How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage...
Transcript of How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage...
![Page 1: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/1.jpg)
![Page 2: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/2.jpg)
HowtoTradewithPriceAction
(Strategies)
TradingSetups,Rules&Examples
GalenWoods
©2014GalenWoods
Contents
Notices&Disclaimers.....................
i
Introduction..........................
iv
1.ASimpleInsideBarDayTradingStrategyUsingYM
Futures...........................
1
1.1
Time-frameForDayTradingYMfutures......
1
1.2
TradingRules-SimpleInsideBarDayTrading...
2
1.3
![Page 3: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/3.jpg)
SimpleInsideBarDayTradingExamples......
3
1.4
Review-SimpleInsideBarDayTradingStrategy.
5
2.TradingConsecutiveUp/DownDaysWithLowerRisk
7
2.1
TradingRules-ConsecutiveUp/DownDaysLow
RiskEntry......................
8
2.2
ConsecutiveUp/DownDaysTradingExamples..
9
2.3
Review-ConsecutiveUp/DownDaysLowRiskEntry11
3.Three-BarReversalPatternForDayTrading......
12
3.1
TradingRules.....................
13
![Page 4: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/4.jpg)
3.2
TradingExamples..................
13
3.3
Review-Three-BarReversalPatternForDayTrading15
4.NR7TradingStrategy...................
17
4.1
TradingRules-NR7TradingStrategy........
17
4.2
NR7TradingExamples................
18
4.3
Review-NR7TradingStrategy...........
19
CONTENTS
5.ASimpleandEffectivePriceActionTradingSetup..
21
5.1
BasicDefinitionsForPriceActionTrading.....
![Page 5: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/5.jpg)
21
5.2
TradingPremise...................
23
5.3
TheTrendBarFailureTradingSetup........
23
5.4
Conclusion......................
28
6.Two-leggedPullbacktoMovingAverage(M2B,M2S).
30
6.1
TradingRules-Two-leggedPullbacktoMA....
31
6.2
Two-leggedPullbacktoMATradeExamples....
31
6.3
Review-Two-leggedPullbacktoMA........
33
![Page 6: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/6.jpg)
7.CandlestickandPivotPointDayTradingStrategy..
34
7.1
TradingTools.....................
34
7.2
TradingRules-CandlestickandPivotPoint....
35
7.3
CandlestickandPivotPointTradingExamples...
36
7.4
Review-CandlestickandPivotPoint........
37
8.TradingTheEngulfingCandlestickPatternWithMar-
ketStructure........................
39
8.1
TradingRules-EngulfingCandlestick.......
39
8.2
![Page 7: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/7.jpg)
EngulfingCandlestickTradingExamples......
40
8.3
Review-EngulfingCandlestickwithMarketStructure41
9.HikkakeTradeSetup...................
43
9.1
TradingRules.....................
43
9.2
HikkakeTradeExamples...............
44
9.3
Review-HikkakeTradeSetup............
46
10.CaptureHighProfitswithLowVolumePullbackTrad-
ingStrategy........................
47
10.1TradingRules-LowVolumePullback.......
47
10.2LowVolumePullbackTradingExamples......
![Page 8: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/8.jpg)
48
10.3Review-LowVolumePullbackTradingStrategy.
50
11.What’sNext?........................
52
11.1HowtoTradewithPriceAction(eBooks)......
52
CONTENTS
11.2HowtoTradewithPriceAction(Online)......
52
11.3DayTradingwithPriceActionSelf-StudyCourse.
53
Notices&Disclaimers
Copyright©2014byGalenWoods(SingaporeBusinessRegistration
No.53269377M).Allrightsreserved.
FirstEdition,October2014.
PublishedbyGalenWoods(SingaporeBusinessRegistrationNo.
53269377M).
AllchartswerecreatedwithNinjaTrader™.NinjaTrader™isa
RegisteredTrademarkofNinjaTrader™,LLC.Allrightsreserved.
Nopartofthispublicationmaybereproducedortransmittedinany
![Page 9: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/9.jpg)
formorbyanymeans,electronicormechanical,withoutwritten
permissionfromthepublisher,exceptaspermittedbySingapore
CopyrightLaws.
ContactInformation
GalenWoodscanbereachedat:
•Website:http://www.tradingsetupsreview.com
•Email:[email protected]
FinancialDisclaimer
Tradingisrisky.Pleaseconsultwithyourfinancialadviser
beforemakinganytradingorinvestmentdecision.
Theinformationcontainedwithinthisbookincludinge-mailtrans-
missions,faxes,recordedvoicemessages,andanyotherassociated
content(hereinaftercollectivelyreferredtoas“Information”)is
Notices&Disclaimers
ii
providedforinformationalandeducationalpurposesonly.The
Informationshouldnotbeconstruedasinvestment/tradingadvice
andisnotmeanttobeasolicitationorrecommendationtobuy,sell,
orholdanysecuritiesmentioned.
NeitherTradingSetupsReviewnorGalenWoods(includingallcon-
tentcontributors)islicensedbyorregisteredwithanyregulating
![Page 10: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/10.jpg)
bodythatallowsustogivefinancialandinvestmentadvice.
TradingSetupsReviewandGalenWoodsmakesnoclaimregarding
pastorfutureperformance.Whilethereisalwaysariskalosswhen
consideringpotentialforprofits.Lossesconnectedwithtrading
futurescontractsorotherleveragedinstrumentscanbesignificant.
Hence,youshouldconsiderifsuchtradingissuitableforyou
inlightofyoufinancialcircumstancesbearinginmindthatall
speculativetradingisriskyandyoushouldonlyspeculateifyou
havesufficientriskcapital.
TradingSetupsReviewandGalenWoodsdoesnotmanageclient
assetsinanyway.TradingSetupsReviewisaneducationalservice,
notanadvisoryorstockrecommendationservice.Allexamplesare
providedforeducationalpurposes.
YouagreethatTradingSetupsReview,itsparentcompany,sub-
sidiaries,affiliates,officersandemployees,shallnotbeliablefor
anydirect,indirect,incidental,specialorconsequentialdamages.
Alltradesandinvestmentdecisionsinyouraccountareatyour
ownrisk.Thereisnoguaranteedtradingperformance.
MembersandreadersagreetoindemnifyandholdTradingSetups
Review,subsidiaries,affiliates,officersandemployeesharmless
fromanyclaimordemand,includingreasonableattorneys’fees,
![Page 11: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/11.jpg)
madebythememberoranythirdpartyduetoorarisingoutofa
member’suseoftheservice.
Companynames,products,servicesandbrandingcitedmaybe
trademarksorregisteredtrademarksoftheirrespectiveownersand
theownersretainalllegalrights.Theuseoftrademarksorservice
Notices&Disclaimers
iii
marksofanotherisnotarepresentationthattheotherisaffiliated
with,sponsors,issponsoredby,endorses,orisendorsedbyTrading
SetupsReview.
Tradingisrisky.Pleaseconsultwithyourfinancialadviser
beforemakinganytradingorinvestmentdecision.
AffiliateDisclaimer
TradingSetupsReviewseekstoprovideyouwiththebesttrading
resources.Asaresult,wealwaysincludeusefullinksinourarticles.
Someoftheselinksareaffiliatelinks.Itmeansthatwemightreceive
acommissionfromyourpurchasesmadethroughthoselinks.But
youdonotpaymore.
Fortransparency,wearedisclosingourlistofaffiliatesbelow:
•Amazon
•MarketInOut
![Page 12: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/12.jpg)
•TheStreet.com
•Bookdepository.com
•Firstrade
•Optionshouse
•ADVFN
•ForexSmartTools
Youshouldassumethatanylinkstothecompanieslistedaboveare
affiliatelinks.
However,weincludelinks(affiliateorotherwise)inourarticles
onlyifwefeelthattheyprovidevaluetoyou.
Pleasedon’thesitatetocontactusifyouneedanyclarification.
Introduction
ThiseBookcontainsaselectionofarticlesIhavewrittenonTrading
SetupsReview.Youcanfindoutmoreaboutmebyclickinghere.
(AllarticlesinthiseBookareavailableforviewingonlineat
http://www.tradingsetupsreview.comforfree.)InthisStrategiesEdition,Ihaveselectedthe10mostpopularprice
actiontradingsetupsreviewedonTradingSetupsReview.These
strategiesusepriceactionpatternsandminimalindicators.Thelast
setupfocusesonusingvolumetocomplementpriceaction.
