The three principles: PA, S/R and balance
Introduction
Hi!
First, I'll introduce you to the concepts I use. Afterwards, we'll look at some pictorial examples of these principles in action. This is a systematic approach to understanding prices (specifically EUR/USD), but it is a very general approach to understanding price movements in currency pairs. This way of thinking about price consists of three principles: Price Action, Support and Resistance, and Price Balance and three time frames: D1, H1, and M1.
Price Action <br> The most important is price action, which is the derivative principle of the other two principles. I choose to define "price action" as the pattern of recent historical candles. Price action tells us how fast and in which direction prices are changing, and it also defines trends.
Support and Resistance <br> The second principle is support and resistance. Price action also tells us the presence of support and resistance. Support and resistance levels are orders executed at specific price levels with associated total volume.
Price Balance <br> The third principle is price balance. Whenever price touches or is very close to a certain level, I define it as the daily exponential average. Of the available timeframes, it is the most clearly defined on M1, which is the 1440 exponential moving average period.
To analyze prices, I use the D1, H1 and M1 timeframes for all good reasons.
D1
D1 is used to determine the overall price deviation. The purpose of this is to determine whether it would be easier, safer, and more profitable to sell or buy. D1 is all about doing this and nothing else. There is always a bias in analyzing this and that is its main purpose.
H1
H1 is used to determine the current intraday trend and most other things. H1 should be enough to trade on its own without other timeframes, but the other two have their advantages as well. Maybe for beginners, if using these three tools seems like a lot of information to analyze, it's better to just focus on H1.
M1
M1 is used to define support and resistance levels and to define accurate and optimal entries and exits.
This way of thinking and analyzing prices is flexible, but may not be great for forex beginners. There is no fixed, specific way to enter or exit. There is no exact stop loss and no exact take profit. Why? Because these things come down to personal preference and how you are most comfortable trading. There is no one right way to trade. It's just something you have to discover for yourself.
Personally, I don't use stop losses and rarely use the take profits I set. Instead, I use small lot sizes and trade daily, so most of the time I monitor my trades throughout the day when the London market is open. This is because as the price changes, I have to adapt to its changes in order to be profitable. If the price seems to be stalling near my take profit, I will close the position with less profit. Sometimes, if I find that I'm completely wrong, I close my trade at a loss. I don't have any fixed numbers to determine this, these actions are based on current price changes.
Hi!
First, I'll introduce you to the concepts I use. Afterwards, we'll look at some pictorial examples of these principles in action. This is a systematic approach to understanding prices (specifically EUR/USD), but it is a very general approach to understanding price movements in currency pairs. This way of thinking about price consists of three principles: Price Action, Support and Resistance, and Price Balance and three time frames: D1, H1, and M1.
Price Action <br> The most important is price action, which is the derivative principle of the other two principles. I choose to define "price action" as the pattern of recent historical candles. Price action tells us how fast and in which direction prices are changing, and it also defines trends.
Support and Resistance <br> The second principle is support and resistance. Price action also tells us the presence of support and resistance. Support and resistance levels are orders executed at specific price levels with associated total volume.
Price Balance <br> The third principle is price balance. Whenever price touches or is very close to a certain level, I define it as the daily exponential average. Of the available timeframes, it is the most clearly defined on M1, which is the 1440 exponential moving average period.
To analyze prices, I use the D1, H1 and M1 timeframes for all good reasons.
D1
D1 is used to determine the overall price deviation. The purpose of this is to determine whether it would be easier, safer, and more profitable to sell or buy. D1 is all about doing this and nothing else. There is always a bias in analyzing this and that is its main purpose.
H1
H1 is used to determine the current intraday trend and most other things. H1 should be enough to trade on its own without other timeframes, but the other two have their advantages as well. Maybe for beginners, if using these three tools seems like a lot of information to analyze, it's better to just focus on H1.
M1
M1 is used to define support and resistance levels and to define accurate and optimal entries and exits.
This way of thinking and analyzing prices is flexible, but may not be great for forex beginners. There is no fixed, specific way to enter or exit. There is no exact stop loss and no exact take profit. Why? Because these things come down to personal preference and how you are most comfortable trading. There is no one right way to trade. It's just something you have to discover for yourself.
Personally, I don't use stop losses and rarely use the take profits I set. Instead, I use small lot sizes and trade daily, so most of the time I monitor my trades throughout the day when the London market is open. This is because as the price changes, I have to adapt to its changes in order to be profitable. If the price seems to be stalling near my take profit, I will close the position with less profit. Sometimes, if I find that I'm completely wrong, I close my trade at a loss. I don't have any fixed numbers to determine this, these actions are based on current price changes.
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