Revisiting 'Price Action'

This is a discussion on Revisiting 'Price Action' within the First Steps forums, part of the Reception category; Nunrguy, thank for this, I am finding it really useful as I am sure others are, especially as I am ...

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Old Dec 2, 2010, 12:10pm   #22
Joined Feb 2008
Re: Revisiting 'Price Action'

Nunrguy, thank for this, I am finding it really useful as I am sure others are, especially as I am studying the Jankone thread and believe it is the right system/method for me.

However can I check I understand you. In the first graph, if we take a 'dumb' entry (on break of bottom of pin bar) we need to look at lower time frame to see momentum down and confirmation (what exactly would that look like?). But for a smart entry we can just stay on this time frame as we are waiting for the next candle to confirm reversal?

On the second graph, are you saying as the market came off, the highlighted levels are where our stop should be moved too?

Hope that makes sense. Thank for your time.
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Old Dec 2, 2010, 1:10pm   #23
 
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Re: Revisiting 'Price Action'

nunrgguy started this thread That's because I've not got to that bit yet.

If we're considering trading based on a four hour TF wait until price makes a new low.

Where that low is located may well be where someone who trades from a daily or weekly perspective is already holding profit from.

Wait to see that the new 4 hour low really is a low. i.e. wait for at least another bar, preferably also observing some long momentum.

Some considerable money is going to have to stop the market stone dead, turn it around and move it in the other direction for four whole hours+

Now, at some point what do traders tend to do? They tend to move their stops to break even so that they feel safe. This occurs after they they have some profit on the table, i.e. price has moved 'enough' beyond their entry. So at that price we know there's likely to be a lot of sell orders in the market. For the market to continue going long, buyers will need someone to buy from and the nearest price known with lots of sellers is where?

If we are looking to enter a '4 hour trade' long where MIGHT price go to as a rough target? Buy orders sitting somewhere in the market would be needed for the short sellers? Where will they be? Where daily traders who were short moved their stops to b/e? Where weekly traders moved their stops?

We need someone to buy from to go long, and there are all the juicy sell orders at the place where break even stops will be. So, look for pullback to that general area. If 1hr chart for our entry is our preference, that is what we use. If price pulls back and seems to turn before reaching that area, it may be the pullback we are waiting for BUT it is a risker trade.

If price doesn't pull back to that first area, sometimes it does blow straight up (more momentum, the pull back will likely be to the next area that stops will have been moved up to, keep in mind all the time, "Where would I move my stop?" because that's where you are looking to enter.

Some traders will want some kind of bar confirmation from the smaller time perspective and therefore use stop orders to enter (I do this, amateur hour I know), others will target the price with limit orders as it's still coming down.

After entry we DO NOT MOVE OUR STOP, if we do, someone is likely to do exactly the same thing as us to us. We enter on the 1 hour? OK then traders who perhaps trade on 5 minute know exactly where we have entered, moved our stops to and look to capitalise on that.

At any point in time, for the market to move in any direction there has to be both buyers and sellers as well as an imbalance in buyers and sellers.

Where to place our stop is a personal thing but again I don't necc. recommend the usual practice of putting them a couple of pips below the low. How often does that low get spiked out one or two time periods later, again for the same reasons already mentioned? Maybe a volatilty based stop is a better idea?

BTW by no means am I saying that you can't bottom pick and trade a pin bar itself but know what went on INSIDE the pin bar because that is where the entry was from that time perspective.

You don't even need to know they why's and wherefores which is why I didn't start with them, it's enough to say, look for low on 4hr, see it go up a bit, look for pullback on 1 hr or less, see that go up a bit, go long. BUT knowing where price is likely to pull back to will help stop a few whipsaws that you will otherwise get.
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Old Dec 2, 2010, 1:26pm   #24
 
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Re: Revisiting 'Price Action'

nunrgguy started this thread [Nunrguy, thank for this, I am finding it really useful as I am sure others are, especially as I am studying the Jankone thread and believe it is the right system/method for me.

However can I check I understand you. In the first graph, if we take a 'dumb' entry (on break of bottom of pin bar) we need to look at lower time frame to see momentum down and confirmation (what exactly would that look like?). But for a smart entry we can just stay on this time frame as we are waiting for the next candle to confirm reversal?

On the second graph, are you saying as the market came off, the highlighted levels are where our stop should be moved too?

Hope that makes sense. Thank for your time.]



Well hopefully what I'm now showing is that you don't move your stop. Where you place your stop is where you want to get stopped out yes? The only time you should really be moving your stop is if you think 'Ive made enough on this trade, don't think it will go much further but I'll put my stop here and see if we can eek a bit more out of it'....Greedy so and so
What makes you move your stop? Fear of losing your profit? Take your profit then.

Momentum is a subjective thing but consider inside a four hour pin bar signalling a short, does it contain 1 large 15 minute up bar followed by three small down 15 minute bars.
Does that look like downward momentum? It looks like a pin bar but it's fooling you.
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Last edited by nunrgguy; Dec 2, 2010 at 1:45pm.
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Old Dec 2, 2010, 2:59pm   #25
 
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Re: Revisiting 'Price Action'

nunrgguy started this thread I used to move my stop to B/E for 'safety'. I had a lot of 1 and 2 pip trades for my time.

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Old Dec 11, 2010, 12:54pm   #26
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Re: Revisiting 'Price Action'

I move my stop loss to break even after it has moved 12pts in my favour and I usually get stopped out, only for the trade to shoot off in my direction *sigh*. However, I believe this is the best approach to take because its a risk free trade. By not moving my stop loss to breakeven, I run the risk of turning a winning trade into a losing trade, which is sooooo bad psychologically for me.

You mentioned before that you used to move your stop loss to breakeven, but now you dont. May I ask why? - had you found out that it was in fact more profitable not to move it?

Thanks
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Old Dec 11, 2010, 1:23pm   #27
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Re: Revisiting 'Price Action'

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Originally Posted by Pi3141 View Post
I move my stop loss to break even after it has moved 12pts in my favour and I usually get stopped out, only for the trade to shoot off in my direction *sigh*. However, I believe this is the best approach to take because its a risk free trade. By not moving my stop loss to breakeven, I run the risk of turning a winning trade into a losing trade, which is sooooo bad psychologically for me.

You mentioned before that you used to move your stop loss to breakeven, but now you dont. May I ask why? - had you found out that it was in fact more profitable not to move it?

Thanks
The psychological part of it depends on how many losers you have over a given time. If you have good wins, it becomes easier not to move your stops to B/E.

I get a "feeling", when the trade starts to retreat, whether the trade will turn out to be a loser and, quite often, decide to cut it. I consider that trade to be a loser, even though I managed to close while in profit, even at B/E. Sometimes, I wish I had not done that but, in general, I believe that the market tries to take out stops in both directions. That, really, is all that the retraction, pullback, area--call it what you will--- is.

Your job, if you are not a scalper, is to get your trade out of that area. IMO, the only way to do that is to cut trades as soon as they reverse. Whether you open in the reverse direction afterwards depends on what your view of the longer trend is but I try not to change my original view. If I am wrong, then I try to keep my losses small and better luck next session.
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Old Dec 11, 2010, 1:24pm   #28
 
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Re: Revisiting 'Price Action'

Pi, an option you could try is to close half your position once price has moved in your direction the same amount of pts as your stoploss, i.e. if stoploss is 12 points, close half at +12. This ensures a risk-free trade but gives price much more room to re-test your entry.
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