Learn a price action trading strategy based on momentum loss shown through candle sizes and shapes. Identify key levels of support and resistance to spot high probability reversal trades. Look for smaller candles approaching key levels as it shows that price is losing momentum. Avoid candles showing gaining momentum as it approaches key levels. Look for a candle color change at support or resistance which can signal a possible trend change. Be cautious when seeing large candles approaching support or resistance levels. Good price action reversals reject support or resistance levels with smaller candles and shapes.

The Momentum Loss Price Action Trading Strategy: A Guide for Traders
Introduction

In this video, we will be discussing a powerful price action trading strategy that can revolutionize the way you trade. This strategy is based on the concept of momentum loss, which is reflected in candle sizes and shapes. Using this technique, traders can spot high-probability reversal trades and take advantage of them.

Identifying Key Levels of Support and Resistance

To implement this strategy, it is essential to first identify key levels of support and resistance. These levels are areas where price has previously hit and reversed, making them significant points on the charts. Once these levels are identified, traders can begin looking for price action signals that indicate a potential reversal.

The Importance of Momentum Loss

When approaching key levels, it is crucial to observe how the candles behave. Specifically, traders should look for candles that are getting smaller and smaller as they approach a level of support or resistance. This decrease in candle size indicates that price is losing momentum, which is a vital signal for traders.

The Candle Patterns to Look Out For

Let’s take a look at some examples to illustrate this further. Suppose we have the Kiwi Dollar, and we identify a level of support. As price approaches this level, we can observe a sequence of candles getting smaller and smaller until there is a small green doji candle that acts as an inside bar, which signals a powerful reversal trade opportunity.

Similarly, when price approaches a level of resistance, we want to see a sequence of candles getting smaller and smaller as price approaches the level. These smaller candles indicate that sellers are losing steam and that momentum is decreasing.

Pro Tip: The Color of Candles Can Signal a Possible Trend Change

A pro-tip for identifying key levels of support and resistance is to observe the color of candles. Look for a candle color change at support or resistance, which can signal a possible trend change. For instance, as price moves upwards, notice all the green candles. Then, watch as a red bearish candle appears right at resistance, followed by a reversal in price.

Examples of Price Action to Avoid

While momentum loss is a significant signal for traders, it is equally important to avoid specific candle patterns that indicate a gain of momentum. For instance, small candles followed by massive engulfing candles show a gain in momentum that traders should be wary of.

Conclusion

This strategy focuses on reading price action and identifying key levels of support and resistance. By spotting momentum loss using candle sizes and shapes, traders can take advantage of high-probability reversal trades. With careful observation of candle patterns, traders can discern the difference between a good reversal and a bad reversal.

So, if you are a trader looking to improve your strategy and boost your profitability, give this approach a try. Remember, trading should not be hard if you know what you’re looking for.

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