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PriceAction Learning PDF
PriceAction Learning PDF
Disclaimer
The information contained in this book is for informational
purposes only. I am not a financial advisor. Any legal or financial
advice I give is my opinion based on my own experience.
Table of contents
Contents
Disclaimer ............................................................................................................................................... 0
About the Author ............................................................................................................................... 2
Table of contents ............................................................................................................................... 3
Acknowledgments ............................................................................................................................ 5
Introduction........................................................................................................................................... 6
Price Action Trading — Support & Resistance are the best levels to trade
on your chart......................................................................................................................................... 8
Support & Resistance.................................................................................................................. 8
Dynamic Support & Resistance .......................................................................................... 10
Impulse & Corrective move................................................................................................... 11
The 4 stages of the markets every serious trader must know ............................ 13
Stage 1: Accumulation phase ............................................................................................... 13
Stage 2: Advancing phase ...................................................................................................... 14
Stage 3: Distribution phase ................................................................................................... 15
Stage 4: Declining phase ........................................................................................................ 15
How to tell when the market is trending .......................................................................... 17
Structure of the markets ........................................................................................................ 18
Moving average ............................................................................................................................ 19
How to tell when the market is ranging ............................................................................ 21
Range expansion ......................................................................................................................... 21
Range contraction ...................................................................................................................... 22
How to read the price action of any markets (and determine the strength
and weakness of it) ......................................................................................................................... 23
Slope of impulse moves getting flatter......................................................................... 23
Candlestick bodies getting smaller on impulse move ......................................... 23
Slope of corrective move getting steeper .................................................................. 24
Candlestick bodies getting larger on corrective move ....................................... 25
Stop memorising candlestick patterns, you only need to know these 4
things ....................................................................................................................................................... 29
Wick ..................................................................................................................................................... 29
Length of the wick ...................................................................................................................... 30
Acknowledgments
Unfortunately I never found one person to act as a mentor. I
consider myself to be self-taught,having developed my trading
approach through trial and error.
Study everything you can find that was written by these people.
Introduction
Dear Traders
To share with you the way that I view the financial markets and
some of the way that I use price action to identify and manage
trade opportunity.
The strategy shared within this book is a discretionary method of
trading. It is not a simple “buy on trigger A and sell on trigger B”
system. Such simple systems do not work, no matter how much
we wish they did. Spend a day surfing any of the numerous
systems forums and you’ll see this for yourself. Many systems are
presented which appear to offer great potential, generating
excitement amongst the forum participants and a flurry of
posting activity. Ultimately they fade away to nothing as the
participants discover the system fails to deliver consistent results,
or they become frustrated as it morphs into a completely
different system as filter after filter is applied to try to overcome
its limitations.
In the initial chapters I have started with most basic tenants of
Price Action and have moved on to the more advanced stuff on
the later section of the book. Remember I haven’t covered money
management and trading psychology. That will be on my blog but
as far as this book is concerned you will have plenty to learn and
apply.
Most of us think that indicators are the holy grail of the market
and hence they run after every indicators out there and in the end
they return in vain thinking that trading in the stock market is not
for me.
Actually they are chasing shadows and the reality behind those
shadow is price.
Let’s begin.
Remember…
…Support & Resistance is not a single line, but an area on the chart
Next…
Now:
You’ve just learnt what are Support & Resistance, and their role
reversal with one another.
These are “static” Support & Resistance, where their areas are
fixed on the chart.
You’re wondering:
Indicators are simply trading tools. It’s how you use them that
make a difference.
Accumulation
Advancing
Distribution
Declining
This is the stage where traders who do not cut their loss become
long-term investors.
So, you’ve learnt what are the 4 stages of the market, and the key
characteristics to look out for.
You’re wondering:
This means there are trends on different time frames. You can
have a downtrend on 5 minutes chart and an uptrend on a daily
chart.
Here’s an example…
Moving average
Alternatively, you can use a moving average to define the trend.
If 20 ema is pointing higher, and the price is above it, then the
short term trend is up.
If 50 ema is pointing higher, and the price is above it, then the
medium-term trend is up.
