Profiting from noise. Price Action Trading on tick charts

Sorry dude, I dont have lols.

I just saw his fluffy moustache. hahahhaha!

Just popping in to apologize for not posting. My weekend has been full celebrating my boys birthday and that’s what its all about. Make up for it during the week.

Bob

Hey Bob!

Crazy weekend here too!
Thanks for the explanations. I get a better picture now. Hope to follow u thru in the coming weeks. :slight_smile:
Have a great pip-ing week ahead!

How old is your son? I have a lad of just under 3 who I look after.

The boy’s was 4 on Sunday. Its great just to kick back for the weekend and enjoy life.

Gday all. Just time to post a quick trade today. Here is a a long trade.


This was a pretty good trade. Market was trending up with higher highs and high lows. A box pattern form just after a swing low. Set our SL at the second last swing low, 8 pips from our entry. Set our TP at 8 pips to keep our 1:1 RR ratio. Calculated the lot size and the rest is history. TP hit.

I have over-laid the chart with a zig zag indicator just to highlight the importance of identifying swing highs and lows to determine trend which we will talk about soon. Where these box patterns form in relationship to the current swing highs or lows validates their use as an entry signal.

Time to talk trade direction. By now you will have realized that the “Box pattern” tends to pop up all the time on your chart. How do we know the right one to trade? Well, you have to eliminate the bad ones. And that doesn’t talk long. I break it down to market bias and conditions.

Market Bias
This is a bigger look at the markets. Nothing wrong with going out to the daily chart and see what’s happening. Indeed you have to. You need to have an opinion on who is in control of the markets. The bulls or the bear? The best thing is the answer SIMPLY DOES NOT MATTER! All you have to have is an opinion, your market bias, and trade to it. After trading this style you will quickly form a bias to which players are in control and that doesn’t change day in day out. My bias is bearish. This is my daily chart.


Market Conditions.
We are only interested in the here and now. What’s been happening in the last 2 to 4 hours. Although data a day or two old can provide important clues to support and resistance levels that subject is for another day. A key concept to understanding PA on the tick chart is the same PA that forms our candles, forms every other candle on every time frame. So we can apply the same techniques and hold true the same meanings. Market conditions is no difference. We want to know if current market conditions is trending or ranging? We’ll use the following definitions;

A TRENDING MARKET is characterized by the formation of higher highs and higher lows in an uptrend. The formations of lower highs and lower lows in a downtrend.

An Uptrend


A Downtrend


A RANGING MARKET is characterized by the first swing high and low forming an upper resistance level and lower support level with subsequent swing highs and lows forming within that range.


How we trade each one depends on our market bias. We will be either trading with bias(our bias and current trend match, trend trading), against bias (our bias and current trend conflict, counter-trend trading) or range trading. We’ll explore these in future posts.

Our favorite and preferred method as indeed the trend is our friend. So if our bias is bullish, we are looking to trade long box pattern break outs in an uptrend. If our bias is bearish, we look for short box pattern break outs in a downtrend. If we are in a true trend each box pattern break out should be valid and tradable. But we are in no hurry and can afford to wait. We want to trade the right one or at least I do. Why, because my money management is built around the right one.

Like any other trend on every other time frame the price will swing from highs to lows. The price trends, then corrects, trends then corrects. And on it goes forming our higher highs/lows or lower highs/lows. Any strategist will tell you that entering a trade quickly after a correction is a good idea and for us it’s no different. Ideally we want to do the same. So the ideal box pattern forms within 5 to 8 bars from the most recent swing low. The high (upper resistance) of the box is ideally no further than 5 pips higher than that swing low and no further than 10 pips higher than the previous swing low. The previous swing low is where we will set our Stop Loss and difference in pips will be used to calculate lot size and Take Profit.


Of course nothing ever happens in the ideal in the market so be happy to apply poetic license when searching for this box pattern. You at the end of the day are responsible for your trading plan, your decisions. Trading Price action is a purely subjective method and only your opinion matters. You are only accountable to yourself. As I said earlier, any box pattern break out in the direction of the trend is profitable until the trend ends and that’s the only thing you need worry about.

Ah Bob,
Just took a week off, cashing in my pips for a short vacation so could not reply earlier. I have bookmarked this thread, and hope the others join in as well…will check out your updates tomorrow since I just flew back…

Well, was going to do a post on trading against bias but I think I’ll brag instead! This is why I like this style of trading so much. Just made 6% in 3 trades over 3 hours and nothing happened yet. ECB interest rates are still and hour away. But who needs to trade now. Probably will anyway.

