Pure Price Action For Dummies

[Nikitafx]

Pure Price Action Trading For Dummies.

No Indicators.

No Guestimations.

No Checklist as long as a pilots to enter a trade.

Ideal for newbies if they have not yet cluttered their trading method with too many things.

Now enough of the sales pitch!!!

All you have to do is click this link below and you will be on your way to your first couple of millions and a few more to spare… ( heard that one before havent we??? )

Sorry Folks, I was just browsing and I didnt think I had in me to start a thread explaining a trading method.

So there I was posting charts now and then at another thread, giving advice that was not needed. and before I knew it I had quite a few charts up.

I had an exceptionally good run today so I thought what the hell. Since I was all done by 5 pm local time I thought Ill write down one of the ways I trade.

And since I have done the chart posting and sharing the trade method I thought it would be a pipping sin not to have my own thread.

That doesnt mean I am going to do some extra work moving things from there to here.

I for one am very allergic to doing more than what I absolutely have to. ( aint that one of the reasons most of us are here clicking buy and sell ?? )

So without further ado, I present to you a very very basic way to make a few pips.

Always keep it simple.

Happy Pipping.

( P/S I was not happy with the way my posting was spread around and scattered without any structure on the other thread, so I have apologized to the thread owner and decided to move some of my postings and charts here so that it could be abit more structured. I hope I am not breaking any forum rules for double posting some of it here. )

[Nikitafx]

Below are the example of a screen shot that I use to trade.

Again I dont use Indicators for this trading method.

D TF

H1 TF

I believe in keeping it simple. Especially when you are starting off and you should be paying attention to the candlestick charts and money management more than figuring out how indicators work

Happy Pipping.

[Nikitafx]

Need To Know

1. Wave Patterns in a real chart.

• No need to be an Elliot Wave expert. Just watch and learn on how prices move in a real chart. Especially Higher Highs HH and Lower Lows LL. ( helps with TP and SL )

2. Candle Stick Patterns

• First 6 basic patterns will do.

3. Support and Resistance.

• I am not big on these, but basic knowledge is always an advantage.

4. Currency Correlation.

• Read up on what this is. It helps when making a buy or sell call in general. Again no need to get your PHd on the subject matter. Just read up on what kind of an animal this is. I dont trade a single pair but I have my favorites.

5. Market Bias.

• Get a general idea what this is.

$$$$$$$$$$$$$$$$------------ EDIT : 24/05/2013 ----------$$$$$$$$$$$$$$$

1. This trading method remains profitable to date.

2. This method has changed a little over the years, where I no longer use correlation of currency pairs as a entry rule. Correlation has been discarded, only price action is used.

3. Entry is focused on Day TF and Weekly now. Smaller TF is just used to pick entry signals.

Thank you.

[Nikitafx]

Trading Tools / Parameters.

1. Time Frame ( TF )

• Day TF for market bias
• Hour 1 TF for entry, SL and TP

2. Indicators

• None
• Candlesticks only
• Warning. Adding Indicators to this without knowing what you are doing will cause you to loose pips / money.

3.Trading Hours.

• All market hours. Monday to Friday. The only thing that matters is valid bias and entry.
• Preferably UK open ( 3pm GMT + 8 ) to US close ( 5 am GMT + 8 ).

4.Stop Loss ( SL )

• None / Imaginary *Warning, not recommended for newbies
• Practical SL. Previous wave peak. Or previous D TF wave peak if entry is on today’s HH or LL.

5. Holding Period

• Rarely more than a few hours. Max one day. Greed occasionally makes me hold longer.

Take Profit ( TP )

• 40 to a 100 ++ pips per entry. Ability to read waves really helps.

6. Entry Per Day.

• Maximum of 2 entries. Ideal is one entry per day as only one valid entry is available per day if you look at it technically.

$$$$$$$$$$$$$$$$------------ EDIT : 24/05/2013 ----------$$$$$$$$$$$$$$$

1. This trading method remains profitable to date.

2. This method has changed a little over the years, where I no longer use correlation of currency pairs as a entry rule. Correlation has been discarded, only price action is used.

