Top five Price Action setup’s

Every System has a personality behind. Some systems will be looking for crosses, patterns, divergences etc. With every analysis method takes the trader back to price action for entries.

“Trading is not about picking market’s direction, but about great execution” by George Soros.

List of my set ups

  • Break out failure
  • Break out pull back
  • Pull back
  • Complex pull back
  • Test

These setups when executed accurately tend to attack idiots in the market. Many of us human beings tend to assume and believe the market will mysteriously fulfill our goals. I define markets as traders making trading decisions: if 10 000 traders are participating on the EURUSD why would they aim to satisfy your desires? This question is important as it addresses to the mind some of the natural traits that have huge potential to end careers i.e When the market is in a bull trend, it is difficult to wait for pullbacks, some traders get impatient to the point of counter trading, future price action is always in the direction of strength disregard of individual traders thought. When the trader is shrouded by emotions, he feels late in an ongoing trend and his option for feeling early is to reverse trend or enter in market movement that cannot be classified to any of the above listed setups.

Trends change every day and people hate frequent change (observe how a man acts when dumped by a girl), that desire to be unchangeable is a professional traders gold mine. In a bull trend: Sellers are reversing the trend but many buyers have got personal issues of entering late (usually when they don’t have guts to enter early, they won’t have guts to withstand counter trend threats). These people make a bull trend continue.

In a trading range market: Buyers and sellers have got equal control. Their knowledge for the fact that sooner or later  price action will break range boundaries is enough to keep them executing heavily with greed and anticipation. The unprofitable group are those who execute in the middle of the range or get trapped in a rapid price action movement event when professionals execute a BOF setup. The likely profitable bunch are those who execute around range support/resistance with the professionals.

In a bear market: Bulls are reversing the market but some bears have got personal issues of entering late because of doubt (usually if they miss a whole sale entry, they become chasers. If they failed to have guts for an early entry, they wont have guts to withstand counter traders threats).

How does a Break out failure occur?

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Every imaginable occurrence is possible in the markets. This occurrence happens often in trading range markets. Emotional traders imagine a potential huge move after the break of support/resistance, majority enters before the break with anticipation and greed. Should price action fail break out traders get trapped in a very expensive trade. It also occurs at areas of trend change, traders see increase of depth and seemingly strong counter move, should price action show weakness, traders get trapped in an expensive trade.
 How does a break out pull back occur?

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This setup occurs when a break out failure set up fails at support or resistance. Some traders will marry the high probability breakout failure set up even in bad conditions where price action shows strength in the direction of the break (bad condition for counter trend breakout failure-good condition for with trend break out pullback). It also occurs at trend lines. Price action breaks a trend line, after the breakout traders will look for a break out failure set up, should it fail that’s a break out pull back set up.

How does a pull back and complex pullback occur?

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A pull back occurs in a strong trend when price action suddenly surprises emotional traders with a huge move, many individuals who missed it attempt to fade the first stall. Should price action fail to show them strength they automatically get trapped in an expensive counter-trade. A complex pullback occurs in a slow trend, deep pullbacks trap greedy counter trend traders looking for an early reversal.

Using these setups as a weapon to attack idiots sounds simple for a dual auction process, that’s because the play does not work when taking them all with insufficient experience. The setups don’t work out smoothly hence the traders job is to manage that risk. Completely letting go of trades can give a trader an advantage because he gets the chance to clear his mind for a completely new trend next day.

Making money depends on discipline, how many times do you allow an order? Where is your target compared to price action target? If you have an entry rule of trying twice per entry, why not cancel the session when two setups fail? If you will be trading for 10 years and it’s still your second year, relax the decade is still young. Happy trading!


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