Strategy – Trading with Price Action Volume

In this article lets look at Strategy – Trading with Price Action Volume methods.

Table of Contents

• Strategy – Trading with Price Action Volume
• Principles behind Setup Locations
• Fading Weakness
• PRICE ACTION VOLUME (PAV) Trading Setups
• Setup Definition

Strategy – Trading with Price Action Volume

• We have prepared our Battlefield.
• We have conducted our Market Analysis and defined our Structural Framework and the Trend that moves within that framework.
• We have established a bias for the likely Future Trend Direction
• Now it’s time to find and manage the trade opportunity within this market action
• High Probability, Low Risk Trade Opportunity.
• In this article, will examine the YSTC’s “Trading with Price Action Volume” Strategy.

Principles behind Setup Locations

• The way to profit on a consistent basis is through finding those opportunities where there is a higher probability of a sufficient number of traders making trading decisions, which will lead to net order flow in a particular direction, and then acting to trade with this order flow.
• We’ve seen that individual trader decisions are usually unpredictable, leading to no or minimal edge in the markets. However at times of stress they become much more predictable.
• Our trading approach therefore needs to be based on this fundamental understanding of how to profit from the markets:
  • We identify areas at which sufficient numbers of traders will be experiencing stress, and will make trading decisions to relieve them of that stress, and then act before or with them in order to profit from the resultant order flow.
• That is the basis behind our strategy and setups.

Key Points behind Setup Locations:

• Find the areas on a chart where other traders will make trading decisions and you’ve got yourself an edge.

• Enter at or before the change of net order flow and you’ve got a great opportunity to profit (provided you manage the trade well).

• The most important factor in looking for your trade opportunities is… maintaining a good awareness of the structure of the market and the likely future trend direction.

• Trading is not about objective analysis.

  • It’s about identifying weakness in the market and then having the confidence to get in at a wholesale level fading that weakness.
  • It’s about actively managing that trade, in order to maximize opportunity if you are proven right and minimize risk if you are proven wrong.

Fading Weakness

Identify Weakness

• Previously in Volume 3 we already showed you how to identify weakness. We now use the same analysis concept to identify our areas of trade opportunity.
• We look for weakness in several key areas – around S/R (HTF S/R, range TTF S/R, key swing LTF H/L) & at pullbacks in a trend. The below picture shows 4 areas.
  1. Traders trying to catch a trend reversal, entering against a trend on a weak pullback, are taking very low probability trades. The pullback is most likely to fail, leading to continuation of the trend.
  2. Traders entering into a breakout which shows weakness are taking very low probability trades. The breakout is likely to fail.
  3. Traders entering in the direction of weakness, right into an area of S/R, are taking very low probability trades. The push into this region is most likely to fail.
  4. Traders fading a breakout, which shows weakness on its first pullback, are taking very low probability trades. The breakout pullback is likely to fail, leading to continuation in the breakout direction.

Fading Weakness Chart example

In the above chart after the break of the support Short Position were entered thinking that its a breakout (Breakdown). But suddenly there was bullish pressure next candle. Why, because the traders who short didn’t see the bigger picture.

As you can see it was a bigger support zone. Also it was uptrend Pullback to that support zone that is why uptrend continued and those entered shorts will exit once their SL hits so more added fuel to bullish pressure.

PRICE ACTION VOLUME (PAV) Trading Setups

• Opportunity is found at S/R levels (higher timeframe S/R, range S/R, swing H/L) and on pullbacks within a trend. It is identified in these areas by weakness within the price action, trapping other traders into low probability positions.
• Let’s start by looking in detail at each of the setup types, and then following that up with which of these setups we look for in each particular market environment.
• Don’t worry about
• Entry &
• Exit yet –
• Just identify the locations for the trade setups**.**

Setup Definition

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In the next article will start with TST Setup.