Price Action Swing Trading - The PAST Strategy
- Thread starter Nigel Price
- Start date
- Watchers 91
Bulls are attacking the underside of the trendline - if it holds, nice one, if not, we get into defensive mode and make sure the loss is no bigger than it needs to be.
Alright guys, that's me out at - 10 pips
The main trendline is obviously the one as outlined in the video , so that's the one to keep an eye on. In the short-term, things look a little mixed, so am neutral now until I see some indication from the bears that they are ready to step up to the plate
The main trendline is obviously the one as outlined in the video , so that's the one to keep an eye on. In the short-term, things look a little mixed, so am neutral now until I see some indication from the bears that they are ready to step up to the plate
Bulls are letting off some steam to the upside here, so I am not going to get involved. Price can do whatever it wants now, because I am not in the market. I'll only sell when it becomes clear that the bears are pushing price down. The only thing I look for as indication that the bears are gaining control is broken trendlines. If there are no broken trendlines, no trades. That rule keeps me out of trouble.
A classic newbie error is just fighting price, fighting the dominant trend. Selling when the market is moving up and buying when the market is moving down.
We need to be selling when the market is moving down and buying when the market is moving up. It sounds obvious when you say it, but you would be surprised at how often we are tempted to just blindly fight price. Our brains seem to be hardwired to go against the trend, so we must recognise that and put in place measures that stop this inclination from getting us into bother.
A classic newbie error is just fighting price, fighting the dominant trend. Selling when the market is moving up and buying when the market is moving down.
We need to be selling when the market is moving down and buying when the market is moving up. It sounds obvious when you say it, but you would be surprised at how often we are tempted to just blindly fight price. Our brains seem to be hardwired to go against the trend, so we must recognise that and put in place measures that stop this inclination from getting us into bother.
Thank you for the welcome Nigel and detailed reply.
Looks like you made the right decision on CAD/JPY.
I am trying to understand how low a timeframe you can go down to before this strategy becomes less reliable. If using the weekly as your anchor chart, surely there must be a timeframe like the daily or at a push the 4Hr that would be the maximum you would be able to go down to.
Steve
Looks like you made the right decision on CAD/JPY.
I am trying to understand how low a timeframe you can go down to before this strategy becomes less reliable. If using the weekly as your anchor chart, surely there must be a timeframe like the daily or at a push the 4Hr that would be the maximum you would be able to go down to.
Steve
Interesting day today:
I was stopped out at BE on EURAUD and CADJPY. I view this as a positive outcome as I lost nothing in my attempt to profit from the market.
I am at BE on my USDCHF short. It has moved a great deal but I am in a great position if the market does decide to go in my direction.
As for EURAUD and CADJPY. I would like to see some evidence that things are going my way before I attempt a re-entry.
Stuart
I was stopped out at BE on EURAUD and CADJPY. I view this as a positive outcome as I lost nothing in my attempt to profit from the market.
I am at BE on my USDCHF short. It has moved a great deal but I am in a great position if the market does decide to go in my direction.
As for EURAUD and CADJPY. I would like to see some evidence that things are going my way before I attempt a re-entry.
Stuart
Morning Steve
That's a good question.
I'm just going to play devil's advocate here, just to get our brains working.
Why does the size of the timeframe chart we enter on have to bear any relationship to the size of the timeframe of the anchor chart?
Is there anything, theoretically or practically, to stop us using a monthly chart as an anchor timeframe, and taking entries off the 1 minute chart?
A yearly timeframe chart as anchor, and entries off a tick chart?
What would the potential risks be if we were trading like that?
What would the potential rewards be if we were trading like that?
Like I said, I'm just provoking thought and discussion here, I'm not picking on you
Anyone else feel free to jump in and offer their point of view.
For example, would you trade this trendline if price broke it?
Looks ok to me...
Looks ok to me...
Morning Steve
That's a good question.
I'm just going to play devil's advocate here, just to get our brains working.
Why does the size of the timeframe chart we enter on have to bear any relationship to the size of the timeframe of the anchor chart?
Is there anything, theoretically or practically, to stop us using a monthly chart as an anchor timeframe, and taking entries off the 1 minute chart?
A yearly timeframe chart as anchor, and entries off a tick chart?
What would the potential risks be if we were trading like that?
What would the potential rewards be if we were trading like that?
Like I said, I'm just provoking thought and discussion here, I'm not picking on you
Anyone else feel free to jump in and offer their point of view.
