Professional Documents
Culture Documents
4 5956412997172725112
4 5956412997172725112
2
WHAT WILL THIS BOOK DO FOR YOU
3
ABOUT THE AUTHOR
5
WHAT WILL YOU DISCOVER
6
PART 1: THE SHIFT TO TECHNICAL ANALYSIS
8
TRADERS EDGE
12
PRICE ACTION PRINCIPLES
13
IDENTIFYING SUPPORT AND RESISTANCE
16
UNDERSTANDING PRICE ACTION
17
DRAWING TRENDLINES
24
CANDLESTICK IDENTIFIER
30
PATTERN IDENTIFIER
34
PART 2: MARKET STRCTURE
35
NATURES THEORY
37
PRICE STRUCTURE
42
PATTERNS
54
TRADE MANAGEMENT
59
SCALING IN
62
PART 3: TRADING PSYCHOLOGY- GETTING YOUR MIND READY
63
THE PSYCHOLOGY OF PRICE MOVEMENT
65
PROBABILITY
1
MASTER PRICE ACTION THE
This guide is dedicated to all the traders out there, who have been in the industry for ages or are
just getting started out. This is that one tool that will help you succeed faster in your trading
journey and I believe to have added as much valuable information as possible in order to make
sure you get the information that you need.
I believe that the users of this guide will surely get to have success in the forex market if they
apply the knowledge and strategies given in this book. This is based on the fact that this is
information took me years to gather and develop.
I decided to write this because I realized that people struggle with getting enough finance for the
course that I offer, therefore I took it unto myself to summarize the contents of my course. This
book does not contain everything but I believe it is enough to get someone going.
By reading this guide, I can surely tell what kind of a person you are and I appreciate the efforts
it took you to purchase this book and most importantly chase the knowledge knowing for sure
that the money will follow. You have signed up on a journey of success and fortunately you are
the one responsible of whether you do succeed or not. With the help of this book, chances are
that you are steps ahead of most financial traders out there because you take action on what
you have to do in order to succeed.
The information contained in this guide is for informational purposes only, I am not a financial
advisor.
Any advice I give is my own opinion based on my own experiences and You should definitely
always seek for help from a professional before acting on anything recommended or published.
I want you to understand that there are links contained in this guide that both you and I will
benefit financially from.
This information should not be sold, reproduced or passed on without the prior written consent
of the Author.
2
MASTER PRICE ACTION THE
I believe you have across me and/or my brand on social media platforms- Facebook and
Instagram- or even better on YouTube. Or the easier and most free option, through a colleague,
family member, friend or neighbor. The only thing that matters really is that you are hear and I
truly appreciate that.
I have created this guide as I believe every trader needs to learn how to read Price Action of the
markets in a proper way and to make sure that you are following the right person because as
we know, following a blind person might lead you to a hole. But with everyone nowadays
becoming Forex mentor how are you supposed to know that Forex Chasers is where you need
to be? Well, let me tell you a little something about myself.
I started Forex Trading at April 2017 and just like you, the start wasn't so well as I had been
blowing accounts and losing money, I couldn't afford to lose in the first place. Well not to forget
to mention that a few months later after having my very first Live account I had lost my phone
meaning that I have to start all over. The burning desire of trading forex kept on making me
come up with ways on how I can accumulate money to get a brand new phone and trade forex
full time, which is when I started reading a lot of books I had downloaded on my laptop both on
personal development and forex trading and eventually got a way to sell sweets and chips in the
college I was in to accumulate at least a little something to get me a new phone and fund my
trading account. Why am I telling you all this? I want to show you that you can literally start with
nothing and work your way up to be able to live a life you want to create for yourself.
A few more months later I had gotten a new phone and was now fully active on the markets but
the challenge became school, how was supposed to concentrate in class when forex in taking
up most of my time. Before I got consistent or anything, I decided to go full time as I believe if
you dedicate 100% on something It has to play out whether it takes years or months but It has
to play out and looking at my families situation I was in no position to waste any time but focus
on trading and taking care of my family with responsibilities as I just found out that I will be a
father. A year later from the year I started trading Forex I decided that I will put in 110% of
dedication and started feeding myself with the right type of information and it was that same
month I experienced a breakthrough. I took my account from 171GBP to 3200GBP in just a
week and that gave me confidence in the strategy I have developed. Now I had to figure out
how to be consistent which lead me to investing my time in learning risk management. Today I
have been consistently profitable for over a year and 10 months. With that being said I have
been blessed with the mindset to develop multiple streams of income and most importantly take
care of my family and I at the age of 21.
If I can then so can you
3
MASTER PRICE ACTION THE
4
MASTER PRICE ACTION THE
Price Action trading is a methodology that relies on historical prices such as (open, high, low,
and close) to help you make better trading decisions.
Unlike forex trading indicators or fundamentals. Price Action tells you what the market is doing
and not what you think It should do.
This is the magic of trading but if you dedicate time to learning price action. You will be trading
with cleaner charts and can be able to trade forex profitably on a consistent basis due to you
being able to understand the win rate of the strategy and you being able to make better trading
decisions that really work as that is how the market works.
Here is what You will discover:
5
MASTER PRICE ACTION THE
6
MASTER PRICE ACTION THE
Technical analysis has been around for as long as the financial markets have been around in
the form of exchanges. But the trading community didn't accept technical analysis as a tool for
making money until the late 1970s or early 1980s. Here's what the technical analyst knew that
took the market community generations to catch on to.
Traders participate in the markets on any given day, week, or month. Many of these traders do
the same things over and over in their attempt to make money. In other words, individuals
develop behavior patterns, and a group of individuals, interacting with one another on a
consistent basis, form collective behavior patterns. These behavior patterns are observable and
they repeat themselves with statistical reliability. Technical analysis is a method that organizes
this collective behavior into identifiable patterns that can give a clear indication of when there is
a greater probability of one thing happening over another. In a sense, technical analysis allows
you to get into the mind of the market to anticipate what's likely to happen next, based on the
kind of patterns the market generated at some previous moment.
As a method for projecting future price movement, technical analysis has turned out to be far
superior to a purely fundamental approach. It keeps the trader focused on what the market is
doing now in relation to what it has done in the past, instead of focusing on what the market
should be doing based solely on what is logical and reasonable as determined by a
mathematical model. On the other hand, fundamental analysis creates what is called a "reality
gap" between "what should be" and "what is." The reality gap makes it extremely difficult to
make anything but very long-term predictions that can be difficult to exploit, even if they are
correct.
In differences, technical analysis not only closes this reality gap, but also makes available to the
trader a virtually unlimited number of possibilities to take advantage of. The technical approach
opens up many more possibilities because it identifies how the same repeatable behavior
patterns occur in every time frame—moment-to-moment, daily, weekly, yearly, and every time
span in between. In other words, technical analysis turns the market into an endless stream of
opportunities to enrich oneself.
7
MASTER PRICE ACTION THE
Many people believe that price changes are random and un-predictable; if this were true, the
only logical course of action would be to avoid trading and to invest in index funds. This is, in
fact, what a significant number of financial advisers recommend their clients do. On the other
hand, there are analysts and traders who believe that they have some edge over the market,
that there is some predictability in prices. This camp divides into two groups that historically
have been completely opposed: those who make decisions based on fundamental factors and
those who rely on technical factors. Fundamental analysts and traders make decisions based
on their assessment of value, through an analysis of a number of factors such as financial
statements, economic conditions, and an understanding of supply/demand factors. Technical
traders and analysts make decisions based on information contained in past price changes
themselves.
