Laurentiu Damir Price Action Breakdown PDF

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PriceActionBreakdown ExclusivePriceActionTradingApproach toFinancialMarkets byLaurentiuDamir

 Copyright©2016LaurentiuDamir AllRightsReserved. ThiseBookiscopyrightprotected.Nopartofthisbookmaybereproduced,distributed,soldortransmittedinanyformorbyan means,electronicormechanical,includingphotocopying,recording,oranyinformationstorageandretrievalsystem,withoutpr writtenpermissionoftheAuthor.Legalactionwillbepursuedifthisisbreached.  Disclaimer  Pleasenotethattheinformationcontainedwithinthisdocumentisforeducationalpurposesonly.Everyattempthasbeenmadet provideaccurate,uptodateandreliablecompleteinformation.Nowarrantiesofanykindareexpressedorimplied.Byreadingt document,thereaderagreesthatundernocircumstancesistheauthorresponsibleforanylosses,directorindirect,whichareincu asaresultoftheuseofinformationcontainedwithinthisdocument,including,butnotlimitedto,-errors,omissionsorinaccurac

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TABLEOFCONTENTS  ChapterOne–FairValueofPrice WhatIsTheFairValueArea? TradingVolume ExcessPrice ControlPrice InitiativeandResponsiveTrading ChapterTwo–ValueShifting MovingValue ConstructingtheBigPicture ValueHigh,LowandExcess ChapterThree–UseInTrading Rejection Framework TrendIdentificationandChange Support,Resistance,Rejection ChapterFour–PuttingItTogether Timeframes SupplyAndDemandKeyLevels

 WHYHAVEIWRITTENTHISBOOK? Ifyouarereadingthis,thereisagoodpossibilitythatyouhavereadmateria frommeinthepast.Iwroteanumberofshortbookssomeyearsagoexplaining mytradingideasandmethods.ThoseshorteBookshadquiteabitofsuccessa itturnedout.Oneofthemwasactuallybestsellerinitscategoryformorethan6 monthswiththeothersfollowingclosely.I,ofcourse,leftmyemailaddressfo readerstocontactme.Andthattheydid.Ithasbeenalmostfouryearswithou writing anything but the emails keep coming every day. The most popula requestIgetistowritemoreaboutpriceaction,topublishamaterialwhereto explain comprehensively the price action techniques I use to trade the markets with.Ithastakenmequitesometimeasyousee,tofollowuponthisrequest.  WHOISTHISBOOKFOR? This material assumes the reader has knowledge of basic functionalities o themarketormarketshewantstotrade.Thingslike“howtoopenupatrade” “how to switch between timeframes” on your trading platform, “how trading withleverageworks”,“whatisafuturescontract”,“whatstocksarebesttotrad and why” or “what is a forex pair and which are best to trade” will not b covered in this material. With minimal effort, you can find all this basic information freely on the internet and, to be honest, it will probably be bette organizedandexplainedthanmyversionofthesame.Iwillbefocusingsolely ontechnicalanalysiswithpriceactionalone.Ifyouhavereadoneofmybook before you are aware ofthe fact that I do not like to write just for thesake o writing. My writing style has always been to the point, without any trading storiesorredundantinformation.Thismighthavesomethingtodowiththefac thatEnglishisnotmynativelanguage,butthefeedbackIgetisthatthisconcise wayofwritingisaplus.Also,Idon’tliketellingstoriesandspeakingofftopic inmynativelanguageeither. All of this said, if you are at the very beginning with respect to trading, suggest you do some online searching and acquire basic knowledge of the market or markets you want to start trading. Familiarize yourself with your tradingplatformandthencomebacktoreadingthisbook.Aswell,thismateria isforpeople whoareactually ateasewith doingthehard workofbecoming a verygoodtrader.Thistypeofpersonhastobeofananalyticalnature,andbyno meanssuperficial.Beingprofitableconsistentlyintradingrequireshardwork.I youexpectsometypeofextraordinarysolutionthatwillmakeyourichovernigh

