In our War Room ‘Chart of the Day’ market commentary, I spoke about an Inside Day consolidation pattern that formed at a bullish hot spot on the daily time frame.
Looking at the USDJPY daily chart today where a bullish trading opportunity has manifested. The last daily New York candle closed as an Inside day, right at the ‘sweet spot’ where we should be targeting bullish trades. The Inside day had a nice bullish body with a close near its highs – which is generally a good indicator that the Inside day will break to the up side, not to mention the fact we’re nice and close to the mean and resting on a daily swing level here.
Traders should wait for breaks higher before considering long positions, the news calendar does show heavily USD based news this session, including an FOMC statement. This could cause the market to go crazy during the New York session, so apply your best money management.
The Inside day triggered and the FOMC statement injected volatility into the market that was in favour of our Inside Day breakout trade. This is a good example of how price action signals tend to line up nicely with news volatility – this is why we don’t concern ourselves too much with what’s happening on the economic news calendar.
The USDJPY clearly demonstrates the power of trading high probability price action signals. This Inside Day trade has allowed us to position into the market and ride the volatility – the best part is we were able to position in long before any of it occurred. These price action signals can be an ‘early warning’ system to what’s going ot happen in the market and allows us to anticipate future price movements – and take advantage of them.
The other markets also provided early warning price action signals to the upcoming move…
EURJPY long tailed rejection daily signal
The EURJPY market produces a ‘long-tailed’ bullish rejection candle off a strong support level earlier this month. These long tailed candles can generally be large in range so we take advantage of retracements down (or up) the signal candle to grab a better entry price and tighten up the stop loss spread. In turn this will increase the reward potential of the trade.
The bullish rejection candle shown here offered a nice retracement entry price, which soon after seen the market move upwards. The trade offered instant gratification, it was explosive, and positioned the price action trader into profitable volatility fueled from the economic and fundamental news – before it happened. The ‘early warning signal’.
The best part about it is these trades are set, forget and collect style end of day Forex setups. Once the trade was triggered, we don’t have to be in front of the charts to monitor these positions – the market takes care of the rest. You set up your trade, you forget about the markets and go enjoy your life and collect the rewards. Obviously not all trades will be ‘collectors’, but with our positively geared risk/reward money management system, you can remain ahead even with losing positions ( which are a fact of trading life).
AUDJPY 4 hour swing signal explosion
High volatility markets can also offer good intraday price action setups that allow you to tweak your entry and tighten your stop up even further. I am not a fan of trading on very small timeframes, but an intra day chart like the 4 hour is something we can work with under the right conditions.
This 4 hour chart shows a nice Higher High, Higher Low bullish trend pattern, creating very clear swing levels for price action traders to work with. This swing levels are we we high probability trade setups will form in-line with the trend. A 4 hour bullish rejection candle formed here off a swing level, demonstrating rejection of lower prices and that higher prices were most likely to continue. A 4 hour ‘early warning’ tip off.
The only concern is the overhanging weekly level that could post an issue. Conversely, if the weekly level is broken, this market will have the freedom to expand into higher prices without much resistance.
This is trading with price action at its best, this 4 hour bullish rejection candlestick signal now looks insignificant in contrast to the explosive upward movement that developed from it. I am not going to gloat here unnecessarily because I didn’t take this trade personally, but using retracement entry strategies – this trade could have returned over 1200% return on investment! Think about that for a second, you risk $100 and you get $1200 back in your pocket. You risk $1000, and you could have a nice weekend at the shopping center.
With our split risk money management system, trades like this could hit a ‘risk free’ status within a matter of hours – meaning if the trade ended up failing you wouldn’t lose any capital. These type of explosive returns don’t occur every day, but today I am just highlighting how trading minimalistically with simple price action can be very lucrative.
The NZDJPY daily chart also offered early warning signals ahead of the pending volatility. The constant rejection of price moves into the weekly support area were consistently being rejected by the bulls – creating the lower tails on the daily candles. The trade setup here wasn’t as clean – but still ended up in profit. Most traders would have been frustrated with this market because it didn’t offer instant gratification. Instant gratification is where the trade triggers, moves into profit and never dips back below the entry price. In short, triggers into profit and remains in profit and keeping dopamine levels up in the brain 😛
The CADJPY is a market I don’t generally get involved with much for the simple fact: CAD! The canadian dollar can be very volatile and produce hard to anticipate price action. An ‘after shot’ of the recent market events shows us that a strong price action on a CAD pair can still yeild good returns. The only issue here is the signalling candle didn’t offer a retracement entry opportunity – making entering this trade setup a difficult one to tackle without using very wide stops.
The actual bullish rejection candle had a strong ‘text-book perfect’ anatomy. A nice clear rejection of an important level in the market, a close in favor of the signal direction – which is a close higher than the open price, and it created a new swing low within the recent price action.
The market offered one slight pullback correction which is a good example of where intraday signals can be exploited. Unfortunately no intraday signals formed here, and only serves as an example of intraday target points.
Take Away Message
Price action trading is the ability to look at plain price chart, and anticipate future price movements by identifying trade opportunities where the probabilities are in your favor. There is no need to go ‘all out’ and look to indicators for ‘confirmation’ or ‘filtering’, they just don’t work. The only thing that is going to give you the best chance of accurately forecasting where price is heading is by looking at the price movements itself.
This article demonstrate how we can use price action signals as an ‘early warning’ system to pending movements, targeting the candlestick anatomy to build the framework for our trades, so we have logical places to determine where our entry, stops and even target prices should go. If you couple this with a strong money management plan then you’ve got yourself a simple, easy, stress free approach to the Forex market and that’s exactly what our Price Action Protocol trading course will teach you.
If you would like learn to become a master chart reader, expert risk manager and have all the time in the world to do what you want during the day/night using our set, forget and collect approach – then check out our War Room Trader Lifetime Membership Package.
Until next time – best of luck with your trading!