Tag Archive for: price action context

What you’ll learn in this forex trade plan article:

-How do you build a successful forex trading plan?
-How do you evaluate whether your trading plan is working?
-Why you need a forex mentor to help with your trading plan

One of the more common questions I get from traders is “how can I build a successful forex trading plan?” If you’ve had this question before, or feel your trading plan is not sufficient, confusing, or not working, then pay attention because this article will answer your questions directly.

From my experience, you will need (at a minimum) these 5 major components to be in any successful forex trading plan you make. Let’s go through them.

#1 Your Why

From my experience, you need a ‘why‘ as to why you’re doing this. It should be the ‘core‘ reason and inspiration behind why you’re trying to become a successful trader.

For most traders, the why is simple:

“To build financial independence while working from home, having more time to spend with your friends, family, while determining your value and income, and having no limit to the upside you can make.”

Would this pretty much encapture the main reasons why you want to become a successful trader?

Now there is certainly a deeper discussion we can have about your ‘why‘ and what you think it will give you, but for now, my guess is almost all of you fall into the above reasons why you’re wanting to become a professional trader.

The reason why I suggest getting really clear about your why is it will remind you (no pun intended) why you are doing this, but more specifically, why you should work hard to achieve your goals. This is helpful when things are going wrong as that is when you need a boost in motivation and connection to your why.

By having a personal and emotional connection to your why, you’re more likely to stay focused and keep going when things are challenging.

#2 Daily Preparation

Ever watch a professional sports game, particularly before the game starts? What do you notice if you turn on a football game a few hours before it starts? You’ll see the same thing across pretty much every sport on the planet.

All professional athletes start hours before the actual game/contest doing one thing: Preparation!

They are preparing their body and mindset to get ready for the game ahead. Take a look at this 30 second video of Odell Beckham Jr. (American Football Player) getting ready before his game.

What do you see him doing? Rehearsing the exact same things he’ll be doing in the game (running routes, making cuts, catching passes). Keep in mind, this is after he’s done his stretching and exercise routine to get his body warmed up for this.

Now I have one simple question for you: “Do you think trading should be any different when it comes to preparation?” 

The question is mostly rhetorical, however when I quiz most struggling traders about their pre-trading routine, its usually very minimal at best.

Now I know many of you have full time jobs and lead busy lives, and perhaps only have 1-2 hours per day to trade. If that is the case, then I’d suggest spending at least 15 minutes preparing mentally for your trading day. This should be finely crafted into a very specific routine you execute day in, day out.

What should you be doing during this preparation phase of trading? At a minimum:

1) getting your mind (and ideally body) in an optimal state for trading
2) mentally rehearsing everything you need to do during your trading day
3) after you’ve done the above, then starting your pre-trade routine

The above is what I would call a ‘sufficient‘ and ‘expedient‘ way to prepare for your trading day and get you in a mindset + state to make money trading.

#3 Core Trading Mechanics

Now that you’ve 1) connected with our ‘why‘, and 2) mentally prepared for your trading day, it’s time to sit down in the chair and start trading your edge. However, you need to clearly lay out what you are trading, and how. These are your core trading mechanics and a blueprint of what you’re trading.

In this part of the forex trade plan, you need to cover the following:

1) markets/instruments you are trading (should be fixed in the beginning until you’re at least stable or consistently profitable)
2) what strategies are you trading (these should be very clear what you are trading, along with the parameters/conditions for each strategy and setup, such as entry, SL and TP conditions)
3) what time frames you are analyzing the price action context and making your trading decisions from

In the beginning, I recommend trading no more than 5-10 instruments (less is usually better in the beginning) so you can learn their price action, volatility and order flow patterns by watching the same instruments day in, day out.

Gaining familiarity will allow you to find more trading opportunities in those instruments over time, and thus profit more.

You’ll also need to know exactly what trading strategies you are using day in, day out so you’re very clear about what setups you should be focusing on, and what you should let go of.

Forex Trading Tip: Once you know what strategies you are using, make sure you have screenshots of those setups (ideally you trading them successfully live) so you can imprint these patterns and charts into your brain. This way when that same pattern in the price action shows up, your brain will (sub-consciously) tell you “Hey, that’s a good trade, you need to jump on this.

#4 Risk Profile

This part of your trading plan is all about risk, and risk is all about the numbers (mathematics). It’s a confluence of the risk required to make a maximum amount for each trade, your risk tolerance and risk capacity.

risk profile 2ndskiesforex

There are several things which will help determine your risk profile in your trading plan, such as:

1) % risk per trade
2) max risk per day
3) max risk per month

NOTE: If you want to learn why we recommend a % risk based model, click here.

Regardless, you’ll need to know exactly what you’re risking per trade and it should be consistent. This is because you could be varying your position size, but if you increase size on your losing trades, and decrease size on your winning trades, you’re leaking your edge (losing money where you shouldn’t be).

Since you don’t know whether your next trade will be a win or a loss, you need to be risking a fixed % per trade.

I also recommend having a max risk per day so you can shut things down if you’re off for that day. This will minimize your downside when not on your game.

In terms of your max risk per month, this is the same concept as above.

Trading Tip: If you want to avoid having major draw-downs you’re unlikely to recover from, we recommend having a max risk per month <10%. For every month you have a 10%+ drawdown, you decrease your chances exponentially you won’t recover your losses by year end.

Also in your risk profile, you should be aware of your risk of ruin, which tells you mathematically a) whether your account will blow up, or b) whether you’ll mathematically make money. So critical you understand your risk of ruin.

risk of ruin table 2ndskiesforex

If you want to learn more about the risk of ruin for trading, click here.

#5 Analytics & Review

Every successful trader reviews their trading for the day. Just like an athlete reviews film from their past games to see what they could improve upon, you have to have a process for reviewing your trades each day/week/month.

A simple way to relate to this is:

“You cannot change what you cannot measure.”

(Pro football players reviewing film below)

If you don’t measure and review your trading performance in detail, you’ll continue making the same mistakes over and over again. Have you had this experience? If so, most likely you’re not reviewing and analyzing your trades and trading performance properly.

I recommend the following:

1) spend at least 15mins each day reviewing your trades for the day
2) spend at least 1hr per week reviewing your performance and execution for the week
3) spend at least 1hr per month reviewing your overall stats

What should you be reviewing?