IhopeyoufindthiseBookafriendlycompanionforyouroffline
![Page 13: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/13.jpg)
learning,andIwishyouallthebestinyourtradingcareer.
1.ASimpleInsideBarDay
TradingStrategyUsing
YMFutures
Todaytradesuccessfully,weneedamarketthatisvolatileand
liquid.S&P500E-mini(ES)andNASDAQ-100E-mini(NQ)futures
arepopulardaytradingmarkets.Beyondthem,theE-miniDOW
(YM)futurescontractisalsoagreatchoice.Amongequityindex
futures,thetradingvolumeofYMfuturesranksrightafterESand
NQfutures.
LikeESandNQ,YMfuturesisalsoanelectronicallytradedcontract.
ItsunderlyingistheDowJonesIndustrialIndex.Foraone-point
movementintheindex,itsvaluechangesby$5.
Ifyouarecompletelynewtofutures,youshouldspendsometime
browsingCME’swebsite.
ReadonforasimpleinsidebardaytradingstrategywithexamplesfromtheYMfuturesmarket.
1.1Time-frameForDayTradingYM
futures
The5-minutetime-frameisacommonchoiceamongdaytraders.
Butthatisjustaconvention.
![Page 14: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/14.jpg)
Instead,IusethePriceActionTime-frameIndex(PATI)*tofind
time-framesthataretradeable.Itfindsthesmallesttime-framethat
istradeableforapriceactiontrader.Aslongasyouaretrading
abovetheminimumtradeabletime-frame(MTT)*,priceaction
ASimpleInsideBarDayTradingStrategyUsingYMFutures
2
analysisispossible.ButnotethattheMTTchangesovertimeas
marketpriceactionchanges.
FortheYMfuturesmarket,itscurrentMTTisthe4-minutetime-
frame.TradingusingtheMTToffersthehighestnumberoftrading
setups.Hence,wewillbeusingthe4-minutetime-frame.
Ifyoupreferfewersetupsorlongerintervalsforongoinganalysis,
increaseyourtime-frame.
*TheconceptsofPATIandMTTareexplainedinmycourse-“Day
TradingwithPriceAction”.
1.2TradingRules-SimpleInsideBarDay
Trading
Theserulesattempttocapturethefirstlow-riskpullbackinanew
trendusinganinsidebar.Wedefinethetrendwiththehelpofa
21-periodsimplemovingaverage(SMA).
BullishInsideBarTradingSetup
![Page 15: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/15.jpg)
1.FrombelowtheSMA,themarketrisescompletelyaboveit.
ApricebarmustclearabovetheSMA.
2.Waitforthefirstbullishinsidebar.
3.Placeabuystoporderatickaboveit.
(Whyuseastopordertoenterthemarket?)
BearishInsideBarTradingSetup
1.FromabovetheSMA,themarketfallscompletelybelowit.A
pricebarmustclearbelowtheSMA.
2.Waitforthefirstbearishinsidebar.
3.Placeasellstoporderatickbelowit.
ASimpleInsideBarDayTradingStrategyUsingYMFutures
3
![Page 16: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/16.jpg)
1.3SimpleInsideBarDayTrading
Examples
ThechartsbelowshowtheYMfuturesmarketusing4-minute
candlesticks.Theorangelineisa21-periodSMA.
WinningTrade-YMFuturesBearishInsideBar
YMFuturesInsideBarExampleWinning
1.ThemarketwasabovetheSMA.
2.ThisbarwentbelowtheSMAandsignaledachangeintrend.
Westartedlookingoutforbearishinsidebars.
3.AfterYMpushedbelowtheSMA,itdidnotpromptany
significantbullishresponse.Noneofthecandlesticksmanage
totesttheSMAaboveit.
4.AttheendofitsthirdattempttorisetowardstheSMA,a
bearishinsidebarformed.Wesoldatickbelowit.
Therearemanyoptionsforexiting.Asweexpectedthetrendto
continue,themostconservativetargetisatthelastextremelow.
(horizontaldottedline)
![Page 17: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/17.jpg)
ASimpleInsideBarDayTradingStrategyUsingYMFutures
4
Evenwiththisconservativetarget,thistradingsetupgaveusa
2:1reward-to-riskratio.Hence,itwasasetupofhighpositive
expectancy.
LosingTrade-YMFuturesBullishInsideBar
YMFuturesInsideBarLosingExample
Thefirstbaronthischartisalsothefirstbarofthesession.
1.ThissessionstartedbelowtheSMA.
2.Withinhalfanhour,YMmanagedtoclearabovetheSMA.
3.TheSMArejectedthefirsttestbythemarketfromabove,
givinghopetobullishsentiments.
![Page 18: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/18.jpg)
4.However,asthemarketmadeanewsessionhigh,itstarted
congesting.Thecandlebodiescontractedandpricesmoved
sideways.
5.Withinthiscongestion,abullishinsidebarformed.We
boughtabovethisbarandgotstoppedoutimmediately.
ASimpleInsideBarDayTradingStrategyUsingYMFutures
5
1.4Review-SimpleInsideBarDay
TradingStrategy
Inanactivemarket,usingtherighttime-frame,insidebarsoffer
greattradingwindows.Itisatooltocontrolourriskandtimeour
entriesinatrendingmarket.
WhileweusedYMfuturesinthisexample,youcanusethisstrategy
inotherliquidandvolatilemarkets.
ThistradingstrategyissimpleasyouonlyneedaSMAand
knowledgeofinsidebars.Buttherearetwopointstotakenoteof
whenemployingthistradingstrategy.
First,lookfornewtrends.Thisisbecauseretracementtradesearlyinatrendhashigherchanceofsuccessandmoreroomforprofit.
Second,avoidcongestionareas.Thisiscrucialforinsidebar
trading.Thisisbecauseinsidebarsareoftenfoundincongestion
![Page 19: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/19.jpg)
patterns.Thetrickhereistodistinguishbetweenaninsidebarin
congestionandonethatisnot.Youwillsufferwhipsawsifyou
assumethatthetrendwillcontinuewhenthemarketisactually
incongestion.
Lookatthetwoexamplesagain.Inthewinningexample,YMwas
clearlydriftingupwardsandthetopshadowsweremoreprominent.
Itwasnotcongesting.Butinthelosingexample,thepricebars
weremeanderingsidewayswithbothtopandbottomshadows.It
wasdefinitelyformingacongestionpattern.Hence,weshouldhave
avoidedtradingthebullishinsidebar.
Withregardstotargetplacement,youshouldatleastaimforthe
lastextremeofthetrend.Whenthemomentumisclear,youcan
aimfurther.Youcanusesupport/resistanceareasprojectedusingpastswingpivotsandpricethrusts.Anothergoodoptionisthehigh
orlowofthelasttradingsession.
Read:10WaystoTakeProfit
ASimpleInsideBarDayTradingStrategyUsingYMFutures
6
Inall,thisYMfuturesstrategyisasolidstartingpointforbuilding
yourownsimpletradingmethod.
2.TradingConsecutive
![Page 20: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/20.jpg)
Up/DownDaysWith
LowerRisk
Whenamarketclosesupforconsecutivedays,tradersgetexcited.
Theystartspeculatingthatthemarketcannotcontinueitsupwards
streak.Somehow,wearewiredtothinkthatwhatgoesupmust
comedown,andviceversa.(See:Gambler’sFallacy)
Thisiswhyconsecutiveup/downdaysformthebasisofmanystock
scansandmarketstrategyresearch.Traderswanttofindoutifthere
isanedgeinbuyingafterconsecutivedowndaysorsellingafter
consecutiveupdays.
•Buyingafterconsecutiveup/downdaysandsellingaftera
week.
•Testingfourdaysdownandup.
•BuildingaheatmapofQQQreturnsafterconsecutiveup/-
downdays.
Inthesestudies,theyapproachedthetradingideaasquantitative
systemtraders.Theresultsseemencouraging,buttheyarenot
conclusiveofanactualtradingedge.Thisisespeciallytruefor
discretionarypriceactiontraders.
Inthisarticle,wewillexploreapriceactiontradingstrategybased
onthesameideaofconsecutiveup/downdays.Butwewillfocus
![Page 21: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/21.jpg)
onthemarketcontextofsuchconsecutiveup/downdays.
