Price Action Swing Trading - The PAST Strategy

Discussion in 'Trading Systems and Strategies' started by Nigel Price, Jul 1, 2013.

  1. Nigel Price

    Nigel Price Master Trader

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    Hello and welcome to this thread. I am going to show here a style of trading that I use called Price Action Swing Trading, or PAST for short.

    In very simple terms, it just combines two very simple price action setups, one on a larger timeframe and one on a lower timeframe.

    I use these two price action set ups as tools to implement a simple trading objective, which for me is of paramount importance – to keep losing trades as small as possible and allow winning trades to grow as large as possible.

    I will start to post some charts here this week to give you a greater insight into the price action signals that I use. Hopefully they will be of some use to anyone who is interested in price action trading.

    See you soon.

    Nigel
     
  2. Nigel Price

    Nigel Price Master Trader

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    I'm going to be looking for opportunities to short the EUR/AUD pair this week. I'll explain why in a later post.

    But as it is happening right now, I thought I would show the trade I opened just this morning. Here it is on a 1 hour chart.

    I love this type of price action set up because it allows me to get into the market with a very tight stop, so I can keep my risk to a minimum. In this case the trade only went 10 pips against me at its worst point.

    It's now 35 pips in profit, and I have set my stop to breakeven.

    Risk = zero; reward = yet to be decided.
     

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  3. Nigel Price

    Nigel Price Master Trader

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    In the above example I get interested when price is approaching the underside of the trendline (drawn in orange in the above example).

    I like to enter my sell trade when price is as close as possible to the trendline.

    I have very clear expectations - price should not manage to establish itself above the trendline, because this would signal that the buyers have regained control of the market. If price manages to to this, I quickly acknowledge that I am wrong on this occasion. I close my trade and take my loss.

    I want to see price fail at the underside of the trendline and then quickly fall away. The buyers tried to regain control of the market after the trendline break but have run out of steam; the sellers are back in control. When this happens my sell trade will move into profit, and as it does so, I will tighten my risk by bringing my stop to break-even.

    I now have a risk-free trade.
     
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  4. Nigel Price

    Nigel Price Master Trader

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    Just an update from the trade this morning - it is now approximately 80 pips in profit.

    I regularly aim for significantly more than 80 pips. I like to control risk very tightly, so I must be prepared to take a lot of losing trades. It is important therefore that when the winning trades come along I make the most out of them.

    My stop is at break-even, so I am risking nothing on the trade now. There is an Aussie rate decision due out tonight, so the volatility might take me out. But if it does, I won't lose anything. If it moves in my favour, I might gain a lot.

    This is the most important thing in trading in my view - always put yourself in a position that if you lose you only lose a little, but when you win, you win a lot. Big wins pay for lots of little losers.

    Anyway - here is the chart.

    See you soon

    Nigel
     

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  5. Nigel Price

    Nigel Price Master Trader

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    Morning

    The Aussie weakened last night after the rate decision, which prompted a rally in the Eur/Aud, triggering my stop. So I have lost 0 pips so far this week.

    I will continue to look for shorting opportunities in Eur/Aud this week. As I said earlier, I will do a post later in the week explaining why.

    The next trendline I am going to keep an eye on is shown on the 1 hour chart below.

    You might draw a different trendline to me, there is no right or wrong. As long as it joins two or more points on a chart, it's a trendline. I just happen to like the one below because it has quite a few touches.

    I might enter on a break of this trendline if and when it occurs, or I might wait for a retest. When you enter is not what it important. What is important is that when you do enter you control your risk as tightly as possible, and if your trade turns out to be a winner, you give it every opportunity to grow into a large one.

    I'll update on this later in the day. :D
     

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  6. Nigel Price

    Nigel Price Master Trader

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    Morning,

    During the course of the Asian session my trendline was briefly broken, driven by some volatility after some Australian economic data was released.

    I was in my bed so I didn't trade this, but it's worth taking a look at to see how it might have panned out.