1) charts for each and every trade, showing the price action context before the trade, along with your trades entry, SL, TP, & the result
2) how well did you execute your trading plan (were you over-trading?)
3) what was your performance (stats) for the month and how does that compare to your baseline?

By having a time to analyze and review your performance, you’re teaching your brain to spot the habits and actions which led to making successful trades, which further reinforces good trading habits.

In Closing

These are the 5 major components you’ll need for any trading plan you create. There is a lot more that could be said on the subject, but this should give you a solid framework to build your own trading plan.

In the beginning, you’ll need to do some experimenting to tease out what feels more natural for you. I recommend doing this in 3 month chunks so you don’t change your plan too often, and give it enough time to play out.

Eventually, you’ll likely need some feedback on fine tuning your forex trading business plan. This is where a forex mentor really helps, because they can see things you’ll likely be missing, and can give you actionable insights on  how to increase your profits, accuracy and performance.

Below is one of my students first quarter performance for this year whom I’m constantly helping with their trading plan.

trading analytics 2ndskiesforex profitable traders

If you’d like to learn more about our Trading Masterclass course and how we can help you build a successful trading plan, click here.

Now Your Turn

Did you learn something from this trading plan article? Notice anything lacking in your current forex trading business plan? Feel like you have a more clear idea how to build a successful forex trading plan?

Make sure to leave a comment below, and share this article on social media.

Until then, I’ll look forward to hearing from you.

Additional Resources: What if your trading plan is costing you money?

I wanted to write a brief trading mindset lesson for today as I’ve been ‘out of pocket‘ for days now. I recently caught a nasty flu virus that has taken the piss out of me.
Fever, sneezing 100x per day, congestion, phlegm, cold shakes, trouble breathing, you name it, I’ve had it for the last several days. Luckily my girlfriend has been awesome in taking care of me, so a big shout out to her (if she actually reads this :-o).
Speaking of which, my girlfriend actually inspired this short trading mindset lesson.
The other day, the fever really set in. To me, this is a bad situation and experience. Who thinks getting a fever is a good thing?
However my girlfriend said something which got me thinking about trading. She said, “Oh, the fever is a good thing. It means your immunity is really kicking in to fight off the virus.

And that got my mind thinking about my process of making money trading, and those who struggle to make money trading (perhaps you are one of them?).
If you are struggling to make money trading, you’re probably experiencing ‘symptoms’.
These could be:

and more…

Have you experienced any of these trading mistakes or symptoms?

Most likely you have, and I did just like you do now.
There is a reason you experience these trading symptoms.
Your brain right now has a 99% chance it isn’t wired to make money trading. This has to do with our brains evovled and development over time.

Right now, you have many components and neural structures in your brain. Some of them are new, such as the pre-frontal cortex, which allows you to make analytical decisions (i.e. reading the price action context in the chart).
Some of these structures on the other hand are very old, like millions of years old. One of them is the amygdala, and it is one of the most frequent actors to cause you to trade poorly.

Why? Because for most of our human existence, we experienced life threatening situations as a daily occurrence.

Think about this fact:

1 in every 8 lads died from protecting our families and resources 10,000 years ago.
In the 20th century, that number is 1 in 100 (I’ve written another extensive article on this subject which you can find here).

Why does this matter to you as a forex trader?

Because of this experience, parts of our brain (such as the amygdala) are heavily wired as if we’re dying at a ratio of 1 in 8. This wiring causes us to experience things today, even though it’s not reflective of our current reality.
So you today right now in front of the charts are trading with old parts that aren’t accurate, nor wired to make money trading.
Your amygdala has several functions, such as:

  • Having a primary role in the process of memories
  • Decision making
  • Emotional responses (more negative than positive)
  • Along with affecting your reward systems

Now think about the above 4 things for a moment.
Let’s say you have an emotional response to trading, such as opening a trade, and the market instantly goes against you. What’s the first thing you’ll likely experience? Doubt, fear, worried about a loss, etc.?

Do you struggle with these emotions while trading?

That’s your old amygdala and wiring affecting your trading performance now.
In fact, your amygdala can get so easily triggered, that every pip the market moves against you is experienced way more intensely than every pip it goes for you.
Have you experienced this before? If so, you’re experiencing the ‘symptoms’ of your old neurological wiring.
Now circling back to being sick and having symptoms, when you experience FOMO, revenge trading, start over-trading, get worried about a profitable trade starting to go against you, etc…you’re experiencing the ‘symptoms’ of your brains wiring, which by and large, isn’t currently wired to make money trading.

When my girlfriend told me the fever is a good thing, my initial reaction was:
“What? Why the heck is feeling like I’m burning alive a good thing?”

But this was simply my immune system kicking in and trying to fight off the virus.
And that is very much how your trading symptoms are. You see, you and your brain want to make money trading. You want to experience less negative emotions, you want to avoid over-trading, you want to be able to trade without being worried of missing out.
You experiencing these things is your brains way of telling you ‘something is wrong, I think this is a bad situation’ but in actuality, it’s not.
You and your brain want to evolve, fix your trading mistakes, and make money trading.
But you can’t until you start to change how your brain is wired.

The good thing is, you can wire your brain to make money trading, but currently, you’re experiencing these ‘symptoms’, and you’ll need to make adjustments to get better.
If you want to learn how to make money trading and rewire your brain for trading success, then check out my advanced price action course where we teach you how to fix your trading mistakes and make money trading.
And if you’re really hard core about changing your brain and wiring it for success in trading (and life), then check out my advanced traders mindset course, where the entire focus is on changing the way you think, trade and perform so you no longer over-trade, you no longer experience FOMO, you no longer revenge trade, and no longer get derailed by your negative emotions in trading.
traders mindset course 2ndskiesforex
I hope you enjoyed this brief article on the trading mindset and how to fix your trading mistakes.
Also a big shout out to my apprentice ‘Sascha‘ who helped me finish this while being under the weather.
Make sure to comment, along with sharing it with others as sharing is caring so that others don’t have to make the same mistakes you and I have in trading.
Time to wire your brain to make money trading.

