Using Price Action to Generate possible Profits
Trading financial securities is a business that requires a sound strategy that allows you to consistently generate returns over time. To achieve these goals, you will need to develop a trading style that is consistent with your personality and degree of risk tolerance. Developing a trading style requires an analysis of your personality. Your business personality can help you develop a trading methodology which can lead you to whether you need a system that uses price action to drive your trading completely or one that given you some type of discretionary overlay.
Trading is a business. You would probably never open a stationary store without determining the demand or the competition in the area. You would try to find the best location and attempt to keep your rent at a minimum. The same is true for a trading business. You have to determine the risk you are willing to take and keep that in line with your personality. If the risk of losing money overnight keeps you up, you should probably focus on day trading.
One of the best trading techniques is to focus on price action and to find a systematic approach to determine future price movements. Analytical strategies evaluate the market price action and are geared for those who are looking for a historical track record.
The most important benefit of an analytical strategy is that it removes human emotion from your trading decision. My traders find out the hard way at the beginning of their trading careers that it is a lot easier to trade using a demonstration account compared to actually risking real capital.
Once real capital becomes part of your trading experience, human emotion can take hold and destroy even the best trading plans. Fear and greed will erode your ability of generate robust returns by quickly altering your trading decisions. Many times when a currency pair or futures contract is moving against you, the easy way out is to just cut your losses. You will feel better immediately, but you have allowed you emotions to alter your strategy.
Greed will also alter your strategies. If your emotions get involved in your trading, a 1% take profit target can quickly turn into dreams of retirement, and before you know it, the trade has moved against you and you are frustrated by your mistake. By finding a system that will remove this emotion, you are on your way to achieving your trading goals.
There are numerous studies that show that historical price action repeats itself and can assist in predicting future profits. Best Pro Trade is a high powered analytical software that is geared to traders who are looking for an edge using an analytical approach.
There are hundreds of analytic trading strategies that can theoretically show fabulous returns, but there are very few that can sustain long term success. Many black box strategies work for a short period of time, but eventually experience rocky periods. Best Pro Trade on the other hand, has a profound analytical methodology, and has had profound long term success.
The basis of Best Pro Trades price action concept is defining the beginning of a trend. Many traders attempt to catch a trend in a financial security using moving averages that help them initiate a position just as the trend is expired. Best Pro Trade on the other hand, has a proprietary approach that focuses on multiple time frames to achieve trading success.
The Best Pro Trade system focuses on price action using a combination of proprietary indicators to achieve the most efficient risk reward. The trading signal, shown above, shows how the system uses a combination of momentum and combines this to find trend exhaustion and a trend reversal, which signals an entry at the most attractive time.
Our state-of-the-art trading panel provides a large range of specific trading data, which allows traders to pin point changes in market sentiment and catches the beginning of each trend with a wide rate of asset classes.
Best Pro Trade immediately calculates the highest probability profit zone using past price action and a Fibonacci sequence. Price action is also used to find the most appropriate stop loss, giving traders a high probability trade with the most comprehensive risk-reward profile.
While many Best Pro Trade customers allow the system to completely drive the trading process by sending signals directly to brokers, some use this process as an overlay, to greatly enhance their discretionary trading business.
Utilize NinjaTrader’s comprehensive market analytics tools
Most of us are familiar with Fibonacci retracements. If you are not, you can find information all over the internet about the mathematician, who lived in Italy between 1170 and 1250, and formulated what he observed in nature. His discoveries have been used in trading for decades, but how they are used has always been the real question.
At Best Pro Trade we focus on developing software that puts our traders ahead of the game, by solving the question of how you can really use Fibonacci retracements to make money. Our platform monitors the market and constantly develops signals that are designed to target Fibonacci levels.
Technicians have focused on the Fibonacci sequence, which forms the basis of the Fibonacci retracement. The most famous retracements are the 38.2%, 50%, and 61.8%. A relatively standard use of the Fibonacci retracement is to gauge how much an asset will retrace after ascending or declining.
For example, if the price of asset XYZ drops from $100 to $40, then the Fibonacci retracement levels would be the difference ($60) times 38.2%, 50% and 61.8%, which are then added back to $40 to find the levels the market should retrace to, which would be $62.9, $70 and $77.
The real question is what will likely happen, if the market starts following this self-fulfilling prophesy and retracing toward these levels? Will they stop at the 38.2% retracement, or will the asset continue to climb? Now if you knew that, you would have an excellent advantage. As opposed to picking indiscriminate levels to buy or sell and asset, you would have a target point to place a trade, as the market moved toward pre-determined points.
