Price action trading - Trade like the pros!

Timing explained:

Obviously, when we're trying to make money off trading, we want to capture those times of the day, when there will be momentum to bring price from A to B.
As it relates to the dollar (specifically EU, GU), we have to take note of a few windows of opportunity, when there would be enough liquidity for the daily range to develop.

Price won't move straight up or straight down like we've already said so many times on here. The daily open is at midnight, yet for me, there are 2 sessions: morning session & afternoon session. The morning session starts at 6 am GMT+2 and ends around 1pm GMT+2. It coincides with Frankfurt open, London open, Tokyo and Sydney close. There is hence a lot of momentum during that time. Usually, after 6am the high of the day (HOD) or the low of the day (LOD) is set. Sometimes it takes a very short while, sometimes it can extend past London open, but no later than 1pm GMT+2. Naturally, we want to trade away from the HOD or LOD. I posted a diagram earlier with the daily range and it how it looks on intraday timeframes and I said we want to be buying below the daily open and selling above the daily open.

As for the Asian session, I keep an indicator to denote it simply because I use it for my morning entries, I will often look for a return inside the asian range. There are small-TF supply and demand areas within it. The Asian Range goes from midnight to Frankfurt open for me.

Now, regarding the second session I said, it's the afternoon session. It goes from 2pm to roughly 7pm GMT+2. Usually, that's the window where we get all the US data, we have New York open at 4:30 pm GMT+2, we have sensitivity an hour before that, euros coming back from lunch around the beginning of the window etc. In a nutshell, there will be momentum here again.

Now what will happen on most days is, price will set a HOD or LOD in the first session, travel from A to B and go into consolidation when it ends at 1om. Slowly, it will begin to move countertrend and at around 3 o'clock in the afternoon it will resume the London direction. So in my book, that's a trend continuation.
HOWEVER, and this is why it's important to have good awareness, the afternoon session may be a reversal if price has traveled to a key level during the morning session. In that case, we want to take profit before that happens.

Usually, the daily range will be fulfilled by 7-8 pm GMT+2, and it will pull back slightly from there. At 10pm, there is usually a small return back to the original direction and midnight is the start of the new day.

As I add new theory, I will add a link to it in the initial post. That way it's all systemized in one place.

OK understood thanks.

On the EURUSD today I saw a lot of movement that I'm attributing to comments from Draghi. How do you normally factor in the effect of the news releases and speeches in your analysis? Do you give any consideration to them. For example, do you redo your analysis with them in mind or do you maintain your bias even if they cause a reverse in the trend.

Great thanks Wdays for that explanation , now I was wondering if you also look at gold , Silver and bunds and T Bills ? And would the Norwegian Krona or SEK work as well ?

Do you think analysis of the Treasury Yields can add value to this system?

Usually I disregard HIN, because I think of it as liquidity injection for price to reach its destination. However, there are exceptions - I hate having exposure during Draghi, usually choppy as hell; Fed is pretty dangerous too, and NFP are 50/50. I like GBP releases best because they tend to whipsaw the least.

So in a word, I maintain my bias of where price is headed and I expect the news to drive markets rather than cause mayhem...with the exception of ECB/Fed and sometimes payrolls.

I'm not big on commodities. I don't trade them at all if that's what you mean. As far as using them for analysis goes, I'd say meh... Don't really need to monitor them. I used to use a lot of T-notes and Bunds to try to determine possible shifts in monetary policy that can cause a ruckus, but I gradually started doing it less and less. I do use COT charts, though. That's commitment of traders. They help me back my analysis by having a look at the fundamental side. They are limited to the US, but still a very good compass.

I have never traded the Krona, I see a lot of big fund traders do, especially ones at Saxobank. I don't favor it at all. If the method works on there too? Sure it does, it goes for all instruments, including indices and commodities.

Sure they can, it's just a matter of keeping it simple for me. Also there is no point in checking them every single day, once a month is okay in my book.

