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Thread: The Philosophy of Price

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    Default The Philosophy of Price

    Hello

    Lets talk about price action. To me this is a theory, where some formations in price by candlesticks and by larger formations that can be said to be created even without candlesticks on the chart. How to use the information provided by candles, if it is a bar chart or olhc chart. I'd even go so far as to claim that heikin ashi charts have some of these elements within it. I do not like line charts but there is some information in them also, it is just that I claim these are for pure beginners and should not be used by people attempting to make profits from the market.


    Rules of this thread:
    Please before you read any further understand that I will continue to post the other chapters, ideas and teachings in this thread.
    Ask a lot of questions = I will answer them.
    Do not make posts that are useless or spam.
    This is NOT A SYSTEM or a strategy in itself.


    Index:
    chapter 1 pinbar
    chapter 2 engulfingbar
    chapter 3 doji and spinning top
    chapter 4 levels in price
    chapter 5 the harami and inside bars
    chapter 6 examples and enterpretations


    Chapter 1 pinbar

    I like to start the talk about price action at the pinbar or hammer as some call it. What is this really? Well it is a formation in price detailing the reaction of price at a certain level. What happened at the tip of the hammer, what does the pin mean?




    Take a look at the area where B is. The pin up there is where price turned, think about what it looks like that. Price started at A went all the way up to B but still ended up close to A. The reaction at the top is what we see in this particular bar. It it this reaction or sign that we see here that tells us information about the market at this particular place. Other signs, symbols or price action formations tell us other things but I thought it was important to start with the pinbar. This is where it all starts for me.

    The pinbar can also be upside down, sometimes it is called a hammer and it can also have white or a black candle within it. These are all variants of the pinbar and for me I just call it a PB. So to recap the PB displays a reacion in price at B, where it did not want to go higher and closed at almost the same place where it opened, A. This can ofc be used for placing trades when reinforcing a level or for tightening stops when a reverse sign is seen, as with the engulfing bar which we will go into next.

    ---------- Post added at 07:17 PM ---------- Previous post was at 07:01 PM ----------

    chapter 2 engulfingbar

    This PA formation tells us about the power in two candlesticks. Where one is smaller and the other is larger. As you will see in the example below the force is down. The idea is that the first candle, where something happened, is overcome but the force in the second candle. Together the two candlesticks show us the force that happened during them. This way it shows us that indeed in these two candlesticks the power was down, the reverse is ofc true for a reverse example.




    At the engulfingbar or EB for short something happened. For what ever reason price was overcome and the was apparent force in one direction. This can be used for placing trades when reinforcing a level or for tightening stops when a reverse sign is seen. Sometimes it happens that the EB has tails or pins sticking out of them, force still holds true if they do but note that the original engulfingbar did not have any pins. Also the second bar originally engulfed the entire first bar, with high and low regardless of pins.

    ---------- Post added at 07:43 PM ---------- Previous post was at 07:17 PM ----------

    chapter 3 doji and spinning top

    These two while often misinterpreted PA formations consist of a single candlestick. Mainly what they tell is uncertainty or some will say equality. This is something that is not that good in the market, because how are we to make profit when price only goes sideways on the chart?

    The rumor also says that the Japanese say that when they see this “the market is tired”, because of that we can use this one to place trades and also as a warning that price might not want to go any further then this. Or if this sign is at a previous level we might use these signs to enter the market on a validating basis; “this sign says that the market will not go further I will do this here..”



    What is the difference between a doji then and a spinning top? Well for one the amount of trading done is usually more in a spinning top, since the spinning top does not have the same open and close price. Because of this we can use the doji and claim “here the market is tired”, we do not know why it just is. Likewise we can use the spinning top and say “here there is indecision in the market” and it might not go further unless more information/trading comes into the market. Also note that I have on purpose not market out all the dojis and spinning tops on the chart, doji is orange and spinning top is blue.

    ---------- Post added at 08:15 PM ---------- Previous post was at 07:43 PM ----------

    chapter 4 levels in price

    First of all if you want to see my other thread about levels in price check it out here: https://forum.mt5.com/showthread.php...lows-in-price/

    Now there are some examples in that thread but what I will do here is do some further explaining. Lets start with a clean chart what do we see?



    First of all where is the highest point? That is A, which level was the previous highest? That would be D. The lowest point is B and the previous low when price came from the left is C. So what does this all mean? Well when searching for the levels in price these are some of the questions that you should be asking yourself. It is at these levels that we look for the price action formations.

    You might ask me, why is that then? Why not use all PA formations on the entire chart? The answer is simple; if you want to buy something you want the best price (low) and if you want to sell something then you want the best price (highest). Why would you want to buy or sell something, and it can be anything really, if you did not think that the price was right?