In today’s article I’m going to talk about an important subject in forex trading psychology called ‘the comfort zone‘.
Before we get into this important trading and mindset lesson, I’d like to talk about a close relative of mine named ‘Vesh‘.
Vesh recently had his 2nd hemorrhagic stroke in 5 years.
Most people who have two hemorrhagic strokes aren’t very functional. Vesh is definitely an exception.
He was a database programmer for decades, and ironically, after the stroke, can still do database programming.
brain image after stroke
However there are many things he cannot do as a result of his two strokes.
Such as numbers…he’s not that good with numbers any more, and often gets them confused. If he’s talking about something from 100 years ago, he might say ‘Back over 20,000 years ago in England, the British…
To compensate for his brain being damaged, he eats the same thing every day. It’s what he’s most ‘comfortable’ with and makes it easier for him. Man is it easy grocery shopping for him every two weeks 🙂
How does this relate to the comfort zone and trading successfully?
How your brain and body is wired right now is what you feel most ‘comfortable‘ doing. My friend Ross runs 5 days a week, 2 miles a day, so he feels quite ‘comfortable‘ running 2 miles a day 5x per week.
flight runner
However if one day, I came up to him and said, “Today you’re going to run 20 miles, and you’ll do this 3x this week,” Ross is not going to feel very ‘comfortable‘. In fact, he’s going to feel profoundly uncomfortable attempting such a feat.
Just like Ross, whatever is outside of your brain, body and psychology to do comfortably right now is called being ‘outside’ your ‘comfort zone‘.
This is where an article by Noah Kagan comes in. Noah is a highly successful entrepreneur who recently wrote an article called ‘How to Step Outside Your Comfort Zone in 2018′.
It’s a well written article with some simple steps to accomplish this, which I definitely recommend reading.
However he makes one major error in how he defines growth in relationship to your comfort zone.
He says, “growth happens outside of your comfort zone.
While technically true, it’s also ‘false‘ at the same time. Wait, how can something be both true and false at the same time? Let me explain.
Growth in your brain, mindset and body will happen when you go outside your normal programming, or what you’re currently wired to do easily now.
comfort zone 2ndskiesforex
The same goes for you and your trading, and this is why it’s important to go ‘outside‘ your comfort zone, so Noah is correct in saying ‘growth happens outside your comfort zone‘.
However, Noah fails to make an important distinction here regarding your comfort zone.
There is a range you can go beyond this where there is ‘growth’. This range or ‘zone’ has also been discussed by those who talk about ‘being in the zone’ or ‘peak performance’ (image below).
peak performance zone 2ndskiesforex
However, if you go too far outside this zone or range, you won’t grow at all. In fact, you will almost certainly fail.
Hence there is a range you can go outside of your comfort zone and still have growth. This is what I call the ‘challenge zone‘ or ‘learning zone‘.
Asking Ross to do 2.5 miles per day is ‘challenging’ himself.
But asking Ross to run 20 miles today, and he won’t grow. He’ll struggle, experience pain, and most likely will fail.
The same goes for you and your trading (especially if you’re struggling).
Where you are right now in your trading process, there are definitely some strategies, methods or tasks you are just not ready for right now.
For example, if you don’t know how to read the basic pillars of price action context in the forex market, you’re definitely not ready to trade a price action strategy. If you don’t even have a trading plan that you can easily execute day in day out, you’re not ready to trade $10 million dollars.
Hence while Noah was correct in stating that ‘growth happens outside your comfort zone‘, so does failure by going too far outside your comfort zone. Venturing too far outside your comfort zone is what I call the ‘panic zone‘ or ‘failure zone‘ (see below).
comfort zone learning zone and failure zone 2ndskiesforex
You have to make this important distinction (and know the difference) if you want to succeed in trading forex.
I think this is where most struggling traders in their trading process fail. I see many traders taking on methods, skills or strategies they simply aren’t ready for yet.
While I think it’s a good idea to ‘challenge‘ yourself and go outside your comfort zone, going too far will almost always lead to failure.
It’s important to learn what are the various steps, skills and mindset you’ll need to learn along the way so you don’t go too far outside your comfort zone, and set yourself up for inevitable failure.
Thinking you can start making money trading price action without having a trading plan, without proper risk management, or without forex training isn’t a path to success. It’s setting yourself up for certain failure.
This is one of the most common mistakes I see struggling traders and students make.
I get it…you seriously want to succeed in trading forex, you want to work from home, and make more money than you could in any ‘job‘. And you see that I make money trading and am a professional trader.
chris capre verified trading performance 2ndskiesforex
I get it…who doesn’t want to do that? That’s why you’re here, to learn how to trade the forex markets.
But there is a difference between the challenge zone (growing), and failing consistently (failure zone).
If you are constantly losing money trading, and consistently making the same mistakes, most likely you’re going too far beyond your current skill set.
You’re likely in the ‘failure zone‘, which 99+% of the time will lead to you losing money trade after trade, month after month, feeling like you’re not going anywhere.
losing money trading
If you have this feeling, that is actually a good thing, because it’s your self-image and unconscious mind telling you “Hey, you’re too far outside your comfort zone.
If that is your regular experience, then it’s time to get a forex mentor, one with a proven track record of successful forex trading.
Chris-Capres-Verified-Forex-Trading-Results-2017
Hence if you want to stop making the same mistakes day in-day out, month and after month, losing money consistently, then check out my trading course or my mindset course, both of which give you insights into the psychology of successful traders as well as a step by step process on how to trade successfully.
Did I describe your process and trading experience? Does any of this sound like you? If so, I want to hear your comments and feedback below.

NOTE: Check out Chris Capre’s Verified Forex Trading Results for 2017
As 2017 comes to a close (an interesting one thus far), I wanted to share my top 12 currency trade ideas for 2018. In sharing these forex trading Ideas, I’ll be talking about the price action context, key levels, trend bias, and where I think these forex pairs, stocks, CFD’s, commodities, and or global markets will hit next year.
FYI: They are not in any order of value or strength. Just what I’m seeing as the top currency trade ideas for 2018.
1) Bitcoin
As I’ve talked about in my video on crypto-currency trading, I think most people are overlooking key aspects of Bitcoin. In my view, it’s disruptive on a global scale, and will likely be adopted more in 2018 than it was in 2017.
I personally bought bitcoin around $3,000, Ethereum around 200, and Litecoin near 42. I even tweeted about this ahead of time.
Where are they now?
Bitcoin +320%
Ethereum +210%
Litecoin +200%