TradingConsecutiveUp/DownDaysWithLowerRisk
8
2.1TradingRules-Consecutive
Up/DownDaysLowRiskEntry
Fadingconsecutiveup/downdaysoftenmeansgoingagainstthe
markettrendandmomentum.Itisadangerousstrategy,butitdoes
nothavetobe.
Inourlow-riskvariant,wefocusonfadingconsecutiveup/down
daysthatgoagainstthemarketstructureofswings.
LongEntryAfterConsecutiveDownDays
1.Fourormoreconsecutivedaysdown(closebelowopen).
2.Ifthemarkethasnotbreachedthelastswinglow,buyatick
abovethenextbullishbar.
ShortEntryAfterConsecutiveUpDays
1.Fourormoreconsecutivedaysup(closeaboveopen).
2.Ifthemarkethasnotbreachedthelastswinghigh,buyatick
abovethenextbullishbar.
![Page 22: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/22.jpg)
TradingConsecutiveUp/DownDaysWithLowerRisk
9
2.2ConsecutiveUp/DownDaysTrading
Examples
WinningTrade-LongEntryROSTDaily
ConsecutiveDownDaysTradingWinningExample
ThisisadailychartofRossStoresInc.Itshowsanunderachieving
four-bardownthrust.
1.Thesefourconsecutivedowndayscaughtourattention.Isit
alast-ditchattemptbythebears?Orisitthebeginningofa
powerfuldowntrend?
2.Thefour-barthrustdidnotevenreachthepreviousswing
![Page 23: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/23.jpg)
low,hintingthatthemarketwasinthefirstscenario.
3.Thisbullishbarwasoursetupbar.Weboughtatickaboveit.
Themarketcontinuedtorise,openingwithupgapsforthenext
fourdays.
TradingConsecutiveUp/DownDaysWithLowerRisk
10
LosingTrade-ShortEntrySPYDaily
ConsecutiveUpDaysTradingLosingExample
ThechartaboveshowsthedailybarsofSPY,theS&PETF.Theprice
actioninthischartislessstraightforward.
1.Therewasastrongbearishplungethatwashardtoignore.It
breachedthelastswinglowsoitwasnotacandidatesetup
![Page 24: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/24.jpg)
underthistradingstrategy.
2.Butafterthebearishplunge,themarketrosewithseven
consecutivebullishbarsthatdidnothitthelastswinghigh.
Thatwasinlinewithourtradingrules.
3.Wesoldatickbelowthisbearishbarandwasstoppedoutas
themarketcontinuedtorise.
Afterthestrongbearishplunge,themarketrosesharply,forminga
V-shapedreversal.InterpretingsuchV-shapedpatternsistricky.Itshowsstrengthinbothdirectionsanditisdifficulttojudgewhich
sidewillemergevictorious.
TradingConsecutiveUp/DownDaysWithLowerRisk
11
2.3Review-ConsecutiveUp/DownDays
LowRiskEntry
Inmostmarkets,therearemanyinstancesofconsecutiveup/down
days.Mostback-testingresearchtradesthemindiscriminately.
Thus,theyaregoingagainstthetrendmostofthetime.
Usingthemarketstructuretofilterconsecutiveup/downdaysisa
simplemethodtomakesurethatwetakeonlythelowrisksetups.
Thisisakintotheimprovedthreebarpullbacktradingstrategy.
Therewillbefewertradingsetups.However,itisaworthwhile
![Page 25: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/25.jpg)
sacrificeforbettertradingquality.
Otherthanthemarketcontext,youcanalsopayattentiontothe
pricethrustformedbytheconsecutivebars.
Aretheconsecutivebarsmakinghigherbarhighs?Orlowerbar
lows?Dotheyexceedthepreviousbarbyanincreasingdistanceor
adecreasingdistance?
Inmypriceactiontradingcourse,Idiscusstwopricepatternsderivedfromansweringthesequestions.TheyaretheDeceleration
andAnti-climaxpatterns.Theyareusefulpatternstolookoutfor
whenyouseeconsecutiveup/downbars.
•TheDecelerationpatternconsistsofconsecutiveup/down
barsthatweakensastheyprogress.Thewinningexample
aboveisalsoabullishDecelerationsetup.
•TheAnti-climaxpatternconsistsofconsecutiveup/down
barsthatareexhaustive.Thelosingexamplewasinfactan
Anti-climaxpatternthatwasinvalidatedbeforethesetupbar
appeared.
Tolearnmoreaboutthesepricepatterns,takealookat“Day
TradingwithPriceAction”.
![Page 26: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/26.jpg)
3.Three-BarReversal
PatternForDayTrading
AltonHillfromTradingSim,adaytradingsimulator,wroteaboutanenhancedthreebarreversalpatternfordaytrading.
AccordingtoAltonHill,three-barreversalsaretoocommonin
intradaytime-frames.Toselectthebestthree-barreversalpatterns
fordaytrading,hewantsthethirdbarinthepatterntocloseabove
thehighsofthefirsttwobars.
Thediagrambelowdemonstratesthedifferencebetweentheusual
three-barreversalpatternandAltonHill’sdaytradingversion.
![Page 27: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/27.jpg)
ThreeBarReversalPatternForDayTrading
Three-BarReversalPatternForDayTrading
13
3.1TradingRules
RulesforLong
1.Bar1closesdown
2.LowofBar2isbelowlowofBar1(andBar3)
3.Bar3closesabovethehighofbothBar1andBar2
4.BuyatcloseofBar3
RulesforShort
1.Bar1closesup
2.HighofBar2isabovehighofBar1(andBar3)
![Page 28: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/28.jpg)
3.Bar3closesbelowthelowofbothBar1andBar2
4.SellatcloseofBar3
3.2TradingExamples
WinningTrade
ThreeBarReversalPatternWinningTrade
Three-BarReversalPatternForDayTrading
14
Thisa5-minutechartofESfutures.Itshowstheregularsession.
Iincludedpartoftheprevioussectiontoshowtheuptrendthat
endedyesterday.Afterourentry,thepricesdriftedupfortherest
ofthesession.
1.Theprevioussessionendedwithastrongbulltrend.
![Page 29: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/29.jpg)
2.Thethree-barreversalpatternwasalsotherightshoulderof
abullishheadandshouldersformation.(Youmighthave
noticedthattheheadoftheformationwasaregularthree-
barreversalpattern.Inthiscase,itgaveabetterentrythan
ourenhancedpattern.)
3.Thelastbarofthepatternclosedabovethehighsofthetwo
previousbars.Thatwasoursignaltobuy.
LosingTrade
ThreeBarReversalPatternLosingTrade
Thisisa5-minutechartofE-miniDowcontract.Despiteastrong
signalbar,thepatternfailedimmediatelyafterentry.
1.Althoughpricesweredroppingconsecutivelyforsevenbars,
theincreasingbuyingpressureisobviousasthebarsshow
longbottomtails(shadows).
Three-BarReversalPatternForDayTrading
15
2.Tailsdevelopedatthetopofthebarsduringthepullback
upwards.Tailsonbothtopandbottomofthebarsaregiving
usmixedsignals,implyingthatpricesmightbecongesting
soon.
3.Ifweignoredtheabovewarningsignsandshortedthethree-
![Page 30: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/30.jpg)
barreversalpattern,itisdifficulttofindaworseentrypoint.
3.3Review-Three-BarReversalPattern
ForDayTrading
Thismodifiedthree-barreversalpatternisimpressive.Asimplerule
hasturnedthiscommonplacepatternintoapowerfulsetup.
Infact,thisaddedruleisaskingforconfirmationofthepatternin
advance.(Applyingthetechniqueofcandleblending,ifBar3inanormalthreebarreversalpatternhasgoodfollow-throughinBar
4,blendingBar3andBar4wouldhaveresultedinthisenhanced
three-barreversalpattern.)
Youcaneasilycombinethispatternwithotherindicatorsorprice
patternstofindhighprobabilitytradesetups.Thewinningexample
isagreatcombinationofaheadandshouldersformationanda
threebarreversalpattern.
However,duetotheextrarule,thesignalbar(Bar3)tendstohave
alargerange.Asourstopsareusuallyplacedontheoppositeendof
thesignalbar,thetraderiskmightbehigher.Weshouldeithercut
downourtradesizeortightenthestopifpossible.Ifyouareunable
tomanagetherisk,thenskipthetradesetup.
Onelastpointtonoteisthatifthemiddlebarofthepatternisan
outsidebar,beverycareful.Outsidebarsoftenprecedewildand
![Page 31: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/31.jpg)
unpredictablepriceaction.
