Now, we shall examine the three different types of price action chart patterns.
In case you are unfamiliar with the term “price action,” it refers to price movement, patterns, and other observable price characteristics on day trading charts. We use price action to determine how we trade, including first recognizing whether an opportunity exists, what the goal (profit target) and risk (stop loss) should be, and how to manage a trade after an order is filled.
In the video, you are first shown an example of a trend. Price moves upwards (aka bullishly) over a considerable period of time. If you were to buy early in this trend and hold the position through the climb up, you could exit the trade with a profit. However, spotting trends before they occur is easier said than done for most traders. That is why the goal of many trading systems, including those we offer on our site, is to identify such trends as well as other potential winning opportunities.
The next example of a price action pattern provided in the video demonstrates both slow, fast, and favorable trading conditions. The primary tool (indicator) in use to gauge tradability is the ATR (Average True Range). Be sure to set the period value of the ATR value to four (4) first, as the default value of 14 will lead you to inconsistent conclusions! In a basic sense, favorable trading conditions occur when then the ATR value is between two and four points. If the ATR value one or less, the market is considered too slow (or risky) to be worth trading.
Continue to watch the video above to learn more.
Note that we teach how to filter and further assess market conditions in our eight-week Mentorship Program. The next class begins Sep. 15, 2020. Early enrollment is encouraged, as you will be able to learn a new trading method before class begins. We hope you will find the material rewarding in many ways.