"ABCD" - Continuation Pattern ( Price Action Trading )

"ABCD" is not a continuation pattern ( our D entry could be or not, in the direction of the trend ). But if we see it like this ( or trade it like this ) we'll spot it earlier and we won't make confusion between this and 1-2-3-4 reversal pattern.

So on the counter trend ABCD pattern, we will have AB = CD and we buy/sell D ( trend direction ).

Ideal ABCD is like this:

Special case 1:

When AB and CD is in the direction of the trend ( and also a powerful trend's impulse ), we might find that AB CD.

So on the trend direction ABCD pattern, we can find that CD = 127.4% from AB ( so not equal in pips ) and we buy/sell D ( as a counter trend direction ).

Practicing this patterns trading while combined with 1-2-3-4 reversal pattern, you will see that these 2 strategies combined with fibs is all that you need most of the time.

* Special case 2: We will study this in "Advanced Strategies".

ABCD Trading Strategy.

Lets say we had the new trend confirmation ( using 1-2-3-4 pattern ) and get the profit between the 2-4 distance. Now we can look after ABCD ( in the direction of the trend/counter trend ).

1. Bought on BO of 2 ( using 1-2-3-4 )
2. TP @ 4 ( using 1-2-3-4 )
3. Use 3 as A, 4 as B
4. C= 61.8% from AB ( we could buy here using PO for fibonacci strategy No 2 )
5. As we going long, we found out that AB=CD (and TP for our buy limit =161.8 % from BC = D)
6. Sell D
7. TP for ABCD = 61.8% from CD.

In this chart we see that we won 2 profits from trading 1-2-3-4 and ABCD. Now we can search for another entries ( in the direction of the trend or counter trend ).
Not longer than 1 swing further we spot something that got our attention again: a powerful retracement that could form AB ( in the direction of the trend ):

* We also could of sold our B as a 50% retracement from previous traded swing ( as ABCD ), but that would have been a counter trend position and we will speak about it on our "Advanced Strategies".
** Also: C is failing to BO lower than 78.6% (yellow fibonacci, candle close above - in case we trade manually). But we would've bought with PO the 61.8%, with SL = previous LL (A).

Now, we have ABC formed:

1. We find that D = 127.4% from BC ( special case ) - we can use a TL and trade it as BO of TL
2. Sell D
3. TP = 61.8% from CD. (olive fibonacci)

Practicing this you will find out that B is sometimes only 50% from AB, or TP is only 50% from CD.
Never the less this pattern, like I said before, is one of the most powerful tool along the 1-2-3-4 pattern and of course Fibonacci retracement tool.

Best regards,

Longer term trades

First trade short of aud/usd after negative fundamental news. It's not ideal to open such trade pretty much late. I gave it big stop of 77 pips. Target was the same.  Three open trades were just because I was experimenting with sizing in relationship to stop. First stop was 100 pips, when I changed stop I took bigger size for a trade. Yellow mark is average.
That trade didn't really work from the start. I had nice push after being first in negative but then it reversed. I'm thinking that on such trades that from start don't really go in my direction I should take profit if later given in size that was previous negative move. But it's all fluid, I really don't know is that optimal. I didn't touch this trade, or reevaluate it. I just left it to do whatever. Maybe some trade management would be better to exit with smaller loss then full R.

Entry short immediately after the news, move before the trade was instant. Support held and it moved slowly toward the stop. I wouldn't do much different in this trade. I think that probability was more for down side. Stop and target were 100 pips. Maybe stop should have been lower because if it goes back to 160 resistance it's hardly weak. Maybe in this case stop of 70 and target 70-100.

Third trade short in eur/gbp.This trade was opened around the same time as previous short in gbp/usd. I didn't believe that previous down break in eur/gbp will so easily fail on gbp weakens. So I shorted with idea that it's now top of the range. It worked that way. When I checked that trade next day I found it not taking my take profit for just one pip, so I closed.

Fourth trade short eur/usd after Spain downgrade. I was early in the move. Two trades because I found out that I don't need 100 pips stop to invalidate my idea of down side. So I doubled the position because I only needed 50 pips R. At first I set up things that one take profit is at 1R and second at 2R. Later after move went in my direction I moved my stop down and widen the take profit. So for first trade it was at 3155 and move only went to 3160. It moved exactly 1R. After it rushed bit by bit back up (I was by the screen scalping) I was mad because of my greed. If I had 1R target all would be peachy. I didn't believe that it was full reversal, I expected some resistance at some point.
Basically it's very hard for me to decide what to do with the trade in between my stop and target. On smaller time frames it's different story from minute to minute and I can't judge clearly.
So those were my longer time trades. I don't know will I continue with it. This is only testing and treading water. It's interesting but I feel little bit new and clueless.

