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Understanding Price Action: Practical Analysis of the 5-Minute Time Frame by Bob Volman

By smilingsynic on 2015 Mar 11 Wed 18:45

Summary

The book addresses Forex exclusively. While he claims that the methods “are applicable to all markets,” I disagree. Markets have some general similarities, but they also have prominent differences. I think his methods would work on the S&P, but they almost certainly work better on Forex which I don’t trade. I nevertheless recommend this book for a serious trader’s library, although not as heartily as I had originally thought.


Book Information

Understanding Price Action: Practical Analysis of the 5-Minute Time Frame
Written by Bob Volman
Light Tower Publishing, 2014.

Useful
Original
Readable

Review

Bob Volman’s Forex Price Action Scalping, which was published in 2011 and reviewed here by me last year, impressed me as one of clearest, most coherent trading books I have ever read. That book addressed short-term scalping on a 70-tick chart. His follow-up, Understanding Price Action, focuses on longer-term trading, “longer” meaning five minutes.

In terms of pages this book is also much longer. Question is, does longer necessarily mean better?

For the five-minute chart he recommends a 25 ema and trades with a 1:2 risk/reward ratio (10 tick stop, 20 tick target). He uses no other indicators, unless one considers round numbers in Forex as indicators.

Compared to his first book, this book goes deeper into his philosophy of price action. He devotes two lengthy chapters to the concept, one on theory and one on practice. There is little groundbreaking in this part—basic variations of support and resistance, coils, flags, and breakouts. The strength in these chapters is in the clarity of his writing. Many trading books are plagued with cloudy prose that is as thick as tapioca pudding (for examples, see Al Brooks’s early books and articles). To his credit, Volman make the concepts make sense. To advanced traders, though, these chapters offer little new.

He defines and provides examples of his four trade setups: pattern break, pattern break/pullback, pattern break that uses inside bars for entry, and pattern break/reversal. I don’t want to give everything away here for free, since I do think Volman’s book is purchasing, but I also think an experienced trader can pretty much guess what the trade setups are just by the way they are phrased (if price plows through resistance, and price pulls back, then maybe there may be a potential trade coming, no?).

I see a lot of potential application with those who use Lawrence Chan’s price levels or use my five-minute flip.

Like in his previous book, he preaches using real stops, not mental ones.

Something new here is his day-by-day intraday analysis over six months, complete with brief comments regarding trade setups. I was looking forward to this section,since I think providing ample examples reflects good teaching. I was a little disappointed, however. Often he passes on trades, without giving a full justification as to why. “Skip this trade.” “Let this go.” Maybe so, but why?

The book addresses Forex exclusively. While he claims that the methods “are applicable to all markets,” I disagree. Markets have some general similarities, but they also have prominent differences. I think his methods would work on the S&P, but they almost certainly work better on Forex which I don’t trade. I nevertheless recommend this book for a serious trader’s library, although not as heartily as I had originally thought.

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