The 3 step Price Action Trading Strategy ONLY Top 5% use...

Summary

This video script outlines a simplified three-step process for mastering price action trading, which involves trading without indicators by focusing on price movements. The steps include identifying trends and market structure, preparing and predicting potential trade setups, and taking action with confidence by entering trades at key levels with proper risk management. The speaker emphasizes the importance of trading with the trend, using support and resistance, and employing candlestick patterns to confirm trade entries, ultimately aiming to achieve profitable trades with a favorable risk-reward ratio.

Takeaways

• 📈 Price Action Trading: The script introduces price action trading as a method of trading without indicators, focusing on price movements and patterns to identify profitable trade setups.
• 🔍 Identifying Trend and Structure: The first step in trading is to identify the trend of the market and the key support and resistance levels, which help in determining entry points for trades.
• 📉 Trading with the Trend: It's crucial to trade in the direction of the trend, as trading against it can lead to significant losses if the market moves against your position.
• 🤔 Preparing and Predicting: After identifying the trend, traders should wait for confirmation signals, such as candlestick patterns, before entering a trade to ensure higher probability of success.
• 🕊️ Doji Candlestick: A doji indicates indecision in the market, often signaling a potential reversal in the trend, which can be a sign to prepare for a trade.
• 🐻 Bearish Engulfing Pattern: A bearish engulfing candlestick pattern suggests strong selling pressure, indicating a likely continuation of a downtrend and a potential entry point for a sell trade.
• 📌 Stop Loss Placement: Proper placement of a stop loss is essential to limit potential losses and give the market some room to move without triggering the stop loss prematurely.
• 💰 Take Profit Strategy: Setting a take profit level based on the market's previous behavior and key resistance levels can help maximize profits when a trade goes in your favor.
• 🚫 Avoid Overly Tight Stop Losses: Placing stop losses too close to the entry point can result in being stopped out by minor market fluctuations, missing out on potential profitable trades.
• 🌟 Importance of Market Structure: Understanding and utilizing market structure in determining entry and exit points is fundamental to successful price action trading.
• 🏆 Successful Trading Outcomes: The script emphasizes that with proper identification of trends, patterns, and market structure, price action trading can yield successful and profitable outcomes.

Q & A

What is price action trading?

Price action trading is a method of trading financial markets without the use of indicators, focusing on the price movements and patterns to find profitable trade setups. It involves analyzing support and resistance levels, candlestick formations, trend lines, and chart patterns.

Why is it important to trade with the trend in price action trading?

Trading with the trend is important because it increases the probability of successful trades. Going against the trend can be risky, as the market might move against your position and potentially wipe you out if the trend is strong.

How do you identify the trend in price action trading?

The trend is identified by observing the price movement and looking for patterns such as higher highs and higher lows in an uptrend, or lower highs and lower lows in a downtrend.

What is the significance of structure in price action trading?

Structure refers to the key levels or zones on the chart that have historical significance due to previous price action. Identifying and understanding these levels can help predict future price movements and potential reversal points.

Why is it necessary to wait for confirmation before entering a trade?

Waiting for confirmation, such as a candlestick pattern or a chart pattern, ensures that the market is showing signs that align with your trade setup. This reduces the risk of entering a trade prematurely and increases the likelihood of a successful trade.

What does a doji candlestick indicate in price action trading?

A doji candlestick indicates indecision in the market. It suggests that the price is likely to reverse direction, as it has tested a key level and is showing no clear direction, often preceding a trend reversal.

Why is it important to place the stop-loss order above a key level when selling?

Placing the stop-loss above a key level when selling ensures that if the price reverses and moves up, breaking the key level, the trade is closed out with minimal loss. This is based on the understanding that if the price breaks above the key level, the trend may have changed.

How should you determine the take profit level in price action trading?

The take profit level is typically determined by looking at the most recent significant low in a downtrend or the most recent significant high in an uptrend. This is based on the assumption that the price will likely retrace to these levels before continuing in the established trend direction.

What is the importance of the breathing room for a stop-loss order?

Giving the stop-loss order some breathing room prevents the trade from being stopped out by minor price retracements. It allows for some natural market volatility without closing the trade prematurely.

Why is a risk-reward ratio considered when placing a trade?

A risk-reward ratio is considered to ensure that the potential profit from a trade is worth the risk being taken. It helps traders to avoid trades with a low potential return relative to the potential loss, aiming for a ratio that is favorable, such as 1:3 or higher.

How can you identify a potential reversal from a downtrend to an uptrend in price action trading?