Technical traders may find that their entries and exits into markets can be better timed with an
understanding of the relevant elements of market structure, money flows, and price action. The
key distinction, for us, is that technically motivated traders acknowledge the primacy of price
itself. They know that price represents the end product of the analysis and decision making of all
market participants, and believe that a careful analysis of price movements can sometimes
reveal areas of market imbalance that can offer opportunities for superior risk-adjusted profits.
Building the tools for that analysis and learning how to apply them is the purpose of this book.
Most of the time, markets are efficient, meaning that all available information is reflected in
asset prices, and that price is a fair reflection of value. Most of the time, prices fluctuate in a
more or less random fashion. Though a trader may make some profitable trades in this type of
environment purely due to random chance, it is simply not possible to profit in the long run;
nothing the trader can do will have a positive effect on the bottom line as long as randomness
dominates price changes. In theory, in a true zero-expectancy game, it should be possible to
trade in a random environment and to break even, but reality is different. Trading accounts in
the real world suffer under the constant drag of a number of trading frictions, transaction costs,
errors, and other risks. Together, these create a high hurdle that must be overcome in order to
break even. It is even possible for a trader to work with a positive expectancy system and still
lose a significant amount of money to the commissions and fee.
Newer traders especially are often drawn to focus on elements of performance psychology and
positive thinking. There is an entire industry that caters to struggling traders, holding out hope
that if they could just get their psychological issues resolved, money would flow into their trading
accounts. However, this fails to address the core problem, which is that most traders are doing
things in the market that do not work. Excellent execution, risk management, discipline, and
proper psychology are all important elements of a good trading plan, but it is all pointless if the
trading system does not have a positive expectancy. These are essential tools through which a
8
MASTER PRICE ACTION THE
trading edge can be applied to the market, and without which a trader is unlikely to succeed in
the long run. However, none of these is a trading edge in itself.
A positive expectancy results when the trader successfully identifies those moments where
markets are slightly less random than usual, and places trades that are aligned with the slight
statistical edges present in those areas. Some traders are drawn to focus on high-probability
(high win rate) trading, while others focus on finding trades that have excellent reward/risk
profiles. Neither of these approaches is better than the other; what matters is how these two
factors of probability and reward/risk ratio interact. For instance, it is possible to be consistently
profitable with a strategy that risks many times more than what is made, as long as the win rate
is high enough, or with a much lower percentage of winning trades if the reward/risk ratio
compensates. In all cases, the trading problem reduces to a matter of identifying when a
statistical edge is present in the market, acting accordingly, and avoiding market environments
that are more random. To do this well, it is essential to have a good understanding of how
markets move and also some of the math behind expectancy and probability theory.
Many of the buying and selling decisions in the market are made by humans, either as
individuals, in groups (as in an investment committee making a decision), or through extension
(as in the case of execution algorithms) One of the assumptions of academic finance is that
people make rational decisions in their own best interests, after carefully calculating the
potential gains and losses associated with all possible scenarios. This may be true at times, but
not always. The market does not simply react to new information flow; it reacts to that
information as it is processed through the lens of human emotion. People make emotional
decisions about market situations, and sometimes they make mistakes. Information may be
over weighted or underweighted in analysis, and everyone, even large institutions, deals with
the emotions of fear, greed, hope, and regret.
In an idealized, mathematical random walk world, price would have no memory of where it has
been in the past; but in the real world, prices are determined by traders making buy and sell
decisions at specific times and prices. When markets revisit these specific prices, the market
does have a memory, and we frequently see nonrandom action on these retests of important
price levels. People remember the hopes, fears, and pain associated with price extremes. In
addition, most large-scale buying follows a more or less predictable pattern: traders and
execution algorithms alike will execute part of large orders aggressively, and then will wait to
allow the market to absorb the action before resuming their executions. The more aggressive
the buyers, the further they will lift offers and the less they will wait between rushing to buy
more. This type of action, and the memory of other traders around previous inflections, creates
slight but predictable tendencies in prices.
There is no mystical, magical process at work here or at any other time in the market. Buying
and selling pressure moves prices—only this, and nothing more. If someone really wants to buy
and to buy quickly, the market will respond to the buying and sellers will raise their offers as
they realize they can get a better (higher) price. Similarly, when large sell orders hit the market,
buyers who were waiting on the bid will get out of the way because they realize that extra supply
has come into the market. More urgency to sell means lower prices. More buying pressure
9
MASTER PRICE ACTION THE
means higher prices. The conclusion is logical and unavoidable: buying and selling pressure
must, by necessity, leave patterns in the market. Our challenge is to understand how
psychology can shape market structure and price action, and to find places where this buying
and selling pressure creates opportunities in the form of nonrandom price action.
This is important. In fact, it is the single most important point in technical analysis—the holy
grail, if you will. Every edge we have, as technical traders, comes from an imbalance of buying
and selling pressure. That’s it, pure and simple. If we realize this and if we limit our involvement
in the market to those points where there is an actual imbalance, then there is the possibility of
making profits. We can sometimes identify these imbalances through the patterns they create in
prices, and these patterns can provide actual points around which to structure and execute
trades. Be clear on this point: we do not trade patterns in markets—we trade the underlying
imbalances that create those patterns. There is no holy grail in trading, but this knowledge
comes close. To understand why this is so important, it is necessary to first understand what
would happen if we tried to trade in a world where price action was purely random.
10
MASTER PRICE ACTION THE
The answer, I think, is simple but profound: you can make money because you are not playing
the same game as these other players. One reason the very large funds have trouble beating
the market is that they are so large that they are the market. Many of these firms are happy to
scrape out a few incremental basis points on a relative basis, and they do so through a number
of specialized strategies. This is probably not how you intend to trade. You probably cannot
compete with large institutions on fundamental work.
This is all true, but you also do not have the same restrictions that many of these firms do: you
are not instructed to have any specific exposures. In most markets, you will likely experience
few, if any, liquidity or size issues; your orders will have a minimal (but still very real) impact on
prices. Most small traders can be opportunistic. If you have the skills, you can move freely
among currencies, equities, futures, and options, using outright or spread strategies as
appropriate. Few institutional investors enjoy these freedoms. Last, and perhaps most
significantly, you are free to target a time frame that is not interesting to many institutions and
not accessible to some.
One solution is to focus on the three-day to two-week swings, as many swing traders do. First,
this steps up out of the noise created by the HFTs. Many large firms, particularly those that
make decisions on fundamental criteria, avoid short time frames altogether. They may enter and
exit positions over multiple days or weeks; your profits and losses over a few days are little to
them. Rather than compete directly, play a different game and target a different time frame.
11
MASTER PRICE ACTION THE
Price action principles form the basic ingredients of all sound trading techniques. While their
variations in appearance are practically infinite, as are the ways they can be implemented into a
plan of attack, all will find footing in a small set of elementary concepts that repeat over and over
again in any technical chart. The core principles relate to:
Market Structure
Natures Theory
Support and resistance.
False breaks, and proper breaks.
False highs and lows.
Pullback reversals.
Probabilities Vs Probabilities.
12
MASTER PRICE ACTION THE
You have to pay close attention to one thing on the chart if you trade naked: price. Price is king.
