5 Price Action Rules EVERY Trader NEEDS To Know

Summary

This video script delves into the critical role of price action rules in trading, emphasizing their effectiveness due to the consistent patterns formed by human behavior in the market. It debunks the reliance on indicators, advocating for a focus on 'naked price action' to understand market movements. The script outlines key rules, including the trendline rule, trading range rule, high probability setup rule, and signal bar rule, providing insights on how to identify and capitalize on trading opportunities while minimizing risk and avoiding common pitfalls.

Takeaways

• 🧠 Understanding market patterns is crucial because they reflect unchanging human behavior, such as greed and fear, which influence market movements.
• 📉 Retail traders often start with indicator-based strategies, which can be misleading and clutter the chart, detracting from the true price movement.
• 📊 Focusing on raw, naked price action is essential for grasping how the market truly moves and for identifying non-random patterns.
• 📉 The trendline rule states that after a trend line break, a new extreme is likely to form, followed by a correction or reversal, signaling potential trading opportunities.
• 📈 In a downtrend, traders should look for short opportunities and wait for a new low before considering a trend reversal.
• 🚫 Avoid counter-trend trading while a trendline is intact, as it often leads to losses and is against the price action rules.
• 🔄 Price action is never alone and is always part of a pattern, such as a channel or a trading range, which can provide context for trading decisions.
• 🔄 The trading range rule suggests that most breakouts from trading ranges will fail, and traders should look to fade breakouts rather than chase them.
• 📈 High probability setups are identified by second entries in the direction of the trend, failed breakouts, or higher lows/lower highs confirmation setups.
• 📊 The signal bar rule emphasizes the importance of entering trades with the right signal bar that confirms the market's direction and momentum.
• 🛑 Patience is key in trading; waiting for high-quality setups at key entry points rather than chasing the market can lead to more consistent success.

Q & A

Why do markets continue to form the same patterns repeatedly?

Markets continue to form the same patterns because they reflect human behavior, particularly human greed and fear, which have remained consistent over time.

Why are most retail traders unaware of how price moves on the chart?

Most retail traders are unaware because they are often first introduced to information and strategies that misguide them, such as relying on indicator-based strategies which do not predict future performance effectively.

How do indicators on a chart typically affect a trader's understanding of price movement?

Indicators can clutter the chart, preventing traders from learning about the true movement of price and making it difficult to gain a proper understanding of price action.

What is the first price action rule discussed in the script, and what does it entail?

The first price action rule is the trendline rule, which states that after a trend line is broken, with candles closing outside the trend line, a new extreme is likely to be formed, followed by a correction phase or a possible reversal.

What is the significance of looking for patterns in price action trading?

Patterns are significant in price action trading because price action is never alone on a chart; it's always contained within some form of a pattern, which helps traders identify trends and potential trading opportunities.

What is the trading range rule, and how does it differ from trading breakouts?

The trading range rule suggests that most breakouts of trading ranges will fail, at least temporarily. It advises against trading breakouts in their initial phase and instead recommends buying low and selling high within the range, fading the breakout.

Why is it important to avoid trading in the middle of a trading range?

It's important to avoid trading in the middle of a trading range because the price gets too indecisive, leading to congestion and a higher likelihood of failed trades.

What is a high probability setup according to the high probability setup rule?

A high probability setup is a second entry at a key entry point with the direction of the trend. It is a failed second entry that goes against the current trend, failed breakouts, or higher lows/lower highs confirmation setups, combined with key entry points such as trend lines, support or resistance lines, or the exponential moving average.

What is the signal bar rule, and how does it affect entry decisions in trading?

The signal bar rule states that traders should only take longs above bullish bars and shorts below bearish bars. The signal bar must confirm the direction and momentum of the market, ensuring that entries are made with proper confirmation of the market's movement.

How can the price action rules help traders avoid common pitfalls in trading?

The price action rules help traders avoid common pitfalls by providing a framework to identify trends, key entry points, and high probability setups. They discourage counter-trend trading, picking tops and bottoms, and trading in the middle of congestion areas, thus increasing the likelihood of successful trades.

Outlines

00:00

📈 Understanding Price Action and Market Patterns

This paragraph emphasizes the significance of recognizing and adhering to price action rules in trading. It explains that market patterns are a reflection of consistent human behaviors such as greed and fear. The narrator critiques the common approach of retail traders who rely on indicators, which only show past performance and can clutter charts, hindering true price movement understanding. The paragraph introduces the 'trendline rule,' which suggests that after a trend line is broken, the market is likely to form a new extreme before a correction or reversal occurs. The importance of identifying patterns in price action is stressed, as it is not random and follows certain rules that can guide trading decisions.

