Price Action 101 (naked trading w. no indi, no pattern, no robot)

Hi all,

 

It's been a long time since I started a new (long) thread on this forum. Being busy and lazy of me >:)

 

Well, I know that it's quite rare to find any price action "guides" to learn, so how about we make one ourself? Let's all try to add your knowledge here and there to make this a good and usable "guide"

 

For beginners, you might find the word "naked trading" a weird phrase. Naked trading is trading without any indicators. Some may said that using only chart pattern is considered naked trading. Some said that even chart patterns are not allowed in naked trading. I myself don't care which one is true. If it's not making any money for me, I would care very less about the strict definition of naked trading.

 

Now, the definition of price action is... Well, the action of the price. It's a very vague term that in my personal opinion is naked trading in a very naked way. No indicators, no robots, no patterns, just price and the movement of price.

 

Like what should you compare price action traders? Price action traders are like a noble man (or woman if you are femme trader) fall in love in the 1st time. :"> He (the noble man a.k.a the price action trader) would look with love and awe at the woman (the price) he loved. He looks the beauty beyond any cosmetics or make ups (indicators). He looks the beauty beyond any hairdressers (robots). He does not judge whether the woman's nose is too long or too big (no chart pattern), he does not care how long the head and shoulder's proportional height. He sits there quietly hours by hours looking with love at how the woman react. He does not grow tired or bored at looking how beautiful the woman really is. He looks with love when the woman jumps in euphoria. He looks with love when the woman sinks in sadness. He just looks with love. Love at the woman. The woman herself. Her true self. Nothing else. :">

 

Ok, back to earth. ;))

 

I know that price action is very hard to do, mostly because it takes time. A very long time to understand, and most people don't have that much time. For all price action traders out there, I really hope that we could collaborate and help each other by sharing your experiences here so that we could shorten our learning time. Yes, I understand that this kind of knowledge could not be taught and must be gained by experiences. Even if you share it here, we must also experience it ourselves to gain the same understanding as you are. Thus, we find no scam artists on price action. Yes, I understand that it took a very long time for you to gain this understanding. But, by helping each other we could shorten our "foreplay" time :P

 

Let me start with my own. These experiences are from EURusd only.

 

#1 === Psychological round number (double O) ===

- Many people said that price with double zero, e.g. 1.3100, 1.3200, 1.3300, etc are good as Support and Resistance.

- In my experiences with EURusd... not true.

- Yes, you could draw a very nice and "perfect" SR lines using each and every round number prices. It's beautiful on chart, it's almost dead-on. But in my experiences, not all of them made me money. I want money, not beautiful chart.

- In my experiences, if on H4 or Daily chart the double O price has been breached 3 times or more in at least the last 100 candles, then the double O is useless as SR. Yes, it's a beautiful sandwiched SR lines, but it does not make me any money. It's useless for me. I don't see them as double number anymore.

 

#2 === Price moving to 0.xx20 and 0.xx80 from 0.xx50===

- This price action idea was 1st introduced to me by Boris Scholberg. He said that if price has moved to 0.xx80 from 0.xx50 without moving back to 0.xx50 again, then it would have high possibility to move to 0.x100. Vice versa if price has moved down to 0.xx20 from 0.xx50 then it has high possibility that the price will go to 0.xx00. e.g. from 1.3050 to 1.3080 then it will go to 1.3100. vice versa from 1.3050 to 1.3020 then it will go to 1.3000

- At 1st I thought this would be a great idea to gain 20 pips blindly.

- My experiences on EURusd... this only works 50%. Not making me any money.

- I think there are more criteria. I think there are some additional movement criteria that he didn't mentioned. Well, it was a free report so I can't expect much.

- If you have better experience in this, please, please, please share.

 

#3 === the buffer price of 0.xx27 and 0.xx70 ===

- This is my "creation" from trying to get the experience on #2 and #1

- Have you met this situation: price went up fiercely and has met the double zero price. e.g. 1.3100 It hesitated for a while moving only betweek 1.3090 to 1.3110 You think the price has already run out off steam and exit your long position. Then suddenly price went up to 1.3111, then 1.3115, then 1.3109, then 1.3117, then 1.3111 then 1.3121. Seeing the price movement, you entered long again. But then not long after than price fall down to 1.3060 :D yeah, life sucks.