April 2012. results

-118 pips
-40 %

My trading with nano account  continues in similar fashion. It's now near to paper trading. So monetary it doesn't mean anything so results are easily that bad. Basically I'm just trying out ideas and looking  for style that will suit me.

I started trying out things on longer time frames on even smaller subaccount. This is like first time in my trading history that I made four separate longer term trades. It's nothing spectacular, I basically don't know how to behave on longer time frames but it's somehow interesting for me. On four trades I'm at -2R. More about them in next post. It could have been better, but I managed trades not so good.

Rest of the month

April 9.

-7 pips

April 10.
-20 pips
I stayed inside daily stop. Too much momentum seeking trades when there is no momentum. I'm used to trading like this and do it when it's not appropriate. But my first goal is to stop trading when my daily stop is hit, today I did that without resistance.
I believe that when I get to trust myself about daily stops that it will get me relaxed and open up to a whole new level of non anxious trading. Then results will follow. So first step is respecting daily stop. If I managed to get rid of widening my individual stops I can do this also.

April 12.

-16 pips
Sometimes I can say I don't have sightless idea of what I'm doing.

April 13.
+8 pips
Insane how much time for + or - 6 pips move.

April 16.
-19 pips
Losing machine.

April 18.
-6 pips

April 20.
- 12 pips

April 24.
+6 pips

April 25.
-29 pips

April 26.
+13 pips
Stupid to keep scalp stops in situation like this when I'm not scalping. Serious problem is mixing trading styles. 

April 27.
-25 pips
I'm getting angry because I don't take scalp profits. If I'm going against the trend for any reason and have some profit on hand I should simply take it. This is not scalping, nor daytrading.

Fibonacci Tools & Strategies.

Fibonacci is one of the most powerful tool for trading. There are many fibonacci tools in trading platforms: Retracement, Expansion, Fibonacci Fan, Fibonacci Arcs and Fibonacci Times Zone.

The beauty of this toll is that work in every markets conditions and on every TF. Ofcourse like all trading strategies, works better on higher TF.

Before I'll start to tell you about strategies using these tools, I want to make sure you will use correctly Fibonacci Retracement:

1. Always draw this tool in the direction of the trend ( we want to see how much the PA will retrace, before continue the main trend - we want to know the possible end of the counter trend ).
2. If trend is short, click top, drag while keep pressing click, until bottom and release click.
3. If trend is long, click bottom , drag while keep pressing click, until top and release click.

Now the chart should look like this:

The HH level used for drawing is not actually HH, but it's a previous High ( LH ). You can use only the previous swing's High for measurements. 

For the importance of Fibonacci you might wanna look this article too: Fibonacci Retracement.

1. Fibonacci Retracement + TL BO.

This is one of the most used strategy using fibonacci retracement. But before we continue, you must look at TL BO Strategies.

Drawing a TL ( on counter trend ) offer us a great entry possibility to enter the market when:

1. PA failed to BO the 61.8% fibonacci retracement level ( golden ration ).
2. BO of the TL
3. Tight SL, previous High, before BO occur ( or 61.8% fib level + spread + 5 pips ).
4. TP is 0.0% fibonacci retracement level ( the start of the counter trend - here PA is possible to fail to break further )

2. Pending Orders on Fibonacci Retracement Levels.

 This is one of the most profitable fibonacci strategy because you always trade with this in the direction of the trend only. ( "the trend is your friend " ).
For this, we will use same example as the previous strategy chart. This strategy works better from H1 to Weekly chart.

1. Draw the fibonacci retracement from top to bottom ( since our chart has main trend short ).
2. Put pending Sell Limit Orders on 32.8%, 50% and 61.8% ( we expect PA will return to short trend at one of those levels ).
3. As SL use 61.8% or 78.6% level ( if PA BO the 61.8% from the big main swing, we might have a change of the trend, from short, to long, in our example ).
4. For our first TP, we will have 0.0% level ( or the LL - we expect this to be BO or rejection from it, when PA will fall down )
5. For the next 2 levels of TP, we can use Fibonacci Expansion. 100% and 161.8% ( drawn same as retracement tool - click top, drag bottom, then click and adjust the retracement line to the correction end - near 50% retracement level, in our example - the red dotted line ).

At this strategy you might wanna consider this:
a) If only 1 pending order hit ( first 32.8% ) and PA follow the main trend down, delete the other 2 pending orders. As TP use TP 3. ( 161.8% - expansion tool red ). If counter trend was so weak to touch only this level, that means stronger main trend down coming ).
b) If 2 pending orders were hit ( 32.8% and 50% ) delete the 61.8% pending and as TP you can use TP 1 for 50 %, TP 2 for 32.8%.
c) If all 3 pending orders were hit, you can use TP 1 for 61.8%, TP 2 for 50% and TP 3 for 32.8%.
d. Also you can use Trailing Stop or move SL manually after each BO, to the previous HL until BE.