05:01

📉 The Pitfalls of Counter-Trend Trading and Trading Ranges

The second paragraph delves into the dangers of counter-trend trading, especially for novice traders who might be tempted to pick tops and bottoms against a strong trend, leading to frustration and losses. The 'trendline rule' is again highlighted, urging traders to follow the trend until a clear reversal is confirmed. The 'trading range rule' is introduced, noting that most breakouts from trading ranges will initially fail and pull back, contrary to the common belief of many traders. The importance of market geometry and structure is underscored, with an example provided to illustrate how to identify bearish patterns without the need for indicators.

10:02

📊 Price Action Rules for Trading Success

This paragraph discusses the importance of the 'high probability setup rule' in trading, which involves identifying the right entry points to maximize the chances of a successful trade. It explains that the market tends to move in pairs, with two-legged pullbacks being a key indicator of potential reversals. The 'signal bar rule' is also introduced, which dictates that trades should be entered in the direction of strong bullish or bearish bars. The paragraph provides examples of how to combine these rules with key entry points such as trend lines, support or resistance lines, and the exponential moving average for effective trading strategies.

15:03

📈 Applying Price Action Rules in Trading Ranges

The fourth paragraph provides a detailed explanation of how to apply price action rules within trading ranges. It advises identifying the structure of the market, locating key support and resistance levels, and avoiding trading in the middle of a trading range where the market is indecisive. The paragraph emphasizes the importance of patience, waiting for high-quality setups, and fading breakouts according to the trading range rule. It also discusses the significance of trend lines within trading ranges and the preference for second entries with the trend and failed second entries against the trend.

20:05

📉 Price Action Rules for Uptrend and Downtrend Trading

The fifth paragraph outlines the specific price action rules for trading in uptrends and downtrends. It stresses the importance of identifying the market structure, following the trend, and avoiding counter-trend trading until a clear trend reversal is confirmed. The paragraph explains the process of identifying key entry points, high-priority setups, and the correct signal bars. It also advises against chasing the market and emphasizes the need for patience, especially when waiting for a proper pullback to occur after a new high or low has been established.

25:07

📈 Maximizing Profits with Price Action in Bullish Markets

In this paragraph, the focus is on using price action rules to maximize profits in bullish markets. It describes how to identify key entry points after new highs have been established and the importance of waiting for pullbacks to these points for second entry opportunities. The paragraph also discusses the concept of channel patterns and how to recognize high-quality setups with strong bullish bars and two-legged pullbacks. It advises against taking trades at the highs and stresses the importance of sticking with the trend and avoiding poor signal bars.

30:08

📉 Navigating Bearish Markets with Price Action Rules

The final paragraph provides guidance on navigating bearish markets using price action rules. It discusses the importance of recognizing bearish bias within a range-like structure and waiting for clear opportunities to short the market. The paragraph emphasizes avoiding trades in the middle of a trading range and waiting for confirmation of a downtrend with lower highs. It also explains how to identify high-probability short entries using the trend line and key entry points, and the importance of avoiding trades with poor signal bars, even if the context seems favorable.

📊 Price Action Rules for High Probability Trading

This concluding paragraph summarizes the key price action rules for achieving high probability trades. It reiterates the importance of sticking to the trend, waiting for price pullbacks to key entry points, and avoiding trades with poor signal bars. The paragraph also highlights the significance of recognizing patterns such as micro double bottoms and the importance of context and signal bar quality in making trading decisions. It concludes by wishing traders good luck and emphasizing the importance of following these rules to stay on the right side of the market.

Keywords

💡Price Action

Price action refers to the movement of a financial instrument's price, reflecting the collective behavior of market participants driven by their emotions such as greed and fear. In the video, it is emphasized that understanding price action is crucial because it reveals patterns that repeat over time due to consistent human behavior in the markets. The script explains that focusing on price action without the clutter of technical indicators can lead to a better comprehension of market movements.

💡Trendline

A trendline is a straight line drawn on a price chart to connect the lows during an uptrend or the highs during a downtrend, serving as a visual tool to identify the direction of the market. The video script discusses the 'trendline rule', which posits that after a trendline is broken, the market is likely to form a new extreme before a reversal or correction occurs, indicating a continuation of the previous trend.

💡Reversal Pattern

A reversal pattern in technical analysis is a change from a prevailing trend to the opposite direction. The script mentions that after a new extreme is formed following a trendline break, traders should expect a reversal pattern, which could be a correction phase or a straight-up reversal, signaling a potential change in the market's direction.

💡Breakout

A breakout in trading occurs when the price of a financial instrument moves past a specific technical level, often a support or resistance level. The video script warns that most breakouts from trading ranges tend to fail, meaning the price often pulls back into the range after the breakout, which is a key insight for traders looking to fade breakouts rather than chase them.

