The Authority’ on Price Action Trading. In 2016, Nial won the Million Dollar Trader Competition. Hot spot forex action: Price action is the movement of the price of a market over a specific period of time.
By learning to read the price action of a market, we can determine a market’s directional bias as well as trade from reoccurring price patterns or price action setups that reflect changes or continuations in market sentiment. So, basically, when we look for confluent areas in the market we are looking for areas where two or more levels or analysis tools are intersecting. I use the 8 and 21 day EMAs on the daily charts to help with trend identification and dynamic support and resistance identification. Both the 8 and 21 EMAs are factors or levels that can add confluence to a price action setup. Here’s a video on drawing support and resistance levels.
Event areas are levels in the market where a significant price action event occurred. I don’t get into all the other Fibonacci extension levels as I think they are too discretionary and haphazard to be of any use. The 5 factors of confluence above are just some of the levels that can intersect to form a confluent area in the market, there are also intra-day levels and other factors of confluence that we can watch for, which I discuss in my price action trading course. Combining levels of confluence with price action signals When I am analyzing the markets, I am primarily looking for an obvious price action pattern that has formed at a confluent point in the market. This pin bar had confluence with the dominant downtrend, as it formed telling you to sell the market with the trend. The pin bar was also rejecting a horizontal level of resistance.
This pin bar had confluence with the recently formed uptrend, as it formed telling you to buy the market with the trend. The pin bar was also rejecting a horizontal level of support. This inside bar had confluence with the strong downtrend that was in place. The inside bar formed at a horizontal level of support. This fakey pattern had confluence with the strong downtrend that was in place.
Also, the market was falling on the daily chart at the time this 4 hour signal formed, so that adds more weight or confluence to our setup. The fakey formed at a horizontal level of support. Conclusion From the examples above, you should have gained a basic knowledge of what trading price action from confluent levels in the market is all about. I recently took a trade on the daily and I went through this checklist.