Price will tell you all you need to know. The wonderful thing that all markets have is this: a
history. The market will tell you where the critical area is on the chart. This critical area will be
the foundation for everything you do as a naked trader. A critical area on the chart is a support
and resistance zone. You may be familiar with the concept of support and resistance; however,
support and resistance zones are different from what many traders characterize as support and
resistance. I will call these support and resistance zones by one word— zones. The eight
important characteristics of zones are as follows:
1. Zones are an area, not a price point.
2. Zones are spots on the chart where price reverses, repeatedly.
3. Zones may be extreme highs or lows on the chart.
4. Zones are where naked traders find trading opportunities.
5. Zones are often seen by many traders.
You may want to take a closer look at each of these five characteristics. It is incredibly important
that you understand how to draw zones, why you should draw zones on your charts, and
understand when these zones become critical for your trading.
Let us define what Support and Resistance is so we on the same page.
Support – A horizontal area on your chart where you can expect buyers to push the price
higher.
Resistance – A horizontal area on your chart where you can expect sellers to push the price
lower.
13
MASTER PRICE ACTION THE
14
MASTER PRICE ACTION THE
Now I want you to do the Following and make sure you get it right, go onto your trading platform
and open up three currency pairs. Try to spot these support and resistance even importantly
spot how support becomes resistance and how resistance becomes support. Don’t continue
reading this book till you are done!
Okay I believe you went thru your platform and saw how accurate this information is, Now I want
us to discuss on why does this happen? Why do they swop roles?
When the price breaks support, traders who are long are losing money and, in the red., So
when the price rallies back to support, this group of traders can now get out of their losing trade
at breakeven and that induce selling pressure. But that is not all because traders who missed
the breakout will want to short the markets which increase the selling pressure and that is why
when support breaks it tends to become resistance. Makes sense?
Now you are probably wondering ... How do I draw support and resistance on my charts?
That’s actually a good question.
Her are the guidelines I use:
1. Zoom out your charts at least 150 bars for me
2. Draw the most obvious levels, if you need to second guess. Then it probably isn’t an
important level.
3. Adjust your levels to get the greatest number of touches, try sticking to using the wick.
Now if you want a full training on how to draw support and resistance then check out Lesson
five in your Premium course dashboard, and if you are not yet a member, I suggest you watch
this video below …
15
MASTER PRICE ACTION THE
It is inevitable that you will encounter losses – especially early on when you are still learning the
fundamentals of our approach to the market. Losses are essentially the “price of doing
business” and will always be experienced regardless of how skilled you become. We are not
aiming for a 100% strike rate in the markets, instead we are constantly refining our edge over
the long term and leveraging this to pull consistent profits out of the market.
Trading forex should be treated the same as you would treat running a business. There are
running costs which you would identify as expenses that are a part of running that business.
You wouldn’t think that your business is “losing” just because you must pay for your outgoings
such as business calls to close deals or office rent; you would see it as a necessary component
of running the business and a key part of its ability to succeed and become profitable
In Forex, “losses” should be viewed as “expenses”. Accepting this may be an alien concept,
however it is something that you will adapt to over time and realize as an important tweak in
your perception of results in the market
Sometimes the fear of losing can come from a want to be a perfectionist in your day to day life –
which may have formed over the years as a habit. When it comes to trading however it can
hinder your performance as your focus is drawn towards executing a perfect 100% strike rate.
Putting the pressure on yourself to be right 100% of the time is a form of self-sabotage that can
lead you to becoming a part of the 90/90/90 statistic
90% of retail traders will lose 90% of their capital within the first 90 days.
One of the main reason’s traders develop a fear of losing is because they fail to truly understand
the mathematics behind the probability model and how your strategy has an “edge” in the
market.
For example, many successful traders can lose more than they win by targeting a high risk to
reward ratio which essentially outweighs the losses. If you take ten trades in total – win five and
lose five – and you cap your losses at 1% maximum, then you know all those five losses can
only ever amount to a -5% loss. Your winning trades can vary based on your strategy and
targeted risk to reward.
However, the great news with the Forex Chasers Institution is that we generally look for a
minimum target of 3% per positions, and often much higher. So, let’s say the other five wins
were an average of 3% profit each, that would equate to a total of +15% profit. Now if we take
away our losses from our wins, we are left with +10% profit which is incredible considering that
you were only correct one half of the time
Now that we have covered the basics of understanding that you will not be 100% correct all the
time but can still be consistently profitable. I want us to enter an interesting topic whereby we
get to speak about trendlines ….
16
MASTER PRICE ACTION THE
Before we dive in deep into details, I want to quickly share with you the power of trendlines.
• It is simple to use.
• It allows you enter high probability trades with deadly accuracy and capture maximum
profits effortlessly.
• is price-driven entry based on what happens on touch of Trendlines
• is a trend following strategy that will allows you to make trades with the trend which
means you have a higher chance being correct on your side.
OVERVIEW OF TRENDLINE STRATEGY
1. Works on any Timeframe.
2. Can be used on any Currency Pair.
3. Requires no indicators to execute trades.
Let us take a look at a general setup for a Long Entry (Buy Setup)
17
MASTER PRICE ACTION THE
And now I want us to take a look at the same scenario in a downward trend on the chart below ….
18
MASTER PRICE ACTION THE
I want you to see how price reacted to the third and fourth touches of this trendline we
have projected. And I also want you to understand that price doesn’t have to only give us
two entries, the market is possible of giving us four or even five entries on just one
trendline so you need to take note of that.
I like this the fact as this type of trading allows you to get in at almost the beginning of a new
trend so even if you miss the first entry, you have an advantage to get another position along
the way this is amazing as it requires no indicators but price action alone.
But wait on a sec, before we get into the rules of Trendline strategies, we need to build you a
good foundation of understanding how this works. This includes:
- How to draw valid Trendlines.
- When is a Trendline still valid and when does it become invalid?
- Understanding common mistakes in drawing trendlines.
- How to use Support and Resistance to your advantage.
- Understanding trends and knowing when they may be starting or ending.
- Technical trading is the best way to analyze as you do not need any indicators to gain
success.
Understanding the points listed above is critical for applying this method, okay now what are we
waiting for? Let us commence
HOW TO DRAW VALID TRENDLINES
As you probably know from the Study Guide, (if you haven’t please go once again thru the study
guide for the very basics of technical trading as this Ultimate guide is more advanced). There
two types of trends, The upward trend and downward trend. These trendlines are drown in just two
easy steps: First Step: Identify the obvious lows and highs.
19
MASTER PRICE ACTION THE
Second Step: Connect a minimum of two lower highs for a downward trend and a minimum of
two higher lows of an upward trend.
It is really simple to draw trendlines but I want you to develop different perspective on how to be
able to see the market in a 3D perspective and as we go deeper you will understand what I
mean, the confusion traders make begins when they look at the a chart and see too many lows
and highs and they just cannot figure out which two they are going to use to draw trendlines.
The solution to this problem comes down to prioritizing which lows or highs to use and the rule
could be this:
- For lows, the one with more higher candlesticks on its left is and right will be more
significant than the other one with lesser candlesticks on both the left and the right.
- It works the same for highs except that it is completely opposite.
In other words, you look for highs and lows that are easy to spot. Can I explain further?
- When you select two highs or lows, they must be visible or obvious to everyone to spot
them.
- If the lows or highs can be clearly seen and identified that means that they are significant
because that is where the market has been observed to reverse.
Okay, you probably thinking to yourself … Lesiba, Stop speaking and show me charts. Well that is
what I will be doing below.
