vpc price action part 1

Price Action

Table of Contents

2

1

3

4

5

6Putting it in Practice

Trending or Trading

Price ActionWhat is a Price Action?

Supply and Demand

The Art of War and Trading

Support & Resistance

Fire & Ice 7

Price ActionWhat is Price Action?

In simple terms, price action is a trading technique that allows a

trader to read the market and make subjective trading decisions

based on the recent and actual price movements, rather than relying

solely on technical indicators.

DEFINITION

Since it ignores the fundamental factors of an instrument and looks

primarily at the instruments price history it is a form of technical analysis.

HOW IS IT CATEGORIZED?

Price ActionThe theory behind PA

• Price Action Trading is the discipline of making all of your trading decisions from

a stripped down or “naked” price chart.

• This means no lagging indicators outside of maybe a couple moving averages to

help identify dynamic support and resistance areas and trend.

• All financial markets generate data about the movement of the price of a market

over varying periods of time; this data is displayed on price charts.

• Price charts reflect the beliefs and actions of all participants (human or

computer) trading a market during a specified period of time and these beliefs

are portrayed on a market’s price chart in the form of “price action”.

Briefly


• The basics of economic theory revolves around the terms ‘supply and

demand’

• The fair value or price of a currency pair is determined by the equilibrium of

supply and demand

• The premise is that the current price is ‘the correct price’. It has to be as this

is where it is trading

Supply & Demand


The Art Of War for Trading

“Rouse him, and learn the principle of his activity or inactivity. Force him to reveal himself, so as to find out his vulnerable spots.”

• Consider trading like a conflict between warring nations

• On the one side we have the ‘nation of Supply’ (sellers) and on the other

side ‘nation of Demand’ (buyers)

• Each lining up in preparation for battle. You the trader can choose either

side and when you trade you have chosen a side

• As a trader you are a free agent, a mercenary that can move from one side

to the other

• Price action helps you determine which side to choose


• The starting point of every trade should be the determination of the ‘trending or

trading’ phase

• Strip your charts of all indicators and start with a clean candlestick chart

• Pairs will either be trending, moving in a specific direction ..bullish or bearish or

• Trading, which is trading within a specific range

Trending or Trading


• Trending is defined as continues ‘higher highs and higher lows’ or ‘lower highs

and lower lows’

Trending or Trading


• Trading is defined as a period where prices range between ‘support and

resistance’

• A period of consolidation

Trending or Trading

“In the midst of chaos, there is also opportunity”


• Support is a level where the majority of the buyers agree that the price is fair or

cheap and the sellers are not willing to sell lower

• Resistance is the level where the majority of the sellers feel that the price is fair

or expensive and the buyers are not willing to buy higher

Support & Resistance


• Support becomes resistance and resistance becomes support

• Major levels will reverse once they have been breached convincingly

Support becomes Resistance


• Support and resistance comes in many forms

• Trendlines

• This is a constant level preventing the price to move higher or lower

• A static barrier depicted by a line joining just 2 specific points on a chart and

extending beyond

Support & Resistance Forms


• Moving Averages

• MV have the ability to predict short term price action

• Used to identify a moving support and resistance levels only in a trending market



• Round Numbers

• Round numbers become psychologically important

• Many traders will place stop losses or take profits at round numbers rather than in-

between prices

• Because so many traders are at these numbers they become strong price barriers

• Round numbers tend to change markets from trending to trading being consolidating

in nature


“He who is prudent and lies in wait for an enemy who is not, will be victorious.”


• Trending or Trading EURUSD

• STEP 1

• Determine if trending or trading – TRADING

Putting it all together - TRADING


• Support and Resistance

• STEP 2

• Plot the support and resistance lines



• Placing orders

• STEP 3

• Place BUY LIMIT at support 1.1000



• IF DONE place Take profit order

• STEP 4

• Place SELL LIMIT at resistance of 1.14700 or incline resistance line of 1.1340


“who wishes to fight must first count the cost”


• Trending or Trading USDZAR

• STEP 1

• Determine trending or trading – Lower lows lower highs – TRENDING

• Lower Lows and Lower Highs - Short

Putting it all together - TRENDING


• Placing Order at resistance

• STEP 2

• Place SELL LIMIT order at resistance - 15.60

Putting it all together - TRENDING

“So in war, the way is to avoid what is strong, and strike at what is weak.”

Price Action

• Attempts to describe human thought processes invoked by experienced

traders that are not subjected to a specific discipline.

• It is a simplistic method of determining and creating a forecast of probability of

how prices change. therefore the name Price Action.

• Can stand true in theory with almost any instrument but is best based on

markets being highly liquid and highly volatile.

Summarized

• High liquidity shares

• Shares that show volatility and

movement

• Resource sector - trend

• Gold sector – trend

Which shares most commonly are good for Price Action trading?

• Banking - trade

• Financials – trend and trade

• Consumer – trend

• ‘Fire & Ice’ is a Lead trader in the CopyTrade stable

• Fire & Ice uses Price Action as one of its analytical tools

• What is Copy Trade

• Clients can copy lead traders automatically using the Copy Trade service

• Clients mandate Copy Trade to automatically copy the trades of Fire and Ice

• Copy Trade copies based on clients risk requirements and the exact ratio to the lead trader Fire and Ice

• An addendum to the mandate is required giving Copy Trade the right to copy the trades

• There is no cost to Copy Trade

Price Action in ActionFire & Ice Copy Trade

Thank you for attending

Please Join us for the next in the Price Action Series 2

Questions?

vpc price action part 1

Economy & Finance