Ifyouwanttoreadmoreaboutthree-barpatterns,youmusttake
alookatourreviewofJohnanPrathap’sThreeBarInsideBar
PatternandThomasBulkowski’s“AreThreeBarPatternsReliable
Three-BarReversalPatternForDayTrading
16
forStocks?”articleinTechnicalAnalysisofStocks&Commoditiesmagazine.
4.NR7TradingStrategy
Thequietperiodbeforethenextexplosivemarketmoveislikethe
calmbeforethestorm.NR7helpsustofindthecalmsothatwecan
prepareandprofitfromtheimpendingstorm.
NR7meansnarrowbar7.Itisabarthathasasmallerrangethan
thesixbarsbeforeit.Itisarangecontractionthatprecedesrange
expansion.
Inourtradingstrategy,weaddasimpletrendruletofindlowrisk
trendtrades.
4.1TradingRules-NR7TradingStrategy
LongTradingStrategy
1.Past7barsarecompletelyabovethe20-periodEMA
2.BuyonbreakofhighofNR7bar
ShortTradingStrategy
![Page 32: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/32.jpg)
1.Past7barsarecompletelybelowthe20-periodEMA
2.SellonbreakoflowofNR7bar
NR7TradingStrategy
18
4.2NR7TradingExamples
WinningTrade-BearishNR7
NR7TradingStrategyWinningTrade
Thisisa3-minutechartofCLfuturesonNYMEX.Theorangeline
isthe20-periodEMA.TheNR7barshaveayellowbackground.
1.PriceswungdownfromabovetheEMAwitheightconsecu-
tivebearishbars.
2.ThesevenbarsthatdefinedtheNR7barwereallbelow
![Page 33: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/33.jpg)
theEMA,showingthatthebearishmomentumheldup.
AlthoughtheNR7barclosedhigherthanitsopen,itformed
amicrotripletopwiththetwobarsbeforeit.Afterthelow
oftheNR7barbroke,wewentshort.
3.Pricecamebackuptotestthebreak-evenlevelofthetrade.
However,followingafailedbullbreak-outofthedojiNR7,
pricesplummeted.
ThedojiNR7isalsoagreatexampletowarnusagainstusingNR7
totradereversalswithoutconfirmationfromotheranalysis.
NR7TradingStrategy
19
LosingTrade-BearishNR7
![Page 34: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/34.jpg)
NR7TradingStrategyLosingTrade
Thisisanother3-minutechartofCLfutures.Inthisexample,the
NR7tradeexperiencedwhipsaws.
1.ThesevenbarsleadinguptotheNR7barwereallbelowthe
EMA.Despitethefourbullishbarsintheretracement,price
couldnotreachtheEMA.
2.AspricebrokethelowofthesecondNR7bar,wewentshort.
However,theconsecutiveNR7barswasahintofthetight
congestionthatfollowed.
3.Pricehitourstop-lossatthehighoftheNR7bar.Itwasa
falsebreak-outthatreversedandcontinuedthebeartrend.
Re-entrywasavalidoptionaspricestayedbelowtheEMA
throughouttheretracementandourbearishoutlookwasnot
compromised.
4.3Review-NR7TradingStrategy
TobyCrabelstudiedtheNR7patterntogetherwiththeNR4/ID
tradingsetup.Bothpatternsarepopulartradingtoolsfoundinmanytradingstrategies.
NR7TradingStrategy
20
(Read:DayTradingwithShortTermPricePatternsandOpening
![Page 35: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/35.jpg)
RangeBreakout)
InthisNR7tradingstrategy,welookedformarketswithastrong
trendandusedNR7asalowriskentrypointtojointhetrend.
Donotfollowthetradingrulesmechanically.SomeNR7bars
appearatthehighofabulltrendorthelowofabeartrend.These
setupsarenotthetargetofourtradingstrategy.Waitforareal
pullbacktoenter.
BeverycarefulwhenyouseemultipleNR7bars.Narrowrangebars
inproximityareasignofpricecongestioninwhichNR7patterns
arelessreliable.
Remembertofollowthepathofleastresistance.ThebestNR7bars
occurwhenpriceismovingagainstthepathofleastresistance.
5.ASimpleandEffective
PriceActionTrading
Setup
Observingpriceactionisthesimplestwaytotrade.
Yet,manypriceactiontradingsetupsarenotsimpleatall,requiring
interpretationofcomplexandsubjectivechartformations.
Theworstpartisthattradersoftenmemorizepriceactiontrading
setupswithoutunderstandingtheconceptbehindthem.
Inthisexclusivearticle,wewillintroduceasimpleandeffective
![Page 36: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/36.jpg)
priceactiontradingsetup-TrendBarFailure.
5.1BasicDefinitionsForPriceAction
Trading
Trend
Inpriceactiontrading,higherhighsandhighlowsshowanupward
trend.Lowerhighsandlowerlowsshowadownwardtrend.
Inourexamples,forsimplicity,wewillbeusingtheslopeofthe
20-periodEMAasourtrendfilter.
Youarefreetouseyourownmethodsanddiscretiontofindthe
trend.Someofthemorepopulartrendtoolsaremovingaverages
andtheADXindicator.
Onetipforidentifyingtrends:trendsareobvious.Whenitis
doubtfulwhetherthemarketistrending,itisnottrending.
![Page 37: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/37.jpg)
ASimpleandEffectivePriceActionTradingSetup
22
TrendBar
Atrendbarisonethatrepresentsatrendonasmallertime-frame.
Itopensandclosesonoppositeendsofthebar.
Abulltrendbaropensnearitslowandclosesnearitshigh.Abear
trendbaropensnearitshighandclosesnearitslow.
Whatdoesatrendbarmean?
Itmeansthattradershavecommittedtoonedirection.Remember
thatineverybar,thenumberofcontractssoldandboughtarethe
same.Theonlyreasonforabartoendupwithahigherpriceis
![Page 38: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/38.jpg)
thatthebuyersweremoreaggressivethanthesellers.Thereverse
istrueforabeartrendbar.
Howdoesatrendbarlooklike?
Whilewecanidentifytrendbarssubjectivelydependingonthe
marketcontext,Ipreferamoreobjectivemeasure.Atrendbarhas
abodythatisgreaterthan50%oftheentirebarrange.
TrendBarforPriceActionTrading
ASimpleandEffectivePriceActionTradingSetup
23
5.2TradingPremise
Thesepremisessetthestageforthispriceactiontradingsetupand
explainitsconcept.Theexplanationbelowisforabulltrend.The
reverseistrueforabeartrend.
Trendstendtocontinue.
Thisisoneoftheprinciplesoftechnicalanalysis.Astrendstendtocontinue,ouredgeliesinfollowingthetrend.
Trendbarsagainsttrendhintattheentryof
counter-trendtraders.
Inabulltrend,beartrendbarsrepresentcounter-trendtraders
tryingtoreversethetrend.Thecommittedbearishtradersare
counter-trendtraders.
![Page 39: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/39.jpg)
Thetrendcontinuesascounter-trendtraders
failintheirattempttoreversethetrend.
Accordingtoourfirstpremise,thetrendismorelikelytocontinue
thantoreverse.Hence,itislikelythatthecounter-trendtradersare
wrong.Thebearishtrendbarislikelytofailwithoutsignificant
follow-through.
Asthecounter-trendtradersrealizethatthebulltrendisnot
reversingastheyanticipated,theywillcovertheirshortpositions
andmightevenreversetobuying.
5.3TheTrendBarFailureTradingSetup
Followingthepremisesabove,theentryforatrendcontinuation
tradetakesplacewhenatrendbaragainstthetrendfails.
ASimpleandEffectivePriceActionTradingSetup
24
Ifatrendbarisnotfollowedbyanothertrendbar,weshould
prepareourselvesforaTrendBarFailure.
RulesforLong
1.20-periodEMAisslopingup(orifyourtrendassessmentis
bullish)
2.Beartrendbar
3.Lowofbeartrendbarbroken(withoutformingasecondbear
![Page 40: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/40.jpg)
trendbar)
4.Placeabuystoporderabovethehighofthebar
5.Cancelorderifnottriggeredwithinonebar
RulesforShort
1.20-periodEMAisslopingdown(orifyourtrendassessment
isbearish)
2.Bulltrendbar
3.Highofbulltrendbarbroken(withoutformingasecondbull
trendbar)
4.Placeasellstoporderbelowthelowofthebar
5.Cancelorderifnottriggeredwithinonebar
ASimpleandEffectivePriceActionTradingSetup
![Page 41: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/41.jpg)
25
TradeExamples-ESFutures(5-Minute)
TrendBarFailureESExample
Wehavemarkedthetrendbarsinthecharts.Bulltrendbarswith
greenarrowsandbeartrendbarswithredarrows.
