ElectroFX Pure Price Action Trading - page 5

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Theo Patsios
317
Theo Patsios  
electrofx:
This does not mean you will win all your trades but it does mean you will win more than you will lose and it also means that you will usually have larger profits than the losses. Tipping the scales well in your favor.

Just fixing a typo as it won't let me edit the previous post

Theo Patsios
317
Theo Patsios  

Let's understand my previous post with 2 images now, the first is a look at the main market swing flow of this H4 chart scale (Green-Swing1), the next is a zoom further in to look at the faster scale of swing activity and structure (Turquoise - Swing2).

electrofx:
So, thus far you have used the non-repainting naked price action evidence that you can see on your chart for the following:
  1. To understand the current swing flow/market structure
  2. To decide on the next potential areas of SR that the current swing flow could turn
  3. To get a trigger at one of those SR areas so that you can confirm the area is holding
  4. To then get your entry point and judge your risk:reward to make sure it is even worth it
  5. To naturally then have a pre-planned unquestionable stop loss, take profit and break even point.
.

There are many more trades on this chart than I have pointed out in the picture but let's start with these really obvious ones to cover a variety of them... all based on evidence.

In this first trade you see an area created by swing 2's high returned to after a swing 2 lower low.

The swing structure shows you a down trend on that Swing 2 scale and a lower low was just made.

The area was reacted to very precisely and a nice pinbar formed.

So now before you enter the trade you know several things.

  • It is not following the trend of swing 1 but it is following the trend of swing 2 so all of the management decisions will be made with swing 2.
  • The previous swing 2 high gives you the area you are trading and therefore your stop loss.
  • The break of the pinbar gives you your entry point.
  • You now know your risk and the most conservative reward you can assume will be a higher low on swing 2

So as you can see without guessing you are just reacting to what is happening and the evidence laid out before you... the area of resistance was created, returned to, and reacted again via that pinbar to prove that you are not alone in thinking that is a good area. You now have the probability of the trade working out well in your favor.

The trade is also worth it on the risk:reward side of things because you really can expect a lower low on swing 2. If you do then 1:3 risk:reward is available but for the conservative trader this fact means that targeting a higher low is very safe indeed. The conservative higher low will still yield you 1:2 risk:reward.

As the Trade progresses more evidence shows you an area that it stalled at being broken and a safe time to lock in a 1:1 level of profit in case your target is not met.

I will go over Trade 2 tomorrow

Files:
eurusd1.jpg 95 kb
eurusd2.jpg 82 kb
markcoronado
33
markcoronado  

Very good I'll wait till tomorrow.

Theo Patsios
317
Theo Patsios  

Let's move along to the 2nd Trade in this picture and zoom in to understand its dynamics.

This 2nd trade differs from the first because now we are not only following the trend of Swing 2 but we are also using it to trade the breakout of Swing 1.

The 2 Green boxes I have drawn are on the previous Swing 1 Low and the previous Swing 2 Low. After the previous Green scale Low was broken it is safe to play the breakout of that scale of activity using a swing 2 scale movement. The 2 areas of interest are each of those 2 boxes that were broken. However if you apply the concept of wave relativity then a pullback to the thin long box I have drawn is not really suiting Swing 2 as a relative pullback, therefore the other box makes alot more sense if we are to respect the current market flow. When price returns there a nice tweezer top inside bar combo formation appears and you now have an entry trigger point as it breaks it short.

So now before you enter the trade you know several things.

  • It is a breakout of swing 1 and it is following the trend of swing 2 but it is the 5th push down at that scale which is as far as I am ever willing to go... so all of the management decisions will once again be made with swing 2.
  • The previous swing 2 low gives you the area you are trading and therefore the tweezer top inside bar combo gives you your stop loss.
  • The break of the tweezer top inside bar combo gives you your entry point.
  • You now know your risk and the most conservative reward you can assume will be a higher low on swing 2

So as you can see once again without guessing you are just reacting to what is happening and the evidence laid out before you... the area of support was broken, returned to, and reacted again but now as resistance via that tweezer top inside bar combo to prove that you are not alone. The pullback was relative to swing 2's recent history of this swing 1's move down and so you now have the probability of the trade working out well in your favor.

The trade is also worth it on the risk:reward side of things because you really can expect a lower low on swing 2. If you do then 1:2 risk:reward is available but for the conservative trader this fact means that targeting a higher low is very safe indeed and the fact that it is the 5th push down on swing 2 also weighs in. The conservative higher low will still yield you 1:1 risk:reward which is the minimum requirement there.

This trade goes straight to profit and needs no break even point or stop loss trail.

Trade 3 tomorrow

Files:
eurusd3.jpg 85 kb
eurusd1.jpg 95 kb
markcoronado
33
markcoronado  

I think I'm starting to understand it.