The techniques I’m posting are there as guides only. Designed to get a new trader going in the right direction. The one thing I can’t stress enough is that;

Price action trading on the tick chart is a purely subjective style

The only opinion that matters is your own and you have to justify every decision to yourself. This is truly the domain of the discretionary trader. The human brain is a wonderful thing and if you are prepared to persist, practice and have the patience it learns very quickly. To quote Bob Volman:

"As much as technical skills will contribute to a trader’s survival in the markets, it is the way he handles his open positions that will ultimately determine the degree of his consistency. "

So today trades. Today I have no market bias because firstly I know what data is coming up and secondly the tight ranging market we are in according. So I am basically going to use range trading techniques. Sell at the know resistance levels, buy at the support levels. Trade what I see. This is what I saw


The first trade occurred just after a double bottom. The 1.3150 level was offering a strong resistance and when the price broke below a box pattern near this level I exited. Then seeing a double top at the 1.3150 level decided to go short. Got spooked on this trade and exited early on a false long box pattern break. Realizing this quickly another opportunity presented and took it. Bit of a wild ride but put faith in the system and waited this one out.

So interest rates are out, press conference held and what a movement that was. Picked up another 50 pips before losing 30. My fault for getting greedy. Learnt a lesson. Hope you made some.

I have my tick chart up and running from downloads from another site. I have taken 6 trades with 3 being winners and 3 losers. However with a profit ratio of 1:1.5 I am up. I have not read Bob Volmans books but I have copied a brief summary of his entry criteria and I am using that for my entries. I am going to take as many trades as possible. It doesnt matter if I lose it is getting to grips with the chart that is important.

Have a good weekend guys.

All the best Daxter1962. I’m sure you’ll like this style. Nothing wrong with taking trades and going for it. You quickly learn that you don’t like losing money and you quickly adjust your strategy to avoid those situations. I started with just a $200 micro account trading 0.01 lots and couldn’t blow that (although I gave it a good try). Bets the couple of thou I lost doing other things.

Make sure you post a few trades. Nothing like documenting things to bring it all back in perspective. Sure others will be interested in your progress.

A good weekend to you to .

Bob

OK. Just entered short at 1.29595 an hour out from NFP data. Stop loss set at 10 pips (1.29695) with 5% risk. Using some of last nights profit. Lets see how things pan out in a couple of hours.


Ok had a good pick up here. This trade started working almost immediately after I placed it giving me the confidence to let it run. As a good rule of thumb if a trade doesn’t work immediately I look to get out as quick as possible preferably with some sort of profit. Another better opportunity will come along.

This was an interesting trade to manage. As it was a hour out from NFP you can see the larger players starting to position themselves by the strength in the bars towards the later half of the trade. Where I got spook was when a tight box pattern formed 10 min out from NFP. As well as being an excellent entry pattern, the box pattern is also a pretty damn good tool to exit a trade. This point I’m up 11 pips and with such a high risk attached to the trade it’s time to exit.


I’m remembering the lesson from last night where greed to over and I loss half my gains. You take what the market gives you and don’t ask for more. Get greedy get punished.

I bought the RWtickchart v1.14 software last week but I confess to finding the analysis of the tick bars rather difficult. I was, therefore, very pleased to find your thread and very useful it has been too - many thanks. By way of gratitude for your efforts I thought you, and your other readers, might like to refer to this for some very useful extra instruction:please see “prorealtime” with content referring to x-tick-charts.
Trade canny,
Hamish.

If the market is trending in the opposite direction to your bias then don’t trade. It’s really that simple.

Or at least while your developing your own plan. Trading against your bias is the most risky time to trade. The market is either correcting or reversing leaving little guarantees that there’s room for your trade to work. Trading against bias is about picking tops and bottoms of fast moving swing highs and lows. You are far better off learning to trade with bias and in a ranging market before applying you skills in a correcting market.

However once you start to spend time focused solely on this single pair that ability to read the market will allow you to spot opportunities even during a correction or reversal. The same techniques are used, you just look for a signal in the opposite direction.

A ranging market is a bit more difficult to extract pips but still opportunities exist. When first starting you can apply some simple rules which we will explore. Like trading any other range system we’ll enter long at support levels and short at resistance levels. So if our bias is bullish we look for long box pattern break outs near support levels. If our bias is bearish, look for short box pattern break outs near resistance levels.

