If someone asked me to describe my trading strategy in as few words as possible, it would be this; horizontal levels and price action. Indeed, trading price action setups from horizontal levels is the “core” component of my trading theory and strategy, and if you were to take away only one thing from my website it would be that you can learn to trade the market effectively by simply drawing the core levels on your charts and waiting for obvious price action signals to form around them.
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Why are horizontal levels so important?
If you want to learn to trade a “naked” price chart, you’ll need to learn about two things at minimum; price action
and horizontal levels. Everything in the market starts with a
horizontal line; this is the back-bone of my trading approach as well as
the trading approach of many other great traders. Indeed, traders like
George Soros, Warren Buffet, Jesse Livermore and others, all pay (paid)
close attention to the key levels in the market, because they know that
these levels are significant and can thus have a strong impact on the
direction of price.
Horizontal levels help with timing and they provide “value areas”
that can help you define your risk by giving you a price level to place
your stop loss beyond. I have been a disciplined trader of levels
combined with price action for years; probably about 80% of my trades
involve an obvious “core” horizontal level combined with a price action
signal. Horizontal levels provide us with a confluent area to trade
from, but they are not the only factor of confluence that I look for;
the more factors of confluence you have lining up with a price action
signal the better. However, I do consider horizontal levels to be the
“core” piece of confluence in my trading strategy and I want to show you
guys some examples of how I use horizontal lines and price action to
trade the markets. Ready? Let’s go…
Examples of trading with horizontal lines and price action signals:
I teach a plethora of price action trading
confirmation signals in my course that I combine with levels and the
trend, here’s a few examples of how I trade price action signals with
obvious horizontal levels in the market.
• Trading horizontal lines in trending markets with price action from “swing points”
My favorite way to trade with horizontal lines is to trade them in
trending markets from swing points. As markets trend, they create
horizontal levels as they ebb and flow, these levels are what I call
“swing points”, and we can find very high-probability trade setups by
watching for price action forming from these swing points in the market.
Look at the illustration below, note how the market is trending
higher and as it makes new highs it also creates resistance when it
falls away from these highs, then as it pulls back the previous high /
resistance actually turns into support (swing point). Thus, old
resistance becomes new support in an uptrend, and in a down trend old
support becomes new resistance, also known as swing points.
The way that we take advantage of these horizontal level swing points, is to watch for price action strategies
forming near them as the market pulls back. Look at the blue circles in
the illustration above, these are the swing points at which you want to
watch for obvious price action signals forming, then you are trading
from a confluent point of “value” within a trending market.
• Trading horizontal lines in range-bound markets with price action
Another excellent way to trade horizontal lines in the market is to
simply watch for price action setups forming near the boundaries of a
range-bound market. Unfortunately, markets do not always trend like we
want them to, instead, they often swing between support and resistance
in a trading range. Fortunately, trading with simple price action setups
allows us to trade in any market condition, so we can still find
high-probability trade setups even in range-bound market conditions.
In the illustration below we can see an example of what a range-bound
market might look like. When price is obviously bouncing back and forth
between a horizontal support and resistance level, we can wait for
price to hit one of the boundaries of the range and then watch for price
action signals forming there. This provides us with a very
high-probability entry scenario and a very simple trading strategy. It
also gives us obvious levels to define our risk and reward. Risk is
defined just beyond the trading range high or low from the boundary you
are entering near, and reward is defined near the opposite end of the
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