A potential reversal can be identified by observing a new higher low in a downtrend, followed by bullish signals such as a bullish engulfing candlestick. This indicates that buying pressure is increasing and the market may be preparing to move upwards.

Outlines

00:00

📉 Mastering Price Action Trading

This paragraph introduces the concept of price action trading, which is trading without indicators by focusing on price movements. The speaker shares a three-step process to simplify this method. The first step is to identify the trend and structure, exemplified by analyzing AUD/USD in a downtrend with lower highs and lows. The second step is to prepare and predict, which involves waiting for signs like candlestick patterns that confirm the trend's continuation. The third step is to enter the trade with action, placing the stop-loss above a key level to limit potential losses and ensuring there's room for price re-testing. The summary emphasizes trading with the trend and using price action tools like support/resistance, trend lines, and chart patterns to determine entry and exit points.

05:00

🚀 Executing Trades with Proper Stop-Loss and Take-Profit

The speaker continues to elaborate on the trading process, focusing on the importance of placing stop-loss and take-profit orders correctly. They explain that the stop-loss should be set above a key level to avoid being stopped out prematurely and that it should have some 'breathing room' to account for potential price re-testing. The take-profit is placed at the most recent low, or the last point where the price stopped, to maximize potential gains. The paragraph also discusses the importance of trading with a favorable risk-to-reward ratio, aiming for at least a 1:3 ratio, and provides examples of how to identify strong support and resistance levels to make informed trading decisions.

10:01

💹 Transitioning from Downtrend to Uptrend in Price Action Trading

This paragraph discusses the transition from a downtrend to an uptrend in the context of price action trading. The speaker identifies a key support level where the price is likely to reverse, using the recent formation of a higher low as an initial sign of a potential trend reversal. They highlight the significance of a bullish engulfing candlestick as a confirmation of buying pressure. The speaker then explains how to enter a buy position with a stop-loss set below the last higher low and a take-profit placed at a previous resistance level. The summary underscores the importance of market structure in determining entry and exit points and the strategy's effectiveness in identifying trend changes.

Keywords

💡Price Action Trading

Price action trading is a method of trading financial markets by analyzing the price movements of assets without the use of technical indicators. It focuses on raw price data and patterns to identify potential trade setups. In the video, the speaker emphasizes the simplicity and effectiveness of this approach, using it to demonstrate how to identify trends and trade setups based on support and resistance levels, as well as candlestick patterns.

💡Support and Resistance

Support and resistance are concepts used in price action trading to identify price levels at which the asset's price tends to stop and reverse. Support is a price level where the price is more likely to find buyers, and resistance is where it is more likely to find sellers. In the script, the speaker uses these levels to determine entry and exit points for trades, such as identifying a downtrend by observing lower highs and lows and using a broken support level as a potential entry for a sell position.

💡Trend

A trend in trading refers to the general direction in which an asset's price is moving. It can be upward (bullish), downward (bearish), or sideways (ranging). The video script explains the importance of identifying the trend to trade in the direction of the prevailing market movement, as seen when the speaker identifies a downtrend in AUD/USD and suggests selling in line with that trend.

💡Candlestick Patterns

Candlestick patterns are graphical representations of price movements within a specific time frame and are used to predict future price movements. The script mentions 'doji' and 'bearish engulfing' patterns, which indicate indecision and selling pressure, respectively. The speaker uses these patterns to confirm trade entries, such as waiting for a bearish engulfing pattern to confirm a sell entry after a price retests a support level.

💡Chart Patterns

Chart patterns are formations on a price chart that can suggest future price movements based on historical data. The video does not explicitly define chart patterns but implies their use in conjunction with price action trading. The speaker refers to the importance of waiting for signs of potential trend reversals or continuations, which could be indicated by chart patterns.

💡Entry and Exit

Entry and exit points are critical aspects of trading strategies, defining when to initiate and close a trade. The script provides a detailed explanation of how to determine these points using price action, such as entering a sell position after a bearish engulfing candlestick pattern and placing a stop-loss above a key level to limit potential losses.

💡Stop-Loss

A stop-loss is an order placed with a broker to sell a security when it reaches a certain price, typically used to limit an investor's loss on a position. In the video, the speaker explains the importance of placing a stop-loss to protect against unfavorable market movements, emphasizing the need to give it 'breathing room' to avoid being stopped out prematurely.

💡Take Profit

Take profit is the level at which a trader decides to sell a security to realize a profit. The script discusses setting take profit levels based on the most recent low or a previous resistance level, illustrating how to use historical price action to determine where to exit a trade for maximum profit potential.

