Commitment: If you do it right and master what I write in this article, you will make money in the market.
To write this one, I have prepared an account with 6 weeks of trading to summarize examples as evidence for the knowledge below. Hope this will be the article you are looking for.
It includes the following parts.
– Remind knowledge about Downtrend and levels (Key level and Fibonacci)
– 5 best confluence Sell trading positions.
– Signal candles and how to set SL accordingly.
H4 candlestick chart + view more candlestick signals at H1. Especially for Gold, I usually watch candles at H1 (but only for Gold). Do not view candles on small timeframes (M30, M15…). If you are a beginner, you should use the daily chart + H4.
Some major currency pairs include XAU/USD, USD family (GBP/USD, EUR/USD, NZD/USD, USD/CHF) and 2 JPY family (EUR/JPY, GBP/JPY). Just list what I understand and trade a lot every day. For example, I would never touch USD/JPY or CAD families.
Read these 2 articles again to understand Downtrend.
For me, a downtrend starts from a broken uptrend candle + Breaks out of the support zone and goes down. The candle marked on the picture I will call the Master Candle (Very important).
For example, USD/CHF – The master candle fell sharply, broke the uptrend and broke out of the support zone.
Or like GBP/JPY
Experience: The master candle is an extremely important signal. Because to reverse the trend (breaking trend and the support level), a strong bearish force is needed for confirmation. After the master candle is the time to work – Find SELL opportunities.
Resistance/Support, Key Level or Supply/Demand zone I will refer to as levels. Note: The levels are zones, not 1 point. In addition, in this Price Action series, I have added Fibonacci levels with 3 zones (0.382 – 0.5 – 0.618)
Experience: Downtrend is the first factor and level is the second one. You can combine more indicators. The more factors, the lower the probability of your entry => The death rate is also lower.
4 Best Sell positions
Confluence of Trend, levels and SELL positions
We will talk about confluence first, then candle signals.
There are many confluence positions. I will list 4 positions with a high probability of winning (verified by me).
Position 1: Confluence of uptrend + retest + level
Gold usually has this type of position a lot. A sharp drop + test the uptrend + level, then continue to fall deeper.
Experience: Only enter the first order when the price returns to retest the uptrend + level.
Position 2: Confluence of downtrend + level
This is known by everyone because it’s very easy to trade. The winning probability of this position is relatively high. Reason: The market has entered a downtrend. The story is just waiting to sell. I used to meet a continuous SELL segment of EUR/JPY.
Or USD/CHF. Confluence of level + bearish trendline = SELL
Experience: This is a position that you must learn and practice fluently in a downtrend. Sometimes you just need to catch exactly one trend like that. Trading the same position over and over is enough for a month’s profit.
Position 3: Confluence of level + Fibonacci
Necessary condition for this position: the price moves after the master candle. The confluence of level + Fibonacci (Fibo) is also strong enough for me to enter SELL orders. Continuous SELL Gold continuously at confluence zones. The image below is an example.
Or like this, the best SELL Gold shot in the Academy account. After the master candle fell sharply => wait for Sell. Plan: Wait for the price to return to the confluence of level + Fibo = SELL. This is a very easy position to make money with Gold (XAU/USD): Strong crash > bounce (retracement) > wait for the confluence > SELL.
Experience: Only enter an order for the first time. Don’t do it the next time. That means if the price returns to test again, then skip.
Position 4: Breakout Sell
Simply put: The market has entered a downtrend. The price continues to break the support level and go down. Breakout SELL is chasing the market in this case.
Looks like my Academy account has never traded this type of position. To put it bluntly, my personality doesn’t like chasing the market. If today I can’t sell, I can do it tomorrow. If tomorrow is not a good day, no problem. Just wait for next week.
Position 5: Sell at the top
Meaning: I predict the price will reverse (from bullish to bearish) and break out of the support zone and go down. NZD/USD – this shot is considered a lucky top catch. Of course, it can be explained by the distribution zone, overbought zone, candlestick signal, etc. But it is just luck after all.
Experience: Most of the top and bottom catchers I know are armless. Don’t do that often!
So I’ve already gone through all the SELL positions. Everything is very simple, easy to grasp and practice. Now is the hard part, candles and how to set Stop Loss properly.
Candles only have meaning when they appear at a confluence zone. For the rest, don’t worry about it.
There are 3 candlestick patterns that I really like.
(i) Bear candle – take a close look at this article: Fakey candles and tricks.
It appears at the levels and creates Fakey – False breakout (pull the upper wick long then plummet really hard). This feature belongs to the specialty of Gold and GBP/USD – pops up to hunt and sweep the stop losses of sellers, pulls the buyers in and then reverses sharply. Finally, gently RIP both sides – Extremely prestigious!
(ii) A set of strong bearish candles (Double pattern) – Professionals call it EG (Engulfing). This set of candles is only reliable when candle (1) is small and candle (2) is a strong bearish one.
The market story is when the price enters the level (disputed area), the BUY and the SELL side will continuously act. So the movement of the candle (1) will be smaller. DANG! The SELL side wins and the price collapses sharply, creating a strong bearish candle (2).
(iii) Bearish Pin Bar
Candlestick pattern with the head pointing down and the foot pointing up. In terms of “delicious”, it is not equal to the two candles above.
How to set Stop Loss
(i) Active SL
My SL level is usually: Never lose a trade more than $400 with a capital of $18,000 (~2.2%/order).
Setting an Active Stop Loss means: When I enter a Gold order of 0.5 lots I will place an SL maximum of about 80 pips. Other currency pairs I will enter 0.8 lot/order => SL max 50 pips.
Link to calculate lots on orders: https://howtotradeblog.com/lot-size-calculator/
(ii) Place SL above the master candle
If you SELL actively, it means there are full signal candles. So SL just needs to be placed above the master candle and that’s OK. For example, USD/CHF, previous master bearish candle, strong force => Place SL above that candle.
Experience: You can place SL anywhere you want. Far or near SL is both fine. But if you don’t have SL, don’t read anymore. Because the more you read, the more you lose.
Winning and losing are common things in this market. But to lose everything, you are exactly an idiot. If that’s the case, don’t waste time in this market to save your money.
If you are a beginner, you should only practice 1 type of position. Focus on some currency pairs, eat and sleep with them and wait for the SELL position. If it’s wrong, you have SL. If it’s right, use partial profit-taking. Do it over and over again to become a master.
The point of trading is survival – Do whatever it takes to survive. The orders in my Academy account may not win much, but it is absolutely not allowed to lose a lot thanks to SL.
Finally, let me say again. Trading is a game of probability. And the methods above, too, are probabilities, not the holy grail. Capital management is the guideline and truth in this market.
Ok! The following article will be about BUY positions. Quickly end the Price Action series so we can go back to Wycoff to learn more safe skills.