Updated: Mar 2
The Best Forex Strategy Based on Price Action - Trade Like a Professional
As someone who has been trading since 2013, I have made many mistakes, reviewed many strategies and indicators as an author writing for multiple trading related websites but also tried many of them myself as a trader.
What I learned reviewing hundreds of strategies and indicators and analyzing charts for thousands of hours is that what eventually works best is not indicators, systems and strategies but actually learning to decipher the charts and existing patterns that are displaying themselves on the charts on a daily basis.
I've shared many forecasts on my YouTube channel - "Trade with my Forex Forecasts" where you can verify how powerful price action is and how well it can identify potential take profit targets, trends, breakouts, support and resistance and recurring pattens!
Now it's time you learn these skills as well.
Lesson 1: Forex Multiple Time Frame Analysis - a Powerful Technique
The first lesson is multiple time frame analysis - a very powerful charting technique that allows you to get the bigger picture!
Let's start the example to the right! Blue candlesticks are bullish.
Here we see a chart of EURUSD that is on the H4 time frame. It looks like there are higher highs and higher lows. Aha! You scream out loudly, it means it's an uptrend because I read that on some website.
Well, then take a look at this chart below which is also of EURUSD... oh, that's right, the trend is bearish on the higher time frames such as the Monthly and Weekly, as well as the Daily TF not shown. So... which is it? Is the trend up or down - bullish or bearish? Or, more importantly, should you trade up or down?
In order to give you a good answer - keep reading below on the difference between what you should view as a retracement vs what you should view as a trend!
The Higher TF is Trend & Lower TF is retracement Rule I use this simple, logic based rule, to answer that question. It goes like this: If, for example, like in our case above, the HIGHER time frames are in a downtrend, then price moving in the opposite direction on lower time frames are simply retracements. Simple right? Another example: If a H4 chart is moving heavily up - a strong bullish price movement is observed but on a... let's say M15 chart, price has been moving down, then this M15 bearish movement is most likely just a retracement.
Now that we got that sorted out, we can start analyzing the highest time frame we got. I prefer to start with Monthly and Weekly TF. Identify the bias - is price trending up or down? Or is it not trending at all?
Lesson 2: Segmentation of a Candlestick Chart - Drawing Support and Resistance
The next lesson is about segmentation - at first sight, a chart looks like a mess with no clear patterns and goal. Once it is segmented, you will see clear targets and movement patterns. This is done by drawing accurate trendlines that act as support or resistance lines. In lesson one, you learned to start with the higher time frame and identify a trend. As you move down to lower and lower time frames, you will find more and more patterns. The best way to illustrate this is... well, by having you here next to me so I can show you but then again, what are videos good for? So I went and made this video for you - and don't worry, I made it short so you don't get bored or don't risk getting caught watching it at work. Anyway, here it is: "How to break down the candlestick charts using trendlines in under 4 minutes"
Yeah, it took me several years to learn this but you can learn it in under 4 minutes, and for free! Good deal huh? =)