Learning to read Price Action with P&F Charting
- Thread starter HolyGrail
- Start date
For intraday short term trades on ES and ZG I use .5 x 3.
For swing trades in YM I use 25 x 3 or 50 x 3 depending on my level of comfort with the market. I only take triples, quads, spread triples etc. I am looking for lock trades on long term trading so I probably only will trade two or three swing trades a year but they will be big moves. I still scale out and keep a runner which I trail a stop one box away from the previous low or high ( this essentially gets you out on a double top or bottom with a stopped out runner)
For USD/JPY try .025 x 3 and see the huge moves you can catch in this instrument. It is important to use mental stops with forex, never set a hard stop they will find it.
Basically you can do a little research on the net to find the appropriate box size for a given price.
I do not personally use the previous top as a target. I find that the best moves will always have a couple of retracements. As long as each retracement makes a higher low or lower high (for shorts) my stop management will keep me in the trade. You must have the confidence in your method to watch the price retrace and take some of your unrealized profits. You should definately paper trade these charts before you dive in so you know what to expect. I do always move my stop to my entry price as soon as my second mechanical target is taken out. I do not vary my first two targets. You will sometimes watch your first target get hit then get stopped out. It is ok, if you reduce the target sizes too small you will never make enough on winners to pay for stop outs.
My win rate is nearly 70%, so if you are selective with your trades, and follow the rules you can do well.
Oh by the way, I never trade between noon and 2:30 Eastern in the stock indexes and usually try to trade gold between 5:30 and 11:30 Eastern. Most of the best signals are in these time periods. Trade when the market is moving.
For swing trades in YM I use 25 x 3 or 50 x 3 depending on my level of comfort with the market. I only take triples, quads, spread triples etc. I am looking for lock trades on long term trading so I probably only will trade two or three swing trades a year but they will be big moves. I still scale out and keep a runner which I trail a stop one box away from the previous low or high ( this essentially gets you out on a double top or bottom with a stopped out runner)
For USD/JPY try .025 x 3 and see the huge moves you can catch in this instrument. It is important to use mental stops with forex, never set a hard stop they will find it.
Basically you can do a little research on the net to find the appropriate box size for a given price.
I do not personally use the previous top as a target. I find that the best moves will always have a couple of retracements. As long as each retracement makes a higher low or lower high (for shorts) my stop management will keep me in the trade. You must have the confidence in your method to watch the price retrace and take some of your unrealized profits. You should definately paper trade these charts before you dive in so you know what to expect. I do always move my stop to my entry price as soon as my second mechanical target is taken out. I do not vary my first two targets. You will sometimes watch your first target get hit then get stopped out. It is ok, if you reduce the target sizes too small you will never make enough on winners to pay for stop outs.
My win rate is nearly 70%, so if you are selective with your trades, and follow the rules you can do well.
Oh by the way, I never trade between noon and 2:30 Eastern in the stock indexes and usually try to trade gold between 5:30 and 11:30 Eastern. Most of the best signals are in these time periods. Trade when the market is moving.
Your initial stop on any trade will be one box below or above the previous column (that is, if you enter a long on a triple top breakout you put the stop one box under the last O in the previous column.) I usually do not take any trades that require a stop more than three points from the entry as the risk reward is not too good. Ideally you want a triple top breakout where the entry is say 1530.00 and the last column of o's has a low of 1528.00. This setup would give you a stop at 1527.50 (2.5 points.) This setup is even more powerful if each successive row of o's finishes higher than the one before it. Think of a bullish flat-top triangle.
As I stated earlier you will develop a feel for the entries that will work and I often now work without a hard stop but it is a feel thing. Some of the most powerful trades are wide spread quad or even quintuple trades where the price sort of makes a hard run at the resistance and some times the payoff is worth having a wider stop.
I promise to attempt to learn how to do screenshots so I can show some of these. Marcrivalland.com has some good basic material on P&F.
As I stated earlier you will develop a feel for the entries that will work and I often now work without a hard stop but it is a feel thing. Some of the most powerful trades are wide spread quad or even quintuple trades where the price sort of makes a hard run at the resistance and some times the payoff is worth having a wider stop.
I promise to attempt to learn how to do screenshots so I can show some of these. Marcrivalland.com has some good basic material on P&F.
I just got a pm that really worries me. I don't want to see this happen BECAUSE YOU CAN AND WILL LOSE MONEY TRADING ALL PNF SIGNALS. I PROMISE YOU WILL.
The chart was submitted to me for evaluation. I placed it below this post.
Today it broke into a triple top buy signal. Do we buy it?
NOT ONLY NO, BUT HELL NO!!!!
Why do I say that?
First off the stock is in a severe downtrend.
2nd any move up will only likely make it to the 38-50% retracement level which is on 2-3 boxes away.
We have an 11 box risk to make 2 or 3 boxes. This trade sucks.
Now if there was an obvious reverse of the downtrend then yes we might have a different and higher target, but we are not out of the downtrend.
The chart was submitted to me for evaluation. I placed it below this post.
Today it broke into a triple top buy signal. Do we buy it?
NOT ONLY NO, BUT HELL NO!!!!
Why do I say that?
First off the stock is in a severe downtrend.
2nd any move up will only likely make it to the 38-50% retracement level which is on 2-3 boxes away.
We have an 11 box risk to make 2 or 3 boxes. This trade sucks.
Now if there was an obvious reverse of the downtrend then yes we might have a different and higher target, but we are not out of the downtrend.
Holy Grail more like holy shit! 
I started reading your thread on the 22nd with your first couple of posts and i just spent the better half of 2 hours skimming and analyzing the last 30 something pages! And it has all been very relevant...I think that is an ET record. 
Awesome thread sir!
I started using p&f's about a year ago to setup vertical debit spreads, but i have moved on to other things that are more "fun" to watch than theta decay i use stockcharts.com (the free part) for my scans and charts.
I also programmed a VBA excel P&F "chart" macro so that i could get realtime updates, but i use thinkorswim so it updates via DDE. Its kind of klunky and unreliable (like when tos hangs and i loose x mins of dde data) so i have moved away from it. I figure i would mention it incase someone has the time and desire, but not the money for a real time charting software package.
Anywhoo i have a nice chart for some of the new people to look at before tomorrows opening.
http://stockcharts.com/def/servlet/SC.pnf?chart=NYB,PWTADANCBO[PA][D][F1!3!!!2!20]&pref=G
Once again, great job paying it forward.
I started reading your thread on the 22nd with your first couple of posts and i just spent the better half of 2 hours skimming and analyzing the last 30 something pages! And it has all been very relevant...I think that is an ET record. Awesome thread sir!
I started using p&f's about a year ago to setup vertical debit spreads, but i have moved on to other things that are more "fun" to watch than theta decay
i use stockcharts.com (the free part) for my scans and charts. I also programmed a VBA excel P&F "chart" macro so that i could get realtime updates, but i use thinkorswim so it updates via DDE. Its kind of klunky and unreliable (like when tos hangs and i loose x mins of dde data) so i have moved away from it. I figure i would mention it incase someone has the time and desire, but not the money for a real time charting software package.
Anywhoo i have a nice chart for some of the new people to look at before tomorrows opening.
http://stockcharts.com/def/servlet/SC.pnf?chart=NYB,PWTADANCBO[PA][D][F1!3!!!2!20]&pref=G
Once again, great job paying it forward.