Live Price Action Trade Setup – Nikkei 225 | Aug 30
Now that I’ve moved, am settling down and almost have my new office setup, I’ve been a little more actively trading the markets. I wanted to share with you a live price action trade setup on the Nikkei 225 I opened on the 27th and closed early on the 28th.
The setup was actually a counter-trend setup. As a general rule, counter-trend setups have two consistent characteristics;
1) They are often a lesser probability setup (being pre-dominantly against the trend, thus against the order flow)
2) They often turn around faster (as with trend players will often step up to buy/sell on the cheap, trading with the trend)
Keep the above in mind as I show you this live trade setup.
Looking at the chart above, you can see where I entered and exited the market via the green arrows. These are the actual entry and exit points from my brokers chart, showing how I traded this live trade setup.
Any quick glance to the daily chart on the Nikkei 225 can see it’s currently in a medium term bull trend, hence making this a counter-trend trade setup.
Now if counter-trend trades are a) generally lesser probability setups, and b) often turn faster than with trend trade setups, why did I take this trade?
General Structures of Trends
Before we get into the price action behind this setup, it should be known all trends have pullbacks in them. The more volatile the trend is, the larger those pullbacks will be.
(For a good article on trend volatility, transitions and trading with the trend, click on the link)
Although I prefer to trade with trend as much as possible, I’ll trade both sides of the market when opportunities arise. If there is a good counter-trend setup I can consistently make money on, I’ll buy or sell that setup every time.
Maybe I will not win this time, but over 100 or 1000 trades, I’ll make money on that, thus giving me an edge. This is why you have to be trading and thinking in probabilities. Hence there is no reason to fear counter-trend trades – they just take practice and the proper skill set.
The PA Behind This Trade Setup
If you look at the chart below, you’ll see two horizontal support lines. The lower one is the major support area while the upper one a short term support level in the pullback structure.
The peak you see in the middle of the chart is the highest swing point from this most recent up-leg. The sell-off that manifests from here occurs over 12hrs before hitting the first support line and finding buyers.
You’ll notice from this first pullback the next up-leg fails to make new highs. In fact, it makes an LH (lower high) also forming a pin bar rejection just below the prior swing highs.
A slightly lower high by itself doesn’t mean the trend will end, but how the price action behaves after can hint to the next short term direction, along with the current order flow strength behind the with trend players.
The next pullback heads right to the same support line, once again finding buyers. However, notice how it forms another LH along with a larger pin bar rejection. This shows from an order flow perspective the bulls are less able to maintain the current trend strength.
The next bounce off this short term support level is followed up with 6 more bear closes. That + the inability to close above the dynamic resistance and 20 EMA suggest bears are taking over short term. The smart money bulls are likely mostly gone at this point, waiting for a deeper pullback before adding new longs.
This is where I am sensing a short term trade opportunity. Technically there already were a few others, but this is what’s available to me now.
My Trade Idea & Setup
Sensing the bulls were likely going to lose the short term support, I noticed a price action squeeze and pre-breakout structure. I actually wrote about this ahead of time in my members commentary intimating the short term breakdown was likely to happen and offer a good trade setup.
My read suggested once the level folded a 3rd time, I could get short targeting the next major support level around 15365. I entered at 15480 with a 30 point stop (15510), gunning for 15365 initially, but would hold the position if I felt I could get more downside out of it.
I went to bed within minutes feeling confident about my execution, entry and trade idea.
Shortly after pulling the trigger, price mostly consolidated around my entry level, forming 3 out of 4 lower wick highs, also hinting the bear pressure was increasing. By the 4th candle, bears closed below the support level.
Notice how the next 3 follow up candles all showed large upper wicks right at the level, both confirming the entry level and short term control from the bears.
When I woke up, I saw the following 5 minute chart below.
With the price action hitting the anticipated support level, breaking below it, then forming a false break and closing above it, I decided it was time to get out as I suspected bulls were coming back in pre-US open.
This ended up being the right play as price bounced 3x off the anticipated support level closing near my entry.
After you account for the spread, I profited +95 points profit with a 30 point stop for +3.16.
Generally trading counter-trend will be a lower probability event, and you have to be ready to take profit quicker than usual.
This is because with trend players will be quicker to jump in and push back against your trade. However with the right price action context, we can often exploit these opportunities and trade both sides of the market.
I’ll confess trading counter-trend is not my soup-de-jour as I’d rather trade with trend as much as possible. But when the opportunities are there, I’ll pull the trigger on that trade setup every time.
It should be noted trading counter-trend takes a lot more confidence and price action skill to execute consistently.
Hence make sure your skill set, confidence and ability to read price action in real time is well established before trading counter-trend on a regular basis.
One way to build that skill set up is to do live forward simulation trading in Forex Tester 2, where you can execute hundreds of simulation trades in a matter of hours.
(For those wanting to get a discount on Forex Tester 2, click on the link)
It is important to note I wasn’t trading some price action pattern alone, like a pin bar, engulfing bar or any 1-2 bar pattern. Nor was I only trading from higher time frames in isolation. I was using a combination of higher and lower time frames, from the daily, 4hr, + the intra-day 1hr and 5 minute charts.
With all these, I was reading the price action context in real time, finding key support and resistance levels, and taking advantage of the market structure.
Had you been only waiting for a 1-2 bar pattern, you would have missed this trade completely.
Lastly, I wasn’t waiting around for days to make a good +3.16R profit. There is no reason why you should be waiting around for days on end to find good +3R setups. These happen all the time which you can spot with the right training.
The methods I used are the exact same I teach in my price action course, where I share various trade setups, daily market commentary, private member webinars, and more.
Want More? My private members get all my trade ideas & market commentary up to 3x per week. Click here to become a member.
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