Morning folks
I will throw in my 2 cents.
I generally use the h4 and h1 charts for entries and the reasons for this are:
1. If I was consistently using m5 or m15, I would have to watch my charts much more regularly. I have a job so this is really an option.
2. A weekly or monthly signal can take a long time to play out. It is not that often that price instantly goes in the way we want it to. Because of this, I have to mitigate my losses, I am far more likely to take more trades if I am trading the smaller time frames and as a result will probably incur more losses.
3. Following point number 2, I still want to have capital left to trade with if and when the longer term trade goes in my favour.
All that being said. If I am around and there is a nice m5 or m15 trend line break I will not hesitate to take the trade.
I have probably only confused matters but thats my view.
Stuart
Well the EURUSD certainly woke up and moved over the last few hours. The reversal candle from last week may be negated.
As for timeframes for entries, if lower timeframes mean tighter stops, than as low a timeframe as possible so long as you can find a good trendline. In practice, I think the time available to sit and watch the charts may well be the determining factor.
Personally, I have less confidence in avoiding false breaks of trendlines on the lower timeframes such as M5 and lower. That is just an opinion and I don't have any statistical data to support my bias. I should preface my comment with a disclaimer that I am in the US and my observations are based on the NY session. It has been many years since I stayed up late to try and scalp a few pips during the London open.
I try not to fall victim to my bias because even if the lower timeframes do have more false breaks, that is not a negative since a trader can generally have a tighter stop the lower they go on the timeframe. That tighter stop should equate to less risk (in pips), which would lead to a larger reward relative to risk. A higher reward:risk would offset being stopped out more due to any false breaks.
As an example: Trader A shorted GBPUSD with a 30 pip stop, basing his entry on the H1 timeframe. Trader B shorted the same pair with a 15 pip stop, basing her entry on the M15. Trader B could be stopped out for a 15 pip loss and re-enter with the same 15 pip stop before she has risked the 30 pips that Trader A put at risk.
If both traders put the same % of their account at risk on each trade, Trader B would come out ahead as far as % return on the account. (Both traders exit after a 150 pip decline. The 30 pips risked by Trader A equated to 1% of his account, with his profit on this trade equaling 5% of his account. The 15 pips risked by Trader B also equated to 1% of her account. She netted 135 pips with her total profit on this trade equaling 9% of her account.) Like my wife, Trader B is one smart lady. Too bad my wife doesn't trade, she could have saved me many years of trial and much error.
These examples go back to Nigel's statement about using PAST to obtain longer timeframe reward (big) with shorter timeframe risk (little), which effectively multiplies your reward:risk. This supports using the lowest timeframe possible with a good trendline so as to minimize your risk and maximize your reward. And that is the best position for which a trader can hope.
Jonathan
Personally, I have less confidence in avoiding false breaks of trendlines on the lower timeframes such as M5 and lower. That is just an opinion and I don't have any statistical data to support my bias. I should preface my comment with a disclaimer that I am in the US and my observations are based on the NY session. It has been many years since I stayed up late to try and scalp a few pips during the London open.
I try not to fall victim to my bias because even if the lower timeframes do have more false breaks, that is not a negative since a trader can generally have a tighter stop the lower they go on the timeframe. That tighter stop should equate to less risk (in pips), which would lead to a larger reward relative to risk. A higher reward:risk would offset being stopped out more due to any false breaks.
As an example: Trader A shorted GBPUSD with a 30 pip stop, basing his entry on the H1 timeframe. Trader B shorted the same pair with a 15 pip stop, basing her entry on the M15. Trader B could be stopped out for a 15 pip loss and re-enter with the same 15 pip stop before she has risked the 30 pips that Trader A put at risk.
If both traders put the same % of their account at risk on each trade, Trader B would come out ahead as far as % return on the account. (Both traders exit after a 150 pip decline. The 30 pips risked by Trader A equated to 1% of his account, with his profit on this trade equaling 5% of his account. The 15 pips risked by Trader B also equated to 1% of her account. She netted 135 pips with her total profit on this trade equaling 9% of her account.) Like my wife, Trader B is one smart lady. Too bad my wife doesn't trade, she could have saved me many years of trial and much error.
These examples go back to Nigel's statement about using PAST to obtain longer timeframe reward (big) with shorter timeframe risk (little), which effectively multiplies your reward:risk. This supports using the lowest timeframe possible with a good trendline so as to minimize your risk and maximize your reward. And that is the best position for which a trader can hope.
