PURE PA TRADING STRATEGY
What You 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.
Trading Methods / Parameters.
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.
Entry Triggers
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.
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
EU Trade. 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.
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.
Price Action Trading Example 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.
UCHF D TF Price Action 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 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.
DO NOT TRADE AGAINST BIAS?TREND. MAY BE LUCK SOMTYM. BUT, DANGEROUS TRADE. 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. EU D TF
EU H1 TF
That coupled with NFP news made me stay out of the market for most of the day. 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. 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?
Near Disaster Trade and Bias saving the day/ CounterTrend trade, Wait for a reliable Pullback for entry in H1 This is an example of disastrous entry on H1 TF GU H1 TF
Trade was entered at the Yellow arrow. The reason the trade was entered was I was already holding an AU in profit and AU started shooting higher during the Asian session. So I broke two of my basic rules. ( Happens often
)
First Rule. One trade at a time. ( this was cause of greed ) Second Rule. Dont Think. Dont assume. ( this was cause of lack of discipline ) So I ASSUMED its a Asian Session mover today and because I was blinded by greed, I THOUGHT that USD pairs will move higher together. So I was blinded to all the candlesticks prior to my entry point that was clearly showing that prices have stalled. So I took the trade and it went against me. Holding 80 pips minus on 10% risk, with AU that was at 40 plus pips but now at BE is not a feeling that I would recommend. But the thing that helped me to hold is bias. Market Bias and Correlation showed that it was going to be an upper. So sit tight and hold. U can atleast expect a break even trade.
This is the D TF chart for reading bias.
This below is the AU Chart on DTF that confirmed Correlation. Sorry I didnt take a shot of the EU DTF chart showing the same. Or I might have it somewhere but not sure where it is. Either way,
Anyway this went to about 40 ++ pips and the AU recovered to 70 ++ pips and I was happy to TP on both at the same time. The ideal candle to have entered a buy on that chart on H1 TF should have been the 6th, 7th or the 10th candle from the candle marked with the yellow arrow. Either way, it was a hard ride as GU tends to do. So what was the loss on this trade?. Well firstly I was a quarter of a hairs breath away from telling myself that this trade was a goner when it hit - 80 + pips and it was touching yesterdays LL. AU was also dropping and it had crossed my BE point. I nearly convinced myself that if I hold any longer I am going to loose more on both GU and AU. Somehow I just convinced myself to hold on for another H1 candle. Secondly the GU trade was a great loss because it went against me by 80 pips and gave me about 40. Imagine if I had waited for a better price and entered lower. I would have had atleast 60 or 70 pips on this trade minus the worried sick moments.
Missed the early morning entry. AU DTF
AU H1 TF
Watch the candle marked with the Yellow arrow. See how simple candle stick patterns is used with bias from reading higher TF to trade price action profitably. I wont hold for long as I have entered late. I might take 25 or 30 pips on this one or move it to BE as soon as possible and leave it to luck. ( p/s 70 pips and I am out at 3.55 pm GMT +8 )
EJ H 1 TF
EJ D TF
For those who are wondering why there are two buy entries, well I forgot to up the lots to suit todays projection size. Realised it 20 pips late, but still took it.
AU D TF SL at the moment is on the previous LL.
AU H1 TF
TRENDLINES/SUPPORTING ANALYSIS
EU H1 TF.
EU H1 TF.
Supporting Analysis EU H1 TF
EU H1 TF
Yellow line on top is possible SL area. Yellow at the bottom is possible TP area. This might go down further south from TP area.
EU H1 TF
Gave us two opportunities to TP in a range of 30 to 70 pips. Notice our SL at the Yellow line. The SL has been a strong and valid a one. Please note how the final spike 3 hours before this screen shot was done, came so close to the SL area but did not cross or hit that line? In this case, the HH wave worked as a charm. We say the SL was a valid one. Please take note on how SL is put on the peak of a wave ( either previous LL or HH ) and not set as arbitrary values. Pay attention to the statement above. When traders say that " my trading system has a SL of 30 or 50 or even a 100 pips", then what they mean is that is the range of their SL. That is the maximum loss that they are prepared to accept. We have to see if the trade setup that is unfolding infront of us has valid areas of LL or HH that can be used as a SL and the pip count from the entry should be inside our SL range. The lower the better. If its higher then we dont take the trade. The SL has to be valid. It depends on the wave patterns. But which ever it is, the SL that is on the screen should be inside the range of our acceptable loss. Part of how much we are prepared to risk as per our money management. This is where our system comes into play. If our system is one that gives us a profit of a minimum of a 100 to 150 pips, then I guess its fair to say a SL of 50 pips max is acceptable. If the system that we are using gives a max of 20 pips per entry and its not wise to hold for more, then what is the point of taking a trade that has a SL of 50 pips as per current wave?? "As per my system, the SL is 40 pips and its rarely hit/very safe" does not mean that the System will ensure that it will give you an entry that rarely goes above 40 pips as Draw Downs. ( DD ). It just means thats the maximum I can risk as per my money management and the risk to reward ratio my system is capable. It does not mean that the damn thing is safe and it wont be hit! You decide to pull the trigger as per your system after considering a range of things. One of it is the value of a valid SL in the current set up. Just smacking a cut off order 40 pips from your entry point just because your system says that the SL is 40 pips is going to make it much more difficult for you to be a profitable trader.
Remember, this is a numbers game. And in any game that is based on numbers, any small itsy bitsy tiny little thing that you do to improve your chances of not being eaten by beings that are much much much much more bigger than you in this pond will go a long way to ensure your survival and growth. I hope that explains SL. Its not about the value. Its about the waves. The same goes to TP. Statements such as a trade has to be 1:4 ratio is a guide. It does not mean that for a 25 pip SL, you must have a TP of 100 pips. You are in a profit of 70 pips and it sort of stalls, or has hit the previous LL area, or its hit a resistance area, or its going to go out of the market times you normally trade and you dont TP?. You going to say look my Risk to Reward ration is 1:4 so unless it crosses a 100 im not cutting and banking?? Dont take it literally. Trade entries as per our system become much more valid and ensures us a much higher rate of success in this business when we start paying attention to such details. These are the sort of small details that maximizes our chances of growth. Remember,systems or a set of indicators are not the same as a crystal ball that foresees the future. ( and if you are having any bright ideas, there are no crystal balls that can see the future either.)
A system is just a reason for us to take a trade at a particular price level. Its just a guide on where we can TP and where we can put in a SL. You need to work out the details of the system to maximize your chances of profiting, Dont be blind in looking at the blinking indicators and keep pulling the trigger because your system just showed an entry. No amount of maths is going to save your money if your trading is mechanical in nature and you work your chosen system that way. If you have a system that is very profitable for a given time period and then falls flat on another stretch of time, then you are being mechanical in some aspect. You need a diagnostic exercise and a system tune.
AU D TF
AU H1 TF.
Entry was late. Late by about 13 to 15 pips. Moving SL to high of current candle as I also have a EU trade open. Dont want to have both go against me if things go sour. 50 pips now.
