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Setup Price Action in Various Market Conditions: A Practical Guide

Price action is one of the popular approaches in forex trading that can be applied in various market conditions, as long as the formed bars have sufficient validity.

In this article, we will review several examples of applying price action to different currencies and commodities, as well as how to identify bar formations and the right timing for entry.

  1. 1. Example on EUR/USD: Pin Bar and Counter Trend

On the 4-hour EUR/USD chart, a valid pin bar formed on August 6, 2010. The level of 1.3333 is a strong key level, and the pin bar formed near this resistance level, indicating a potential trend reversal. With a valid pin bar formation and confirmed bearish momentum, a sell entry can be executed with an appropriate stop loss level.

  1. 2. Example on AUD/JPY: Inside Bar/Pin Bar in Ranging Conditions

On the daily AUD/JPY chart, the market condition appears to be ranging with clear resistance and support levels. An inside bar formed around the resistance level, followed by a pin bar formation indicating potential trend continuation (downtrend). A sell entry can be made after the pin bar formation, with the target profit at the support level.

  1. 3. Example on AUD/USD: Fakey Bar, Counter Trend, and Pin Bar

On the AUD/USD chart, a fakey bar formation is evident, indicating potential counter-trend movement after rejection at the resistance level. This is followed by a pin bar formation confirming the sell signal. Although not clearly confirmed on the daily timeframe yet, a sell entry can be executed with an appropriate stop loss level.

  1. 4. Example on NZD/USD: Successful and Failed Pin Bar

There are two pin bar formations on the NZD/USD chart. The first pin bar successfully signals a sell after rejection at the resistance level. However, the second pin bar fails to indicate trend continuation, showing that not all bar formations always work well.

  1. 5. Example on USD/CAD: Successful and Failed Pin Bar in Sideways Market

On the ranging USD/CAD chart, a pin bar is seen successfully indicating a buy signal. However, another pin bar fails to indicate trend continuation, emphasizing the need for caution in interpreting bar formations in ranging market conditions.

  1. 6. Example on XAU/USD (Gold): Successful and Failed Pin Bar in Sideways Market

On the XAU/USD chart, there is a pin bar formation successfully indicating a sell signal after rejection at the resistance level. However, there is also a pin bar formation that fails to indicate a buy signal, highlighting the importance of careful analysis and selection of trading setups.

Price action formations can occur in various market conditions and on various currencies and commodities. However, not all bar formations always generate valid trading signals. It is important for traders to conduct careful analysis and pay attention to the risk/reward ratio according to their trading plan. With a good understanding of price action, traders can improve the accuracy of their trading decisions.

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