I agree, you’d be trading straight into a support that was recently rejected. I also don’t like the amount of traffic you’d be going into if you were to short that pair. It’s evident that the pair is ranging but the range isn’t clearly defined. If it were to head downward, it could reverse on any one of those smaller support levels in that range and stop you out if you don’t set your limit properly. It doesn’t have much space to move. What you would have to do is set a smaller limit which ultimately hinders your R:R. Not worth it IMO.
Since this candlestick pattern is included in this threads rules I thought I post it since this pattern is pretty rare on the daily chart.
A bullish flag pattern is forming on the NZDUSD daily chart. 
I’m a curious regarding how you guys would trade this. Trade the breakout aggressively or wait for the retrace and enter if we get a price action at a support level?
How I see EURUSD 4H
Gbpnok 1d
Care to explain more what a bullish flag pattern is ?
thank you
Under" one of the things we do" (page one) Aaron has put "Morning Star/Evening Star"for those unfamiliar with this here is a useful utube explanation which some people may find useful 32.How to Trade the Morning/Evening Star Candlestick Pattern - YouTube hope this helps someone.
Trade Idea: USDSEK Short
Price have broken through support and forming nice pinbar on retrace.
I will rate this once Aaron have given example of the rating system. As this is his thread and I will respect that.
I look at this PB too. There is only one thinq that scares me and it is large bullish candle before pinbar. Not sure that PB is large enough.
EUR GBP 8 Hour Chart
does this qualify as an evening star or not because it is 4 candles and not 3?
If it is a tradeable setup where would you set your entry and SL ?
Thanks
Thannk you bambino for your reply…i did notice the bulish bar but the previous support was held so strongly. Resistance will be strong too and we got confirmation with a pinbar.
[QUOTE=“krugman25;547029”]Video - "How to Identify Market Structure and What a Pinbar Is"
Video Link: http://www.youtube.com/embed/WR2gp1t8hJE?rel=0
I’m new to adding video so if anyone knows how to embed the actual video into the thread please message me about it.
This is the first video tutorial I ever made discussing price action. It is a 2 part video. First I discuss how to analyze the market to figure out what direction you should be trading and where to specifically look for price action. The second part is a detailed explanation of a price action pinbar and the requirements for a valid pinbar. The video had a third part that I clipped off because it was too long, but it essentially covered the psychology of pinbar and why they form. Video is my favorite way to teach so I imagine there will be more to come.
Enjoy![/QUOTE]
Excellent video Aaron, thank you! Looking forward to more.
Newbie island sounds like a plan. We are here really picking up steam way too fast, and it makes me sad that people simply throw whatever they can think of in their chart without much thinking. It’s like people simply ask for your confirmation for a tempting setup and once you say ‘yes’, they’ll take the trade in their live account without hesitation. Maybe it’s just me, but the last few posts make me think that some people kinda miss the ‘educational value’ and instead move into merely ‘signal service’ thread here.
I’ll be really honest here. The only reason I’m here is because I have faith in you, Krugman. Only very few people from the other thread that have really earned my respects. That’s including you, bhops, dudest, and Johnathon. Let’s face it. We both have discussed it in the other thread, most of the time the setups we read are garbage -no offense to anyone who has posted his / her chart, but it’s a fact- anyway, and it’s not worth to seriously consider putting any money in those trade. That’s why in the other thread I only focus on the best of the best of A+ trade setup, and here I want to focus only on the best of the best of 5 star trade setup. I will wait until we have enough examples of your best of the best 5 star trade setups to safely ensure I really get your idea here, and in the mean time I will keep helping you with whatever I can think of to ensure this thread stays faithfully to its value as an educational tool in price action trading.
I agree with what you are saying. Most of the other well know teachers here, came here with websites jam packed with articles and videos, so they just slapped it down in the thread and were ready to rock and roll. It’s going to be pretty raw here for a while. I’m not expecting a lot for the first couple weeks until I get some material here for people to read. What is going to be lacking the most for a while are a clear rule set. Price action has a side that is rule based and methodical, and a side that is very subjective. Most people have a hard time following hard set rules, and completely fail when it comes to the subjective parts of PA. So I am going to be pumping out “hot off the press” articles hitting the core aspect of PA, how I trade and focusing on the rule side of PA. This means we will see most trades as cookie cutter. After a few months I will start moving into the part of PA that can be more subject, and really discussing the uniqueness of each trade.