- This is famous for the situation of "big eats small". We know this is the place where brokers take the limit and stop around round number prices. Broker eats the players.

- In my experience with EURusd... 0.xx27 and 0.xx70 is a safe number to put a break high and low respectively. If price is able to up touch 27, then it has high probability that it could move up to 50. If price is able to down touch 70, then it has high probability to down touch 50.

- It's not perfect, but the probability is quite high, I would say this price action has a probability around 80% being true.

 

#4 === 1st hesitation on small daily range break out ===

- again this one is from my experience on EURusd. I normally see this on M30 chart.

- This is the ONLY situation where the saying "follow the market" could really be applied, imho.

- There are several strict conditions that have to be met for this price action to happen.

- 1st market must be running at normal speed before hand. If the market is calm then you could get bigger profit.

- 2nd on the M30 chart, you suddenly see a wild movement on current candle. It was normal the candle before, but at this candle, it suddenly went wild. If there are fundamental news behind it, it's better. However, this is not very effective on NFP though.

- What I mean wild is that the current running candle is as big as two or 3 normal candles. That is wild.

- 3rd, the price has to be breaking the daily range. It has to be on the same wild candle. It has to break, e.g. 5 pips. but no more than 10 pips.

- 4th, the price move back to the last daily range leaving only the candle tail on the running candle.

- You enter the position according the break.

- Expect a profit of 20 to 30 pips in several minutes.

- This has a high probability of 85%

- If the previous daily range is quite small, below 60 pips, you could expect around 50 to 80 pips profit if you ride the trend. This riding could take up to 6 hours though. So you really need a big heart when the price moving up and down to your BEP.

- You do not need to wait for the candle to close. As long as it breaks for 5-7 pips and come back, enter. If you can enter on the same wild candle it's better. Most of the time, in my experience my entry time is around 2 to 3 minutes before this wild M30 candle close.

- This normally happens on European time until US 1st session.

 

That's all that I can remember right now. It's been quite a long thread already.

 

Again, I know that price action is very hard to do, mostly because it takes time. A very long time to understand, and most people don't have that much time. For all price action traders out there, I really hope that we could collaborate and help each other by sharing your experiences here so that we could shorten our learning time. Yes, I understand that this kind of knowledge could not be taught and must be gained by experiences. Even if you share it here, we must also experience it ourselves to gain the same understanding as you are. Thus, we find no scam artists on price action. Yes, I understand that it took a very long time for you to gain this understanding. But, by helping each other we could shorten our "foreplay" time :P

 

So, what do you think of my experiences above? Could you add or even fix mine so that it would have higher probability to benefit both of us? Would you be kind enough share your experiences? Or, nobody is actually following price action? Anybody would like to add #5, #6, etc?

 

Regards,

the silly me

 

Edit:

 

#5 === H4 spike by SoundFX ===

http://indo-investasi.com/showthread.php/5799-Price-Action-101-(naked-trading-w.-no-indi-no-pattern-no-robot)?p=66690&viewfull=1#post66690

Edited April 15, 2010 by William

thanks a lot William. informative post. hope this grows into a huge price action discussion similar to the other price action/naked trading threads on other forums. i would love to explain support and resistance but ive gotta run now.... could any experts out there explain support and resistance in 'dummy' terms.... i believe that this is the basic foundation that everyone needs whether their trading is naked or fully clad :)

I love what you wrote here .. and I'm with you on this..

 

When I started on this forum, I had only 4 months of forex experience.. and I tried all the systems out there, all the indicators, all the robots... it was thrilling and exciting time for me .. but very soon I saw that this will not work out and that I was only losing my money ... so after some time out and thinking of dropping this, I come with an idea that I need to do this in a right way if I want it to work .. the right way was to truly learn what is going on here, not just by looking pretty green and red lights, but by truly understanding "the magic behind the forex".. so one month ago when I've come back from my vacation I downloaded all the books I could fined on naked trading and PA, I read every day, look at the charts and learn (and loving it) .. honestly I feel it in my heart that this is it, this is the right way, so I don't worry any more, I just travel the path :)

 

To all naked traders out there: read and learn, read and learn until it comes clear to you (and it will) what you need to do, and how to do it :)

 

That's it from me.. sorry if my English is bad :P

 

Barbara

Well said barbara, have the same feeling myself and seems that I am too travel down your path ...

