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#1 Live Trading on Glenmark Pharmaceuticals Ltd #1 Live Trading on Godrej Industries Limited #3 Live Trading Session 1-2-3 Strategy 1-2-3-4 Reversal Trading Strategy 10 CHART PATTERNS FOR PRICE ACTION TRADING 10 Habits of successful traders 10 Performing Candlesticks 10 PRICE ACTION BAR PATTERNS YOU MUST KNOW 10 PRICE ACTION CANDLESTICK PATTERNS YOU MUST KNOW 10 Things You Can Learn From The World’s Best Traders 10 TYPES OF PRICE CHARTS FOR TRADING 123 forex trading strategy 123 Trading Strategy 200 SMA 3 Bar Net Line Strategy 6 Best Price Action Trading Strategies 7 RSI TRADING STRATEGIES 9 Advanced & Profitable Trading Strategy 9 Funny Facial Expressions AB = CD Price Action Strategy Abb India Limited Aditya Birla Nuvo Limited Aditya Birla Nuvo Ltd ADVANCED REVERSAL STRATEGY Alice Blue Opening Link Alphabets Amaraja Battries Ambuja Cement Anupam Rasayan India Limited IPO Asian Paint Ltd Aurobindo Pharma Limited Bajaj-Auto Bearish Crossover Bearish Engulfing Bearish Engulfing Candle Bearish Reversal (Red-Red) BEML Ltd Best Stock Market Strategy Bharat Finance Inclusion Blood Rain Pattern bollinger band Bollinger Band Price goes below Mid line Strategy Bollinger Band Price gone above mid line Bollinger Band Strategy Breakout Stock Trading Strategy Bullish Crossover Bullish Engulfing Bullish Gartley Pattern Strategy Bullish Three Bar Reversal Butterfly Spread Cadila Healthcare Limited Calendar Spread Camarilla Equition canara Bank Candlestick Charts Candlestick Patterns Candlestick Patterns Strategy Cesc Limited Chart Patterns Cipla Closing Above Previous High for 3 Days Closing Below Previous Low For 3 Days coal India Cup & Handle Pattern Daily Life of a Trader dark cloud cover Day Trading Breakout Day Trading Setups Day Trading Setups – 6 Classic Formations Day Trading Strategy DBLHC Descending Triangle Divergence Price Action Strategy DIVI'S Laboratories Ltd Doji Candlestick Patterns Dojis Double EMA Dr Reddy Dr. Reddy's Laboratories Limited Early Morning Range Breakouts – 4 Trading Strategies EMA Equity Market EXHAUSTION BAR Falling Wedges (26th Dec 2017) Federal Bank fibonacci Fibonacci Retracement Fibonacci Retrenchment Strategy Fibonacci swing trading strategy Flag Pattern Strategy Flash Pattern Forex Trading Strategies Fyers Account Gandhi Jayanti Gap Up Gartley Pattern Glenmark Pharmaceuticals Limited godrej Godrej Consumer Products Limited Godrej India Gppl Happy Birthday Happy Chhath Puja Happy Diwali Happy Diwali (2017) Happy Diwali (2018) Happy Dussehra Happy Ganesh Chaturthi Happy Holi Happy Independence Day 2017 Happy Janmashtami Happy Krishna Janmashtami 2017 Happy Muharram 2017 Happy Navratri To All Happy Teacher Day Harmonic Pattern HCL Technology HDFC HDFC Bank Head & Shoulders breakout Head & Shoulders Pattern (6th Oct 2017) Head and Shoulders Pattern Higher high of 3 days Hikkake Pattern Hindustan Petrolium Hindustan Unilever Hindustan Unilever Limited HOW TO DRAW TRENDLINES How To Trade Supply And Demand IndusInd Bank Indusind Bank Ltd Infosys INSIDE BAR Inside Bar - 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Friday 27 April 2018

Trade Price Action

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Love price action? Want to learn more about trading with price action? Start here.
How to Trade with Price Action

#1: PRICE ACTION FOR BEGINNERS

Just getting started?
From the definition of price action to the essential price patterns, you can find all you need to kick-start your price action trading education.

WHAT IS PRICE ACTION?

READING PRICE ACTION

#2: PRICE ACTION TRADING TOOLS

Already grasped the basics?
Move on to learning price action based tools – trend bars, trend lines, channels, swing pivots, congestion, price-only chart types and more.

