In trading, tools such as technical indicators are not always used. There are many trading systems, and the most popular of them is Price Action. In this method, traders work only according to candlestick patterns, models and configurations. The system is based on price indicators, as a result of which candlestick patterns are formed on the chart. With their help, you can determine financial risks, the direction of market movement and even future profit.
Candlestick trading is the basis of technical and graphical analysis. It does not matter what time range the trader uses, since all patterns work equally well on any timeframes. Experts have specially developed automated assistants for exchange speculators who can independently determine the pattern and give a signal. It is these indicators of patterns that will be discussed in this article. The reader will find out what tools exist for determining candlestick patterns, how to install them on a chart, and how to use them correctly.
Price Action Indicator Functions
This indicator is perfect not only for experienced traders, but also for beginners. Beginner traders have such a problem - they can not always see and define patterns on charts. The fact is that they simply do not have enough experience and, as they say, are not full of eyes. The more time a beginner devotes to trading, the more experienced he becomes and the better he can determine candlestick patterns on charts.
However, the advantage of this system is full automation. The trader, of course, must know the types of patterns, under what conditions and how to act, but he will not have to determine them independently, as the pattern indicator will do this for him. As a result, trading for the trader becomes the most comfortable and lightweight.
Three main indicators for determining candlestick patterns:
- MTF_IB_SCAN.
- MTF_PB_SCAN.
- MTF_OB_SCAN.
The first indicator can find the “Inner bar” reversal pattern on the chart. This is one of the most frequently repeated patterns that appears on the price chart. The second indicator helps to determine the "Pin-bar" pattern, which is a very strong signal for a reversal of market movement. The third indicator is on the chart and signals the trader about patterns of absorption, for example, such as “Bearish Absorption” or “Bullish Absorption”.
Instructions for installing indicators on MetaTrader
It’s best to set all three Price Action indicators on the chart at once, which will greatly facilitate the tasks for the trader to find patterns.
There is nothing complicated in the installation:
- Download the indicator from the selected source.
- Unpack to any convenient place.
- Go to the MetaTrader trading platform. Select, in the "File" tab, "Data Directory".
- Next, open the MQL4 folder with two clicks of the right mouse button on the computer mouse.
- Then go to the Indicators folder and use the mouse to drag the previously extracted indicator file. You can simply copy and paste.
Such actions must be repeated with each indicator.
Tool settings
The settings of the indicators considered in this article are very similar to each other and quite simple, which even a beginner can handle.
The main parameters of the indicator pattern:
- dist - you can select and adjust the distance between the squares in the table;
- oX, oY - indents in the information window are configured;
- barsback - you can set the number of candles to be analyzed;
- arrows - enable or disable signal arrows, and the arrowsize parameter - adjust their size;
- beararrow and bullarrow - color choice for arrows, for the downward and upward directions of the market;
- paintbar - setting on and off coloring patterns;
- bearishcol and bullishcol - color choice for patterns;
- alarm - sound signal when a candlestick pattern occurs;
- M5 - D1 and so on - the timeframe of the chart.
For beginners, it is recommended not to change the initial settings of the indicators and use them by default from the developers. In the future, of course, if desired and necessary, you can add something or, conversely, remove it.
Types of patterns
All patterns are divided into two main groups:
- Trend continuation models.
- U-turn patterns.
Although it seems that the groups are few, only two, but the models themselves, there are several hundred species. Professionals advise beginners to study at least a few dozen of the most common models, but you won’t even have to do with pattern indicators, as these tools independently find them on charts and give signals to traders.
The most common patterns must be known to every beginner.
Graphic Models
In addition to patterns in trading, there are combinations of models that form figures. For example, using the indicator of the Triangle pattern, you can determine such a combination on the chart in a timely manner. In addition, the figures of the "Triangles" are different:
- An upward triangle occurs during the growth of market movement.
- A downward triangle is formed when market quotes have a downward direction.
- The expanding triangle. Its feature is the gradual expansion of the price range.
- A tapering triangle, the movement is exactly the opposite.