You’re welcome…
Now while I think all of them are due for a pullback (which they average about 1x every quarter between 25-40%), I’m looking at buying more bitcoin for a long term play. Let’s get into the price action context and where I see it going.
Bitcoin Price Action Analysis
Looking at the chart below, you can see where the crypto currency started, and where it is now. In my view, price action like this looks almost parabolic, and getting ‘frothy’. Do I think the price action is exhaustion? I’m not 100% there yet, but we’re getting close IMO.
bitcoin price action chart 2ndskiesforex
In parabolic, or exhaustion price action moves, each successive leg climbs faster, higher or both and will have a steeper angle on each impulsive leg up. This has to do with an acceleration of order flow as more players from institutional to retail move in.
If you look at the moves from P0 to P1 (1800-4900), that is $3100 from July 16th – Sep 1 (46 days). The next leg P2-P3 went from $3000 – $7600 (+$3600) in about 50 days. The last run went from $5500 – $11400 (or +$5900) in just 17 days. So all 3 impulsive legs up getting bigger in price moves each time. That is looking ‘frothy’ to me.
Hence I’m looking to buy on a pullback either at the first key support zone, or the major structural support. Also, a 40% pullback in price would bitcoin just under $7000, while a 30% pullback towards $8000.
Where do I think bitcoin is going next year? Assuming it doesn’t have a major crash (like it has 3x in the past of 50+% or more), IMO bitcoin will hit $20K before the end of 2018. If we get that major crash, it could be years before it makes new highs.
To Summarize:
ST Price action context: neutral to slightly bearish with current volatility
MT Price action context: bullish
LT Price action context: bullish
2) USDCAD
Jumping straight into the price action context for the CAD, the most important thing in my mind is the false break that happened late in Q3.
USDCAD trade ideas and price action context 2ndskiesforex
After breaking a multi-year support level around 1.2449, instead of finding new sellers and continued interest from current shorts, the pair broker sharply back above the key level, forming a false break setup.
After spending 3 weeks holding the key level, the pair has surged and is now holding for over a month above the weekly 20 EMA. All of these signs point to IMO more bullish prices for the pair.
1.2673 and 1.2449 become ST support in the current context while the next key resistance zone for bulls is between 1.35 and 1.3750.
To Summarize:
ST Price action context: bullish
MT Price action context: bullish
LT Price action context: neutral
Alibaba (BABA)
One of the most successful companies to come out of China recently, Alibaba (owned by Jack Ma) has had an amazing 2017. Starting at about $90, the stock is set to end November around $175, or a ~95% gain on the year.
Alibaba trade ideas and price action context 2ndskiesforex
When I look at the current trend and price action, I see a clear bull trend with expanding volatility. Course members will recognize the UVT and what that means in terms of the order flow behind the market.
The expanding volatility (or UVT) doesn’t signify a trend change, so I’m remaining bullish on the stock for 2018.
The first major support zone comes in just under $160 and goes to about $145 where you can see a PBO setup.
The next support IMO is the pre-gap highs at $125.
Assuming we don’t get a major market crash (similar to 07-09), I’m expecting Alibaba to hit $300 next year, and a ‘most optimistic’ case with a $400 price target.
Simply put, this doesn’t look like the price action context or chart of a stock that is reversing or ending it’s bull trend.
To Summarize:
ST Price action context: neutral/volatile
MT Price action context: bullish
LT Price action context: bullish
Want to see my other top trades for 2018?
Then check out my Advanced Price Action Course where my members got a full video breakdown of my other top trade ideas for 2018.
In that video, I discuss the price action context, key levels, trend bias, potential entry points and price targets.
Course members also get access to my member market commentary (2-3x per week), access to the private member trade setups forum, trader quizzes, private member webinars and a free skype follow up session with me, so quite a lot.
I hope you enjoyed these trade ideas and hope to see you in the members area soon.

Learn 5 simple steps on how to prepare for your trading day.
Here is a link to a meditation practice for traders
Learn the base model for understanding price action context

albert einstein not following the crowd
This article is going to be a tad ‘controversial‘ to many developing traders out there. It is not meant to be negative in tone or start arguments.
It is to get you to question what you’ve been told about price actionIt is to open up a dialogue, about another way of approaching PA beyond the typical narrative.
The general price action story spun out there goes something like this;
To make any buying/selling decisions and pulling the trigger, it ultimately comes down to one final piece of the puzzle.
This final piece comes in the form of a ‘confirmation price action signal‘. And said ‘signals’ only arise in the form of a 1 or 2 bar combination.
They come in many names, such as pin bars, inside bars, fakey/false break setups, or engulfing bars.
pin bar fakey price action signal failed
And the follow up to this magical fakey pin bar signal…
pin bar fakey price action signal failed 2ndskiesforex
Regardless of the name, the idea is the same. You should not enter the market till you see one of these famed 1-2 bar price action patterns.
Thus far, everyone spinning this narrative are derivatives. What do I mean by this?
Those who preach confirmation price action signals, copied all they knew (with minor adjustments) from someone else.
Many of them were students of one individual (Nial Fuller). A little investigation will reveal Nial Fuller’s price action strategies are also derivatives.
He was a member of J16 and copied all he knew from there, again with only minor adjustments.
If you look at most of the price action mentors, you’ll see the overwhelming similarity & repetition. Now you know why the narrative around PA sounds the same.
Essentially, they are either a derivative (copy) or a derivative of a derivative (copy of a copy). What you’ll also notice is none (or almost none) of them have institutional experience.
What’s really being sold here is a ‘green light buy/red light sell‘ methodology. It’s targeting easy prey who don’t want to do the work, who want understanding price action to be easy, who want to be lazy traders (in their own words).
Yes, with just three simple setups that are easy to find, you too can make profitable buying and selling decisions! Or so you are told…
The reality is far different from this (especially in institutions and hedge funds). By the end of this article, I’m guessing you’ll start to see why.
Below are my 5 reasons why hedge funds don’t trade confirmation price action signals.
 

Reason #1: Paying 5-6 figures To Train Their Traders?

smb training
photo: smbtraining.com (does it look like he’s sitting there just waiting for daily pin bars to form???)
The skill and time required to identify pin bars, inside bars, fakey’s and engulfing bars is minimal (a few months max). Shoot, you can even build an algo to do this for a few hundred dollars.
Bank traders on average will make 2000-4000 trades before they can trade the bank’s money. Hedge funds will also spend large amounts of money and time either training or finding talented traders.
If trading is as simple as finding these three patterns to enter the market, why spend so much to find/train traders what a $300 algo could do?
There is a reason for this.
Because reading and trading PA goes beyond confirmation price action signals. Because buying and selling decisions aren’t as simple as these 1 and 2 bar patterns.
If they were, there would never be the need for such expensive and exhaustive training programs. Would you ever spend that much training someone to trade daily pin bars?
My guess is no.
 

