AppId is over the quota
Price Action Breakouts Price action traders feel that everything that is needed to analyze markets is available directly from the price chart, including a mechanism with which to enter into strong moves AS they begin. What is this mechanism? The mechanism is simply price itself. After our last article investigating swing-highs and swing-lows, we can now look for areas of support and resistance as substantiated by the market. For instance, on the chart below, notice the up-trend in the AUD/USD currency pair as price approaches the vaulted ‘parity,’ value.
(Created with Trading Station 2.0/Marketscope) As a side-note, parity is often considered a form of ‘psychological,’ resistance as it is an even, whole number. When placing orders, as matter of natural human behavior, many traders will look to round numbers for setting of stops or limits. This can greatly alter price action, as up-trends can be slowed by the selling that ensues with a litany of stops hit at a pre-determined price. We will investigate psychological support and resistance in a future price action piece, but for now, let’s just consider that this could be a form of resistance. As price crosses this ‘psychological,’ level of parity, notice the sell-off that ensues. This can be predicated by limit orders that traders have placed on long positions. Once this 1.00 even level has been hit, an onslaught of sell orders come as those limits execute. On the other end of the trade, we have short-sellers that have placed stops at that nice, round, even value of 1.0000. Once price hits parity, those stops get triggered, further exacerbating the selling that is taking place. This brings on an entire change in momentum; as you can notice the trend-line that had supported the pairs’ bullishness on the run-up gets broken; and then price action heads lower. The astute trader could take a step back and imagine: The pair previously had a lot of bullishness (which is why price had run up to parity in the first place). The turn-around at 1.0000 even may have been brought on from protective stop or limit orders. If price moves up to that level again (with strength) it may break this resistance and just continue running. This is the breakout trade. Taking these major levels of support and/or resistance and opening positions with the prevailing momentum at the time. But what if support or resistance is far away from any psychological levels? That’s ok, we can grade support and resistance in a variety of ways; not just with psychological levels. For instance, in the below chart, we’ve taken a snapshot of the AUD/USD currency pair. As price runs up to .9876, we seem to hit an area of resistance. This can be identified by the fact that price wicks up to .9876 and is met by selling. 
(Created with Trading Station 2.0/Marketscope) Price then ‘re-tests,’ this .9876 level again, this time to be met with massive selling as you can see price going down by over 100 pips shortly thereafter. This should look similar to the previous chart, when price was rejected around the psychological level of parity (1.0000). Many traders will consider the 2 points of resistance as a ‘double-top,’ candle formation. This is another tool that can be used by price action traders that we will investigate in a future piece, but for now, lets examine this level as points of resistance. Notice, the second inflection off of .9876 wasn’t EXACTLY at .9876. This is, often-times, how price action support and resistance will work. As a ‘zone,’ of support and/or resistance; rarely is support or resistance an exactly perfect price. The astute trader could have recognized this occurrence, and the fact that Aussie seemed to be resisting the .9876 resistance zone; and hypothesized that once AUD/USD finally broke through .9876, it may have some room to run to the upside. Below is the same chart we were looking at previously, only this time we’re looking at what happened after the .9876 resistance zone was broken. 
(Created with Trading Station 2.0/Marketscope) As you may notice, the bullish strength that invigorated the AUD/USD currency pair enough to break the .9876 resistance zone continued for over 125 pips. This is the breakout, and there is more than one way to do it. The important thing is to identify support or resistance that we feel strongly about, and then using effective mannerisms to enter into those situations. Links to additional resources: Price Action, an Introduction Price Action Swings Price Action Pin Bars Support and Resistance lesson 1 (On-Demand Video Course) DailyFX+ Trading Room --- Written by James B. Stanley To contact James Stanley, please email Instructor@DailyFX.Com. You can follow James on Twitter @JStanleyFX. To be added to James’ distribution list, please send an email with the subject line “Notification,” to Instructor@DailyFX.com. 