That’s where Best Pro Trade comes in. We have spent decades following movements of the
capital markets looking for an edge, to place trades that were likely to move to a Fibonacci target point. Once the market arrives, our software analyzes the momentum, and combines that information with a trading signal that helps us determine whether a currency pair or a future contract is pausing and refreshing or ready to turn towards the other direction.
You can see what I am talking about if you observe this intra-day 3 minute chart of the FDAX. After the security declined and subsequently reversed, the system targeted the first level of retracement, which formed the basis of our targeted lines (in white). The movement of the market at this point relayed that the upward momentum was soft, flashing a yellow caution signal. Best Pro Trade then combined different time periods to determine the likelihood of the market moving higher which set off the sell signal.
In essence, our proprietary software acts as an automated measurement of supply and demand for a security at targeted points. The Fibonacci levels give us a place to measure the market, and since many people are evaluating price action at those point, we use that to pin point the markets temperature. Gauging the temperature of the market at these levels is the key to our success.
The chart above shows exactly how we gauge different location. After a short setup is launched, a signal triggers when the market breaks through the pink Fibonacci target. The market falls and consolidates at another Fibonacci target and then gives us another opportunity to cash in (yellow line). Through each step of the way, the market falls to our floating Fibonacci lines that dynamically generate Fibonacci targets, and consider the temperature of the market to evaluate a signal.
This sounds very simple and that’s because our platform has a state-of-the-art control panel that gauges market sentiment and combines it with momentum to create a signal that gives a trader the best idea of the future direction of the market at a specific targeted price.
Sentiment is reflected by bulls and bears in the upper left corner of the control panel and creates a percentage, which describes the platform’s view of confidence. As you can see, the ebbs and flow of price action is constantly updated to target the next market move. If you are active trader, gauging market sentiment is most likely your most important trading tool, and for long term players, combining multiple time horizons will give the optimal entry and exit points.
High Time Frame Analysis
he most efficient revenue generating trading strategies incorporate high time frame analysis, which not only focuses on one data point to produce a trading signal, but instead evaluates multiple times frames to validate underlying market momentum.
At Best Pro Trade, we provide a comprehensive trading platform and strive to produce the most efficient trading signals in an effort to generate the best risk adjusted returns. To do this, we employ a number of sophisticated techniques, including high time frame analysis, and wrap it up nicely in a bow for our customers using a combination of graphical representation and an easy-to-read control panel. The control panel is broken down into a few segments to make it easy for traders to evaluate trading signals, while evaluating a number of different inputs that are used to initiate trades.
Our system is proprietary but some of the underlying concepts are known within the trading community. For example, we employ the idea of sentiment to the market and accurately depict specific periods when bullish sentiment outweighs bearish sentiment. Sentiment is a measure of confidence and measures the pulse of the market. On our control panel, we reflect bullish and bearish sentiment at the top and display this sentiment index in percentage format.
The control panel provides a signal, using an algorithm that takes into account a multitude of factors, and produces either a long, neutral or short trading signal. Each signal is accompanied by specific high probability targets that pinpoint levels on the chart. This is combined with the frequency as well as the volatility to gauge the strength of the signal. The control panel works in conjunction with our charts to pinpoint entry and exit levels.
Multiple Time Frames
The platform uses high time frame analysis to enhance our performance. We overlay our trading parameters over multiple time frames. A general theory is that longer time frames remove most of the noise associated with market fluctuations. As you drill down the time frames, the charts become noisier as a distribution of prices surrounds value. Each of the time frames, listed on the control panel, represent a signal that uses 10 different proprietary indicators to generate either a long, short or neutral signal.
Selecting what time frames to use is unique to each individual trader. The Best Pro Trade control panel has a shorter-term panel on the right and a longer-term panel on the left. By overlaying shorter-term signals with a longer-term signal, a trader can evaluate the broader direction of a security and use short-term term signals to get a jump on rest of the market.
High time frame analysis allows traders to choose the time frame they are interested in, and then choose a time frame above and below it to complement the main time frame. As such, they could use the long-term signal to define the trend and the short-term signal to provide the trading signal.
Order flow is another very important component to high time frame analysis. Order flow reflects the size of volume that is entering a market. When order flow is increasing at critical buy and sell points, the control panel alerts traders by flashing a warning signal. Generally, when high volume trades hit the market, they act as catalyst for changes in current price of the security. Movements to new price levels are generally foreshadowed by changes in order flows. Break outs that occur during high volume periods have more influence over signals as opposed to low volume signals, which sometimes can indicate false moves.