What is confluence? Well, let’s find out here in this following example… What if you were watching the market and then you saw that price is heading to a resistance level and then you checked your Fibonacci retracement and it’s almost like a coincidence that the resistance levels are also at 61.8 Fibonacci level as well. And there’s even more…the overall trend is also down. So you have 3 things lining up for you, here they are again: the overall trend is down you have a resistance level that price is coming to and you notice that the price is also heading up to the fib level is 61.8 which coincides with the resistance level. What I’ve described above is an example of confluence. A confluence is a point/level in the market where two or more levels intersect each other (or come together) and they form a flash point or hot point or confluent point. Here’s An Example Of How I Trade With Confluence Let me give a real example of a trade that I took as I was writing this. This is the daily chart for AUDUSD. Have a good and close look at it. Here’s why I took […]
When the market is heading down, it forms downswings and upswings as it continually moves lower. Similarly, when the market is in an uptrend, it will form upswings and downswings as it continues to move up. The peaks that are formed by the upswings and the troughs that are formed by the downswings can be used to draw trendlines. And you need a minimum of 2 peaks to draw a downward trendline for a market that is in a downtrend and you need 2 troughs to draw an upward trendline for a market that is in an uptrend. How To Draw Downtrend Trendlines Now, for a market in a downtrend, you can connect the peaks with a line and that forms you downward trendline. What you are waiting for is for the price to come back up and touch that trendline and when it does, this could mean that a downswing will start and it may be the best time to enter a short trade. The use of bearish reversal candlesticks as trade confirmation is highly recommended with this trading method. How To Draw Upward Trendlines When the market is in an uptrend, connect 2 troughs and you have an […]
There’s a difference between chart patterns and candlestick patterns.Chart patterns are not candlestick patterns and candlestick patterns are not chart patterns: Chart patterns are geometric shapes found in the price data that can help a trader understand the price action, as well make predictions about where the price is likely to go. Candlestick patterns on the other hand can involve only one single candlestick or a group of candlestick which have formed one-after-the other in regard to how they form in relation to one another in terms of their body length, opening and closing prices, wicks(or shadows) etc. Not knowing what chart patterns are forming can be a costly mistake. If you are like that, this is your opportunity to get back on track. Why costly mistake? Because you are completely unaware of what is forming on the charts and you end up taking a trade that is not in line with what the chart pattern is signalling or telling you! These are the 9 chart patterns you will learn about today: Triangle chart patterns-symmetrical, ascending and descending (3 patterns) Head and shoulders and Inverse Head and Shoulders (2 patterns) Double Bottom and Double Top (2 patterns) Triple Bottom and […]
Nothing is more noticeable on any chart that supports and resistance levels. These levels stand out and are so easy for everyone to see! Why? Because they are so obvious. As a matter of fact, support and resistance trading is the core of price action trading. The key to successful price action trading lies in finding effective support and resistance levels on your charts. Now, in here, I talk about 3 types of support and resistance levels and they are: 1.The normal horizontal support and resistance levels that you are probably most familiar about. 2. Broken support levels become resistance levels and broken resistance levels become support levels. 3.Dynamic Support and Resistance Levels Now, let’s look at each in much more detail. Horizontal Support and Resistance Levels These are fairly easy to spot on your charts. They look like peaks and troughs. The chart below is an example and shows you to trade them: How To Find Horizontal Support And Resistance Levels On Your Chart If the price has been going down for some time and hits a price level and bounces up from there, that’s called a support level. Price goes up, hits a price level or zone where […]
When you have price moving across time due to supply and demand, then this creates trends. This section is a discussion about trends, how they form and how many types of trends and what kind of structure trends have. It is important for you to understand the structure of trends so you will not depend on any indicator to tell you if the trend is up or down because understanding what a trend is, the structure of a trend, what signals to look to tell you that a new trend may be starting and previous one ending is one key knowledge you require as a price action trader. And you only need to use price action to tell you if a trend is up, down or sideways. As I’ve mentioned above, there are 3 types of trends. In simple terms, a trend is when the price is either moving up, down or sideways. So when the price is moving up, it’s called an uptrend. When the price is moving down, it’s called downtrend. When the price is moving sideways, it’s called and sideways Now each of these 3 trend types has certain price structure about them that tells you whether […]
INTRODUCTION TO PRICE ACTION To really understand price action means you need to study what happened in the past. Then observe what is happening in the present and then predict where the market will go next. “Regardless of what you may think, all traders are forecasters, just like the weatherman.” The weatherman knows where the wind is blowing from, sees the high and low-pressure systems forming over the land, knows the temperature variation, cold front, hot front…you know what I’m talking about, right? Then what does he do? He will say something like “tomorrow, the weather in Edinburg will be mostly cloudy, slight chance of a shower and possibly sunny in the afternoon.” How does he know that? Well, from studying the past data and seeing what the current weather situation is at the moment (and these days, their prediction is more reliable due to advanced computer models and weather satellites in space). So traders are like that… If we get the direction wrong, we lose money, we get it right, we make money. Simple as that. So everything you are going to read here is about trying to get that direction right before you place a trade. Before you […]
The Horizontal Price Channel Forex Trading Strategy is a trading strategy that is based on a price structure called a trading channel and it is used by all levels of traders-including beginning Forex traders. To form a horizontal price channel, price action changes from a trending market into a market that is consolidating sideways. Price action begins to plot an obvious support level and a resistance level. Given that markets spend most of their time consolidating (called a trading range) in a horizontal price channel, learning to trade price channels is a great addition to the toolbox of any trader – swing trader, day trader, and even position traders. Keep in mind that on the trading time frame a trend may not be evident, horizontal price channels, as price traders from support to resistance and back again, can set up great trending trades on lower time frames. This is one reason why every trader should consider a multiple time frame trading approaches. What is A Horizontal Price Channel Traders should know what a trending market looks like – the price action pattern of higher highs and higher lows for an uptrend – reverse that for a downtrend. A horizontal price […]
The 123 Forex trading strategy is based on price action and normal Forex market structure that any trader should know. The 1 2 3 trading strategy is used as a continuation trading setup that is designed to take advantage of the trend of the market. The failure of the 123 trading strategy is also a trade setup but can also warn you of potential price consolidation in the market or even a trend reversal in whatever Forex pair you are watching. Keep in mind that even though it is a continuation pattern upon confirmation, it is also a reversal pattern from the short term trend direction. 1 2 3 Trading Pattern Formation In any trending market, there is a pattern of higher highs and higher lows. In order for the trend to the upside to remain active, each successive impulse swing must take out point 2 in the formation. When price surpasses the price at #2, the trader can use that as confirmation that the 1 2 3 chart pattern is present. This is a line chart that explains the concept of the 1 2 3 trading pattern and in this case, we are assuming an up trending market Let’s […]
A bull trap trading strategy looks to take advantage of traders trapped in a losing position. Just like the name says, it looks to trap bulls into making a trade and then slams price against them forcing them to exit their position. As the trapped bull traders exit, they sell their positions which helps to propel traders who are trading in anticipation of a bull trap, in the direction of their short trade. The bull trap trading strategy is a pure price action trading strategy and one I talk about in my free Forex trading signals that I publish every week. The post, What is a bull trap in Forex? will show you how to avoid getting trapped in these trades. What Type Of Pattern Do We Use For Bull Traps? I wrote a post on the patterns we are looking for to trade the bull trap trading strategy. Review that trading article but here is a quick visual on what we are looking for. I want to say that this version of trading bull traps will differ slightly than the common trading approach. This approach has a higher success rate (not fully backed by stats) and is easier to […]
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