Each trader has his own methodology – however, this is one that has worked for me for over 15 years
Price Action Strategy – Filters & Triggers
The concept of filters and triggers fits perfectly into a price action trading approach
A filter is a set of parameters which must be passed before a trade setup is even considered.
See this price action program for full details but an example might be
- The market must be in an uptrend.
- The market must have only pulled back once already.
- The market must be trading above a prior resistance.
(additional indicator filters can also be added here)
If these criteria are met then a trade setup can proceed IF the trade trigger fires.
A trigger is a precise set of price action patterns that occur to trigger the entry (or exit) of a trade. A trade will never fire a trigger if it has not passed the filter process first.
An example would be:
- Price breaks below a very short term support level.
- Price then pushes back up above that level forming a candlestick wick under the support.
- The next candle is green.
The trader would then consider buying on that green candle for a continued drive higher.
The advantage of this filter and trigger approach to price action is that you are eliminating the very worst trades and waiting for not only the right conditions for that particular setup but also waiting for good trade timing to ensure you have a strong risk to reward ratio and aren’t pulling the trigger too early or missing the entry completely.
Price Action Strategy – Momentum Ignition & Exhaustion
As traders, we are either looking for the market to continue in the direction it is already moving or we are looking for it to move back in the opposite direction. (We try to avoid getting into a trade that just stagnates).
Momentum ignition is a strategy which looks for momentum before it really kicks into gear. The way price behaves can give the astute trader clues that may precede a strong momentum move. If you can jump on these before they really get moving you can capitalise on a strong move before others have committed capital.
Exhaustion is another price action strategy in which the trader looks for clues within the price behaviour to indicate the move has exhausted. Little tells from price can indicate this move is done and the market is about to reverse. Fitting into the mean reversion category of trades this is the ideal strategy to use to capitalise on those market turning points.
Where to Learn Price Action?
If you want to discover more about the price action traders approach and discover momentum ignition strategies and exhaustion trade setups, check out this price action trader program.
A price action method is perfect for traders looking for a clean, uncluttered way to view the markets. One that can harness your existing trader skills and give you a clear roadmap of potential price movement.
Many traders often start trading forex, indices or stocks with technical analysis, and many aren’t getting the results they want.
They are missing trades, getting stopped out, giving back gains, making seemingly avoidable errors, generally spinning their wheels are not making progress.
Price action trading is a different way of looking at the markets, it resets your trade analysis process and allows you to see price charts in a subtly different way.
Of course, nothing is the holy grail, and work is still required, but many traders who have now adopted this price action trading approach often wish they’d done it sooner.