One more PA Sample

Now, lets analyze this chart. Lets look at the first highlighted portion. Price has broken through resistance. You think thats wonderful and you are itching to go long.but wait!! The candle that broke through the resistance was not a big one. The resistance has been strong so far and so if it has to be broken, you need lot of buyers to push the the price and so you expect a very long candle. But what u have is a small one. So lets wait and watch for other stuff. It is an area of previous resistance i.e. not only is it a resistance as the MM level is there, it is a resistance cos there has been a previous high in this area, as can be seen on the left of the chart. So u stop and think again. In such cases, when a previous high is near a MM level, the indicator to go long is not the break of the MM level, but the break of the previous high. The previous high tells you that there has been a lot of sellers in this area. You want all the sellers to be overcome before you go long. You want to be with the big boys who push the prices past sellers, not with the small traders who get caught with false longs.

You see the price pushing thru resistance, then a small retrace and you see that price did not break the previous high after the retrace and you see a pin bar as well. All signals for you to be careful and to wait b4 you go long. As expected the break thru resistance breaks down and down we go again, always look for previous highs or lows before you take a trade apart from seeing the MM levels. This would lead to you wasting many trades but you get money for the pips you make not the number of trades that you take…

now, lets move on to the second highlighted portion.this is pretty obvious as there is no clean break nor is there any retrace…its pretty obvious that it is going to go down…

now the third highlighted portion.a nice break on high volume….first point is good on our checklist…wait for a retrace and retrace happens….second point in our checklist is fine…but the retrace goes down below support !! a good retrace is one which goes to the nearest support available but this one goes below support…you have a previous high in this region and you wait for the retrace to come back and break the previous high…it never happens….and a bearish pin bar as well….that too with high volume…if this volume was buyers, the candle would close at the top, not the bottom..so all this tells you that the break is false…and down we go…

now the fourth. Well, this one never closes below support. You have long wicks closing above support with good volume. All of which shows that there is good buying. So literally , there has been no break of support at all. Surely not a short. Maybe a good long.

All the above would show you that learning PA is quite difficult. Yes it is and it takes lot of practice..but it is like car driving. Initially, you have to learn so many things….clutch, gear, brake, hand brake, petrol, oil, wiper, rear view, front view etc and you feel giddy. But once u have got a hold on everything, it automatically comes to you and after 2-3 yrs, you dont even realize that you are doing so many things. You are doing everything sub consciously. Thats how i do it now. It was so much for me initially…retrace, support, resistance, break, low volume, high volume, pin bars, timeframes. Soo many things….but now i can see stuff in a couple of minutes…any pair, any chart, any time. and i can tell you good trades from it.i see resistances, retraces, pin bars, volume, previous highs …everything within 30 secs. If I can do it, you can too !!

Do follow me on twitter (http://twitter.com/ns_karthik ) where i post some of my trades in real time.

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  • thanks Rohit

  • Rohit

    Very very useful info Karthik.. Appreciate the effort.
    Thanks