Price Action That Matters

darthfrancis · February 26, 2014, 12:18pm

I’ve even less, so don’t worry too much bro.

Darth

kayvon77 · February 26, 2014, 4:26pm

I’m starting with $5,000. You think I can make a living doing this full time?

darthfrancis · February 26, 2014, 5:49pm

Maybe after 5 years of steady growth with compounding all your profits. Sure depends on your life style.

Jason_Rogers · February 26, 2014, 5:49pm

All FXCM accounts will allow you to trade micro lots. However, there are differences between platforms in how trade sizes are displayed. For example, on Trading Station a micro lot (10 cents per pip) is displayed as 1k or 1,000 currency units. On MT4, a micro lot is displayed at 0.01 standard lots (with a standard lot being $10 per pip). On Trading Station, a standard lot is displayed as 100k, while on MT4 it’s displayed as 1.00 standard lots.

darthfrancis · February 26, 2014, 5:52pm

Geez such a slow grind but the ascending triangle on the USDJPY is still intact.

And is it me or is the market holding its breath? 2 nights in a row and not a single good trade on the dailies just consolidation everywhere.

Jedi

darthfrancis · February 26, 2014, 5:55pm

Also this has peaked my attention. On the H1 gold chart massive divergence on the price vs volume

Thoughts?

Darth

adamjn · February 26, 2014, 8:41pm

It is not such a great thing when you loose a trade though, I only trade heavy lot sizes on a few different pairs that I have gotten to know quite well. EURAUD, UJ, UJ and Gold.

It still scares me making trades in excess of 50 lots, the loss can be so big, which is why I only trade a few setup with this volume, setups with a stop of 30 pips or less. If I have a 100 lot trade open, I know for a fact I will not sleep that night… it is emotionally painful at times.

cyanidez · February 27, 2014, 12:20am

Hey master Darth,

Do you think we can call that divergence? I’m not sure if you can correlate price action with volume slope… if you ask me, that graph correlates perfectly… smaller candles, less and less volume…

What I would consider price/volume divergence is if there is a small candle but a huge spike in volume or vice versa, which might definitely be something interesting to study and backtest!

Cheers bud

Panupat · February 27, 2014, 12:25am

I know what you mean. Although at a much smaller scale, there was once I mistakenly opened a 3 lot trade instead of 0.3. And OMG it was stressful.

Henry9986 · February 27, 2014, 12:28am

Awaiting your article to delve more into IBs. :57:

krugman25:

Gold has reached a very major resistance area in the 1340-1350 range. As I mentioned in my post to Adam, going long right below a resistance line is very dangerous. What makes the type of price action trading we do here so successful is that we go long at support, and go short at resistance. And we make those trades from price action setups that give us even more of an edge. There are 2 types of inside bar trades, as a continuation or as a reversal. You trade the continuation when you are trading with the trend and you aren’t trading directly into resistance. When an inside bar forms right below a key resistance, it is usually traded as a reversal signal, not as a continuation. If you do think price will continue, you want to wait for price to break through resistance and then pull back before you jump in line.
This is one of the big reasons I wanted to wait to highlight IBs here because they are themselves a neutral candle pattern, and they only supply true trading edges in certain types of setups. IBs have a high rate of false breaks which makes them difficult to trade profitably. As you drop below daily time frame, IBs become even more random with higher failure rates. I don’t mind IB discussion here but I want to make sure we are still trading with an edge, and not trading into resistances.

darthfrancis · February 27, 2014, 3:25am

Thanks for your input mate, yeah I see your point, I’m starting to look out more for other price indications i.e triangles, IB’s, volume and divergences. Not trading them individually but along side solid PA.

Interesting point about small candles with high volume, I’ve seen some of those the last couple of days, but as they appeared at insignificant areas didn’t think much of them.

So what instruments do you use for trading bro alongside PA?

dARTH

adamjn · February 27, 2014, 8:12am

Gold should go down to at least 1314.22 if it breaks the IB low on H4. Doubtful it will go up at this stage.

darthfrancis · February 27, 2014, 8:26am

Personally it looks like a retracement from the strong bullish uptrend ready for the old 1-2-3, IF bulish PA formed around this level I don’t see much wrong going long at least to the recent high.