witha minimalamount ofeffortfrom yourpart then youwill bedisappointed Suchathingdoesnotexist.Ifyouwanttobecomeatoptraderyouneedtowork hardandbepassionateabouttrading.Thesooneryouunderstandthis,thebetter Youwillstopfishingforthemagicindicatororsomesortofautomatedprogram that will do all the trading for you and provide good returns. Instead, you wil begin to concentrate all your efforts on what really matters. Every movemen thatpricemakes,interpretingitandputtingittogethertohelpyoumakethebes tradingdecisionspossible. The trading style presented is highly discretionary, you definitely canno wrap it into an expert advisor or something of the sort. There is nothing mechanical in the way I trade. Every trade has its own particularities, you trained eye and experience will be the best tool you can have to make trading decisions.Isuggestthatyoutreattradinglikeabusinessanddothehardwork which is analyzing the price action on a daily basis. It is the only way if you want to become profitable consistently and eventually make a living out o trading. OnemorethingIwouldliketoaddhereconcernstimeframes.Youcanuse whatispresented inthisbookon anytimeframestartingfrom thefive minutes timeframeup.Ifyoupreferaswing tradingapproachto fityourbusy schedule you can use the one hour or four hour charts, if you have more time on you hands to dedicate to trading, you can use the thirty minutes charts or even the fifteen or five minutes zoomed out charts. I do not recommend trading a timeframelowerthanazoomedoutfiveminutesonebecauseitwillexposeyou to the daily trading noise and random movements, to the point where you tradingwillstarttoresemblegambling.  WHYSHOULDYOUREADIT? First of all, let me say that this book will be organized in chapters, each building on the next one. Every concept, technique, trading idea will be thoroughlyexplained.Thelogic behindit,whatpurposeit servesandhowyou can benefit from each concept or technique in actual trading will also be explained. I will use a lotof chart examples, and I do mean a lot, because th bestwaytolearnistovisualizewhatisbeingdiscussed. Asyousurelyhaveguessedfromthetitle,thisisabookaboutpriceaction about price movements, how to interpret them, how to put them together to formulatetradingideas.Thetypeoftradingyouwilllearnbyreadingthisbook applies to all financial markets. This is because I do not use any technica indicatorswhatsoeverorsomeothertypeoftoolsthatcanbesuitableforsome marketswhile,atthesametime,notapplicableinothers.Idonotuseasorto

marketdependenttechnicalanalysistechniquethatcanbemoreefficientinone market and less in another because of market particularities. If you have read somethingofmineinthepastyouknowthatIdonotrecommendusingtechnica indicatorsinyourtradingastheyareallconstructedonpastpriceactionthatyou can see with your naked eye on the chart. They are all lagging. The bes indicator you can have is your brain analyzing the raw price movements. This doesn’t necessarily mean that you cannot make some profits trading with indicators. However, my experience is that these profits will not be consistent Youwillwinsome,youwilllosesome,youwilllosesomemore,dependingon how the market is moving. If you are not completely new to trading and you havetriedoutsomeofthemostpopulartechnicalindicatorsyouprobablyknow whatImean. Thetypeoftradingthatwillbediscussedisbasedontheunderlyingforces thatmakethepriceofanyparticularfinancialinstrumentmoveupordown.Tha is supply and demand and crowd behavior. The techniques you will learn are basedsolelyonreadingthepriceactiononthenakedchartinfrontofyou,with themainpurposeofdiscoveringwhatarethebuyersandsellerdoing,andwha are they most likely to do next. The price movements on any financial marke haveonecommondenominator.Crowdbehavior.Thiscrowdconsistsofpeople whobuyandpeoplewhosell.Thesellingandbuyingprocessiswhatcreatesth pricemovementsyouseeonanychart.Thepeoplewhobuyandsellarecalled traders but, before being traders, they are people with emotions which alway exhibitthesametypeofpredictablebehaviorwhenengagingintheprocesseso buying and selling. This being said, you can use the methods learned here to tradeany electronicallytraded financialinstrument. Ifthat instrumentis traded by people like you and me, with all sorts of emotional behavior, it does no matter if it is the Stock market, the Forex market, Futures, Commodities Indices, Options, Bonds, CFD, ETF and so forth. It will work just as good in any of these because people’s fear or greed makes them act in predictable patterns. Therefore, one reason to read it, would be that it is about reading and interpreting the price action, thus making it effective in just about any marke youwanttotradein.Anotherreason,andperhapsthemostimportant,wouldbe the price action techniques themselves. If you have read about price action trading before you have probably seen discussions about candlesticks, abou candlestick wicksthat show rejection of a certain price area,about candlestick patterns like “hammer”, “morning star”, about price patterns, continuation o reversalones, like“doubletop”, “headandshoulders”, “flag”and soon.Well this book is nothing like that. I have covered this type of price action

