Understanding Price Action by Bob Volman (Notes and Examples)

I want to praise two of Bob Volman's books, they are simply the best on the market when it comes to learning to scalp, and I haven't found a post dedicated to his second book (Understanding Price Action) so I thought I'd start one.

Below are my notes taken from the book, and I've listed key points that will help give you the backbone of your strategy around the book.

Price Action Theory - This is the key element in understanding price movements

1. Double Pressure – price compression tension that occurs before a unidirectional breakout
2. Support and Resistance (S&R) Lines – Key areas for technical testing where we can expect price to stall
3. Cap Test - Think of it as a smaller S&R line forming near a technical test
4. FALSE BREAKS - As the name suggests, these breakouts may or may not occur; we need to realize that breakouts can be false and as stated in the book a good way to assess breakout quality is to wait for price to move above the initial breakout signal line
5. Pullback Reversal - into the 40-60% zone; the further you allow the pullback to go, this will provide a good risk to reward ratio
6. Circle Number Effect - Apply guidelines in 50 pip increments on your chart, allowing you to easily see the pull these lines have on price and use them to your advantage

More general instructions

1. The setup is 25ema (closing price) on a 5 minute chart with a target price of 20 and a stop loss of 10 (the example mainly uses EURUSD, but the principles can be applied to other charts as well)
2. Pay attention to double tops, triple tops, head and shoulders, inside bars, and flags as they can indicate where the price will go next.
3. Try to execute orders close to 25ema (aka the perfect filter in the book), it is better to wait for the squeeze and then the breakout to happen before confirming the deviation
4. Be wary of the possibility of failure in a trade due to an upcoming resistance/support/technical test/round number/reversal candlestick etc. It would be wise to exit strongly, watch the next price action and then consider re-entering (or wait for another next setup)
5. Stay away from the news unless you know how to trade
6. Maintain a risk-reward ratio of at least 1:1

action list

1. Pattern Breakout - consists of a rise and a breakout (a breakout is a signal to trade)
2. Pattern Breakout Combination - A strong bullish/bearish candlestick (i.e. "Powerbar") with an inside bar next to it and a close close in the direction of the Powerbar (the inside bar is a signal to place a trade, or you can wait until price passes the Powerbar)
3. Pullback Reversal - Ideally, we want three conditions to be met: a 40-60% correction, a test of the 25ema, and a test of any previous S&R lines. Once these requirements are met, we can proceed with the transaction immediately or wait for confirmation