3. Fibonacci Retracement on multi Time Frames.

Another profitable way of trading fibonacci is to draw it on a higher time frame and look for entry on lower TF. For example draw fibonacci on Daily chart and look for entries on H1.
For this you need all fibonacci levels for retracement added in the "Properties". To go there, use this way. Here you should have all those levels: 23.6%, 38.2%, 50%, 61.8%, 70.7%, 78.6%.

1. Draw Fibonacci Retracement on Daily chart ( same as previous example ).
2. Lower the TF to H1 and look trades on every level ( buy counter trend or sell correction over ) like Trend Lines Strategies or Support/Resistance Lines Strategies. Careful attention on 32.8%, 50% and 61.8%. In those area correction should end. In case correction is only 32.8% a fast down trend usually occur.
3. TP = next level / opposite TL BO / Trailing Stop.
4. SL = next level / opposite TL BO / Move SL manually on previous HH/LL.

Best Regards,

How to setup your Fibonacci Retracement to show price on each level on MetaTrader 4 ?

Here is a simple trick that will show price near every level from your Fibonacci Retracement tool:

1. Draw your fib to the chart ( for example from the top to the bottom )
2. Double click on the "Common Line" ( connect levels from top to bottom, for example )
3. Right click on the selected Fibonacci Retracement + Properties.
4. Select "Fibo levels" from menu.
5. At "Description" add near the levels "= %$" (you can put 2 x space before that = to see it more clear)

Now your drawn Fibonacci Retracement tool will show the price on each level like this:

Now you don't have to check the price everytime, using your "Crosshair" tool, cause price apear next to the fibs levels.

Best Regards,

"1-2-3-4" - Reversal Pattern ( Price Action Trading )

This reversal pattern can be found at the end of the trend if:

1. TL is broken.
2. PA failed to make HH ( for Sell ) or LL ( for Buy ).
3. BO of 2 ( confirmation that the trend is changed ).

This is a Price Action Strategy and for better understanding this you should check this strategy, too: Swings Trading ( Price Action Trading )

Lets see an example on the chart:

In our example, we have a retest of the BO of 2 level, but it doesn't happend all the time. That's why for proper trading this strategy, you can use only 1 pending order, Buy Stop/Sell Stop at the Break Out of 2.

SL can be @ 3, but also you can use a more relaxed SL, below 1 level.
For TP we project the same distance in pips, as between 1 and 2 level.

Best Regards,

Swings Trading ( Price Action Trading )

Swings ( waves ) are PA formations, described as an impulse, followed by a correction, during trends and counter trends. Every trend have ups and downs (swings ).

Best way to see the swings, is to draw them manually, connecting with lines the Higher Highs and the Lower Lows.

Now all we have to do is to mark the swings:

HH = Higher High
LL = Lower Low
LH = Lower High
HL = Higher Low

So for an UP Trend ( bullish ) we will have swings:


And for a DOWN Trend ( bearish ) we will have swings:


So based on the swings and PA, we might use the next strategies:

1. Trend Lines BO 

2. Support & Resistance Lines ( S/R Lines )
3. Channels

For trading the swings, SL should always be a large one ( previous HH or LL ).

Best Regards,

Moving Averages ( MA, SMA, EMA )

A Simple Moving Average is the average of a series of prices, over a period of time which is constantly updated by dropping the oldest value and then adding the newest value and recalculating the average.

For Exponential Moving Average, the formula is changed and the last prices count more than the oldest ones.

MA is used for trading, as a "mobile" Trend Line or S/R Line ( range market ), because every time a new candle is closed the "line" is drawing that change in PA.

Also, MAs, even if there aren't used as crossing strategy, can be used as trend indicator ( like a TL, adjusted every time a new candle is formed ).

There are many ways we can use it as trading strategies, too.

1. One Moving Average BO

For example we can use 50 SMA, like this.

1. Always use the direction of the MA to establish trend for swing
2. When 50 SMA point UP, look to BUY only, when 50 SMA point DOWN look to SELL only.
3. After trend is confirmed ( SMA pointing UP or DOWN ), you can open a buy ( in our example ), after PA closed above 50 SMA. SL would be the LL of the candle that made the BO or the previous LH ( we are in a uptrend now ).
4. After that, you can add more positions ( BUY ) on every retest that failed to break below 50 SMA or other crossing ( from below-above ) between PA and 50 SMA. SL would be previous LH or the LL of the candle that made the BO (crossed the 50 SMA ).

