Full transcript (4019 words)
So, in this video, I'm going to do a full breakdown on how to take high probability buy and sell positions as a price action trader. I'm going to start with how to effectively do a top-down analysis, then how to mark your support and resistance levels the right way, then how to read candle bodies, and at the end, I'm going to show you in real market conditions how to actually take these setups. My goal is by the end of this, you could actually enter into the market today and take these same setups and the same strategy I'm going to teach you right now. So, check this out. Top-down analysis. It's the most important thing you need to do when you jump into the market for your trading session. What is it? It's exactly what it says, top-down. We start at the daily time frame. Now, the goal here is just to get an overview of the market. You want to start at the highest time frame and work your way down. So, what's the best way to do that? Literally start at the daily time frame. Now, the idea is just to get an overview. It's simply to get an overview. You want to see what the daily's doing, but you don't want to put too much weight or too much of an emphasis on what it's doing. All I know now is that the daily's been moving down. This daily candle is moving down. Interesting, we're bearish for the day. That's good. I'll keep a little note of that, but I'm not going to worry about it too, too much. The next thing you want to do is drop down to the 4-hour and just get an overview. Okay, the most previous 4-hour candle moved down super aggressively. It smashed through a previous 4-hour level and actually closed below that level. Look, it even retested it. Could this be an indication that, hey, on those lower time frames, if I'm getting confirmation of a potential push down, I'll take note that I remember that the 4-hour broke a a key level here and retested, and could I continue to sell down? I don't know. We're going to have to see what the lower time frames say. Then we drop back to the 1-hour. Interesting. 1-hour could almost look like it's been maybe stuck in a bit of consolidation here, right? For 3 hours, we haven't really moved. It's just kind of going up and down. Drop back to the 30. Now we're starting to get a bit of a clearer picture of what's going on. And then finally, the final time frame that I'll drop down to is the 15-minute. Okay, so we can check out here that if you remember, what did that 4-hour do? It broke here. Here's the retest of that 4-hour, and we're pushing back down. Now, is there confirmation on these lower time frames of a potential sell opportunity? I would say potentially yes. Because if you look at this, if you're like me, someone that takes trades based on breakout breakouts or reactions of zones, I would say that there's a support level here. We've actually broken out of that support level and potentially retesting. If this flips down, you could have like a nice wick fill opportunity here and sell the market down. Because I remember the daily was bearish, the 4-hour was broke out and retested. So there's actually quite a lot of confluence, um you know, telling the same story here. And what I like to do when it comes to doing top-down analysis is always or primarily, just before you're about to take your trade, do it again. Right? Do it again because you could be sitting in front of the charts for like an hour, uh you know, and the market conditions have changed. You do a top-down analysis and realize the 4-hour is telling a different story. The daily is maybe flipped bullish at this time. So, really important to like every now and then just flick through the higher time frames again. Get a refresher in your mind of what is actually going on. Now, the second thing I want to talk about here is uh understanding ranges. So, if we zoom out a little bit here, if I wanted to sell below here, it's really, really important that you check what's to the left on these mid to lower time frames. Check what is to the immediate left. Like you can see here, this pair, there is like a major major level of support that we're at right now. Like you can see that one, two, right? >> [clears throat] >> One, two, three, four. We're here again. Now it's like, if you're a price action trader, there's two things that are going to happen. It's really simple. Price is either going to freaking It's either going to break through or it's going to react off like it did three other times. So, your job is to kind of use what you understand with candlesticks, price action, session times to identify which one of those it's going to be. Right? If it does break through, you need to look to the immediate left and figure out what kind of level of resistance am I running into down here. Right? What kind of What kind of structure is down here? I can see if I'm running into this Right? If this is the breakout level, I know below here, we've got clean traffic. Now, you pull out your measuring tape here and measure. What is that? What's the range here? You know, it's like 200 pips. That's 200 pips of clean traffic. So, the good news is, if I do get that break below there, I do get that retest, I know I've got a ton of range until the next level of