💡Breathing Room

Breathing room refers to the space or buffer given to a stop-loss order to avoid being triggered by minor price movements. The speaker uses this term to explain the importance of not placing stop-loss orders too close to the market price, to prevent being stopped out by normal market volatility.

💡Risk-Reward Ratio

The risk-reward ratio is a comparison of the potential risk of a trade to the potential reward. It is used to evaluate the attractiveness of a trade. The video script mentions a preference for trades with a ratio of at least 1:3, indicating that the potential profit should be at least three times the potential loss, as a measure to ensure trades are worth taking.

💡Market Structure

Market structure in the context of the video refers to the underlying framework of price movements, including trends, support and resistance levels, and patterns. The speaker uses market structure to explain how to identify key levels for placing stop-loss and take-profit orders, and to make decisions about entering and exiting trades.

Highlights

Mastering price action trading simplifies the process to a three-step method.

Price action trading involves trading without indicators, focusing on price movements.

Traders use support and resistance, candlestick patterns, and trend lines for profitable setups.

Identifying the trend direction, such as downtrend with lower highs and lows, is crucial.

Structural analysis involves drawing key levels based on previous support or resistance.

Waiting for price to re-test key levels before making a trading decision is essential.

Candlestick patterns like doji indicate market indecisiveness and potential reversals.

Bearish engulfing candlestick patterns signal a strong sell entry opportunity.

Using the one-hour time frame for entry after analyzing the four-hour frame can provide clarity.

Placing a stop-loss above a key level limits potential losses if the trade goes against you.

Avoid placing stop-loss orders too tight to prevent being stopped out prematurely.

Take profit levels should be set at recent lows or significant resistance areas.

Understanding market structure is vital for placing stop-loss and take-profit orders effectively.

Recognizing when a market might reverse from downtrend to uptrend is key for buy positions.

Bullish engulfing candlestick patterns indicate strong buying pressure and potential buy entries.

Ensuring a favorable risk-reward ratio, like 1:3, makes a trade worth taking.

Price action trading relies on simple yet effective strategies without complex indicators.

A successful trade example demonstrates the practical application of price action strategies.

Zooming out to identify key resistance areas for take profit placement is a recommended practice.

The video promises to simplify price action trading to a level understandable even for beginners.

