To be completely honest, I did not begin with price action. I am a firm believer of positivity. But I went in the wrong direction with it. I thought indicators were the easiest to use and that I could only trade with them, even when experts say that basic price action knowledge is required. I believe that any strategy only provides us with 40-60%. So why should I bother learning about price action? Right?! And why high probability trading strategies?
A simple moving average crossover strategy can be used to indicate both the stop loss and the target. If the trade fails, it exits early. If it’s correct, we’ll make a lot of money. That sounded like a straightforward strategy with strict money management guidelines.
Indicators proved to be extremely powerful and profitable. But I was never confident when I took a loss. I wanted to change the strategy. I kept trying new strategies, but nothing gave me confidence.
Then I began watching a lot of videos on YouTube and discovered that price action works the best and that I could easily understand price movement. Now I use very simple price action strategies with complete confidence, and I don’t feel anxious even if I lose.
You will not be sorry if you learn price action. You gain confidence in your trades and become more profitable. That emotional state is what we require as traders and as humans. We don’t want to be tense, frustrated, anxious, and so on all the time. We could have gotten a full-time job if we had wanted to do that.
And here are my top 3 high probability trading strategies that I use !!
Price action
There are numerous price action concepts available.
But first, I’ll go over the fundamentals of market direction. As we all know, the market only moves in three directions. Upward, downward, or sideways movement.
When the market moves sideways or within a particular price range, it is referred to as a consolidation / range / sideways market. It simply means that no one has decided on a price yet. When it breaks through that value and moves in any direction, we can say that the trend has been reversed or simply continued, depending on the direction.
And when the price is trending, there is always a pullback. The price moves in a zigzag pattern. For example, price rises 10 points, then falls 2 points, then rises 5 points, then falls 3 points.
And if it moves in the opposite direction and breaks through the previous pullback, it indicates that the price has reversed.
These are the fundamental concepts that we will use to make money in the market.
Price action strategies
The strategies that we’ll see here are
- Tight consolidation breakout
- Gap filling strategy
- Market structure strategy
You can use these strategies in any market depending on market conditions, but I’ll share which markets I use them in.
Backtest the strategies before implementing them in live trading.
Consolidation breakout strategy
I use this strategy for swing trading equities.
It gives me at least 10% per trade because price breaking out a long period of consolidation usually results in huge returns.
I wouldn’t short the equity market with this strategy when I am swing trading, as it is not allowed in some markets.
But if you can, feel free to backtest the strategy and use it for shorting the stocks.
Time frame used – 1 day
BUY STRATEGY
My buy strategy goes like this
Stock selection
Stocks based on high-volume and bullish breakout,
Entry
1.Price breaks a tight consolidation range / multiple touch points of support or resistance
2.Gives a pullback,
3.Forms a bullish candle after pullback.
Stop loss
1 ATR – pullback price,
Target
1.4 or higher * stop loss / next level of support & resistance ( whichever is nearby as well as follows my risk reward ratio. ).
SELL STRATEGY
Stock selection
Stocks based on high-volume and bearish breakout,
Entry
1.Price breaks a tight consolidation range / multiple touch points of support or resistance
2.Gives a pullback,
3.Forms a bearish candle after pullback.
Stop loss
1 ATR + pullback price,
Target
1.4 or higher * stop loss / next level of support & resistance ( whichever is nearby as well as follows my risk reward ratio. ).
Gap filling strategy
I use this strategy for day trading index options. You can also use this in any segment that is bound to give you gap ups or gap downs frequently.
As far as I have seen banknifty index gives atleast 5 gaps per month and it achieves minimum 1:1+ risk reward ratio.
This strategy has a high win rate because the price almost always closes the gap when it begins to do so.
Time frame used – 5 minutes
BUY STRATEGY
My buy strategy goes like this
Stock selection
Bank nifty option CE premium selected based on open interest and capital required.
Entry
1.Price starts filling the previous gap and moves up
2.Entry is near support or resistance
3.Forms a bullish candle.
Stop loss
1* ATR – entry price,
Target
1 or higher * stop loss / next level of support & resistance ( whichever is nearby as well as follows my risk reward ratio. ).
SELL STRATEGY
Stock selection
Bank nifty option PE premium selected based on open interest and capital required.
Entry
1.Price starts filling the previous gap and moves down
2.Entry is near support or resistance
3.Forms a bearish candle
Stop loss
1 ATR + pullback price,
Target
1 or higher * stop loss / next level of support & resistance ( whichever is nearby as well as follows my risk reward ratio. ).
Market structure strategy
I use this strategy for equities, crypto, options etc. This is the basic price action strategy that works on any segment / time frame/ asset.
This is similar to consolidation breakout strategy but the difference is that here you can enter a trade if you miss the range breakout or pullback when the price is trending.
It is not recommended to enter after two or three pullbacks unless the next support and resistance are far away from your entry point. Because it has the potential to reverse and move in the opposite direction.
BUY STRATEGY
My buy strategy goes like this
Time frame used
Any
Stock selection
Stocks based on high-volume and bullish breakout or a single asset
Entry
1.Price breaks the higher high after consolidation range / multiple touch points of support or resistance
2.Gives a pullback,
3.Forms a bullish candle after pullback.
Stop loss
1 ATR – pullback price,
Target
1.4 or higher * stop loss / next level of support & resistance ( whichever is nearby as well as follows my risk reward ratio. ).
SELL STRATEGY
Time frame
Any
Stock selection
Stocks based on high-volume and bearish breakout or a single asset
Entry
1.Price breaks the previous lower low after consolidation range / multiple touch points of support or resistance
2.Gives a pullback,
3.Forms a bullish candle after pullback.
Stop loss
1 ATR + pullback price,
Target
1.4 or higher * stop loss / next level of support & resistance ( whichever is nearby as well as follows my risk reward ratio. ).
These are the high probability setups I am currently using. To increase your chances of success, you can combine two or more of these strategies or add one to your existing ones.
* However, whatever strategy you choose and wherever you learn it, backtest it on 100 trades, either manually or automatically, demo trade it a few times, and then begin using it in the live market.
*Resources
These are the resources that influenced me to develop my strategy based on my preferences.
About Post Author
Resources & Links
Tradingview – Charting Platform
Zerodha – Trading brokerage platform (India)
Disclaimer
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