This is where indicators can help. Indicators, based on past price information, can be added in an effort to assist the trader in making heads or tails of what is actually going on. The list of possible indicators to be used can go on for quite awhile, and there are a lot of different mannerisms in which indicators can come into play. But there is one universal concept that many Technical Analysts try to keep in mind: No indicators or Trading Systems works 100% of the time. Once again, we have to remember that price action, like any other future event, is unpredictable – especially when we’re using past price information to make those decisions. This is where price action can help. Price action is the process of using the price chart itself, without any indicators, to assist in trading decisions. To get started, lets first look at one of the more pertinent areas of analysis: Trend identification. Many traders, with the idea that future prices are unpredictable, simply try to use Technical Analysis to try to ‘get the odds on their side.’ Traders can attempt to identify their trend under the presumption that price, of recent, had shown a bias in one direction and that bias may, perhaps, continue. If price is in a down-trend, then traders can look to initiate short positions in an attempt to be on the correct side of this bias in price. If price is showing an up-trend, the exact opposite can be true; where traders are looking to Buy into long positions so that this bias may work for them to push their trades higher. Below is the same chart we had looked at previously, a weekly EUR/USD chart, but this time we have 2 sections identified. 
No indicators were needed to identify these trends; this was done entirely from the chart itself. Notice that during the down-trend, price did not make a linear movement down in a straight line. Most of the movement can be explained by big moves down, followed by congested price action, followed by further moves down. Below is the same chart, but this time we’ve went down to a Daily time-frame. 
Each dark box identifies the periods of ‘congestion,’ during the downtrend. As the trend began above 1.50, notice the quick movements made as the currency pair trends down. Shortly after piercing 1.45, a run of ~500 pips, the currency pair begins to display congestion; exhibiting price movements that disagree with the direction of the trend. But these ‘counter-trend,’ price movements don’t last for long, as the currency pair, eventually, strives to even lower levels. During these periods of ‘congestion,’ or ‘counter-trend,’ price movements, the trader can notice the rice swings displayed on the price chart. Below is our EUR/USD chart with swing-high’s circled in red. 
Did you notice something that was consistent amongst each of these ‘swings?’ Each swing-high is at a lower price than the previous swing. Lower-lows and lower-highs are being exhibited on the chart. And with this, I can then grade this as a ‘down-trend.’ 
The exact opposite can hold true for Uptrends. Over our next few price action articles, we’ll take a look at mechanisms that can be used to potentially trigger into trades in the direction of the trend. --- Written by James B. Stanley To contact James Stanley, please email Instructor@DailyFX.Com. You can follow James on Twitter @JStanleyFX. To be added to James’ distribution list, please send an email with the subject line “Notification,” to Instructor@DailyFX.com. 
(Created with Trading Station 2.0/Marketscope) The exact opposite can be said for up-trends, being accentuated with ‘down-swings.’ 
(Created with Trading Station 2.0/Marketscope) And of course, if we have a range, we can notice both up-swings and down-swings. 
(Created with Trading Station 2.0/Marketscope) Swings-Lows, or Down Swings, can be classified as a low point of price that is accompanied by a ‘higher-low,’ value in price on each side of the candle. 
(Created with Trading Station 2.0/Marketscope) The multiple swings exhibited by price behavior throughout the day can be used for a multitude of functions. For instance, for traders wishing to grade trend, they can often do so by observing ‘higher-highs, and higher-lows,’ or ‘lower-lows, and lower-highs.’ 
(Created with Trading Station 2.0/Marketscope) Taken a step further, traders wishing to manage risk can potentially look to these swings for stop placement. For example, in the chart below, the trader looking to take on a long postion can adopt the stance: “If price breaks this swing low, then I no longer want to be in my trade as the trend may no longer be to the upside.” 
