In Price Action Trading Strategy

I'll commonly refer to price in trending environments as stacking bricks, because you will notice over and over again that price forms “blocks” and stacks diagonally, one on top of the other. Below we have a chart of USD/CAD. You’ll see that on 3 different occasions during this uptrend, a level of resistance turned into a level of support, a bullish sign indicating further price movement upwards.

In regards to intraday trading, using this technique and using these levels will provide high probability setups over and over again on heavily trending days. When an area finally becomes broken, it is typically a sign that the uptrend is over and either reversal or consolidation is on the way.

Additionally, you will notice from the chart that the diagonal trendline was forfeited for the horizontal support and resistance. Playing a bounce off of a diagonal trendline would not have given you nearly as good of an entry as the horizontal lines, or you would have missed entry altogether, depending on how you were to draw the line. It is why we always require horizontal support and resistance be present before entering any trades.

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Showing 3 comments
  • Chris
    Reply

    Are you referring to a short setup when the levels are broken (back down), or a long setup at consolidation on top of one of the levels? It seems like the explanations in the second and third paragraphs are opposing setups. You talk about the uptrend ending and playing a reversal in the second, but refer to a bounce of a trendline (but instead using the horizontal lines – I'm assuming long) in the third paragraph? Some arrows and direction on the chart like previous articles would clarify a bit – but thanks for the post, much appreciated as always!

    • Ryan L
      Reply

      Chris, I think the point he’s trying to make is that sometimes you can have more entry opportunities playing horizontal S/R levels rather than using diagonal trend lines.

  • umapathy
    Reply

    amazing website ———— naked truth about Forex —————–thanks…………..

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