How to enter a trade in the direction of the Dominant or Primary Trend by combining all price action tools?
- Identify the primary trend’s direction – Here the primary trend is down
- Wait for a retracement or consolidation within the current trend, look for chart patterns – Here in the above image, after continuing prior downtrend Triple Top Chart pattern is formed, which indicates an indecisiveness in the trend or a pause in the trend. A triple top chart pattern is s bearish reversal chart pattern.
- On breakout of the chart pattern, Confirm the chart pattern’s neckline break with a bearish reversal or continuation candlestick pattern. – Here a three-black crow, bearish reversal candlestick pattern is formed that confirms the selling pressure to continue in confluence with the breakdown of the triple top chart pattern.
- Now Combining all the above analogies we get to know the conviction of the trade is on the sell-side and should initiate the trade accordingly with position sizing.
- Confirm this price action trading setup with your indicators, for e.g using RSI, Moving averages and OBV in confluence will give you how long the trend may continue and so as you can et your targets.
- Targets and stop loss for any trading setup can be set according to Fibonacci extension levels, ATR, Market structure-based (HH-HL, LH_LL), percentage-based, Chart Patterns based targets, prior swing Highs or Lows, and trendlines in case the asset is trading at new highs or lows.