I whipped this up over breakfast to help simplify Candlesticks a little.
Don't forget that when we have the correct Candle Pattern at the correct location I then want that Pattern to be broken in the correct direction to enter the trade. This can be done via Pending Orders and you do not have to stare at the charts.
OK, so hopefully everyone is up to speed so far but I still want to break this first example down further because it is important that you understand every aspect of what you are doing. I am sorry this is a slow process but my experience in teaching has proven to me that this is the best way.
It is easy for people to tell you some way to find entries, but entering is only 1 piece of the puzzle if you wish to be successful on a consistent basis.
So looking at the same example again, everyone should understand how PA, SR, and TL's where used to intelligently find the trade.
Let's just take an even closer look at the exact entry point for the trade and why, the exact place for a SL and TP and why. There is a reason for everything you do, or at least there should be. This way when you are in a trade or just entering a trade there are no unanswered questions going on in you head. It is almost robotic because you know exactly what you are doing and why.
So in the picture I have outlined the Entry point, SL and TP once again.
The entry point was just below the Pinbar that had re-confirmed the new Resistance area and consequently what I believed would then be the Lower High that followed the Lower Low.
The SL was just above the newly confirmed Resistance area
The TP at a conservative level was a slightly Higher Low even though we were expecting a Lower Low due to the current PA and because even that level provided almost a 1:2 RR scenario which is very acceptable.
(in the next post I will explain the thought process during the trade)
Now that you are in the trade and you have an intelligent SL and TP, plus before you entered you made sure the RR was also intelligent.
How do you manage this trade also using just Price Action to make your decisions?
In this picture you will see I have looked down and to the left of price at the time of entry and found any "Obstacles" that may get in the way of the trade.
Point A is the first obstacle but it is too close to the entry point for my style of trading so it is ignored, if however you are a very safe player then this would be a good point to move your SL to Break Even (BE).
Point B is the next obstacle and this is where I moved my SL to BE, if you had already moved your SL to BE at Point A then Point B would be used to move you SL to actually lock in some profit.
Point C is of course the conservative TP initially mapped out. If you are a more aggressive trader then you would not actually place your TP at Point C but an Alert instead. This way if price was moving nice and fast you have a chance to grab some extra pips.
Advanced Note: As you will learn later Point C is also right before a HighLow Breakout trade that I keep my eye on as a place to add to my already entered swing position, this can only be achieved if you used an alert at your initially mapped out TP instead of a hard TP
I will wait at this point for interest in me going on or questions on what I have covered so far.
A HL Trade?
Thank you very much for this lesson. I'm just getting to grips with the abbreviations when u conclude with another one - 'HL' - in HL trade. So where a more cautious trader may look to go flat in this area,a more aggressive trader may be looking to add to the position - yes, no?
PS, I live in the middle of nowhere in the french countryside and my son has come to visit me until next tuesday after which I will be reading and responding to your lessons as soon as I have read and understood them. Thank you once again.
thanks for pointing that out to me .. I have re-worded the above post.
what I meant to say was a HighLow breakout trade but I typed HL for some reason.
The HighLow breakout trade is what I have named the trade because it is the break of the Low that was first LowerLow Lower High sequence following the 'Core Trade'. You can continue to trade these HighLow Breakouts as the trend continues but I find this first instance to be the safest... and of course reverse all the logic when you are going the other way.
Since I personally favor swing trading this trade can end up being a great place to add to your position that you are already in from the Core Trade if you are at your computer and did not just let your conservative TP to be hit. It can however be taken all by itself as a breakout trade risking 1/3 of the 60 day AverageDailyRange and targeting 1:1 on the RR side of things as a minimum. I will get into Breakout Trading later on though with examples.
The instance of the HighLow Breakout Trade in the above picture worked out just fine as you can see.
thank you very much for starting this thread & explaining things in great detail one step at a time.
Communicating new ideas & information to others is a skill in itself & greatly lacking on these boards. Most have all the good will & intent needed but are vague or inconsistent or have prima donna tendencies.
Going slowly is great as I will be practicing to the letter these little lessons as the thread progresses. Physically doing something the same way again & again trying to eliminate all the little unforeseen mistakes that naturally occur when trading in real time going forward.
I have been trading for a while virtually indy free, but it always feel like I just make it through the month by the skin of my teeth. In order to progress I need to be calmer & less caught up in the market, so with practice I am hoping your clear & patient teachings will help.
All the best & thanks again
I think I have been thorough enough in explaining that particular trade and since there seem to be no questions yet I will answer them later if/as they come in.
REMEMBER: the core trade explained I have traded right down to the M2 chart with decent success..
it will work on any timeframe but my crazy 8 hours staring at the screen days are long over with my new trade management EA's and VPS,
so I now take this trade on M30 and above depending if I am travelling the world or at home.
I will now go prepare a similar step by step process to explain the dynamics behind the next price action trade I will explain.. the TL bounce
Drawing Trend Lines is actually something I should have covered before the 1st trade example but I will cover some basic TL drawing concepts I have before I move on.
The next trade is the TL bounce so it is very important that you draw them correctly.
Firstly there is no point drawing a TL unless there is a Trend, hence the name of the Line I suppose. So how do we determine if a TL is warranted?
There are essentially 2 main conditions I look for to draw a TL. TL's are used to gauge the Momentum of a move.
1. Confirmed Trend Line Zone:
Quite simply 3 points to connect that, in the example of a sell, created the Lower High, Lower Low, Lower High, Lower Low scenario.
*When you look at my charts you will see the gray boxes, these are Support/Resistance boxes, they are not a single price but a small area. Trend Lines are essentially angled Support/Resistance and therefore I also look at them as zones rather than a single line.
2. 2nd wave has greater gains and is much more powerful than the first indicating a possible Impulse wave from the Elliott wave theory. I don't apply the EW theory too much in my trading except in this kind of scenario where it tends to apply more often than it does not. I won't go in to Elliott Wave theory here but instead explain in a logical manor. Basically the increase in power and momentum indicates that there is a very high chance of the next wave continuing a Lower High Low pattern so I place a single TL (as it is not a confirmed TL zone by having a 3rd point) to remind me that it is not as solid as a zone, but a predictive momentum line. I do not find these as reliable if the TL is way too steep.
Trend Lines ... cont
The one exception to the rule is when price is swinging in large smooth swings yet still making gains in a particular direction.
These TL's should also not be very steep and remain a single TL to remind you it is a predictive TL and not a confirmed TL
* Do not clutter your charts with TL's, they are momentum guides and help with 3 of the types of trade I take, The first was of course the Core Trade and the 2nd is the TL bounce which comes next