Price action: trading without indicators
What you learn in 3 minutesThis lesson shows how to find an entry from the shape of the chart itself, using recent highs and lows, rather than waiting for an indicator to give a signal. On EUR/USD near 1.0850, one pip on one standard lot is worth 10 units of the quote currency, so a 20 pip move on 0.10 lots is 20 x 0.10 x 10 = USD 20, which converts to KSh at the rate your broker shows. By the end you will be able to mark a level, wait for price to reach it, and calculate what the trade costs before you place it.
The same 20 pip entry, found two ways
| Step | Amount | Note |
|---|---|---|
| Chart level marked | 1.0850 | the upper edge of a range that price has already touched twice |
| Entry on the break | 1.0850 | price closes above the level, so the level becomes the entry |
| Stop below the range | 1.0830 | 20 pips below entry, under the nearest swing low |
| Position size | 0.10 lots | one tenth of a standard lot of EUR/USD |
| Value of one pip | USD 1 | 10 units of the quote currency x 0.10 lots |
| Risk on the trade | USD 20 | 20 pips x USD 1 per pip |
| Risk in shillings | KSh amount at your broker's USD rate | USD 20 converted at the rate quoted when you trade |
The broker may round the pip value, add a spread on entry, charge a commission, and use its own conversion rate. Those costs vary between brokers and change during the day, so check the contract specifications before you trade.
The mistake people make here
The common mistake is to wait for an indicator to confirm what the chart already shows, then enter late, after the move has gone. A second mistake is to place the stop at a round number that has nothing to do with the chart, such as exactly 20 pips away, when the nearest swing low sits somewhere else. Mark the level first, decide the stop from the structure, and only then work out the lot size that keeps the risk at a figure you can afford. If the structure gives you no clear level, there is no trade to take.Check yourself
Price breaks a range top at 1.0850 and you buy 0.20 lots with a stop 25 pips lower. What is the risk in USD, and what is one pip worth?
One pip on 0.20 lots is 10 x 0.20 = USD 2. Risk is 25 pips x USD 2 = USD 50, which converts to KSh at your broker's rate.
You want to risk USD 15 and your stop is 30 pips from entry. What lot size does that give, and how many pips is that per USD 1?
USD 15 divided by 30 pips is USD 0.50 per pip. Since one pip on a standard lot is USD 10, the size is 0.50 / 10 = 0.05 lots.