Reason #2 Macro + Technical

prop tradinng firms
 
If a fund is not trading algorithmically, most likely they are incorporating a combo of macro (read fundamental) + technical analysis.
I talked about this in my article Book Review: Cultures of Expertise in the Forex Trading Markets. The author (Leon Wansleben) is a sociologist who followed forex traders at a top-10 German bank desk for over a year.
Never once are the words ‘pin bar’, ‘engulfing bar’, ‘inside bar’ or ‘fakey’ mentioned in the book.
What you do find is traders working a combination of macro/fundamentals + technical analysis into how they trade.
They also discount the ‘lower time frames are noise‘ meme pretty quickly. Why?
Because most bank traders have to be reading the intra-day price action (due to flow trades, which accounts for about 70% of their trades).
By the end of the book, you realize entering the market goes way beyond pin bars, engulfing bars and inside bars. You realize they aren’t even trading those to make their buying and selling decisions.
 

Reason #3 Confirmation Decreases Accuracy and Profitability

 
“I was in (insert derivative name here) price action course and quickly realized how weak it is compared to yours. 
I’ve made over 20% in the last few months using your methods. I’m glad you poked giant holes in his price action strategies. 
Otherwise I’d still be waiting for pin bars and inside bars, missing hundreds of pips.
After posting my video How A Typical Pin Bar Entry Is A Retail One, many struggling traders started to see price action differently.
They realized how many times they were sitting on the sidelines doing nothing when others were making money. They also realized how waiting for ‘confirmation signals’ decreased their accuracy and profitability.
To learn why this is the case, watch my video below.
pin bar entry is a retail entry
 
 

Reason #4 Waiting for Confirmation Price Action Signals is Passive Trading

 
Hedge funds and bank traders are (if anything) passive when it comes to entering the markets.
Institutional traders would not (and could not) be making trading decisions once a daily pin bar has formed.
If they were doing this so consistently, they’d be picked off by HFT’s or predatorial funds who could see their entries a mile away.
This is on top of the fact they’d all be competing for the same liquidity and relative price, which would only mean a worse entry and lesser profits on the same trading idea.
A little investigation into how predictable these entries are will change your perspective on trading.
 

#5 The Pepsi Challenge

pepsi challenge
Ok, let’s say you are a devout believer the real way to trade price action is via confirmation price action signals.
Let’s say the above 4 reasons didn’t convince you. We can simplify this through a pretty simple test – The Pepsi Challenge.
Your challenge, should you choose to accept:
Walk into a dozen or two hedge fund offices, bank trading desks and prop trading firms. Then ask them these two simple questions:
 
1) If you don’t see a daily pin bar, engulfing bar, or inside bar, are you staying out of the market?
2) If you do see a daily pin bar, engulfing bar, or inside bar, are you loading up on your position even more than usual?
 
I’m willing to bet the answers to the above questions will be a resounding NO.
More likely, you’ll get several laughs, along with someone perhaps escorting you out of the office.
 

To Date

waiting 2ndskiesforex
As it stands right now, nobody has taken me up on this litmus test (let alone proven otherwise). I’m still waiting as I posted this challenge many months ago.
I am confident(while open to being wrong) that after you take this test, you’ll look at price action differently.
Once you let go of the current narrative, you’ll be forced to examine how order flow and the balance/imbalance between buyers and sellers is reflected in the price action. You’ll begin to see how liquidity impacts the PA and volatility.
And you’ll start to trade contextually, meaning through the price action context.
That is when your real training in PA begins, when you let go of the freshman narrative. You’ll also realize trading those 1-2 bar patterns does not build your trading skills.
If trading pin bars really built PA trading skills, then bank traders would be going through thousands of reps on those alone.
It takes no skill to find those signals and spend your time looking for them. And doing so discounts all the other candles in the process.
 

About All Those Other Candles…

 
All those other candles is what forms a structure. This ‘structure’ is (by and large) a representation of the order flow.
The order flow gets reflected in the PA, and this PA forms the price action context.
This is where your study should be.
 

In Conclusion

 
Looking for 1-2 bar patterns doesn’t make you a price action trader. It makes you candlestick trader, and that is a different approach to the markets.
When you investigate it, hedge funds aren’t trading via confirmation price action signals. And when you stop waiting for confirmation, you’ll find yourself getting better trade locations and higher + R per trade.
Looking at the market contextually will change your mindset. You’ll start trading and thinking in probabilities.
You’ll also discover how waiting for confirmation is a retail traders mindset.
With all that being said, do you agree or disagree with these forex confirmation price action trading misconceptions? Can you see how hedge funds aren’t trading price action signals this way?
Even if you don’t agree, please do comment and share below (in a non-negative tone por favor).
Regardless, I’m hoping you’ll really open up to other ways at trading price action.
Until then – may good health, trading profits and success be with you.

Changing tack a bit here, I’m going to be covering a losing trade forex management analysis here to give you an idea about price action, trade management and what I learned from this trade.

In my weekly trade setups commentary, I covered the USDJPY which had just broken range resistance and the ‘big figure’ at 125, suggesting more bullish price action.

I trade more with trend vs. counter-trend and was definitely bullish on this pair, so looking to get long.

Below is a 1hr chart of the pair right before the breakout.

usdjpy 1hr chart price action 2ndskiesforex

You can clearly see the uptrend movement starting from the bottom left of the chart, which eventually led to a corrective phase (blue box), or a period of balancing in the order flow.

Corrective phases at the top of a bull move and trend generally signal continuation, so was anticipating a breakout.

And the pair did just that, also forming an intra-day corrective phase at the highs (1hr chart below).

usdjpy price action breakout after correction 2ndskiesforex

After this breakout, I was looking to buy on a pullback. I talked about my buy being in the support zone around 125.10 – 124.75 so this was my trade location.

I put a resting limit order at 124.81 with a 30 pip SL and target around 126.60 for a potential +6R. If my idea is correct, we should minimally get a bounce towards the recent breakout highs.