#3: PRICE ACTION TRADING CONCEPTS

If you are comfortable with the technical aspects, perhaps what you need are some perspectives and tips to propel your performance.

TIPS

TECHNIQUES

TAKING A STEP BACK

#4: PRICE ACTION TRADING STRATEGIES

Ready for trading strategies? Here you go.

BAR PATTERNS

CANDLESTICK PATTERNS

PRICE WITH VOLUME

PRICE GAPS

PRICE ACTION WITH MINIMAL INDICATORS

#5: MORE RESOURCES FOR PICKING UP PRICE ACTION

Need more help?
This page is regularly updated with more tutorials/tips/strategies. So bookmark it, and share it with your friends!

Sunday 22 April 2018

Island Reversal Pattern Trading Strategy

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Island Reversal Pattern Trading Strategy (LEARN TO TRADE THE ISLAND PATTERN)

The island reversal pattern trading strategy as the name says is based on the Island reversal pattern.
It is a price action trading system.
Now, I don’t use this trading system but from my experience, it would be very rare to find this kind of pattern in the forex market because of its high liquidity.
But in the share market, you may have a chance of finding the islands reversal patterns.

What Is The Island Reversal Pattern?

Well, I’d better let the charts do the speaking and explaining.
There are two types of island reversal patterns, the bullish and the bearish pattern.
This is what a Bearish Island Reversal Pattern Looks like:
bearish island reversal pattern
This is what a Bullish Island Reversal Pattern Looks Like:
bullish island reversal pattern

How To Trade The Island Reversal Patterns

The trading rules are really straight forward.
Selling Rules:
  1. identify the bearish island pattern
  2. you can either use a market sell as soon as you see the bearish gap form or wait for that candlestick to close first then place a pending sell stop order as shown below.
  3. your stop loss should be placed on the other side of the bearish gap.
  4. for take profit, aim for 1:3 risk:reward or aim for the previous swing low.

island reversal  pattern trading strategy sell setup

Buying Rules:
  1. identify bullish island chart pattern
  2. you can use a market order or sell stop order as soon as the candlestick makes a bullish gap as shown on the chart below or wait for that candlestick to close and use a buy stop pending order.
  3. place your stop loss on the other side of the bullish gap.
  4. profit should be 3 times or more what you risked initially aim for the previous swing high
island reversal pattern strategy buy setup

Summary

As stated above, the island reversal patterns rarely form in the forex market but if you happen to see one, you may need to use this trading strategy to trade it.
One thing you will notice is that the stop loss distance are not “tight”.
The reason is because sometimes price has a tendency to move and fill the gap before going in the original direction and for that, the stop loss has to be placed on the other side of the gaps.

Monday 16 April 2018

6 Best Price Action Trading Strategies and How to Avoid Head Fakes

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At first glance, it can almost be as intimidating as a chart full of indicators.  Like anything in life, we build dependencies and handicaps from on pain of real-life experiences.  If you have been trading with your favorite indicator for years, going down to a bare chart can be somewhat traumatic.
In this article, we will explore the 6 best price action trading strategies and what it means to be a price action trader.

Contents

Chapter 1 - What Makes up Price Action?Chapter 2 - Price Action Trading StrategiesChapter 3 - False Signals
Chapter 4 - How to Protect Against Head Fakes

Chapter 1: What Makes up Price Action

Before we dive into the strategies, I want to first ground you on the four pillars of price action.
  1. Candelsticks
  2. Bullish Trend
  3. Bearish Trend
  4. Flat Market
If you can recognize and understand these four concepts and how they are related to one another, you are on your way.

Pillar 1 - Candlesticks

I have listed candlesticks here, because this is the most popular form of charting in today's trading world. Historically, point and figure charts, line graphs and bar graphs were the rave of their day.
Not to make things too open ended at the start, but you can use the charting method of your choice. There is no hard line here.
However, for the sake of not turning this into a thesis paper, we will focus on candlesticks. The below image gives you the structure of a candlestick. To learn more about candlesticks, please visit this article that goes into detail about specific formations and techniques.
Candlestick Structure
Candlestick Structure
The key point to remember with candlesticks is each candle is relaying information and each cluster or grouping of candles is also conveying a message. You have to begin to think of the market in layers.

Pillar 2 - Bullish Trend

This is a simple item to identify on the chart and as a retail investor you are likely most familiar with this formation.
A bullish trend develops when there is a grouping of candlesticks that extend up and to the right.
Think of a squiggly line on a 45 degree angle.
Bullish Trend
Make sense?

