PRICE ACTION TRADING EXPLAINED » LEARN TO TRADE THE MARKET

Every trader approaches the market differently. But no matter how you analyze the market, you need a trade trigger – a signal that tells you when to enter the market. It’s an essential part of your trading plan. While you have many options, price patterns stvà out as great candidates.

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Why?

A trade trigger must have sầu a precise definition. A trade trigger should help you become a decisive sầu trader. You need to know exactly when the trade is triggered and enter the market without hesitation. There’s no room for vagueness here.

A trade trigger should help you manage your trade risk. A well-timed entry can limit adverse movement & inkhung you when to lớn exit if the market is not going your way.

A price pattern fulfills both requirements.

You can define price patterns clearly with identification rules.

This does not mean that you must define a Sạc Bar like other traders. But you vị need to lớn stick to a consistent definition of a Sạc Pin Bar.

On top of that, a price pattern is the footprint of a short-term change in supply và demand.

Hence, it acts as a minor tư vấn & resistance feature. Accordingly, it offers a natural stop-loss level (also known as a pattern stop). This trait helps you lớn limit your trade risk.

Here, you will learn how to time your trade entry with three price patterns.

HikkakeThree-Bar Reversal (with a tweak for intraday trading)Pin Bar

The most efficient way lớn learn is by going through examples. For each price pattern, we start with its identification rules and over with a chart example.

In the examples below, we perkhung trend line analysis và use price patterns as triggers. In particular, we are employing the first strategy covered in this trover line trading article.

(Note to course students: All trover lines drawn are according to valid pivots.)

Price Pattern #1: Hikkake

A Hikkake is an inside bar failure pattern. This price formation ensnares the traders who gunned for a breakout trade with an inside bar.

Identification & Trigger Rules

Find an inside bar. This is Bar 1.Bar 2 must have sầu a lower high và lower low.Place a buy stop order at the high of the inside bar (i.e., Bar 1).Cancel the order if it’s not triggered after three bars (i.e., by Bar 5).

These rules are for the bullish Hikkake. Reverse for bearish entries.

Trade Example – Daily SPY ETF

This chart started with SPY in a bearish trend.A bearish Hikkake broke the short-lived bullish trkết thúc line. We expected the downtrover to continue.A bullish Hikkake pattern formed as a shallow pullbachồng to lớn the trover line.This bar triggered our entry as the market found support at the bull trover line. The pattern stop-loss was the lowest price reached between the Hikkake pattern and the entry bar.

Clichồng here for more Hikkake examples & in-depth discussion.

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Price Pattern #2: Three-Bar Reversal (Day Trading Tweak)

A Three-Bar Reversal pattern occurs too frequently in intraday trading. Hence, Alton Hill from TradingSyên ổn proposed an additional criterion for intraday Three-Bar Reversals.

Identification and Trigger Rules

Bar 1 closes down / is bearish.The low of Bar 2 is below the low of Bar 1.The low of Bar 3 is higher than the low of Bar 1.Bar 3 closes above sầu the high of both Bar 1 and Bar 2.Buy with a market order as Bar 3 closes.

These rules are for bullish Three-Bar Reversals. Reverse for bearish entries.

Trade Example – 4-Hour EUR/USD Futures (6E)

This bullish gap towards the bearish trover line threatened the bearish market.However, the market rejected it in the form of a bearish Three-Bar Reversal. Our trade trigger was the cthua thảm of this bearish pattern. The stop-loss point is right above sầu this price pattern.

(The quichồng failure of the two earlier bullish Three-Bar Reversals hinted at a continuation of the bear trkết thúc.)

Cliông chồng here for more Three-Bar Reversal intraday trading examples.

Price Pattern #3: Pin Bar

A Pin Bar is one of the most popular price patterns and is a useful trigger for many trading methods.

Identification và Trigger Rules

A bullish Pin Sạc Bar must:

xuất hiện above a supportTrade below the support for most of the bar rangeCthảm bại above the support

Reverse the rules for bearish Sạc Pin Bars, & look for a kiểm tra of resistance instead of support.

Trade Example – SPY ETF Weekly

You often hear that you can use price patterns on any time frame. While this is not true for the more complicated patterns, it is the case for simple patterns lượt thích the Sạc Bar.

This example takes on the weekly chart.

Many Sạc Pin Bars formed as the market rose. But this Sạc Pin Bar triggered our trade as it bounced off the bull trkết thúc line.The pattern stop-loss is just below the low of the Pin Bar.

Clichồng here for more Sạc Pin Bar trading examples.

Conclusion

Price patterns are not the only way khổng lồ trigger your trades. But they are practical tools for price action traders operating on all time frames.

They help you enter decisively và offer you with a logical exit point if things go south.

The examples showed how these patterns work within a trkết thúc line bounce strategy. Your trading strategy will work better with specific price patterns. Tweak your entry price pattern khổng lồ find one that’s compatible with your trading plan.

These are examples picked to lớn show you how to lớn use these patterns as trade triggers. They are textbook examples and are in no way proof of the profitability of these patterns.

chú ý on the Price Action Pattern Indicator

In the examples above, I used the Price Action Pattern Indicator. It marks out five price patterns including the three above.

An indicator is not necessary. But it is helpful for making snap entry decisions when a qualified price pattern appears.

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The Price Action Pattern Indicator has been updated recently for NinjaTrader 8 (NT8) which is the charting platkhung used for the charts above sầu.