If 200 ema is pointing higher, and the price is above it, then the
long-term trend is up.
Now, before the light bulb in your head goes off with “buy low
and sell high”, I want you to see the reality of trade range markets.
Range expansion
Range contraction
Range expansion
This occurs when the market does a false breakout and trades
back into the range. Thus expanding the “space” between
Support & Resistance.
An example:
Range contraction
This occurs when the market enters a period of low volatility,
usually due to an impending major news release.
Looking to “buy low sell high” would put you on the sidelines as
the markets went into a tighter consolidation.
Example 1:
Overall:
Example 2:
D-Look at the slope, it seems like flattening out, but we can’t say
bulls are done yet, as high is still higher the previous swing high.
F-Very flat move and into the resistance and topped by a doji,
showing strong downward pressure.Bears are getting ready and
can pounce anytime.
G-Look at the candle size, bears have come and want to take
price down.
H-Last attempt by bulls to take price higher but they failed and
now bears are in full control.
Overall:
Bulls were in full control upto the resistance area, as the price
reached resistance area bears pounced, I will go short at swing
high after corrective move H.
1. Wick
2. Length of the wick
3. Size of the body
4. Close of the candle
Wick
The wick of the candle represents price rejection. If you see a
longer wick, it represents greater price rejection.
When you see wicks “flying” all over your charts, you’re probably
in a “choppy” condition (usually in a range market).
An example:
Now…
I’ll explain to you how not to trade them, how to trade them, and
other variations of it.
Pinbar
Inside bar
Rising three method
Wide range candles
Narrow range candles
Pinbar
A Pinbar is a reversal pattern, which was first introduced by Victor
Sperandeo, in his book, Trader Vic: Methods of a Wall Street
Master.
Now:
Look at this:
Recall:
But, there are more than one ways to show price rejection, and it
may not come in the form of Pinbar.
So…
…if you’re only focusing on Pinbar trading setups, then you’ll miss
trading opportunities like these…
Remember…
Inside bar
It can be both a continuation and reversal pattern (I’ll focus on
continuation pattern).
The key takeaway about this pattern is low volatility. Thus, you
can get an entry with tight stops on this pattern (and
improve your risk to reward).
Inside bar – Small candle contained within the previous bar highs
and lows
Most traders would trade the break of the Inside bar, hoping to
capture a quick profit.
But…
Here’s an example:
It’s when the Inside bar breaks out in one direction, only to
reverse and close in the opposite direction (otherwise known as a
false breakout).
Moving on…
By waiting for this precise pattern to occur, you’ll not get many
trading setups (following an exact 3 candles pullback).
If you think about it, another variation of this pattern is the flag or
pennant formation.
Next…
PRICE ACTION TRADING THE EASY WAY YOURNIFTYCOACH.COM
46
There are traders who swear by Supply & Demand, and some who
do just fine, with Support & Resistance.
You don’t want to trade them in isolation, but use them with
other technical tools, that add confluence to your trades.
When you get range expansion, the market is sending you a very
loud, clear signal that the market is getting ready to move in the
direction of that expansion. – Paul Tudor Jones
You’re wondering:
You can look to trade the initial breakout or the pullback after the
breakout.
Here’s an example…
This is important…
You must understand the trading strategy isn’t the holy grail.
In fact, you’re going to have both winners and losers. And the only
thing that will keep you in this game is proper risk management.
My advice is to risk no more than 1% of your account on each
trade.
Guidelines:
The best setup occurs when the market is trending strongly,
or shortly after it breaks out of a long term range
Risk no more than 1% of your equity on each trade
You can use 10 EMA to trail your stop loss
Further considerations to ask yourself:
Do you place your stop loss using the previous bar or the
inside bar?
Do you set your entry using the previous bar or the inside
bar?
Do you want to capture a swing or a trend?
**Disclaimer: I will not be responsible for any profits or losses
resulting from using these trading strategies. Past performance
is not an indication of future performance. Please do your own
due diligence before risking your hard earned money.
enough, then persevere on and always look at the big picture: the
chance to one day be a consistently profitable trader.