Darth

adamjn · February 27, 2014, 8:52am

It depends, if it breaks the low, then down, if it closes above the trendline, then chances are that will will go up, will just have to wait for confirmation.

The important thing is now, we are at a weekly trend line, and also you can see momentum has been stalling, on H4, daily and weekly candles.

darthfrancis · February 27, 2014, 9:14am

Good point, yeah confimation is need.

I’m still kicking myself over this trade, I was long at the 1245 area and saw price struggling at the 1250 area so closed out with small profit. needless to say…gutted. lol

Darth

adamjn · February 27, 2014, 11:43am

Seem to have confirmation of higher prices. Waiting to see how this H4 closes then I will take a position, TP at the high would be best.

Yeh, I was long from an IB at 1262 and closed out at 1329, still a nice profit

Henry9986 · February 28, 2014, 1:27am

Often found your comments worth reading more than once :44:

krugman25:

I would have to somewhat disagree on your analysis. Your are correct that their is a long term bullish bias, but a long at this point would be extremely risky, let me point out why. You had mentioned the weekly pin bar. That is the pin bar I pointed out a few weeks back and ended up making about 4% profit going on long it. I would say at this point that pin bar has ran it’s course as we have now reached a major resistance area. The second thing to mention is that in the chart you posted, there is a bearish hammer which has formed off of the AHT(All Time High). The other big thing to look at is correlation. The SP correlates strong to the Dow Jones which is flirting with the possibility of a 1-2-3 reversal pattern right now. Every day that closes below the 16300(key trend-line resistance) increases the chance of that reversal playing out. Right now the market is at a point of inflection which means the market isn’t giving us clear direction either way, but whatever direction is does break out in, it will most likely be a huge breakout. Which may come with some major volatility and whipsawing. When you have a long term bull trend bumping into a major resistance and showing signs of weakness, it’s almost certainly best to let the direction shake out, wait for the pullback to jump in.

Henry9986 · February 28, 2014, 1:52am

As it is there are risks everywhere in life. Traveling in cars, on board planes, ships… all involves risks. We cannot run away from taking risks. The big difference is whether it’s calculated risk or blind risk. For example, walking on a busy highway with eyes open or blind-folded.

krugman25:

I respect your experience with the markets, but you never “know” what the market will do. There is the more probable outcome and the less probable outcome, that’s it, and 95% of the time the outcome is close to random, which is why we sometimes wait days or weeks for the right setup. It’s extremely dangerous to think price will perfectly follow the lines you drawn out on your screen. I’ve been trading for about 10 years now and the markets don’t always do what I think they should, or obey the lines I have marked on my charts. If they did none of us would be chatting in this forum, we would all be cruising the ocean in our 100 million dollar yachts.

"[B]If you don’t take risks, you won’t bank :P[/B]"
We have a casino a few towns over and people there are taking risks all day, although 99% of them walk away broke. Having a trading edge is about reducing risk as much as possible, so I would say the less risky the more you bank and the more you risk the quicker your risk-of-ruin. Also remember that most people here don’t have the the years of experience you do and will lose much more on excessively risky trades.

Again I am not against the IB pattern, that is a pattern I use in my own personal trading plan but we need to stick to the foundation of the trading method here which is trading pullbacks and reversals and also having support underneath us when we go long and resistance above us when we short. That means not every inside bar is tradable, and realistically about 90-95% of IBs won’t fit that criteria and should be avoided.

Henry9986 · February 28, 2014, 2:14am

Don’t worry abt starting out small. You know what: if you double your capital, say, every year the compounded gain in the Nth year alone is MORE than the sum total of ALL the gains from the 1st to the (N-1)th year!

Henry9986 · February 28, 2014, 2:23am

Be careful whether it is the usual lull period of the trading day! Low volumes don’t mean much there.