support until I'm going to run into a bit of, you know, potential issues there. So, then the question might be, well, how do I know what's the level the levels of support or resistance? How do I actually identify those ranges? That's the next seg- segment I want to get into. How to identify support and resistance. So, check this out. So, as a price action trader, the basis of what I'm looking for when I'm I'm trying to take trades is a reaction off a support or resistance level or a break through a support or resistance level. Now, the easiest way to identify those levels, and it's really the simple, a lot of people like to overthink it. Let me get rid of maybe this candle. And this is really as simple as it's going to get. On the 15-minute time frame, now this is how I do it and this is how I teach my guys. I've been teaching for a long time. I've helped hundreds of students find success trading this using this exact strategy. So, the idea is on the 15-minute time frame, you do your top-down analysis and then now that you're in your high-volume session, you mark your key levels. It's going to look like this. For this case, you're looking at equal bodies, right? You're looking for equal body lows. So, I can see this red candle here and this green candle here where the lowest point where price closed side by side uh in this session. I don't care what's up here, right? Because I'm here right now. The session that I'm trading, the market's right here. So, whatever happens up there doesn't matter cuz that's not going to be affected for another couple hours. So, I've got right here as my closest level of support and then resistance, the top end, would be here. Now, the question might be, "Well, where do I mark that level? Do I put it at the body of the candles all the way down there? Do I put it at the top of the wick?" The easiest way that I teach, it's put it just above the body of the candles, right? Just above the body of the candles. That's going to be the best way to do it because the idea is if a candle can come up and break above this level, you want enough bullish volume to break above the bodies and engulf a bit of the wicks as well, right? It's not enough to just to just scrape by and, you know, just break above the body. No, you want it above the wick a little bit and just really kind of engulf that range. It's a better indication of like actual high volume in the market and that's what we want to see, right? So, uh again, as simple as it gets, which is you're just marking these key levels just above the body on the 15-minute time frame, just below the body on the 15-minute time frame, and essentially waiting for a breakout of that range or a reaction off, which is, you know, a whole different system that I don't know if I'll go into too much detail today, but that's the basic premise of marking your support and resistance levels. Now, the next thing to note is, okay, if I'm going to mark my levels there, you need to ensure that if a candle breaks up and a break breaks above that level and retests, and you're looking to buy it up, you need to ensure there's enough clean traffic above there for you to to essentially ride that candle up without it being too interrupted by other candles. What would that interruption look like? It's simply other levels of minor support or resistance. So, if there were green and red candles side by side, like I said, you're you're now running into new levels of structure, and just based on the game of probabilities, price has a reaction off those structural points. Could that reaction be enough to come back down to hit your stop loss? Um I don't know, but I don't like those probabilities. So, the best thing to do is to ensure that there's clean traffic to the immediate left. That's That's really going to be your best way to approach this. So, the next thing to do is to talk about is uh candle bodies, because this is all great. Okay, I've marked my levels, it's a high volume time, I've done a top-down analysis, but what if I get a breakout of this level, but the candle bodies are small or the wick's high? Cuz the market never gives you exactly what you want. It always throws a spanner in the works, and you've got to really think about it and play the game of probabilities on whether this is going to be a good trade or not. So, check this out. It's really important to identify, using your ability to read candlesticks, what's going on in the market. Now, this right here, this is going to be like your most basic candle that you can see in the market. It's actually a great candle, which is a big-bodied candle, kind of equal wicks on equal side. The wicks aren't bigger than the body. You know, this is like if I seen if if there was like a breakout level, you know, like there and this candle broke out of that level, that'd be a great sign. I'd be like, "This is a beautiful candle. All I'm looking for now is a retest and it starts to push up. This is good stuff." Right? So, this is like just like your standard standard bullish candle. Opened up there, wick down there, pushed all the way up there, and then closed there. All right, that's a basic nice candle. Now, this in the other case, imagine if there was a breakout level here and this