Williams Can you please clarify my dumb Questions-

When we talk about Naked price trading do we consider Major S/R levels, Pivots, Fibo Retracements, Trendlines/Channels or just simply looking at the price as numbers?

Do we consider also Fundamentals like news as a part of naked PA strategies?

Because even though I totally agree on keeping my charts clean of indicators (even though I would like to have a debate in some other thread, on ignoring Bollinger Bands & Simple Moving Averages as just another indicator.)...I cannot imagine not trading without Major S/R levels, Pivots, Fibo Retracements and Trendlines.

If what we are going to discuss is something without the above, I am really curious to know more, both about naked price-actions and its success.

Very eager to learn.

Thanks William for an interesting topic!

 

I agree with permierpips that support and resistance is one of the key price action indicators. That along with patterns e.g. head and shoulders, 'W' formation, 'M' formation, flags, pennants etc. and also candle patterns - particularly "spike" candles.

 

Here's a chart of EURJPY where I've highlighted how to look at support and resistance from price action alone. You can also use S&R from pivots or from Fibos, however the price action S&R is king.

 

http://farm3.static.flickr.com/2787/4513536985_f10dfe6de6_o.jpg

First, thank william for starting this topics and sharing some of his experiences. It valuable.

 

For barbara & synergy, mind to share your experience what is 'travel down' your own path. Is it like working wit the

flow like those mentioned in some book ? And how do we know that we achieve that state ?

 

I also starting to learn PA recently only, however, like what is mentioned here, it doesn't seem to have any 'manual' or pattern

that we can based on, we need to learn by experience. I still reading and learning by myself and those from book.

 

In the meantime, I based my PA on the following as I trade in the daily chart only.

 

1. Weekly chart bias direction for the week.

2. Daily chart bias direction must be in the same direction as weekly chart

3. Price at Key support S/R level, Fibo

4. Reversal pattern of candlestick based on pt 3.

5. When in uptrend, lower chart timeframe must give higher high and higher low, vice visa for down-trend

 

Hope those with experience in PA will share their experience here for the benefit of all and himself.

Edited April 12, 2010 by learningfx

Hey guys, better go to this website for naked trading/price action or whatever u name it..

 

http://www.forex4noobs.com/

Edited April 12, 2010 by William

Just my two cents, are Renko charts better for Price Action trading since it disregard time and only shows portions of price movement that actually 'matters', therefore eliminating most false signals and noises?

Wanna share with u this :

 

Trading with zero, i don't know if it's new to you guys or just a typical one..

 

http://www.forexsuccessformula.com/FSF-ComReport.pdf

 

Thanks for me, if u guys like it :)

fxeturn,

 

That's a good point.

 

Renko charts, constant range bars and Heiken-Ashi candles can all make aspects of price action easier to see visually, however there are some traders who don't even trade with candles or bars, they just view price moves in a line chart. All of these have their faults and won't necessarily eiliminate false signals and noises - for example Renko bars still show "noise" but make it look neater lol.

 

It's the same story as usual, that each trader needs to find their own "niche" and develop a system which is easiest for them to use. By saying "develop", this doesn't mean that they have to create new ways of trading, just to use the tools, timeframes, trading times etc. which suit them personally and allow them to make good profits.

 

For example, I'm starting to see more and more scalping systems using Heiken-Ashi bars and I believe that they work well when used in conjunction with something like bolli bands, however Eggzactly came up with a scalping system in the "Pacman" thread which uses constant range bars. When you have knowledge of price action in addition to systems like these then you start to really have an edge on the market. Rather than following bad signals blindly, you can make a decision to override signals when you can see the system is telling you to go long at a major resistance level. The time to go long is when price has convincingly broken out of a major resistance level and not before.

 

There's no requirement for a trader to be either a price action trader or an indicator trader, the two can be combined, however because price action is where everything starts from it makes good sense to get fully to grips with what price action is and how it works before trying to use anything more complex. Most people will find that price action is all they need, whilst others may use indicators to trigger trades and price action as confirmation or the other way round.

For barbara & synergy, mind to share your experience what is 'travel down' your own path. Is it like working wit the

flow like those mentioned in some book ? And how do we know that we achieve that state ?