    So then.. again on the chart. This is how the story went. Price started from the left and fell down to the point C, I marked this for later reference. Price did then go up to D, I marked it but because price went even higher then the highest point is A and I removed the line that was at D. Now at this point you might not understand my ideas but here it comes; we look for formations in price at these levels, currently we have C and A. As it happens we have an engulfingbar formation later appear at A and price goes short it pauses for a bit and then falls even further.

    Lets stop there, at the level below D what is that? Well this level is how far price fell after creating D, this is the reason for marking this level. Notice that after the engulfing bar price fell and halted very close to this level. But price continued to fall all the way down to the previous known lowest low so we check what happened there.
    At the level C, but now B in this story of price, there was some formations made. The first sign I noticed was the doji and later another engulfingbar warning us that something might happen. Later price stalls and starts a small climb.

    Now I do know that this will take many examples to explain so please if you read this post your questions. I will continue to explain more concepts ftm.

    ---------- Post added at 09:50 PM ---------- Previous post was at 08:15 PM ----------

    chapter 5 the harami and inside bars

    For starters let me say that a harami bar formation can also be an inside bar formation but the reverse is not true. This because of definition, one is the other but they are both not the same thing. I know many traders usually use these inside bar formation variants to place trades, usually the idea is some sort of breakout with some other filters attached to it.

    Though that is not the intended use, at least if we read it from the source Nison. But before that let me show you how they look.




    Both of the outlined formations are insidebars but only the left one is a harami formation. The difference is that the second bar of the harami is about 1/4 of the first bars range and sits at the bottom making it a bullish harami. A bear harami would have the second candlestick at the top of the previous bars range.
    The blue square shows us something that looks like two dojis and they are, but together they for an insidebar formation. Where the second bar is completely inside the previous bars total range. Notice on the chart how price did not close below any of these outlined formations. This example displaying the change of current force in the market at that time.

    That leads me to the intended use of these formations. Where the harami formations only validates a previous level, in the example it creates it though, the insidebar formation show that there is stalling and indecision in the market. Leaving the trader to wait for new information/force in price to come into the market to show the direction of what happens next.
    Last edited by Alexander Tatsumaki; 14-01-2015 at 08:16 PM.

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  2. 4 users say Thank You to Alexander Tatsumaki for this useful post.

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    thank you for sharing what you hope to be useful for traders to find a suitable system. sometimes there are some traders who do not fit in with the system of others but it should not be a problem for them. because as much as you do not understand the purpose of the system if the system, it will not be useful for users who do not understand

    Though trading on financial markets involves high risk, it can still generate extra income in case you apply the right approach. By choosing a reliable broker such as InstaForex you get access to the international financial markets and open your way towards financial independence. You can sign up here.


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    Quote Originally Posted by jontarno     
    sometimes there are some traders who do not fit in with the system of others but it should not be a problem for them. because as much as you do not understand the purpose of the system if the system, it will not be useful for users who do not understand
    so wait.. what does that even mean? honestly if your going to use google translate to write stuff then at least have some knowledge of the language. what you just wrote makes zero sense. if people does not fit into a system it should NOT be a problem for them? what? i have no words..



    anyway, here is a chart:




    Notice now on the chart, what do we have here? Okay lets start from the beginning where A is the highest point on the chart, thats the second time it happened and many traders probably went short there. The lowest point is C and at D we have a level where price paused before it went all the way up to A (now B) again.
    Note how B is higher then A but there is no apparent higher close. This is very important. As it forms a double top or some might even claim a triple top if we count the first time..

    What can we do with this? Currently not much. But notice how price at B created several formations. There is an engulfingbar at B that may or may not have provided profit there is also an inside bar that looks very profitable. It is natural to me that if traders went short at B (confirmation of the level A by the insidebar at B) that the first potential target is at D. To the very least profits would be locked in once price comes back to D.

    Look at the chart, try to understand the levels and see how the priceaction formations are at the circled areas.

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    Mate, can you give another example of the chart? I'm still learning to understand all the formations of the chart picture that you gave, but there may be other conditions with the same concept in the market. It is a good thread. Thank you.
    "Behold the turtle. He makes progress only when he sticks his neck out"


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    Quote Originally Posted by samurai3x     
    Mate, can you give another example of the chart? I'm still learning to understand all the formations of the chart picture that you gave, but there may be other conditions with the same concept in the market. It is a good thread. Thank you.
    yes there will come many examples. but i don't have time just right now to make one. maybe toonight. is there something special that you would like to see?

    ---------- Post added at 02:32 PM ---------- Previous post was at 02:15 PM ----------

    as if there was any doubt of where the market would go to test a level .. when the recent shock came today. you bet i was short




    look at the chart. the lowest point is seen there at A and the high is seen at B. when price evetually stalls where is a good place to put a target? well at the low i'd say. if we get there, and yes i know this example is very extreme, we don't know. but to place a target there is not wrong now is it. this will get you thinking.

