Live Trading Course on Price Behavior

The recording of his FxStreet Webinar is here. An introduction to price behavior is part of the live sessions archives.

The winner of The World of Trading Show was Mike Baghdady. The Power of Price Behavior was used by Mike to beat the other nominees.

He can be seen on Fxstreet.com.

More than 4 hours of training.

A study of price behavior.

The expert: Mike Baghdady is the Head Trader at SpyGlass.

During the session, topics will be covered.

There are trading opportunities. The behavior of trends.

Session Material:

The introduction is about something.

I will show how a proper understanding of price behavior can help the new trader stay on the right side of the market and avoid some possible whipsaws. The Behavior of Trends, What creates trading opportunities, and the questions a Technical Trader should ask before taking a trade will be discussed.

By understanding the price behavior and proper implantation of technical indicator, and developing the skill of combining multiple time frames a trader can eliminate at least 50% of his losing trade.

A study of price behavior.

Price behavior and price structure are the most overlooked aspects of technical analysis and trading. Understanding price behavior and structure will put the ODDS on the trader’s side so that he can make better decisions, trade more successfully and with better results.

More and more traders and sophisticated investors use technical applications to make their investment or trading decisions. The basic principles of Technical Analysis and the study of price behavior and chart structure are no longer applied to trading.

Take a look at the first and second figs and try to figure out which would be the high probability trade. Should we buy? Or sell?

I will try to present the material in a way that is clear to the novice and experienced alike, as we have a large number of aspiring new traders attending today’s session.

The session is too short to fully cover this topic.

I will be focusing on the markets that are hot.

How to study price behavior?

There are several rules that are simple to understand.

The Market is a discounting mechanism, events are usually discounted in advance with movements likely the result of the so called Smart Money or the informed buyers and sellers.

We have impulse waves in the direction of the trend and countertrend waves in the direction of the trend.

If you accept this simple truth that prices never move in a straight line, you will stop trying to pick tops or bottoms and instead take a trade in the direction of the trend.

There is an imbalance in supply and demand that moves the price.

The market tends to have a relationship with each other. In areas where prices have been marked up to a new higher level or marked down to a lower level, after a big move in either direction, price will consolidate at that new price level.

The trends usually start from sideways or contracting price zones. There is an area of price equilibrium. Once there is an increase in demand, prices break out of this equilibrium area and are bid higher or marked up to the next level where the market consolidates at the new equilibrium zone.

Trends have better odds of continuation than reversal. A major event will change the direction of the trend in motion.

Most trends don’t change direction without giving signals or warning signs. Sometimes these signals are accompanied by a buy or sell. Time is needed for a trend to change.

This is a very important concept. I can’t emphasize it enough. The trend usually precedes the price with the help of momentum. As the trend develops, the momentum tends to accelerate. If you just look at the chart and see the momentum increasing and making new highs or lows, the odds are that you will see higher prices or lows.

When prices reach the next level of equilibrium, there will be a decline in volatility and a decrease in momentum.

A loss in momentum is not a sign of a reversal. The new level of equilibrium is the reason for the loss of momentum and volatility. They will continue to buy and sell within a narrow range which is known as backing and filling, thus forming some of the known patterns like triangles, ledges, flags etc.

The trader’s biggest profit potential can be found in the area between equilibrium zones.

Let us review the charts, apply what I have just mentioned, and then decide which trade we should have taken.

We should be asking ourselves some questions.

What is the market condition? Is it a trend or consolidation? Is the momentum increasing or decreasing? What is the current trend? Do we have a buy or sell pattern? What is the location of support and resistance?

Look at the first box.

Can we answer the questions?

The market is moving up, with a series of higher highs and lower lows. It was increasing all the way to the top. The magnitude of the price swings is bigger in the direction of the trend than in the direction of the corrective swings, this indicates that higher prices will follow. The major trend is up. At the top, we have a buy climax followed by a failure of prices to make higher highs, then prices gapped down taking out support. That would be the first sign that the trend has changed.

The box 2 is in fig 5.

Box 2 has the same questions as the next swing.

We had a buying Climax followed by a Failure to make higher highs and then prices broke down through support. The market is going down. There are bigger down swings and red price bars. We would still expect a new lower low to follow, even though the final push down does not indicate a trend change, and it could be a profit taking area for us. The trend is down, with lower highs and lower lows. The next swing down made a higher low and consolidated at an area marked with low volatility, followed by a break to the upside and an increase in momentum indicating a new trend to the upside.

There are boxes in fig 5 box 3

We can examine the next swing up Box 3 by applying the same rules and answering the same questions.

The market broke out of a consolidation and is moving up. It was actually making a higher low. The charts show an increase in momentum with large upswings and small corrective down swings. The trend is moving in a positive direction. New price highs are yet to come. The last corrective swing down at the top of the chart is shallow and sideways for about 7 days.

Even though the indicators are giving sell signals, and the information we get from the price action, I think we can all conclude that the high probability trade is to be go LONG.

See fig 7 and 8.

You would have been on the right side of the market if you applied the principals of technical analysis and studied the price behavioral. If you choose to use some technical indicators, they should be used to confirm your trading decision rather than being used to initiate a trade.

I am attaching more charts to show you that the same type of analysis and rules apply in all markets.

Taking trading signals off an indicator or analyzing several indicators at the same time would have a negative effect on trader’s bottom line.

Most of the traders that I trained and have worked with know that I rely mostly on charts and indicators when I am trading live. I use indicators to confirm my biases. You can develop these skills over time by studying the chart and gaining experience.

You need to be able to make a trading decision based on your observations and what you see on the chart. You can get a lot of information from the charts that will give you a reason to stay in a trade longer and add to your confidence, if you choose to.

If prices don’t act in the way you expect them to act, then get out of the trade and study the chart. Make sure you have enough price data on your charts. This is what we teach at Online Trading Academy.

No one knows where the next price will be. If I am wrong, where is my exit from that trade? Decide if that level of risk is acceptable to me.

At Online Trading Academy, where I teach, we emphasize that the key to making money is minimizing our risk and taking small losses, try to never take big losses and put the odds on your side.

Profits will take care of themselves.

The summary is here.

Mike has a website at http://spyglasstrading.co.uk.

I found 3rd candle system on our forum a few days ago, if you read it and watch Mike’s videos, you’ll get more Price action feeling.

I demoed it on 3rdcandle SYS yesterday and it worked 3 times out of 3. In the second half of London session, after daily candle was mostly formed, I was taking only SELLs on major downtrends, as per the SYS, which is basically breaking down of last fractal.

If the trade is on a positive side it is fine, but if it is on a negative side it is not. It is my opinion that the odds of having 3 out of 3 decrease with time. Good luck!

Get Download McDady – Live Trading Course on Price Behavior at nextskillup.com today!

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