Transcripts

i became a profitable trader after

mastering price action trading which is

why in this video i'm gonna show you a

three-step process that turn price

action trading from something so

difficult and so complicated to

something as easy as counting one two

three

so what is price action trading price

action trading is basically trading

without any indicators because we are

going to be focusing on price so we use

price action to find profitable trade

setups based on things like your support

and resistance your candlesticks trend

lines supply and demand chart patterns

etc so we use a combination of all these

tools to help us determine where to

enter for a buy where to enter for sell

so the first thing we need to do is to

identify the trend and structure so

right now you can see on aud usd price

is in the downtrend because price is

making your lower highs and lower lows

since price is in a downtrend we should

only be looking to sell as simple as

that because we always want to make sure

that we trade with the trend rather than

against the trend because you never know

when price is going to wipe you out if

you trade against the trend after you

have identified the trend you also have

to identify structure so we can draw a

key level right here because this is the

previous low in this downtrend and if

you look towards the left is also a

support level so right now price has

just broken through this little support

level and he has come back up to re-test

this support level which brings us to

our next step so the second step is to

prepare and predict so right now we see

that price has come up to re-test this

key support level but we cannot enter

here yet because we don't know whether

we should

go in for a buy or going for sell

because right now price can do two

things right price can either continue

going back down after it's retested this

level or it can reverse and head back up

so in this case which scenario do you

think is much more possible which

scenario has a higher probability

obviously the scenario where price

re-tests and it continue going down

right because right now price is in a

very very strong downtrend but with that

said you cannot end up for a sell

position right here yet because you need

to wait for some sort of signs and

confirmation that tell you that price is

going to reverse and head back down and

continue this downtrend and this sign

could be in the form of some sort of

candlestick patterns or chart patterns

so right now price has not shown us that

yet so we'll just continue waiting so

now we just wait for some sort of signs

that tell us to enter for a cell so we

wait we wait this is why this stage is

called prepare and predict because we

are literally just preparing for the big

move so we wait

okay you can see like price has come up

to officially retested this key level

right here and you can see it from a

doji so for those of you who do not know

what's the doji the doji's this

candlestick right here and it basically

means that the market is indecisive that

means that price is going to like

reverse right and right now price has

been in a mini uptrend a mini

retracement and when you see a doji what

does that mean that means the market is

going to reverse and price is going to

hit back down and continue heading back

down so yeah chances are when you see a

doji at a key level like this that means

that the market is about to reverse and

it's about to change direction but we do

not enter for sale here yeah because i

want to see some sort of bearish

engulfing kind of stick like a big red

candlestick that tells me that okay

price is actually rejecting this area

and it's gonna head back down that is

when we enter for the trade so we still

wait okay so we wait wait

okay we wait

boom boys you see this big bearish

engulfing candlestick this big fat red

candlestick at this key level

guess what this is clear as they enter

for a cell right this is clear as they

you enter for sale right here but right

now we are on the four hour time frame

if i wanted to enter for this trade i

will go to the one hour time frame so

let me just go to the one hour time

frame right now so once you have went

down to the one hour time frame you can

see that price has actually rejected

this level not just one time but three

times once here second time here and

third time right here the third time

price failed to like break past this

thing and like go back up like this

right that means what that means price

is about to collapse and go down to sh

so right now over here we saw that price

gave us a bearish engulfing candlestick

at this key level right here that means

price is just rejecting this level and

this shows us that there is a lot of

selling pressure because you see this

big fat candlestick big red candlestick

which basically just tells us that

there's a lot of sellers in this market

so this is where i will enter for sell

position right now which is basically

your step 3 your step 3 is to enter for

the trade take action and don't hesitate

and enter for the trade with confidence

so i'll enter for a sell position right

here and i'll place my stop-loss above

this key level why why do i place my

stop-loss right there because you guys

must understand market structure if

price is going to reverse and hit back

up like this right that means price is

no longer going back down it's just

going to go up and go back to the moon

so in that case if you place your

stop-loss above the key level guess what

you are limiting your loss so if this

trade does not go as planned you only

lose a tiny amount of money you know

what i'm saying and also make sure that

you don't put your stop-loss like super

tight like this because if you put your

stop-loss like this price can easily go

up back up and re-test this level one

more time before collapsing so you will

definitely get stopped out if you place

your stop-loss like this you're just

asking for it man so what i like to do

is that i want to give my stop-loss a

little bit of breathing room right just

a little bit of breathing room because

if i look towards the left guess what

price was all the way up here before i

reverse all the way up here before i

reverse so of course i'm going to give

my stop-loss a little bit of breathing

room because price can easily come back

up to re-test this same exact area here

and now i'll place my take profit at the

most recent low so where is the most

recent low if you look towards the left

remember just now we drop our lower low

and lower high lower low and lower high

right so this is the low high this is

the low low this is the new lower high

and this is the new lower low this is

the most recent low so i'll place my

take profit all the way down there if

you don't know where to place your take

profit always make sure you look towards

the left once you look towards the left

look at where price last stop at that is

where you place your take profit you

place it at the level where price last

stopped at so i'll place it right here

at the most recent low and let's see how

this trade play out

you just smash your take profit guys you

just smash your take profit as simple as

that before we move on to the next trade

i want you to look at this right here

you can see price literally from this

super long week right here so what does

this mean this means that at some point

of time buyers come into the market and

push the price all the way up here

before the sellers start to come back in

and push the price all the way down so

if you place your stop loss just like

this right here a low of a few pips

above the key level placing it super

tight like this like a little

guess what you would have gotten stopped

out right there and you have lost the

money just to see the trade go in your

way go in your plan that is why you guys

must learn how to place your stop-loss

properly make sure you always give it a