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    Quote Originally Posted by Alexander Tatsumaki     
    yes there will come many examples. but i don't have time just right now to make one. maybe toonight. is there something special that you would like to see?

    ---------- Post added at 02:32 PM ---------- Previous post was at 02:15 PM ----------

    as if there was any doubt of where the market would go to test a level .. when the recent shock came today. you bet i was short




    look at the chart. the lowest point is seen there at A and the high is seen at B. when price evetually stalls where is a good place to put a target? well at the low i'd say. if we get there, and yes i know this example is very extreme, we don't know. but to place a target there is not wrong now is it. this will get you thinking.
    hello, mate ..
    interesting. but to do tring to news like that, the conditions could pasa will be bebalik, a case could last candle will go up. how you want to be able to identify this condition, if the price was going down, mate?
    because this is a very rare condition, when one candlestick can move quickly like that, if you see another pair CHF rivals, you find that more extime for price movements.


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    i'm Sorry Ding Dong but i just don't understand your English. what do you mean if price goes up? if it goes up it would hit your sl if you where short, right? what is the question?

    if you are looking for other pairs that are related to chf then yes there will be moves in them also, that goes without saying. that is not what i am explaining here though. the instrument has nothing to do with it. it's just an example. and fyi this move is not even only rare but IT HAS NEVER HAPPENED BEFORE so there. that's what i heard from my friends ..

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    Hoaa,, i'm sorry with my language, Alex....
    This I have a correction to my language, I use google translation, xixixixi ...

    hello, mate ..
    interesting. but to do tring to such news, market conditions can be reversed, the case could last candle will go up. how you want to be able to identify this condition, if the price will go down, mate?
    because this is a very rare condition, when one candlestick can move quickly like that, if you see another rival CHF pair, you find that more extime for price movements.


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    yea i know you use google translate, but its ok though i did not understand you fully, again. if the case was that the candle went up? i'd need and example of that happening to think about that. as for other pairs that include the swissy well .. if CHF moves like this then ofc other pairs with CHF will also move. other then that.. yea i'd say just post me a chart and i will mark out levels and show you my ideas.

    you know what that would actually be a very good idea. just post a chart for me and i will post my thoughts on it.

    ---------- Post added at 11:38 PM ---------- Previous post was at 12:21 PM ----------

    here are some more examples for you guys:




    1 the pinbar reinforces the level just before it. here price did not want to go higher so we aim to reach the previous low.

    2 the engulfingbar reinforces the previously broken level, here we target the recent low.

    3 the engulfingbar reinforces the previously broken level, here we target the recent low. target may or may not be hit due to where sl was placed and or if some trailing was used to lock in the trade.

    4 spinning top really close to the recent low, target is previous high.

    5 pinbar testing the recent high at 2, sl was hit.

    6 pinbar reinforcing the recent high, target at spinning top at 4.

    7 engulfingbar reinforcing the recent low, going short but there was really bad rr there. either that or a failed trade.

    8 pinbar at recent low, target is previous swing.



    it is not magic, only price action now place your questions!

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    Quote Originally Posted by Alexander Tatsumaki     
    yea i know you use google translate, but its ok though i did not understand you fully, again. if the case was that the candle went up? i'd need and example of that happening to think about that. as for other pairs that include the swissy well .. if CHF moves like this then ofc other pairs with CHF will also move. other then that.. yea i'd say just post me a chart and i will mark out levels and show you my ideas.

    you know what that would actually be a very good idea. just post a chart for me and i will post my thoughts on it.

    ---------- Post added at 11:38 PM ---------- Previous post was at 12:21 PM ----------

    here are some more examples for you guys:




    1 the pinbar reinforces the level just before it. here price did not want to go higher so we aim to reach the previous low.

    2 the engulfingbar reinforces the previously broken level, here we target the recent low.

    3 the engulfingbar reinforces the previously broken level, here we target the recent low. target may or may not be hit due to where sl was placed and or if some trailing was used to lock in the trade.

    4 spinning top really close to the recent low, target is previous high.

    5 pinbar testing the recent high at 2, sl was hit.

    6 pinbar reinforcing the recent high, target at spinning top at 4.

    7 engulfingbar reinforcing the recent low, going short but there was really bad rr there. either that or a failed trade.

    8 pinbar at recent low, target is previous swing.



    it is not magic, only price action now place your questions!
    Good example, Alex .....
    if this is about the identification of the candlestick form. This may not be that easy for me, because I just know pinbar and Enguling, hihihihi ...
    I still need another thing else, like oscalator, or trend line. hhehehe ......


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