My reasoning was as follows:

1) Price Action Context = Bull Trend, Impulsive Breakout, Volatile Trend
2) Corrective Phase led to breakout = Strong Bull + Factor
3) Balancing area was clearly defined = Strong + Factor
4) Looking to buy on a pullback into top of balancing area/corrective structure

If all the above is correct and the bulls are in control, they should maintain the breakout and will want to defend any pullbacks, along with potentially adding to their position.

Breaking back into the corrective structure would be a sign of weakness on their part, so I do not want to be long if we break past the upper area of the zone.

Hence this would invalidate my idea, and thus determined my SL location.

As you know, the trade resulted in a loss (see chart below).

usdjpy losing trade jun 8 2ndskiesforex

However, I did not take the full loss as I exited early for about half my original SL.

Why?

I was managing the trade in real time. If I had used a pure set and forget style trading, this would have resulted in a full -1R.

Instead it was a -.5R.

Now this may seem like a small deal only saving .5R, but over 100+ losses, this could result in a +50R to my bottom line!

I don’t expect each trade I manage personally (or exit early) to be the right decision every time.

Ever heard the old adage from professional traders ‘let your winners run and cut your losses quickly‘?

Does that sound like they are using the ‘set-and-forget’ method to manage their trades? I don’t think so, and neither should you.

Regardless, in managing my trades actively, I do not expect each time for it to be the right decision.

What I do expect is that overall I will have a positive expectancy in managing my losses (and winners). I expect with my trades that letting them ride to the set and forget SL or TP will not be as profitable or provide a greater edge vs. managing my trades.

Before I get into that further, let’s get back to the trade, show you what I was thinking, and why I exited the trade early.

Below is the 15m chart the candle before my actual entry, along with my trade location (entry) and my SL.

usdjpy trade location 15 min chart 2ndskiesforex

Now look at the 5m chart below and you’ll notice some greater detail on how the price action was reacting to the support zone.

usdjpy 125 bids stepping in 2ndskiesforex

You can see there were 3 touches/bounces off 125 (blue arrows) showing where the bids were coming in.

However, you’ll also notice something else (see chart below).

price action angles off key level 2ndskiesforex

Each reaction off the level is getting weaker.

This suggests the bears are pushing back the bulls and forcing them out of the market. The faster players are realizing this and getting out before it breaks.

I’ve talked about the importance of price action angles and how the PA is reacting to a level based on the angle it makes.

This is indicative of the underlying order flow, denoting the strength (or weakness) of the bids/offers in the market and around the level.

My original instincts were to just get out before the trade activated. I wasn’t totally feeling on my game yesterday, so was definitely slow to respond.

Shortly after my trade opened, there was a small consolidation (middle right side of chart above) which was also showing weakness.

Once the breakdown happened from there, I was out. If I was following my instincts, I would have either a) never been in this trade or b) exited early.

An off day mentally and it showed in my trade management.

Learning From Each Trade
Regardless, I learned something from it, and my philosophy regarding trading is either I win and learn, I lose and learn, or a I fail to learn.

The first two are wins to me because I learn something each time which translates into a greater edge and profits over time.

The last one is the real failure (and loss) IMO as there is something to learn (either about price action or my mental execution and mindset).

But this brings me to another key point.

Why Set And Forget Is Not Ideal or A One Size Fits All
Set and forget is one style of ‘forex trade management‘ and there are many trade management options available, all on sliding scale between passive and active.

If I’m a set and forget trader, and targeting a typical +2R, yet I can see the market is mostly likely to run for a +6, +8 or +10R, why would I just ‘forget’ about that?

Why would I not maximize my edge at every turn? Does a professional poker player just say ‘I only want to make x amount on this hand and that’s it‘?

Of course not – they want to maximize their gains from every single hand.

This is why stating the set and forget method is the be all end all of forex trade management tactics is a freshman idea.

There are a few instances I recommend trading the set and forget style of trade management (limited circumstances).

But I do not recommend it as a resting point or long term method.

You’ll limit your upside on runners, take full losses when you shouldn’t, and decrease your feedback loop over time.

It is true that managing a trade in real time takes more skill, psychological confidence and mental strength vs. the set and forget approach.

But that doesn’t mean we should avoid such a skill, venture or challenge.

Why put limits on your upside growth and performance? No elite performer does this.

What I do recommend is starting off with a set and forget style forex trade management strategy.

But once you’ve built up your skills of reading price action context in real time, then it’s time to move onto trade management methods which allow you to take advantage of long running trends.

Want to Build Up Your Price Action Skills?

My Price Action Course is specifically designed to help you build up your price action skills so you can learn when to stay in a trade, let it run for a large profit, or exit for a small loss.

This course is skill-based, meaning we teach you the core price action skills from the ground up. These can be used on any instrument, time frame or environment, and is the core skills I am always trading my live money with.

Did you find this forex trade management strategy article useful?

What style of forex trade management do you use, and have you ever wished you could learn when to cut your losses early and let your winners run?

As always, I want to hear from you on this one.

Thank you for reading this important post, and please do forward this to anyone you think can benefit from it.

One of the more crucial lessons in my price action course is called ‘The 10 Key Tips For Trading Support & Resistance Levels You Must Know‘.

In today’s article I’m going to share two forex support and resistance trading tips from the course lesson which can have a massive impact on your trading and understanding of price action.

The first one will focus on the price action context around key support and resistance levels between higher TFs (time frames) and intra-day TF’s.

For the record, I view the higher TFs as the daily and 4hr chart while the lower TFs to be between the 1hr and 5m charts.
The second key point around trading support and resistance covers the order flow and price action around high probability trades.

Intra-day Price Action Context Can/Often Will Contradict Higher Time Frame Context

Because of the higher time frame myth narrative (which states the only way to trade price action is via the higher TFs), those following this narrative have neglected a key part of price action.  That is learning to understand and read intra-day price action.
Because of this, traders have treated anything in the lower time frames as ‘noise‘ which is a false understanding of price action and time frames.

Lower time frames are just a different lens into price action and sometimes can offer a more nuanced understanding of the order flow behind the PA.

This has led to many traders not understanding that intra-day price action can and often will have it’s own context. This is a problem because we have to understand how the intra-day PA may affect or inform our trades for that day.

What it also translates into is intra-day price action context can and often will contradict the higher TF context.