    If I went short on a break of the trendline I would have been entering around the 1.4150 level. Price quickly got to 25 pips profit, at 1.4125. When price moves into profit quickly you then have to think about reducing your risk, bringing your stop as close to breakeven as possible. At this stage of the process we are totally focused on controlling risk, so we take as much of it off the table as we can.

    Just as quickly as it moved into profit, price began to retrace back towards our entry at 1.4150. We should be alarmed by this. If we are correct, price should continue to move away briskly from the trendline. If it doesn't, we must consider how best to control risk. Perhaps price is considering retesting the trendline from the underneath, as we have looked at in earlier posts. If it does, we can always think about getting back into the trade then. We should never keep a trade open that is showing a loss unless we have a very good reason. We should always keep losing trades as small as possible.

    Although I didn't trade this trendline break, I am estimating that had I have done so I would have taken perhaps a 10 pip loss, purely because price was moving quite fast. I'd have been happy with that, or even a bit more. 10 - 20 pips is nothing when you see what can be achieved on the big winners.

    My trendline is still on my chart, and I'll be keeping an eye on it again during the course of today.

    Hope these posts are of some help :D

    Nigel
     

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  7. myknees

    myknees Trader

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    Thanks for the posts - Hows it going with EURAUD ?
     
  8. Nigel Price

    Nigel Price Master Trader

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    No worries - Eur/Aud is moving a bit higher alright, but I have no position so I'm happy enough. I don't mind a market moving against me as long as I have no losing positions!

    I'll still be looking for short opportunities for the remainder of the week, particularly on a break of the trendline I've been looking at in the previous posts.

    I'll do a post towards the end of the week explaining why I've been looking to short Eur/Aud.

    Any questions don't be afraid to ask :D
     
  9. Nigel Price

    Nigel Price Master Trader

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    As we move through each week, the look of the market changes and price sets new highs and lows. The market is dynamic and so our analysis needs to be dynamic to reflect that.

    Our trendlines should be as obvious as possible, and a couple of new ones have presented themselves during the last 24 hours. So I have updated the analysis with two more charts, a 1 hour chart and a 4 hour chart.

    I'll be looking for short opportunities around the trendlines below over the course of the remainder of the week. I will be continuing to short - if the market does fall I will be aggressive, if the market rises (and it has been strong so far this week) I will keep any losses under strict control.

    See you soon :D
     

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  10. Nigel Price

    Nigel Price Master Trader

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    I will do a more detailed report on the week's trading later, but for now, here is one more bearish EUR/AUD setup. Be careful though, because the NFP is out later today. I have a couple of short positions open already from earlier in the week with their stops at breakeven, so if this breaks I will probably sit it out.

    Maybe if it breaks today we could get a retest sometime next week. There will always be another trade!
     

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  11. myknees

    myknees Trader

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    Really appreciate these updates, thank you
     
  12. fortunatus

    fortunatus Trader

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    Hi Nigel, Been following your strategy for a while, its good to know you are here now. This would make it easier to understand the Nitty gritty of your strategy. But However, get ready for some inquisitive questions bro. *wink*
    All the best and thanks for this
     
  13. Nigel Price

    Nigel Price Master Trader

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    Hi there,

    Here is my chart from the analysis I did over the weekend. After today's price action we are just sitting on the trendline, at the end of the first red arrow. Perhaps we will get a break/retest over the next couple of days.

    I will do a longer post explaining why I am sticking with shorting EUR/AUD at some stage this week.

    Have a good trading week!

    Nigel
     

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  14. Nigel Price

    Nigel Price Master Trader

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    This morning's chart is below; we got our break this morning:
     

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  15. Nigel Price

    Nigel Price Master Trader

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    No worries fortunatus, I'd be happy to answer any questions on the strategy to the best of my ability.
    Do your worst! :D

    Remember, in trading there is no right or wrong, only opinion. It's how you navigate those shades of grey that matters - everything else is of minor consequence.
     
  16. Nigel Price

    Nigel Price Master Trader

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    Good evening,

    So we had a good day today with price breaking our trendline convincingly and falling around 150 pips. As I said earlier, I have one sell position on the break but I was keeping an eye out for a retrace. Price made a feeble attempt to rally mid-morning but it couldn't muster the strength to tag the trendline from underneath and once it became apparent that the bulls were under sustained pressure, price fell away sharply for the rest of the session.