3. Entry is focused on Day TF and Weekly now. Smaller TF is just used to pick entry signals.

4. I only trade one or two times a week.

5. USE A FREAKING SL!!! Was made to eat the humble pie once, and it cost me alot of money. Not recommended not to muse SL!!!

Thank you.

[Nikitafx]

Entry Triggers on D TF

1. If yesterday was a buy, then today is a buy.

2. If yesterday was a sell then today is a sell.

3. Watch for the 6 basic candle patterns

• watch for the 6 basic candle patterns that indicate a reversal on D TF. When that occurs, wait for a reversal confirmation candle to complete before taking the trade.
  Example : when there is a hammer or tweezer pattern on your D TF Chart, wait for a confirmation candle in D TF to strengthen your analysis.

4. Entry is based on H1

• easiest way to trade when direction is known is to enter when price crosses the opening of D TF candle. Hold for about 40 pips.

• Look for HH for a sell and LL for a buy on H1 TF. Again candle stick patterns or even support and resistance areas can be used as a guide for entry in the H1 chart.

The beauty of trading with market bias is, even if you made a mistake or entered too early on the H1 chart and it is going against you by 40 or 50 pips, you can still confidently hold the trade as you know where it will end up.

Its as simple as that. Keep it simple.

Happy Pipping.

$$$$$$$$$$$$$$$$------------ EDIT : 24/05/2013 ----------$$$$$$$$$$$$$$$

1. This trading method remains profitable to date.

2. This method has changed a little over the years, where I no longer use correlation of currency pairs as a entry rule. Correlation has been discarded, only price action is used.

3. Entry is focused on Day TF and Weekly now. Smaller TF is just used to pick entry signals.

4. I only trade one or two times a week.

Thank you.

[m0d]

I like your style Nikitafx.

Out of curiosity, what do you do when you get the daily trend bias incorrect?
Do you engage in any form of rescue using skews or do you just cut your loses?

Regards,

EDIT:

Oh and I would love for you to divulge more on your trading if it’s not too rude of me, I sense some more serious nuggets of gold to what already has been posted.

[Nikitafx]

I like your style Nikitafx.

Out of curiosity, what do you do when you get the daily trend bias incorrect?
Do you engage in any form of rescue using skews or do you just cut your loses?

Regards,

EDIT:

Oh and I would love for you to divulge more on your trading if it’s not too rude of me, I sense some more serious nuggets of gold to what already has been posted.

Do you engage in any form of rescue using skews or do you just cut your loses?
<-------------- Im sorry but I am not familiar with the term skew.

I am going to assume you are talking about hedging ( I think it is called Hedging. I am not big on terminology. Give me the baby, I dont care much about the birthing process nor the pain :53:) .

Or what they say Lock In Position on these parts. Its where you enter a contra trade to what you are holding currently and that position is going against you.

I have seen fellow traders do that. Never seen how they get out of it though.

I like to keep things simple and clear. I rarely if ever take more than one trade at a time as not to violate this policy. It has served me well.

If you read bias wrongly and its going against you, own up and take the fall or beating.

A healthy attitude to being able to accept loss is important part of trading.

Those who cannot accept loss are the ones who always end up loosing more than they are supposed to. Ever had a position that was against you say 50 or 60 pips but you blinded yourself by thinking that it will come back down to enable you to cut it off with a smaller loss?

Then when it is actually coming down you then convince yourself that it will actually give you a profit after all? Then history repeats itself where you end up loosing 100 or 150 pips and feel absolutely miserable? And that wont be the first time you lost money because of that psychological mind bending. It was not the first time it happened.

You will then remind yourself, reprimand yourself, might even shout and yell at yourself saying that you will never ever ever ever make that mistake again. Then it happens sometime in the future??