20
MASTER PRICE ACTION THE
In the examples above and below, I want you to spot how easy it is to spot these significant points
so please don’t frustrate yourself, Remember. If you struggling to spot these points it only means
that it isn’t valid structure points.
So basically, depending on the timeframe you have used, you need that timeframe
candlestick to determine if the breakout happened or is a fake out. This is important to follow
and once you understand this you will know the difference between a real break out and a
fake out. You need to also pay attention to the length of the candlesticks as it will show if the
it’s a valid break or not.
Just be careful on not making the mistake of drawing trendlines that obstruct thru price, let
me show you what I mean in the chart below.
21
MASTER PRICE ACTION THE
My goal was not to waste a lot of time on trendlines so I will pass on this video I made that
helps on being able to see the markets in a perspective I see them. Watch this video below:
22
MASTER PRICE ACTION THE
23
MASTER PRICE ACTION THE
A high-test candle is a rejection of structural resistance level. The psychology behind the candle
itself is that traders are testing a certain level during the initial stages of the candles formation
and by the candle close it has retraced significantly back to where it begins.
24
MASTER PRICE ACTION THE
A low-test candle is the opposite of a high test. Rejection at a structural support area and
signaling a move to the upside. Combined with a pattern such as descending channels and
double bottoms a low-test candle increases in significance
A doji is a low momentum candle that closes where it opens and has not really pushed
far in either direction. We see doji candles primarily where there is a slowdown in price so
generally during the correction in an impulsive move, as it approaches a structural support level
or in the corrective phase continuously as price moves sideways.
25
MASTER PRICE ACTION THE
This formation consists of two low test candles back to back that represents a double rejection
of the area that they appear. Price has tested an area throughout the course of two full
formations and closed back up close to the open of the candle. It is more powerful than a single
low test and is often a sign that price is ready to head higher.
This formation consists of two high test candles back to back that represent a double rejection
of the area that they appear. Price has tested an area throughout the course of two full
formations and closed back down close to the open of the candle. It is more powerful than a
single high test and is often a sign that price is ready to head lower.
26
MASTER PRICE ACTION THE
A bullish engulfing candle is momentum in upward direction. We utilize bullish engulfing candles
to analyze when price is moving impulsively or correctively. Candlesticks are not the only thing
we utilize to determine what phase the market is in, but they are key component.
27
MASTER PRICE ACTION THE
The 1 Hour retrace candle is a very powerful candlestick formation. It is the rejection of an
outlined area by fully retracing the previous candle and closing above or below where the first
candle opened depending on whether it was a buy or sell. This candlestick is powerful to use at
either a resistance area or an area of support.
28
MASTER PRICE ACTION THE
The morning star is not a very common candlestick formation. Price impulses to the downside,
then follows a doji that represents a slow in momentum and then follows an impulse in the
upside to confirm reversal formation. Which can be understood by the sun setting and rising.
When you spot an evening star especially on the higher timeframes it can be a very good
indication that heavy momentum is about to kick in to the downside. When looking at the
evening star it is a bullish candlestick, followed by a doji and then a bearish engulfing that is
similar to the size of the first bullish engulfing candle.
These candlesticks mentioned above are very powerful since historical trading till this day and
my highest probability setups definitely has to have at least one of these candles to meet the
requirements. I hope you took massive value from them and before taking some sort of a signal
from a trade rather wait for these candles to give you the signal. But remember not to just use
this candle as the overall strategy as they are just indications that play an important role, in your
premium course dashboard videos you will see on lesson 4 on how I apply them on the charts
to have a higher winning rate.
29
MASTER PRICE ACTION THE
There are two types of chart patterns and I want you to understand the future direction after you
have seen these patterns, it is the continuation pattern and the reversal pattern. In the figures
below I want us to talk a little bit of them and what they represent and in the next chapters to
come I will show you how to make this easy to use charts make money for you consistently.
A bull flag resembles a flag pole because it is in an impulsive bullish price movement. Price will
impulse up and form a sideways flag continuation that signals to us price is ready to continue its
impulsive nature on the breakout of the flag.
A bear flag is the opposite of a bull flag. It resembles an inverted flag as price has just impulse
to the downside, formed a tight continuation pattern resembling a flag pole, allowing us to
forecast the next impulsive leg to head to the downside.
30
MASTER PRICE ACTION THE
A flat continuation pattern is essentially just a bull or bear flag that is very clear. They are not as
common as your typical bull and bear flag however they represent the same opportunity in the
market to take either long or short.
A symmetrical triangle is another form of continuation that we can classify as we analyze price
action. It resembles a flag that is being compressed out of its structure.
I would like for us to quickly take a look at the difference between ascending and descending
triangle and I believe on Lesson 12 in your lessons you will be able to watch the full video we
speak about getting the very high probability setup from it on our 30 min video that focuses on
just these patterns.
31
MASTER PRICE ACTION THE
Ascending Triangle - Test resistance line at Descending Triangle - Test support line at
least twice and needs least twice and needs to close lower than
To close higher than the previous close. the previous close.
A rising wedge is a both reversal pattern and continuation pattern that resembles a squeeze of
price on its way up. Each touch on the pattern becomes closer together as it reaches further to
the top of the pattern it becomes more and more probable for a reversal or continuation.
32
MASTER PRICE ACTION THE
A falling wedge is spotted when price action is approaching an outlined structural level and
signifying an opportunity for a buy in a reversal form when price has been pushing downwards
as it can act as both a reversal or continuation. It is very similar to a descending channel
although you can visually see that price is being squeezed within structure of the wedge
pushing price to the downside on the breakout and confirmation of the pattern.
If we take a closer look at what is meant here you will understand the following:
A Rising wedge only provides sells whether it has been an upward trend or downward trend and
a falling wedge provides signals for a buy whether you see it in a downtrend or an uptrend
which is why we say it acts as both reversal and continuation, got it?
Well there are a lot of chart patterns we discuss and I believe you will learn instead on how to
use them as we go in deeper, this way it helps us focus on what’s more important when trading
the strategy and you can find much detailed videos explain in your dashboard as a premium
course member along with all the other videos on this subject. I want us now to go into the next
topics and I hope you have gained a lot of clarity this far. Remember that you need to go thru
this guide at least three times so you master this concept of trading subconsciously!
You can take a look at the study guide on the section we display charts because we will be
breaking down the strategies in trading these charts, see you in the next chapter.
33
MASTER PRICE ACTION THE
34
MASTER PRICE ACTION THE
What is Nature?
To understand nature theory, we must first understand what the ‘nature’ of the market means.
‘Nature’ is the name we give to the characteristics of price action. Fundamentally, price action
can either have impulsive characteristics (nature) or corrective characteristics (nature) and is
therefore what forms the foundation of what the Nature Theory is built upon.
An example of this would be if we were to identify a Ferrari by only the exterior, we would be
correct around 70% of the time, however only those who truly understand the underlying
makeup of the internal workings of the car would be able to distinguish the difference between a
replica and an authentic Ferrari. That is what increases our strike rate within the probability model
35
MASTER PRICE ACTION THE
from 60-70% up to 80-90% - enhancing our ability to see what the nature of the price action
making up these patterns is actually telling us.
For example, if price is approaching an area of resistance which may be lining up for a typical
“double top” reversal formation, the most important thing is not that it is now resembling a
double top, but the nature of how that double top formed. Simple identification of patterns tends
to be the skill level of beginner traders, however what is more effective is to identify the
underlying nature that has been presented to us. A common mistake that most traders make is
that they look to sell immediately as price action resembles a double top. This where
understanding the theory of nature is so important as it will help prevent taking unnecessary
losses by taking trades based upon pure price patterns, where often the nature could be telling
us the exact opposite. Thus, by understanding how to identify this nature we are able to become
more skilled and evolve as traders.
