your opinions about what it says…

I dont say this is good idea or bad… just want to know your opnions guys. thanks in advance!

…

[Henry9986]

Hi Aaron

That’s another thought provoking post, as usual. MACD divergence is sth I had interest in. Yours has a new twist. Some good food for thought. :35:

Thx very much.

Henry

@krugman25

… Over in both the stock market and commodities side of the world price has been reaching key levels and setups have been forming in these areas. Pretty exciting for those who watch and trade these markets.

…

[Henry9986]

Thank you for sharing Adam :57:

On UJ and EJ (never trade GJ), a pin bar will usually trigger, then fail the next few candles, when continue down just below where your stop would be and IB’s form.

I trade pin bars on most pairs when I see them at the right level.

There is quite a lot of reversal setups this week, and last, which can fake people out, as usually at a inverse head and shoulders, on the breakout a bearish signal forms and fakes people out as they short, for example, gold this week, UJ, AU, EU, GU.

UK Oil is in the process of what i think is a reversal, and bearish PA is showing.

[adamjn]

Doubt this will work out, EJ has to make a retrace to the 50 level of the weekly candle according to my analysis, and is setting up for it now, UJ has completed the retrace and should find support in the area it is at now to continue upward, failure of the weekly PB low on UJ will suggest lower prices.

I am not buying or selling until we get some move on this…

@dudest

Hey peeps,

Rising wedges on both EURJPY and CHFJPY (very correlated)

See D1 and H4.

Cheers

.

[darthfrancis]

Dathfrancis - still laughing about your comment about “only doing monthly if you were going to do some jail time” – What timeframe do you mostly trade?

Hey dude, thanks for the nice comment. I tend to only trade (in this order) D1,H4,W1,H1 with respect to how much to each i tend to trade 70%,25%,4%,1%.

Daily keeps proving to be the best TF to play but I tend to only enter trades as retracement entries so I then look at a h4 to look at places to set the pending trade.

I tend to forget to check W1 charts but after some posted the other day by Aaron I’m starting to make more of an effort to. H1 is to risky for my type of trading generally. And you can also trade the H8 & H12 etc but I find that alot of effort plus as there not typical charts then most people won’t be trading them either.

Darth

[darthfrancis]

@krugman25

GBPCAD

This was a very high quality setup that introduces a new concept to this thread. That is the concept of repeating price action. In many cases you will have a PA reversal candle form. With each successive formation of that same pattern, it increases the quality and the probability of the trade. In this case when the first pin bar formed we had a good 3.5 start setup form. We had a few downsides such as the overhead minor resistance as well as the pin bar that formed being somewhat smaller than the previous bearish candle. What it had going for it was textbook trend, volume confirmation, and solid trend line & horizontal support levels. The next day we had another pin bar form, this increases the case for going long and the quality of the signal. The next day we had a doji, essentially a neutral candle. I had placed a retracement entry just above the 2 support levels that got trigger on the doji candle. At this point we easily had a 4 start setup. After the doji we had another very nice pin bar form. I didn’t do this myself, but an attentive trader could have added to their position on that 3rd pin bar as the trade was verified once again for the bulls and the quality of the setup increased. I gave it a 4 star because of the overhead resistance was more than just simple noise, and the pin bars were never very large. It is a solid 4 star and an argument could even be made for a 4.5. star.

I also wanted to introduce a new volume idea that can help determine the validity of a setup. The one method we have talked about here is looking for higher volume on the reversal candle. That means the pinbar, engulfing bar, 2 bar reversal should have higher volume. That tells us that there is volume behind the reversal. If there isn’t volume behind the reversal, it may no be a reversal. In this chart I introduce trend volume. Here we are looking at long term volume against it’s long term price trend. If you see a long term trend in play and are worried that if you get long, you may be getting on the train too late and the trend could reverse on you, one of the best ways to find out if a trend is losing steam is by looking at the volume. To get confidence that the trend still has plenty of strength left in it, you want to see steady or increasing volume with increasing price. If you have increasing price and falling volume, this is a tall tale sign that the trend is running out of steam and could be fixing to reverse. The same goes for downtrends, you want to see volume increase as price falls. If price is falling and so is volume, the downtrend may be running out of steam and a trend reversal could be near. This doesn’t mean don’t take a good price action trade, but you may need to treat those trades extra defensively to protect your capital.