ICT has been talking about the "trinity of yields" and it goes a little something like this:

We use a trio of major yields - US Bonds, UK, and the German Bund. We want to see if they're confirming (moving in tandem) or diverging. If one of them is divergent, then we can expect something of a trend shift, and the rest will usually follow. Secondly, we want to see if they're moving up or down. Yields going up means that currencies will be going up.

Illustration below. 2nd chart is Bund declining, which gives us a bearish outlook on euro.

Oh and you can get those charts at http://www.bloomberg.com/quote/GDBR5:IND and you have to add GUKG5:IND & USGG5YR:IND for the first chart

Since there were questions on news releases and trading...

During the Draghi conference, euro whipsawed up before dropping like a hammer. Where did the move up get cut? That's right, into an H4 supply area that we had marked previously in one of the posts above I believe.

It took out a recent lower swing high, dipped into the liquidity pool and dropped.

Since this is ECB press conf and I said I don't trust it, naturally I didn't risk a short... Not that I was in front of my computers at the time either.

And before you go "hindsight", the break of the 1.0970 low was called

As well as the 98.63 mark on USDx

Time to plan ahead of the new trade week I'd love to see other people's analysis posted on here before I post mine.

You CAN predict markets, anyone who says otherwise has no idea what they're talking about.

Hi much appreciated it will take a bit of time to grasp some of the stuff it's pretty similar to price action but without inside bars spinning tops etc etc . Do you trade for a living or part time ? Also are you using a broker or spread firm ? One thing I do use is a 200 day moving average to add a bit of confluence I have been told a lot of big banks use it but I have also been told most the banks financial teams don't trade forex anymore they trade bunds ....

Candlestick patterns cannot be trusted on their own, everybody who teaches trading with candle patterns emphasizes on the fact that we are supposed to only take them at certain levels (support/resistance).

I like to think I trade part time, being involved in projects outside of finance, but trading represents a big part of my income. I use a broker, local one but saxo-backed. I have used FXDD in the past. It's just a matter of easier fund depositing/withdrawing.

I used MAs in the past, mostly as dynamic S/R. It's not consistent for me, just like trendlines aren't. In the end, it's not a moving average that is relative, it's the level the MA coincides at. So think BRN, historical levels, Supply & Demand. It's not true that financial teams don't trade forex anymore, if it were markets would be idle, lol. If anything, it's the other way around. Forex is slowly becoming the only sensible instrument, worth trading mainly because of the contracted risk appetite in regards to any other security.. So they do trade it heavily, only the rules changed over the years. Ranges are smaller nowadays, much more consolidation than trending and so on.

Hi have a listen with latest guy on chat with traders he's full time and trades the bund and also the DAX but his primary is the bund for liquidity if you ever viewed a ladder you will see the volume going through on the bund . He tells you why he stopped trading forex , I do know a lot of traders who trade the Bund as their primary market using volume profile but you really need to be full time to do that. I do like the 200ma on the weekley. I agree with candlesticks you can't just use them. What do you think about patterns in Head and shoulders , flag etc etc ..

Hi WD

Thanks for this wonderful thread. I have been following it and trying to get my head around what you have been saying, until I realised unless I actually post what I think I won't know if I'm right.

My thoughts for well today at least are that the USDx will struggle to the 100 mark.

I trade the EURAUD and I don't think it is going to break the resistance area it has been flirting with.

I have attached (hopefully) 3 pictures. 1) the USDx 2) the current EURAUD coming up to the resistance area (brown lines) 3) last weeks EURAUD and it's love for that area.

Thanks

Hopefully this is the 3rd picture.

Slow monday scalps... 12+5 so far

The 100 mark so far is the record high. It's gonna take a lot for it to make it there. 99.60 is up next in terms of upside target. But it's high time we see a deeper pullback after the march highs were taken out.

You were right, EA didn't break resistance, however I'm thinking it will just by eyeballing. It's ranging right now, in a pretty wide range that is common for EA. There is liquidity above the last swing high, it should get taken out at some point soon.

Right now I'm more bearish on euro crosses than anything else, even though they're choppy and slow.

As far as the USDx, this is what I'm seeing for today...