Traders need to understand the nature of how price moves into these areas to successfully
capitalize on potential moves rather than taking a trade simply because you have identified a
specific pattern – the lesson being we must ALWAYS focus on the NATURE of the price action;
we must ask ourselves this key question:
36
MASTER PRICE ACTION THE
reversal – it doesn’t matter if price breaks the areas we are looking at as long as it is still
corrective by nature. If corrective nature was forming – we would normally see the corrective
nature take the formation of an ascending reversal pattern such as a rising wedge or rising
channel.
Essentially, we are only focusing on how price approaches the double top rather than focusing
on the area itself.
Learning to analyze the sentiment of the market in such an enhanced way naturally requires a
higher level of skill, however this means you have created a lasting skill set that will not need to
change every few years as is the norm for most secondary indicator-based strategies. Learn
nature theory and you will know how to EVOLVE your analysis with the ever-evolving market
conditions.
Throughout this guidance book will be visual representations of what we are looking for on the
charts, paired with written text that is thorough and structured for your understanding of the
contents. After the screenshots we will dive into the next section on Price Structure.
What is Structure?
To understand the meaning of structure, we must first understand that the market has a
continuous cycle that is ever-present; we call this the breathing cycle of the market. A series of
consecutive corrections and impulses in a 1-2-3 formation (impulse-correction-impulse) which
we have touched on in the above chapter. Each cycle is identified as either the corrective phase
or the impulsive phase.
The nature of a corrective phase is corrective price action, a set of stagnant candlesticks
moving sideways or into an angle of incline/decline taking the formation of a continuation or
37
MASTER PRICE ACTION THE
reversal formation. The nature of an impulsive phase is impulsive price action, a set of large
momentum candles. The corrective phase is normally counter-trend to the dominant direction of
the trend whereas the impulsive phase is normally moving in the direction of the trend (with
trend) and in the direction of the impulse that took place before the correction phase.
Naturally if the correction took the shape of a continuation the next impulse will be with the
trend, however if the correction took the shape of a reversal then the next impulse will be in the
opposite direction to the trend. This concept will be hardwired in after multiple reads and
through absorbing the members dashboard so instead of reading you watch can the video too
and understand much clearer, so don’t worry if the concepts seem difficult to understand right
now.
In its simplest form, structure is the use of trend lines and ray lines within your charting software
to draw in market “framework” across multiple timeframes based upon the principles of how the
market works/moves (Nature Theory) allowing us to understand and interpret what is
happening. We utilize the above across all timeframes (1M/1W/1D/4H/1H) to gain an
understanding of the sentiment in the market and therefore building a bias allowing us to
capitalize on bullish and bearish moves by forecasting them ahead of time, anticipating the
movement of the next market breathing cycle.
The way we draw in structure is by simply identifying larger outer structure (1M); identifying
trends (1W); identifying impulsive and corrective phases (1D); identifying price patterns and
formations (4H) and refine further using the 1H and 15M time frames. We use the trendline and
ray tools to achieve the above by outlining and drawing in larger trends, impulse and correction
phases and then further separating out the correction phases into whether they are continuation
or reversal patterns. This is all explained far more in-depth using countless examples from your
members dashboard in the Premium course – as you watch structure being drawn in repeatedly
you will slowly begin to understand how to draw it yourself.
38
MASTER PRICE ACTION THE
Some examples that we continuously ask ourselves after our framework has been drawn in as
we try to judge the sentiment and build a bias tend to be:
“What is the nature telling us?” “Are we impulsing or correcting?” “Are we in the impulsive phase
or are we in the corrective phase?”
“If we are correcting and in the corrective phase, are we forming a continuation or a reversal?
By asking ourselves these questions we can conclude on our bias towards that given currency
pair. Remember these questions as they will be repeated time and time again in the content and
will begin to come subconsciously wired into your analysis on a routine basis.
In the above example, you can see how the outer structure has been drawn onto the price
action from a HTF perspective and then inner structure are present on the lower time frame
charts that make up their own behavior and price action within. In the next section of this
chapter we will go through the entry Types of our method towards the market, diving deeper and
furthering your understanding of price action.
39
MASTER PRICE ACTION THE
Risk Entry
With ‘risk entry’ trades we are entering the trade based off of a reversal target (often HTF outer
structure) being met, however the reason that this entry style entails an element of higher risk is
due to the fact that we are entering a buy or sell position purely from structure highs or lows
based on a corrective reversal pattern that was formed. This is in turn riskier because we know
that corrections can last for longer than anticipated and evolve into other structures, leading to
increased risk, as it is only when the overall pattern has broken impulsively that the position has
been confirmed. The main benefit to this type of entry is that it can be more rewarding due to
maintaining a smaller position size which in turn will result in higher percentage risk to reward
ratio. With the right amount of experience and skill, risk entries will often provide an advanced
trader with more opportunities. Due to understanding the setups in detail and having a firm
understanding of the Chasers Method, the risk element is minimized and can ironically become
less risky.
40
MASTER PRICE ACTION THE
41
MASTER PRICE ACTION THE
If you went to a casino and you saw red appear fifteen times in a row, what’s the probability of it
being red or black? Answer, it’s still 50/50. But with patterns the reason why the psychology of
patterns is so powerful is that we can literally measure the probability of how accurate they are
based on patterns that have repeated themselves as far as market data goes back. They
provide us with clarity on the market psychology and overall direction of price in all market
conditions. We utilize a mixture of both reversal and continuation patterns – pairing them with
market nature and structure for the most in depth analysis.
Reversal Patterns
Reversal patterns provide us with evidence of a position changing direction and in turn allows us
to prepare for a potential change in bias of whether we are looking to buy or sell a given
currency pair. We utilize a mix of both reversal and continuation patters, lets dig in to the various
reversal patterns we use in the strategy with some visual examples of what they look like.
Ascending Channel
An ascending channel is a reversal pattern that we see very often in our analysis. They are
prominent on all timeframes and we can spot them by monitoring the nature of the market either
corrective or impulsive. They often allow us to capitalize on very large risk to reward positions.
The typical characteristics of an ascending channel involve three touches on both the bottom
and top paired with corrective nature throughout indicating a potential reversal of price is in play.
We pair this pattern often with the 90% rule as highlighted areas for profit taking.
42
MASTER PRICE ACTION THE
Descending Channel
A descending channel is essentially the exact opposite of the ascending channel in sense that
we are looking for a reversal from a downward trending market into a buying opportunity on the
breakout of the channel or on multi-touch confirmation on the bottom of this pattern. Like the
ascending channel, these are very common, and we often pair these patterns with the 90% rule
of price in which after a breakout of the pattern 90% of the time it will reach the beginning of
where the channel started to take shape.
Keep in mind throughout this section on patterns that perfect patterns are not what we are
searching for. We are outlining probable turning points in the market by utilizing a tool that has a
high probability when tested over a long period of time. This is important because it reduces
hesitation in waiting for the perfect set up to play out.
43
MASTER PRICE ACTION THE
Rising Wedge
The rising wedge is another very common reversal pattern utilized in our method of trading.