You will not find a professional trader that see’s signs of weakness in price and just blindly treats that trade like every other trade. This is why naked trading really doesn’t work in the long run. Trading naked or ‘simple trading’ ignores all of the underlying factors of the market and treats every trade the same. Unfortunately the markets aren’t black and white, true or false, yes or no… you get my point. When the fighter enters the ring, he has already studied and considered his opponents ‘underlying factors’(strengths and weaknesses, tendencies), and will adjust his technique to exploit his opponent based on those underlying factors. It would be ridiculous for a fighter to think he will get through his entire career by using the same punch combination. If this is true for fighters in the ring, it is 10 times more true in the markets. It is “ok” to start with a 1-2-3-a-b-c rule set, “set it and forget it” mentality, but you eventually need to graduate from the elementary grade skills and come into high school and higher learning in the markets. There are times to trade very defensively and risk small. There are times to not set a take profit, play it by ear, and give your trade plenty of leeway. This specific trade is a perfect example where I have very little defense in this trade, I have big risk on it and am playing it very aggressively. I have been seriously considering removing my stop loss and letting the price action/volume tell me when the trend may be coming to an end.

For those who have believe that price action does work but who were told that naked charts are all you need, and have found that naked charts don’t work, I encourage you to stick around this thread and stop by frequently. Here we take a look at not only price itself, but the many other dynamics of the market such as trending, momentum and volume. I have a quite a few techniques in my hip pocket that I am going to be slowly introducing to the thread here over the next few months. They will fit perfectly on the foundation that I have been laying over the last 3 months.

2 points from me, firstly gutted about this trade, I play the 1st pinbar and got stopped out by the second pinbar. But at least I was right about the trade though. Also thanks for clearing up the multiple PA signals issue I thought as much so good to get some clarification.

Secondly I love naked PA and just nakedness generally lol but you are right about the market isn’t black and white its very much grey. I entry trades now after that great point you made about PA signal’s giving the green light to entry and find a good place to trade from (retracement). So your have my ear, but for the time being I’m going to monitor your progress.

Darth

[TJTrader620]

@krugman25

GBPCAD

Great right up and explanation, looking forward to what’s to come from your lessons. I entered this trade on the break of the second pinbar. The first pinbar was right after some very large bearish candles so I avoided that one. I got out of the trade Friday at 1.8384, for a gain of roughly 231 pips. That trade brought me to break even for the month, needed it mentally. Hopefully the trend keeps going and hits your TP next!

[dudest]

@dudest

Hey peeps,

Rising wedges on both EURJPY and CHFJPY (very correlated)

See D1 and H4.

Cheers

.

Aftermath:

.

[darthfrancis]

@dudest

Aftermath:

.

Hey dude(st) hope you made some gains here. Did you take either of them?

Jedi F

[Henry9986]

Hi Aaron

Another excellent piece!

After poring over past 2,780 posts, making notes along the way, I revisited the notes & saw more lights. Thank you Aaron & all other lovely folks in this marvelous thread.

You mentioned another idea abt use of volume. It confirmed what I knew abt it in stock trdg. Trouble is there is no centralized volume in fx to look at. Tick volume is used instead. What is troubling is such tick volumes vary widely among brokers, even among different platforms within the [B]same [/B]broker. Example, FXCM’s MT4 shows different volume info from their Trading Station. I asked Jason Rogers abt it (post # 113 in 301 Moved Permanently) but there was no answer so far.

So, short of a live Trdg Station account where else may we have reliable volume info on fx?

May the pips be with you!

Henry

[B]GBPCAD[/B]

…

I also wanted to introduce a new volume idea that can help determine the validity of a setup. The one method we have talked about here is looking for higher volume on the reversal candle. That means the pinbar, engulfing bar, 2 bar reversal should have higher volume. That tells us that there is volume behind the reversal. If there isn’t volume behind the reversal, it may no be a reversal. In this chart I introduce trend volume. Here we are looking at long term volume against it’s long term price trend. If you see a long term trend in play and are worried that if you get long, you may be getting on the train too late and the trend could reverse on you, one of the best ways to find out if a trend is losing steam is by looking at the volume. To get confidence that the trend still has plenty of strength left in it, you want to see steady or increasing volume with increasing price. If you have increasing price and falling volume, this is a tall tale sign that the trend is running out of steam and could be fixing to reverse. The same goes for downtrends, you want to see volume increase as price falls. If price is falling and so is volume, the downtrend may be running out of steam and a trend reversal could be near. This doesn’t mean don’t take a good price action trade, but you may need to treat those trades extra defensively to protect your capital.