Pillar 3 - Bearish Trend

Bearish trends are not fun for most retail traders. Shorting (selling a stock you do not own) is likely something you are not familiar with or have any interests in doing. This formation is the opposite of the bullish trend.
This is where a security will trend at a 315 degree angle.
Bearish Trend

Pillar 4 - Flat Market

Flat Trend
Get ready for this statement, because it is big. The market in general terms is flat about 80% of the time for day traders.
Rarely will securities trend all day in one direction. You will set your morning range within the first hour, then the rest of the day is just a series of head fakes.

If you can re-imagine the charts in these more abstract terms, it is easy to quickly size up a security's next move.

Chapter 2: Price Action Trading Strategies

#1 - Outside Bar at Support or Resistance

For those unfamiliar with an outside bar, an example of a bullish outside bar is when the low of the current day exceeds the previous day's low, but the stock rallies and closes above the previous day's high.  The bearish example of this would be the same setup, just the opposite price action.
outside down day
outside down day
Therefore, it's not just about finding an outside candlestick and placing a trade.  As you can see in the above chart of Cambrex (CBM), it's best to find an outside day after a major break of a trend.  In the CBM example, there was an uptrend for almost 3 hours on a 5-minute chart prior to the start of the break down.
After the break, CBM experienced an outside down day, which then led to a nice sell off into the early afternoon.

#2 - Spring at Support

Spring at Support
Spring at Support
A spring is when a stock tests the low of a range, only to quickly come back into the trading zone and kickoff a new trend.  I like to use volume when confirming a spring; however, the focus of this article is to explore price action strategies, so we will zone in on the candlesticks.
The one common misinterpretation of springs is traders wait for the last swing low to be breached.  Just to be clear, a spring can occur if the stock comes within 1% to 2% of the swing low.
Trading setups rarely fit your exact requirement, so there is no point in obsessing a few cents.  To illustrate this point, please have a look at the below example of a spring setup.
Spring Example
Spring Example
Notice how the previous low was never breached, but you could tell from the price action the stock reversed nicely off the low and a long trade was in play.

#3 - Inside Bars after a Breakout

Inside bars are when you have many candlesticks clumped together as the price action starts to coil at resistance or support.  The candlesticks will fit inside of the high and low of a recent swing point as the dominant traders suppress the stock to accumulate more shares.
To illustrate a series of inside bars after a breakout, please take a look at the following chart.
Inside Bars
Inside Bars
This chart of Neonode is truly unique, because the stock had a breakout after the fourth attempt at busting the high.  Then there were two inside bars that refused to give back any of the breakout gains.  NEON then went on to rally almost 20% in one trading day.
Please note inside bars can also occur prior to a breakout, which strengthens the odds the stock will eventually breakthrough resistance.

#4 - Long Wick Candles

Long Wick 1
Long Wick 1
Long Wick 2
Long Wick 2
Are you able to see the consistent price action in these charts?  If not, were you able to read the title of the setup or the caption in both images?
Just having a little fun here, don't get sensitive.
The long wick candlestick is one of my favorite day trading setups.  The setup consists of a major gap up or down in the morning, followed by a significant push, which then retreats.  This price action produces a long wick and for us seasoned traders, we know that this price action is likely to be tested again.
Reason being, a ton of traders entered these positions late, which leaves them all holding the bag.  The counter pressure will be weak comparatively, so what can't go down must go up again.  This leads to a push back to the high on a retest.
That may have been a little tough to follow, so let's illustrate this point through the charts.
Long Wick 3
Long Wick 3
Notice after the long wick, CDEP had many inside bars before breaking the low of the wick.  After this break, the stock proceeded lower throughout the day.

#5 - Measure Length of Previous Swings

Measure Previous Swings
Measure Previous Swings
Have you ever heard the phrase history has a habit of repeating itself?  Well, trading is no different.
As a trader, you can let your emotions and more specifically hope take over your sense of logic.  You will look at a price chart and see riches right before your eyes.