Price action is approaching an outlined structural level and signifying an opportunity for a sell. It
is very similar to an ascending channel, although you can visually see that price is being
“squeezed” within the structure of the wedge pushing price to the downside on the breakout and
confirmation of the pattern.
44
MASTER PRICE ACTION THE
Take note that throughout these reversal patterns – you can see the 90% rule red ray line drawn
in as price retraces back to the start of the pattern after breakout. This is a VERY important part
of the Chasers Strategy as it allows us to forecast longer term moves and make calculated
decisions on our management, scale in entries, and exit.
Falling Wedge
The falling wedge is again essentially the same as the rising wedge, but we are looking for a
reversal to the upside from a downwards trending market. The falling wedge allows us to
capitalize heavily on bullish price movements from the very early stages of the move. These
again are a very common pattern and one that you will utilize time and time again.
It’s important to note in this example that it is not the perfect example of a rising wedge, but
that’s exactly why it is an important thing to note down. The market is an IMPERFECT thing so
to constantly be searching for perfect price patterns to get into the market is counterproductive
to your growth. The important thing to focus on is that price is approaching a structurally
significant area and is resembling a form of reversal channel that is signaling a setup in the
opposite direction. The edge is in knowing that there is a probable chance of a move to the
upside in that area.
The Arc
As touched on briefly in one of the previous descriptions, the arc is an EVOLUTION of the
double top or double bottom. Mass psychology shows us that a double top or double bottom
formation is being analyzed by most retail traders – when price breaks the high or low
correctively it triggers the retail traders sell orders (taking them into the trade) and hitting their
stop losses (fueling a further move to the upside) before finally adhering to structure and moving
impulsively to the downside. As a Forex Chasers trader, you can spot this formation as we have
branded it “The Arc” formation that is a reversal that can be used in either direction.
45
MASTER PRICE ACTION THE
Continuation Pattern
Continuation patterns are used in all aspects of the Chasers Strategy. They are signals to us
that the market is going to continue in its current phase and allows us to capitalize on further
positioning in either a buy or sell trade. We use them to scale in to the market, and to forecast
entries during an impulsive price movement. Let’s cover the continuation patterns we use.
Bull Flag
A bull flag (hence the name) resembles a flag pole because it is in an impulsive bullish price
movement. Price will impulse up and form a sideways ‘flag’ continuation that signals to us price
is ready to continue its impulsive nature on the breakout of the flag. These are perfect
opportunities for us to analyze and set our orders above the top of the flag, also giving us our
area to place our stop losses below the low of the flag.
46
MASTER PRICE ACTION THE
Bear Flag
A bear flag is the opposite of a bull flag. It resembles an inverted flag as price has just impulse
to the downside, formed a tight continuation pattern resembling a flag pole, allowing us to
forecast the next impulsive leg to head to the downside. These flags probability (bull and bear)
are very high on most currency pairs. It’s worth noting that back testing is important, because
the probability of patterns playing out is relevant to the pair it is being traded on as well.
As a Chaser you will begin to be able to spot bull and bear flags in all time frames, all phases,
and all market conditions. It then becomes a matter of filtering the setups based on the phase
47
MASTER PRICE ACTION THE
that they are in and the probability of the given position playing out opposed to other setups that
are currently forming.
Flat Continuation
A flat continuation pattern is essentially just a bull or bear flag that is very clear. Like it was
mentioned in a previous paragraph, we aren’t looking to differentiate flats from flags and say
that one is more probable than the other. We aren’t purely analysts; at the end of the day we are
traders and the most important thing to take note of is that BOTH are continuation patterns that
can signal setups for us to capitalize on. The flat continuation is a very clean bull or bear flag
that has parallel top and bottom opposed to a bull or bear flag that can either be more slanted or
form larger flag structures.
Symmetrical Triangle
A symmetrical triangle is another form of continuation that we can classify as we analyze price
action. It resembles a flag that is being compressed or ‘squeezed’ out of its structure. The
further price gets into the development of the flag, the more we can begin to classify it as a
given type of pattern. What this does is allow us to outline the most probable areas of the
pattern to enter either as a risk entry or reduced risk entry. The whole purpose of pattern
identification is to have that rough idea of what the ideal pattern looks like and to forecast in real
market conditions based on the behavior of price in those areas. All these patterns are tools
combined with market nature and structure to build a portfolio of evidence to take a position in
the outlined direction.
48
MASTER PRICE ACTION THE
49
MASTER PRICE ACTION THE
Above is an example of an ascending channel within an ascending channel. By the result of the
move you can see how these patterns within patterns can present us with highly probable
entries that have massive risk to reward. By drilling down through the timeframes outlining
structure and spotting patterns from a higher level we can begin to see the potential in trading
this way.
Our ability to forecast the size of the move because of the 90% rule allows us to know the
potential within the move as we are entering it. We are aware of the channel as it is forming,
aware of the within structure as it is approaching the first high, and therefore can execute
efficiently and accurately when the entry presents itself.
50
MASTER PRICE ACTION THE
The important thing to realize with patterns within patterns is the probability enhancement and
the nature of the moves that follow these distinct patterns and setups. The moves often result in
large, very impulsive moves that we can capitalize on multiple times. Therefore, the Chasers
strategy is so powerful because of the fact that we are so aware and in tune with the opportunity
that the market is presenting us with.
Multi-Touch Confirmation
Now that we are continually building on your understanding of price action and have been
through various components of the strategy in detail, we can now finetune the skillset with
further confirmation to stack probability in our favor. Multi-Touch confirmation is the perfect topic
to be covered after patterns as it is another factor to consider that can add probability to a trade.
Multi-Touch confirmation is an analysis that can be used in both reversal and continuation
formations and are a key component of taking risk entry positions in conjunction with structural
levels.
Three touch confirmation is often a sign of a completed pattern right before the impulsive move
out. Remember that as with any other tool we utilize multi-touch confirmation in and of itself is
NOT a reason to take a position rather it is an added layer of evidence to align with your
analysis.
51
MASTER PRICE ACTION THE
What is a phase?
The market moves in a cycle of “phases”. As a trader it is very important for us to recognize
what PHASE we are in within the market. By understanding whether we are in the impulsive
phase or the corrective phase we can identify the behavior of price action and make calculated
decisions on where price is going to head next. It goes from a heavy momentum period, to a
point where price begins to form low momentum structures in which it enters the corrective
phase before it continues its next impulsive leg.
52
MASTER PRICE ACTION THE
In the above example we see the corrective phase from a higher time frame perspective on the
4H chart. Price fell from a large impulsive leg and began to create the bear flag continuation
structure. This is the ‘corrective phase’ because the phase in which price just came from was
very impulsive, with large momentum bearish engulfing candles dominating most of the price
movement. In the corrective phase it is clear for us to see that relative to the previous section of
price action the candlesticks and overall move is a lot more corrective.
Naturally when you’re trading the corrective phase you will have much deeper pullbacks, so
your management style may slightly adjust compared to trading in the impulsive phase which we
will cover next. Knowing that we are in the corrective phase shifts our thinking and observation
to forecasting when the start of the next impulsive phase will be. Be prepared in the corrective
phase to have outlined profit taking areas versus aiming for long term price movements
because naturally in the corrective phase of the market bigger moves aren’t taking place.
While in the impulsive phase of the market it is common practice to be looking for bigger risk to
reward moves. Because of the influx of momentum, we can capitalize heavily by analyzing the
lower timeframes for continuation patterns and being on the ball with executing positions. A
daily or even 4H move may not show any entry points to get into the market, but it shows us the
53
MASTER PRICE ACTION THE
momentum behind the overall move. By utilizing the 1H timeframe we can look for opportunities
to scale into our positions and to capitalize on the full move.