…

[Henry9986]

AUDCHF Head & Shoulders

Looks like head & Shoulders are forming on AUDCHF. Neck line is abt to be broken.

[darthfrancis]

@Henry9986

AUDCHF Head & Shoulders

Looks like head & Shoulders are forming on AUDCHF. Neck line is abt to be broken.

how would you play this?

Jedi F

[Henry9986]

I see 3 ways to enter:

1. when trend line is broken;
2. when neck line is broken; or
3. when price pulls back after neck line is broken.

More suggestions & critiques are welcome.

@darthfrancis

how would you play this?

Jedi F

[adamjn]

The setup
EURAUD H4

I did a full analysis on this, the daily is a head and shoulders, right shoulder was forming when i took the trade…

Inside bars after a breakout. Entry was taken on a break of the 100 level.

After TP 1 was hit at the 161 level. At BE Now.

[adamjn]

Problem with H&S patterns is that they often fail, a while back, NZDUSD had a H&S on the daily, and loads of traders where getting excited selling heavy lots on the break, it was just a fake out.

IMO, you have missed the boat, I try and trade them from the right shoulder, so find PA where the right shoulder should form and sell/buy, for example EURAUD today, I was able to get in on H4 when the right shoulder was forming and banked.

Playing breakouts is a dangerous game… just my opinion.

@Henry9986

I see 3 ways to enter:

1. when trend line is broken;
2. when neck line is broken; or
3. when price pulls back after neck line is broken.

More suggestions & critiques are welcome.

[Henry9986]

Price reversed after you took your TP1. Your remaining position was probably stopped out?

You appear to like inside bar very much. How do you play it normally?

I noted you used extended fib. I use it, too.

[QUOTE=adamjn;604080]The setup
[B]EURAUD H4[/B]

I did a full analysis on this, the daily is a head and shoulders, right shoulder was forming when i took the trade…

Inside bars after a breakout. Entry was taken on a break of the 100 level.

After TP 1 was hit at the 161 level. At BE Now.

[Mr_B_A_Barracus]

[QUOTE=“adamjn;604080”]The setup
EURAUD H4

I did a full analysis on this, the daily is a head and shoulders, right shoulder was forming when i took the trade…

Inside bars after a breakout. Entry was taken on a break of the 100 level.

<img src=“301 Moved Permanently”/>

After TP 1 was hit at the 161 level. At BE Now.

<img src=“301 Moved Permanently”/>[/QUOTE]

Hey Adam

I’m currently watching the NZDJPY inside bars on the daily and wondered how you go about playing them? Do you set pending orders before hand or do you wait for price to close outside and then place an order or do you wait for a break and then a retest?

Cheers

BA

[krugman25]

Hey everyone, been out for the past couple days, looks like lots of good conversation going on though! I did skim through real quick an notice a lot of H&S patterns being posted. I want to re-iterate the H&S patterns are not on the approved list of patterns here. There are many other trad able patterns that are much less subjective, easier to trade and higher success rates. Please check out the approved pattern list on post #2 of this thread.

[krugman25]

2 points from me, firstly gutted about this trade, I play the 1st pinbar and got stopped out by the second pinbar. But at least I was right about the trade though. Also thanks for clearing up the multiple PA signals issue I thought as much so good to get some clarification.

Secondly I love naked PA and just nakedness generally lol but you are right about the market isn’t black and white its very much grey. I entry trades now after that great point you made about PA signal’s giving the green light to entry and find a good place to trade from (retracement). So your have my ear, but for the time being I’m going to monitor your progress.

Darth

Thanks for this post. No worries about missing the trade, now your equipped to whoop the market next time.

I got started with Forex pretty close to what is considered naked, and that made it easy to learn the basic principles of price action trading quickly(trends, S&R, PA patterns). Although as I mentioned earlier trading this way is a pretty large handicap. The best way to put it is if price action trading is like ready the “price story”, then naked trading would be like only ready the chapter titles and maybe the first paragraph. Analyzing the charts more dynamically as we do here, it’s like getting the full text of the story, thus a better picture. By no means do I think I am done on my journey for the best trading method, but I always continue to study ways to get an ever better edge on my trader and a more true view of what price is telling me. Please continue to check out my posts. I don’t often posts trades before they occur, for the reason of this thread not being a signal service, but I do everyone once in a while for the purpose of credibility, and from the count I have been keeping on myself, I have a ridiculously high success rate for calling trades.