We previously defined a ranging market as characterized by the first swing high and low forming an upper resistance level and lower support level with subsequence swing highs and lows forming within that range. This sounds easy enough as words but the reality on the chart is that it is a little more open to interpretation. A second swing high or low may define the upper resistance or lower support level. It will be up to you to interpret what you see. As you can see in this example the second swing low is used to define our lower support level.


So the first thing we are looking for is a fairly tight range. The difference between the swing high that matches the upper resistance level so be no less than 15 pips and no greater than 30 pips from the swing low that forms the lower support level. This is critical for me because of my money management system. How you end up trading will be by your own rules. I’m just trying to demonstrate an alternate methodology to the mainstream trading systems.

Next you will need to divide your range into three. The top third is the upper resistance zone. The middle third is strangely enough the middle ground and the lower third is the lower resistance zone.


When your market bias is bullish you will be specifically looking for long box pattern break outs in the lower support zone with the upper resistance level of that box pattern within the lower zone.

The opposite is true for a bearish market bias. You look for short box pattern break outs forming in the upper resistance level with the lower support level of that box pattern within the upper zone
.
By adhering to these simple rules gives my money management plan every chance to work. Looking at a short trade as our example. The entry price should be considered about 1 pip below the lower support level. Stop loss is set at the swing high that marks the upper resistance level. This will be between 5 to 10 pips and we will adjust our lot size according to risk appropriately. Our Take profit target is set to match our 1:1 R:R ratio so is the same distance from our entry price as our stop loss. As confirmation that we have set our trade up correctly our take profit level should not protrude any further than 1 pip into the opposite support/resistance zone.


The above range also provided a second opportunity and although it does not meet our entry criteria as defined it demonstrates that ultimately you will be learning to trade the markets as you see it in the here and now and recognize that “ideal” trade set ups aren’t always given by the market.


Gday Bob.
I like the way you are trading.
You should have called the thread “Profitable Noise” just to annoy the folks who call anything under an hour noise!
Im guessing you are from Harvey/Brunswick or Capel/Busso - so youre not too far out of Whoop Whoop?
Keep it up mate.
Cheers

Thanks bro. Yep up in the hills of Ferguson Valley behind Dardanup. God’s country if your in the SW. Not quite whoop whoop like dallytrader in the wheatbeat. But then again there’s a whole lot of whoop whoop in WA lmao.

Swing highs and swing lows are just as important on the tick chart as they are in the higher time frames. Their uses are just as relevant. Maybe even more-so. Swing highs and lows keep you locked in the here and now ensuring you trade only on the side you want. They show what levels the current players are respecting. When combined with rounded numbers levels and referenced against time a trader can take great confidence into each trade. How you go about incorporating swing highs and lows into your trading plan will be at the end of the day your decision.

So far I have talked about swing highs and lows to identify what current market conditions. Also I have reference them in calculating our stop loss level. In this post will talk about swing highs and low to confirm the here and now. This ensures we trade what we see not what we want to see.

We’ll use current market conditions to explore this. So it’s 9:15 am New York. My market bias is bearish. I’m only looking for short signals.


As we can see from about Moscow open today the price has been trending up. Slow but never the lest still trending. Except for the last swing low. That was slightly lower. A hint that something might change. Also the latest leg is going to form a new swing low. So signs are there however nothing yet supports a bearish market so we are standing aside. Lets zoom in to the here and now to see if the markets are given any other signs.


By here and now I mean the last 2 hours or so. Our decision on whether to trade is going to be made here. What we want to see is if our swing highs and lows match the bigger picture. If they do then conditions are right to trade. If they don’t well best to sit tight.

Here we see the first two swing highs and lows are higher confirming our uptrend. But our market bias is bearish so we consider this movement as a correction. Eventually the bears will come back. And with a bit of luck we’ll spot it and catch the move. Might be soon. The third set of swing high and low are in fact lower. The market has temporary stalled. The bulls re-entered and given another push up forming a new high. But immediately that run stopped and the price is now steadily falling. Only the bears remain. This is good as soon an opportunity could come. Also note at this specific time the U.S. Treasury Secretary is speaking.

The next swing high will tell the story. But for now I’m just going to accept that the market has nothing to give me so instead I’ll just call it a night. My bias is bearish, and in this market I’m not going to trade against that.