NEW The Price Action Trading Strategy Guide, 6 Best Price Action Indicator Trading Strategies

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Price action trading is a methodology that relies on historical prices (open, high, low, and close) to help you make better trading decisions.

Bạn đang xem: The price action trading strategy guide

Unlikeindicators, fundamentals, or algorithms… price action tells you what the market is doing — and not what you think it should do.

Now, this isn’t the Holy Grail. But, if you devote time to learning price action trading, you’ll trade with cleaner charts, and can pinpoint your entries & exits with better precision.

That’s why I’ve written 2873 words in today’s post, teaching you the secrets of Price Action Trading.

Here’s what you’ll discover…

Are you ready?

Then let’s get started…

This is an extensive post and I would encourage you to download the PDF file below, so you can reference it in future.

The truth about Support and Resistance nobody tells you

First, let’s define what’s Support and Resistance so we’re all 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.

Here are a few examples…

Support and Resistance on EUR/USD Daily:

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Support on (USD/CAD):

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Resistance on (GBP/JPY):

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Also:

Support and Resistancecan swop roles.

This means when Support breaks it can become Resistance. And when Resistance breaks it can become Support.

An example…

Previous Support turns Resistance on (GBP/AUD):

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Previous Resistances turns Support on (NZD/USD):

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But why does it happen?

Because 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.

And that’s not all because traders who missed the breakout will want to short the markets which increase the selling pressure.

And that’s why when Support breaks it tends to become Resistance.

Make sense?

Now you’re probably wondering…

“But how do I draw Support and Resistance on my charts?”

That’s a good question.

So, here are the guidelines I use…

Zoom out your charts (at least 200 bars for me)Draw the most obvious levels (if you need to second guess, then it’s not an important level)Adjust your levels to get the most number of “touches” (it can be body or wick)

Now, if you want a full training on how to draw Support and Resistance, then check out this video below…

Next…

Dynamic Support & Resistance

According to Classical Technical Analysis, Support and Resistance are horizontal areas on your chart.

This is useful when the market is in a range or weak trend.

But in strong trend markets, it won’t work well and that’s where you need to rely on dynamic Support and Resistance.

What the heck is dynamic?

It means Support and Resistance “move along” with the price instead of being static.

For example:

The 20-period Moving Average can act as dynamic Support in strong trending market…

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Or the50-period Moving Averagecan act as dynamic Resistance in a healthy trend…

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Pro Tip:

Dynamic Support & Resistance can also be in the form ofTrendlineor Trend Channel.

Market behaviour secrets: How the market really moves…

Here’s the deal:

The markets arealways changing(I’m sure you’d realize this by now).

It can in an uptrend, downtrend, range, low volatility, high volatility, etc.

But, if you take a step back and look at the big picture, you’d realize the market tends to be in 1 of 4 stages…

AccumulationAdvancingDistributionDeclining

I’ll explain…

Stage #1: The Accumulation Stage

The Accumulation stage occurs after a decline in price, and it looks like a range market in a downtrend.

Here are the things to look for:

Occurs after the price have fallen over the last 5 months or more (on Daily timeframe)It looks like a range market with obvious Support and Resistance areas — in a downtrendThe 200-day Moving Average is flattening out

Here’s an example…

Stage #2: The Advancing Stage

The Advancing Stage is an uptrend with a series of higher highs and lows.

Here are the things to look for:

Occurs after the price breaks out of Resistance in an Accumulation stageYou see a series of higher highs and lowsThe price is above the 200-day Moving AverageThe 200-day Moving Average is starting to point higher

Here’s what I mean…

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Now here’s the thing…

No market goes up forever. It eventually gets “tired” and that’s where it enters stage 3…

Stage #3: The Distribution Stage

The Distribution stage occurs after a rise in price, and it looks like a range market in an uptrend.

Here are the things to look for:

It looks like a range market with obvious Support and Resistance areas — in an uptrendThe 200-day Moving Average is flattening outThe price whips back and forth around the 200-day Moving Average

It looks something like this…

At this point, the market is still in equilibrium with both buyers and sellers on equal footing.

However, the tide is turned if the price breaks below Support and that’s where we enter the final stage…

Stage #4: The Declining Stage

The Declining Stage is a downtrend with a series of lower highs and lows.

Here are the things to look for:

Occurs after the price breaks out of Support in a Distribution stageYou see a series of lower highs and lowsThe price is below the 200-day Moving AverageThe 200-day Moving Average is starting to point lower

An example…

And if you have any trouble trying to identify the direction of the trend, then go watch this training…

Now you might be thinking…

“What’s the point of learning the 4 stages of the market?”

Here’s the thing:

If you can recognize the current stage of the market, then you can adopt the appropriate trading strategy to trade it.