It's only a figure of speech Lerningfx .. don't worry about it, you just explore, read and learn all you can find on naked trading and it will come to you .. it's like you assembling a car (for example) and first it's totally confusing, then frustrating, then you start to see some logical things, and then (after long long time :D ) ALL THINGS START TO FIT and it's like magic .. this is what I was talking about .. it takes time, quiet learning time to achieve this (IMO)

 

Barbara

but very soon I saw that this will not work out and that I was only losing my money

That's exactly what I felt back then. Quite the same huh :D I miss your avatar though, Barbara.

 

When we talk about Naked price trading do we consider Major S/R levels, Pivots, Fibo Retracements, Trendlines/Channels or just simply looking at the price as numbers?

Do we consider also Fundamentals like news as a part of naked PA strategies?

For me, naked trading still includes patterns. But when talking about price action, I prefer to talk only the price alone. But that's me. Any naked trading "systems" that works are welcomed. I really like to know about it.

 

I think rather than discussing about patterns at general, I prefer that we talk about something that is more experience-based.

 

I mean, the explanation by soundfx, is very good and I really appreciate him/her for pointing it out for us. Thanks a lot bro/sis. But, I still think, it's somewhat text-based. I mean that's something that we can read in any ebook or forums.

 

I think I prefer something like... (e.g. only)

"Hey, Look at eur/jpy. since the beginning of this year, it keeps making head and shoulder on H1. I keep banking money with this pair."

or (e.g)

"Hey, I use the the price action technique from www.domain.com and it constantly giving me an average of 30 pips per trade since February this year. It's very good, you guys should check it out."

 

I mean, sharing your resources like what Uniques do, is good, but it lacks the real time experience. You can share it on the appropriate section, similar to other systems. Talking about SR or patterns in general is very good, but Darmawan has even started a special thread on Technical Analysis section talking strictly about GBP/usd.

 

So, I think it's better for us to talk about patterns / naked trading / price action from our own experiences. The success you have, the failure you have. Let's help each other by doing that. e.g.

"look at eur/jpy at last week. I see head and shoulder pattern, I put a sell limit at xxx.xx price because I think if the price has reached that point then it will form a valid head and shoulder, but it failed. Anybody could help me? Anybody shorted the eur/jpy with success?" something like that is very good isn't it?

 

Just my two cents' date=' are Renko charts better for Price Action trading since it disregard time and only shows portions of price movement that actually 'matters', therefore eliminating most false signals and noises? [/quote']

I don't have any experience with Renko chart, but I think eliminating the time factor would somewhat erasing the feeling of the market. But, again, I have no experience with renko so don't take my words on it.

 

Rather than following bad signals blindly' date=' you can make a decision to override signals when you can see the system is telling you to go long at a major resistance level.[/quote']

Very nicely said. It also keeps happening to me. To tell you the truth I still have 68 indicators on my chart. How's that for technical analysis :P But, each time the price action shows something else, I abandon all those 68 indis and trust the price action only.

 

soundfx, from your words, I can see that you are someone that has quite a lot of experiences on forex trading. Could you be kind to share your experiences with us? I would be very grateful.

 

regards,

Hi William,

 

A trading method which enabled me to earn stacks of cash for a good while was trading off spike candles on the 4H charts.

 

To trade a spike, it's simple, you wait for price to go down to a point where it can go no further and a spike candle forms - wait for that spike candle on the 4H to close, then the next 4H candles opens and you can either go long immediately or wait a bit for a last ditch Short attempt to get a better entry. Set stops just below the the spike and trail targets up as far as it will go or target 38% or 50% of the move down. You'll be Long on the upward arm of a 'V' shaped formation. The opposite applies for Sells which will form an inverted 'V'.

 

The only time I came really unstuck with this method is when I was playing the spike game with Shorts in a very strong Long trending market (EURUSD last autumn). As soon as you see strong trends in the higher timeframes - then only trade in the direction of the trend. The rest of the time price meanders happily up and down and you can take good profits.

 

It's well worth being aware of how price typically moves. Look at the average daily range of the pair which tends to stay at around the same sort of level - it may gradually increase or decrease over the years depending on market conditions though this won't be noticeable for day/swing trading.

