The 3 step Price Action Trading Strategy ONLY Top 5% use...
Summary
TLDRThis 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
📉 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.
🚀 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.
💹 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.
Mindmap
Keywords
💡Price Action Trading
💡Support and Resistance
💡Trend
💡Candlestick Patterns
💡Chart Patterns
💡Entry and Exit
💡Stop-Loss
💡Take Profit
💡Breathing Room
💡Risk-Reward Ratio
💡Market Structure
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
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