💡Support and Resistance

Support and resistance are horizontal levels on a price chart where buying or selling pressure is expected to be strong enough to prevent the price from moving beyond these levels. The script explains that identifying these levels is crucial for trading within a range, as they provide the boundaries within which the price oscillates and offer potential entry points for trades.

💡Trading Range

A trading range is a period of time in which a financial instrument's price moves in a horizontal path, oscillating between support and resistance levels. The video script highlights the 'trading range rule', which advises traders to buy low and sell high within the range and to avoid trading breakouts, as they often fail and result in a pullback to the range.

💡Counter-Trend Trading

Counter-trend trading involves making trades that go against the prevailing trend, often in anticipation of a reversal. The script strongly advises against counter-trend trading, as it is generally not favorable until a clear trend reversal is confirmed by the price action, which aligns with the 'trendline rule' discussed in the video.

💡High Probability Setup

A high probability setup in trading is a situation that has a higher likelihood of resulting in a profitable trade. The script introduces the 'high probability setup rule', which involves identifying second entries at key entry points with the direction of the trend or failed second entries against the trend, which are considered high-quality setups with increased chances of success.

💡Signal Bar

A signal bar is a price action candlestick pattern that provides a visual indication of the market's direction and momentum. The video script explains the 'signal bar rule', which states that traders should only enter trades with a proper signal bar that confirms the direction and momentum of the market, such as taking longs above bullish bars and shorts below bearish bars.

💡EMA (Exponential Moving Average)

The exponential moving average (EMA) is a type of moving average that places a greater weight and significance on the most recent data points. In the script, the EMA is used as a supportive tool to identify key entry points for trades, rather than as a primary trading indicator. It helps in determining the overall bias of the market and is used in conjunction with other price action rules.

💡Two-Legged Pullback

A two-legged pullback is a price action pattern that occurs after a strong move in one direction, followed by a correction and then a second move in the original direction. The script mentions that the market often moves in pairs of twos, and recognizing a two-legged pullback can provide a high-quality setup for a trade, especially when it occurs at a key entry point or follows a trendline break.

Highlights

Markets reflect human behavior, particularly greed and fear, which is why they form recurring patterns.

Most retail traders are not aware of how price moves on the chart due to incorrect initial education on trading systems and indicators.

Indicators often clutter charts and prevent traders from understanding the true movement of price.

Focusing on raw, naked price action is key to understanding how price moves in the market.

The trendline rule states that after a trend line break, a new extreme is likely to be formed, followed by a correction or reversal.

Traders should look for patterns within price action as it is never alone and is always contained within a pattern.

A bearish structure is indicated by a downturn looking pattern and a triple confirmation of a downtrend.

After a channel break in a downtrend, traders should expect a re-test of the previous low before considering a trend change.

The trendline rule applies to both uptrends and downtrends, and it's crucial to wait for a new extreme before considering a trend reversal.

Counter-trend trading is risky and often leads to losses as markets are designed to make such entries appear favorable.

The trading range rule suggests that most breakouts from trading ranges will fail, at least temporarily.

Traders should avoid trading in the middle of trading ranges and look for opportunities at the support and resistance lines.

High probability setups are identified by second entries in the direction of the trend and failed second entries against the trend.

The high probability setup rule emphasizes the importance of entering trades at key entry points with a strong signal bar.

The signal bar rule dictates that traders should only take longs above bullish bars and shorts below bearish bars.

Price action rules are crucial for staying on the right side of the market and maximizing trade success probabilities.