STOPLOSS SL Per Wave AU H1 TF
If we are to imagine that for some reason we had decided to sell on the candles being marked by the yellow tick, then the most reasonable or valid SL according to waves on H1 TF would be marked by the yellow lines. Please look at the chart from left to right, the first and top most yellow line being the SL for the first left most tick. The second yellow line is the peak for an entry marked by the second tick. Note how the previous HH was picked as the obvious choice as the smallest available SL for that particular trade. This is one of the most basic way of picking a reasonably valid SL. The current entry that I have entered, presented by the last green dotted line on the last H1 candle will obviously have a SL at the HH of that wave. Which would be at the top of the wick of the previous candle. Take note that the SL has to be at the peak of the wick in order for it to be valid. ( this is demonstrated in the chart by the first entry and the first SL level. Notice how a price spike has happened somewhere towards the end of Friday and had our SL been on the candle opening level of the first SL instead of the wick, our SL would have been hit. ) Now we can go more detailed and pick a stronger SL by looking at trendlines or channels etc etc. But that would come later in the series. For now, HH and LL as our SL as per wave would be sufficient enough for us to have safe trades. In regards to SL and TP , the simplest answer would be to place it on the nearest Higher High ( HH ) for a sell or Lower Low ( LL ) for a buy trade.
Example of SL and TP Continuation
EU H1 TF
Please note tight SL ( 17 pips including spread ) on trade entry. This was subsequently moved to BE +1 ASAP because still holding AU trade from the morning. I dont like to take multiple entries. Further more, trading two pairs that move the same way at the same time is not very wise as in all probabilities, if one goes against you, the other will move against you also.
EU H1 TF
When we enter trade and pick SL per wave, wouldnt waves be also applicable for TP?? This is an example where we would put our TP if we were to let it ride to the next possible resistance area. Again this is just a rough guide or idea to possible TP areas. I will write up on TPs in more detail as we go. I would like to remind newbies two very important things. 1. The market will always move up and down. We cant take it all. 2. 10 or 20 pips banked into your account is 10 or 20 more pips then what is out there.
I have a compounding projection chart. I have a set TP( 60 pips per trade ) for a trade and I am more than happy to take whats there when this level is hit. Sometimes I take 1/3rd of this or 50% of the 60 pips in the first trade and cover the rest on my second. I do leave some entries to run close to 100 pips, but that is when everything looks rosy and I dont see why it would retrace much or reverse.
So what happens after the 60 pips? I up the number of lots for the next 60 pips. This way, I keep my risk pretty much the same but I get more for every 60 pips. This is called the compounding effect. Putting your money to work for you.
More then a trading journal, I will suggest newbies have such a projection chart. If forex was run like any other business, then this projection chart is your business plan. Without this, you are not going to be growing your account as fast as you should and could.
Say you have 1,000 dollars in your account and you use 0.005% (half of 1%) of whatever's in your balance at a time per pip. So if you got 1,000 in your account, a pip should be 5 dollars, your SL on that trade is 15 pips and you lose 75 dollars or 7.5 percent of your balance. So now your balance is 925 dollars and the next trade you round it off to 920 and a pip would be 4.6 dollars. If you had a 20 pip winner, your profit would be 92 dollars making your account balance 1,017. Which is 17 dollars more than your initial starting balance even after a loss. (Emphasizing how great just 20 pips is in this case too) Lot size is the key here, you can have 100 dollars an make it 1,000 real quick by increasing lot size as you go along. And also, if you have a higher lot size than your balance allows then it might go sour too. People usually get really frustrated when they risk more than they should on a trade, adjusting lot size according to how much the balance is like what we did above keeps it in check. If you enter a trade an have a 20 pip SL and 60 pip TP, which is a 1:3 risk reward trade, you'd find if price hit SL then you would lose 10% of your account but if price hits your TP then you gain 30% of your initial balance. I know it sounds big when I say 10% of your account, but compared to the risk reward ratio, it's worth it, plus we analyze the markets and do our research an enter only the best quality setups to ensure our trades have high probability to go in our favor right?
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COMPOUNDING THE PROFITS
I do a projection chart. Its the equivalent of a business plan. Say for example, I deposit USD 1000. I take USD 100 from that and make a, say 20 % risk projection on it. You also need to put in your number of pips per lot size that you intend to take. And finally how much you are prepared to loose on this trade. Say 100 pips against and you call it quits. So you calculate your lot sizes for 20% which should be about 2 lots or 20 cents per pip. and your projection is for 60pips TP. So 20 cents per pip and 60 pips later you are now 12 dollars richer. Your new balance is USD 112. The new projection is now about 3 lots or 30 cents per pip. Again projection is 60 pips. Doesnt matter if you take one trade or three trades but you must collectively have 60 pips or more before you can move on to the next lot. All the while, you are adjusting your lot size to the risk %. Now ur new balance should be about USD 112 + 18 = 130.00 Ur next projection lot size will still be 3 lots because ur risk % goes more than 20% if you take 4 lots or 40cents per pip with a SL of 100 pips. The idea is to increase lots as long as its in the boundaries of 20% risk factor. That is how I compound. Mind you my risk % is not set in stone. I see a very good opportunity and a very sure set up and I go in for about 30% risk. I see something not so pleasing, I take 5%. So I am flexible there. The same goes to my TP. I rarely let it run over night. Most of the time I TP if it crosses above 60. Finally, I have taken as little as 10 pips. A profit is a profit. Dont set things in stone like, I will only TP if there is a minimum of 40 pips. How do you know when are the days you should just take what is on the table now and when are the days to let things run? Practice. It takes time. And its always better to be safe than sorry. If you know bias is up, but you are still not very apt at picking trades in H1 TF, then all you have to do is draw an opening line on the price of where the Daily candle starts. If yesterday was a buy and the price crosses that line to go in the direction of bias, just buy, SL would be at the bottom of the wick.
Example of SL and TP GU D TF
GU H1
Ignore all candle stick entries contra to D TF Bias. Take only those that is a entry trigger that follows bias. My EU is concluded with a healthy 70 pips and GU is at 40 at the moment. Didnt take AU cause there was no sell candle yesterday. Its all about following bias. Are you still guestimating your trades?
H1 ENTRY DICUSSIONS
Since we already have an image up, might itself use that to post further dissection of H1 entries.........
See the left most period separator?? ( the horizontal gray line on ur left ). The third candle from that was the entry for a buy on Tuesday. Friday and Mondays candle were submerged without any momentum hence the lousy trade opportunities. Still it would not have cost you pips had you just followed the Communist Doctrine. you would have still made 40 or so pips and It gave you plenty of time to cut off without a loss.
See Wednesday, the space between the 2nd and 3rd period seperators...........if you had waited for a buy then you did not get an entry signal on H1. So you dont buy. Had you waited for a few pips like me, you would have went short on the 17th candle from the second period separator. Got you some nice pips there.
So then todays trade has been concluded. It takes some practice but its a good way to increase your equity massively cause you can see the good ones from the bad trades easily with price action. And you can hold for BE if you made mistakes.
Another very very very important tip when trading. Regardless what TF you are trading, always wait for the candle to close before assuming anything. Do not enter before a candle has concluded thinking that you are going to catch a price at an earlier level and make a few more pips in the process. A candle that pulls back all the way to the opening price can always shoot back up and end as a very strong full bodied candle. The same applies to SLs or cutting a trade when you are at a loss. I know this is easier said then done but most of the time, the prices comes back closer to your entry price as the candle finishes. So there you go. ALWAYS WAIT FOR IT TO FINISH!. Then decide on the next opening hour on what we going to do.