Here’s how…

If the market is in an Advancing stage, then you want to be a buyer (not a seller).

This means you can look to buybreakouts or pullbacks.

Or…

If the market is in a Distribution stage, then you know there’s a huge potential downside if the price breaks below Support.

This means you can look to short the breakdown of Support or wait for the breakdown to occur, then sell on the pullback.

Now once you understand the 4 stages of the market, then you’ll know which Price Action Trading strategies to use in a given market condition — and you’ll never be “lost” again.

The secret to reading Candlestick Patterns — How to time your trading entries with deadly accuracy

At this point:

You’ve learned the big picture of Price Action Trading.

You know where to enter your trades (Support and Resistance) and what you should do in different market conditions (the 4 stages of the market).

But there’s still one part of the puzzle missing, and that’swhen to enter a trade.

So, that’s wherecandlestick patternscome into play.

Let’s dive in…

What is a candlestick pattern and how does it work?

A candlestick pattern has 4 data points:

Open– The opening price

High– The highest price over a fixed time period

Low– The lowest price over a fixed time period

Close– The closing price

Here’s what I mean:

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For a Bullish candle, the open is always below the close.

And for a Bearish candle, the open is always above the close.

Next, you’ll learn a few powerfulcandlestick patternsto help you better time your entries…

Bullish Engulfing Pattern

I’ll explain…

Hammer

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AHammeris a (1- candle) bullish reversal pattern that forms after a decline in price.

Here’s how to recognize it:

Little to no upper shadowThe price closes at the top ¼ of the rangeThe lower shadow is about 2 or 3 times the length of the body

And this is what a Hammer means…

When the market opens, the sellers took control and pushed price lowerAt the selling climax, huge buying pressure stepped in and pushed price higherThe buying pressure is so strong that it closed above the opening price

In short, a hammer is a bullish reversal candlestick pattern that shows rejection of lower prices.

Now, just because you see a Hammer doesn’t mean the trend will reverse immediately.

You’ll need more “confirmation” to increase the odds of the trade working out and I’ll cover that in details later.

Moving on…

Bullish Engulfing Pattern

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A Bullish Engulfing Pattern is a (2-candle) bullish reversal candlestick pattern that forms after a decline in price.

Here’s how to recognize it:

The first candle has a bearish closeThe body of the second candle completely “covers” the body first candle (without taking into consideration the shadow)The second candle closes bullish

And this is what a Bullish Engulfing Pattern means…

On the first candle, the sellers are in control as they closed lower for the periodOn the second candle, strong buying pressure stepped in and closed above the previous candle’s high — which tells you the buyers have won the battle for now

In essence, a Bullish Engulfing Pattern tells you the buyers have overwhelmed the sellers and are now in control.

And lastly, a Hammer is usually a Bullish Engulfing Pattern on the lower timeframe because of the way candlesticks are formed on multiple timeframes.

Here’s what I mean:

Make sense?

Shooting Star

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A Shooting Star is a (1- candle) bearish reversal pattern that forms after an advanced in price.

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(The opposite of a Shooting Star is Hammer.)

Here’s how to recognize it:

Little to no lower shadowThe price closes at the bottom ¼ of the rangeThe upper shadow is about 2 or 3 times the length of the body

And this is what a Shooting Star means…

When the market opens, the buyers took control and pushed price higherAt the buying climax, huge selling pressure stepped in and pushed price lowerThe selling pressure is so strong that it closed below the opening price

In short, a Shooting Star is a bearish reversal candlestick pattern that shows rejection of higher prices.

And one last one…

Bearish Engulfing Pattern

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ABearish Engulfing Patternis a (2-candle) bearish reversal candlestick pattern that forms after an advanced in price.

Here’s how to recognize it:

The first candle has a bullish closeThe body of the second candle completely “covers” the body first candle (without taking into consideration the shadow)The second candle closes bearish

And this is what a Bearish Engulfing Pattern means…

On the first candle, the buyers are in control as they closed higher for the periodOn the second candle, strong selling pressure stepped in and closed below the previous candle’s low — which tells you the sellers have won the battle for now

In essence, a Bearish Engulfing Pattern tells you the sellers have overwhelmed the buyers and are now in control.

Now…

What you’ve just learned are some of the most powerfulreversalcandlestick patterns.

But, they are not the only ones out there.

In fact, there are many variations that it’s impossible to cover all in one blog post.

But the good news is, you don’t need to memorize candlestick patterns to understand what the market is telling you.

Here’s how…

Candlestick patterns cheat sheet: How to understand any candlestick pattern without memorizing a single one

This is important, so pay attention…

#1: Trending Move

You’re probably wondering:

“What is a Trending Move?”

A Trending Move is the “longer” leg of the trend.

If the candles are large (in an uptrend), it signals strength as the buyers are in control.

