Wednesday, April 22, 2009

Classic Example of Price Action and Volume


Attached is the classic example of a perfect synchronisation between PA and volume on the GJ chart. Attached is the 5M chart of GJ with the 1H SR lines drawn on it using MM levels. Yesterday, GJ never went below 140 and you could see strong support there. From the chart, you can see price stalling around 141.5 which has been an area of previous support and stalling of price there provided you a good opportunity to go long with minimum risk.

So, now you are long and price starts going up , up and up. So where do you exit ? You could exit at 142.2 which is a strong area of resistance and that would be just fine as anyway you would have made a profit. There is a previous high there as well and so that would be a perfect place to exit. Then you see the resistance and the previous high being broken and u enter long again. And you ride it all the way up to 142.9 and there you see a beautiful pin bar. Whats more, the bar prior to that has a high volume and shows a climax and the pin bar with high volume confirms that this is the end of the move and you exit the long with good profit. The pin bar can be used as a good place to short and you could short as well. Since the pin bar is on a very low timeframe, you cannot expect too much profit but anyway you could take this short for a few pips.

As expected the price goes down and you exit when you see price stalling around 142.4 and again you wait. You see price making a revisit to 142.9 where again you see a pin bar and again you can enter a short and ride it down to the place of price stalling and you can continue to play this range for atleast 10 pips each time.

Just an hour or two's work and you could have made hundreds of pips. Easy !!

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