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AU D TF
AU H1 TF
Red arrow would be the hour that this trade should have gone in. This would have been a smaller risk trade as there is no valid candle formation on D TF. But its still safe as the previous candle shows that its running out of steam and other USD pair correlates to show a fall. If we had entered on the hour shown by the red candle, the yellow line would have been our entry and the yellow line at the top would have been the SL, which also turned out to be HH for the day. Now its interesting to note how my SL has become so big now by entering where I did. The SL will still remain at the peak of todays HH as there is no other clear wave on H1 TF. That is why I keep telling newbies never enter a trade in the middle. Avoid entering a trade if you have missed the boat. I get away with 10% risk and much much more than that because I never take trades in between. If I am so very tempted and my fingers are itchified to grab a few pips in the middle, then I drop my risk to less then 5%. It increases ur SL, shortens your TP amount and if it goes against you, it takes too much from your account. 5 hours into the trade I could move it to BE safely as we can see a sort of a pull back and a wave forming before prices continued south. That incidentally was my new SL, at BE after 5 hours of holding. So I hope there is another pointer on picking SL.
GU H1
Its struggling there but just to point out how we ignore all entries that dont follow bias and only take the ones that are with bias on D TF. Check trades once every hour. Simple as that.
EU H1 TF.
SL could have been as low as 9 pips. And it doesnt get any clearer on H1 entries. Watch the pull back. Then the next candle that signals what I dont know, but it shows that price is not going up. Then the next opening candle just flies south 70 - 80 pips in 2 hours. No Draw Downs. 20% risk on that would have been sweet.
EU H1
Z Arrows marking clear opportunity candles. Thumbs marking what looked like opportunity but was not. I skipped the thumb entry yesterday because it was between asian and UK start. It always doesnt pay trading those hours. So I waited for another signal Not sure of the D TF bias so reduce risk by reducing lots and still make some money. Mind you I only took that one trade for the day. It pays not to be greedy. Finish the day then let it do what it wants. Wait for next D TF Candle. Market will move up and down. Cant catch it all.
EURAUD H1
Exotic pair, high spread ( 7 pips ). Very good pip load. Holding total 250 pips now. Look at its D TF chart. Would be silly not to short this one even though I dont trade exotic pairings. (p/s first time holding 300 pips with big lots. Hahahaha even looking at it is tempting me to cut and take! )
EU H1
Two entries given for the day on H1. First one was for a sell, SL was about 30 plus pips. Second was for a buy. SL was again about 30 pips. If we had gone for the sell without bias confirmation then we would have had a loosing trade today. That happens to everyone who trades. Bad calls that hit SL. What would have been worst had we taken the sell is the chance of missing the buy entry also.
EU H1
Both the blue lines are SL and TP for a sell as per wave. Green lines are SL and TP for buy as per wave. The yellow line in the middle would have been the entry for either buy or sell. Note that we would wait for the price pull back candle to be over before waiting for entry on the new hour.
EU Min 15.
Just as an idea how things look on a smaller TF.
Rare Asian trade. GU H1.
Entry was late by about 10 or 12 pips. Yellow is SL, Blue is TP. At the moment at 23 pips, will move SL to BE.
GU H1 TF
GU D TF
Time to cut and run. The yellow was the TP. Hanging on the 40 plus range and the other pairs dont seem healthy.
Its all in the waves. Every type of entry and exits are based on waves. No matter what System you trade or what TF you trade, its all in the waves. Learn how to read waves and you will rarely loose to the market. Learn how to read waves and you can look at any system and understand how to use it. Learn how to read waves and you will know which trades to take and which to let go. GU D TF
GU H4 TF
GU H1 TF
Please pay attention to the yellow line. That is all there is to it. Many would have read at some point somewhere that when resistance is broken it becomes support. Support is broken it becomes resistance.
GU H1.
Always wait for the H1 candle to be over. In the example above it went above the first line, hit yesterdays resistance on the second upper yellow line and down it goes. Also observe how support on Wednesday was broken and became Thursdays Resistance. Same level became Fridays NFP resistance level. Entry on the above was too early. Could have made SL lower then 10 pips. SL at the moment is about 17. News, no news, it always goes by waves.
AU H1 TF
The thick continuous red line at the bottom is where price bounced before this. Clear bounce. Price broke through that level, so resistance is broken, then shoots up and pulls back to test that line again as support. Bounces that line again and shoots right up. In between of looking at GU, EU, AU and Kiwi yesterday I decided to sell EU because of how the charts look like. EU had the strongest pull back of all 4, Kiwi had none at all. I took 43 pips on EU sell. The reason why I skipped AU is because where the price reversal took place. It was higher then yesterdays high. So to me that signals that something is wrong. Its suppose to go by wave remember?? This wave broke the continuation of that wave pattern. So I skipped. The red dotted line is where you should have ideally sold. You got more than 4 opportunities to get out of the trade at BE in 7 hours. That is as safe as its going to get. I bought Kiwi later in the evening for US session. Didnt get as much as AU gave but still 40 pips is good enough.
Kiwi H1 TF
I dont use trendlines often, but this is the reason why I choose to buy Kiwi of all the other pairs yesterday evening. Please note the two lines are markers of previous support and resistance areas. Price broke the down trendline, did a picture perfect pullback to the resistance which was broken and on retesting has become support. In with big lots, SL about 15 pips. As it happened, AU gave more, but then its reasons for me to buy were not as good as Kiwi. We take whats the most ideal setups. If you are not sure, then skip it. Ours is not a trading system per see. Its reading price. So in order for it to be very profitable, we must be ale to make discretionary decisions which will maximize our returns. EU H1.
Resistance breaks and becomes support. Prices bounce of support and 50 pips in 30 minutes.
Complete step to step of taking a trade.
AU D TF.
So bias is a buy.
AU H4 TF
We look for some immediate bounce areas. Support and Resistance if you may. Mark those areas with some lines.
AU H1 TF
Once we have established our Support / Resistance on a higher TF, we just zoom in to a smaller TF. In my case I prefer H1 cause that is as low noise as you are going to get. When you have it right, you will see something like what is happening here. The continuous line above is the resistance area, the thin one below that line is support. Now our bias is buy. So we should try to buy as close as we can to the bottom line to minimize loss and also the trauma of holding.
AU H1 TF
The third dotted line below is the area where I would probably think of cutting the trade off if it goes against me.
AU H1 TF
A properly drawn S&R line would hold beautifully like this one So there you go.............a step by step of what I do to trigger a trade. Had another one going in EA also...........same classic play with bias. Total haul for today is 80 pips.