You were right in your previous post that my method needs to be laid out plain and clear so the thread has a good solid direction. Because of that I am going to focus on producing good articles and learning material first, and not much on trades. I will comment on and post trade setups if they are worth talking about, but for the first while I am going to really be spending time on PA material and a good rule set.
Like I said in the beginning though, I am going to make this thread flexible in a way that it isn’t hindering discussion, but balance it with clear rules from my method. And also give people room to learn how I trade, tweak it to fit their personality, and not have it get confusing here. I will see in time how to strike that balance.
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Article
Step 1: Identifying a Trend
Three steps to finding price action setups
[ol]
[li]Identifying a Trend
[/li][li]Finding Key S/R Areas
[/li][li]Watching for Price Action at these Key Levels.
[/li][/ol]
Intro to Trends/Ranges
I’m going to discuss the first step I use in identifying a price action setup. It’s very important to identify whether a currency is trending or ranging, as this helps you determine what direction you should be trading, how you should be looking for S/R levels, and what the requirements you will have to deem a price action setup “high quality”.
I use the textbook definition of a trend which is higher highs and higher lows for an uptrend or lower highs and lower lows for a downtrend. If price ever breaks this pattern I consider the trend broken. In the simplest terms, price is either trending or it’s not. When price isn’t trending it enters a stage of ranging. I consider it in a range until it can once again establish a HH/HL or LH/LL pattern. A common mistake people make is that they zoom way out of their charts and draw a line from left to right based the wherever price started on the left and ended on the right. This is wrong as is not how trends are identified. Doing this only tells you where price has moved, but does not establish that an actual trend is in play.
When looking for trends you use the “swing points” to establish the high and low swings. It takes a minimum of 3 swings to establish a trend. Once price from the 3rd swing breaks past the 2nd swing point, you are officially in a trend. For the majority of traders and the majority of trades you want to be trading with the trend. A trend means there is a consistent bias in buy/sell orders, and by trading with the trend we are trading with the bias, and in return increase the likelihood of our trades to success. When measuring the quality of my trades, I always take into account whether I am trading with or against a trend, or trading in a range. Another important aspect of trends are that the “swings” of a trend should be of similar size and intensity. You may have a large trend swing, and inside of that large swing, there may be minor pullbacks. These minor movements can be confused as actual swings, but in fact they are only noise. Finding legs with similar size and intensity can help us figure out what is noise and what is an actual swing in price. It’s also important to remember to look for trends in the timeframe you are trading! There may be a very clear uptrend on the daily and a very clear downtrend on the hourly. If I am trading a trend on a lower timeframe I always it’s trend to match what is happening on the daily, although it isn’t a requirement. Also, if you are looking for trends on the daily, the lower in time you go, the less impact the direction of the daily trend will have on your trade.
Trend Trading
The first type of trend trading is simply called a trend trading, or trading with the trend. When trading with a trend we can be more lax on how large of price action signal we are looking for, and use different tools to find key S/R levels. In a strong trend I may be looking to find PA candles, such as pin bars, that are around the same size as the candle before it, or slightly smaller. This is more lenient than a counter-trend trade where you are looking for candles that are very large, up to 2x larger than the previous candle. In a strong trend I can expect that price may not pull all the way back to key S/R areas. In that case I can use tools like the Fibonacci retracement and look for 50% retracements in the last swing, or I may want to look for high quality PA candles to for off of a dynamic S/R such as 21EMA. Tools such as the Fibonacci retracement and EMA are only using in trading with a trend. So you can see, my requirements for quality PA signals becomes more lax once I am trading with a trend. I can safely aim for higher RR when trading with a trend. The S/R tools I use, my trade requirements, and my trade management all change depending on whether a currency is trending or not, and if I am trading with that trend. This is why it is important to learn how to identify trends.
