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The best patterns in the Price Action - review of the most effective models
In the previous lessons on Price Action we took a brief look at such patterns like Pin bar and acquisitions, but this is only the tip of the iceberg, because over the last 10 years traders have discovered dozens of new candlestick patterns. I think it would be logical to complete the collection even more versatile and reliable models.
The first Price Action pattern, which will be discussed today, is called "Rails". In my experience, the foreign exchange market, it is one of the most common, and surprisingly, the quality of its testing does not suffer from such "evidence".
On the chart this figure always appears at the end of the previous trend and consists of two candles with approximately equal bodies.
Pattern Price Action in rails
In the process of forming bullish pattern Price Action buyers are buying the market after a rapid decline, and in the case of bearish figure bidders EN masse to close long positions and flipped to "short".
Incidentally, in the literature on VSA such movements are often referred to as the culmination of the trend (as they are accompanied by a surge in the volume), when trading on the level "Rails" often coincide with false breakouts. These observations allow us to note several criteria that represent the strongest patterns in the Price Action of this kind.
First, the volume (preferably real, but in MT you can use the tick) on the first candle must be above the average (for evaluation which allowed the application of SMA(20)).
Tick volume and price action
Secondly, it is desirable that the rails were crossed by some great level – this can be as important psychological level, and every plank (knee Fibo grid, the level of Murray etc.).
Pattern Price Action for trading on Forex
And the last feature that distinguishes the perfect "rack" Price Action-patterns from nothing invisible figures, is a short shadow, that is the opening price and the closing bars should almost coincide with the Low and High.
To trade on rails is very simple – after the close of the second candle outside the range of the pattern sets the corresponding pending order type stop stop loss which is placed over the opposite extreme of the figure.
The establishment of restrictive orders are in the pattern
Profit you can commit or by setting a take profit is double the stop loss, or any other available method, for example, touching the strong level, or the reversal of the moving average.
But enough about rails, now let's talk about a second, less reliable method Price Action pattern called a Hook Reversal, or translated into Russian language – the pivot on the inner bar.
Hook Reversal pattern price action
As the figure of absorption, HR is a reversal bar that is formed at the end of the previous trend, but he has one feature – the second candle of the formation must be within the range of the previous, not to block it.
Forex such models are formed mainly after the weekend, so as long as the markets relax, the World is still undergoing important developments. As soon as the banks begin to carry out operations on Monday, I received data are taken into account in the price.
Anyway, another scenario can not be here, as the currency market is open around the clock, so price gaps inside a trading week appears very rarely and is most often due to the poor quality of quotes dealing center. It is better to take this fact into account and to work quietly on the daily timeframe.
The following pattern Price Action for Forex called darkly "tombstone". His nickname he received for the appearance, as it is very similar to the Dodge, which has only one shadow top.
Gravestone - pattern with Price Action
Perfect "tombstone" meets the following conditions:
he has no lower shadow;
the body is virtually absent (specific valid range in items to not call as much will depend on the timeframe, because 10 to 20 p. in D1 it is "nothing", and the M30 is quite wide corridor);
maximum "burial" the Price Action pattern must be placed above the High of the two adjacent candles.
Very often traders simplify the methodology and open a trade without waiting for the close of the candle following the "stone". In principle, this figure is reliable, so this approach is valid, just in this case it is recommended to reduce risk (reduce a lot).
And the past pattern of Price Action which I will consider, many already know – it will be about Warhammer.
Hammer price on the Forex chart
By and large, could not be considered as read about just lazy, but the fact that he is the opposite of the previous figure, so no "hammer" her description raises many questions like "is there bullish gravestone?".
The answer is no, does not exist, so to refer to similar models that indicate the trend reversal from bearish to bullish the hammer is used, the ideal which meet the following criteria:
it has no upper shadow;
the range of the candle body is minimal;
the minimum price of the hammer is below the Low of the two adjacent candles.
As you can see, these rules are diametrically opposed to the features marking a perfect Price Action pattern in the form of "gravestone".
If to briefly summarize today's topic, you can make a logical conclusion – a Price Action patterns sometimes overlap with the standard candlestick formations are described in the books on technical analysis, and the last two figures are proof of this.
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| Category: Forex | Added by: (30.10.2017)
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| Views: 635
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