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Trading price action is not trading a system. You either know where price is going and take advantage of it or you dont enter when you dont know what the hell its going to do. You would probably risk much more then trading a system and your account is either growing week to week, month to month, save for the occasional emotional blunder or you have to go back to demoing. If you are still guessing then you have to spend more time on a demo. My take would be minimum of 5 profitable trades on different days before you can say that you are fairly down pat with what is happening. There is no two ways about it. Trading PA is not the same as trading a system. A system is where we take a trade when the system shows a buy or a sell. A good system is profitable only after it has been back tested and statistics prove that it can be profitable in the long run. You then couple that with sound but conservative money management and you are ready to slowly compound your earnings. Both are different ways to play the market. The methods are different and the money management is different.
EU D TF
EU H4 TF
EU H1 TF
Very classic price action. H4 was a clear support broken and retested to be resistance. ==================================================================================================
EU H1
First bottom red line was my mornin marker for previous support area. See the first arrow on our left? That is where I saw the two perfect candles that showed me that something is going to happen. I took a buy on the third candle with a SL of about 20 pips. ( I know, I was too undecided very early in the morning. ). My TP was at the wick of the earlier spike up. Exactly where my sell is currently. Second entry, I could see a fall based on correlation and how H4 was looking but I could not see a very good entry point. I was rushing out so I took the trade regardless and smacked a SL right at the top of the previous support area, which is 65 pips away. Went out and came back in an hour and it had gone against me by 30 plus pips and it was dropping fast. I am 14 pips away from my TP. I am just going to take the 70 pips.
We just need to calm ourselves down, dont get excited and see it play out. Look for those pullbacks and enter there. Our SL is often so small. This is how I take risks up to 20%. Not simply jump on any trade that shows a 10 pip SL but to pick and choose and wait patiently.
AU H1
The top most dotted red line and the bottom dotted yellow lines are S&R areas picked from D TF. The middle red line is a best fit level on H4, which did not show on D TF. We drop it down to H1 and the lines fit perfectly. Now the price has hit the middle line and is touching that line. We should always try avoiding a sell on this scenario. We are effectively selling at the bottom for all intents and purposes. It could just break through the support and keep falling. But most often than not, it will bounce back off and pull some horrid stunts before falling back. Or in many cases, it might decide to fly back up. This is why many do not make it in trading. By the time our brain accepts that prices are falling, prices often are done falling. We have to be able to see whats going to happen with the charts. That, my friend is the toughest part of trading. Now look at the Yellow arrow on our extreme right. That is where I caught my AU trade for 40 pips. Prices fell, through the D TF support/ resistance area from above, then it did a pull back exactly for an hour and the following hour gave us a beautiful entry with so little as SL. 40 pips is enough since I was already holding a good one on EU. How do I know the S/R line is still valid? Look at how the previous H1 candles behaved on that line when prices were above it? Prices pulled back each time it was touched. Right on that line. So when there is a pull back and a new candle starts with a small wick at the top and starting to form a bear candle, we can say with confidence that its going to go down. Now if I have to sell AU again what would I do? I will wait for AU to go back up a little and maybe bounce off 1.0239 or 1.0271 if its very undecided. Or I would wait for price to break the current middle line at 1.0226, do a pullback and see if a bearish candle forms. We always wait for prices to pull back and test the area for an entry, which is what selling high or buying low means. We dont enter now just because previous candle was a strong bear. Then we see it gives us 10 pips before turning back and shooting all the way up because we sold late! We sold at support. We buy at support, we sell at resistance. So this is what I mean by patience. Wait for the candles to tell you something or for prices to retrace back to support and resistance areas. That is the essence of support broken, becomes resistance, resistance broken, becomes support, buy low and sell high.
AU H1 TF
The yellow arrow the right is the candle where we TPed yesterday. I advised against selling at this point, saying price will retrace up to previous levels before continuing on a downtrend. So today morning price goes up and then look at the candle on the right most downward arrow. Ideally we would have sold on the next H candle, after the pullback. These are the areas where we pick candle stick patterns and pay attention to pullbacks etc etc. We dont simply sell or buy on every other candle patterns that form randomly.
EU D TF
I was looking at the DTF bias and I saw that price is either going to range or shoot back up despite the bear candle for today, especially since it was touching a strong support area.
EU H4 TF
H4 between morning 9 and lunch time showed that momentum down had become stagnant. So we have a support area, a stagnant southward drive, so could this indicate a reversal?
EU H1 TF
Entry was a tad bit late because I was mucking around with GU also.
Finally, GU was in a safe spot and EU looked good, so decided to add some more chips into AU also
AU H1 TF
USD CHF.. H4 UCHF
Look at the candle being pointed out by the arrow. It shows stalled momentum at the resistance line above it.
H1 UCHF
Entry late by about 10 to 13 pips. I am still learning to enter as high as I can.
UJ H4
This trade stayed as minus 5 to about minus 9 pips for 40 plus hours. Would have been a loss if we didnt have patience. Its 40 pips now. Decisions decisions. Take or move it to BE and let it ride. The lower red line marks the next level of support.
EA D TF
D TF bias is for a sell.
EA H4 TF
Current candle might signal a weakening upward move. Have to wait for candle to end.
EA H1 TF
This could be the peak for SL. Will wait and watch how this goes.
EA H1
EU H4
I wanted to talk about this for a long long time but never got to making a chart to explain what I meant. Since I saw a chart that i could use, I decided its time we talked about it. We see three horizontal lines on the chart below the red arrow. A Yellow solid line marking the top of the range that we call resistance. A Yellow broken line marking the bottom of the range we call support. Then the last Red Line at the bottom is support from a previous wave. When we look at bias on higher TF and we want to buy when prices are ranging, regardless on what smaller TF it is, we would ideally buy as close or on the yellow broken line. This is what is called buying low. When we are anticipating a sell on higher TF, we would sell as close as we can to the solid Yellow line. If not as close, preferable on or above it. This is what we call selling when the price is high. Its important that we try to do it as high or as low as possible for a few reasons. one of it is to minimize SL. This also allows us to move our SL to BE as soon as possible and the chances of prices hitting our SL as soon as it breaks the range is very rare. Thirdly, profitability sky rockets. Pip count becomes much much heavier. This is opposed to those who wait for the prices to break out of range. When it breaks out of range and we enter, like in this case selling below the broken yellow line, than our SL is the top yellow line. Which makes our SL really really big!. On top of that, we can always end up being caught in a fake break out. Fake breakouts are one of the main reasons PA traders who trade breakouts loose money. The SL for fake break outs are huge. Finally, those who are capable of trading in this manner are profitable when markets range. They can collect the 20 or 30 pips in between a range because their entry is solid. They always bank in pips no matter what market conditions are.
Buying low Selling High AU H4
AU H1
AU Min 15
Pay attention to how close the price came back to touching entry point on the 15 min chart. Its 28 pips now and its safe to move it to BE. It either drops or hits BE and turns. It will very rarely hit BE and than fall when our entry is this high up. I entered this trade using the pullback candle at the top of the min15 chart after drawing the Resistance line on H1. Again dont think too much on this if we are just starting out on PA. But keep this at the back of our mind as we are looking for entries.
PRICE MOVES IN WAVES :
So this is a drawing explaining waves and how we trade price action with waves. As we all know price moves in waves and there are many ways to trade waves.
