Have you been looking for a strong, simplistic, and useful price action trading strategy lately? This price action strategy will teach you how to spot, dead zones, red zones, and end zones. Also, please leave a comment below to give us some feedback, and we will do our best to answer your questions.
Price action is simply how the price will react at certain levels of resistance or support. Now, this could be the price testing a support or resistance area. It could even be when the price movement creates a swing high or swing low.
Price action requires no lagging indicators or moving averages to distract you from the price. The chart will have a clean look to it.
In fact, some traders make a living trading without ever looking at an indicator. So with that being said, we recommend no indicators for this strategy.
We recommend this strategy to be for swing traders and day traders. Anything under an hour time period you will not see us using this strategy. The reason we develop day trading strategies using price action patterns is because the price action signals behave more consistent on larger time frames.
That does not mean that this strategy does not work with scalping, but with our testing, we reveal that this strategy works best on a one hour time chart and above. Nobody likes the dead zone in trading. The buyers and sellers are at a standoff and no one is winning the fight.
This could be interpreted to us traders as this. We entered a trading in the dead zone only to come up with a 3 pip winning trade or a 0 pip trade that you held onto for six or so hours. We do not want mediocre results we want to WIN. So if you see this occurring, you know that no indicator on earth will make you 1,s of pips here. Scalpers will enjoy those small retracements, but for this price action strategy, we are no interested this small channel or consolidation.
As you can see, buyers get on a short run only to get taken over by sellers. Then sellers get on a run and then hit a floor and get take over by buyers. There are no higher highs or lower lows being taken out. This process will go on and on until a district winner is validated. If you know anything about American football, you know that the red zone the area between the yard line and goal line. As you can imagine this is where all the action happens.
This where a team will be most focused because they can see the finish line. The team can see that they only need just a few more yard until they reach their goal of a touchdown. Same can be applied to this price action approach. We saw that the dead zone was stagnant and boring. Hardly any movement and not many pips to come by. But once we get in a red zone, traders get razor sharp in their approach to get to their end goal of a 20, 60, maybe even a pip winner!
Using our example, if the price would have hit our red zone and continued to the upside, we would have been interested in a buy trade since it made a new higher high and gave us an indication that this will become an uptrend. Same with when the sellers took over.
I highlighted these zones in one of the images above for reference. This could be anywhere between pips wide. Here is the example of this:. You see on this hour time chart, many traders got in at the Red zone pushed the price up only about 40 pips and then they got out immediately. As a result, the price continued to draw down to our red zone again and now is hitting a new support level.
Remember, resistance in the past means support in the future. This is our end goal. We want to go from the red zone to the end zone consistently with this price action strategy. To do this, simply draw a rectangle on your charts similar to our drawings. You only trade these zones with this price action red zone trading strategy. Once you determine that the price action will not return into the dead zone, you can go ahead and make the buy trade here. Using our example, we saw a breakout candle occur from the red zone so this is where you would have entered the trade.
Place your stop loss in the lower red zone. If the price action would make its way down to the lower red zone, then the trend is obviously not going up anymore and you want to get out this trade immediately. You can exit the trade when you see that the trend is mostly likely over due to consolidation in price action.
We saw that the price bounced off if this resistance so that is why you would have exited this trade in profit. Be sure to leave us a comment below and tell us what you think of this strategy, and how you trade using price action analysis. Alos, make sure you check out one of the most popular strategies that we call the RSI strategy. Grab the Free PDF Strategy Report that includes other helpful information like more details, more chart images, and many other examples of this strategy in action!
What do you think of this Price action approach to trading? Have you had success in the past using price action techniques? Have been seeing these kind of stuff but I never know how it could be traded……Thanks a lot for the insight am going to start doing back testing with this strategy thanks again am so happy.
This is nice simple, direct, clear. We come up with 4 new strategies a month and post them on our blog. Glad we can help you out with our trading strategies.
Keep it up and you will find success. Staying focused is the key to trading. This is a very profitable strategy.
I started implementing something close to this strategy and my account is exploding! It can be seen on many timeframes on a daily basis. However, for best results as to what direction to focus on, check the trend on the higher time frames. What is Price Action Trading? Trading Time Frames We recommend this strategy to be for swing traders and day traders. The Dead Zone Nobody likes the dead zone in trading.
Here is the example of this: So looking back at our price action trading example, here is what you would have done: Test away and please share your results!More...