1.Astrongbearishbarfollowedbyabullishreversalbar.Ithad
goodpotential,butthebuyorderplacedatthehighofthe
bullishreversalbarwasnottriggered.
2.AbearishtrendbartestedtheEMAwithoutmuchfollow-
through.Thebulltrendbartriggeredthebuystoporder,and
ledtoaprofitabletrade.
3.Thisbeartrendbarwasalsoaninsidebar.Thetwofailure
trades(failureofinsidebarandtrendbar)ledtothe6
consecutivebullbars.
4.Althoughthebarafterthemarubozuwasnotabeartrendbar,
itshighwasnotbrokenandourbuyorderwasnottriggered.
Wecancelordersiftheyarenottriggeredwithinonebar.Thisis
becausethebesttradeshappenquicklylikeakneejerkreaction.By
cancellingordersthatarenottriggeredswiftly,weareavoidingthe
secondbesttradeandtakingonlytheverybesttrades.
![Page 42: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/42.jpg)
ASimpleandEffectivePriceActionTradingSetup
26
TradeExamples-AmerenCorp(Daily)
TrendBarFailureAEEExample
Youcanusethispriceactiontradingsetupforswingtradingaswell.
1.Adojibrokethelowofthebeartrendbar.However,thebuy
orderwasnottriggered.
2.Anirresistibletrade,withtheanoutsidebarhittingourbuy
stoporderaftertestingtheEMA.
3.Thestrongbeartrendbarhadlittlefollow-through,butthe
buyorderwasnottriggered.
![Page 43: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/43.jpg)
ASimpleandEffectivePriceActionTradingSetup
27
TradeExample-EUR/USD(Weekly)
TrendBarFailureEURUSDExample
Priceactiontradingsetupsworkwellintheforexmarket.
1.Thebeartrendbarfailedwithabulltrendbar.Thispattern
isalsoknownasthepipepattern.
2.Thistrendbarfailurewasalsoaninsidebarfailure.How-
ever,thesignalbarwasadojiandnotideal.
3.Thebeartrendbarhadlimitedfollow-through.Althoughthis
tradewasprofitable,priceswentsidewaysbeforeresuming
thetrend.Amoreconservativetraderwouldhaveexited
![Page 44: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/44.jpg)
duringthesidewayscongestion.
ASimpleandEffectivePriceActionTradingSetup
28
TradeExample-SPDRS&P500ETF(Monthly)
TrendBarFailureSPYExample
Thissimplepriceactiontradingsetupisrobustenoughforlong-
termanalysisaswell.
1.Thebeartrendwasalsoanoutsidebar.Thismeantthatthe
bearsoverwhelmedthebullsinthatbar.However,thenext
barwasbullishreversalbar.Thiswasgoodtradewithanice
follow-through.However,itmightendupasalossifour
targetswerefurther.
![Page 45: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/45.jpg)
2.AnothernicepipepatternthattestedtheEMA.
5.4Conclusion
TheTrendBarFailuretradingsetupisextremelysimpleandversa-
tile.Itistheidealstartingpointforpriceactiontrading.
Thebasicpremiseisthetrappingofcounter-trendtraders.How-
ever,itmanifestsindifferentformslikeinsidebarfailureandthe
pipepattern.
Asshowninthemanyexamplesabove,youcanusethisprice
actiontradingsetupintime-framesrangingfromintradaytrading
tolongertermmonthlyanalysis.
ASimpleandEffectivePriceActionTradingSetup
29
TheTrendBarFailureisapricepatternfrommytradingcourse-
“DayTradingwithPriceAction”.
![Page 46: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/46.jpg)
6.Two-leggedPullbackto
MovingAverage(M2B,
M2S)
Manypriceactiontradersclaimthattwo-leggedpullbacksarethe
mostreliabletradesetups.Thevariantwearereviewingtodayis
fromAlBrooks,whowrotethreetomesonpriceactiontrading.
Thesethreebooksarenotaneasyread,butareextremelyinforma-
tiveforpriceactiontraders.
Inhisbooks,heidentifiedatwo-leggedpullbacktothemoving
averageasoneofthebesttradesetupswhenthereisastrong
trend.
Beforewestart,let’shaveabasicexplanationofcountinglegs.Any
![Page 47: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/47.jpg)
barthatgoeshigherthanthepreviousbarstartsanewlegup.Any
barthatgoeslowerthanthepreviousbarstartsanewlegdown.
CountingLegsExample
Two-leggedPullbacktoMovingAverage(M2B,M2S)
31
6.1TradingRules-Two-leggedPullback
toMA
LongTradingSetup-M2B
1.Stronguptrend
2.Two-leggedpullbackdownto20-periodEMA
3.Enteratickabovethebarthattestedthe20-periodEMA
ShortTradingSetup-M2S
![Page 48: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/48.jpg)
1.Strongdowntrend
2.Two-leggedpullbackupto20-periodEMA
3.Enteratickbelowthebarthattestedthe20-periodEMA
6.2Two-leggedPullbacktoMATrade
Examples
WinningTrade-M2S
Two-LeggedPullbackMovingAverageWinningTrade
Two-leggedPullbacktoMovingAverage(M2B,M2S)
32
Thisis5-minutechartofESfuturescontract,whichisthemain
instrumentAlBrookstrades.Thistradeisabeautifulexampleofa
two-leggedpullbacktrade.
![Page 49: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/49.jpg)
1.AfterpricescrossedbelowtheEMA,ittriedtocrossedback
butwasclearlyrejected.
2.Thestrongdownwardsthrustconfirmedthedowntrend,
whichwaswhatweneededbeforelookingforcontinuation
trades.
3.Thetwoshortdottedlineshighlightthebeginningofeach
legup.Thistwo-leggedpullbacklookedgoodwiththelong
toptailsthatshowedaspricesapproachedtheEMA.Thelong
toptailsimpliedsellingpressure.
LosingTrade-M2B
Two-LeggedPullbackMovingAverageLosingTrade
AnothersessionofS&PE-minifuturesshowing5-minutebars,
whichisAlBrook’srecommendationasthesweetspotforday
traders.
1.Thedaystartedwithswingsupanddownwithoutaclear
direction.However,aspricesmadenewlows,bottomtails
emerged,showingbuyingpressure.
Two-leggedPullbacktoMovingAverage(M2B,M2S)
33
2.TheupswingabovetheEMAseemedstrongastherewere
eightconsecutivebarswithhigherlows.However,therewere
![Page 50: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/50.jpg)
threebeartrendbarswithintheswing,whichhintedat
persistentbears.
3.Followingatwo-leggedpullbacktotheEMA,wehada
bullishreversalbarasoursignalbar.Weenteredatickabove
itbutgotstoppedoutaftersomesidewaysmovement.
Akeydifferencebetweenthelosingtradeandthewinning
tradeishowcertainwewerethatthemarketwastrending.In
thewinningtradeexample,wesawclearrejectionfromtheEMA,
whichwedidnotseeinthelosingexample.
6.3Review-Two-leggedPullbacktoMA
Continuationtradesworkbecausethetrendtrapscounter-trend
traders.Two-leggedpullbacksaremoreenticingtocounter-trend
tradersandworksbetterasamousetrapforthem.
Hence,inatrendingmarket,thetwo-leggedpullbacktothemoving
averageisasimpleandhighprobabilitytradingsetup.
Thekeyliesinfindingtrendingmarkets.Payattentiontosignsofa
trendingmarketandtradeopportunitieswillpresentthemselves.
Veryoften,youcanpayattentiontothespacebetweenprices
andthemovingaverageforasenseofmomentum.Two-legged
pullbacksthatfollowstrongmomentumarebetterqualitysetups.
However,verystrongtrendstendtohavesinglelegpullbacks.If
![Page 51: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/51.jpg)
youinsistonwaitingfortwo-leggedpullbacks,thenyoumustbe
readytomisssometradesinstrongtrends.