Waves are just prices bouncing from one level to the other. Like everything in forex, when we say price moves in waves, the rules are more of a sort of guidelines as far as price is concerned. Its up to us to trade patterns or waves that would give us the most chances of having profitable trades. So if we pay attention to the drawing above, the area with the red horizontal lines mark prices falling on a higher TF. So our bias is for a sell. The ones in the blue is the place where its upwards. The tail at the bottom of our price chart is probably where you would find a pin bar on higher TFs.
This is the basis of our most profitable trading method, the BPC or Breakout Pullback Continuation pattern.
The areas marked with the crude green x is where we would ideally take big risk trades. The area marked with the blue I's are areas where most of newbies will either sell or buy and get burned. This is where the candlestick charts, especially on H4 or D TF chart will give us a false impression that price is about to move explosively either downwards or upwards. So we will enter in these areas, with higher risk because of greed and than watch price go against us.
This happens again and again and again. These are the areas that play psychological games with a trader. Those who did the bad call of "predicting" or "guessing" or even "thinking" that the price will fall in this areas will usually hold until the price reverses to the area where profitable traders think of entering the trade. Which is the areas marked with the green X. This again is because of psychological reasons. We look at the same charts, especially on H TF and it will show us candles that look like its going to hit a home run from that area. So we in a panic cut our trades. Those who dont care at all or are very new will try to enter a contra trade now, only to see themselves getting burned again. This time they will block out the fact that prices are reversing and hold on to the loosing trade until prices make a new low or high.
Every newbie and those who cannot make money from the market are only doing one mistake and that is the above. Its not a habit that is easy to break. The brown line in between just shows price action on a smaller TF and how it would look on a slightly higher TF. The purple crosses just show how we can capitalize on LH or HL on a chart, but never against bias. NEVER AGAINST BIAS. Those who are predicting a reversal, make sure you have a break out from a major resistance or support area like and a retesting of that level as I have shown in the bottom of the picture. Do not attempt to simply buy or sell at every pull back or candle with a wick. Only do that when its broke upwards and retests the line again or there were pullbacks from that area previously. This only applies when D TF is in a range. Otherwise stick to BPC! Finally an example of the BPC on H1 EA
If you have picked the right levels on Higher TF, you will see candles doing the classic entry patterns on or nearby those areas without fail, each and everytime. This is how we filter out the noise and decide where are the areas we should pay attention to and where are the areas we should ignore.
GU H1 TF
This is my chart. Please note the trendline drawn on H1 that also applies to H4 from previous LL HL HL etc. This comes heavily into the reason I traded short on GU this week.
GU H1 TF
This is a zoom into the same H1 Chart. The yellow arrows mark the places where I shorted yesterday. First short I took 30+ pips and i cut it off because price hit the support below it and there was alot of news so I did not dare to hold for more. The reason I took a short because it touched the trendline. As expected during ECB news yesterday market shot back up. It hit a high and there were big orders wholesale for a short I think. Those trades triggered and before the hour was over, it was back down. This provided my second entry for a short based on rejection from the same trendline and pull back candle. This one I held for a little more because the momentum of the market was strong. The third yellow candle was today. I didnt take that trade based on bias because I was out to meet a friend. Now the fourth red arrow for a buy is a valid entry if we play by S & R lines. But its breaking rules to enter against bias and I dont know how far it will retrace. It looks like its back into the range. Missed pips but as I always say, market will always move. We cant catch all. Make sure the 3 or 4 trades we take a week are profitable.
GU H1 TF
Last trade for the week 77 pips. Get familiar with the rules of how to trade this simple system. Than keep repeating it again and again. Market will give you. Remember, its not random. wait for the signal. Wait for the entry. Wait. And if not sure, wait some more. The patterns are not subjective or complicated like head and shoulder or flag poles or butterflies etc. Its just pullback candles. One candle pattern most of the time. Be patient.
AU H1
H1 chart shows a turn around. First arrow marks possible entry. Note how we always wait for resistance to broken and retested. The entry should be on the retest, as this will give us quickest profit and smallest SL. Second entry is again previous support which was broken three days ago. This line was than broken from below and retested. Second arrow marks possible entry. Always look for this sort of BPC ( breakout, pullback, continuation pattern ) This is how we use H1 and even H4 charts to pick entry without waiting for confirmation candle.
AU H4
The chart above shows the H4 snapshot and why I picked the support and resistance line that I did, and not on a lower price as you pointed out. The more TFs that show price action on a particular support and area line, the stronger and more valid it is. Finally, if we were to look for a lower and earlier entry, than the bottom red line is a clear support area as prices not only bounced off the previous low, it also shows classic candlestick patterns for us to take the trade.
On the part of your 10 pip entry and SL, your winning ratio has to be 60% or higher in order for this to work. furthermore, as you are fully aware, even if you take entries on min5, you would rarely get SLs as small as 10 pips. Mark your support and resistance on H4. The prices will always make its best effort to go from one level to the other. Your TP can be set accordingly. It will hit. Being jittery is not a good habit that should be encouraged.
AU H1
Finally, if yesterday was a sell and today will be a sell. This would have been the set up. The H1 candle being marked with an arrow would be the candle indicating price has stalled and expect it to continue with bias. If we had entered right after the next candle opening, SL would be about 12 pips and TP would be about 40 pips, right at the bottom of the previous lower low ( LL ). That would be a healthy 1 :4 risk to reward ratio. So there you go. There are more than one way to look at the market, and there are more than one way to trade the same method. What is important is the risk to return we are taking is worth it and valid. The support and resistance areas are just places we should be watching out for price action to form. Not predict where market is going in the middle of a move.
UCHF H1
Yellow arrows marking historical S & R price action. Possible BPC pattern forming, hence entry smack right at the top. UCHF H1 Zoomed in.
Zoomed into this image so that we can see where my entry is exactly on a S & R area as identified by the arrow on our left. The arrow on our right shows where my SL is, or was when I decided to take this entry. If it had gone above that line, I would have cut my position and would have taken a small loss. UCHF H4
The first three arrows from our left shows the candles that I used to identify Support and Resistance areas. The fourth arrow from our left shows the entry, which is exactly where the S & R line would have been.
EU H1
We must first decide on direction first on D TF.
Than we look for our BPC ( Breakout, Pullback, Continuation ) signals. Those two arrows mark candles that show BPC. The wicks of those candles is where you would look for SLs.
Look out for BPC formations. I missed a 100 pip move on Euro Aussie today because it did not hit my pending buy by 12 pips.
EA H1
The green bottom line was where I had my pending buy, the Green top line was my TP. We wait for price to break upwards, than wait for a pullback before entering a buy.
EA H4
The solid green lines mark where my pending and TP was for today. I wont buy now as its now considered buying retail. We want to buy at wholesale prices. Big players buy at wholesale prices. So if I am to look for another buy, I would wait for a retrace and buy at the middle dotted yellow line and my TP would be the upper yellow line. The middle and upper dotted lines are previous S & R areas on H4 TF, just like how the Green solid lines were S & R lines. The game keeps repeating itself again and again. We just need to stop looking at it in a very complicated way. Read how price moves.
Watch how it jumps up from one level and punches through above the next level. ( or jumps down ). Than watch how it falls back to the level that it punched through and it bounces off that level, to punch upwards again to break over the next level. It keeps repeating the same action again and again.