And also on the graphs, other types of triangles are formed. How to work with this information? When the market is in any price range, forming a triangle, and Japanese candles break the triangle up, this means that an upward movement is forming in the market.
A similar situation, but only exactly the opposite, occurs in a downward movement. Candles break down the boundaries of the triangle, and quotes move in a downward direction. According to the same system, other types of triangles need to be analyzed. After the candles break through their borders, followed by mandatory confirmation, you need to open a deal in the direction the price is moving.
Reversal patterns
The "Inner bar" model refers to reversal patterns, its indicator is very easy to find on the chart and immediately signals this. It consists of two candles, and the first bar should be larger than the second, which, in turn, should not go beyond the borders of the first.
Such a pattern can be used in trading only after its complete formation and confirmation. It can not be attributed to strong signals, and therefore, professionals recommend using additional filters, which may be support / resistance levels or other technical indicators. For example, "Stochastic", "Parabolic", the indicator "Moving Averages" and other types.
Absorption models
The pattern indicator also helps to quickly identify uptake patterns. The most common on the market are Bullish and Bearish Takeover. These patterns consist of two candles.
- “Bullish Absorption” - the second candle completely covers the first from the bottom up.
- “Bearish absorption” - there is a complete overlap when the second candlestick absorbs the first one from top to bottom.
The first type of pattern tells the trader that there will be an uptrend in the market in the near future, in the second case - a downtrend. Most often, these models are formed at peak prices, as a result of which the market is turning around. But if patterns are found in the middle of the movement, then in such cases we should expect a continuation of the trend, which depends on the type of pattern.
Pin Bars
This model consists of only one candle. But it has its own characteristics: a very long tail (shadow), a small body of a candle. "Pin-bars" are in the bear and bull markets, and only at the very peak of movements. This is a very strong signal that does not need additional filters and refers to reversal patterns.
If a trader sees that a “Pin-bar” has formed on the chart, and at the very top of the market, then you can safely open a sale deal. The main thing is to wait until the signal is fully formed
Trading strategies
This trading system is based on the above indicators, from which the template is formed. It allows you to simultaneously monitor the formation of patterns on different timeframes. This is very convenient, since there is no need to jump from one time range to another.
A table will be displayed in the upper left corner of the price chart. Each timeframe that the trader chooses will have its own separate square in it. As soon as a signal arrives, that is, the window of the square lights up in green, you can decide whether to open or close a position. If desired, you can choose any color.
In addition, an arrow appears on the chart as a secondary signal. As a result, the trader does not need a large number of different technical indicators, you do not need to independently search for candlestick patterns on the chart. With the help of pattern indicators, everything happens in an automated mode, and the trader only needs to make a decision.
However, it is important to remember that no methodology guarantees 100% profitability results. The indicator-free trading strategy at Forex is based not only on patterns, but also on price levels. Therefore, one cannot completely trust the signals of indicators, it is necessary to analyze the state and mood of the market, the direction of the trend, its strength, speed and other indicators.
A trading strategy based on the Price Action system allows you to analyze the market without any technical tools and speeds up this process. Indicators are helpers, but they cannot make decisions for the trader.
Tips & Tricks
In conclusion, the article will present several tips and tricks from professionals. They will be useful for beginners.
- When choosing a trading tool for determining models, you need to pay attention to the indicator of candlestick patterns without redrawing. Such an indicator does not change signals under any market conditions, which is very convenient when analyzing and predicting movements.
- The simpler the tool, the better. Firstly, it does not require much time to install it on a chart, and secondly, its signals are most understandable.
- Before you start working on Price Action strategies, you must immediately determine the price levels and draw them using horizontal lines. In the future, support and resistance levels can be used as filters. And also with their help, you can determine how strong the signals are. The closer the patterns are to these levels, the clearer the situation on the chart becomes.
- For beginners, it is recommended to sketch or print a table of candlestick patterns and keep it in front of your eyes during trading.
In fact, as mentioned above, there are a lot of candle patterns, but you should not memorize them all. It is enough to simply install indicators on the chart that will themselves determine the candlestick patterns.