54
MASTER PRICE ACTION THE
point) and the Half Risk Method (moving stop to 0.5% risk). We do this for a multitude of
reasons but the essence of it is to deal with the emotional aspect of trading as well as taking
a message from the market. If price has moved around 1% to the previous high or low and
then retraces, this is likely a sign that the market is evolving, and we do not want to be in
this position.
2. Upside Potential
The way that we maximize our upside potential is by taking messages from the market
looking for signs of reversal that may form at key resistive areas, we therefore would look to
act on the formation of these market signals to secure profit via trailing/manually closing
positions. We further maximize our upside potential by utilizing ‘scaling in’ which can often
increase our percentage return at a massive level.
By mismanaging positions – letting positions running at 1-2% profit retrace and take you out for
a full loss; not taking messages from the market as price moves around for days at your entry
point; not identifying reversal signs at potential reversal points and letting corrections correct all
the way back to take you out for break-even we find that traders often give back large amounts
of potential profit to the market. You can find that small management tweaks can be the
difference between consistent profit and consistent loss. All these outlined scenarios can be
avoided with the right trade management principles which are covered in this guidance book.
Once learning the key management principles to cover your downside and increase your upside
it is critical that upon entering each trade we have a management plan ready to apply, having
planned ahead of the time this removes any emotional effects of making decisions within the
trade, increasing your objectivity in your actions, however it is just as important to stay fluid with
the market and adapt your actions as the market forms its price movements and patterns –
which in turn can give you clear indication of management actions to take.
2. The Chasers Method is one of higher discretion thus it creates a higher caliber of traders
which we often describe as ‘enhanced’, the reason for this increased discretion is due to the fact
that we rely solely on our ability to interpret and read market structure and nature thus if the
skillset has not yet been formed there is a higher risk of potential losses, or a streak of losses.
Therefore, effective downside management allows one to learn the strategy live in the market by
learning from wins and losses and the emotional side of trading in a more manageable way. In
essence, the management methods offset the increased discretion.
55
MASTER PRICE ACTION THE
3. We often find that the emotional effects that multiple full -1% losses have on all traders both
new and experienced is a lot higher than B/E trades and half loss trades so naturally the
management techniques aid us in lowering the emotional effect and our judgement will not be
impaired when the next position arises after a loss.
4. The mathematical upside of the B/E method and Half Risk method works in the favor of the
trader. By capping your losses, you are increasing your ability to offset those losses with wins.
5. We have found through our own testing of the strategy that over a period of 2 years when
positions impulse away from our entry points and then retrace back further than our entry (into
the negative) they will over a large sample size be more likely to hit our stops for full -1% losses
and then go back in our favor and into profit. Thus, we choose to eliminate the emotional and
mathematical effect on a probability model and utilize the management methods.
6. We have also found through our own testing that over a large enough sample size the
probability of a position that hovers around our entry point goes in our outlined direction less
than when it takes us out for a loss. Therefore, utilizing these management methods
(specifically the half loss method) we can eliminate the potential loss and mitigate any anxiety or
frustrations.
7. The Chasers Method is very accurate when it is fully understood therefore when we receive a
message from the market that is telling us the analysis is now void there is no reason to leave
risk on the table unnecessarily.
8. As price moves in your favor, you have protected yourself early on and can focus your efforts
on maximizing profits and capitalizing on other trades.
Now that we have covered the reasoning behind utilizing these management techniques, we will
get in to what these techniques look like and how we can accurately implement them into our
strategy.
What is the break-Even method?
Break-Even Method: the movement of the stop loss to the entry point when price has impulsed
away from the entry point.
1. Normal
The Chasers method is based upon anticipating the next impulsive move within the market;
therefore, we look to target the larger momentum moves so as price impulses away from our
entry point, we look to move our stop to our entry point removing risk from the position. An
additional point to aid the above would be to move your stop to the point of break-even only
once your position has moved into or close to 1% profit and/or reached the recent high or low.
56
MASTER PRICE ACTION THE
2. Adaption
In some cases, the break-even method is adapted to fit the scenario or set up better. For
example, where we are taking impulsive reversal trades from structure highs/lows we look to
only move our stop to -0.5% risk where we would normally move to B/E until price has moved
heavily away from our entry. This is due to finding that over a large sample of data through back
testing we found that price often consolidates just enough to take you out for break-even before
dropping, thus we plan for this by only trailing to 0.5% on these specific trades to adapt with
being taken out of trades prematurely.
57
MASTER PRICE ACTION THE
2. As price moves in your favor we will be anticipating corrections and other structures forming
along the way, once these structures form, we can then look to trail our stops behind them as
price continues in our favor.
3. As price moves in our favor and these corrections/structures form, we often find that large
corrections can come into play. Some of these larger corrections may correct all the way back to
our entry point turning a 4-5% positions back to a B/E trade – thus, we look to lock in our profit
at a certain point where if we see price break that level it is more than likely to reverse all the
way back to our entry.
4. Additionally – the ‘90% Rule’ states that 90% of the time an impulsive move should reach the
start of the correction of the pattern that it broke out of. We place a ray line at the structural
highs or lows of the pattern and watch the nature of the price action as we approach this area,
because it is a highly probable reversal area. If a reversal forms, we look to act either by
managing the position more aggressively or in situations where we can see it breaking further,
we will look to let the trade continue to play out.
As your skill set as a trader increases – your ability to understand the way the market moves will
allow you to take messages from the market and help you understand when to close positions
down or to keep them running. By minimizing risk and maximizing your profit potential you are
becoming a skilled trader and molding the strategy to fit your personality best by implementing
the various techniques at your discretion.
58
MASTER PRICE ACTION THE
The 90% rule plays out market wide and is something we utilize heavily to capitalize fully on
price action taking advantage of the opportunity that is presented to us.
Now that we have covered how to lock in profit on running trades and the various management
techniques we use within our style, we can now get into ‘Scaling In’ – what it is, how and when
to do it and touching on the huge impact that scaling in to positions can have on your trading.
59
MASTER PRICE ACTION THE
Scaling in is adding a second or possibly third or fourth position to a running trade all while
keeping the risk at a max of 1%. We do this by entering the initial position, and then adding a
position on the next continuation pattern that forms in the given direction of our trade. However,
we cannot add a second position until our first position has been moved to break-even as that
would lead to an overall risk exposure more than 1%.
As the scale in position then impulses away from its entry we employ the breakeven method as
usual and then we repeat the scale in process as we continue to add positions to our trade as
further continuations form.
60
MASTER PRICE ACTION THE
above the recent lower highs and price broke the high to take us out of the position.
So much value and I believe you are enjoying this. Just because you purchased
this book means you are serious about getting knowledge which is why I want
you to click here and see how I will meet you half way !
61
MASTER PRICE ACTION THE
62
MASTER PRICE ACTION THE
My objective for this chapter is to break down and analyze the dynamics and psychology of
price movement, first, at its most fundamental level, that of the individual trader; then I will
broaden the explanation by examining the behavior of traders collectively as a group. I want to
demonstrate that, if you understand the psychological forces inherent within traders' actions,
you can easily determine what they believe about the future by just observing what they do.