(Created with Trading Station 2.0/Marketscope) And of course, once a trader is in a position – this same mindset can be used in position management. The chart below illustrates: 
(Created with Trading Station 2.0/Marketscope) We’ve covered 3 of the more popular mechanisms of ‘Swings,’ in the market, but we are just scratching the surface. There are numerous additional mannerisms in which these swings can be used by the price action trader. In our next piece, we will look at using ‘Swings,’ to enter into positions that may be amenable for ‘big,’ moves exhibited by the market; a market condition that many traders flock to when conditions are right: The Breakout. Links for Additional Information: Price Action, an Introduction Support and Resistance Lesson 1 (DailyFX+ On-Demand Video Course) --- Written by James B. Stanley To contact James Stanley, please email Instructor@DailyFX.Com. You can follow James on Twitter @JStanleyFX. To be added to James’ distribution list, please send an email with the subject line “Notification,” to Instructor@DailyFX.com. 
Taking Price in to a 2Hour chart we can utilize the Stochastics indicator to find entry signals. We are looking for the %S line to cross over our %D line signaling an opportunity to trade with the trend. Our signal is optimal as currently both lines ( %S & %D ) are residing above the overbought level of 80. A break below this point also can be used as a signal of bearish momentum. 
My preference is to sell UKOIL on a stochastic crossover above our overbought line , near a price of 110.50. Limits should look to first target 106.50, then an extension at 95.50. Stops should be placed at 112.50 for a clear 1:2 Risk/Reward setting. Alternative scenarios include price breaking through resistance for a new bull run in UKOIL. Additional Resources Support and Resistance Video Trading Breakouts Identify the Trend ---Written by Walker England, Trading Instructor To contact Walker, emailwengland@fxcm.com. Follow me on Twitter at @WEnglandFX. To be added to Walker’s e-mail distribution list, send an email with the subject line “Distribution List” to wengland@fxcm.com. DailyFX providesforex newson the economic reports and political events that influence the currency market. Learncurrency tradingwith a free practice account and charts from FXCM. 
(Created with Trading Station 2.0/Marketscope) In the candle displayed above, drawn inside the rectangle, notice that this would be a decline in price as the currency pair closed at a lower value than it had opened. The difference between the open and close is often referred to as the ‘candle body.’ The skinny area above and below the candle body are commonly referred to as ‘wicks.’ Also notice that price actually proved quite volatile during this period, and this can be seen from the ‘wicks,’ of the candles. Although this candle shows price moving lower from the open to the close, the wicks can show the astute trader that price had actually climbed at one point! This can be seen from the wick atop the candle. As price was moving higher than the candle open at the time, this would have appeared as a ‘bullish,’ candle. But that was a temporary movement as negative momentum came back in the pair only to push price lower; much lower in fact. So low that price actually began increasing, exhibiting that the pair may have been oversold. When the candle completes, we have a long wick that ‘sticks out,’ from price action. This is the pin bar: 
(Created with Trading Station 2.0/Marketscope) When the trader notices the pin bar, they can imagine the price action that had driven price higher may potentially continue into the next candle. Traders can potentially look to go long in the above setup, looking to play on the strength that had driven price off the low values in the pin bar. Now, it is important to keep in mind that not all Pin Bars can be identified as ‘tradeable,’ opportunities. By nature, trading on pin bars are ‘counter,’ to current price action exhibited. In the below setup, please take a look at what is happening leading up to the pin bar that forms: 
(Created with Trading Station 2.0/Marketscope) Before the pin bar forms, price has made a fast move to the downside, which some traders may construe as a downtrend. Opening a long position would be going in exactly the opposite direction, which could potentially prove costly. With Pin Bars, its important to add other areas of price action or technical analysis to further confirm the entry into the trade. This is where trading in the direction of the trend, or trading with Support and Resistance can come in handy. Luckily for the price action trader, much of this can be identified directly off the chart without the need of any additional indicators or strategies! Links to additional resources: Price Action, an Introduction Price Action Swings Support and Resistance lesson 1 (On-Demand Video Course) --- Written by James B. Stanley To contact James Stanley, please email Instructor@DailyFX.Com. You can follow James on Twitter @JStanleyFX. To be added to James’ distribution list, please send an email with the subject line “Notification,” to Instructor@DailyFX.com. 