If the candles are small, it signals weakness as the buyers are exhausted.

An example of a Trending Move:

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#2: Retracement Move

A Retracement Move is the “shorter” leg of the trend.

If the candles are large, it signals the counter-trend pressure is increasing.

If the candles are small, it’s a healthy pullback and the trend is likely to resume itself.

An example of a Retracement Move:

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#3: Swing Points

Swing Points refer to swing highs and lows — obvious “points” on the chart where the price reverses from.

Here’s an example:

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This is important because it lets you know whether the market is in an uptrend, downtrend, or range.

As a guideline:

If the swing highs/lows move higher, then the market is in an uptrend

If the swing highs/lows move lower, then the market is in a downtrend

If the swing highs/lows are not moving higher or lower, then the market is in a range

Now if you want to see the discover the secrets to chart patterns, then clickhereto find out.

Next…

To understand any candlestick patterns, you only need to know 2 things…

Where did the price close relative to the range?What’s the size of the pattern relative to the other candlestick patterns?

Let me explain…

1. Where did the price close relative to the range?

This question lets you know who’s in control momentarily.

Look at this candlestick pattern…

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Let me ask you…

Who’s in control?

Well, the price closed the near highs of the range which tells you the buyers are in control.

Now, look at this candlestick pattern…

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Who’s in control?

Although it’s a bullish candle the sellers are actually the ones in control.

Why?

Because the price closed near the lows of the range and it shows you rejection of higher prices.

So remember, if you want to know who’s in control, ask yourself…

Where did the price close relative to the range?

Next…

2. What’s the size of the pattern relative to the other candlestick patterns?

This question lets you know if there’s any strength (or conviction) behind the move.

What you want to do is compare the size of the current candle to the earlier candles.

If the current candle is much larger (like 2 times or more), it tells you there’s strength behind the move.

Here’s an example…

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And if there’s no strength behind the move, the size of the current candle is about the same size as the earlier ones.

An example…

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Does it make sense?

Great!

Now you have what it takes to read any candlestick pattern without memorizing a single one.

The M.A.E Trading Formula (A simple Price Action Trading system anyone can learn) or Price Action Trading Forex…

At this point:

You’ve learned the essentials of Price Action Trading (Support & Resistance, Market Structure and Candlestick Patterns).

Now, let’s use this knowledge to findhigh probabilitytrading setups — consistently and profitably.

Introducing to you, The M.A.E Trading Formula, a proprietary trading technique I’ve developed to help traders get results, fast.

Here’s how it works…

Market structureArea of valueEntry trigger

I’ll explain…

#1: Market structure

Now, I know it can be daunting to be looking at a blank chart.

Because you don’t know what to do.

Should you buy, sell, or stay out?

That’s why the first thing to do is identify the market structure as it tells youwhatto do.

So ask yourself:

“Is the market in an uptrend, downtrend, or range?”

(In other words, identify the current stage of the market.)

Once you can identify the market structure, then you’ll know trade along the path of least resistance.

For example:

If the market is in an uptrend, you look to buy only.

If the market is in a downtrend, you look to sell only.

If the market is in a range, you can buy and sell.

Next…

#2: Area of value

Now, identifying the market structure alone isn’t enough.

Because you also need to knowwhereto enter your trade.

Now you’re wondering:

“There are so many places to enter a trade. Which one should I choose?”

Well, you want to trade from an area of value so you can buy low and sell high.

For example:

Support and ResistanceRespected Moving Average

Next…

#3: Entry trigger

At this point:

You know what to do (identify market structure) and where to enter (area of value).

Now the final part of the equation is to knowwhento enter.

Personally, I like to enter when the market has shown signals of reversal — thus confirming my bias.

This can be in the form of reversal price patterns like:

HammerShooting StarBullish Engulfing PatternBearish Engulfing pattern

Let me share with you a few examples of The M.A.E Formula in action…

GBP/USD Daily: Identify the market structure

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GBP/USD Daily: Wait for the price to reach an area of value

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GBP/USD Daily: Enter on a valid entry trigger

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Another example…

T-Bond 4-hour: Identify the market structure

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T-Bond 4-hour: Wait for the price to approach an area of value

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T-Bond 4-hour: Enter on a valid entry trigger

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Can you see how everything fits together now?

So, what’s next?

You’ve just learned what price action trading is all about, and how you can use it and to get a “feel” for the markets including price action trading with Forex.

If you learn it well, it will improve your entries, exits and trade management.

Now… it’s time to put these techniques into practice.

The first step?

Click on the linkbelow and download TheUltimate Guide to Price Action Trading.

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You’ll get a beautiful PDF file that contains trading strategies and techniques I’ve shared with you (and additional contentthat I’ve no space to writehere).

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