Transcription
Price action is a representation of price movement of every instrument. If you want to dissect the information that the candles, the price action, is telling you; if you want to identify the right places on a chart to enter, you need to be aware of three important factors. These three factors you always want to keep in the back of your mind every single time you're doing your analysis on a price chart.
Number one: What is the overall market structure? Number two: Do I have a key entry point? Because it is a significant place where most of the high-profit setups will form, and is there a high-probability setup? How is the price action reacting? What is the behavior at the key entry point? So when I'm observing structure like this, I have to go through all these factors, ask myself a couple of questions. Notice I have channels drawn on a chart, and this is pivotal because I want to follow the trendline rule. Because there is a rule that says after there's a break, I expect for price action to create new extremes. So we can see: dungeon working, over, breaking low, up to working higher, break new high, down to working lower, break new low. And here we can see that the price action is moving in pairs of twos, and this is important because the market never goes straight up or straight down. In these V-shaped formations, there is always some form of a correction, and the market likes to move in pairs of twos. If something fails once, traders will not give up; they will try to do it again. So this is why the two-legged pullback is so powerful.
So here we have interpretation of the two-legged pullback. Price action is, however, trending back above the EMA now. I have only one indicator; the supportive indicator is the supportive EMA 12-marks bench moving average. And since we're above the EMA, this is right now telling me, okay, the structure is more bullish because sellers, they never reverse the market. We're back above the EMA; this is the new high where I am going to reset the count from, because right now I'm thinking more bullish. And notice what we have: new high, first time to go long, trigger below pullback, second attempt to go long. If there's going to be a break above this tier, one single bar, you may held, ones emailed twice. Remember, the trader will, we need to get a new high, and because we are above the EMA, this is confirming the bullish bias, and we have a great second entry long that is also a failed second entry short. Counting from this low, this is the lowest level of the correction. I forced them to sell, pullback, second attempt to sell, failure. So two high-quality setups in one, and the market keeps working higher. And notice the price action keeps trending higher.
So what is the price action telling me? Well, remember what is the market structure? Since I can see breaking new high, I would expect a stronger reversal. Didn't happen. The push above, game may confirm, okay, you have bullish bias. So right now I expect stronger bullish bias because price action keeps working hard regardless of the first channel getting a break in new extreme. So this is what I'm going to do: redraw another channel, because you always want to find a channel. I'm also looking for some bigger pattern, because this feels like there's a bigger trend in play, but I don't have that much information just yet. So I'm just going to follow the shortening channels as the price action keeps developing. You don't have to find your channel right away; you can wait for price action to develop more. And with more price action, it is much easier for you to collect the information here, to collect the information there, and put the pieces together and locate the right channel. Okay, we are not full at the EMA; the price action is developing; we're breaking the channel, so I expect for price action to create new extreme. Remember to turn louder; we talked about this at the very beginning, so I won't take the two-legged pullback because I have the context, which is bullish. I have the key entry point, EMA, but what is the behavior? I only have first entry long; I want to see the two-legged pullback. Okay, the two-legged pullback would be the high-profit setup. Can we get it? And we already got the first entry long; they already created new extreme. Okay, so no big deal; I will just wait for another chance to enter, for another correction. Price action keeps developing; we have a new extreme, so naturally expect stronger correction. I'm drawing the shortened channels also for these corrections, okay, because there's a trend being present, but there are also small trends within every single main trend. So always hold the trend; I really will break new extreme, and price action is reversing above EMA. This is pivotal; this is resuming the bullish bias again, and this confirms our initial analysis that there may be why the channel.
