Simple Price Action Strategy – Easy Money! $$$$$

Here is one of my favourite setups that is easy to learn and trade. I’ve heard it called many things over the years and know that many successful traders watch for this pattern to play out as it has a high win rate. Whatever you want to call it, it’s worth studying and adding to your playbook.

What’s actually happening in this pattern?
-A low is formed. Long entries have stops below the low providing a pocket of liquidity.
-As price returns to the area these stops are hunted and the liquidity is taken. Early breakout traders will short and become trapped. A base has now been formed.
-Price returns to the base and retests it as support.
-Price bounces back to swing high.

How do we trade it?
-The first thing we want to look for is a swing low (1) followed by a swing high (2). We can then mark out a potential range.
-Next, we want price to return to the swing low and either trade briefly below the range (a deviation) or just quickly wick below (sweeping the lows), and then price should return to the range. This area is shown as 3.
-Bids can now be placed at the range low. The setup is invalidated if price trades lower than 3, so stops should be somewhere under the low at 3.
-Targets should be set at the swing high (2).
-This also works for shorts – just flip everything upside down.

You can see this pattern on all timeframes and it presents a lot of opportunities once you know what to look for.

Happy Trading.