Dynamic Price Action Strategy

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Javad Farzaneh Verdom
191
Javad Farzaneh Verdom  
Hi everybody,

I'm going to describe a very powerful and profitable Price Action Strategy which uses a combination of  dynamic and static support and resistance levels to find potential entry and exit points.


As you may know, Price Action is the movement of a security's price on the chart over time and is about analyzing chart with the price itself instead using indicators. In fact, the goal of price action is to find who runs the market, Buyers or Sellers, and then how to trade in market and find best entry and exit points. Support and resistance levels and candlesticks are 2 important part of price action and with Dynamic Price Action Strategy, we have candlesticks, static support/resistance and dynamic support/resistance to find entry and exit points for each individual trading order.

It's important to know that best time frame for us is Daily time frame. Generally, for price action strategies higher time frames (4H or more) generate more profitable results. Because, candlestick patterns and support/resistance levels in higher time frames are much more relabel and accurate and specifically in this strategy we need to minimize wrong entries.  


Price:

So consider a chart in Daily time frame without any indicator:

EURUSD D1

In this EURUSD Daily chart, we don't have any indicator and it's only a chart of price which can tell us everything we need. But, to find out our goals in this strategy we need 3 fundamental tools, candlesticks, static support/resistance and dynamic support/resistance and we only have price on this chart. But, in the next chart I've been added the static SR levels:


Static SR levels

EURUSD D1

As you can see, there are 4 SR levels on this chart. Please note that, these are support and resistance levels (or areas) which means we shouldn't consider support and resistances as a line (or price). These SR levels, divided our chart to separated areas to guide us how and where have to enter or exit from trade. 


Static SR levels are generally important, because, most of the professional traders, place their entry orders at these levels. So, if you trade on these levels, you actually trade as a professional trader.

Placing SR Levels is very easy. You need to follow these steps to do this:

1. Select a Daily chart and zoom on that to see 6 month to 1 year data on the chart.

2. Place SR Levels on the highest and lowest price which you can see in the chart.

3. Place SR Levels between these 2 levels considering following rules:
  • Place SR lines on the body of the candles. Shadows are not important.
  • SR Levels are not a line or a specific price. They are areas, so create levels a bit thick and price will enter to or exit from this thick SR  level.
  • Place SR Levels on 2 or more bounces, except times you don't have a second bounce for a long time(Like higher and lower prices on the chart).
  • The newest chart status is more important to oldest one. Place your SR levels on the recent bounces on the chart.

Considering above rules, you can find that there are normally 3 to 8 SR levels on a chart. Please have a look again on the above EURUSD chart and check the rules on that.



<<< If you are still not comfortable to place static SR levels yourself, I created an indicator that place SR levels perfectly. To get this indicator click on following link >>>

<<< Price Action Support Resistance Levels >>> 




Dynamic SR levels

So far, we have price and static SR levels and we need now dynamic SR levels to complete our tools for this strategy.

But what is dynamic support and resistance levels? 

Dynamic SR's are same as static SR's with 1 different. They are not horizontally placed on the charts. They can place like a trend line, channel or even curve lines.

Actually, unlike static SR levels, placing dynamic SR levels in curve mod, isn't easy and it need a lot of calculating. We need this curve mode dynamic SR levels for this strategy and for that reason, we use a very functional indicator named Triangular Moving Average (TMA) indicator. Please have a look on the following chart:

EURUSD D1

As you can see the two lower and upper bands indicates our dynamic support and resistance levels.

So we now have all 3 tools we need in this strategy: Price, Static SR levels, Dynamic SR levels.


Dynamic Price Action Strategy

In this strategy we have 3 entry conditions. I'll explain the first one in this topic: 

Direction Entry Trigger

TMA indicator has a middle line which is showing the current direction of the trend:

  • If it was upward we consider that as BULLISH
  • If it was downward we consider that as BEARISH
  • If it was not BULLISH or BEARISH, we consider that as NTZ (not trading zone)

After finding direction:

If it was BULLISH, and price hits to one of the static SR levels lower than indicator middle line, it triggers a long position. SL is lower low around the static SR and TP is next upper static SR or indicator middle line(whichever close to entry point).

If it was BEARISH, and price hits to one of the static SR levels higher than indicator middle line, it triggers a short position. SL is higher high around the static SR and TP is next lower static SR or indicator middle line(whichever close to entry point).


Please have a look to following charts to get more details:

EURGBP D1

On the EURGBP chart the indicator shows it's a BULLISH trend, so on the static SR line lower than indicator middle line, we are looking for a long trigger. 

Price is bounces on the line for multiple time, so it's a very good place to enter. SL will be consider some pips lower than lowest low in static SR level and TP will place on the next upper static SR level.

On the next image you can see a BEARISH setup:

CADJPY D1 

The mid line shows it's a BEARISH trend. So, we look on the static levels upper than mid line to find a proper short trigger and complete our setup with SL and TP.


There are 2 more setups for this strategy and I created an EA to cover all the setups.

I'll add a signalling system for this strategy on Signals section very soon and inform you in this topic.

Please let me know your questions and share your ideas and thoughts.


Thanks.



William Roeder
20808
William Roeder  
Javad Farzaneh Verdom: . I attached this indicator to this topic.

No you didn't. Don't attach EX4s

Javad Farzaneh Verdom
191
Javad Farzaneh Verdom  
William Roeder:

No you didn't. Don't attach EX4s

Ok, I removed this indicator, but if someone needs to use it, what should we do?

I tried to upload this one freely on the market, but it needs to recompile with new compilers and I don't have the source code for this indicator to recompile it.

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