Jonathan
As for timeframes for entries, if lower timeframes mean tighter stops, than as low a timeframe as possible so long as you can find a good trendline. In practice, I think the time available to sit and watch the charts may well be the determining factor.
Personally, I have less confidence in avoiding false breaks of trendlines on the lower timeframes such as M5 and lower. That is just an opinion and I don't have any statistical data to support my bias. I should preface my comment with a disclaimer that I am in the US and my observations are based on the NY session. It has been many years since I stayed up late to try and scalp a few pips during the London open.
I try not to fall victim to my bias because even if the lower timeframes do have more false breaks, that is not a negative since a trader can generally have a tighter stop the lower they go on the timeframe. That tighter stop should equate to less risk (in pips), which would lead to a larger reward relative to risk. A higher reward:risk would offset being stopped out more due to any false breaks.
As an example: Trader A shorted GBPUSD with a 30 pip stop, basing his entry on the H1 timeframe. Trader B shorted the same pair with a 15 pip stop, basing her entry on the M15. Trader B could be stopped out for a 15 pip loss and re-enter with the same 15 pip stop before she has risked the 30 pips that Trader A put at risk.
If both traders put the same % of their account at risk on each trade, Trader B would come out ahead as far as % return on the account. (Both traders exit after a 150 pip decline. The 30 pips risked by Trader A equated to 1% of his account, with his profit on this trade equaling 5% of his account. The 15 pips risked by Trader B also equated to 1% of her account. She netted 135 pips with her total profit on this trade equaling 9% of her account.) Like my wife, Trader B is one smart lady. Too bad my wife doesn't trade, she could have saved me many years of trial and much error.
These examples go back to Nigel's statement about using PAST to obtain longer timeframe reward (big) with shorter timeframe risk (little), which effectively multiplies your reward:risk. This supports using the lowest timeframe possible with a good trendline so as to minimize your risk and maximize your reward. And that is the best position for which a trader can hope.
Jonathan
Fantastic post Abercrombie, thank you very much for this - couldn't put it better myself.
Ok guys, CAD/JPY has absolutely stormed off to the upside this week!
Remember this has nothing to do with our ability to read candles or technical analysis or anything like that. The set-up was spot-on, you couldn't have asked for much better. But on this occasion, it appears for now at least, to have failed.
What's the important thing to remember?
When I was scrawling all over my chart in the video, I mentioned the conventional way to trade that long wick candle. Usually on a break of the low, and a stop above the high.
Sometimes people do not wait for a break of the low and simply open the trade at the close of the signal candle, with a stop placed above the high.
Well those traders who traded it like that have been steamrolled this week, with at least a 100 pip loss.
Yes I hear you cry, but the traders who waited for a break of the low of the candle did not get triggered, so they have lost nothing!
But are they the winners? Perhaps they are, this time.
I played this candle signal, but I spent just 10 pips to be in not only with a chance of participating in the upside profit should it have materialised, but also did so at a better price than the person waiting for a break of the low.
Plus there will be plenty of occasions when the market takes out that low and then steams off the upside and takes out their stop above the high. Any of us who have traded for any length of time know that the market will probably wait until you have figured out what exactly would be the most frustrating outcome, and then will proceed to go and do precisely that.
So on this occasion I lost my 10 pips. But I was in with a chance of being involved in something big had it come off. And I live to fight another day, ready to play the next reversal in exactly the same way.
Rinse and repeat.
Remember this has nothing to do with our ability to read candles or technical analysis or anything like that. The set-up was spot-on, you couldn't have asked for much better. But on this occasion, it appears for now at least, to have failed.
What's the important thing to remember?
When I was scrawling all over my chart in the video, I mentioned the conventional way to trade that long wick candle. Usually on a break of the low, and a stop above the high.
Sometimes people do not wait for a break of the low and simply open the trade at the close of the signal candle, with a stop placed above the high.
Well those traders who traded it like that have been steamrolled this week, with at least a 100 pip loss.
Yes I hear you cry, but the traders who waited for a break of the low of the candle did not get triggered, so they have lost nothing!
But are they the winners? Perhaps they are, this time.
I played this candle signal, but I spent just 10 pips to be in not only with a chance of participating in the upside profit should it have materialised, but also did so at a better price than the person waiting for a break of the low.
Plus there will be plenty of occasions when the market takes out that low and then steams off the upside and takes out their stop above the high. Any of us who have traded for any length of time know that the market will probably wait until you have figured out what exactly would be the most frustrating outcome, and then will proceed to go and do precisely that.
