There are countless price action strategies and courses out there with varieties to choose from. But which are the very best and ensure you fall in the 5-10% who are profitable in the forex market?
The Fibonacci retracement tool is used innovatively in two of the price action strategies on this list so I’ll speak on that first.
The Fibonacci Retracement Tool
The fib tool is best used in a trending market. It looks like this;
As the name suggests, it is a tool used to predict the area(s) of retracements of a trend by measuring the percentage of the pullback with horizontal lines called Fibonacci levels.
These levels are labeled with percentages. An ideal retracement is usually 60%-79% of the initial move.
Commodities like Gold and Oil respect the 23% level on the fib sometimes.
To use this tool;
- Find a clear trend on any pair.
- Draw your fib from the swing high to the swing low if it is a downtrend or from a swing low to a swing high for a bullish market.
Price action strategies; #1- ICT concepts
The major stand out from this price action strategy is the entry techniques it provides. Almost every price action trader uses these now.
An order block can be either bullish or bearish.
A bullish order block is formed when buyers are in total control but just for an instant, sellers took control of the market.
A bearish order block is formed when bears are in total control but for a little while, bulls take over.
It is important to note that the bearish candle that comes after the bullish one engulfed it and vice versa.
To choose high probability order blocks, premium and discount pricing are incorporated. A trader that sells and buys goods will be used as an analogy to explain this.
The trader in question will want to buy goods when they are at a discount price so he can sell them at a premium price.
This logic can be applied to the foreign exchange market as well.
In a bullish market, you should buy at a discount, and in a bearish market, sell at a premium.
The Fibonacci tool can be used to determine these regions of discount and premium pricing. The 50% level is used as shown in the examples below;
When price moves aggressively from one point to another, inefficiency occurs. Inefficiency is an area of price where only either bulls or bears are in total control.
Just like order blocks, these have to be in premium and discount pricing as well depending on the market trend.
Price action strategies; #2- The Wyckoff Method
A man named Richard Wyckoff, one of the early pioneers in the technical approach to analyzing the markets developed this methodology.
He did this just before the 19th century and it’s amazing how it is still applicable today in the stock market, forex market, and even cryptocurrency charts.
Mr. Wyckoff started working at Wall Street at the age of 15 so it is only natural that he noticed most retail investors were being fleeced.
He advised retail traders to assume that every manipulation and fluctuation in the market is caused by one man; the composite man developed a series of laws, and schematics to enlighten the general public on the “real rules of the market”.
There are three Wyckoff laws but only two apply to the forex market. These laws are;
- The law of supply and demand states that when demand is greater than supply price rises. Likewise, when supply is greater demand price falls.
- The law of effort: no matter how little price moves, it must be backed by volume. For example, if the price is making new highs but this is barely registered on the volume chart this indicates that a change of trend might occur soon.
Schematics allows traders to know when the balance between demand and supply is changing. There are 6 schematics but only 4 will be discussed;
Accumulation occurs when the market has been downtrending and it starts losing momentum to go lower i.e. demand starts getting higher than supply. Below are the two accumulation schematics and on-chart examples.
Distribution occurs when buying pressure diminishes. Supply becomes greater than demand and bears take control. There are two schematics for distribution as well.
Before and after chart of a distribution schematic to emphasize the effectiveness of the Wyckoff schematics.
It is important to know that Wyckoff schematics form easier on intra-day time frames(1hr, 30 mins) and lower time frames compared to macro time frames like the daily.
Price action strategies; #3- RC Visionaries
This is my favorite of the three price action strategies. It emphasizes the relationship between lower time frames and larger time frames. The Wyckoff Method is implemented as well.
The 1 minute time frame feeds the 5 minutes which in turn feeds the 15 minutes and so on.
Since this has been established, doesn’t it make sense to wait for a change of character on these lower time frames first before placing a trade on higher time frames?
This price action strategy uses multi-timeframe analysis to its full potential. Losses are reduced because of more confluences (confirmation) and the risk to reward ratio greatly improves.
A downside to this price action strategy is, there are instances when your overall analysis is spot on but price does not give a lower time frame entry.
Price action setups using RC Visionaries
From the first image, the structure is clearly to the downside so ideally only sell opportunities should be desired.
Instead of entering immediately, when the price gets to the order block, we wait for lower time frame confirmation.
As seen in image 2, price tapped into the order block and failed to create a new 15 min high indicating bearish momentum.
This was followed by the creation of a 15min lower low which confirmed that sellers are now in control and it is safe to enter.
Now for the second price action setup;
The first thing to identify is the market’s trend.
Higher highs are being created; we are in a bullish trend.
After price retraced to the 15min order block, it broke structure to the upside on the 1 min time frame confirming our intent.
WWA trading is also a very good price action strategy but it’s quite similar to RCVisionaries.
The former explains the relationship between lower time frames and higher time frames better but the latter is more sound with the Wyckoff Method.
Summary- Price action strategies- Top 3
Regardless of how which price action strategy you use, it is important to understand the “logic” behind the concepts. No author can go through every possible scenario that you will come across in the market. But a sound understanding of the logic behind the concepts will allow adaptability and development of your derivatives from your observations.