Lesson #10 The Real Price Action Setup​

The Real Price Action Setup

Price Action Lesson #10

Types of Candlesticks

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Congratulations, you’ve made it to the last lesson of this short email price action trading course. 

By now you’ve realised that price action is more than a simple pattern. It is a way of tracking the smart money and find opportunities where probabilities are on our side.

To find those, we must not only focus on one the last candlestick but rather read the whole chart. If we do that we’ll realise that the right trade is showing itself in all 5 stages of the price action setup.

What are those stages, you’ll ask?

Here they are:   

Crude Oil chart

Stage #1 The move before the ultimate low (High)

Stage #2 The Ultimate Low (High)

Stage #3 Between the lows (highs)

Stage #4 The higher short-term low (lower short-term high). 

Stage #5 Trade development 

The idea of this course is to cover all those five stages and to teach you an actionable setup which to use on your own.

And now is the time to reveal that setup in full.

Here is again the Crude Oil chart and as you can see it contains a lot more data.

Crude Oil Price Action pattern explained

Let’s get through all the stages again.   

Stage #1 Crude Oil is making a strong down move.   

Stage #2 At some point during the fall, the market is making the biggest down day. Usually, such days mean panic sell-off and most likely after that there is no one left to sell. That is the first bullish sign, but this is not a buy signal, not yet. 

Stage #3 Crude Oil is starting to rise. In this stage, it is good to start reading the individual candlesticks. Some would show buying.  But this stage encompasses a very specific move after the end of the previous trend where emotions are still very high so don’t worry if the candlesticks in this stage are hard to read.

Stage #4 is the higher short-term low. This is where we want to buy (or sell if it was the opposite example). If you remember from the previous lessons we need to have at least two down candlesticks before the low. Here we have such a situation.  And if we continue to read the chart, we’ll see that those two candlesticks are 0T and 1xN which are contributing to the general bullish idea. Especially when the Long Nose‘s high is penetrated. That, in around 62% of the cases can be expected to lead to a bullish move.

Here we have an entry (the high of the 1xN), a stop-loss level – below the low of 1xN and targets. The first target is the short-term high reached in stage #3. It is almost 1 to 1 risk-reward. The second target is set as described in price action lesson #8.

Stage #5. We are in a position with an already set stop-loss and a target. Here again, we read the chart to catch initial signs of weakness which might suggest that the second target won’t be reached. Reading the chart correctly is extremely important when the price is close or at the target. Doing that correctly, will increase your R/R big time.

Those were the five stages of this price action bullish setup. As you probably noticed, we are looking to have bullish signs in all stages. But for this setup, the most important is the largest day in stage #2, the higher short-term (stage #4) low and the targets. 

This price action setup can appear in almost all trading instruments and all timeframes. Of course, I would recommend you to use the daily chart, but it is up to you. 

It will be a good exercise for you to think what else can you add in any of those stages to strengthen the setup? Maybe an indicator?

Alright, this was the last lesson number #10 from this price action trading course. I hope you liked it. If that is the case, please let me know what you liked the most and if you didn’t like it don’t write to me 🙂 just kidding help me make it better 🙂 Also, help other traders by sharing this mini course.

Good Trading! 

Vassil Banov

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