EU Weekly TF
The four lines are the rough S & R areas that I have marked on Weekly TF. Now if we look at what the price is doing, we notice that it has pierced the two bottom lines which were a resistance area with last weeks bar. Last weeks bar ended as a solid bull candle. I am banking that the bearish candle that we are seeing for this week is the pullback for a BPC formation. Which means we should ideally be looking for a buy on the Weekly TF. But the problem here is, other than what looks like a breakout upwards and a retest currently taking place, there are no other signals on this TF to signify that we should be taking a long position. There are no candle patterns etc etc.
EU D TF
Now going into the D TF, we see the three red lines that shows S&R areas that were picked on the Weekly TF. The forth line is above the screen shot. Again, the same. It looks like price has broken the resistance area and is now resting on the same area that is acting as support. This is where we would ideally look for a long entry.
The screen shot below is EU D TF, but slightly zoomed out, so that we can see the S&R level that its currently pulled back to.
So, we are seeing prices resting on a significant S & R area and it has pulled back to that area after breaking out from below. This is a classic BPC scenario for a buy. But than, we do not have a confirmation candle or a candlestick formation signifying price reversal, on either the Weekly or D TF chart to actually give us the second confirmation that, yes we can buy as price has stalled on its downward cycle and is going to shoot up. Since there is no second level confirmation, for all we know, price might continue to go in the same direction of yesterdays bias, which was a strong bear candle. This is where we need to go down to H4 or H1 to see if we can find a candle stick formation that tells us that price is definitely taking of in the northern direction. I have entered a buy with a SL in place as this is a trade that has some potential but it does not satisfy all the our entry requirements. When we have such a scenario, there are two things that we can do. Decide to take a non ideal trade such as this or stay out of the market. If we decide to take a trade that does not satisfy all that we are looking for, than we should reduce our risk size significantly. Never trade signals that you are not sure of. Usually, if I decide to go with the flow and take such a trade, I will only risk about 50% or less of what I would normally risk on a trade that shows clear signs of direction. This is where your money management and risk management comes into play. Do not spend your valuable cash or SL purse on trades that are not clear. I took this trade 2 odd hours ago with a SL of 10 pips. If it gives, it gives. If it does not, I will wait for the UK session and see if I can find any other clearer signs showing us a PA set up on smaller TF. DO NOT GUESS. If you cannot see where its going, wait. The best place to be most of the time is out of the market.
Usually, at the beginning of each week, I will try to look at the charts and see if I can see where it is all eventually going to end up. Most of the time, the picture will not emerge until Tuesday or even Wednesday. This is where I believe my edge lies in the fact that I dont simply trade price action on every formation but pick and choose. That is why I have other layers like Bias and the Communist way of doing things. This is what makes the difference between a profit and a loss at the end of the week in my trading. I have said this through out this thread. And I am going to repeat it many times over. If you are not sure what its doing or what its going to do, stay out of the market. There will always be another opportunity later. Its easier said than done. But its absolutely imperative that you do not break this rule. Do this, and your gains will be very high. Filter the trades. Especially when market is range bound on a higher TF. Do not guess on Break Outs. So this is one of the things that I do. I scan all TFs. These days I go up to monthly TF. Than I glance through Weekly, Daily and H4. I than mark the obvious Immediate S&R areas on either Monthly or Weekly. Once that is done, I than proceed to see what price might do at that levels. The pairs that show me a clean, clear cut, obvious move, is than moved to the left side of my MT4 platform. Those pairs which I cannot read at all goes to the extreme right. This is so that I know what are the pairs I need to spend time paying attention to. I do this at the beginning of each trading day. Aussie USD is one of those pairs that is sitting on the left side of my Terminal today.
AU W TF
So we see that weekly has got some sort of a pullback candle. So that means, there is a chance for the price to climb higher this week. Than I proceed to D TF.
AU D TF
Here, I mark the nearest current S&R levels with the yellow dotted lines, so I can than know which is the Higher TF S & R area when I am in the lower TFs. If we look at the left side of the chart, we see another reversal that happened sometime back. That area acted as a support and prices today opened at or below that area. So, what that means is I wont be buying now because most probably prices will be rejected at the current level and it will be pushed down. But than, Friday was a healthy bull candle. Which means that, today, I should be looking at a buy, rather than guess on a bounce at this level and take a sell position. I than proceed to the H4 TF to look at what my trade plan is going to be. This is very very important. You should not be guessing if you are going to buy or sell the moment you look at your charts. This is how you keep your emotions in check and learn how to wait for your entry. You plan your trade earlier. Look at a few pairs. Rearrange your charts. Prepare for the weeks trading hours before actually taking a trade.
AU H4 TF
H4 shows that price has stalled in the last two candles. Chances are now that it will do a pullback. But this is where you should be careful on Mondays and Fridays. For all you know, the two candles that are showing price has lost momentum could really be because of the traders getting ready to close for the weekend and not really the underlying sentiments of the price of the pair itself.
So I can clearly see that the bottom yellow line which is an S&R area that I marked on D TF. So since the previous Weekly Candle shows a reversal candle or rejection candle, and previous DTF candle is a solid bull candle, I am thinking that the bottom yellow line would be a very good place to put in a large buy order. If prices reach this area and I can see a clear pullback on H1 or even Min 5, than this trade has a potential of giving me approximately 70 pips in profit. Which means my SL should be around 20 pips, which falls within my purse of 100 pips SL. Now my general trade plan for the week on AU has formed. I now go about doing what I need to do and watch the market once every hour. I know what Bias is most probably going to be, and where to watch out for an entry and finally, if it pans out, where to get out of the trade or do a partial close and move the rest to BE etc etc. Now I just have to see if it pans out.
AU H1 TF
Without all the preparation above, looking at a lower TF like H1 will be quite confusing and frustrating because of the many mixed signals/false signals that it produces. So what happens if price does not pullback to that level I marked, but keeps shooting straight up? Well I dont get an entry. Easy as that. What happens if it decides to keep shooting down and my take on the market is wrong? Well I dont get an entry. Too bad. My bias reading is a buy. If it becomes a sell I dont get an entry.
So this is what I mean by trying to read the markets. Do not enter when you dont know for sure what its going to do. Take the emotions out. Take the excitement out. Be prepared and be cool as ice. Mark your TP levels even before you take the trade. Look at the potential pips, work out whats the Risk to Reward ratio is going to be, so that you wont be caught in a situation where in a rush to take the trade, you find yourself risking 40 pips for 40 pips potential profit. All this is done as preparation long before you take the trade. Than you only wait. There are no more emotions to deal with as the entry is forming because you have worked it all out and you know what its going to do.
EJ D TF.
This is a formation that is as rare as April 29th. Alot of price action traders pay very close attention when something like this happens. Its called an IB candle. IB candles can be a signal for very big moves. But when to trade it and when to ignore is a different matter all together Continuation of above trade
EJ W TF
The communist system says if previous candle was a buy, than buy on this candle. So previous week was a bull, so we ideally look for a buy. Than the IB forms on D TF. The IB might be a cursor for a continuation of the down trend, or it could be the signal for a violent up move. We do not know which way it will end up, hence we use the Weekly TF as a guide to increase the probability of our trade being profitable. No system will be 100% profitable. But a system can be 60 to 80% profitable. With a RRR of 1:2, a 80% profit rate is massive returns. Stop doing sudokus and scribble the numbers for a projection chart. Than revise it. Than revise it again. Than throw it out and do another one. You will soon see how to get the statistics to be your edge.
