Price Action Strategies

Overview

As a reminder, Alan's method is first and foremost price action. The box serves as a structure to create

Trading Opportunities

Targets and

Protection

The most important aspects are

Take only the best qualities setups

Focus on identifying follow through bars

Never fade a zone (ie, never sell a support zone, never buy a resistance zone); and

Use PVAC guidelines

The folloiwng pages go into the price action strategies that Alan has shared to take advantage of trading opportunities ("setups"), protections ("stops"), and targets (pattern and setup completions). are summarized in subsequent pages.

Bar Relationships

Price action is viewed by Alan in many ways, but to keep it simple, there are two areas of focus: bar relationships to nearby bars and larger pattern completions.

Very generally, bar relationship type patterns create shorter trading opportunities ("scalps") whereas the pattern completions allow for either pyramiding onto a trade, or holding a trade into the close of the day. This of course applies to trading from the 10-minute box.

As price moves across the box zones and angulars, the push-pull and emotional extremes can be exploited by the trader when viewed as territory gained or lost; proximity areas of protection or open areas of exposure; and pattern completion targets.

To lay the groundwork, this page presents a few ideas about how to approach the box through its components. However, Central to all the strategies, learning to identify quality follow-through (FT) bars is the most important concept, followed by Violations. FTs and Violations will over-ride, or at worst 'shade' the broadly general 'reads' of angulars, bars, and zones.

If you plan to use this method, your time would be well spent studying the FT bar concept.

Additionally, setups arise through the creation of obligations and return-side targets (VBTs, 2Z, Apex splitters, 123s, pattern completions).

Part1:
Early Read of Chart
Angulars
Zones

(this page)

Part2:
- Territory: Win it, Prove it, Lose it
- Follow through (FT ) bars
- Bands

Part 3:
- Bars1, 2, 8, 11
- VBTs
- 2Zeds
- Apex Splitters
- Fade4th of anything

Part 4:
- 123s
- Misc

Early Read of Chart

Once Chart1 is drawn, at 8.20am ET), quickly assess Bar1, and then, Bar2 characteristics using these guidelines:

Proximity of Bar1 to nearby angulars and horizontals

The placement Bar2

Above, below, or through the H, L, or Mid

If through the H, L, or Mid, this creates a 2Z possibility for Bar2

Above, below, or through a quartile

Example of an Early Read

Chart2 can also be used as an early read for Chart1

Angulars (image of Box parts)

The box exists only to draw angulars (meaning, angulars are the most important part of the box)

Trade short under Down Angulars, esp. above the 75% quartile

Trade long above Up Angulars, esp. below the 25% quartile

Price proximity of an angular when in a trade provides a price level for protection

The further from the angulars price goes, the more your trade is exposed and lacking protection.

Price riding the top of a down angular will be agonizingly slow.

Price surfing an up angular targets the end of the line plus one quartile

Price crossing the angular targets the exact end of the line

Price surfing under an angular, trade at the kisses.

Zones (image of Box parts)

To recap, there are four zones and two Apexes

Support (SZ)

Resistance (RZ)

Neutral (NZ)

Dead Zone (DZ)

Apexes (not technically zones, but the meeting point of various zones)

The "flag areas", ie, left and right of an apex where the zones meet, are closed-in, "boxing-in" price and thereby diminishing the potential for rewarding a position taken nearby. The best setups happen high up in a Resistance Zone and lower down in a Support Zone.

There are also areas of proximity protection, eg, a price line where a trader can put his stop and protect his position, such as a major angular.

The guidelines below are general. Bear in mind the previous caution that FT-bars in particular and many times Violations, will take precedence. Incorporate your study of FTs and Violations when using the Zone guidelines.

Support Zone

Long as low down in the SZ as price action allows
Longs on the right side of a SZ can use the up angular as protection.
Generally, do not initiate a short position in a SZ.
Bars that break a SZ to the right of an apex creates a VBT (Vacuum Back Targets), discussed below.
Bars that break a SZ on the left of an apex fall into an RZ and create a potential to short

Resistance Zone

Short as high up in the RZ as price action allows
Shorts on the right side of a RZ can use the up angular as protection.
Generally, do not initiate a long position in a RZ.
Bars that break a RZ the right of an apex create a VBTs (Vacuum Back Targets), discussed below.
Bars that break a RZ on the left of an apex rise into a SZ and create a potential to long

Dead Zone

As price goes into the Dead Zone, so it will go out of the DZ, ie,
- If it goes into the DZ with a down bias, it will eventually exit with a down bias, or
- If it goes into the DZ with a up bias, it will eventually exit with a up bias
Scalp trades countertrend to the entry into the DZ, ie,
- Scalp shorts high up in the RZ of the DZ, or
- Scalp longs low down in the SZ of the DZ
The maximum number of bars in a DZ is 23
Only the primary box (the box created by yesterdays H and L) has a Dead Zone. The zones in the extension boxes are generally treated as typical Support or Resistance.
Only Chart1 has a DZ, ie, Chart2 does not have a DZ

Image of DeadZone

Neutral Zone

Refrain from initiating a trade in the NZ until
- Long when price is low in the SZ of the NZ
- Short when price is high in the RZ of the NZ
Image of Neutral Zone

Apex

The two major Apexes are the outside boundaries of the DZ
Apexes, being the meeting point of six zones, provide protection left and right. This is what Alan calls a give-them-no-oxygen area.

Here are a couple of charts from Alan of ideas for trading zones.

Next: Price Action Strategies, Part2
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