techniquestouseforreadingthemarketsinsomeofmyotherbooksthatIhave written in the past. This book will be about core price action concepts and strategies, the type that you will not find very easily elsewhere, if at all. Th reasonIsaythisisthatallthepriceactionconceptsandtechniquesthatyouwil seeinthisbookaretheresultofmypersonaltradingexperience.I’vereadmany booksontradingovertheyears,I’vewatchedthemarketsdailyforalongtime Asaresultofthis,Ihavemanagedtotakesomegeneralconceptsabouttrading modify,test,tweakagainasmanytimesasittakesandapplythemsuccessfully in trading. It might be that someone, reading the same books as me over the years,might havearrived toroughly the sameoverall interpretations,and, asa consequence, developed a similar approach to trading. The odds of this ar howeververyslim.Youwillseewhywhenyouactuallygetintothecontentso thebook.  HOWWILLREADINGTHISIMPROVEYOURTRADING? Whatyouwillbereadingthroughoutthismaterialisnotaboutjustscratching thesurfaceofpriceactionanalysiswithcandlestickpatternsandpricepatterns liketriangles,flagsandhammercandlesticksatasupportorresistancelevel.A Isaid,Ihavecoveredthistypeofpriceactioninsomeofmyearlierbooks.Thi isnottosay,thattheaboveapproachisnoteffective.Itisactually,butthisbook willbecoveringamoreindepth,analyticaltypeofpriceaction,whichiseven morerewardingandreliableiflearnedandappliedcorrectly.Itisaboutwhatis generallyrecognizedaspurepriceactiontrading. Iflearnedand usedproperlyyouwill beabletosee themarketmovement with different eyes, it will give you a clear market structure that will enhance your decision making process. I am not the type of person who will use expressions like “holy grail” so I will refrain from this type of language to describethetradingmethodspresentedinthisbook.Iamgoingtoletyoudecide ofcourse,howmuchvaluethisbookaddstoyourtrading,afteryouhavereadi andputitintopractice. Youwillbeintroducedtoconceptslikefairpriceareas,valueofprice,price ofcontrol,theshiftingofvalue,supplyanddemandkeylevels,marketbalance andimbalance,responsiveandinitiativepricemovements,excessprice,finding thetrailofthelongtermtradersthatmovethemarketsandmanymore.Youwil be introduced to some new price action ideas that willmake you see the price movements in a more structured way, you will have a clear understanding o howpricebehavesandwhy.Iwillthengoonfurthertoshowhowyoucanuse thisnewlyfound knowledgein youractualtrading withlogicallyand carefully explained chart illustrations and commentaries. I will be moving further on to

providetradingideasandmethodsofincorporatingthenewconceptsinyourday todaytrading,intheformofacompletetradingplan,thatwilltakeyouthrough allthestagesofanalyzingthemarket,interpretingit,findingtradingsetupsand executingthem. Okay,IthinkIamdonewiththeintroductions.Itmightbewisetomoveon totheactualessenceofthebook,whichisthepriceactionyouwillbelearning. 

CHAPTERONE FAIRVALUEOFPRICE  Letmejustsaybrieflythatthepriceactionconceptsandideasthatyouwil findinthismaterialaresomewhatinspired,toanextent,fromthemarketprofile technique of analyzing the markets. I sayto an extent because it will go on to divergequiteabitfromthemarketprofilewayofstudyingthemarkets.Overthe yearsIdidquiteabitofresearchonthiswayofmarketstudyingbutIneverdid actually trade the markets using market profile. My impression was that i providedsolidideastobuildonbutitlackedpracticality.WhatIdidwastotake part of what I thought were solid concepts, added some of my own, and used themasasolidbasegroundtobuildon.Thefinaloutcomethatyouwillreadin thisbook has actuallyvery littleto dowith howmarket profiletechnique does withanalyzingthemarkets. Themarkets,attheiressence,werebuilttofacilitatetrading.Thepriceaction movementsonanychartonyourtradingplatformaretheresultofthisprimary objectiveofthemarket.Simplyput,whatyouseeonyourchartsistheresulto supply and demand principle. Otherwise said, if demand exceeds supply, the totaltradingvolumeofbuyersisgreaterthanthetotaltradingvolumeofsellers causingthepriceofanyparticularfinancialinstrumenttogoup.Conversely,i supplyexceedsdemand,thetotaltradingvolumeofsellersovercomesthatofthe buyer’s, causing the price to fall down. In the scenario where supply equal demand the price will not move in any direction, instead it will begin to accumulate or consolidate, and develop what I call a fair value of price, or an area where both buyers and sellers agree that the instrument or security i correctlypricedconsideringtheunderlyingfundamentals. 