Also,withregardstocountinglegsofpricemovement,thereare
manynuancesthatwedidnotcover.RefertoAlBrooks’Trading
PriceActionTrends:TechnicalAnalysisofPriceChartsBarbyBar
fortheSeriousTrader(WileyTrading)tolearnmore.
7.CandlestickandPivot
PointDayTrading
Strategy
Whatistheonetradingrulethatallcandlestickexpertsagree
on?Usingcandlesticksinisolationisnotprofitable.Hence,many
candlesticktradingstrategiesincludeothertradingtoolsforconfir-
mation.
JohnPerson’scandlesticktradingapproachusespivotpointsfor
confirmation.Inthisreview,weareusingasimplerversionofhis
tradingstrategy.
(Explore:CandlestickTradingStrategies)7.1TradingTools
PivotPoints
Pivotpointsarepricelevelscalculatedusingthehigh,low,andclose
ofthelasttradingsession.Thesepricelevelsarepotentialareasof
priceexhaustion.
![Page 52: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/52.jpg)
Thesearetheformulaforthecommonpivotpoints:
•PivotPoint(PP)=(High+Low+Close)/3
•1stSupportLevel(S1)=(PPx2)-High
•2ndSupportLevel(S2)=PP-(High-Low)
•1stResistanceLevel(R1)=(PPx2)-Low
•2ndResistanceLevel(R2)=PP+(High-Low)
CandlestickandPivotPointDayTradingStrategy
35
Mostchartingsoftwarecanplotthepivotlevelsautomatically.If
youneedtodrawthemmanually,youcanusetheonlinePivotPoint
Calculator.Itcalculatesuptothe4thsupportandresistancelevel.
HighCloseDoji
JohnPersondevisedhisowncandlesticktradetriggersforhis
tradingstrategy.Thebullishtriggeristhehighclosedoji.
Basically,waitforadoji.Then,lookoutforacandlesticktoclose
abovethehighofthatdoji.Thatisoursignaltobuy.
LowCloseDoji
Thelowclosedojiisthebearishversion.Similarly,waitforadoji.
Butinthiscase,wearelookingoutforacandlestickthatcloses
belowthelowofthedojitogiveusthesellsignal.
7.2TradingRules-CandlestickandPivot
![Page 53: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/53.jpg)
Point
LongTradingStrategy
1.Dojiatasupportlevel
2.Buyoncloseofhighclosedoji
ShortTradingStrategy
1.Dojiataresistancelevel
2.Selloncloseoflowclosedoji
CandlestickandPivotPointDayTradingStrategy
36
7.3CandlestickandPivotPointTrading
Examples
WinningTrade-HighCloseDoji
![Page 54: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/54.jpg)
CandlestickandPivotPointWinningTrade
ThischartshowsacompletetradingsessionofESfutureswith5-
minutebars.Pricestartedfallingrightafterthemarketopened.
1.PricesfoundsupportatS2.Thefourdojisandthreebullish
barstanglingaroundS2confirmedthesupport.
2.Thebullishcloseabovethelastdojifiredoffahighclosedoji
signal.
3.S1wasthenaturalfirsttarget.
CandlestickandPivotPointDayTradingStrategy
37
LosingTrade-LowCloseDoji
CandlestickandPivotPointLosingTrade
![Page 55: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/55.jpg)
Thisisanother5-minutechartofESfutures.Itshowspartofthe
previoustradingsession.Thesolidverticallineseparatesthetrading
sessions.
1.PricegappedupandrosestronglythroughR1.
2.TheascentpausedatR2withabearishreversalbar.However,
ithadlittlefollow-throughasshownbythetwodojis.
3.Thisbarclosedbelowthelowsofthetwodojis,settingup
alowclosedoji.Wesoldintoalosingtradeastheupwards
trendcontinued.
7.4Review-CandlestickandPivotPoint
Tradingcandlestickpatternsfoundaroundsupportandresistance
levelsisaneffectivetradingstrategy.Inthisparticularvariant,we
usedJohnPerson’shighclosedojiandlowclosedojiwithpivot
pointlevels.
Dojisrepresentuncertainty.Highclosedojisandlowclosedojisare
break-outsfromuncertainty.Mostbreak-outsfail.
CandlestickandPivotPointDayTradingStrategy
38
Tofindhighclosedojisthatperformbetter,lookoutforthe
following:
•Multipledojisaroundpivotlevelstoconfirmpriceexhaustion
![Page 56: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/56.jpg)
•Nostrongbearishbars
•Failedlowclosedoji
Applythesamelogicforlowclosedojis.
Whenindoubt,itisalwaysbettertowaitformorepriceaction
tounfold.Thisisbecausethebesttradesusuallycomeaftersome
congestionaroundthepivotlevels.
Pivotpointsarepopulardaytradingtools.However,theyarenot
superiortootherformsofsupportandresistance.Donottradereversalswiththemindiscriminately.
ThecompletetradingapproachofJohnPersonincludesmoving
averagesandtheuseofdivergenceforconfluence.Healsouses
anothertradetriggercalledjackhammer.Tolearnmore,referto
hisbooks:
•CandlestickandPivotPointTradingTriggers:Setupsfor
Stock,Forex,andFuturesMarkets(WileyTrading)
•ACompleteGuidetoTechnicalTradingTactics:Howto
ProfitUsingPivotPoints,Candlesticks&OtherIndicators
(WileyTrading)
8.TradingTheEngulfing
CandlestickPatternWith
MarketStructure
![Page 57: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/57.jpg)
Ifyouhavelearnthowtotradecandlesticks,youmustknowthe
engulfingcandlestickpattern.Itsstrikingnameandvisualmakesit
oneofthemostpopularcandlestickpattern.
Reference:JapaneseCandlestickChartingTechniques
Theengulfingcandlestickpatternhastwocandlesticks.Thebody
ofthesecondbarcompletelyengulfsthebodyofthefirstbar.
Itrepresentsatotalchangeofmarketsentiment.
Anengulfingcandlestickintherightcontextoffersahighproba-
bilitytradingsetup.Findingthebestcontextwithmovingaverages
andoscillatorsarereliabletradingmethods.
Learn:CandlestickwithRSITradingStrategy
However,inthisreview,wewilllookatasimplermethodthat
usestheconceptofmarketstructuretofindpointusintheright
direction.Marketstructurereferstotherelationshipofswinghighs
andlowsthatlendstructuretomarkettrends.
8.1TradingRules-EngulfingCandlestick
BullishEngulfing
1.Higherswinghighandhigherswinglow
2.Buywithbullishengulfingcandlestickpattern
3.Highofpatternmuststaybelowpreviousswinghigh
![Page 58: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/58.jpg)
TradingTheEngulfingCandlestickPatternWithMarketStructure
40
BearishEngulfing
1.Lowerswinghighandlowerswinglow
2.Sellwithbearishengulfingcandlestickpattern
3.Lowofpatternmuststayabovepreviousswinglow
8.2EngulfingCandlestickTrading
Examples
WinningTrade-BearishEngulfing
EngulfingCandlestickTradingWinningTrade
ThisisadailychartofAllergan(AGNonNYSE).Itshowsamarket
plungethaterasedmonthsofgains.
![Page 59: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/59.jpg)
1.Thelowerswinghighandlowconfirmedthebeginningofa
downwardstrendwiththeclimaticbearbar.
2.Pricesretracedupimmediatelyafterthedrasticfall.Thebull
movestoppedasabearishengulfingcandlestickemerged.
3.Thebearishengulfingcandlestickpatternformedonthemid-
point(50%retracement)ofthestrongbeartrendbarwhich
providedresistance.
TradingTheEngulfingCandlestickPatternWithMarketStructure
41
LosingTrade-BearishEngulfing
EngulfingCandlestickTradingLosingTrade
ThisdailychartofCardinalHealth(CAHonNYSE)showsabearish
![Page 60: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/60.jpg)
engulfingpatternthatdidn’tfollow-through.
1.Technically,therewasasetoflowerswinghighandlow.
2.However,inthiscase,theswingsdidnotpushoutofthe
sidewaysmovementofCAH.Hence,thelowerhighandlow
structurewasnotareliableindicatorofadownwardstrend.
3.Thebearishengulfingcandlestickpatternledtoalosingshort
trade,aspricesbrokeoutabovethetradingrange.
8.3Review-EngulfingCandlestickwith
MarketStructure
Manytradingstrategiesuseengulfingcandlestickpatternsasa
signalformajortrendreversals.Thatisalowprobabilitystrategy.
