Best Price Action Patterns For Day Trading Strategies In 2016

Lots of beginners are confused with price action patterns and looking for the ones or searching what price action is and its definition seems more complex than you’d ever think.

Price action contains almost every single price action pattern, fore-more candlestick patterns like pinbars, enguilfing and others.

When I started as a beginner look for tradable patterns I used Google to study each other of them. After few days I became more confused than smarter so I decide to stop searching and aim on the ones which makes sense to me.

As a day trader I simply left all candlesticks patterns. Pinbar on D1 or H4 is much more stronger than on 1M or 5M timeframe so it was the main, logically reason.

Price action patterns most tradable for day trading strategies

Role reversal

In my last article I showed up the power of this pattern and main advantages like simplicity, robust and high frequency of potential entries. This one is also included in higher timeframes as part of common moves of market. While market moves long, corrections are necessary for growing price and those corrections are usually filling previous gaps of long momentum bars.

How it does look? Check screenshot bellow:

Role reversal pattern

Role reversal pattern

Main advantages:

  • High frequency of entries
  • Pattern is naturally created while price moves in trending market
  • Small stop loss
  • Adding trend lines supports and increases win probability

Specifically logic pattern. RR has pre-defined entry zones. Combination of support and resistance levels, trendlines, pivots or crossovers of moving average may significantly increase final probability.

Disadvantages

  • Price rises or falls quicker than the pattern is „complete“ – usually happening in strong momentum trends.

Triangle

One of the easiest and most profitable patterns. Easy to draw, easy to trade.

Everyone knows the power of this simple pattern but most of people overlook triangle due to prejudices that the triangle could not work.

People are learnt to ignore easy and logic things and instead of using logic things, they need to complicate everything.

The most easy and profitable strategies contain easy patterns you already know. Looking and adding unnecessary indicators or rules you create so much complicated system that is not tradable at all.

triangle price action pattern

triangle price action pattern

Advantages:

  • After breakout price rallyes and offers lots of ticks
  • Easy way how to put stop loss
  • It happens usually 2-3 times a day in day trading
  • High RRR

Recommondation

Add volume indicator (I know, indicators were not recommended by me until now) but you can see how many contracts are taken during momentum candlesticks and it could be helpful.

2b reversal

We all know situations when price made its high and falls down while tries to break up the high of days. It repeats over and over again on daily base. Once you handle this pattern properly, high frequency of potential entries are on. Do not trade 2b reversal without any backtests on historical data or demo.

In day trading, once price creates specific day-high there is high probability that market will try to break up the high and move higher. BUT it usually fails and price moves back in opposite direction. Does it seem like a known scenario? I guess it does.

loading…

How to trade 2b reversal?

Firstly we need to determine trend direction clearly, then find and mark day-high/low and wait for next scenario – break up or move back – in moving back we need to being focused as professional snipers and wait until price fills up entry requirements.

2b reversal price action pattern

2b reversal price action pattern

2b reversal price action pattern

2b reversal price action pattern

Last one

2b reversal price action pattern

2b reversal price action pattern

As you can see, I usually wait for breakout of trendline as signal – then I put my trigger.

Advantages:

  • Easy to trade
  • Nice profits
  • Quick move to B/E
  • Great for newbies
  • High RRR

Recommendation:

Pattern has higher probability while it creates in daily high. It’s required! Combination with trendlines makes more sense and brings logical view into.

Breakouts with high RRR

Breakouts are favorite patterns to people who likes strong momentum that may bring lots of ticks in really short time. There are two ways how to properly trade breakouts and I suggest you detailed test of both.

First one is entering once price break local area with strong (usually enguilfing) candlestick that symbolize strong momentum – an ideal enviroment for trading.

More times touched bounds significantly supports the break.

Breakout pattern

Breakout pattern

Advantages:

  • It usually happens after some news
  • Pre-defined SL
  • High RRR

Recommondation:

You must be extremely patient. The need of being in trade or boredom during looking into charts for hours and timing the perfect trade is really hard. Do some backtest and find out when breakouts are creating the most.

Trading is not hard thing if you keep it stupid simple.