Advanced Price Action Trading Course

Page 1

Price action setups - to be used as final confirmation for a trade

Perfect Pin Bar Criteria:

1. Candle body to close within the previous candle's range (the range is the high and low of a candle), the strength of the bulls & bears can be measured by where the price is closing - if price is breaking to the downside consecutively of the range of the previous candles, then selling momentum is strong. Pin bars signal reversal, they don't signal continuation.

2. Size of the body - twice (rejection wick), with a bullish pin bar the rejection wick is the lower wick, with a bearish pin bar the rejection wick is the upper wick.

3. Opposite wick to rejection wick to be very small or non-existent - we are looking for a market that is clearly one-sided, not a pin bar that signals market indecision.

Optional

1. Pin bar rejection wick must have unique chart space - otherwise you might get stuck in a choppy market and will be more likely to take a loss

Correct Engulfing Candle Criteria:

1. Engulf previous candle body

2. Candle range to engulf the previous candles range

Page 2

Horizontal Support and Resistance

Major levels of reversal

Should be used for both trade entry & exit.

Focus on major swings when identifying levels of support and resistance.

Mark at lowest / highest point of body, not wick.

Hourly charts.

Page 3

Head and Shoulders Pattern

trend reversal pattern

seen in uptrends (bearish signal)

peak (shoulder #1), followed by a higher peak (head), and then another lower peak (shoulder #2)

neckline drawn by connecting the lowest points of the two troughs (trendline)

slope of this line can be either up or down

entry order - to be placed below neckline

target profit - calculated by measuring the high point of head to the neckline (approx. how far price will move after it breaks neckline)

look out for diminishing volume on the tops

breakout indicates the pattern has completed, once pattern completes price will often, not always, move back to, or above breakout point

stop loss placed above high of the right shoulder

Inverse Head and Shoulders Pattern

occur after extended downtrend (bullish signal)

valley is formed (shoulder #1), followed by even lower valley (head), and then another higher valley (shoulder #2)

long entry - to be placed above neckline

target profit calculated as above

look out for diminished volumes on the bottoms

there is usually a burst of activity on the breakout

could be a neckline test/retracement after breakout

stop loss placed below the low of right shoulder

* the drawback of head and shoulder patterns is the low reward-to-risk ratio!