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Pure Price Action
w/ Jake Abrahams | 2016
Mindset comes before everything else- everything. Without the proper mindset you can literally never be successful. Mindset could be developed over time, but only if it comes from a place of respect for the endeavor you’ve embarked upon. The trader’s mind isn’t turned off when the price charts are closed down- trading is a lifestyle choice that impacts all aspects of your existence.
Attention to detail, professionalism, and respect are of utmost importance when it comes to developing this mindset.
We all start somewhere and I’ve chosen to start w/ mindset for a reason; It is the fuel that powers our decision making engine.
What is Pure Price Action?
Pure Price Action is an approach to trading designed to provide a lens in which individual traders can better interpret market sentiment through the logical application of discretionary technical analysis.
Pure Price Action seeks to address the following questions across multiple timeframes (near, medium, long term) to aide in the generation of a market bias:
What type of environment are we in?
Who is in control?
Answering the above three questions will aide in considering trading methodologies to employ.
How / Why? Because we have a deeper understanding of market participants’ underlying motives and can use this understanding to lean on their behaviors.
What do you mean “lean on their behaviors”?
Human beings are creatures of habit. A market is made up of human beings and their intentions to buy and sell an instrument at certain prices (limit orders). A price chart shows executed intentions (market orders). Price rotates up and down in search of liquidity (order flow). This search for liquidity can be interpreted by other market participants as bullish, neutral, or bearish behavior.
Utilizing discretionary technical analysis on a price chart, a trader can recognize patterns of behavior which more-often-than-not will play out a certain way over time; i.e. an “edge”. When the pieces align, we can proactively enter the market (rather than waiting for a signal) w/ the confidence gained from knowing the answers to our 3 questions posed above.
How do I apply discretionary technical analysis?
Put in the time behind the charts. There are no shortcuts here, and to become a true technician you need to be very active analyzing markets and following-up to “see” if you were right or wrong (plainly put).
Every chart time-frame is utilized. All are used in unison with one another to arrive at our multi-timeframe bias. A 20 period exponential moving average is applied as well. The H4, alongside the M5 chart, are the “primary lens” to aide in interpreting the market.
Pure Price Action approach to trading, visualized.
The below graphic captures the pure price action approach to trading perfectly; An approach that requires a fair amount of discretionary technical analysis.
At the end of the day, it’s all about gaining an EDGE. Being able to confidently rely on your analysis that certain market environments are “more bearish” or “more bullish” then others, and the notion that you “have to take a shot” are crucial to securing that edge.
Also, as a trader (not an investor) you need to set realistic expectations in terms of how accurate you will be in the markets (accuracy being measured by how often your profit targets are hit vs. your stops). Just because price recently traded 200 points away from your entry does not mean that’s where your profit target is set.
All of the analysis done leading up to trade execution may need to be re-evaluated if market conditions change. That’s @ the crux of being able to read price action- you need to be smart about how you move to eliminate risk as efficiently as possible.
Burn this image into your head.
Understand that the process of becoming a successful trader is no different than any other worth-while challenges in life. One of the most important equations you need to live by is INPUT = OUTPUT. Garbage in, garbage out.
If trading is something you can’t go a day without thinking about, then you owe it to yourself to do everything humanly possible to exhaust all avenues in an effort to satisfy those thoughts.
FX MAJORS: EURUSD GBPUSD AUDUSD NZDUSD USDJPY USDCAD USDCHF USDOLLAR
FX JPY: EURJPY GBPJPY AUDJPY NZDJPY CADJPY CHFJPY
OTHER FX: EURGBP EURAUD EURNZD EURCAD AUDNZD GBPCHF
EQUITIES / OTHER: SPX500 JPN225 DYJ0 QQQ EEM XLF SPY SPXS TNX VXX VIX TLT
COMMODITIES: XAUUSD GDX UGLD GEUR GYEN IAU USOIL
EURUSD FEB 3 2016
USDJPY FEB 10 2016
GBPCHF MAR 1 2016
USDJPY MAR 8 2016 USDJPY MAR 8 2016 (PART II)
AUDJPY MAR 8 2016
USDJPY MAR 10 2016
NZDJPY MAR 10 2016
USDJPY MAR 31 2016
USDJPY APR 4 2016
AUDUSD APR 6 2016
GBPJPY APR 7 2016
GBPJPY MAY 6 2016
AUDJPY & USDJPY MAY 12 2016
Interaction within this thread is encouraged! Please put your thinking cap on, and come w/ more than “EURUSD will definitely go up this week, I’m long”.
A post should include (@ minimum):
1 or 2 charts
The currency pair in discussion
Your own unique analysis (what’s happening, why is it happening, and what you think is going to happen)
Whether or not you’ve staked your own money on a position
Thread is live! JAN 31 2016
10,000 Thread Views! APR 5 2016
**More to come - stay tuned. **