How I Trade Using Price Action Signals

Filed under: Learn Forex Trading |

I’ve been giving trade examples for a number of weeks now in my “Daily Trade”, so I thought it was about time to clarify in one article exactly what my own personal trading methodology is – just so that there is no confusion.

 

To begin with, at the beginning of the week, I look for any significant levels of support/resistance on the daily charts across all forex pairs, plus gold and silver. When I have found a level that has been respected at least two or three times, I draw in a line as close to the open/close prices as possible, and then draw in a wider zone using the rectangle function in MT4. Once a zone has been drawn in, I keep a close lookout for price re-entering that zone.

 

Once price re-enters a particular zone, I watch for any price action signals on the daily, 4 hour, and 1 hour charts. The price action signals I am looking for are pin bars, inside bars, and my personal favorite, the engulfing pattern. You can find past articles on each of these price action signals on this website.

 

Once a price action signal has been formed (and it is important that the candle has closed), I will take the trade and place a stop at the swing high/low, with a target set at least two times my risk. My risk is usually 1% of my bank, so the target has to be at least 2% of my bank.

 

I also like to trade with the longer term trend as much as possible, so I am mainly looking for retracements before a continuation of the trend.

 

And that’s about it! It isn’t a complicated methodology by any means, but it is one that has been working for me. So until next week, have a great weekend!

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