EJ H4 TF
There is a pullback candle or a hammer right before the current candle which signals a buy. The entry is late because of waiting for this candle. For those who trade pending orders because they cannot watch the charts continuously, a pending order would have been set at 95.780 with a SL of 30 to 50 pips below it. This would have been the best price to enter because we enter right at the bottom of the price range on H4, or consolidation area. This is best because we buy as low as we can and sell as high as we can. ( This one is thanks to Yunny1. This revelation came to me when I was watching his entries. Euro Pound EG, gave me a 100 pips last week because of him. ) Pay attention to what I mean by Buy low Sell High. At a place where price ranges, its extremely important that we buy at the bottom of the range if we think its going to go up, contrary to what newbies do, wait for the candle to pierce up of that range and buy. That is not buying low. That is buying right at the top. That is trading a breakout without a pullback. In all cases, if price decides to reverse or you misread the direction, than you are going to loose maximum pips because now your SL is at the bottom of the range. Minimize SL. Buy at the bottom of the range and sell at the top of the range. In this particular trade, the entry could have been lower by about 20 pips. That means 20 pips extra to my initial SL. So pay attention to market mantra that is repeated across the board. BUY LOW SELL HIGH. SELL AT RESISTANCE BUY AT SUPPORT. We all know this. But what does it really mean? How does it apply in a chart? These are the small details that makes a BIG Difference.
EJ H1 TF
Again, entry was right after that small Hammer we see on H1 TF. Min 30 and Min 5 also gave us entry signals right at the Support area. Trading Min 5 charts are fun, because SL can be as small as 5 pips. But when, where and why take an entry? This are what you have to find out and learn for yourself. It will only come when you put in the screen time. You cannot read a method and expect to do what the person writing that method does until you start trading by yourself. When our entries are perfect, the drawdawn on that particular trade is nearly 0. The trade has been moved to BE+2 the moment it hit 30 pips profit. After this I forget about the trade and just watch what happens. If it engulfs yesterdays IB candle and shoots up, than this will be a massively profitable trade for me. If I win, than its Christmas.
But what happens if I loose? What happens if this trade reverses and hit my SL? I dont care. The whole point is if it hits my SL, than I do not loose a single cent. Ill get about 50 bucks for the effort of looking at the charts and taking the trade. The most important thing is that my capital is off limits to the market on this trade. If it goes against me and hits my SL, I dont loose a single cent.
PROTECT CAPITAL AT ALL COST. That is the biggest consideration we must have when we decide to take an entry. How much am I going to loose is THE QUESTION. Not how much will I make from this trade. Stop loosing and you are already winning. What happens if it hits my SL at BE + 2 and than massively shoots up? Well I dont care. You must come to a level where you never should say Oh Crap I should have held that trade. You must be sincerely be able to tell yourself that. Than you know you are no longer affected emotionally when trading. I hope this post answers those who were wondering what I do when I see an IB candle or any other signal for that matter. Most of the time I dont do anything. Spend time on the Higher TF. When U know what the Higher TF is going to do, than you dont even need to read the lower TFs. == We ignore all signals that go contra to the direction of daily bias. The short pullback candle signalled a buy but we would have lost money had we bought there because the D TF and W TF were heavily bearish. So we entered a sell at a bounce on yesterdays resistance area. We trade with bias as guide to direction. Otherwise we cannot read lower TF Price Action due to too many false signals generated == Price cannot go in one direction alone. So we cannot expect a sell to be a continuous sell or a buy to be a continuous buy. If we look at a chart. There are two extremes that price can be on a given time frame ( TF ). At the top, or the bottom. We sell when it hits the top, buy when it hits the bottom. Now here in lays the detail that becomes the devil. Monthly, W, D, H4, H1, Min 30, Min 15, Min 5 and Min1 TFs all have their own top and bottom. What might be the top of Min30, might just be in the middle of H1 in an up move. And that middle price level of H1 that is moving up might just be the beginning of a up move on Weekly TF. So by the time Weekly TF hits its maximum upper level in a few months time, H1 would have broken its higher level again and again to reach newer and newer highs and heights. So price essentially forms a sort of a virtual ladder in its steady climb upwards. Once weekly hits its up, it reverses and comes down. On its way down the flight of stairs, price will again bounce up and down on the H1 chart exactly on the same levels or there abouts give and take a few pips, just like how it would be when we walk down a flight of stairs. This is called historic price action.
Now why does price go up on smaller TFs if the bigger TFs are bearish and vice versa when its bullish? Well without going into the detail of how the market works, just imagine price being the sole of your feet or shoes. Now imagine how that level moves when you are moving one foot down from a higher level to a lower level of stairs on your way down. You lift your foot a little higher than where it was earlier and than move it lower. Well price moves pretty much the same way. It does not fall in one go from point A to B. It moves in waves. So our game plan is to figure out where these levels are, figure out what is the higher TF price doing, and than try to jump into the action at a level that guarantees us a profit. The tough part of trading is figuring out which is a retracement and which is reversal. Why? A retracement on D TF is a reversal on say min 15 chart. A retracement on a Monthly chart could be big enough for it to be taken as a reversal on the D TF. That is why you see that price does not move in a linear motion. So big institutional players who are the market makers do not buy because a currency is cheap per say and sell because its expansive and ripe for them to take profit if compared to another currency in the sense the real world sense that we are used to seeing and dealing with. They sell and buy based on a relative value. What is this relative value? Relative to what? Well this is what we see as the price levels. The price waves. The flight of stairs. This is how and why D TF might go sell sell sell than buy buy than a big long sell than a small sell than a big buy before continuing as a sell if we look at it as separate candles. Its just the big players batting price from their perspective over priced and under priced levels.
Figure out where these levels are and we will be profitable because the big boys are going to be bating the price like a ping pong ball back and forth, up and down from these areas.
The other important thing I forgot to mention. Dont expect to open the chart daily and see things with clarity. Most days we cannot see what its going to do. But in a week you will get atleast two entries on each pair where you can reasonably see what its going to do if you follow the communist system. Forget about free speech, forget about freedom of expression, forget about rights to do what you want to do. Just follow what price did yesterday and you will get it right half of the time. Couple that with a RRR of 1:2 atleast and you will never loose money on the long run. What do you do when you cannot see what its going to do? DO NOT TAKE A TRADE! Dont waste your capital on assumptions and guessing. If you fancy something like that, go to the casino in the evening. The rate of returns and a guarantee of the casino winning in the long run provides better odds than you surviving the market if you are guessing and assuming.
Question : I wonder if you could expand on the concept of retail/wholesale prices by way of a chart eg where the newbies would enter at retail and the experience trader and institutions might for wholesale Ans ) Retail price is the entry price of a trade that had cost us money. Wholesale prices is the entry price that made us a nice profit!