I bet you have. And if you have then welcome abroad, I have done it too. Many times. Like me, you are now on the learning curve.

If you are very new to the game, or if you have not lost some money, you will actually avenge your loss and end up loosing even more. Its all part of the learning curve.

So back to your original question. Hedge or not? I dont. I wont advocate it. I am sure there might be others who do it routinely and have a way to work themselves out of the mess.

I will explain currency correlation as we go and how I use that to avoid misreading bias.

I dont use SLs because my chart reading in regards to bias is nearly spot on. Its my psychological barriers that needs a bit more work on. How do I deal with it at the moment?

Again by keeping things very simple.

Not sure?

DONT PULL THE TRIGGER.

Again, the trick is to keep it very simple. No one is holding a gun to your head forcing you to take a trade that you are not sure of. SL is used when you are not sure. Loss is incurred not only when you are wrong, but also when you are not sure.

I would like to call this trading method The Communist Method. Have very rigid laws and Ideas. Stick to it no matter what. And it works. Its when I start to think when I am using this method that things start going wrong. The rules are rigid. I follow.

I hope that helps you

Happy Pipping.

[Nikitafx]

The Following are the D TF Charts of three USD pairs.

GU

EU

AU

They are not complete candles as the trading day has not ended. I look at these in the morning ± 9 am GMT + 8 so that I can see what is going to happen today.

I did not take screen shots of yesterdays candle first thing today morning. It was a classic scenario of different bias on different pairs. I should have because it showed a good example of issues with correlation and the reading of bias.

AU had completed the pullback D TF candle as highlighted by the yellow arrow today morning. So AU should most probably be a buy.

But then GU had a bear candle. EU had a bear candle. Bear in mind, you are looking at the chart without today’s candles being there. So ignore the last candle and continue reading.

The validity of a reversal is only comfirmed when there is a confirmation candle. So until the confirmation candle for AU that is currently taking place or the pull back candle on EU at the moment was formed, the scenario was still set for a sell. Can u see what I mean?? Picture it by getting rid of the last candles on the charts.

The first rule is if yesterday was a sell then today is a sell. If your correlation is not spot on and you are not sure then you dont take a trade.

I avoided AU altogether.

Skipped GU because of the cluttered candle patterns on previous days around that price range. There are more than one candle that had long wicks in GU at that price level.

EU looked clean. So I stuck to the communist doctrine and went for a sell.

Now this is where experience helps a little. I took 60 pips, my daily target and not hold for more because the correlation was out of whack with AU, which was showing that it might turn around and be an upper. Looked at GU and it was a mess that didnt inspire confidence. What is there to say that prices wont get rejected at one of those areas and it ends up like an AU candle like the previous day?

EU hit my 60 pips, went down a tad bit more then reversed and now it looks like a reversal.

So this is an example where you use correlation to avoid misreading charts. Its an additional layer of safety. It is what I use to judge if my chart reading for the day is solid or not. If correlation is out of whack and I cant see where prices of a pair are going to go, then I avoid trading.

Correlation has one drawback that you have to keep in mind. Prices dont move just because of USD movement. It also can move because of AD, Euro or Pound. Think about that part.

I hope it helps.

Its NFP today.

Have fun and Happy Pipping.

[m0d]

Nikitafx,

Thanks for the reply. Not hedging, more a form of averaging down your position - increasing your lot sizes as prices retraces. Nevermind I was just curious as I’ve seen people who advocate not using SL, instead they would babysit their trade and average down a position. So just assumed you implemented something similar.

I totally agree with getting the trend bias correct on the daily - having a perspective of where price is and time is so important. That along with proper money management. In my opinion is king.

Anyway apologies for going off on a tangent, I’ll shut up now and just enjoy your future posts.

Happy pipping.

[Nikitafx]

Nikitafx,

Thanks for the reply. Not hedging, more a form of averaging down your position - increasing your lot sizes as prices retraces. Nevermind I was just curious as I’ve seen people who advocate not using SL, instead they would babysit their trade and average down a position. So just assumed you implemented something similar.