Counter-Trend Trading
Then there is the opposite of trend trading which is counter-trend trading. In a counter-trend trade the trade dynamic changes. There is inherently a larger amount of risk because you are trading against the bias of the market. Because of this, the requirements of your price action signal become higher. To achieve the same quality of trade in a counter-trend vs. a trend trade, your price action signal must be much larger, and it must form at very critical key SR levels. The reason is because you are counting on both the major price rejection and major resistance level to shift market bias and in doing so shift the balance of buy/sell orders. If this can be done correctly, the reverse in price can be quite fierce and profitable. Fibonacci and EMA’s are not used as S/R in counter trend trades, only very key horizontal and trend S/R lines. Again you can see how the S/R tools you use and how you view a trade will change depending on the dynamics of the trade.
Range Trading
The first type of market is trending, the second is ranging. All markets fall into these two categories. There are many variations of a range, but they should all be treated the same. In a range, sometimes the price moves horizontally, hitting the same S/R areas over and over. In other cases price winds up and makes lower highs and higher lows. And again other times price expands and makes higher highs and lower lows with each successive swing. I try to keep my method simple by treating markets as either trending or ranging. In ranging trades, Fibonacci retracements are not used. EMAs can be used, but sparing, and only when a price swing is moving strongly in one direction. The requirements for high quality PA candlestick are have middle of the road requirements. I.E. you are looking for candle sizes that are 1 – 1.5x the size of the previous candle. Also what you are shooting for as far as risk-reward, is also somewhere in the middle of the road. A ranging trade overall gives you a middle of the road requirement, middle of the road expectations and usually a middle of the road amount of risk. Again you can see how even a range trade vs. a trend trade has its own dynamics.
Trends vs. Swings
The final thing I want to talk about is trends vs. individual swings. Many people confuse price swings with price trends. When price is stuck in a range and is swinging back and forth, many people will say call those swings, trends. While it may be true that on the lower timeframes, those swings are solid trends in play, but if our trade is a higher timeframe, we always want to identify trends in that timeframe, on now lower timeframes.
A Word on PA
Learning how to find trends can seem somewhat like magic and very subjective. As a matter of fact much of price action can be subjective, even something as basic as finding horizontal S/R lines. My goal is to make PA trading as methodical and rule based as possible, while at the same time teaching that each trade is unique. It is a tough balance to find. Many PA teachers have such a strict rule set that it hinders your ability to see all of the dynamics of the market, and ultimately hinders your trading potential. Learning the basics first and the hard rules help you get started with PA. Learning the more subject and advanced areas of PA will help you maximize your trading potential.
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AUDNZD has been ranging for awhile and is real close to a resistance that was rejected several times before. Keep in mind that there are supports between the 2 S/R lines on my chart that I did not mark. Particularly around 1.12700 and 1.13300. Be aware of those. Definitely a trade opportunity if we get a sufficient confirmation.
Also, there are supposedly statistics/reports coming out tomorrow regarding New Zealand and Australia. I got this information from myfxbook.com but they have been wrong before, so do your own research.
Thoughts, comments, opinions ?
IMO, This is a bullish flag sign. Before that is ranging trend and then suddenly went up all the way. It can be a changing sign of trend. Since it must form a first high and a higher low before going up again. Now it should be higher low and if tend to breakout the flag by going up, it may go up further.
Correct me if I am wrong, i am in learning process
Regards,
Shane
Wow Krugman I honestly didn’t know what to expect from this thread as the first pages rolled on but your posts seem to be packed with really useful information. This post really made me think about how the different market conditions (trend vs. range) effect what requirements a trade must fit to be worthy of investing. Thanks again for starting this whole shindig, I can’t wait for more
Edit: Also, I’ve never heard someone discuss the size of a pin bar in relation to it’s previous candle. I know the signal pretty well and that it must close within the previous candle, but can you talk a little more about how the pin’s real body effects the signal.
Haha I remember watching this guy’s video’s back when I was 15 hanging out in Borders Coffee shop XD, if anyone needs help with patterns, candle formations, or anything technical analysis related watch the “informed trades” channel investing GOLD
Hey X, I actually shorted the bearish pin bar that happened about a dozen candle back. I think the reason it failed was that price momentum is fairly bullish right now on the daily. Whilst this is a lower time frame setup, what is going on at the daily level is still going to have some pull down at the lower time frames. I have set my stop loss at your market S/R area at the bottom, and as you can see price never reached and I was stopped out at break even. I think the safe move here is waiting for price to break through the upper S/R, then pull back to it and wait for signals to go long. Although if a very large and well defined pin bar forms, it may be worth considering a short.