Hence if we are trading with the intra-day context, but against the higher TF context, our holding times by default should be shorter and we should be anticipating (or be prepared) to exit quicker.

I’d like to share a good example of this principle with the USDJPY which has been in a large 550 pip range since the end of last year.

USDJPY Daily Chart
usdjpy daily chart

What you are seeing above is the USDJPY daily chart.

After a large bull run from 107.50, the pair entered a corrective phase forming a large range near the highs between 115.75 and 121.15.
You’ll see the range marked by the red box and the first two pullbacks into support (#’s 1 and 2) which were around Dec. 16th and Jan. 15th.

In the next chart, you’ll see the intra-day price action context on Dec. 16th via the 1hr chart.

USDJPY 1hr Chart
usdjpy 1hr chart

Notice how the intra-day price action context is completely different from the higher TF context?

By not segregating the two types of context (intra-day and higher) we can often get scared out of these trades as they run into our key levels impulsively.

Many times I hear struggling traders email me how they had a trade setup to buy or sell at a particular level and trade location.
Yet because they were watching the intra-day price action context only, they abandoned the trade.

However right after you let the trade go and canceled it for fear of getting stopped out, the market touches there entry location, bounces right off of it and runs straight to your target.

A great example of this is the USDJPY pair on Dec. 16th (see below)
usdjpy 300 pip bounce off key support

Hours later after not taking the trade, you are wondering why you abandoned your trade plan and missed out on a perfectly good trade.

Has this ever happened to you?

It’s certainly happened to me, and likely all of us at one point.

The key point here is it’s important to understand intra-day price action context can and will contradict the higher TF context.
This DOES NOT mean we abandon the lower TF context for the higher one. We have to understand it is information and can often add to our trade ideas.

But ignoring it and focusing on the higher TFs only is not the approach as this leaves you lacking a key skill – learning to understand and read intra-day price action.

And this skill will be of great value to you in locking in high +R trades when learning to manage them.

Impulsive Rejections & Short Holding Times At a Key Level are a Positive Confluence Factor

This one is important to understand regarding the order flow and PA around (and off) a key level.
Many times the PA will just consolidate around a level before making a move (to hold or break). There are plenty of price action clues we can learn to read which will intimate the more likely scenario.

But anytime you see a very large reaction off your trade location around a key support or resistance level, it usually indicates a positive confluence factor to your trade.

Why?

Because the sharp bounce more often is caused by large institutional players holding/defending a key level with strength.
Being able to reverse the move into a key level takes size and volume, and pushing back with vigor indicates the ability to absorb the pressuring heading into the level (often called ‘absorption’).

By creating a heavy imbalance between the buyers and sellers, this further reduces the counter-move interest and shows the order books are likely heavily stacked to one side which further supports your trade idea and location.
Also the fact the PA spent little time at a level indicates the speed of the buying interest from the institutional side which is also highly supportive for your trade.

The key take home point from this is to a) be able to observe and read the price action and reaction off the level to get an insight into the order flow around the level, and b) understand this impulsive bounce likely indicates a high profit potential trade.

An example of this is in the chart below on a live trade setup for the EURUSD we profited from heavily and I traded with my own money (really can’t believe I have to keep saying this as I’m only always trading with my own money).

EURUSD Live Trade
live price action trade eurusd profits heavy

Looking at the chart above, you are seeing a screenshot of when I was in the trade, showing my entry trade location (1.1075), my SL at 1.1050 and my TP and 1.1250/60.

This trade ended up hitting it’s target, but notice how the pair bounced off the support level quickly forming a pin bar rejection in the process.

NOTE: If you were trading the illusory pin bar 50% retrace tweak entry, you would have gotten a much worse entry location vs. mine.
It is important to understand why confirmation in price action is an illusion and how it hurts your profits.

Regardless, the nice tail rejection + closing on the top of the bar indicates strong buying off my entry location.
The fact the next two bars also repeated the same meant a) my trade almost never went in the negative, and b) the strong impulsive reaction off the level indicates a high +R potential trade.

And that is exactly what happened profiting +186 pips on a roughly 25 pip stop for a +7.5R trade.
How often do you get those trading your daily pin bars?

In Review

Ignoring the intra-day price action context will leave you with a weakened skill level and ability to understand the overall price action context. Yes, intra-day context can and often will contradict the higher TF context, but this does not mean we ignore them.

It is simply ‘information‘ and can be highly informative for us when either trading intra-day, with trend, or counter-trend.
The information can also be informative to us about our trade when you learn to read the subtle price action clues before, and at the level.
Also we have to be aware of highly impulsive reactions off a key level as that could indicate a larger profit potential for our trade.

You may have a typical +2R profit target for your trade, but a highly impulsive and quick reaction (or short holding time) at your trade location may indicate there is a larger move in play (and thus more profit potential).

With that being said, what tips do you use to help trade price action around key support and resistance levels?

Please share, like and tweet these forex support and resistance trading tips along with sharing it on any forums or with anyone you think can benefit.

This is part 2 of a 4 part series. View the next one here: How the Typical Pin Bar Entry Is A Retail Entry or if you missed the first one, checkout The Price Action Confirmation Myth & the Retail Mindset

blind entry 2ndskiesforex 1

Preface

I’d like to preface this post before I share the meat and potatoes stew.

People are going to have differing opinions on how to trade, particularly when it comes to price action, and that is to be both expected and accepted.

I think as colleagues, it is perfectly ok to offer a critique on a trading method.  It helps bring greater clarity and information to the trading world, especially for developing traders.

As long as the critique and constructive criticism is not personal, and not based on speculation, but simply comparing the differences in technique or approach, then it seems perfectly fine (IMO).

We see this in science, mathematics and medicine, so there is no reason why it cannot or should not be here.

I’ve recently posted a video on Why Confirmation is A Retail Traders Mindset, and not how professionals think.

This article is my critique and explanation of how and why the forex blind entry method communicates a retail traders mindset about price action.

Let’s begin.

The Critique On The Blind Entry

There is this retail version of price action, that trading a support or resistance level without a ‘confirmation signal’, is trading the market ‘blind‘.

It is called the ‘blind entry‘, because if you are trading without any confirmation signal, then you are trading the market blind.

I want you to think about that for a moment.