Well, that my friend is not reality.  Did you know in stocks there are often dominant players that consistently trade specific securities?
These traders live and breathe their favorite stock.  Given the right level of capitalization, these select traders can also control the price movement of these securities.
What you can do to better understand the price action is to measure previous price swings.
As you perform your analysis, you will notice common percentage moves will appear right on the chart. For example, you may notice that the last 5 moves of a stock were all 5% to 6%.
If you are swing trading, you may see a range of 18% to 20%.  Bottom line, you shouldn't expect stocks to all of a sudden double or triple the size of their previous swings.
I fully understand the market is limitless; however, it's better to play the odds with the greatest chance versus swinging for the fences.  Over the long haul, slow and steady always wins the race.
To further illustrate this point, let's go to the charts.
Measure the Swings
Measure the Swings
Notice how FTR over a 10-month period experienced many swings.  However, each swing was on average 60 to 80 cents.  While this is a daily view of FTR, you will see the same relationship of price on any time frame.
As a trader, do you think it would make sense to expect $2, $3, or $4 dollars of profit on a swing trade?  At some point, the stock will make that sort of run, but there will be a more 60 to 80 cent moves before that occur.
Just on this one chart, I can count 6 or 7 swings of 60 to 80 cents.  If you can trade each of these swings successfully, you in essence get the same effect of landing that home run trade without all the risk and headache.

#6 - Little to No Price Retracement

No Price Retracement
No Price Retracement
Not to get too caught up on Fibonacci, because I know for some traders this may cross into the hokey pokey analysis zone.  However, at its simplest form, less retracement is proof positive the primary trend is strong and likely to continue.
little retracement
little retracement

The key takeaway is you want the retracement to be less than 38.2%.  If so, when the stock attempts to test the previous swing high or low, there is a greater chance the breakout will hold and continue in the direction of the primary trend.

Chapter 3: False Setups

Trading comes down to who can realize profits from their edge in the market. While it is easy to scroll through charts and see all the winners, the market is one big cat and mouse game.
Between the quants and smart money, the false setups are everywhere.
As a price action trader, you cannot rely on other off-chart indicators to provide you clues that a formation is false. However, since you live in the "now" and are reacting to directly what is in front of you, you must have strict rules to know when to get out.
For me, in lieu of a technical indicator, you can use time as a gauge.
Time
Just to be clear, the chart formation is always your first signal, but if the charts are unclear, time is always the deciding factor.
I did a study of all my winning trades and over 85% of them paid in full within 5 minutes.
If you have been trading for a while, go back and take a look at how long it takes for your average winner to play out.
Let's review a few head fakes to get a feel for what we are up against in terms of false setups.

Head Fake 2
Head Fake 3
I just showed you two examples of head fakes in both equities and futures markets.
In each example, the break of support likely felt like a sure move, only to have your trade validation ripped out from under you in a matter of minutes.

Price Action Flash Card

Now that we have covered price action setups and the fact there are considerable amounts of false signals, let's use this flash card exercise to test your muscle memory.


Chapter 4: How to Protect Against the Head Fakes
Protection
I could not leave you hanging with the feeling trading is impossible.
There are many ways you can protect yourself against head fakes. For starters, always have a stop in place to protect yourself against loss.
Next up, do not go hog wild with your capital in one position. Make sure you leave yourself enough cushion, so you do not get antsy with every bar that prints.
Again, let time play to your favor. I know there is an urge in this business to act quickly. However, there is some merit in seeing how a stock will trade after hitting a key support or resistance level for a few minutes.
If you think back to the examples we just reviewed, the security bounced back the other way within minutes of trapping traders.

Chapter 5: Price Action Traders

Price action traders are the Zen traders in the active trading world.
These people believe the human brain is more powerful than any machine.
Please do not mistake their Zen state for not having a system. The price action trader can interpret the charts and price action to make their next move.

Benefits of Price Trading

Benefit
For starters, there isn't as much information to process, so you can focus on the chart action.
Secondly, you have no one else to blame for getting caught in a trap. Don't bother emailing the guru with the proprietary trade signal that had you on the wrong side of the market.
The biggest benefit is that price action traders are processing data as it happens. There is no lag in their process for interpreting trade data.

Challenges

Challenges
Price action traders will need to resist the urge to add additional indicators to your system. You will have to stay away from the latest holy grail indicator that will solve all your problems when you are going through a downturn.
The real challenge is it's extremely difficult to trade purely on price. It's not something you can just pickup and start doing right away.
You need to think about the patterns listed in this article and additional setups you will uncover on your own as stages in your trading career.
First learn to master one or two setups at a time. Learn how they move and when the setup is likely to fail.
This my friend takes time; however, get pass this hurdle and you have achieved trading mastery.