Transcripts

in this video we're going to talk about

practical rules and why it is so

important to have understanding of these

rules

why price action rules work it's simple

it's because markets reflect a human

behavior a human greed and fear and

since the core human behavior hasn't

changed and most likely will not change

market will continue to move in the same

way and will continue to form the same

patterns again and again

most retail traders are unaware of the

fact how price actually moves on the

chart and why is that it's because

average trader gets first introduced to

information that will do the complete

opposite of what he should do to educate

him most traders at first look for

system that will do the work for them

and they will look for indicator based

strategies but as most traders already

know this is a force errand and

indicators don't work they only show

past performance all these fancy

indicators look great at first but the

only thing these indicators do is they

clutter your chart having all these

indicators on a chart will stop you from

learning about the true movement of

price and it's going to be next to

impossible to get the proper

understanding about the price movement

only when you start to focus on raw

naked price action you will understand

how price actually moves since markets

are not random and there is a reason to

how price action moves

there are rules that will help us to

stay on the right side of the market and

the first rule is the trendline rule

which says after break of a trend line

which means that the candles will close

outside of the trend line new extreme is

going to be formed and after new extreme

is formed we expect correction phase or

possibly straight up reversal

now we have a downturn looking structure

on the chart so as price action traders

you want to find a pattern because price

action is never alone and naked on a

chart and it's always contained

by some form of a pattern you guys can

see we have a nice bench down to working

lower and we have a triple confirmation

of this downtrend so at this point on

the structure is bearish and trader is

only looking for short opportunities

notice what price created there was a

break of this channel there are candles

that close outside of this channel most

traders will take this information and

they will think that the trend is over

and they will start counting trend

trading they will start looking for

buying opportunities but at this point

on according to trendline rules we know

that we cannot go along just yet this

downtrend needs to get new low it needs

to get a re-test of this previous low

and notice what price created it created

move to a new extreme and after new

extreme was formed then we expect

correction or possibly straight up

reversal and price in this instance

straight up reverse and this is the

uptrend now when you're safe to be

looking for buying opportunities so this

is the rule number one when you're

following the trendline you're only

looking for longs after you get a proven

trend in opposite direction and after

you have a break of a channel you expect

new extreme to be formed same thing

will apply for the shortened channels as

well notice as there's a downtrend

working lower there are shortened up

trends in between and these uptrends at

the same time have a break

and re-test of a new extreme or at least

attempt to create new extreme breaking

new high only in this instance there is

a break no new extreme form but that's

because the downtrend is just too strong

but you expect the same thing to happen

even on a micro level even for these

corrections after a break of up trend

you expect new extreme to be formed and

then you know that this uptrend is over

so this is the trendline rule polish

option working higher

break of the channel

and the trendline rule says that after

break new extreme is most likely going

to be formed and price created new high

and this high is higher than the high

inside of this channel so the trendline

rule was fulfilled after that press

created a shortened downtrend which also

had a break move to a new extreme and

then price indicated correction phase so

after you have a break in your extreme

and you have a reversal pattern you can

start looking for shorts but once this

downtrend played out because this was

just a shortened pattern the correction

phase for this overall initial uptrend

came into play so this is how you follow

the training rule when price breaks the

trend line don't start counting trend

trading just yet

expect continuation of the previous

trend

counter trend trading while trend line

is in play is against the price session

rules and most of the time you will get

burned after correction

trend can resume or reverse meaning

after is a break of a channel new

extreme form and there is a correction

phase

if the bias is strong enough there can

be a larger pattern and trend may resume

or after that correction the new trend

may start in the opposite direction the

trend may reverse we have a nicely

fitting option working higher multiple

confirmation indicating to me that this

channel is valid

so i'm following the trendline rule i'm

only focusing on long opportunities

i'm not looking for shorts even when i

have a break of this channel just

because we have a break of this channel

that doesn't indicate reversal that's

against the trendline rule and that's

against the price session rule i expect

for price to create new high price

created new high form a double top which

is close enough to be considered as new

high and after that price slowly

consolidated and there was eventually

downtrend after that but only after you

get a break a new high the trendline

rule is fulfilled and then you can start

acting accordingly down to working lower

beautifully fitting channel this is why

market geometry is a real thing and this

is how you can understand that the

structure is bearish you don't need any

indicator all you can need is the simple

naked chart naked candlesticks and you

can get the understanding what the price

is going to do price close outside of

this channel indicated break this is not

the time to buy the market just yet

price created

big move to new low to a new extreme and

from this point on traders are safe to

at least play with the idea of possibly

buying the market and eventually going

long with train run rule correlates the

second price section rule that says

don't count a trend trade a lot of

beginner traders when they're watching

the strong trend go they feel that the

trend cannot go any further and they

will start to pick tops and bottoms and

this lot of times lead to never ending

frustration and to a lot of multiple

losing streaks doesn't matter how good

the signal bar looks how good the setup