So how this structure looks, if I'm going to look for channel like this, note this: I have so much MTM at the top; you already have a small break new high, so this is not really helpful, but this looks to me like a spike and a channel that is developing. So what I'm going to do: I'm going to connect the first two swings, something like this. I'm just going to play around with it so I get the most confirmations. We're getting confirmation here, confirmation here, and here comes the sweet part. If I'm going to copy it, I'm going to put it at the top. Notice the confirmation at the top; notice market geometry is real; notice these highs, how they are working higher, allowing me to spot this channel here and here. So this is telling me that this spike and channel is valid, and there's always a reason to practice one; there are always channels being present on the chart. Trend lines are not subjective; that doesn't mean that you will find the right trend line every single time, or sometimes you may be way off finding the right channel, but it doesn't mean that the channel is not there; it's just much harder to find. So we have new low; this is the lowest level correction, just like here I used to reset the count. So this is the low I'm going to reset the count. We have first attempt to sell; we're pushing above EMA, so what am I expecting? Failed second entry short, because I've structure, it is bullish; I have key entry point; I'm at the EMA, and I have the channel, and I expect the second entry short failure. We have a failed second entry short, but it is way too far from the EMA, and this is why I use EMA; it helps me to measure distance. If it's okay to go long this time, it worked, but next time it will take it, it will not work. So even though it's the first second entry short, I cannot take micro double tap resist account in price action. So I'm gonna use the second tap, the double tap, to start my account over again. I have first entry long; EMA is holding, confirming the bullish bias, and notice what we have: we have a second entry long, but this is not the only information that price action is giving me. I can also see that we have triple test forming: one bottom, double bottom here, prices came back and tested it again. So you have second entry long, and we have triple test. The first thing I'm aware of where the second entry long triggered was this horrible doji bar, so I cannot go long above this bar, but once I see this strong bullish bar, I can enter this as a double bar entry. If I'm gonna get a break above this bar, I can consider this triggered, drop my limit order, and put my stop loss one tick below the single bar. It is a little bit more congestive; I try to take this setup myself, but I use my limiter two, three ticks back due to the congestion, and it never came back, but you can see structure clearly bullish. What is the key entry point? You got the main channel, and you got the EMA; you got the triple test, and what is the behavior? The behavior is that the buyers are coming to the market because EMA is not letting price action close lower. Okay, this is the correction phase; attempt to create new extreme. Are you concerned that you don't have full new low for the downtrend? No, we keep drawing this downtrend, same thing I'm gonna do here; that's not the big of a deal because there's a temp renewal, an attempt is considered for us enough because the triple test is coming into play, and buyers deal this price level worthy. So the new low cannot be made due to the overwhelming of buying pressure. So it's a great high-priority setup as well, but you will have to be fast, and more importantly, there was no pullback with the limit order, unfortunately. I think you have to use due to the congestion, and at this point the trend is much stronger. So for this reason I can be taking more aggressive setups, and you can see price action keeps developing new high. So I'm going to redraw the downtrend again: break new extreme, great; I have a breaking low, and you have to like a pullback. So you can already see how price action works during a bullish trend: there's a push, fade; there's a correction phase. I'm not particularly panicking once I miss something, and I can see price action working higher; that's okay; I'm just gonna wait my turn; I'm gonna wait for price action to pull back all the way to the key entry point in the form of a two-legged pullback, and this is exactly what is happening: new high for entry long, break lower; we're interested in buying for entry long, downtrend in play, second entry long, and you can see that we have the two-legged pullback, and this is exactly what I'm looking for. Just gonna quickly go here: we have another first leg down, break, second leg down; we can also see the gun like a first leg here, and the second leg was much shorter. So there are variations of two-legged pullback; here there is not such a clear two-legged pullback, but it's okay; just because something doesn't happen every single time, that doesn't mean they're not repeatable patterns. Nothing in trading is 100% repeatable; you're looking for clues; you're looking for similarities; you're looking for patterns that tend to repeat over and over again on a long enough statistical basis. So nothing is 100%; you don't have to have the exact repeat pattern, but you're finding the nuances that help you find consistency. If a new high for entry long, pullback, second entry long at the key entry point at the trendline, so it doesn't get any easier; great high-profit setup, great second entry long, T1 signal bar. Remember market structure: Factor one, clearly bullish, series of higher highs. What is our key entry point? The trendline and the EMA, and the behavior of the market is telling me, okay, two-legged pullback, create new one single bar; this is a great textbook second entry long, but here's a little kicker: it was right around