 

This indicator alone can help you in making trading decisions. If you know for example that the current average daily range (High to Low) for EURUSD is say 120 pips, then if you see price zooming up over the past few hourly candles in 140 pip move (which you've missed), do you jump on that rocketship to the moon lol?

 

It's never good to "catch a moving train once it's left the station" as they say and you can tell why in this case. The daily range has already been exceeded with an abnormal move, so it's going to have to retrace - you can't have buyers for ever and no sellers. The bigger the move, the bigger the recoil on the retrace.

 

When price goes up there are more buyers than sellers, however a point is reached where all the buyers want to take profits and price will drop like a stone, helped by opportunist spike traders later on adding more short trades into the mix. Thinking in terms of what other traders would do can sometimes help your own trades - thinking things like "If I was Short here - would I be thinking of closing my trade now?" etc.

 

I now tend to trade breakouts more than anything else. I like this style of trading more than the spike trading mainly because you're always in synch. with the market - you're momentum trading on what you hope will be the next big move. Of course it may not be, there are plenty of false signals in breakout trading - however typically these can be identified by price breaking out and then forming a spike candle which enables you to get out with small losses.

 

There are stacks of systems for breakout trading - some of the ones which trade breakouts based on the range formed in the Asian session work well. There are a couple of good videos here which explain trading breakouts of retracements in a trending market:

 

http://www.forexmentorpro.com/breakout-trading.php

 

Alternatively, if you see price is obviously in a compressed horizontal channel, it will have to break out in one direction or the other soon. Here you can just place buy stop orders a bit above the range and sell stop orders a bit below the range and wait and see what happens.

Hello everybody; I want to share & revealed My "Basic" Naked (Nekat) trading, it is so simple & not complicated like thread starter explanation before; ... So here's the Basic rules:

Bullish = "If you found Bar with a Closing more higher than Previous High before".

Bearish =" If you found Bar with a closing more lower than Previous Low before".

 

This is the basic setup

 

Here's the examples :

 

http://img638.imageshack.us/img638/516/52389207.gif

 

Look the round blue,thas a lower previous candle rather than present close candle.

 

Now here's the result :

 

http://img535.imageshack.us/img535/9836/19464593.gif

 

Any suggestion or comment ?

Edited April 13, 2010 by Gyverd

Hello everybody; I want to share & revealed My "Basic" Naked (Nekat) trading, it is so simple & not complicated like thread starter explanation before; ... So here's the Basic rules:

Bullish = "If you found Bar with a Closing more higher than Previous High before".

Bearish =" If you found Bar with a closing more lower than Previous Low before".

 

This is the basic setup

 

Any suggestion or comment ?

Hello everybody; I want to share & revealed My "Basic" Naked (Nekat) trading, it is so simple & not complicated like thread starter explanation before; ... So here's the Basic rules:

 

 

This is the basic setup

 

Any suggestion or comment ?

 

 

Hi,

 

This way too basic and if you'll look on your chart you will see places where this doesn't happen. You can not trade according to just 2 candles or bars, it will not show you any thing about the behavior of the market (trend reversals etc.)

 

Note that you chose the bar which had momentum this is more than just any bar because it gives you more information about the market's behavior at that time - people wanted to buy and that is why you saw that big nice bar. That might imply the way the trend goes.

Thanks SoundFX for your experience sharing. I'll put this on the front page also as #5 so that we all may get some kind of index of all the latest techniques in this thread. :D

 

My question to you SoundFx, i've tried this kind of technique before but normally the stop loss is quite or even very large. Beside playing the money management, do you have any other suggestion to solve this problem based on your experiences?

 

Hi there Gyverd, love to see you back with this login name :D

Yeah, I have to agree with pipfighter that your explanation is quite limited. Do you mean "previous high" = "last highest daily swing"? So, basically if you see a H1 candle closing above the highest daily swing you enter long? How about the time, do you have any preferred entry time from your experiences?

 

Thanks for both of you for sharing the experiences, any other?

 

Regards,

Hi William,

 

I'm sure you're familiar with a lot of the stuff I'm writing here, but I'll include it for the benefit of others less experienced...

 

If you're trading on the 4H, Daily or Weekly charts stop losses will seem huge if you're normally used to day trading.