looks if the trend is in play under any

circumstances you cannot counter trend

trade just yet you will use the

trendline rule to identify the trend to

follow the trend and if you cannot find

the perfect trend line you will still

follow the overall bias only when you

get a trend improve in opposite

direction

that's when you can start looking for

entries in that trend but under any

circumstances you cannot pick tops you

cannot big bottoms and you cannot

counter trend probabilities are just not

in your favor and most traders are

losing their money trying to pick tops

and bottoms markets are designed to make

counter-trend entries look favorable and

there are designed to make with trend

pullbacks to look sketchy for that

reason a lot of traders are attempting

to buy the bottom in strong downtrends

but most reversal attempts in trends

will fail these rallies to the upside

are just reversal attempts and most of

them will fail there against the overall

trend when you are not sure if the trend

ended or not you follow the overall bias

and even if you are struggling to find a

proper trend line you are sticking with

the overall bias and you are not

counting trading don't sell the uptrend

even if long traps occur

sometimes there can be a good long setup

good buying opportunity in a bullish

structure and a bullish trend behavior

may be wrong the trade may be a little

bit of a congested which is another rule

we're going to talk about there may be a

shortened trend line that is in play

that needs to play out remember the

trend line rule it goes even for the

short term trends as well you cannot

sell the long trap even if you are

confident that the buyers are trapped

because the trend is still in play and

you're still going against the trend and

arts are not in your side you just let

these long traps play out and you're

still sticking with the trend you're

still following the trend trend is your

friend this thing has been around for a

long time there's a reason why and this

rule goes for shortened channels as well

even if there is a small channel and the

structure is not this big because right

now i have an example of a quite a

strong bullish uptrend even if this

uptrend is minimal you still don't want

to count and trade unless you have a

break of a trendline in new extreme form

this one is a big one the trading range

rule the most important thing to

understand about trading range rule is

that most breakouts of trading ranges

will fail but we see it all on the

internet beginner traders are trading

breakouts majority of traders are trying

to trade breakouts and they keep losing

money because most breakouts of trading

ranges will fail at least temporarily

there can be a pullback and the breakout

may succeed eventually but if you are

trading the breakout you want to take it

on the breakout pullback setup you don't

want to trade the breakout in its

breakout phase because most breakouts of

training ranges will pull back into

training range and the breakout will

fail

these breakouts are working just enough

to keep the majority traders trying but

in the long term this is not the proven

strategy to approach the market and it's

against price action rule now when we

are watching training range we're

observing the health of a trading range

we want to see if there is a bullish

imbalance or bearish imbalance now

trading range rule also says not only

most breakouts will fail but we want to

buy low

and we want to sell high you want to do

the opposite but the common sense is

telling you congestion is just a small

pattern of a trading range and you want

to avoid trading these congestions

that's a price session rule trading

range rule because congestion is just a

microliter trading range and the price

gets too indecisive there and you want

to stay away from these trades price is

swinging up and down up and down we as

price action traders need to identify

the support identify the resistance bars

are never alone on the chart there's

always some form of a pattern remember

price action reflects human behavior and

this behavior always results into price

action patterns price former double top

and we have a break below support but

notice the breakout ended up failing why

because most breakouts of trading ranges

will fail price broke above the

resistance and what ended up happening

breakout fail again and price pull back

into a trading range this is how you

approach trading ranges and this is the

trading range rule that you want to

follow you're looking for opportunities

off the bottom

off the top and you're trying to fade

the breakout you're trading them against

the direction of a breakout if breakout

breaks to the downside you want to look

for buy and if breakout breaks to the

upside you want to look for sale another

trading range structure huge breakout to

the upside that is looking very bullish

a lot of traders rely on momentum but

the breakout snap back into trading

range another breakout right here price

pull back into range

another breakout and price pull back

into range again

most breakouts of trading ranges will

fail most beginner traders trade

breakout they like the momentum they see

so many bullish bars breaking up because

a lot of times trading ranges are boring

markets they're slow and traders just

cannot deal with this they're too

anxious to take the trade and once they

see price breaking out they will start

buying but what they're doing realizing

they're just taking other side of the

professional orders which they're trying

to sell because if i want to sell i want

to sell as high as i can so i want to

sell i need somebody to take the other

side of my order people are buying i'm

selling it will result into market

pulling back into trading range like

this another beautiful failed breakout

scenario because price will just pull

back into train range after breakout 90

of these breakouts will fail some will

eventually work there is no denying that

but you cannot try to look for the one

that will eventually work and there are

instances including price session will

help you understand

which breakout is going to work and

which fell such as bullish or bearish

imbalance most breakouts will fail

even in small trading ranges this right

here this small consolidation is a

trading range structure just like we saw

in the examples earlier just on a small

micro frame there is a support there is

a resistance there's just indecision

there is no clear direction price broke

to the downside strongly this is a

failed breakout and price pull back into

train range notice we traded up into

this trading range so you expect for

price to eventually break to the upside

and even when there was a breakout to

the upside notice price pull back first