candle broke out of that level. What do you think you'd be thinking? For me, I'd be like, "Ooh, this is like ugly stuff. I'm not very interested in this." It's a doji candle, meaning it's like a tug-of-war. Buyers or sellers, no one really took over. I guess in this case, buyers just did, but at the end of the day, there's there's no direction. All right, that's the danger of like a doji candle or trying to take a trade when there's a doji candle in that region. It shows that there's still a little bit of a tug-of-war. There's no like No one's winning just yet. You know, the next type of candle is something like this where you get either it opens up with no wick at the bottom or the other way around. Now, the thing when a candle opens up and maybe it Again, if you think about it like this, this candle broke out of a of a resistance level, but I know it opened up and didn't create a wick at all. We know that like, you know, I don't know, 94 or 95% of candles have a wick on each end. If this next candle starts to wick down and push up, and I take a buy there, I'm going to be pretty scared that, you know, the market doesn't want to come down and at least test and fill that range a little bit. I don't know why, but markets tend to always do this kind of thing. They love to, you know, test all areas that haven't been tested. So, don't think about it too much, but yeah, there's definitely some things to take to to take note of when there's no wick there. And then, you get this other kind of candle, which is like your hammer or your shooting star, which is essentially a a rejection, a big rejection off a off a level, and then that kind of smaller body there. Now, I don't like to put too much thought into these type of candles, but you know, it is what it is. Again, if a candle were to break out like that, depending on what the structure of the market is at the time, you've got to adjust accordingly. Now, that's all cool, you know, candles individually, but what about when they're side by side? Something like this, which is consolidation, right? You've got all these candles that we kind of just went through, but in a consolidation range. Now, as a breakout trader, this is actually great, cuz I can mark my support and resistance levels just like this, and my job now in the market is simply to wait for one candle to what? To break out of that range. All right, I'm simply waiting for a candle to break out of that range. Because as soon as it does, then I start putting on my hat, I start getting interested, I flick back to the higher time frames, get a bit of an overview of what's going on in the market, and now I'm getting interested in taking a sell position. All right? The next candle wicks up, maybe, starts to push down, I enter a sell there, and I've taken a breakout trade. Awesome. But, my point is, as a price action trader or a breakout trader, don't be scared of consolidation. The only thing I would say about consolidation is to ensure that you do have a mixture of big-bodied candles in here, all right? Those big-bodied candles imply there's volume still in the market. We're not consolidating because there's no volume, we're consolidating because just whatever, who gives a but um it's important to identify and be sure that there is volume in the market. Now, what about this? Trending. All right, a trending market. We can see what? We're moving down. If this was a line chart, you could say it's higher highs, uh sorry, lower highs, lower lows, lower highs, lower lows, lower highs. Now, this is great because one of the systems that I teach is um reactions of key levels like this, right? So, if I were to catch a reaction type two kind of sell off this and sell it down, it's great cuz I can already identify that the market's trending down. It's a It's like rule number one in the book of trading is trade with the trend. Um So, identifying are we trending or are we consolidating is is an important thing, I think. Same here, the opposite. Now, higher highs, higher lows, higher highs, higher lows. Cool. If I can identify there's a higher low here, I'm going to try and catch a trade and buy that up. So, this is good. Now, let's move over to a simulation software. And I want to show you how I package all this together to actually take those high probability trades. I want to show you the strategy and the system I use, a basic overview, but the best thing to do is to show you it in a simulation software so you can see in real time how it plays out. Okay, so I got the simulation software up here. We're going to have a look at gold. First thing I'm going to do, I've already done the top-down analysis, so now it's a matter of marking the support and resistance levels. It's a high volume time, so I'm going to put a support level there and a resistance level here. And in short, I'm looking for a candle to break above or break below, right? We're looking for a break out of this range. So, let's press play here and just see how things start to pan out as this candle develops here. So, price is pushing down. At this point, I would consider this overextended from that point in which I wanted it to break out of. Um but we do have another level here. So, it's really important So, there's