Once you know what traders believe about the future, it's not that difficult to anticipate what they
are likely to do next, under certain circumstances and conditions. What is really important about
this insight is that it will help you to understand the distinctions between wishful thinking and the
actual potential that exists for the market to move in any given direction. You will be learning to
let the market tell you what to do by understanding the forces behind its behavior and then
learning to differentiate between pure, uncontaminated market information and how that
information is distorted once it starts doing something to you. The most fundamental component
of the markets is traders. Keep in mind that traders are the only force that can act on prices to
make them move. Everything else is secondary. What makes a market? Two traders willing to
trade, one wanting to buy and one wanting to sell, who agree on a price and then make a trade.
What does the last posted price represent? The last posted price is what someone was willing
to pay and what someone was willing to sell for at the moment the two traders agreed on the
trade. It reflects an agreement in present value between those traders acting at that price. What
is the bid? A trader announcing the price at which he is willing to buy. What is the offer? A trader
announcing the price at which he is willing to sell. How do traders make money? There are only
two ways to play this game to make money. To buy at a price you believe is low relative to
where you can sell it back at some future point in time. Or to sell at a price you believe is high
relative to where you can buy it back at some future point in time. Now, let's take a look inside
the pit to see what has to happen for prices to move off equilibrium and how this will tell us what
traders believe.
Market behavior
The market's behavior can be defined as the collective action of individuals acting in their own
self-interest to profit from future price movement while simultaneously creating that movement
as an expression of their beliefs about the future. Behavior patterns result from the collective
actions of individual traders doing one of three things: initiating positions, holding positions, and
liquidating positions. What will cause a trader to enter the market? A belief that he can make
money and that the current state of the market offers an opportunity to enter into a trade at a
price level that is higher or lower than the price at which it can be liquidated. What will cause a
trader to hold a position? A sustained belief that there is still potential for profit in the trade.
What will cause a trader to liquidate a trade? A belief that the market no longer provides an
opportunity to make money. This would mean in a winning trade that the market no longer has
the potential to move in a direction that will allow the trader to accumulate additional profits or
that the risk of staying in the trade is too great in relation to the potential for additional profit. In a
losing trade, the trader believes that the market no longer has the potential to move in a
63
MASTER PRICE ACTION THE
direction that will allow him to recover his losses or the trade was a calculated risk in which a
predetermined loss level was set in advance. If you look at any price chart, you notice that over
a period of time, prices will form patterns in a very symmetrical fashion. These kinds of
symmetrical-looking price patterns are not an accident. They are a visual representation of the
struggle between two opposing forces—traders squaring off, so to speak, taking sides and then
having to switch sides to liquidate their trades.
How many times have you felt the following emotions while trading?
1. Hope: I really hope this pair goes up after I buy it.
2. Fear: I can’t handle another loss; I’ll skip this trade.
3. Greed: I’m really doing well in the market; I’m going to increase my risk.
4. Despair: This trading method doesn’t work; I keep losing money with it.
5. Regret: I wish I hadn’t traded with such high risk.
We all experience these emotions now it is time to learn to master how you react towards them
Understanding the probable vs, the possible will help you massively understand what to do next
in the markets before going thru the emotions above.
The Probable vs the Possible.
This section begins to dive into ‘probability’ within the market. It’s important to understand that
as a financial trader your edge lies completely in the probability of forecasting positions and
entering them adhering to your strategy. What the probable vs. the possible states is that no
matter which position you are forecasting regardless of how much evidence you have found to
take the position it is always possible that it won’t play out. Our edge however lies in the
PROBABLE which is why the Chasers strategy has such a high strike rate of forecasted
positions – because with the right technical knowledge the probable has been built up over and
over again to evolve and adapt with market conditions. In a trading sense what this means is
that if you are awaiting the completion of a three-touch pattern, that is the probable because
your analysis has forecasted that this is the way the trade is going to play out. However, the
possible is that it doesn’t always have to create that third touch before it rejects and the move
plays out, the market is imperfect and in any part of the strategy that is the key point that it
always comes back to. The market is imperfect, we succeed based on probability.
Forecasting Psychology
Most people need the market to do something for them in order to make a decision. Not
inflicting our bias on what we want the market to do or what we think it has to do but allowing it
to show us what it can do and what it is likely to do is where our edge plays out. The psychology
behind knowing that the market will present us with opportunities and over the course of time
our edge is playing out consistently as we are adhering to our strategy and to our trading plan.
64
MASTER PRICE ACTION THE
one key difference to remember is that the market is neutral rather than your opponent. Most
traders believe that it’s their losses that hinder their success but the reality it’s a lack of
forecasting and inability to capitalize fully on the trade. Now that we have covered the topic of
probability and the importance of psychology in your development as a trader – lets dig in to
probability even more yet make sure to visit the chapter on psychology in your dashboard.
The so called ‘emotional side’ of trading has people differing away from the simple concept that
the strategy is built from a sustainable long-term perspective. The “get rich quick” mentality is
the exact opposite mindset of what we embody within our style of trading. If you can monitor
your language of how you speak about trading to yourself and to others, you will start to realize
that the reason you may not be achieving the things you want to be achieving is because you
are literally placing limiting beliefs and barriers in front of yourself before you ever had the
opportunity to begin in the first place.
An important rule of thumb to keep throughout your progression is to never control your
emotions, but to manage them. Small tweaks in language effect your mindset, your energy, and
ultimately your results within the market.
Mass Psychology
The idea of mass psychology refers to the collective mind of the market – the other traders who
are executing positions that move the market from its impulsive phases to its corrective phases
and into patterns and ultimately the entire market as you see it. By taking a step back and
realizing that the charts are of human psychology you can begin to dive deeper into your
analysis and execute positions backed by your understanding of the topic.
By pairing it with the technical tools you have learnt throughout this guidance book you can
begin to see the market from a much clearer perspective. What you need to realize right away is
that you are a Chaser and will forever not be a part of that 90% traders that lose money. What
65
MASTER PRICE ACTION THE
you can do is know 90% of retail traders are trading strategies that DO NOT evolve with the
market and allow them to expand their understanding over time. By understanding the
strategies that they trade which is largely support and resistance based with indicators such as
moving averages and RSI we can literally forecast and see price action play out backed by that
understanding.
This is a common theme for those who are new to trading and can be detrimental in the early
stages. If you were to “win big” by allocating massive portions of your account balance to a
trade, you may quickly lose respect for risk management and fall down a path that is not
sustainable over the longer term.
In Forex Chasers we preach simplicity, and sustainability over the long term. The Chasers
methodology has always had the long-term picture in mind which is why the strategy literally
evolves with the market – rather than being reactionary we are being proactive in our approach
to the market. Therefore, we cap our risk to a 1% risk model per trade. The sooner you can rid
your mind of the “get rich quick” mentality the better off you will be, allowing your edge to play
out over time. One of our main recommendations within The Chasers is to add these books to
your reading list:
These books touch on many of the core principles in psychology that are needed on your
journey through to consistency and long-term sustainability in your trading. Get ready to
transform your mind and inner dialogue as you progress through The Chasers, as it is more
than just FX education but rather a formula to live your life by mastering the art of simplicity.
These books cover trading psychology, mind management, procrastination, and a practical
approach to goal setting that is directly in line with the Chasers methodology.
66
MASTER PRICE ACTION THE
I would love to give a credit to the following books for helping me producing this book with great
content:
And what can possibly be the next step? Well I want you to click right
here and see what is the next step for your trading success. Thank you
for believing in us!
67
MASTER PRICE ACTION THE
68