    The bulls don't look very lively right now, so a retest may not occur at all. But no-one knows what is going to happen tomorrow - if we see ourselves back underneath the purple line again I might consider re-shorting.

    My primary focus, as always, is to control what I know I can control, and that is my risk. My stop is at breakeven now so my risk is zero. I intend to hold through any rallies that may occur tomorrow or later on in the week, with a view to price falling further. If I am wrong, I get stopped out and I lose nothing. If I am correct my position will grow even bigger. Let's see what happens.

    The updated chart is below.

    All the best for now :D

    Nigel
     

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  17. fortunatus

    fortunatus Trader

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    Evening Nigel,
    I also watched the trade today, the bears were very aggressive as you rightly said. Do you manage your trades on the TF with which you placed the order or is it discretionary?
    Have a good Night rest
     
    Last edited: Jul 9, 2013
  18. Nigel Price

    Nigel Price Master Trader

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    Hi fortunatus, Good question. The timeframes are very much a matter for personal preference. And your situation too. For instance, if you can only check your charts a few times a day, you probably shouldn't be planning and executing your trades on a 1 minute chart.

    But there is a broader point here that I think people sometimes miss. Say for instance you are standing on top of a mountain and there is a spectacular view in front of you. You want to take a photograph to remind yourself of the scenery. You take out your camera - you will adjust focus, zoom, orientation, angle, etc, to try to make sure you get the best shot possible. Did anything in front of you actually change as a result of you fiddling with your camera? No, of course not.

    Price is the same. It follows the same path no matter what timeframe you choose to show it on. What size is your screen? Maybe a 1 hour chart might look terrible on my small screen but beautiful and clear on yours. It is simply a matter of presentation.

    Below is the chart from today on the 30 min timeframe instead of the 4 hour. It's a bit more scrunched up but the levels are still the same. Some people like to look at a chart like this, some people like to have a chart with big candles, some people like OLHC bars, some Heiken Ashi, some just line charts. They are all just different ways of presenting the same information.

    When you say "manage" trades, I am presuming that you mean where I get out when I am wrong. Well, my main reference point on the chart is usually the trendline, and that should come at roughly the same price no matter what the timeframe - as I said, the levels are the same no matter what chart you are looking at.

    Notwithstanding all of the above though, I do recommend when people are starting out that they don't really go much below the one hour chart, because on the lower timeframes it is sometimes easy to lose perspective a bit. Four hour is a nice compromise too.

    But other than that, use whatever timeframe you are most comfortable with. Personally I check out a few and just use whichever one fits the price best on my screen.

    Hope this helps :D
     

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  19. myknees

    myknees Trader

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    Great trade and a great update, thank you Nigel.
     
  20. Nigel Price

    Nigel Price Master Trader

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    No worries myknees, glad you liked it.


    As far as today is concerned, I don't envisage much happening on Eur/Aud that is likely to interest me in terms of new trades. I have two positions open at the moment and I don't really see any good trendlines that look like they might offer any opportunities.

    Let's consider what can happen and how we might deal with the different possible situations:

    Option 1: Price could just continue lower. This obviously would be the preferable option for me, as I am already in the market short.

    Option 2: After the sharp drop yesterday price could just consolidate quietly sideways/slightly upwards for a while. This could develop into a trendline on the shorter term timeframes that could offer a selling opportunity over the next few days - we would have to wait and see.

    Option 3: Price could stage a short-covering rally back up to the underside of the trendline. This could well take my stop out at breakeven on my second position, but I could look for new selling opportunities on the retrace to the trendline. It would offer people who aren't in the market short yet the chance to sell at a pretty good price.

    Option 4: The bulls could stage a spectacular comeback, steam through the trendline and on to new bull market highs. This obviously would be the worst scenario for me, but I have to always concede that anything is possible. It has happened before and it will happen again. Frustrating? Definitely. However, at the same time I would lose nothing, because my stops are at breakeven.

    Risk is off the table now and I am playing with the market's money.

    See you soon :D
     

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