38# Price Action Strategy Trading System

Submit by Janus Trader (07/08/2012)

BORC = Break-Out-Retrace-Continue price action.

1 The idea behind this system is nothing new, I did not invent it. I have seen it used and I

myself used it many times, and thought perhaps if someone out there can benefit from it

by adding it to their trading arsenal it would be great.

These are basically visual, nothing scientific

about these levels. Just look at your charts and see areas of support/resistance to

draw these lines. I also included an indicator that draws daily pivot points. These

are important levels to be aware also and you may get good action at these points.

-2 Once the breakout occurs, we do NOT trade the initial break, as there is always a

likelihood of a price bounce back into the original trend. This is also known as a

false breakout.

This happens quite often and stop hunters make good money

triggering stops and causing a breakout, only for it to be a false one. Patience for price action is key here.

3- We need the break to take the price at least a few bars and a good number of pips

away (~50 pips on an hourly chart) from the breakout point to make this a true

breakout and not a false one, and make this setup worth the risk of trading. (price action)

4- Now we patiently wait for the price to pull back (retrace) to the breakout zone.

This is the zone where resistance turns into support or support turning into

resistance (depending on which direction the trade is). Note how I say “zone” and

not “point” as you may imagine it is very difficult to pin point the exact price at

which the market will react, but my zone is the breakout point +/- 10 pips . Please

note that this pullback after breakout will not always occur. Sometimes the price

will continue running away without pulling back and that is just the way the

market goes sometime and you can’t predict them all.

In the pictures Price Action Strategy forex system in action.

5- Once the price retraces into the area of interest (zone) we can start to look for The

Trade Setup. First condition is that price retraces back to the area of interest and

stalls. Second condition would be to get a candlestick formation to confirm the

reversal back into the direction of the breakout. My preferred candle formations

are Pin Bar, Englufing, Railway Tracks, Inside Bar, Double or more Doji. You

may have your own preferred way of determining a reversal pattern. In addition

to the previous 2 conditions, if there is also confluence with something else, i.e.

another (higher frame) trend line support/resistance area, round (double zero)

number, Fib Number, Pivot Point, etc. that would make the trade more solid in my

opinion. Please see chart below for confluence of 3 trend lines at 0.9900 (round

number).

6- Entry. Depending on your trading personality, you may place a limit order at the

zone and wait for it to get filled, this way you might possibly get in at the best

price, however this is aggressive and speculative and you are not waiting for any

confirmation of the reversal. You may zoom in to a lower time frame (4 times

lower) and then look for a 1-2-3 formation to be broken in the same direction of

the trade to get into the trade. However, if you wait for second and/or third

condition, you can enter the trade as soon as the next candle opens (which I do not

follow myself). Or, you can wait for the price to break the low/high of the

confirmingcandle formation, or you may zoom in to a lower time frame (4 times

lower) and then look for a 1-2-3 formation to be broken in the same direction of

the trade to get into the trade.

7- SL is the just above or below the high of the confirming candle formation, TP1 is

same amount as SL, TP2 is the previous swing high or low(+/-10 pips), TP3 let it

ride with remaining position at BE to next 00 number or Pivot Point or trailing

stops to the previous 2 candles high/low. Again this needs to be tailored to your

trading personality and risk tolerance and style. I personally like to take at least

some small profit (at TP1) off the table and that just keeps me going, as I do not

like to be stopped at BE with no profit even though my trade was profitable at

some point during the trade.

8- General stuff. You can use this on any currency pair and any time frame,

although I do not recommend trading this on anything lower than 15 minute

timeframe. I like the 1 HR and higher time frames on the majors, and some GBP

and EUR crosses. Remember if you go with higher time frame, you need more

patience as the setups will take longer to develop, larger stop loss since your

candles will be span much larger number of pips, and you will be in the trade for

longer period of time. However, your TP will be much larger as well. So, if you

can’t afford screen time, go with longer time frames. ALWAYS exercise good

money management. I like to risk 1-2% per trade. So, you need to adjust your lot

size according to your SL. If you go with 1-hr or 15-minute time frames (for Price Action), do not trade during news or during dead trading time (2pm to 7pm EST).

Share your opinion, can help everyone to understand the forex strategy.

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