Reading The Price Action

anil_s_trivedi

Well-Known Member
#1
Hello Friends,

starting this new thread related to price action...why...its a skill every trader should learn, whether an investor or a trader...one should have a fair analysis of reading prices, then he can jump for entry/exit with other methods if at all required...human mind wants to see every thing under the complex sense, and we miss the simple things being playing out, its a similarity in markets too where almost 90% of traders/investors look for Expert advisors/indicators to check whether buy/sell triggered...but he/she misses the bigger action being played out...

I am not guaranteeing any sure shot success formula, but yes one thing i can assured you, if you followed it religiously, you will learn this way of analyzing a chart...

Let me put a disclaimer here, the findings i am posting here is not of mine, and i accept this that i learned this techniques from forex traders, who are damned active there and yes i will add my own way of mixing it with my analysis in indian market context...

so just enjoy the journey..and yes please keep thread clean, if at all you are not happy with my postings, please ignore this thread and you can have your hands at every indicator/expert advisor under the sun...

Happy journey...
 

anil_s_trivedi

Well-Known Member
#2


Initial analysis if you are trading 5min chart is have a horizontal lines at previous close and todays open, most of the action of support/Resistance will be played here, so just place these two lines and watch how prices reacting will decide the trend for the day, it also helps in placing your Targets and stoploss!

Its simple to comment what is a trend...how...watch any chart,
1) if prices going from down leftmost part of our screen to right topmost its a uptrend in action in that time frame
2) if prices going from topmost left to down on right side its a downtrend in that time frame
3) if prices going nowwhere but travelling horizontal its sideways

Still if you not getting where us the trend, ask a 5 year child, 'what you see on this Frame'...

hope i am clear uptill now...
Next post will be on analysing pivots as support/Resistance levels and identifying them...
 

anil_s_trivedi

Well-Known Member
#4
hi guys,

so you must have enjoyed chart on 5min timeframes with pattern forming near to open of today or close of previous day...study it..more and more...you will find certain patters keep occuring...

Now lets focus on...if i give you a chart to analyse, most people will look at todays bar or few bars left, some will see from where prices are correcting(high levels) or from where prices are advancing ( from lower levels)..and few who knows how to read it, will look at extreme left on the chart, and buildup a story from there, how price got reached till todays bars...that means you need to focus on prior trend, or whats happening on left, just dont be busy projections targets for every 1-2-3 or a-b-c projections...

so analyse and watch period of consolidation-acceleration-distribution, and see in what phase it currently sits in...like most of you have heard of famous Head & shoulder pattern, but if it appeared at top with signs of fatigue in prices, then surely its a distribution in progress...sign of fatigue can be seen from angle with which prices are moving...as in initial stages it bumps the resistance and then run in phase - then a reversal...so angle of prics keep the story intact what is happening...more steeper angle>45 higher the chances of prices retracing almost half or sometimes fully...a pace at 45 degrees is considered good one...and less than 45 will show some sign of fatigueness when prices are in uptrend(HH-HL formation).

so look at chart with grace and not greed...you will be rewarded...then only you will know from where you need to sit in train and where you need to left it...
 

anil_s_trivedi

Well-Known Member
#5
Now as everybody knows prices moves in certain fashion depending on power of demand and supply or rather buyers and sellers...so you need to understand whats happening, which side is in pain ( i mean whether long or shorts in pain)...the side in pain will suffer more,always remember...

now prices move in
1) Bullish manner - making higher highs and higher lows( demand exceeeding to supply)
2) Bearish manner - making lower highs and lower lows(supply dominating)
3) sideways - where supply meets demand equally

so your part of interest should be on points where demand-supply imbalance occured...i mean the point at which one side surrendered...mark that point it is the point of future supply/demand level, sometimes it may be formed by one bar or few bars,but more number of bars will not be a reversal pattern, then its a solid trap...prices react when majority got stucked in positions and smart money will make every thing to create more pain...

look at the following chart, now draw swing high and swing lows (peaks and valleys) from the last 2 BIG moves (up-move followed by down-move or vice versa)...