a breakout. This is actually great. This is a breakout. So, the the important thing here is be dynamic with your levels. As the market moves, move with it. Don't be stagnant. Don't be stuck in your bias. That's why I don't really like to build too much of a bias when doing that top-down analysis because as the market develops, I'm going to have to change with it. So, yeah, I'm actually interested in this because let's go back to what I was talking about before, which is do we have clean traffic below? The answer is yes. We just got one color, so there's enough range for me to sell down. I typically wouldn't like it if price had moved all the way from resistance and broke out of support, but we didn't. We created like a mid-range of consolidation and then broke out. So, to me, this is a great This is a great potential setup. Now, the next thing I'll be looking for, which is potentially what it's doing right now, I want to see this level retested, right? I want to see this retested. If this can retest this level, buyers try and push price back up into that range in which it broke out of, but they fail to do so, and it flips and comes back down and breaks its own low, this is a really good sign of a potential breakout here. We've got clean range to the left. We've got the retest. This is a good spot for my stop loss. I can look to put my TP down here. You've got a nice one-to-one risk-to-reward, and uh and let's see how things actually play out here. Okay, so price has broken the low here now. Sell. Stop loss goes above current candle wick. Take profit can move down to like a one-to-one risk-to-reward, and uh just let the rest play out. I've done my job. Wait for the setup, and uh get in a nice breakout retest push here. Let's speed things up a little bit. Target hit. Easy. So, that's the premise of like a basic breakout trade. Everything we've kind of gone through in this video so far. Now, let's look at a situation where instead of price breaking out of that range, instead we get a reaction off that range, and we try and buy that reaction off. So, So, as you can see, price This is where we took our sell position, broken out of that range. This price is coming down, so we can see we're in a bearish market right now. Like I spoke about before, when the market moves in trends, it typically moves in a zigzag fashion. So, it's making lower highs, lower lows, lower highs, lower lows. So, if I understand that about the market, could this potentially be a pullback where creating a new lower high, and then I'll sell it down to create that new lower low? I don't know, but let's see if we get any type of confirmation from these candles. So, price is moving up here. Let's press play. Um we've got a new candle open up here. Now, the signs that I like to look for, if that is the case, if we are potentially creating a new lower high, is something like this. Right? We've created a new level of resistance, right? So, there's dynamic levels being created as the market moves. We've got an engulfing candle here, as well. We've got a nice failed attempt above. So, price has come back down the range, engulfed the previous 15-minute candle. If I can get that retest, which it looks like it's doing right now, I'm actually going to take a sell at the break of the low here. I think this is a pretty good indication that, hey, this is potentially a new lower high, and uh get geared up to take a sell here. So, if it breaks the low here, let's see if we can get interested in in uh participating in this trade. Okay, there's there's that low there. Perfect. I'm going to bring my S Yeah, I'll bring my Look for a bit more than a one-to-one here. So, you know, because of the simulation software, it doesn't work too well on my laptop, but what I would typically do in this case, if it does continue to push down, maybe around there, I would take off 80%. All right? I'll be looking to take off 80%. Then I would move my stop loss to break even. All right? So, now I'm in a risk-free trade. And the idea with that is, if that 80% gets snagged, then I'm going to move the remaining 20% down to the next range, and really try and get a runner out of it. So, let's see how things start to pan out here. Yeah, okay. Well, you can see here price had moved down. It hit my hit that initial target. Unfortunately, I can't take the full thing, but you can get the premise here. You get You get what I was talking about, right? With with having that pullback continuation down. We've got the signs based on these candles that are indicating such. And full TP most likely would have been hit there if I had my partials running. So, just to summarize, we talked about how to do a top-down analysis, how to read candlesticks, how to mark your support and resistance levels, and then how to actually use that information to take buy and sell positions in the market. This is something I've been teaching for a long time now. It's something that I've done successfully for over 6 years now. And if you want to learn more about how you can do the same, there's more videos on my YouTube and in the description of this video, there's a link where you can work one-on-one with me. Hopefully, you enjoyed the video and I'll see you on the next one.