because the first breakout will fail at

least temporarily and this is the

breakout pullback but now you know that

you want to go long after price pull

back and now you're safe to look for

longs but most breakouts will fail even

from these tiny consolidations and you

want to stay away from trading in the

middle of these tiny little

consolidations that's against the rule

we just talked about three price action

rules that mainly has to do with the

structure and the bias of the market but

is there a rule that will help us

identify

proper place to enter yes there is and

it's called the high probability setup

rule

when you train your eyes to see the

price movement you will realize that

market moves in pairs of twos market is

not just pointing straight up or

straight down no these would be reshape

reversals and they are not common there

are small pullbacks in between and these

are two legged pullbacks remember price

reflects human behavior what high

priority setup rule does it will tell us

when to enter

and when we put odds on our side that

the trade has high likelihood of

succeeding so what is a high quality

setup high priority setup is a second

entry at key entry point with the

direction of a trend it is a failed

second entry that goes against the

current trend

failed breakouts or higher lows lower

highest confirmation setups now these

setups don't mean anything on their own

if we want to take a high priority setup

we need to combine it with the key entry

point this is the place on the chart

where high quality setup can appear now

key entry point is a trend line

support or resistance line

and exponential moving average now i'm

aware the exponential moving average is

a indicator but we use this indicator

only as a supportive tool we are not

relying on this blindly this is very

useful tool that can help you identify

the proper key entry point and can tell

you information about the structure this

is what the high quality setups look

like

notice we have a very structure so what

we have to do we have to draw the

channel we have a trendline working over

notice we have a break and a new extreme

perfectly following the trend line rule

i mentioned that price likes to move in

pairs of twos and this is what it looks

like we have a first leg correction

second leg and this is the key and trip

when you guys can see the trend line

support or resistance line or this blue

line 21 bar exponential moving average

this is the two-legged pullback so we

have a downturn working lower

price is working to the upside we have a

shortened option that had to break a new

extreme remember the trend and you keep

drawing it even for the short term

corrections so you know that the option

played out and price created first

attempt to sell

second bullish leg up and the second

attempt to sell it is off to two key

entry points not only the trend line but

the 21 bar exponential moving as well

and this is the place where the odds of

this trade succeeding are highly in your

favor so you guys can see two like a

pullback second entry short at the key

entry point option working higher break

at a new extreme

first trend line break you're following

the trendline rule you expect to get a

new extreme so you're still thinking

about selling you're not content trading

at this point on there's a two legged

pullback second entry short and resulted

in the big move to new york stream this

time you're below ema you're at the

expense moving average even though

you're not coming off the trend line

you're still following the rule because

you're combining the trendline rule with

the high quality setup rule i also

talked about a failed second entry that

goes against the trend but it's fairly

simple

when we have a bullish structure working

to the upside we're not concentrating

we're following the trendline rule we're

looking for second entry longs two

legged pullbacks at the key entry points

but we can also take a felt to like a

pullback to the downside felt second

entry short because the trend is to the

upside it's not to the downside so any

second entry short means nothing and it

means that it's going to most likely

fail and we have a second entry show

right here new low first century short

second entry short and we have a second

entry short failure this is the felt

second entry short against the overall

trend your stop loss goes one thing

below this single bar and would have

resulted in winning trade same scenario

right here price create a new low first

century short pullback second entry

short so this is a failed second entry

short

also at the same time it is a second

entry long first leg pull back second

leg first central long second intro so

the high priority setup rule says that

you're only taking these setups that

have higher chance of succeeding you're

not interested in taking setups that are

not confirming the key entry points that

are far away from ema from the trend

line and there are not variations of a

two-legged pullbacks we have a bunch of

entries right here but you're not

interested in taking these entries

chasing the market you're not interested

in selling the market high quality setup

is when price pulls back to key entry

points this is where a lot of smart

traders are starting to buy on a high

probability setup the fifth price action

rule that you need to follow is the

signal bar rule

which means you only want to take longs

above bullish bars and you only want to

take shorts below bearish bars you only

want to enter with the proper signal bar

signal bar must confirm the direction

and the momentum of the market

these are a few examples of a good

bullish bars that you want to go long

above and these are just a few examples

of good bearish bars that you want to

sell below you never want to sell below

these bars that you never want to buy

above these bars you need to combine the

high priority setup rule with the signal

bar rule so you can maximize the

probabilities of trait succeeding of

course

stronger the context the signal bar is

less

important sometimes the context may be

just so strong where you can afford to

take a slightly less ideal signal bar

and you're still following the rules but

for the most part you want to stick to

this rule you want to follow a good

signal bar let's now take a look how to

use these rules in markets let's talk

about a price action rules in trading

range structures when i'm trading

trading ranges there are a couple

key points that i have to go through in

my mind when i'm trying to identify a

high quality setups and these are just a

few points that quickly flash through my

mind number one i try to identify the

structure it is an uptrend or is a

downtrend or it's a trading range i want

to locate key levels if i know that it's