Result should look like this...i took help of custom zig-zag, but i will tell you if you do manually it will be a fun and learn process...mark my words...



And finally draw horizontal trendlines starting from the swing-point to the right like here...



dont worry it doesnt matter whether you are right or wrong uptill now...just do it!...

Now its a clear how swing highs-lows got highlighted and many times prices got rejected or taken support here...watch it...the high in chart is a intermediate pivot high and low is intermediate pivot low...in between are minor pivots...but obvious major and intermediate pivots carry more significance...the key to success in price action is reading daily/weekly charts why...on 5min charts it will result in whipsaws...hourly can be taken...as you must know a pivot on weekly/daily will anytime carry more weightage than 5min pivots...

just do this much of exercise we will discuss more things in time to come...so focus on pivots and draw lines..we will study then which lines carry significance of passing for Resistance/support lines...

Thanks...
 

anil_s_trivedi

Well-Known Member
#6
Communication and learning is successful only when it got communicated two ways..rgiht now its good you appreciated my posts, but i will love to see some charts of your interest and analyse and post it here..so that we can have on going learning to become interactive...hope you got my point..merely seeing my posts dont get you anywhere...but yes if you do it yourself, you will learn every bit of this journey....

Thanks...and i m waiting...
 

Reggie

Well-Known Member
#7
Good post. I too trade basis price action. Your post is insightful and makes interesting reading. Thanks a ton for sharing.

Having said that though, my only observation is that seeing left side of the screen(what's happened) is easy, but the catch lies in drawing inference or making assumption on what's going to happen on the right side of the screen.... all traders do try that, and as is said, 90% of them are wrong!
 

anil_s_trivedi

Well-Known Member
#9
Till now we are clear with drwaing swings and then placing horizontal lines through pivots...now we will analyse when trend changes..as per dow theory a market in uptrend has higher highs-higher lows and downtrend as lower highs-lower lows...when market changes direction from bearish to bullish, it will close above previous swing pivot high to mark change in trend..similarly when market changes from bullish to bearish, it will have its closing below previous swing low to have lower low in place and if its unable to take previous swing high,,it will form lower highs-lower lows...

So we need to focus on place where swing is unable to take on prev lows or prev highs, it will possible trend reversal signal...remember a change in trend on hourly not necessary it will change in daily/weekly....its all matter in that timeframe...

look at following chart...



Now you should be able to see the actual trend...We won't see anything spectacular until the price CLOSES significantly above the last swing-high OR below the last swing low.

Next is your focus on identifying possible support and resistance lines...
Strong Support/Resistance -> Support/Resistance which happened in the last 2 major moves in the time-frame you trade and probably confluence with fib-retracement,... and so on -> And Trendlines which comes from higher time-frames.
so take out charts of your choice and see the trend with this angle..if its shifting then a probable trade is on the cards...
 
#10
hi,

uptil now we are clear in what trend we are, according to swing high-lows in that timeframe...
Now i am combining it with another tool, someone may argue its a indicator, and the thread objective is to focus on price action only...let me clarify this the tool i am introducing is not an indicator in my sense, since it is doing nothing on price(i mean its not a derivative of price)..also if you know standard dow theory you will know importance of 1/3rd, 2/3rd levels...so i am focussing my new tool that is 'Fibonacci Retracement' instead of 33/66% i am focussing on fibo retracements and our great emphasis will be on 78.6% and 50%...and yes golden ratio 61.8%...
so our new excercise will be after drawing swing high-lows and horizontal pivot lines, one has to draw fibo retracement ...guidelines are...
Please draw the fib-level from the last swing low to the top of the swing if you are in an uptrend or from the last swing high to the bottom of the swing if you are in a down-trend.
Find then levels where fib-levels are in confluence with S/R-Lines.
so the confluence zone is more important for us, in terms of support/resistance for the prices...

watch below chart and confluence of fibo zones with horizontal pivot lines...


Also if you observed on chart, for some classic chart patterns lovers, zig-zag told you what pattern forming, see i marked two triangles...so the objective of todays post was having confluence zone...
 

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