THE POWER OF PRICE ACTION FOR DAY SWING TRADERS ~ mechanical forex trading system
The power of Price Action analysis is its capacity to predict the formation of major market patterns across all Time Frames. We can forecast movements that will take place the next day or even in the next few months and prepare our trading plans to take full advantage of them ahead of other traders.
On Monday August 10th last week, the EURO USD was expected to provide a Bull Candle to indicate a Rally to the Resistance of a Pennant that was being formed. This Rally would complete the Support boundary and the Pennant Consolidation itself.
DAILY CHART- EURO USD
A pair of Double Bottoms were already given in addition to the the break of the Downtrend Line. This suggested that another Bull Signal would be given/needed to confirm the start of the move to Resistance and that a potential trading opportunity to go long was near. Two days later, this took place...
DAILY CHART- EURO USD
...a strong Bull Candle Signal that offered traders up to 100 Pips of potential gains on that day. Not only would they have been able to predict this movement a few days in advance, they would have also seen this pattern in its early stages months ago in June this year...
DAILY MARKET UPDATE OF JUNE 23, 2015
(Provided to Clients)
As you can see, the bearish and bullish waves that were predicted have now taken place. Although the bearish wave was actually larger than expected, traders would still have expected this U-Turn and rally to take place to complete the Pennant and temporarily end USD gains.
With this strong Daily Candle now given, traders on the 4 Hour Chart or lower would have been entering to go long to take advantage of the expected rally higher. However, based on the 3-Wave Rule that the Methodology in the Manual explains, this would have been dangerous.
The chart below shows that the uptrend on this time frame was very strong and that a Bullish Signal was given at the Uptrend Line to indicate the continuation of this rally. This would have been a natural expectation since U-Turns at Trend Lines are common entry signals especially if they coincide with Support areas.
4 HOUR CHART UPTREND
Nevertheless, as pointed out to traders in the Daily Market Update, entry at this 4th Setup was risky and should not be done based on that 3-Wave Rule. And as can be seen in the chart below, this decision proved to be the right one...
4 HOUR CHART VOLATILITY AND TRADING LOSSES
This 3-Wave Rule is crucial to avoiding pullbacks and periods of volatility that lead to these unexpected reversals (Pages 35 & 36). It can be seen across all time frames with strong trends and explains a large part of why trends will either pause before continuing or change direction altogether.
Another important Price Action pattern that will prevent these types of reversals affecting your trades relates to Breakout Setups & Signals. We will often see a strong breakout candle from a Consolidation Setup that appears to signal the start of a strong move and large gains for us. However, if this Consolidation is too weak, the trade will not be successful despite the strength of the Breakout Candle. An example of this took place on the USD CHF Daily Chart where a very strong Bull Candle appeared to promise hundreds of Pips of profit in the days ahead. Again, the danger of this trade was pointed out in the Daily Market Update when that signal appeared...
DAILY MARKET UPDATE - AUGUST 4, 2015
...a warning that proved correct a few days later...
USD CHF DAILY CHART - SHARP REVERSAL
This reversal took out several Long Positions that were gradually being opened after that initial Bull Candle Signal. A similar scenario was seen on the NZD USD which was breaking below its Counter Trend Line (CTL) on the Daily Chart to resume its Downtrend. Despite the strength of this CTL that was being broken, the candles themselves were too weak to justify entry..
NZD USD DAILY CHART BREAKOUT
Yet, on the 30 Minute Chart, this appeared to be a strong enough Downtrend that would have led many to open short positions...
30 MINUTE CHART DOWNTREND
Once more, the market had other ideas due to the weakness of the Daily Chart`s Signals and what normally follows...
DAILY MARKET UPDATE - AUGUST 10, 2015
NZD USD DAILY CHART PENNANT
30 MINUTE CHART REVERSAL
The failure of these last 2 setups to lead to breakouts highlights the importance of Section 5 in Part 1 of the Manual, applicable to both Trends and Consolidations...
With the power of this Price Action Trading Manual in your hands, you will sidestep these traps of the Currency Market and focus on the Setups that offer the greatest chance of profitability. You will be able to identify the strongest Setups and Signals that lead to large breakouts...
AUD NZD BREAKOUT SETUP
...setting profit targets that maximize on the Pips captured...
...exiting comfortably ahead of sharp market reversals...
...avoiding moments of regret from holding trades longer than we should...
As you go through the Manual and begin to apply it to your trading, you will be the one in control of the Forex Market. With the Daily Market Updates and Videos that provide in-depth analysis, forecasts and explanations of market moves based on the theories and techniques never before seen in this book, Profitability and Long-Term Wealth will be yours.
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