2. Two or more Moving Averages Crossing

This is the common use of MAs for trading. For example we can use 20 SMA, 100 SMA, like this.

1. Previous down trend is over, 20 SMA crossed above 100 SMA, we look to BUY opportunity.
2. PA retested the SMA 100 = BUY, SL would be @ previous LL.
3. Candle closed above 20 SMA, you can also BUY , the next candle opening. SL would be @ previous LL.
4. After the BO of the new formed HH, move the SL to next HL ( our entry ) until BE, or use trailing stop.
5. You can also add more BUY positions on every crossing UP ( 20SMA over 100 SMA ), or new closed candle above 20 SMA ( when changing directions again from pointing DOWN to pointing UP - rejection from 100 SMA)

In this way you can also add the 3rd SMA and add positions to the crossing of first 2 ( 20 and 50 ) and use SMA 100 for trend direction confirmation.

If in this example, 20 and 50 SMA, cross below 100 SMA, the long trend is over and we look for sell opportunities only.

3. Moving Averages and TL or S/R Lines

As I said, MAs are also good for indicating ( pointing ) the main trend.

But another way you can use 50 SMA is to confirm BO. One of the best ways to do it is to trade TL's BO on the main swing trend like this.

To read more how to setup the trades using TL's BO systems, SL and TP, go here.

4. 200 EMA using multi TF

This is one of the best trading strategies. Very simple and yet so effective ( you will never be against the trend ).

1. Daily chart, PA is below 200 EMA
2. H4 chart, PA is below EMA
3. M15 chart "bucking" the trend and must also go below 200 EMA.
4. For filtering the entry, on M15, you can use Stochastic oscillator crossing from top to bottom ( crossing 80% - oversold level )
5. SL would be previous @ LH ( down trend ).

Best Regards,


Channels are basically 2 parallel TL drawn on the chart, that contain LL and HH of PA's last swings. There are many ways to trade channels.

1. The common use of channels is to trade it as Trend Lines BO or Pullback ( rejection ).

2. Also, when the formed channel is horizontal we can trade it as S/R Lines BO or Pullback ( Rejections ).

3. BO Boxes Channel Trading Strategy

After we found a channel on higher TF we can lower the TF to M30 to find our first BOX. Then we can use it to keep add positions or to move SL until BE.

Also using same technique with boxes, you could of predict the drawn channel forming since beginning. All you have to do is to find first pullback and make a box of it.

Sl would be opposite BOX direction. You can add positions, move SL ( BE ) when it's BO of the BOX, or use Trailing Stop = BOX pips. ( HH-LL ).

From my experience this work better on London's opening and no important news in that day for the pair you trade.

Best Regards,

Support & Resistance Lines ( S/R Lines )

Support & Resistance Lines ( S/R Lines ) are horizontal lines connecting at least 2 previous HH or LL of PA on the chart.

To draw S/R Lines we can use HH/LL or close price, as our R Line from the chart above.

The common mistake of trading these S/R Lines, is to consider them ...lines. S/R Lines are actually Zones.

Normally second R Line is a LH on the chart ( is a resistance when we connect at least 2 previous HH/LL ).

In this example using zones, we could connect our second R Line with previous LL/HH. ( since there are sometimes 10p-20p difference, between those levels ). Using only a line we can't connect them properly.
Every broken Support, becomes Resistance and every Resistance broken, becomes Support.

There are many ways to trade S/R Lines.

1. S/R Lines BO Strategy.

After a candle broke a S/R Line and close below you can entry on the next candle opening, with a SL above the candle's high ( our example is a short one ).

For TP you may use Trailing Stop, BE ( moving SL after each further BO ) or find the next Support Zone pullback. ( rejection ).

2. S/R Lines Pullback Strategy ( rejections )

If you look carefully at our previous chart, you will see that was a false BO of the S Line on the bottom of the chart. If we would of drawn a Line, we might of trade it as a BO of S Line.

But since we've considered a S Zone ( connecting the last previous low and the last one ), we look for a candle to close above to entry. ( rejection )

3. S/R + TL BO Strategy

An interesting idea of trading S/R Lines is to combine it with TL.

For trading it like this all we have to do is to lower the TF ( we used H4 and now we entry on H1 - for proper entry and a tight SL ).

4. Pending Order @ Retest previous BO of S/R Strategy

This is one of the best and yet simpliest trading strategy I've ever found.

Ypu can use pending order for this ( after previous BO ), or use rejection from R Zone.
Your SL would be @ new formed HL. For TP you can use previous LL, BE or Trailing Stop.

Best Regards,