a trading range i want to find a support

and resistance line because market likes

to oscillate in between these lines and

if i want to follow the train range rule

which means i want to buy low sell high

and fade the breakouts i need to

identify my support and resistance

correctly i also want to locate trend

lines i want to locate the shortened

trend lines because there are trends

working even inside of a trading range

trendline rules still apply even inside

of the trading range for the most part

i'm careful trading in the middle

trading range i want to stay away from

congestion that's very important rule i

want to look for setups to fade the

breakout following the trading range

rule buy low sell high

i want to be patient don't want to chase

entries in case i miss the trade if i

miss a trade i need to wait for another

high quality setup to appear i cannot

just jump the gun and risk taking entry

there is not a high probability i cannot

trade a breakout i cannot take first

entries i cannot concentrate

that will not result in long-term

consistent success i'm looking for

entries at exponential moving average

i'm looking for good signal bars if i'm

about to enter and i'm looking for

second entries with the trend and failed

second entries against the trend because

like i said there are trends working

even inside of trading ranges so when

i'm looking at the trading range like

this what i have to do i need to

identify my key levels and i need to

identify my shortened trend lines

because you guys can see there's uptrend

break two legs to a new stream dungeon

break new low and you guys can see the

trend line rule playing out perfectly

after each new break there is a new

extreme and then reversal option working

higher little break new extreme so at

this point on i expect for price to go

down but at this point on we are in the

middle of trading range so i'm just

sitting patiently i'm not doing anything

notice price created

last lag during your extreme and

eventually trade it down so i keep

drawing my shortened channels i keep

following the trendline we have a break

new stream form which tells me that the

downtrend played out and notice we broke

below the trading range and most

breakouts of training ranges will fail

so i'm looking for opportunity to trade

back into train range i'm following the

trendline rule i'm following the train

range rule i'm following the high

quality setup rule but i don't have a

great signal bar so i'm just waiting

patiently price indeed pull back into

trading range i need to draw the

shortened channels at this point on

i have a strong bullish uptrend and i'm

waiting if i get a good setup at the

exponential moving average at the key

entry point because i'm most likely not

going to get good entries off of this

channel because it is too tight and it

will be too far away from the

expenditure moving average notice price

is strongly continuing to the upside

we bounce off the resistance but i'm not

selling just yet that would be against

the trend i don't want a country train

just yet we have a 20 bullish bars

consecutive working higher only bench

bar was this one right here but you can

classify this as a bullish bar as well

because it has gigantic pulley stim at

the bottom so i expect according to

trend line rule to get new extreme and

notice price get a new high

first century long pullback second entry

long is about to form where at the

important key entry point even though

the signal bar is not the greatest the

context is so strong that after 20

consecutive bullish bars i'm going to

get new extreme and this is a second

entry long and then price created new

low

first century short felt second entry

short this is a failed second entry

short that goes against the overall

trend it is once again off the key entry

point

signal bar is great and i still need to

get new extreme i'm not concentrating

just yet and if i miss the second entry

long i cannot go long

all the way up to here no my scalp was

already made and i need to wait for

proper pullback again felt second entry

short worked new high was formed and

according to trendline rule we now

expect correction or straight up

reversal but i'm gonna combine the

trendline rule with the trading range

rule and most breakouts will fail so i

can take this failed breakout as a high

probability setup and i can expect for

price to pull back into training range

at the same time still following the

shortened trendline rule so these are

the rules that are going through my mind

when i'm trading at trading range

identifying key levels sticking to

shortened channels for the most part

avoiding trading in the middle avoiding

congestions i'm still following trend

line rule with the key entry point

setups with the high probability setups

and i'm trying to fade the breakouts

price session rules for the uptrend i

still need to identify what is the

structure i'm still trying to follow the

trend i'm not looking to counter trend

trend just yet following the trendline

rule identifying the key entry points

identifying the high priority setups not

trying to jump the gun in case i miss a

trade i'm not entering at the very highs

of the move i want to take the pullbacks

i'm trying to stay away from congestions

i'm drawing my shortened trend lines for

bearish corrections because i want to

see the burst corrections play out so i

can take along opportunities and i try

to identify good signal bar

after new high is reached buying is on

hold for short period of time until we

get more confirmation and if price keeps

creating multiple new extremes that's

the indication that there is a probably

new bigger channel in play which is

typical for strong uptrends

so when i'm looking at the structure

like this i have a break but i see price

created new extreme another new extreme

and another new extreme we just keep

pushing higher price is failing to close

below ema this is indicating to me that

we are still in a bullish bias structure

so i'm still looking for long

opportunities i cannot tell just yet i

will need to see the reversal pattern

below ema or proven downtrend for me to

just sell i'm staying away from these

congestions so at this point on i'm

still thinking long but i cannot just

buy at the top of the move like that

it's far from ema and price can pull

back i want to see price pulling back

this is where smart traders are buying

this is time for me to capitalize on a

discount in the market and price create

a new high first century long i'm not

interested in taking a long entry here

because it's just a first entry

and price created we tickle over here

and created a second entry long we have

a little inside bar here but this is the

proper second entry long right here so

there's a two legged pullback at the key