Wholesale prices are putting in an order right at that redline based on previous history. We can see very extreme prices on previous pinbar or pullback wicks on the higher TFs. D TF and above. Ever had a trade that went on a negative and just kept on going south without even a chance to cut it off at BE or a lower loss? Well those were the times that we had accidentally got on the wrong side of the wholesale price. Wholesale and retail is just another term, just like oversold and overbought or support and resistance. Question : how clear candle patterns must be for you? I know it is enough for some traders that for example pinbar doesn't open/close during previous candle etc. Ans) Well for me its more of the whole picture, and not too much into where the prices closed. I see a BPC pattern and the higher time frame supports directional bias than I take the first pullback candle or I put in a pending at yesterdays bounce area. Monitor each and every D TF candle. Often you can see where the price retraced to before it takes of in yesterdays direction. That price level will match very closely with previous candles around that area. A previous high acts as support etc. There will be one or two trading days a week per pair where you can read it like a crystal ball. Those are our trading days. Every other day is spent on reading how other people are trading.
Question : does it mean that even though the daily bias is showing a buy, but there's no setup for buy but good setup for sell, we would still go for a sell?
The whole concept of trading with bias is so that a trader can have maximum number of winning trades over a given period of time. Something very important if we are to make it in this game. Also to take away the stress of trying to figure out if its going to be a buy or a sell. Decide on the direction before looking at the lower TFs allowed me to form a trade plan in my head. Than I just have to wait for that trade plan to play out. Often it plays out exactly as how I thought it would because of bias. Going back to selling when the higher TF made a higher high on the previous days trading is now wrecking the entire concept of this system. If you have a different system that defines a contra trade with an acceptable SL and risk management, than by all means yes go ahead. But changing a clearly spelt out trading system is one of the classic mistake newbies make. They start complicating things. And thats when it all gets messed up. The hardest part of this method is waiting. Unless one adopts a very strict approach to trading it, we will find ourselves jumping the gun and making assumptions and loosing money.
Question : I have question regarding the PA when it involves S&R. For beginner, i understand that i should stick to trades that follow the daily bias. e.g: If today bias is up, i should only be looking for buy setups. However, what if today's bias is up and there's a significant resistance.
Ans ) Days like this stay out the market. This is not a perfect system but avoiding days like you speak of will prevent you from taking loses. In the end your greatest chance of success is knowing when to sit it out. Trade only when things are clear let the rest of the fish swim in those shark infested waters. Not worth getting your feet wet
Question : when the method tell's the directional bvias so easily like following the yesterday's bias, why do still many lose ? I mean if we know that tomorrow is a bear day, we only look to sell..!! Ans ) We know bias. Good. But that is only the first question. Looking at bias by just looking at the previous candle is just the first part of technical analysis. Have you checked what your weekly candle is and was? Your Monthly? Are they at any significant resistance or support areas? Once you have figured that out, you need to look for bounce or even retrace price levels on the weekly or sometimes on the monthly. These are often very very precise entry points. You see all TFs sporting a bear candle and you say bias is sell. But have a weekly candle touching a previous price wave or opening, closing, HH or LL and your sell can end up as a major disaster!. So you have just done all that analysis. Now you know direction. You know direction, but do you know where to enter. ? Most of my trade these days follow my bias readings. Knowing where to enter is a different ball game all together. I use to chase the market. The moment I see some bear signal on the smaller TF ( H1 TF ) I sell if the bias is sell. Buy if vice versa. Than the next thing I know it spikes all the way up, hits my SL, than continues to zoom past my entry point and ends up at a price level that would have given me a very healthy profit. By now, our emotions are on a roller coaster You see many newbie traders talk about Stop Hunting by the market or the broker etc etc. They will swear that the market just made a move to take them out. Allow me to let you in on a secret. The broker who is running a set up that costs a couple of million dollars, or worst, the market movers who are controlling a few hundred million as spare change cannot give a rats ass even to 1000 USD we just lost on our stop. Most newbies would not even be near the 1000 USD figure. Most would be loosing about 50 or 100 USD, many a few dollars.
Most days, I know where its going to end up. But I dont get a trade. Why? Because I expect price to retrace to a very specific area, and if it does than I am in a trade. Most days, it will retrace short of my analysis and continue with my bias. It took me more than two years to come to this point where I can sincerely tell you that it does not bother me at all that I had lost 100 or 150 pip move because price had not retraced to the levels I had marked out. So lets assume a trader has now figured out how to read bias and he or she has also figured out where to enter.
Do you know when to enter? What are your trading statistics for the first week of the month, compared to the other three weeks? What are the news you should be keeping an eye out for the monthly economic news callender announcements? What about other issues that will affect your trade? The ECB might decide to have another meeting to remind the attendees that they are a proper bureaucratic establishment. Do you anticipate that move or do you ignore it? The statistics for newbies who wanted to be traders but failed is apparently around the 70 odd percentage area. 85 % or more new start up small businesses fail to cross their 5th year. The real world statistics is even more grim compared to trading. ( These figures were posted in Babypips in another thread about a year back ) Most traders who have had the good fortune of not choosing a lousy system and not learning bad habits or being conned out right will now come to the last stage before they can say that they are reasonable profitable. You have figured out the workings of your choosen system, and everything looks good. At this stage, traders will be facing their last and most difficult challenge. That is playing real money and sticking with the rules of their system even if they have had a few consecutive losses? Most traders will tell you without a seconds hesitation that they are mentally prepared for this. The truth is very few actually cross this last barrier. The hardest battle people have on a daily basis is a fight that is against themselves. Add money into this and your chances of fighting your impulses just took a massive nose dive. All the above are just assumptions being made for the sake of putting a point across. The actual process is much more elaborate and complex. Sometimes you have to realise that you have gone down the wrong path, and you must be able to retrace back to the earlier point, and getting rid of all the false and bad things you had learned walking down this path earlier. Easier said that done.
In a nutshell, So many loose because they have not put in enough screen time. My personal view is a minimum of 10 thousand hours, reading, analysing and trading the markets before you can even reasonably say that you have some idea of how it actually works. Try opening Google and search for words like "how to make easy money" or "easy money" etc etc and I can bet you my bottom dollar that the first ten results would have atleast 2 results that has something to do with "trading" and "forex". Most go home very disappointed and adding to the statistics when they realise that its not easy to become proficient in trading. By than every single cent invested originally, and many more dollars diverted from elsewhere would have been lost. Forex will not work for you if you do not have the patience. It will not work for you if you are planning to get rich by end of this year. Forex will not work for you if you are someone who blames others, the system or even the dog for their losses instead of knowing solidly in their hearts that its actually they themselves who have not figured out something and keep looking, reading, searching, posting on forums and most importantly trade against all these morally devastating hurdles the market throws at them. The market and how it works is very very simple. If you look at it objectively, you only need to decide one direction price is going to go from a potential of two, up or down, buy or sell. It does not get any simpler than that. Actually doing it and making money out of it requires 100% effort from all angles. Those who fail do not have what it takes from a multitude of characteristics or trait that will get them to being termed a profitable trader.
One More Example :
EA H4
Touching the resistance that was broken and retested to be support. EA D TF
Well that one there is the pullback candle and long today.
I do pullbacks exclusively because the SL is very very minimal and easy to pick. Watch D TF. They tell you alot.
