Trading Price Action in the Recent Forex Market Volatility
Volatility is a scary word to some, but to price action traders it is something to look forward to because price action leaves its most obvious “footprints” during volatile market conditions like we’ve seen recently.
Due to the recent volatility in the markets, I wanted to take the time in today’s lesson to highlight some of the recent valid price action setups that have worked out for nice gains, some that didn’t work out, and explain why they were valid setups. Before we get started, keep in mind that all the examples in today’s article are from daily charts, I recommend all traders focus on daily charts as their core “anchor” chart, and beginning traders should exclusively focus on the dailies until they have gained a firm grasp of my price action trading strategies.
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Recent Price Action Trading Examples:
EURUSD – long-tailed pin bar with 50% entry and inside bar
On September 6th a long-tailed pin bar formed in the EURUSD. This pin bar trading strategy had a number of things going for it which I will highlight here:
– The daily 8 / 21 EMAs had recently crossed lower prior to the pin bar forming on September 6th after price rejected the top of the trading range it had been in for nearly 3 months.
– The pin bar itself was long-tailed, this means the tail showed a very “forceful” rejection of higher prices and it was also in-line with the fresh bearish momentum.
– The close of the pin bar was lower than the open and near the bottom of the pin bar, another indication of a “forceful” and meaningful rejection of higher prices.
– As we often see with long-tailed pin
bars like this one, a 50% entry opportunity presented itself the following day as an inside bar formed. This allowed many of our forum members’ to get a very tight stop and large risk reward ratio. I personally made a reward of 3 times my risk on this setup.
– On September 16th another inside bar formed after a counter-trend rally into the 8 day EMA. This inside bar could have been used to re-join the downtrend again.
GBPUSD – pin bar and inside bars
On September 8th a pin bar formed in the GBPUSD, and on September 16th and 20th we had inside bars form. All of these setups were with the recent daily bearish momentum and worked out quite nicely for savvy price action traders. Let’s dissect them a bit more:
– The trend was already down when the pin bar formed on September 8th, as we can see in the chart below the 8 / 21 EMAs were already crossed lower, so this setup was with the near-term daily chart momentum.
– The pin bar itself was obvious and had an obvious upper wick or tail, which showed clear rejection of the 8 day EMA dynamic resistance level. The market sold off nicely after the pin bar formed and provided the potential for a large reward potential relative to risk.
– Next, we had two inside bar setups form near the core level of 1.5775 on September 16th and 20th.
– These inside bar strategies were with the dominant bearish momentum on the daily chart and provided excellent risk reward ratios to re-join the downtrend. As we can see they both paid off quite handsomely. Inside bars are best with obvious trending markets, like the two seen below.
USDCHF – pin bar