the news, which means, me personally, when I was watching this, I was not taking a setup here; this was a big bummer because it doesn't get any easier. And also you can see we have another high-quality setup, why? Because it's a high-low confirmation setup of this two-legged pullback, high-low confirming the two-legged pullback, and we are still at two key entry points and still off the main trendline, but because we were exactly around the news, unfortunately I skipped, but because it's such a great setup, you know, actually you can take the risk on a higher low because it's telling you that the news are not that significant, and high-low is always safe confirmation setup, despite the fact that we have news, you can actually risk it right here on the high-low, and market continue working higher. New high for entry long, second entry long, no trigger, inside bar, far away from EMA. Okay, I'm not interested. You can see the second entry long never triggered, install the inside bar, and overall it is far from the EMA. I'm gonna redraw and downtrend, and notice what I have: first leg down, second leg down, once again, a doji entry points; the signal bar is fairly doji-ish, but the tail at the bottom is telling me if the bar looked very bearish and reverse strongly bullish. Am I to worry about this? Not really, because this is still decent bullish momentum bar; great second entry. Actually, this is a double trap because the micro second entry long form, bad double trap form when something is wrong with the second entry; it's either far from the EMA, it's too congested, the dungeon is in play, so all the early buyers will get trapped, but all the people who are selling the failed entry long against the trend, they're gonna get trapped as well. Either way, you can see two key entry points and visual two-legged pullback. If something looks like it's like a pullback, you can trust it. Dungeon has a break new extreme, great high-profit setup, and basically a textbook repeat pattern. What's happening here? You put your establish one thing below the single bar, so you're not panicking. Don't ever move your stop-loss thinking, because sometimes traders, they see this bullish bar and they think, okay, I'm gonna get stopped; they're very positive, and they see this bearish bar and suddenly it, it shifts, and they start doubting themselves. This is where trading is manual; a lot of times traders, this is very common, traders will actually enter the good trade, but there are many demons will actually talk them out of this, just because the market is not rallying off exactly within one second as you expected; that doesn't mean that your analysis changed. You have to go through the thought process why you like the trade in the first place; how is the key entry point; how's the single bar. So just because market reversed here, remember you keep your stop loss one tick below the single bar, so you're not really worried; you cannot close it prematurely. If you find yourself closing trades prematurely, you haven't accepted the idea that the trade may be a losing trade, and you need to accept it because on every single trade you may pick a wrong one; market can reverse; it can happen; nobody can predict the future, and you have to accept the losing trade; never move your stop loss; never exit early. You can exit early once there is a very long congestion, but this is not the case; market continue working higher. I'm going to zoom back a little bit so you can see the overall structure; you can see you always wait for price action to correct, for the correction phase to end; you're going through this checklist, and you want to take the high-probability setup; you can see at the key entry point, this is the place where all the high-priority setups will form, and this is where you want to be buying; it is counterintuitive because you're buying low; you're not buying high; you are buying low, but you're trusting the price action rules, and you can see the trend is losing steam; one trade already asked me why did I go along with this double check; I actually sell myself for quick easy scalp; am I too worried about loss of momentum? Not really, because this was a double trap, and double trap basically is like a high-low confirmation tip. If this was ordinary second entry long, I would probably skip; I'll be probably afraid of the loss of momentum, but we can see each bullish push fade is smaller and smaller; it is losing steam; we are only hacking this trendline so we can roll over. So for this reason I'm not thinking about buying any more because we're about to roll over; we're only hanging the trendline; we can't even make it to the midline, not even, you know, a little bit higher; price action is working lower now. What am I thinking? Remember the trader rule: after a break, we expect for price action to create new extreme for this main uptrend. So I'm thinking about push-up of EMA and a hollow or failed second entry short, preferably first secondary short because the downtrend is still in play. Okay, we're backlog EMA; I'm not buying as long as we build EMA, and the dungeon is still in play; I cannot be buying just yet. Also you can see we have first leg down, so the bears probably have this target, the second leg down, and once I see flat EMA and consistent price swings up and down, up and down, this is where I already tried to predict where the key level is going to be, so I'm going to put it at the top, train range. Am I playing this is a train range? No, I'm not selling; might be buying at the bottom because you trade it up, but this option needs to get new high, so I'm just using this to let me know when it's okay to go long, break new extreme, and all downtrends reach new extreme: our first one, this one, and even the secondary one, and you can see visual two-legged pullback, and notice what we have: triple bottom, one bottom, double bottom, triple