So on this occasion I lost my 10 pips. But I was in with a chance of being involved in something big had it come off. And I live to fight another day, ready to play the next reversal in exactly the same way.
Rinse and repeat.
Just a word of warning for this evening/tomorrow morning guys, all bets seem to be off for what is going to happen in this referendum.
Things will be jumpy alright, that much is for certain, but if it comes out as a Yes, there is no telling what the market reaction will be in the short term.
Obviously the strategists and the talking heads will say "bearish for GBP", and of course that makes sense. But its one thing being able to figure that out, it's quite another to try to manage risk when your broker spreads are going bonkers, entries and exits are slipping everywhere and price is jumping around, 200 - 300 pips in a few minutes.
I'm sure you will have seen this stuff before - someone will come out and say it has gone one way, the algos will go mental in one direction, then someone will come out and say no, it actually has gone the other way, driving a huge spike in the opposite direction. And the action won't just be confined to GBP.
Brokers have practically no duty of care to you in these circumstances, so be careful. There WILL be accounts wiped out tonight, don't be one of them.
As anyone who traded in 2008 will tell you, having the correct view in terms of market direction in conditions like that is practically useless.
The one good thing is that this is not occurring over a weekend, so the market will be able to adjust as the news comes through. Traders won't have to contend with massive gaps, which is one good thing.
Maybe it will be a storm in a tea-cup and we will all wonder what the big deal was about. But it might not. So look after your account first and foremost. There will be plenty of time to trade the outcome after things have settled down.
Things will be jumpy alright, that much is for certain, but if it comes out as a Yes, there is no telling what the market reaction will be in the short term.
Obviously the strategists and the talking heads will say "bearish for GBP", and of course that makes sense. But its one thing being able to figure that out, it's quite another to try to manage risk when your broker spreads are going bonkers, entries and exits are slipping everywhere and price is jumping around, 200 - 300 pips in a few minutes.
I'm sure you will have seen this stuff before - someone will come out and say it has gone one way, the algos will go mental in one direction, then someone will come out and say no, it actually has gone the other way, driving a huge spike in the opposite direction. And the action won't just be confined to GBP.
Brokers have practically no duty of care to you in these circumstances, so be careful. There WILL be accounts wiped out tonight, don't be one of them.
As anyone who traded in 2008 will tell you, having the correct view in terms of market direction in conditions like that is practically useless.
The one good thing is that this is not occurring over a weekend, so the market will be able to adjust as the news comes through. Traders won't have to contend with massive gaps, which is one good thing.
Maybe it will be a storm in a tea-cup and we will all wonder what the big deal was about. But it might not. So look after your account first and foremost. There will be plenty of time to trade the outcome after things have settled down.
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Morning folks
I have abandoned any attempts to short CADJPY for the last couple of days. Instead I started looking at the other potential set ups I went over in my video and I noticed an opportunity in AUDCHF. I went short yesterday on the break of an h1/h4 trendline. Stop is now at BE, here is the chart:
Stuart
I have abandoned any attempts to short CADJPY for the last couple of days. Instead I started looking at the other potential set ups I went over in my video and I noticed an opportunity in AUDCHF. I went short yesterday on the break of an h1/h4 trendline. Stop is now at BE, here is the chart:
Stuart
Hi Folks
Hope you all had a good weekend. Not much of interest on the Weekly charts for me this week. I will still be watching AUDCHF for short opportunities. I was stopped out of my trade at BE on Friday.
Whilst there is not much on the Weekly, I wanted to draw attention to daily chart of GBPCAD. I touched on this pair a few weeks ago but never managed to find an entry. After the referendum there was a huge daily rejection bar which went up to touch the broken weekly support turned resistance. I will be looking to trade this over the coming week. Here are the charts:
Daily:
H4:
Happy trading this week.
Stuart
Hope you all had a good weekend. Not much of interest on the Weekly charts for me this week. I will still be watching AUDCHF for short opportunities. I was stopped out of my trade at BE on Friday.
Whilst there is not much on the Weekly, I wanted to draw attention to daily chart of GBPCAD. I touched on this pair a few weeks ago but never managed to find an entry. After the referendum there was a huge daily rejection bar which went up to touch the broken weekly support turned resistance. I will be looking to trade this over the coming week. Here are the charts:
Daily:
H4:
Happy trading this week.
Stuart
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