However,asweuseengulfingpatternsforcontinuationtradeshere,
wehavebetterodds.
Manycandlesticktraderswaitforonemorecandlestickafterthe
engulfingpatternasconfirmation.Forthistradingstrategy,you
TradingTheEngulfingCandlestickPatternWithMarketStructure
42
shouldnotwaitforconfirmationformosttradingsetups.Waiting
forconfirmationworsensourrewardtoriskratio.
Ifyouwaitforconfirmation,thetradingsetupislikelyinvaliddue
totradingrule3.Basically,thatrulekeepsusawayfromtaking
![Page 61: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/61.jpg)
tradesthathavepoorrewardtoriskratio.
Observingswinghighsandlowsisthesimplestwaytofollow
markettrends.Itbuildsonthemarketstructureanddoesnotneed
anytradingindicator.Whilethisapproachgivessomeconfusing
signalsduringdeeperpullbacks,itssimplicityisstillattractive.
Regardlessofyourtradingstrategy,payingattentiontothemarket
structurewillhelpyoufilterbadtrades.
Read:TakeOnlyTheBestTrades
Congestedmarketsmighthavemanyengulfingcandlestickpatterns
withnofollow-through.Becarefulandavoidsignalsinsideways
market.Lookforclearswingstoavoidcongestion.
Honeyourskillsinreadingthemarketstructure.Itisinvaluablein
anytradingmethod.
9.HikkakeTradeSetup
DanCheslerdiscussedthiscandlesticktradingsetupintheActive
TraderMagazineinApril2004(“TradingFalseMoveswiththeHikkakepattern”).Hikkakemeanstrap,trickorensnare.Thistradesetupseekstoprofitfromfalsebreakouts.
9.1TradingRules
RulesforLongHikkake
1.Aninsidebar
2.Thenextbarhasalowerhighandlowerlow
![Page 62: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/62.jpg)
3.Placebuyorderatthehighoftheoriginalinsidebarforthe
nextthreebars
4.Cancelorderifnottriggeredafterthreebars
RulesforShortHikkake
1.Aninsidebar
2.Thenextbarhasahigherhighandhigherlow
3.Placesellorderatthelowoftheoriginalinsidebarforthe
nextthreebars
4.Cancelorderifnottriggeredafterthreebars
HikkakeTradeSetup
44
9.2HikkakeTradeExamples
![Page 63: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/63.jpg)
WinningTrade-HikkakeTradeSetup
HikkakeWinningTrade
ThisisadailychartofCairnEnergylistedontheLondonStock
Exchange.Wehadaninsidebar,followedbyabarwithahigher
highandhigherlow,providinguswithaHikakkesetup.Weplaceda
sellorderatthelowoftheinsidebar.Twodayslater,pricetriggered
thesellorderandthestockwentplummetingintoprofits.
Thiswasanexcellenttradeastherewasadownwardstrend
followedbyaseriesoffivebullishbars,whichgavereasonablehope
tothebulls.Hence,bullishtraderssawtheinsidebarasalow-
riskentryforatrendreversalupwards.Notethattheinsidebar
hadagoodfollowthrough,butnotgoodenoughtoeventestthe
beartrendbarthreebarsbefore.
WhentheHikkakesetupcamealong,pricewentsouthandstopped
outthebulls.However,thehopeforareversalwasstrongandprices
wentbacktotestourentrypricetwobarslater.Whenthattestfailed
too,thedownwardstrendcontinued.
![Page 64: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/64.jpg)
HikkakeTradeSetup
45
LosingTrade-HikkakeTradeSetup
HikkakeLosingTrade
ThisisadailychartofInternationalPowerPLC.Wesawabearish
insidebarfollowedbyabarwithahigherhighandhigherlow.We
placedasellorderatthebottomoftheinsidebar.Anoutsidebar
triggeredthesellorder.Pricesbegantodriftupwardsafterthatand
welostthetrade.
Thereweretwomainreasonsnottotakethistrade.First,price
brokeabeartrendline(notdrawn)beforeformingahigherlow
(sixbarsbeforetheinsidebar),hintingatabullishcontextwhich
![Page 65: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/65.jpg)
wasbadforshorts.
Next,forashortHikkaketosucceed,wehaveenoughtraders
bettingonabullishbreakoutoftheinsidebar.However,asboth
theinsidebarandthebarbeforeitwerebearish,traderswere
unlikelytobetonabullishbreakout.Moreover,itlookedlikea
doubletop,whichagaindeterredbullishtraders.Withoutbullish
traderstrapped,thisshortHikkakedidnotlookgood.
HikkakeTradeSetup
46
9.3Review-HikkakeTradeSetup
Thistradesetupillustratestheconceptoftrappedtraders.From
whomdoyouthinkyourprofitscomefrom?Youalwaysprofitat
othertraders’loss.Thisisafactofthemarket.
Theinsidebarhasasmallerrangeandhenceasmallerrisk.This
low-riskinsidebaropportunitytemptsmanytraders.TheHikkake
patternthensetsuptoenterwhenthesetradershavetoexitwith
aloss.Understandingthisconceptoftrappedtraderwillhelpyou
findthebestHikkaketradingsetups,whichoccurswhenpricehas
trappedmanybreakouthopefuls.
(Read:4WaystoProfitfromTrappedTraders)However,aninsidebarisacontractioninrangeandmaylead
![Page 66: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/66.jpg)
toatighttradingrangewherepriceactionbecomesratherunpre-
dictable.Thisexplainswhythissetupoftenfailswithanoutsidebar,
whichshowsstrengthinbothdirections.Remember,thecontext
givestheedge.
(Learn:UsingCandlestickPatternswithaMovingAverage)
10.CaptureHighProfits
withLowVolume
PullbackTrading
Strategy
DowTheoryreliesonvolumeasasecondaryindicatortoconfirm
priceaction.Nonetheless,interpretingmarketvolumehasdevel-
opedintoawholebranchoftechnicalanalysis(volumespread
analysis)andspurredmanytraderstocreatevolumeindicators.
Inthisreview,wewillfocusontradinglowvolumepullbacksin
trends.
Likeeverythingelseintrading,absolutevaluesareuseless.Rather
than“low”,weactuallymean“lower”.Welookatchangesin
volume.
Whenvolumeincreases,tradersareinterested.Whenvolumede-
creases,tradersarenotkeen.Themarketdoesnotmovewhen
tradersarenotinterested.So,theideaistofadelowvolume
![Page 67: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/67.jpg)
moves.
10.1TradingRules-LowVolume
Pullback
LongTradingSetup
1.Priceisabovethe20-periodsimplemovingaverage(SMA)
2.Pricebreaksabovethelastswinghighwithhighervolume
3.Pricefallswithlowervolume
4.Buyatickabovethenextbullishbar
CaptureHighProfitswithLowVolumePullbackTradingStrategy
48
ShortTradingSetup
1.Priceisbelowthe20-periodSMA
![Page 68: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/68.jpg)
2.Pricebreaksbelowthelastswinglowwithhighervolume
3.Priceriseswithlowervolume
4.Sellatickbelowthenextbearishbar
10.2LowVolumePullbackTrading
Examples
WinningTrade-ShortSetup
LowVolumePullbackTradingStrategy-WinningTrade
ThisisaweeklychartofSPDRStraitsTimesIndexETF(ES3.SIon
SGX).ItseekstoreplicatetheperformanceoftheSTIwhichisthe
maingaugeofSingapore’sequitymarkets.
Volumeoverlaysaregreattradingtools.Theyallowyoutokeep
tabsonvolumewhileyoulookatpriceaction.Theymitigatethe
riskofignoringpriceactionandfocusingonlyonvolume.Inthis
case,greenmeanshighervolumethanthepreviousbar,andred
meanslowervolume.
Gettheoverlayhere.
![Page 69: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/69.jpg)
CaptureHighProfitswithLowVolumePullbackTradingStrategy
49
1.AftermovinguptotesttheSMA,priceplungeddownbelow
theearlierswinglowwithhighervolume(asshownbythe
greenbackground).Itconfirmedthatbearishmomentumwas
stillinplace.
2.Aspricespulledbackup,itseemedasthoughwewouldnot
havealowvolumetradingsetup.Thepullbackbarsroseup
sharplywithhighervolume.However,thebearishoutsidebar
haltedtheupthrustandsignaledthereturnofthebears.
