Price Action Trading - page 2

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I want to discuss single bar supply/demand analysis:

Price will increase when you have increasing demand (buyers) or decreasing supply (sellers)

Price will decrease when you have increasing supply (sellers) or decreasing demand (buyers)

Supply/demand is the basic building blocks of price action and you can use candlesticks to help visually identify it. Let’s take another look at that picture that I posted early.

To make things simple if price close above the midpoint of the candlestick then that is consider bullish (or more buyers than sellers). And if price closes below the midpoint then that is consider bearish (or more sellers than buyers).

Since we are using time charts (i.e. 5mins, 15mins, etc…) each bar represents a battle between buyers and sellers. At the close of the bar you will know who has won the battle based on the above midpoint rule. Now think of each bar as a word in a sentence. Each word will have a meaning, but when you string a few words together you can have a sentence. And a few sentences can tell a story. So when you start stringing some single price bars together it starts to tell a nice story called Price Action

 

Price action is the best way to trade.

I encourage this endeavor and wish you luck.

 

3 states the market can be in:

1. Uptrend - Higher highs (HH) and Higher Lows (HL)

2. Downtrend - Lower Lows (LL) and Lower Highs (LH)

3. Congestion or Consolidation

It’s important to understand these above concepts into order to trade price action

 

I want to discuss Support & Resistance (S/R). S/R ties into supply and demand analysis.

A Support level is found when the market is considered low enough for buyers to step in or sellers to stop selling. Conversely, a Resistance level is found when the market is considered high enough for sellers in to step in or buyers to stop buying. See the below chart for an example of horizontal S/R lines for GBP/USD:

Also please note that when price breaks resistance it may act as support in the future. Vice versa for when price breaks support is may act as resistance in the future.

 

This is good information, I have been trading for 5 years now and the last three have been on price action only, no squiggly lines on my charts. I also consider the engulfing pattern the most helpful candle pattern in detecting a change in trend direction. Are you going to get into chart patterns?

 
lotsofpips:
Are you going to get into chart patterns?

Yes. My next post will be a few chart patterns that I saved from yesterdays PA.

 
lancenicolase:
A price action area is the area preceding where an 'extended' price move occurs - often from some consolidation period like in this case.

I agree, those are usually the best trades.

 

Ok, I think I have given enough basic background information on Price Action.

I want to discuss a few trade set ups:

1. Continuation Trade - Buying or selling retracements in the current direction of the trend.

2. Divergence Trade - Buying or selling tops or bottoms looking for a trend reversal.

I also want to explain the 1 indicator that I use. The EMI indicator shows current buying and selling pressure. Do you need it to trade PA, no. Does it help me, yes.

I'll will post a few examples soon.

 

Hi Everyone

I am new here, I did trade forex over a year, I need help for EMA cross with an alert on the chart (MT4)and most importance it able to send alert to my cell phone. Thank in advance

Alvin

 

Continuation Trade Example

This example is from the other day. You have the EUR/USD making higher highs (HH) and higher lowers (HL) from about

1 AM. And you know HH and HL means price is currently in a uptrend. Also to confirm and uptrend I like to take a look

at the EMI and it's above the zero line.

Basic rule of thumb is if the EMI is above the zero line price is in a uptrend and if EMI is below the zero line price is in

a downtrend.

In this situation I will be looking to buy the retrace of the uptrend in the expectation of the trend continuing in the

current direction. Also note you have price increasing on strong EMI (buying pressure). Once price begins to retrace

and EMI is decreasing I will keep my eyes peeled for a potential continuation of price.

Once I see price starting to move in the current direction of the trend I will get long at the close if the signal bar and

use the swing low as my stop. The swing low in this case is just the low of the signal bar. Also to confirm the price bar

looks good I will take a look at the EMI to see if it is increasing as well.

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