Pro money actions

This is a tough post to put words to. Pro money activity is not a single candle or formation that happens, it is a combination of time, price, reaction to their efforts and how easy or difficult it is for them to slow and finally turn a trend or range in progress. It is expensive for pro money to do this work and it has to be done in places where it will the best opportunity to work and not have to do it again at a later time. Too much effort with little result means a range is likely to form and then its a game of who has the deepest pockets. Ranges are very expensive to break and he who has the most cash wins. This is why I tell you to wait for a break and test of the break to see will it hold. Let the pro's do their thing and be happy in that you can see what has happened and can react accordingly.

Here are a few charts of the Eur/Usd and a break down of one approach used by pro money. There is little point in learning the pattern or naming anything other than the most basic parts there are in this, because all it will achieve is you filling your brain with useless words and terms and not concentrating on how price looks. Once you have at least one good eye, all you need to do is watch price form and close. I say form, because you want to see where the action took place as a candle formed, this can be useful intel especially around price areas of interest to pro money.

There will be plenty emotional tugs in your mind as to why you must trade in the direction of the candles because they just look so good and strong and are moving with great progress. This is nothing more than a sucker punch and you are falling into their trap. It is very hard to show anyone why not consider going opposite to the main move when it is so obvious to them that thats not where price is going. Breaking these emotional ties will be difficult and takes a long time. If something looks too good to be true, and even if you are in this money making move, you will have so much confidence that nobody can talk you out of taking profit or closing the position completely in readiness for the turn.

If I had a penny for each time someone wanted just 10 more points, or I know it will turn around now, or it looks weak/strong etc, I could give up work and retire. Be ruthless with your entry, stop and target because without knowing all three before you enter the market, you are on the poor man's slide to becoming broke and throwing money away. All three functions must be plotted either on the chart or in your mind before you enter and DO NOT change them. You must know what is the most money I am prepared to loose before I take a new trade. This is basic money management and it must be a realistic figure. Wealth is not created in a few trades, but over a longer period of time where smaller bites are taken out of the market and not look for big moves. Take small profits all the time and take small losses a lesser amount of time. Then your account grows and given enough experience and confidence you can then slowly places slightly higher value trades in the market, this gets extra profits for the same point risk and target as you will have always done. But dont jump into increasing trade size until such time as your account can take it.

I could write volumes on taking care of your capital, but let the most basic things be your guide, protect your capital and it allows you come back to trade again tomorrow. But loose it and you can no longer trade.

Moving on to some charts.

4hr chart of the Euro and I have drawn in a box on top showing historic supply. We know sellers were active here in the past and that the area has been untouch for a long time relative to this time frame. We know any new entry into this price area is likely to see some sellers come back in and we watch for signs of the bullish move showing signs of weakness.

The big sign in this chart is the single long bullish candle with a spike on top. This is printed as a bullish candle, but is in reality bearish. We this from the reaction to it in the next closed candle. If such a powerful bullish candle resulted in the next candle being strongly bearish, then how can the up move continue. Could it be the orders up in the box be some over whelming that the buying was really an attempt by pro money to show the retail trader that the price is really heading for the moon and its been like this for the past half days trading session and you are missing out unless you go long right now!

Sure, its the ulitmate sucker punch that happens on all financial instruments and on all time frames. But they happen much nicer on the 4hr and daily. Which is why I take most of my trade leads from the 4hr and daily time frames.
 

1hr chart.


A little closer in on price action here, count 4 candles back, but start from the candle with the spike. This is how the 4 hr candle looked as it was forming. Can you now see how the strength of the buying started to slow down towards the end of its life?

This folks is the basis of price action, it is often reported as closed candles only, but its also important to look for how it behaved as it was forming. Become fully informed and get as much intel as you can in these important areas.

15min chart.

Here is the first real clear sign of the bullish move in trouble. Again look at the candles from the spike back left to where the large bearish candle held price down for one time period. That puch back up to the spike was nothing other than the tugs on the retail traders emtions to get in now before you miss the rocket take off. The candles rarely form the same pattern time after time inside these boxes. You must look at them in context with the other candles around it and not try and fit them into a pattern, but allow the newly formed pattern make sense to your logical brain. Ask yourself some fundamental questions, who would be buying up here, who would be selling up here. If I bought up here, who am I buying from?....if I am selling here, who I am selling to?

Your customer must always be, the retail trader. And I guess there are folks here who have been my customers. But unlike the faceless institutions who just take your money, I tell you how this works. There is a lot of work for you to do in learning to be patient and getting an entry after you have seen the evidence of pro money at work. There tends to be a second shot where the more careful traders step in and place their orders. It wont happen all the time and its important you not be hard on yourself for missing what was a perfect trade. Unless I see the right entry after a good setup, I let it go and wait for another. In time this will save you money and help you grow an account rather than pull the trigger on any entry after a good setup. Quality rather than quantity is the message.

Down to the 5min and this time frame and sometimes the 1min is where I take my entry lead from after all the higher time frames are shown good intel. I have zoomed in closer to price action so that I can explain this clearer than the regular chart view.

The brown box is of course the bow from the 4hr chart and I have to make this clear because there are emails asking me at times why some of my chart have two background colours.

We still start with the highest candle that looked not too unlike this on the 4hr chart. There is still a large wick and a bearish reaction. The bearish reaction is not as impressive as the 4hr, but it does still tell us a story. There are tails on the tow candles after the climatic bullish candle and there were some buyers remaining who were most likely have been the retail trader cannon fodder types. The large bearish candle is an important placement because it showed up in a place where only buying within a pull back would have otherwise taken place.

A small bullish move up over the next three candles happened with signs of selling coming in as price rose higher. Again, any bullish continuation would not have shown this. There are also two tests on bullish candles which are checking for remaining buyers. Each test resulted in lower prices and helps solidify pro moneys investment in more down side. They wont jump in right away and slowly unwind one position and sell into remaining buying. This is will different each time which is why looking for patterns wont be as productive as you analytical and logical brain can be.

Note the bottom of the brown box, it has setup into a resistance area. This wont always happen but in this instance it shows up the willingness for pro money to effectively put a cap on price and do not want to see higher prices.

A second 5min chart. I have drawn in a yellow line to show what was and what will further be shown as another area where price has reacted in the past.

Here is another 4hr chart zoomed out and showing the same yellow line as the above 5min chart.

In this chart we can see way back left where this area was important and if you look for long enough on high time frames you will see there are a few of these on other price areas. Make yourself aware of them.

Towards the upper right of the box you will see another spike into the box drawn in all of the charts. Take note of the similar approach used by pro money, highly emotive push for price to reach the moon and if you are not in, you will miss a big move.

Also note the reaction was different to the last, even though the push is the same. This is why I say to not learn patterns just for the sake of knowing patterns.

I hope this helps some of you and that something does go click in your head. Lots more can be written on this, but for the moment there should be plenty in that to feed your brain. Take some time now and apply this to other pairs from high time frames all the way down to the 5min.