Happy pipping.

Time for me to pick your brains m0d.

I have come across the term of averaging down. Especially hear this term when american traders speak. Never really understood what they meant. Lost in the terminology again maybe.

Would you be kind enough to give me an example or a scenario when you are averaging down?

I cannot mentally picture what you meant by " increasing your lots as prices retrace."

Do you mean that for an example you are on a sell and then prices stall and start reversing and you add to the lots? Im totally lost to the concept.

Would be great if you could explain that part to me.

Thanks again.

Happy Pipping.

[Master_Tang]

Not MoD here, but I can help.

Averaging down is a silly way to lose a lot of money.
It basically boils down to adding to a losing trade, in hopes that the trade will turn enough to get all of them out with a slight profit.

Can you say “Martingale”?

So say you bought E/U at 1.44, and it immediately dropped to 1.43. Your trade is 100 pips in the hole. If you “averaged down”, and bought one more at 1.43, you would only need price to move to 1.4352 to get out at break even.

Or, if you bought 3 more, you would only need price to move to 1.4326 to get out alive.

But often, what happens, is a trader winds up far overleveraged, and in the hole in a bad way.

If you’re smart about it, and use say, 5:1 leverage or less, you can do the technique fairly safely, and still be under 2% risk. But most people don’t think that way:D

[Nikitafx]

Another example of Pure price action trading.

EU D TF.

Please note the candle that is being pointed by the arrow. Its a classic reversal candle.

Keep in mind, there is no confirmation candle to validate the candle being pointed.

But if we had checked other USD pairs for correlations, we would have seen that USD pairs were going to fall for the day.

This is as early as you are ever going to get on a trade.

EU H1 TF

Entry on H1 was based on candlestick patterns also. Note the third candle from the current candle. It looked like prices upwards had stalled. I entered there without a confirmation candle being formed.

This screen shot was taken on the second hour after trade was entered.

See what happens for jumping the gun?

Well prices did go up a little bit further but since I am trading with bias on my side , it was a very good trade.

EU H1 TF

Please note that had we placed a SL, we would have most probably placed it at the previous wave peak, which was the peak of the day before. And you would have been taken out before prices started going your way.

This is another reason why I dont put SLs on when I am trading. I have to remind you that I am online watching every 15 or 30 minutes once just to keep an eye on things. A trader should not leave a position without safety levels if they are not going to be watching the markets. Better still dont trade if you are going to be away.

This applies especially when you take risks that are a much higher than 3 or 5 % per trade.

Hope that helps peeps ( pips ? )

Happy Trading.

[Nikitafx]

Not MoD here, but I can help.

Averaging down is a silly way to lose a lot of money.
It basically boils down to adding to a losing trade, in hopes that the trade will turn enough to get all of them out with a slight profit.

Can you say “Martingale”?

So say you bought E/U at 1.44, and it immediately dropped to 1.43. Your trade is 100 pips in the hole. If you “averaged down”, and bought one more at 1.43, you would only need price to move to 1.4352 to get out at break even.

Or, if you bought 3 more, you would only need price to move to 1.4326 to get out alive.

But often, what happens, is a trader winds up far overleveraged, and in the hole in a bad way.

If you’re smart about it, and use say, 5:1 leverage or less, you can do the technique fairly safely, and still be under 2% risk. But most people don’t think that way:D

If you were a soccer player, Sir, and the market was a soccer game, the tackle called averaging that you just pulled would certainly earn you a red card and a royal send of from me.

Anyway the technique makes sense. On paper atleast. I can imagine the stomach churning that goes on when you had pulled the second trigger. This is where I would be deciding on getting on my knees or lighting up joss sticks and mumbling like we Asians do when we are praying and hoping for a miracle. Santa Maria!!..LOL

Pulling a stunt like that would be madness in my books. I like to keep my trading very sharp and uncluttered. Doubling your risk hoping to Break Even is very highly risky for my liking.