bottom. Now I like to call triple test mainly a local price action setup more supportive, so I wouldn't really call it a triple test; this is more like a triple bottom, but you can definitely go long here because everything has a new extreme, two-legged pullback, you're right at the support where the buyers are coming to the market, key and triple. Once again, structure right now is more train range, but it's with the bullish bias; you got the key entry point; you get the support, and behavior is good, two-legged pullback, new low and decent enough bar. If you're unsure, you want to wait for high-low above EMA or failed secondary short; we have high-low, but it's below EMA, so I can't really take it. By the time I get a full second entry short, once again, super far from the EMA; I still expect new high of this uptrend; you cannot be selling because this option is to get new high. You have been trying hard the entire day, so even if you're playing in the Thai channel, you cannot be selling; always respect the overall bullish trend, and we finally created a new extreme for the main uptrend, but price action is not behaving that way, and we continue working out. So this is where I decided to widen my channel a little bit like this, because this is a lot of times how strong trend will continue: you have a break new high, but price action is rarely correcting, and now we have another two-legged pullback. Problem here though is that we're not full at the EMA; EMA, I can't really take it; sometimes they work, yes, but sometimes they fail, and you don't want to be guessing; you don't be gambling; you want to take something that you're comfortable with. So if you're more, you know, taking risk here, you can take the second entry long, but I really recommend the patient because there's a lot of times for double trap forms; it is right off the wider channel, so you know why not, but it's a little bit more aggressive. Okay, now we're way too far to decide just the first entry long are interested; now we have too much congestion by bar, so I'm just waiting price action reverse is lower. Okay, this is interesting, and this is where the structure is not clear; this is where the three factors are not being fulfilled because if I'm going to zoom back, our main option has a breaking high, and we're right now going choppy, so I cannot really put the finger on the price action now. This is where you basically have to be honest, objective, and admit the fact that you know it's not too clear what's gonna happen; it was clear all the way up; everything here is clear, perfect price action, and now it's not that easy to decipher what the price action is telling me. It will resume; there's going to be once again easy pattern, but I want to be sure. We have a hollow here, but the hollow is double bar entry, you know, not the clear; don't really feel that great about this; I was thinking that the market will go higher; I was looking for a higher low above EMA because the second entry long with blue EMA can't take it, but we never push the buff EMA with higher low, and market continue working lower. So I'm going to redraw shorten downtrend, okay, and finally the structure is getting better; market structure is a downtrend; key entry point, we have the trendline; behavior, I'm looking forward to two-legged pullback, and we only have first entry short, another first entry short, two legs to an extreme, and market is reversing. So this entire dungeon was fairly strong; EMA pointing down, but no way for me to capitalize, only just first entry short, first entry short, you know, first entry short, unfortunately, camera the entities, first leg down, break, second leg down, market continues working here. I'm going to redraw short and uptrend once again; no pullback to the key entry point, so I can't really go long; I have to respect these areas where nothing is happening. We have a small break new high, but there is in price action a little bit new when you want. If I can see massive blue spike and I can see breaking new high and we didn't touch EMA prior to making breaking high, this is a lot of times resulting into additional bullish continuation because this was such a massive spike and you never touch the EMA, so buyers are not considering this new high valid and they want to see kind of like a legit push. So we have first entry long, failed second entry long, but everything is so sticky. Can I get a hollow? I can't get hollow; we have a legitimate new high; market reverse lower and reverse back up, so it is not that clear; price action keeps working higher; we have first entry long; we have a second entry long, but it's too far up; almost double top; it's way too wide; you can see the body is so far from the EMA; only the tail touch; you cannot enter. When I was watching this, I was thinking about possible wider uptrend like this, but the problem is we don't have third swing confirmation. So when I don't have third swing confirmation and the option is not weak, we still have decent bearish pullbacks; I would like to see some confirmation, so I've had the second entry long form close to the EMA, so you have room to get out before reaching this swing high. You can consider, but not like this, especially since the uptrend is not fully confirmed; market keeps reversing; I'm gonna redraw the shortened downtrend, but if only first entry short, and now it's getting way too late, and the market is closing.
These are the three main important factors that you always want to combine; you always want them to be met; you don't want to be guessing; you don't make gambling; you have to remain objective so you understand what exactly is happening. Of course, there are other ways how to read the price action; there are more advanced setups, but it's way more for advanced traders. These are three main factors that you need to master as a developing trader. Good luck with your trading.