little bit of breathing room here's

another example you can see right now

price is at a major key level why did i

mark up this key level because if you

look towards the left right around this

area here price always reverse when it's

at around this area which makes this

area a very very strong support area

that price has failed to break past

multiple times so right now price is at

this exact area so what's the first step

the first step is to identify the trend

so right now recently as you can see

price has been making lower highs and

lower low lower highs and low low which

means that price has been in a downtrend

but right now we are at a key support

level a very strong support level and

there's a very good chance that price is

going to reverse and hit back up right

because this is a very strong support

level but i want you to notice this one

thing you can see right now price has

been making your lower highs and lower

lows and lower highs and low low then

where is the recent lower low oops there

is no lower low guys look at this price

actually reverse and come back down and

create your new higher low if price

wanted to continue going down here's

what it would do instead price would

have broke past this level come back up

to re-test this area here and then

continue going back down like this to

form your new lower low right here but

nope that is not what price did price

actually reversed at this area right

here and come back down to create your

new higher low you can see this low is

higher than this low right here so right

now this is the first sign that tells us

that maybe the market is going to

reverse from a downtrend to a uptrend

so we might be looking to buy right now

which brings us to the second step which

is to prepare and predict right and

right here price has created your new

higher low right here so that's the

first sign that tell us that price is

going to reverse the second sign is this

bullish engulfing candlestick right here

look at this bullish engulfing

candlestick this tells us that there is

a lot of buying pressure in the market a

lot of buyers in the market because it's

literally a big fat green candlestick so

we can enter for by position right here

and i'll place my stop loss a few pips

below the last higher low this is the

last high low so basically a few pips

right here and for my take profit i want

to look towards the left look towards

the left and see where price last stop

at so if i look towards the left and i

see that okay right here at this area

here there is actually like a very

strong resistance area right here

because whenever price is up here it

always reverse up here reverse and this

is what makes it like a very strong

resistance error so yep i'll place my

take profit all the way up here at this

resistance level and you can see this is

the one it's the 3.69 wrist rod ratio

and if you guys know me you guys know

that i will never take the trade if it's

like once to one because that's just not

worth it if the trade is like let's say

like right here it is one is to one then

guess what maestro just wait for another

better trade opportunity which is gonna

come in the next one hour or something

so i will never take the trade if this

one is to one i always want to make sure

there's at least one into three right

here so this is one is to 3.68 and let's

look at how this beautiful trade play

out

okay as you can see price goes up goes

up goes up goes up create a new higher

low goes out and create a new high low

and ultimately guess what we went up

there and smash our take profit we are

the champion we

are we

are warriors what the hell is the song

again warriors so yeah this was a very

very successful trade if you still do

not get it don't worry just another

example for you i'm gonna make sure i

simplify this thing to like a standard

where like a five-year-old can

understand and by the end of this video

i guarantee you you're going to be able

to understand this entire price action

trading thing yeah using the same

three-step process that we have right

here the first thing you want to do is

to identify the trend and structure and

if you look at this if this does not

look like an uptrend to you you're blind

this is clearly an uptrend this is clear

as day and up trend now that we have

identified a trend we want to identify

structure so i can draw like a little

level right here because this was the

last higher high before price come up

here to create your new higher high

right so i can mark up a key level right

here and we should be expecting price to

come back down to re-test this last

higher high before continue going up

even higher which is what price did

price actually came back down here and

re-test this higher high but bros we do

not want to enter here yet we want to

wait for some sort of signs right that

is step two prepare and predict so right

now we are still in the preparing stage

we are preparing for war so we still be

patient and wait

so we wait

so we wait and see for some sort of

signs that tell us that like okay that

is actually buying pressure rejecting

this key level and it's gonna hit back

up that is when we enter for a buy so we

still be patient wait wait wait wait

wait okay wait wait wait okay you can

see price is starting to consolidate at

this key level here that means like

right now anytime soon price is going to

reverse and head back up so we still

wait

as you can see right here price has come

back down to create your new higher low

this is the new higher low because if

you look towards the left this low is

higher than this low right here and then

we see two green candlestick in a row

two big green candlestick in a row which

show us that there is a lot of buying

pressure right here so i will enter for

buy position right here place my stop

loss below this last higher low guys

remember you always want to base your

stop loss based on market structure you

cannot be placing it like anywhere right

you want to place it based on market

structure and also make sure you give it

a little bit of breathing room don't be

like a stingy little boy and put it like

all the way up here all right make sure

you give it a little bit of breathing

room place it right here and then for a

take profit in this case price has not

really like created like a new high high

yet right this actually comes as a

higher high but this is the previous

higher high and chances are price is

going to go up even higher right if

price is showing us that price has just

retest this thing and it's going to like

pump up and go up to the moon so why do

we place our take profit in this case

remember you want to look towards the

left so what i'll do is to zoom out

literally zoom out zoom out zoom out

zoom out zoom up zoom out and if you

zoom out you can see that right here at

this area there is a very key resistance

area right here because whenever price

was at this area right here you always

reverse and head back down go up reverse

it back down go up reverse it back down

so this is a very strong resistance

error and that is where we should be

placing our take profit i'll place it

all the way up here all the way up here

so i'll just delete this now grab some

popcorn and let's look at what's gonna

happen next

smash or take profit just like that guys

as simple as that boys

price action trading works this entire

strategy works this is easy and it also

works right you don't need like super

complicated indicators hehe none of that

right price action trading is the way to

go it's the way to go if you're still

watching this that means you really

really enjoyed this video so make sure

you smash the like button if you have

learned something helpful and make sure

you hit on that subscribe button if you

want to learn more about price action

trading click on this video to learn

more welcome to the tribe and remember

you're just one trade away