Figure1:Marketphasesusedfortradingfacilitation

 Do not worry, as there will be plenty of full charts later on throughout the book when we discuss how to take advantage of what is presented, in actua trading.Thechartswillhavethenameofthefinancialinstrumentincause,along withthepriceand timeaxes.Atthis earlystage inthechapterthough,as Iam just beginning to explain how to recognize the market structure and the fai valueconcept,I willuse chartsliketheabove onewithoutany otherirrelevan information. The above chart illustrates how supply and demand translates into price movements.Thefirstupwardsmoveatthebeginningofthechart,accompanied bythatuparrow, istheresultofdemandexceedingsupplyforthissecurity.To putitinpracticalterms,thetotalvolumeofbuyorderswasgreaterthanthetota volumeofsellorders,whichiscausingthepricetomoveup.Regardlessofthei reasons,the sellersdid not havethe confidenceto enterinto the marketat tha time.Theyprobablyfeltthatthepriceofthissecurityisnotinaccordancewith their evaluation of the latest fundamental news and it should be priced higher Onlythentheywillenterthemarket,creatingasupply.Andtheydidthatinthe area marked with a rectangle. They entered the market increasing supply and

causing the price to stop its ascent, as a result. This area where the price i moving sideways, shows that the market has found a balance, the supply i matching demand. The market has met its purpose to facilitate trading between buyers and sellers. At this point, both buyers and sellers are in accordancethatthispriceareaisfairforthissecurityandneitherisinterestedin steppingintothemarkettopushthepricehigherorlower.Theyfeelcontentwith keepingthepriceinthatconfinedarea,withthebuyerssteppinginonlyasmuch asittakestokeepthepricefromfallingbelowthelowerboundaryofthisarea andthesellersenteringatthehigherboundaryofthearea,topushthepriceback inside. It is important for you to understand the following: the buyers and sellers thatI speakof andthat behaveinthis mannerare notindividuals likeyouand me.In any givenmarket, thereare twotypes oftraders, short termtraders and longtermtraders.Theshorttermtradersaremainlyretailindividualtraderslike you,meandmanyothers.Shorttermtraderslikeusengageintradingwithone thinginmind.Tospeculatethemarket.Wemaketradingdecisionsbasedonthe short term timeframes, we do not really care about the weekly or the monthly trend.Wedonotmaketradingdecisionsbasedontheunderlyingfundamentals of a stock or foreign exchange pair. Some of us read the news, avoid trading when important news come out, some even try to trade the news. We use th newsinaspeculativeway,weavoidtradingwhentheyarereleasedbut,Ithinki issafetosaythattheimpactfundamentalnewshasonourtradingstopshere.We donotmaketradingdecisionsbasedonthenews.Theonlythingwearereally interestedinisturnaprofitfromspeculatingmarketimbalance.Andwedothis byanalyzingthemarketfromatechnicalpointofview,inthehopeoffindinga solidtradingopportunity.Wewaitpatientlyfortheopportunitytopresentitself weactonittomakeasmallprofithopefully,exitandrepeattheprocess.Why shouldwecaremuchabouttheoverallhealthofonemarketoranother?Wedo notkeep openpositionsfor ayear,it doesn’t mattertosmall individualtraders like you and me that the Euro currency might collapse in three months fo example.Sowhat?Itdoesn’taffectmytradingatallyouwouldsay.Idon’thave anylongterminvestmentsintheEuro.Idon’tcareiftheEurofallsornot,Iwil not beaffecteddirectly in anyway. My jobis to takeadvantage of themarke movementsthatthisfallwillgenerate.IwillbetradingtheEURUSDinandou as many times as I can without giving it a single thought to the euro’s overal health compared to the other currencies and all the economic implications tha willresultfromthis.  And then there is the long term trader. And he does care about the euro’s health.Hehasopenlongtermpositionsontheeuro.He,thislongtermtrader,i

actuallyaninvestmentfundwithlargeamountsofcapitalathisdisposal.Heis looking...