How To Trade The Obvious-A Real Trade Example

Hello Traders,

this post is about how to trade the obvious. For those of you who have downloaded the Ebook “The ultimate Guide To Price Action Trading” (if you have not, see the ebook image on the right side of this website??? enter your name and email address and get it) and have read it, you will understand what I am talking about here.

SO WHAT DOES TRADING THE OBVIOUS MEAN?

It simply means, you trade what you see. Still getting confused?

Ok, let me explain…

What things are so obvious on your charts? What things stand out or stick out? Can every trader see those things as well? If so,that’s obvious to everybody.

The two main obvious things where even a 4year old can see are Support and Resistance Levels on your chart.

They are so obvious and “stick out”  like bulls balls!

The thing is…

you don’t have to go looking for these levels, or trying to find these levels. You just open your chart and you can see them instantly!

Why?

Because they are so obvious.

So if they are so obvious…and you can see it, what do you think other traders all over the world are seeing? They are pretty much seeing the very same thing you are seeing.

So if they are seeing the same thing, the next question you need to ask is this: “How are they going to react?”

You see, almost all humans react to certain things in a predictive manner.

Let me give you A simple example…

If you are walking in a bush path and you see a poisonous snake and you shout “SNAKE!” and  jump to avoid getting bitten. Can you guess what the likely reaction of  your buddy right behind you will be?

You bet he is going to jump out of the way just like you did!

( I hate snakes by the way…I’d run for a spade, stick or a bush knife or stones…I’d rather see them dead than alive…Sorry snake lovers if you are reading this post!)

That’s why in trading, you see prices hit support levels and shoot up.

That’s why you see prices hit resistance levels and fall back down.

Now, does it work all the time? No. Levels will get broken and you should expect that.

SO HOW DO YOU TRADE THE OBVIOUS?

Well, for my case these are the steps and how I do it:

1. Identify the obvious “major/significant” levels by using monthly, weekly and daily timeframes.
2. Wait for price to reach those levels
3. Wait to see a “slowing down of momentum” and also as a result the formation of a reversal candlestick(s).
4. Alternatively, I can set a buy limit or sell limit pending order and place my stop loss like 20-50 pips away and wait for price hit that level and activate my pending order.

HERE’S A  REAL TRADE EXAMPLE ON EURGBP CURRENCY PAIR

This is what I saw on the weekly chart and saw that price was heading down to a significant support level. So I waited for price to hit that level.

And when it did, I entered in and this is what the trade looks like viewed from the weekly chart:

This is what the trade looks like when viewed from the daily chart:

This is what the trade looks like when viewed from the 4hr timeframe:(notice the downward momentum slowing down as price nears and hits the support level?)

This is what the trade looks like when seen in the 1hr timeframe:(notice the bullish reversal candlestick signals?)

Did you notice also that price did only move down 9 pips below the major support line and shot back up?

This is an example of how to trade the obvious.

TRADE UPDATE 7th Of Jan 2015

4 days later, this trade is still running. I’ve locked in 78 pips so far. This is the chart of the trade as can be seen from the 1hr chart.

Don’t forget to follow me on twitter and like on facebook (links on top right). Remember, to download the Free Ebook ” The Ultimate Price Action Trading Guide”.  Also like this post, tweet, email, share this post links with your network and circle of friends.

Happy new year 2015!