That a trend which has been moving for 1500 pips, selling off for 7, 8 or 9 weeks/months in a row…that if you are shorting without a price action confirmation signal (such as a pin bar, engulfing bar, or inside bar), that you are trading blind.

If that is how you approach price action, that trading without such a confirmation price action signal, is really trading blind, then you really don’t trust price action.

You don’t trust trading trends, you don’t trust price action context, you don’t trust an imbalanced order flow in the market, you don’t trust key support and resistance levels.

In reality, you really don’t trust your ability to trade at all now, do you?

Do you really think that a professional bank, prop or hedge fund trader has been sitting on the sidelines of the EURUSD downtrend these last several months, simply because they did not get a daily price action signal to ‘confirm’ the trend is valid?

Is that what you really think?

One has to ask the question, if attempting to join a well established trend, or entering the market without a ‘price action signal‘ (in the form of a 1-2 bar pattern) is trading ‘blind’, you really have to question that approach to the markets.

You have to question that understanding of price action as it is likely causing you to lose money.

In Closing

Are you one of those trading these price action confirmation signals?

Have you been sitting on your hands in trends that have moved thousands of pips, not trading them because you didn’t get ‘confirmation’?

If so, I want to hear your feedback and how this series of videos and articles is changing your perspective on trading price action confirmation signals.

Can you see the difference now in the two versions of price action being taught?

Which one do you think wins over time and why?

I want to know, so please comment and join the discussion below.

Did you like this article and find it useful?

Please make sure to like, share and tweet it below.

And do watch my next video in this series where I show the difference between the 50% retrace tweak entry vs. a professional traders entry.

 

This is part 2 of a 4 part series. View the next one here: How the Typical Pin Bar Entry Is A Retail Entry or if you missed the first one, checkout The Price Action Confirmation Myth & the Retail Mindset

This is part 1 of a 4 part forex price action strategy series. Read the next one here: The Blind Entry (How It Will Leave You Trading Blind)

I can always tell where people are in the trading process based on how they speak about confirmation. Why is that? Watch, and find out!

Here’s the transcription for the video:

“There’s a really big misunderstanding about confirmation.

When I hear people talk about confirmation and how they talk about confirmation, I can always tell where people are in the trading process based on how they speak about confirmation. Why is that?

Because there’s been this proliferated idea in the trading education world that to trade a setup or trend or something like that you need this thing called confirmation and the confirmation comes in the form of a pin bar, an engulfing bar, an inside bar or whatever.

So that’s the general idea that’s out there when it comes to trading price action.

The thing is, is that when I hear somebody talk about price action in this way, I know exactly what level of trader they are and what level of trader they’re not, because how somebody speaks about confirmation is very indicative of where they are in their trading process.

If a trader is looking for confirmation that a trade will work and they’re doing this because they’re saying “ok, we gotta wait for a price action confirmation signal from support or resistance“.

Well, where does this idea and need for confirmation come from? It comes from a beginner’s understanding of trading.

Why is that?

Because beginning traders are looking for certainty in the market. They’re looking for solidarity, they’re looking for something really really potent that says “I need confirmation”.

The reason why they need confirmation is because they don’t trust price action, they don’t trust their skillset.

They don’t trust trading as a whole. They don’t trust trading with trends, they don’t trust reversals. They don’t trust support and resistance, they don’t trust price action as a whole.

In the beginning, traders want solidarity, they want certainty. And because of that, they’re looking for confirmation in the form of a pin bar or something like that.

The pin bar ‘confirms’ that this trend is going to continue.

The thing about it i,s is that this is something that professional traders have let go of that a long time ago. And they have to let go of it to become a professional trader.

The reason why that is, is because that idea of certainty, of confirmation and the way that a beginning trader is looking for it, that wanting things to be really certain, that A++ setup.

Where that comes from is a beginning understanding of trading.

“Professional traders don’t look for certainty, because they’ve realized it’s an illusion.”

What professional traders are looking at, which is a different perspective, is trading and thinking probability.

So if you hear somebody talking about confirmation, “we wanna trade with the downtrend and we’re gonna wait for a pullback towards resistance and a pin bar off that resistance as confirmation that the trend is still in play and we can trade it“.

How many have heard that story before?

The reason why you’ve been told that is because the people who are teaching that aren’t trading professionally.

If they were you would know this, and all professional traders would know this because professionals aren’t looking for confirmation signals via a pin bar.

So if you hear somebody talking about that, you know where they are in terms of their level of trading.

They’re still a beginning trader themselves, and if you think about it, if somebody is talking about an A++ setup or they’re saying “hey, we’re waiting for a pin bar from resistance for confirmation“, besides the fact that I would suggest running from them as far as possible, because they’re still beginning traders.

You have to ask yourself “look, if you’re only willing to wait for a pin bar or an inside bar, or a false break, if you’re only willing to wait for those signals before you enter the market, well then you really don’t trust price action, do you?”

You don’t trust trends, you don’t trust price action context, impulsive vs. corrective, volatile vs. non-volatile trends, you don’t trust support and resistance, you don’t trust your own ability to trade.

You have to wait for all these other things to be in place and then this one final supposedly magical pattern and supposedly there’s only like 3 of them, which is amazing to me that this idea is actually out there, that there’s only 3 possible ways that the market is telling you a trend’s going to continue.

I don’t know about you but that seems kind of absurd to me. It seems a little insane to think that a market that is so complex, across so many players, across trends that continue.

Confirmation via a pinbar is an illusion, it’s a beginning way to look at trading.

So, your job as a professional trader… you know you’ve kinda crossed the Rubicon and made a big leap in your trading when you look at trading in terms of probabilities, not confirmation in the ordinary sense.

Confirmation, the way it’s normally talked about is a very dubious notion. It’s a very slippery idea that doesn’t really exist in the way you think it does.

If you’re constantly looking for those things you’re going to miss thousands and thousands of pips in a trend that is already well-esablished.

If you’re looking for confirmation, you won’t be able to make this trade and this trade and this trade and this trade. And that’s… what is that? +240-250 pips?

In a period of, what, 3 days? On one pair? You won’t be able to do that.”

This is part 1 of a 4 part series. Read the next one here: The Blind Entry (How It Will Leave You Trading Blind)

Have you been trading price action via ‘confirmation’? If so, I want to hear from you and what you see as the difference, so please make sure to comment below.

Was this article helpful? Please make sure to like, share and tweet it below to anyone you think can benefit from this.