3.Twobarslater,wegotanupbarwithlowervolume.Itverified
thelackofmarketinterestinpushingpriceshigher.Thenext
![Page 70: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/70.jpg)
barwasasolidbearishreversalbar.Wesoldatickbelowits
low.
Ittook15weeks,butthistradeprovedprofitableastheETFfellto
itsearlierextremelow.
LosingTrade-LongSetup
LowVolumePullbackTradingStrategy-LosingTrade
ThisisadailychartofWalmart.
1.ShortlyafterpricemovedabovetheSMA,itmadeanewhigh
withhighervolume.
CaptureHighProfitswithLowVolumePullbackTradingStrategy
50
2.However,ifweextendedourperspective,wewouldhave
noticedthatpricefailedtoriseaboveakeyresistancethat
sentpricesdownbelowtheSMAearlier.Thisfailuremade
thepicturelessrosy.
3.Wehadalowvolumepullbackfollowedbyabullishreversal
bar.Weenteredatickabovethereversalbar.
Thetrade’smaximumprofitpotentialislargerthantheamountwe
risked.However,thetrenddidnotresumeuntilitmovedbelowour
signalbartotestourstop-losslevel.
10.3Review-LowVolumePullback
![Page 71: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/71.jpg)
TradingStrategy
Weusedbasicvolumetradingprinciplesdirectlytocreatethis
simplelowvolumepullbacktradingstrategy.
Welookedforincreasingvolumeduringbreak-outstoconfirm
themarketmomentum.Then,wetookadvantageoflowvolume
pullbackstotimewhenweenterthemomentum.
(Liketheideaofusingvolumetoconfirmtrendbreak-outs?Check
outtheYumYumcontinuationpattern.)
Thistradingstrategyisextremelyusefulforclarifyingpriceaction.
Whenyoucan’ttellwhatpriceistryingtodo,volumemightshed
somelight.
Payingattentiontolowvolumepullbacksalsoimprovesother
retracementtradingstrategies.Combinethislowvolumeapproach
withthefollowingsetups.
•TheHolyGrail
•Two-LeggedPullbacks
•9/30TradingSetup
CaptureHighProfitswithLowVolumePullbackTradingStrategy
51
Ifyouwanttopickupmoreideasaboutusingvolumeintrading,
havefunwiththese.
![Page 72: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/72.jpg)
•On-BalanceVolume(OBV)TradingStrategy
•ACompleteGuideToVolumePriceAnalysis
•InvestingwithVolumeAnalysis:Identify,Follow,andProfit
fromTrends
11.What’sNext?
Strategiesaloneareuseless.Profitabletradersdonottradestrate-
gies.Theytradethemarket.Understandingthepriceactioncon-
ceptsunderlyingthemarketismoreimportantthanlearningall
thetradingstrategiesintheworld.
Tocomplementthesetradingstrategies,herearesomerecom-
mendedoptions.
11.1HowtoTradewithPriceAction
(eBooks)
YouhavejustcompletedtheStrategiesEditionofthis3-bookseries.
TheKickstarterEditiongivesasolidfoundationwithbasicprice
actionconceptsandtermsthatwillbringyoualongway.
TheMasterEditionexplainsthemoreadvancedconceptsinprice
actiontradingwithafocusonintradaytrading.
Clickheretodownloadthe3-book“HowtoTradewithPrice
Action”seriesforfree(orpaywhatyouwant).
11.2HowtoTradewithPriceAction
![Page 73: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/73.jpg)
(Online)
The“HowtoTradewithPriceAction”eBooksarecompilations
ofselectedarticlesonTradingSetupsReviewandareupdated
periodically.
Forourlatestarticlesonpriceactiontrading,visitourwebsitenow.
What’sNext?
53
11.3DayTradingwithPriceAction
Self-StudyCourse
InterestedtolearnthecompletepriceactiontradingframeworkI
usetotrade?Takealookatmyself-studycourse.
Clickheretolearnmore.
![Page 74: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/74.jpg)
DocumentOutlineTableofContentsNotices&DisclaimersIntroductionASimpleInsideBarDayTradingStrategyUsingYMFutures
Time-frameForDayTradingYMfuturesTradingRules-SimpleInsideBarDayTradingSimpleInsideBarDayTradingExamplesReview-SimpleInsideBarDayTradingStrategy
TradingConsecutiveUp/DownDaysWithLowerRiskTradingRules-ConsecutiveUp/DownDaysLowRiskEntryConsecutiveUp/DownDaysTradingExamplesReview-ConsecutiveUp/DownDaysLowRiskEntry
Three-BarReversalPatternForDayTradingTradingRulesTradingExamplesReview-Three-BarReversalPatternForDayTrading
NR7TradingStrategyTradingRules-NR7TradingStrategyNR7TradingExamplesReview-NR7TradingStrategy
ASimpleandEffectivePriceActionTradingSetupBasicDefinitionsForPriceActionTradingTradingPremiseTheTrendBarFailureTradingSetupConclusion
Two-leggedPullbacktoMovingAverage(M2B,M2S)TradingRules-Two-leggedPullbacktoMATwo-leggedPullbacktoMATradeExamplesReview-Two-leggedPullbacktoMA
CandlestickandPivotPointDayTradingStrategyTradingToolsTradingRules-CandlestickandPivotPointCandlestickandPivotPointTradingExamplesReview-CandlestickandPivotPoint
![Page 75: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/75.jpg)
TradingTheEngulfingCandlestickPatternWithMarketStructureTradingRules-EngulfingCandlestickEngulfingCandlestickTradingExamplesReview-EngulfingCandlestickwithMarketStructure
HikkakeTradeSetupTradingRulesHikkakeTradeExamplesReview-HikkakeTradeSetup
CaptureHighProfitswithLowVolumePullbackTradingStrategyTradingRules-LowVolumePullbackLowVolumePullbackTradingExamplesReview-LowVolumePullbackTradingStrategy
What'sNext?HowtoTradewithPriceAction(eBooks)HowtoTradewithPriceAction(Online)DayTradingwithPriceActionSelf-StudyCourse
![Page 76: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/76.jpg)
TableofContents
TableofContentsNotices&DisclaimersIntroductionASimpleInsideBarDayTradingStrategyUsingYMFutures
Time-frameForDayTradingYMfuturesTradingRules-SimpleInsideBarDayTradingSimpleInsideBarDayTradingExamplesReview-SimpleInsideBarDayTradingStrategy
TradingConsecutiveUp/DownDaysWithLowerRiskTradingRules-ConsecutiveUp/DownDaysLowRiskEntryConsecutiveUp/DownDaysTradingExamplesReview-ConsecutiveUp/DownDaysLowRiskEntry
Three-BarReversalPatternForDayTradingTradingRulesTradingExamplesReview-Three-BarReversalPatternForDayTrading
NR7TradingStrategyTradingRules-NR7TradingStrategyNR7TradingExamplesReview-NR7TradingStrategy
ASimpleandEffectivePriceActionTradingSetupBasicDefinitionsForPriceActionTradingTradingPremiseTheTrendBarFailureTradingSetupConclusion
Two-leggedPullbacktoMovingAverage(M2B,M2S)TradingRules-Two-leggedPullbacktoMATwo-leggedPullbacktoMATradeExamplesReview-Two-leggedPullbacktoMA
CandlestickandPivotPointDayTradingStrategyTradingToolsTradingRules-CandlestickandPivotPointCandlestickandPivotPointTradingExamplesReview-CandlestickandPivotPoint
TradingTheEngulfingCandlestickPatternWithMarketStructure
![Page 77: How to Trade with Price Action (Strategies)...Trading Setups Review and Galen Woods does not manage client assets in any way. Trading Setups Review is an educational service, not an](https://reader036.fdocuments.in/reader036/viewer/2022062609/610259221879520aa0483a0a/html5/thumbnails/77.jpg)
TradingRules-EngulfingCandlestickEngulfingCandlestickTradingExamplesReview-EngulfingCandlestickwithMarketStructure
HikkakeTradeSetupTradingRulesHikkakeTradeExamplesReview-HikkakeTradeSetup
CaptureHighProfitswithLowVolumePullbackTradingStrategyTradingRules-LowVolumePullbackLowVolumePullbackTradingExamplesReview-LowVolumePullbackTradingStrategy
What'sNext?HowtoTradewithPriceAction(eBooks)HowtoTradewithPriceAction(Online)DayTradingwithPriceActionSelf-StudyCourse