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Monday, 19 November 2018

Increase Profit Probability on Forex Trading

Price action is a way of trading by observing and analyzing the forms of pin bar formations that occur in candlestick charts. When our equity in trading is limited, choosing the right and careful price action strategy may be effective enough to save our equity "bullets".

However, even though trading using the price action strategy correctly and accurately will produce a fairly high probability of profit, there are other points that need to be considered. That point is our discipline and patience in observing the formation of pin bars that are formed to match the market conditions that we expect and we have learned in trading rules with price action. The following tips for doing so.


Avoid frequent market entry without targeting the right market conditions.

If we lift a load that is quite heavy, then the more power we spend the faster the load is lifted. But this is not the case in forex trading. The more we often enter the market with great power, the more our equity can shrink. This is because we often go into inappropriate market conditions, or strategies that we implement are less effective to deal with market price movements.

In the rules of the price action strategy, we are recommended to trade on a daily time frame basis, and only if the formation of the pin bar that is formed has met the rules for the new entry we did. To look at the pin bar formation consisting of 3 consecutive bars, it means that for at least 3 consecutive days we observe if at the beginning of the week a sign of formation is starting to appear. Maybe only once or twice a week we trade, but with the price action strategy that we apply it may be our probability to get a very large profit. In this case we are required to be patient and disciplined.

Learn to What Is Forex Drawdown?
Learn to Capturing Reversal with Surge and Canal Patterns

Setup price action and importance of confluence factors.

Confluence or call confluence in this case is a meeting of several factors that support each other in strengthening the rules of price action that have been formed. There are many factors, but the dominant one is support and resistance, both in the form of horizontal and dynamic lines in the form of exponential moving average (ema), usually ema 8 daily and ema 21 daily. In the following illustration we find 3 price action setups, each of which is supported by 3 confluent factors, namely: trend momentum ie uptrend, dynamic support layer from ema 8 and ema 21 daily, and horizontal support lines. Note that these three factors strengthen us for entry.

In the next case we note that there are 2 pretty good pin bars, but they are not supported by confluent factors. The pin bar that indicates the reversal of the trend turned out to turn around immediately (our predictions will continue to rise, it turns out). This is due to the absence of confluent factors such as trend momentum, line support / resistance, moving average, or even 50% fibo retracement.


In conclusion, besides paying attention to the pin bar formation, in trading with our price action it is highly recommended to confirm it with its confluent factors so that our profit probability is high.

Significant confluent factors are support / resistance levels, both in the form of horizontal and dynamic lines (moving averages) and Fibonacci retracement levels. Of course the trend of price movements is also important and of course we have anticipated before looking at other confluent actors.

In addition, the daily time frame is also highly recommended to avoid noise and signal errors at low time frames, especially under 1-hour time frame.

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