But then again it might not be bad if you are risking 1 - 3 % of your account. I tend to take 10 to 30% per trade.

I know some would call me mad for taking such high risks. But I dont trade when I dont see a sure fire opportunity. When I see an opportunity but it does not have a perfect entry set up, then my risk goes to around 5%. If I dont feel right then I just sit and watch.

Thats the beauty of forex. You dont have to do anything that you dont want to.

If we keep watching, we would realize that we always tend not to be able to take maximum profits on the entries that we know for sure because we have lost valuable equities on trades that we guessed.

This is another reason why I dont like Indicators. Not to offend those who are making a killing with it.

Happy Pipping Master Tang.

[Nikitafx]

Another good example of a reversal pattern and entry.

AU D TF.

Note the candle on the previous day.

No confirmation candle formed yet. But I took it because the two other USD pairs that I trade gave me a correlation confirmation. Even looked at NZD USD and it was showing a buy.

AU H1 TF

I entered this trade at 4 am GMT + 8. I knew I was not going to get up in time and AU tends to move more in the Asian session.

This again goes to show that although market times are important consideration, what matters most is the trade entry. The setup. The pattern.

This trade went on to about 250 over pips.

Keep it simple guys.

It makes forex much more enjoyable.

Happy Pipping.

[Nikitafx]

Another classic Candlestick pattern trading.

UCHF D TF

That is what I would consider a tweezer pattern( refer to babypips school for the correct name, I am not big on terminologies ).

Its a bit off as the wicks are not of equal length but hey the world is not perfect and bob will always be your uncle.

Pay attention to the candlesticks before this happened. Please pay close attention to how many times there were pullbacks on D TF and there being long wicks as tails. Imagine what would have happened if you had bought on the next day thinking it was an upper?

This is again where correlation helps. If say for an example, GU, AU and EU was up, then it would be logical to assume that UCHF should be a down.

Be careful not to set that on stone. Movements can also be caused by CHF, GBP, Aussie and Euro, and you can see that happening when things are no longer in sync.

This entry was also supported by the red line showing previous rejection are.

UCHF H1 TF

Just to give you an idea how the H1 candles looked like on that trade. easy 100++ pips for the day.

I didnt take this trade because I was not watching UCHF since I was having so much fun with EU GU and AU that week.

So there we go.

Dont read too much into what I meant by correlation etc etc if you are trying this out, especially in the early stages.

I hope this helps

Happy Pipping.

[m0d]

Nikitafx,

Master Tang is correct. Most basic context is when trading stocks and buying more if the share price goes down, hence the term “throwing good money after bad” is an obvious problem with this method.

Martingale form of averaging is just one way of doing it - there are other ways.

However I can’t divulge further as I personally use stop losses and averaging down does not appeal to me so my understanding of it is not good enough. Hence my initial query as I am always all ears for listening to other peoples modus operandi.

Anyway back on topic, good work with the posts!

EDIT:

I know it’s pedantic, but I wouldn’t call it a silly way to lose money. There are 1000’s of ways to skin a cat. Everyone has their own strategy and what works for them. Averaging down may be silly from your perspective, but for another trader it can work for them. That is why I would never be so myopic and dogmatic and talk down someone else’s modus operandi. I can only say what works for me.

[Master_Tang]

I know it’s pedantic, but I wouldn’t call it a silly way to lose money. There are 1000’s of ways to skin a cat. Everyone has their own strategy and what works for them. Averaging down may be silly from your perspective, but for another trader it can work for them. That is why I would never be so myopic and dogmatic and talk down someone else’s modus operandi. I can only say what works for me.

I’m with you in the “1000 ways to skin a cat” camp.

I by no means am myopic, NOR dogmatic. It’s just not a safe, nor accepted practice as the general rule, and wisely so.

The problem with averaging down is, while it may work SOME of the time, it most definitely does not work ALL of the time.
Average down a trade in a professional setting, and they will boot you out of there before you can pick your iPhone, and that picture of you and the party boys sailfishing in Cabo off your desk.

