This is probably the easiest part of price action and bar counting although the whole process gets easier with practice. This may sound like child’s play and a statement of the obvious but you will be surprised at how often people will forget these simple facts. One of the biggest questions I get asked is, which way is it a market going? By doing a simple exercise you can see which way that price is going and decide on your trading plan and more importantly timing of a trade.
What do I mean by timing? A Short or Bearish Bias Change occurs when the following sequence develops. LH The bias change is confirmed when price moves below the las lower low made as highlighted on the chart. After a bias change has been seen and confirmed, one of the phases that the market can then take is to start trending either up or down depending on the bias change previously. In the chart below we can see what price ideally looks like when price action is trending up and trending down. Now this is where the chart can become interesting. By using the price action counting of the swing highs and lows we can know at a very early stage IF price is going to start to develop range bound activity.
Price is not making new highs OR new lows on the move. If price stays contained within the last swing high and swing low to be made, price will remain range bound until it makes news move highs or lows. Price confirms the range when a lower high and a higher low is made within the previous swing high and low. LL’s all the way to the first blue arrow which in real time would be the latest lowest low. Price then moves higher to make a HH. These two swing levels have been highlighted.
That price could be creating a pullback or bias change and as the chart unfolds for you a new high or low could be made voiding the potential range. There are several definitions of a range one of the more common ones is that you are looking for a double touch of support and resistance. For me this is a little too late in the game as price may not create the double touchas in the example above. In the below images we can see the price action pattern variation and compare them to the outlined price action pattern above. There are currently 0 users and 0 guests online.