 

However it's all relative and you're absolutely right about the importance of MM. On the 4H charts the stops are big but you need to ensure that the targets are bigger most of the time. The key to MM is always to calculate your lot size as a proportion of your account balance. If you want to be really conservative then 2% per trade is about right. However, if you have a small account balance to start with, it will take a long time before you can see any reasonable gains - so if you like a bit of risk and are confident in your system then you could trade 5-10% or some very daring souls may even go for more ;)

 

I believe that you should always place your stops at key price action S/R levels. If these are broken, then you know for certain that you've made the wrong decision and it's best to get out now before the real pain starts. However, if you make the mistake of setting stops according to what you can afford to lose, then you're asking for trouble. Your stops will be too tight and any sudden random market move will blow them to pieces.

 

The % of account balance I'm talking about is the % risk. This risk depends on how much you will lose if your trade turns sour (i.e. your stop loss). So, if your account is $10,000 and you only want to take 2% risk on each trade and you're looking at entering a trade with stop loss 80 pips, then the most you can afford to lose on a single trade is $200. If 1 lot = $10 per pip, then 80 pips = $800 when trading at 1 lot, so your trade size needs to be 0.25 lots.

 

When I was trading these 4H spike setups I was prepared to accept the risk and was looking for a faster increase of funds, so I was trading regardless of stop size and I was using the rule of 0.1 lots per $1,000 in the account. If you're risking more you want to be as sure as possible that you've made the right move - hence the thing to do is sit on your hands and wait before you jump into the trade, if you're aiming to catch a really big move, then you need to be disciplined enough to wait to confirm your entry (which isn't easy!).

 

If the other side of the 4H spike is 80 pips away, then you should be aiming for a target of at least 80 pips. If you see strong support/resistance 50 pips ahead - e.g. confluence of Daily/Weekly fib levels or pivot lines or strong natural support/resistance, then this trade is probably worth leaving - sometimes your best trades are the ones you never make :)

 

By looking at recent price action you can get a flavour of what's going to happen next. If price has typically been ranging in large ranges on the 4H chart and peaking at tops and bottoms with a large spike on the 4H candle, then these are ideal conditions for this trading style.

 

If price has been trending then always trade with the trend...ok at some point the trend will end and you may have to take a loss, however your other 10 trades with the trend will have been winners. There's nothing worse than sitting in a trade on the wrong side of a trend hoping for the reversal which never comes. "Hope" should never be part of your trading plan :)

Hi,

 

This way too basic and if you'll look on your chart you will see places where this doesn't happen. You can not trade according to just 2 candles or bars, it will not show you any thing about the behavior of the market (trend reversals etc.)

 

Note that you chose the bar which had momentum this is more than just any bar because it gives you more information about the market's behavior at that time - people wanted to buy and that is why you saw that big nice bar. That might imply the way the trend goes.

 

Hello; SoundFX & William nice to meet you again; I aggree with you, like i said before this is a raw basic of the methodology, this is not a completed system, but this is the foundation for My Naked Trading; actually it has more rules & filter to take a trade with this system.

 

@ William My bro;

Actually at H4 bro not H1 (The screeenshoot just only example explanation, you can trade with H1 but to many noise you need aditional rules & offcourse filter, but in H4 with stabil pairs you can trade naked trading); The latest High Candle what I mean. So if you look present candle Close is higher more then previous High; thats a sign of the Uptrend (once again this is only a basic principle); Ogut cuma coba lempar ke forum buat dapat feedback siapa tau ada masukan yang bagus, kalo Bro william bisa kasih masukan OK juga. Btw bro William masih ingat ga Thread Nina Wm-nya ? tolong di sundul dunk, Saya mau coba share teman Saya punya setup Nina Step MA. Gbu bro see you.

 

Kind Regrads

Peaks and valley i will tell more about it soon best i found so far

Gyverd would you mind sharing with us with the full system?

Great info, William! Thanks a lot! :)

Peaks and valley i will tell more about it soon best i found so far

 

 

I know of one on ForexFactory by that name. Is that what you're referring to?

 

Here is a link to that one:

 

http://www.forexfactory.com/showthread.php?t=62141

 

Cheers !

Edited February 27, 2011 by Diesel 10

And here is the PDF for Peaks and Valleys. Looks interesting.

 

http://www.mediafire.com/?11wb8m1zxe1boz1