I'm not totally sure what a tweezer top inside bar is.

You wouldn't happen to have a close up of one?

What time frame do you usually trade, 4hr, 1hr?

Theo Patsios
317
Theo Patsios  
markcoronado:
I think I'm starting to understand it.

I'm not totally sure what a tweezer top inside bar is.

You wouldn't happen to have a close up of one?

What time frame do you usually trade, 4hr, 1hr?

Here is an image close up

It's not pip perfect but it does signify a double tap on a much faster time frame to boost the area even further plus it is an inside bar style pattern also. Just proof that the area is being used by others that actually do move the market so that you can join in

Files:
eurusd3b.jpg 18 kb
Theo Patsios
317
Theo Patsios  

Let's move along to the 3rd Trade in this picture and zoom in to understand its dynamics.

This 3rd trade differs from the first 2 because now we are looking at trading Counter Trend swing 2 wave but at a great location for it to be a reaction for swing 1. As always we wait for proof though.

The Green box I have drawn is at the top of swing 1's previous high which was an area reacted from for quite the drop, this is the first time back there since that happened and although it is counter trend on the swing 2 level it has location behind it. As price reacts from the area you can make out tweezer tops once again and the passing of the pinbar backs up enough proof to enter and know you are not alone.

So now before you enter the trade you know several things.

  • It is a prime location for swing 1 to have a reaction but it is counter trend on swing 2 so all management decisions must take keep this in mind
  • The previous swing 1 high gives you the area you are trading and therefore your Stop Loss.
  • The break of the tweezer top pinbar combo gives you your entry point .
  • You now know your risk and the most conservative reward you can assume will be a higher low on swing 2 and the most conservative place for that to happen would be a mirror flip on swing 2's previous high.

So as you can see once again without guessing you are just reacting to what is happening and the evidence laid out before you... the area of resistance was returned to and reacted from via the tweezer top pinbar visual which gave you an entry point and proof that you were not alone. Your most conservative target respecting the current market swing flow was above the minimum 1:1 risk:reward and so this trade made sense.

You can probably start to see a pattern here ... Location, location, location... entry trigger... intelligent management. ALL based on evidence.

This trade goes straight to profit and needs no break even point or stop loss trail.

Trade 4 tomorrow

Files:
eurusd1.jpg 95 kb
eurusd5.jpg 85 kb
markcoronado
33
markcoronado  

Very interesting, can't wait for the next trade.

What time range chart are we using?

Theo Patsios
317
Theo Patsios  

These charts are H4 but this can be done on any timeframe within reason. The lower the timeframe the sloppier things get though.

Theo Patsios
317
Theo Patsios  

Let's move along to the 4th Trade in this picture and zoom in to understand its dynamics.

This 4th trade differs from the first 2 because now we are looking at trading the 5th push up on swing 2 but it has now synchronized with swing 1. On swing 1 it will only be the 2nd push up on that scale since the move started at the bottom of the chart. For the swing 1 scale pullback there are only a couple of locations that it could happen, these locations are very visible by observing swing 2's peaks

The Green box I have drawn is at the first potential lactation for a swing 1 scale turn and the most desirable too because it also means that swing 2 has not made any lower high's or lower lows yet either. As price enters the area it has that first reaction you can see on the big red candle with significant spike. Price then returns in to the area signifying a double tap on a lower timeframe and then displays indecision candles. You now have plenty of evidence supporting this location and the break of the candles north is your final confirmation that you are just joining in with those who do move the market. You have about 8 hours to plot your pending order (buy stop)

So now before you enter the trade you know several things.

  • It is a prime location for swing 1 to have a reaction and it is also a prime location for swing 2 to have a reaction, plus it is still following the trend of swing 2
  • The previous swing 2 low gives you the area you are trading and therefore your Stop Loss.
  • The break of the indecision candles gives you your entry point .
  • You now know your risk and the most conservative reward you can assume will be a lower high on swing 1 or swing 2 since they are now in sync.

So as you can see once again without guessing you are just reacting to what is happening and the evidence laid out before you... the area of support signified by that previous swing 2 low was returned to and the size of the wave down was that of a swing 1 scale also. This support was spiked from and then reacted a 2nd time giving plenty of time to enter once the indecision was broken in the direction of the trade you are expecting.

Location, location, location... entry trigger... intelligent management. ALL based on evidence. This trade had amazing risk:reward also and was an easy 1:3. On the way up you can see the little indecision area that was then broken north again as it went to target. That was a great location to move your Stop Loss up and lock in some profit. Based on evidence once again

In all of these examples I have pointed out the most conservative take profits. I prefer not to be greedy but you certainly could be a little riskier with your take profits if you wanted to and shoot for the expected higher highs or lower lows of the swing you are trading.

Files:
eurusd1.jpg 95 kb
eurusd4.jpg 82 kb
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