entry point under bullish structure

great signal bar this is a high quality

setup and this is the entry that i want

to take after i take this entry i can

hold the runner but i cannot take

entries at these highs we're now far

away from key entry point and at this

point on since press key is pushing

higher there's a probably a different

pattern there's a spike and a channel

pattern which is typical when the first

leg is steep and then the channel

flattens the second line flattens now we

have a bike in a channel pattern and

notice price created new phone first

century short second entry short but i'm

not taking this trade because it is far

away from ema and it's far away from the

trend line i'm still patient here and

i'm just watching market go without me

preferably i'm still holding the runner

and letting this portion on the market

run so i can capitalize and lacking

profits without me getting angsty that i

am missing a big move price is finally

pulling back to my key entry point to

the ema in the form of a new high first

century long second inch long with

two-legged pullback

big bullish bar following the signal bar

rule second inch along in a strong

bullish structure

all rules apply you're in the shortened

downtrend to break a new extreme so this

is a high priority setup followed by a

high low confirmation of a two-legged

pullback a new low form first century

short second entry short that goes

against the trend failure off two key

entry points great signal bar still

sticking with the trend and at this

point on once again i'm not chasing

entries up here i'm only interested in

the high quality setups notice this is

the point where price is creating these

big moves up and without the knowledge

of price session you're wondering why

price is turning up from these points

what's so magical about these points the

price will always bounce here but it's

because there's a key entry point it's

because there's a two like a pullback

and it's because all other price action

rules are being met price session rules

for downtrend are the same as for

uptrend just vice versa i'm still

following the same rule but i'm looking

for short opportunities i see a somewhat

range-like structure but with the

bearish bias

highs are still lower than the previous

highs and the lows are still also lower

and lower

so we have a range structure right here

but with bearish bias so at this point

i'm not particularly looking for longs

i'm just waiting patiently for a good

opportunity to appear notice what is

happening next

price is continuing working sideways

price four menu low and created a two

legged pullback first century short

pullback second entry short can i take

this entry well i don't really want to

take this entry why because it's getting

a little bit stacked we have multiple

bars just working next to each other

showing in decision this is not showing

me any momentum and we close above ema

if i want to go short i preferably want

to sell below ema and we are in the

middle of this training range as well so

this is not particularly the perfect

area i want to sell however i can still

see the low being lower than this and

then this there's a possible downtrend

working lower notice what form next

there was a lower high

confirmation setup of this second entry

short not only that price now confirmed

the momentum and pushed below ema so now

this is better entry lower high after

second entry short bill ema confirmation

setup and it's according to rules price

is failing to reach the resistance is

staying below and the possible downtrend

is now coming into fruition it can also

be treated as a small breakout pullback

of the micro congestion right here

because these bars are just smaller

congestion working next to each other at

this point on structure is clear

bearish downtrend i can identify the

stronger downtrend it fits nicely off

the lows and as the price is pushing

lower we have multiple setups either

first entries or whatever setups they're

just far away from exponential moving

average i'm not interested i'm not

interested in buying the market it seems

the price moved too far down we're way

overdone it's time to pick a nice signal

bar to pull back that is not how you're

gonna maximize the probabilities on your

side you only want to stick with the

direction of a trend and this trend line

is still in play there was a new low

form first century short second entry

short tool like a pullback but signal

bar is doji horrible and waiting

patiently price created another second

entry short why am i calling this

another second entry short because we

have here what looks like almost to be a

micro double bottom and micro double

bottoms reset the count

so technically i can treat it as a first

lag second leg first entry short second

entry short this right here right now

has a much better signal bar it is at

the key entry point and this is the

proper entry

price form at lower high confirmed the

two like a pullback but the signal bar

is horrible so even though context is

perfect here and i can take signal bar

is not great lower highs are supposed to

have good signal bars there are

confirmation setups so this is how

you're using price session rules you're

still sticking with the trend and you

want to see price pull back to key entry

point another numeral form another

two-legged pullback where atrium played

with the breaking new high ema keeps

holding price key entry point second

entry short great signal bar high

probably the setup the scalp was made

price pushed higher

confirmed the key entry point so you're

still inside this channel press form a

lower high

off this key entry point you can

actually consider taking this entry off

the trend line but if you want to wait

for sure entry to get the confirmation

you can wait for a lower height it will

confirm this bounce off the key entry

point and it's actually first century

short second entry short so this is a

great entry as well and price not only

formula or high it formed even felt

second entry long below ema in a strong

downtrend you're coming off the trend

line and the second entry long that goes

against the trend is a still high

quality setup after that notice price is

losing momentum first break of a channel

you expect new extreme and this are the

rules

for a high probability setup if the

signal bar is bad like on this entry

right here i'm not interested this is a

horrible doji i really want to see a

great signal bar if context is good i

can have signal bot it is not perfect

but the signal bar still has to be

somewhat decent and this pure doji is

not what i want to sell below these are

the price session rules that you need to

know and these rules will keep you on

the right side of the market good luck