Forex Price Action
Trading Plan
By: Rush2112
November 22, 2019
Rev 0
Table of Contents
Overview.............................................................................................. 1
Pre-Trading Analysis............................................................................ 2
ABCD Pattern Definition / Criteria ........................................................ 3
Trade Entry – Set Up ........................................................................... 4
Trade Entry – Candle Formations ........................................................ 7
Trade Entry – Checklist........................................................................ 8
Trade Management ............................................................................. 9
Money Management ............................................................................ 10
Appendix A – Advanced Pattern Definitions ......................................... 11
Forex Price Action Trading Plan
Market Forex
Sessions Traded Asian, US Market Sessions
Currency Pairs Any combination of these major currencies
USD, JPY, GBP, EUR, AUD, NZD and CAD
Broker Oanda
Charting Program Ninja Trader, MT4
Evaluation Charts H4 (Bias / Directional Chart)
M15 (Entry Chart)
Trading Frequency 5-10 High Quality Trades / Week
Objective 20 pips per day, which is averaged from the month's results
1
Pre-Trading Analysis
Tools Used For Analysis
Structure Analysis – This will provide the “expectation” or bias towards where
price is going
Area of Interest (AOI) – Based on structure, these will be areas where I believe price
will react and has potential to reverse direction
Support / Resistance – Areas based on past supply and demand
Fibonacci Retracement – Based on natural price movement, these areas are ratios
which price corrects to and traders recognize and respect
Key Retracement Levels – 38.2%, 50%, 61.8%, 78.6%
Fibonacci Extension – Based on natural price movement, these are areas where
price is beginning to reach exhaustion
Key Extension Levels – 127.2%, 138.2%, 161.8%, 200.0%
One to One (ABCD) – Price moves in ABCD patterns and markets typically strive
for harmonic movements completing one – to – one moves
Daily Process
H4 chart, ID current swing using proper 38.2% correction. We will use this chart
to determine our bias for direction on the entry chart
H4 chart, draw 1 to 1 swing with Fibonacci retracement and extension levels.
This is what the overall market is working towards
M15 chart, complete same process as above
Mark “Areas of Interest” (AOI) of support/resistance above / below current price
2
ABCD Pattern Definitions / Criteria
ABCD Pattern
BC = 38.2% – 78.6% retracement
AB = CD (1 to 1)
> 127.2% extension of AB leg
3
Trade Entry – Set Up
Signal 1 C buy / sell with structure (areas of interest) in conjunction with 50% to
78.6% Fibonacci level and in line with higher timeframe trend.
Entry Rules
1. C point buy / sell in the direction with higher time frame (377R / H4)
2. Price must reach AOI (area of interest)
3. Correction is 50% or greater
4. Risk:Reward (R:R) ratio is 1.5 or greater
5. Price has absorption towards AOI
6. Stop loss placed 10 pips above / below point A (or adjusted with structure)
Signal 2 D buy/sell with completion of ABCD pattern with Fibonacci confluence and
structure (area of interest), which is in line with higher timeframe trend.
Entry Rules
1. D point buy / sell in the direction with higher time frame (377R / H4)
2. Price must reach 1 to 1 and minimum 127.2% extension of AB leg
3. R:R ratio is 1.5 or greater
4. Price has absorption towards AOI
5. Stop loss placed 10 pips above / below 161.8% extension (or adjust w/ structure)
Signal 3 Double top / bottom buy/sell with Fibonacci extension 127.2% to 161.8%
and confluence with structure in line with higher timeframe trend.
Entry Rules
1. Entry is in the direction with higher time frame (377R / H4)
2. Price must reach 127.2 – 161.8% extension of the double top / bottom leg
3. R:R ratio is 1.5 or greater
4. Fibonacci extension (127.2 – 161.8%) must coincide with AOI and structure
5. Price has absorption towards AOI
6. Stop loss placed 10 pips above / below structure high / low
4
Below are examples of each trade signal entry.
