Price Action Setups / Price action in forex trading

The inside bar or candlestick

The inside bar is a good indicator that the trend will continue. It therefore hints that a brief period of consolidation is occurring before a breakout in the direction of the prevailing trend. This signal will be stronger on a daily chart. On the below chart, you can see the formation of an inside bar after a strong pin bar signal which precedes a change in the trend. Furthermore, this inside bar provides a strong signal that the trend will continue as it manifests itself at the same time as a 50% retracement.

Daily USD/JPY chart

The pin bar / doji

Pin bars have a very high accuracy rate in trending markets, especially when they occur at significant confluence levels such as support and resistance levels. Pin bars may be taken against the trend if they are well defined and if they significantly exceed the surrounding price bars.

In the sample illustration below, you can see pin bars occuring within a trending market. Each time, prices have reached or exceeded the following resistance.

Daily GBP/JPY chart

The "fakey" / false break of a support or resistance level

A fakey configuration indicates a significant failure and therefore a probable trend reversal of the forex market. The fakey consists of a false break of an inside bar pattern or a significant price level. It will often consist of a bullish or bearish engulfing completely containded within the range of a doji (pin bar), thereby leading to a false break.

Daily EUR/USD chart

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