The Jjrvat’s Price Action Trading Strategy:
A price action trading approach isn’t as specific as a setup or strategy.
But it’s much more useful because it offers market perspectives that will empower you to make your strategy.
In this article, you’ll learn about a scalp trading approach imparted by jjrvat on an elite trader, a popular trading form back in 2008.
Bear in mind that we are discussing an approach and not a rigid setup. You can design the setup parameters yourself once you appreciate the ideas underlying this strategy.
After understanding the jjrats concept, you will have clarity in the difference between:
- Trading an indicator
- Using an indicator to trade price action
Now, let’s dive into the core approach.
• The basic idea here is to have a slow-moving average to define the market’s macro direction.
• use a fast-moving average to help define price wave
• Once you perceive clear higher highs and higher lows (or lower lows and lower highs), you can determine a bullish or bearish market structure.
• From that point, try to enter the market on a pullback.
Trading Rules – JJRVAT’S PRICE ACTION TRADING STRATEGY
The following rules are not set in stone. Adapt them to your trading profile.
Here, the exact parameters are secondary. Consistency is the key.
•A 240-period weighted moving average (WMA) for highlighting the macro direction.
•A 21-period hull moving average (SMA) is used for clarifying price waves with its slope.
The SMA is a simple moving average that works very well for tracking price swings.
The WMA is a weighted moving average that works well for long term moving averages.
Rules for a Long Trade
- The 240-period WMA is sloping up.
- The 21-period SMA highlights higher highs and higher lows.
- Wait for the SMA to start pulling back downwards.
- Go long when the price closes above the SMA.
However, if the pullback goes below the last swing low (forming a lower low), the setup becomes invalid.
Rules for a Short Trade
- The 240-period WMA is slop is down.
- The 21-period SMA highlights lower highs and lower lows.
- Wait for the SMA to start pulling back upwards.
- Go short when the price closes below the SMA.
However, if the pullback rises above the last swing high (forming a higher high), the setup becomes invalid.
These rules offer a frame of work for your analysis. But feel free to override them if you have valid reasons to do so. In a nutshell, exercise your discretion as a trader.
Trading Examples – JJRVAT’S PRICE ACTION TRADING STRATEGY
Example 1: 5-minute Time Frame
This is an intraday trading example.
- The WMA(blue) was sloping down and pointed to a bearish trend.
- The changing slope of the SMA highlighted a set of the lower swing low and lower swing high. It confirmed the bearish market.
- The SMA alerted us to the next pullback here.
- This bar closed below the SMA and triggered a short trade.
- Now, let’s focus on this bearish pin a bar. If you look beyond the SMA and concentrate on the price action, this bar made a minor higher high. It broke the market structure we needed. However, the bearish pin bar also signaled that the market rejected the bullish attempt.
Example 2: 4-hour Time Frame
The candlestick chart below shows the daily prices.
For easy visual analysis, the WMA and SMA change their colors according to their slopes.
- Here, the WMA was sloping downwards, indicating a bearish macro trend.
- Using the waves highlighted by the SMA, we could discern clear lower highs and lower lows. This swing structure supported a downtrend.
- During the pullback that followed, a short setup presented itself as price closed below the SMA.
Holding the position until the end of the downswing led to solid profits.
Example 3: Losing Trade
This is a daily chart.
- The blue wma highlighted the positive slope, implying a bullish trend.
- The thick blue lines highlighted the higher highs and higher lows, as defined by the sma.
- During the subsequent pullback, prices closed above the sma, and we went long.
After stalling for a day, the market reversed abruptly into a sideways trend.
Let’s see if we can figure out why this trade failed.
We saw higher highs and higher lows. There were indeed higher highs if we were trading the indicator: SMA.
But, recall that this is a price-based approach, and the SMA only serves to highlight, but not define, the market structure.
If you look beyond the indicator colors to focus on price action, you’ll find that most of the candlesticks overlapped with the nearly flat SMA. It was a sign that the SMA’s slope was not reliable for clarifying price waves at that point.
Hence, a trading range was likely; a market structure supporting a long trade was weakened.
Example 4: Long Term (Weekly Time Frame)
Price action methods are versatile. We should keep our minds open about their applications.
Although this method was first introduced for day trading, it is also interesting to apply it for timing long-term investments (if you are so inclined).
The chart below shows the monthly candlesticks from the spy, us market elf.
- Many investors hold a long bias when they consider the market with a long-term horizon. If that is the case for you, you can remove the wma as it adds little value to that premise.
- This means that we are looking out for a bullish market structure before considering a long-term position.
- These are possible long entries from since then.
The price waves are smooth and nice in this example. You can track them easily.
But as each candlestick represents a month, the patient is the key challenge.
Conclusion – JJRVAT’S PRICE ACTION TRADING STRATEGY:
In this blog, we have seen the implication of the jjrvat price action trading strategy. one should focus on developing his trading strategy as every human has different psychosocial behaviors.
What works for one, may not work for another person to share market trading. From this blog, you can get an idea about how a trading system looks like its various component like short-term and long-term trend analysis, entry, and stop-loss places.
Other than the technical aspect of trading one cannot ignore the importance of proper risk management and the correct mindset.
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