Signal 1
Signal 2
5
Signal 3
6
Trade Entry – Candle Formation
Time and Tick Charts
Invitation Candle Weaker sign candles toward entry. I.e. Doji’s, hammers, etc.
Rotation Candle Entry candle, which must meet the following criteria:
• Must be over 1/2 body and finish strong
• Must take out at least 1/2 the body of the previous candle
Decision Candle A candle which closes higher / lower than previous
Absorption We must see the absorption of buyers or sellers as it approaches the
price zone. This means candles getting smaller and the presence of
buyers/sellers active towards AOI.
Candle Structure
View Candle in 1/3s Strong Weak
7
Trade Entry – Checklist
Are you focused and ready to TRADE THE PLAN?
Price in my “Area of Interest” (AOI) and meets correction expectation
Absorption takes place towards/in AOI
Rotation candle present
Signal 1, 2 or 3 (Fibonacci, Structure, ABCD pattern)
Trading with the H4 Chart
Is the Main Swing >60 pips
After being taken out at BE, only re-enter at better price, next level up / down
Check news schedule – no entries around news
8
Trade Management – Point C Trades
Stop Loss Placed above / below NSH / NSL
Once prices test the highs/lows, move stop to breakeven + 5 pips
If price has made a NSH / NSL, but before one-to-one or 127.2% extension and >40
pips in profit, trail on structure. If less <40 pips stay at BE + 5 points
Once the one-to-one or 127.2% extension level is reached, aggressively trail on
decision candles until taken out of the trade
Trade Management – D – Pattern Completion Trades
Trade will be entered at the 1-1 completion and price will be between the 127.2% and
161.8% extension.
Stop Loss Placed 10 pips above / below 161.8% extension (adjust if structure
is nearby)
Once price begins to correct at the 38.2% retracement level of the AD leg, move stop to
BE + 5 pips
Once price moves past 38.2% retracement level, begin to trail on structure
At the point where price reaches the 61.8% retracement level, lock in profit there. If an
expectation failure occurs, trail on decision candle.
Trade Management – “Rescue” Trades
Once the trade tests a 100% retracement (between 90-100% area), the trade will be
considered a “rescue” trade with the goal of exiting “gracefully” with minimal loss or
perhaps a small profit. As the trade bounces off the 100% retracement level, we will
look for an entry signal per our plan above. It is important to see absorption towards the
100% level. If rotation and absorption are not present, we just take the single trade
entry loss.
Once the trade has a candle close in profit, trail on decision candle until we reach
breakeven for the expectation to play out. If expectation has failed but stop loss is not
hit, we trail on the decision candle until we exit the trade.
9
Money Management
Mini Lot Plan
A sophisticated money management system will be utilized to determine contract size
and optimize profits, as well as to preserve capital. The system is a “smooth ratio” and
uses the following parameters:
Starting Equity = $1,000
Minimum Amount – This is the amount to use for trading = $800
Initial Mini Lots - 1
Delta - change in account balance to increase by 1 mini lot = $400
Standard Lot Plan
Once the account reaches the $20,000 threshold, we will convert over to a standard lot
plan using the following parameters:
Starting Equity = $20,000
Minimum Amount – This is the amount to use for trading = $16,000
Initial Standard Lots = 1
Delta - change in account balance to increase by 1 standard lot = $20,000
Maximum Lots – largest number of standard lots traded = 10
The money management template spreadsheet will be used to track weekly profit / loss
and for appropriate time to adjust lot size.
10
Advanced Pattern Definitions / Criteria
Bat Pattern
AB = 50% retracement of XA leg
BC = 61.8% retracement of AB leg
CD = 1 to 1 and 161.8% extension of AB leg
AD = 88.6% retracement of XA leg
Gartley Pattern
AB = 61.8% retracement of XA leg
BC = 61.8% retracement of AB leg
CD = 1 to 1 and >127.2% extension of AB leg
AD = 78.6% retracement of XA leg
11
