How would you trade a day like today where price plotted in a V shape? Price trended down then reversed bullishly. If you’re like most traders, this price action won’t make sense. You have to apply a methodology then it becomes clear. You’ll see exactly what’s happening. And that’s exactly what John Paul will teach you in this video…
Let’s decode the price action. First, consider the trading day can be divided into three sections: morning, middle, and late-day. Our ABC Indicator (included with our ATO 2, Atlas Line Lifetime, or our 8-Week Mentorship Program) does the “dividing” for you by drawing vertical lines, shaded high/low breakout regions, and entry signals. Yes, you could manually draw these lines and boxes yourself, but having the indicator on your chart makes it far easier to spot opportunities! As such, this video shows you two great Long/buy signals from the ABC indicator for today.
Moving forward, John Paul gives a demonstration of what a completed A section of the day looks like. It’s shaded yellow. You see, you have to wait until the A section is over before you can have any ABC signals/opportunities. In the B section, we’re looking to see if price moves beyond the high/low of the A region.
If there’s going to be a trending day (lower and lower in this case), we should have a bearish breakout below the A section. But that did not happen! Instead, price began reversion in section B.
Price Action: No Confusion in Trading
One point of confusion for some traders is that in section B, you should ignore the high/low of region B. You’ll have to wait until the time period for section B is over with before the high/low means anything and can be used to trade in the following period, section C. In other words, when you see that signal in section B around 3:30 in the video, that signal is the result of the high reached in section A. The high/low of B doesn’t mean anything at that point. Section B is essentially “alive and growing” with price action until it’s over. Then we trade in section C based on what happened in section B. Got it?
Moving on, a signal or entry opportunity only exists when there are two closing candles beyond the prior section’s high or low. Two closing candles above the prior section’s high will result in a Long/buy signal. Likewise, two closing candles below the prior section’s low will result in a Short/sell signal. Yes, we also use price action to validate itself.
Why two closing candles? It’s a way to “confirm” that price intends to move in that direction. We like at least two bars so we’re not faked out. Indeed, markets like to “test” where they’ve previously been. That means that may go back to prior highs or lows, go through it by a couple of ticks, and then move the other way. So, two closing bars is a bit better.
If you want to learn more details on how to trade the the price action ABC method manually, look for the ABC video at the top of this page.