Strategies for trading using price action

Discretionary Trading

1. MY STRATEGIES (PRICE ACTION)
Introduction
As a trader specializing in price action strategies, my approach emphasizes analyzing raw
market movements through trends, structures, patterns, and disciplined risk management. This
method avoids over-reliance on indicators, focusing instead on historical price behaviour to
predict future movements. The strategies outlined below are derived from my experience in
forex, commodities, and other markets. I've incorporated multi-timeframe analysis to align
short-term trades with broader market context, ensuring higher-probability setups. This report
details my core strategies, with enhancements for clarity, completeness, and professionalism
based on best practices in price action trading.

Identifying the trend
Trend identification is the foundation of my strategy, ensuring trades align with the market's
overall direction to increase success rates.
Higher Timeframes (Daily and 4-Hour): I begin by analyzing the prevailing market trend,
focusing on both daily structure and intraday movements. First, I identify the trend in day time
frame and in 4hr time frame. As shown in chart below we can see the pattern in long time frame.

2. Lower Timeframes (15-Minute and 5-Minute): Once the broader trend is established, I zoom
into shorter timeframes for intraday opportunities. This helps confirm alignment; e.g., in a daily
uptrend, I seek bullish setups on the 15-minute chart during pullbacks. Use moving averages
(e.g., 50-period EMA on higher timeframes) as dynamic support/resistance to validate trends,
but only as a visual aid—not for signals.



Reversal and major structure level
Reversals signal potential trend changes, often at key structural levels like previous highs/lows
or swing points.

3. I identify reversals when trend continuation halts, and prior structures (e.g., support becoming
resistance) are broken and retested multiple times. This is evident in charts where price fails to
make new highs in an uptrend and breaks below a key low.
"BOS" (Break of Structure) and "CHOCH" (Change of Character) concepts: A BOS occurs when
price breaks a significant level, while CHOCH confirms a shift in market sentiment (e.g., from
bullish to bearish dominance).
Incorporate volume analysis and RSI: Higher volume during breaks increases reversal reliability.
Avoid trading reversals in strong trends; wait for confirmation like a retest or candlestick pattern.
Here I see the major structure level is broken. The best way to see the reversal is to see the trend
continuation is stopped and the previous structure has been broken and tested multiple times
as support or resistance. We can see in both charts given below.

4. Breakouts
Breakouts are my primary "cash cow" setups, o?ering high reward-to-risk ratios when executed
patiently.
I wait for price to consolidate near support or resistance for several hours, then enter on a
decisive breakout (upward) or breakdown (downward). This often follows accumulation phases
in ranging markets
- Use false breakouts as traps: If price briefly breaks a level but reverses (e.g., a
"fakeout"), it can signal the opposite direction.
- Confirm with momentum: Look for increasing volume and wide-range candles during
the breakout to filter out weak moves.
- Target calculation: Project the breakout distance equal to the consolidation range (e.g.,
if ranging 50 pips, target 50 pips post-breakout).



Candlestick patterns
While not the sole basis for trades, candlestick patterns serve as precise entry triggers when
other criteria align.
- I use patterns like hammers (bullish reversal), shooting stars (bearish reversal), and
engulfing candles (strong momentum shifts) only after trend and structure confirmation.
- A hammer is more reliable at support in a downtrend than in isolation.
- Avoid over-reliance: Combine with multi-timeframe confirmation to reduce false
signals.
- Incorporate doji patterns for indecision signals, especially at key levels, to anticipate
breakouts.

5. Chat patterns
Chart patterns provide probabilistic edges, treating trading as a "numbers game" were
consistency trumps perfection. I primarily focus on double bottoms (bullish) and double tops
(bearish), entering on neckline breaks with stops below/above the pattern lows/highs.
- Include head and shoulders (reversals) and flags/pennants (continuations) for variety.
- Probability enhancement: Measure pattern symmetry and volume (e.g., higher volume
on the second bottom/top increases validity).
- I always backtest my patterns on the instrument; e.g., double bottoms work well in
trending markets like gold but less in choppy forex pairs.


Entry and Exit
Entry and exit decisions integrate all prior elements, considering external factors for robust
setups.
Entry: Only when trend, structure, breakout/pattern, and candlestick align. Factors like liquidity
(avoid thin markets), news/events (e.g., FOMC for USD pairs), and personal bias (journal to
mitigate) are reviewed pre-trade.
- Confluence checklist: Require at least 3-4 aligning factors (e.g., trend + structure break
+ candlestick) before entry.
- I avoid trading during major news
- Position management: Scale in/out for larger moves; e.g., add to winners on pullbacks in
trends.

Exit: Based on targets from patterns (e.g., measured moves) or trailing stops during trends.
Partial profits at 1:1 risk-reward to lock in gains.



Risk and Return
- I believe in consistency: My trading approach focuses on repeating proven strategies
and maintaining disciplined routines. Rather than aiming for big wins, I prioritize steady,
sustainable returns and measured risk-taking across trades.
- No regret for missing opportunities: I understand that not every market move can be
captured. I avoid emotional trading or impulsively chasing missed trades. My focus
remains on executing my plan, trusting that opportunities fitting my criteria will come
regularly.

6. - No overtrade: I strictly avoid excessive trading, which can lead to poor decision-making
and increased costs. I stick to my setup and only trade when clear signals align with my
strategy, reducing stress and maintaining capital e?iciency.
- Entry with small size: Position sizing is critical to managing risk. I begin trades with a
small lot size, especially when market conditions are uncertain or during initial entries,
allowing for flexibility and protecting my capital from sudden volatility.
- Set S/L before entering: Every trade has a predetermined stop-loss level prior to entry.
This rule helps me limit potential losses, stick to my risk management plan, and avoid
emotional decisions in fast-moving markets.
- Maintain a decent risk to reward, according to the trade: I analyse each setup for its
risk-to-reward ratio (minimum 1:1), aiming for trades where potential reward outweighs
the risk. Adjustments are made depending on market context, but I rarely risk more than
I stand to gain.
- Set maximum drawdown for every trade and for the day: To preserve trading capital, I
set strict drawdown limits both per trade (0.1% to 0.5%) and for the entire trading day
(0.5% to 0.75%). If losses reach these thresholds, I pause trading and reassess, ensuring
emotional reactions don’t compound losses.
- Try to work on only my expertise area and instrument: I focus trading on instruments
and strategies where I have strong expertise. By sticking to markets I know well, I can
identify setups more reliably and respond swiftly to changing conditions, minimizing
unforeseen risks.


Trading Psychology and Performance Tracking
- Maintain emotional discipline: Use meditation or breaks to avoid revenge trading.
- Continuous learning: Review weekly trades for patterns in wins/losses.
- Performance metrics: Track key stats like Sharpe ratio or max drawdown via
spreadsheets.
- Adaptability: Backtest strategies quarterly and adjust for market regime changes (e.g.,
from trending to ranging).



Conclusion
This price action strategy emphasizes simplicity, patience, and risk control, proven e?ective in
volatile markets. By focusing on multi-timeframe alignment and high-probability setups, I aim
for consistent profitability.

- Mirza Aarif
- [email protected]
- [phone]