It’s a bad technique any way you go about it. And more often than not it’s not part of a given strategy, but a desperation move to save a poorly planned trade.

[Nikitafx]

I know it’s pedantic, but I wouldn’t call it a silly way to lose money. There are 1000’s of ways to skin a cat. Everyone has their own strategy and what works for them. Averaging down may be silly from your perspective, but for another trader it can work for them. That is why I would never be so myopic and dogmatic and talk down someone else’s modus operandi. I can only say what works for me.
Last edited by m0d; Yesterday at 10:47 PM.

Not to offend anyone. I agree with what you said, there are more than a single way to make a buck from the charts.

Its just that averaging down seems to be hoping on a lot of luck and when you are doing that then the numbers usually dont add up.

Happy Pipping

[d-pip]

Nikitafx,
You are sharing a nice clean straight forward trading method, I like it a lot!

I hope you find time to continue posting your charts and analysis.

THANK YOU!

[Nikitafx]

This was my NFP day trade. I took 30 pips on UCHF in the morning but stayed away from the market because I like to trade the markets after NFP.

I trade NFP but I dont put in speculative trades with a SL and hope for the best. I wait for NFP news event to be over and then hit a contra trade against NFP move, provided the move was against market bias. I split 10% on both GJ and EJ and took 50 pips each in about an hour.

If you cannot picture what I said about contra to bias movement, then I would suggest you let it go for the time being. I will come back to it on a later stage.

Now for todays market.

EU D TF

EU H1 TF

Now for those of you who had read post 12 of mine, you would remember that I was talking about correlation being out of whack today.

That coupled with NFP news made me stay out of the market for most of the day.

Anyway I could not resist an entry after prices had fallen so much, especially since yesterdays candle stick was a pullback on D TF. That and AU was a buy signal. Only problem now was GU was still showing a sell. There was no pullback candles or reversal pattern on GU for it to be a confirmation.

I took the trade with a small SL at the bottom wick of the previous day on the H1 chart… This trade was taken at 5% risk because I could not see for sure where the price was suppose to go.

Without a correlation on all three pairs, I am thinking, I am judging, I am therefore hoping and wishing, which makes it gambling on a position.

So to balance out the need for a few pips on a Friday and not risking too much, I reduce my risk size and put in a SL.

8.30 pm GMT +8 NFP comes in and pushes the market up, and I was a happy chappy thinking that the news was going in the direction of market bias. I was happy also because since I am in profit now, I can move my SL to BE for a 0% risk trade and add another 10 % to NFP news trading on GJ and EJ.

So back to EUs trade, it shot up by 90 pips at the hour end. This is where taking what is on the table is important. 90 pips in the first candle. Daily TP target is 60 pips. Holding out for more more often then not causes you pips and money.

That is why you should have a table detailing out your targets both in lot size and amount of money targeted.

Hit a target? Get out. Wait for next trade with increased lots. Compound your earnings. Not hope for more pips. Greed always causes you to loose out in the end. Always.

So candle closed on the second hour and I had 70 + pips so I took it.

This is another reason why I close my trades on a daily basis.

What happened next was something I did not expect. The market shot down and now the D TF candles look like they are a continuation of a sell.

This is what I mean when correlation is out of whack. Only take trades when it all looks good. Preemptive trade triggering causes losses. Patience is very important. Wait for the candle to close. If you are new, dont be preemptive, especially with real money and wait for a confirmation candle.

My 70 pips on EU today was sheer luck.

EU D TF as of Market End

Thought it would go up now didnt we?

So I hope you can see what I mean by watch correlation for confirmation.

I hope we will get some chances next week to observe some days where correlation is all in sync and movements are cohesive.

I wont take a trade on a Monday, and definitely not on a Monday that is going to start with things being as messy as they are now.

Until then, have a great weekend.

Happy Pipping.