Trendline Mastery - How To Identify Momentum Change

Trendlines are a tool that help a trader to find a high probability setup. According to price action rules, after price breaks the trendline, attempt to create a new extreme in the previous trend's direction.
Overshoot happens in the direction of a trend. Overshoot indicates oversold or overbought market condition. During this stage price will most often than not break the trendline or even reverse the entire trend. Therefore traders should avoid taking trades of trendline as it may be just a trap in the middle of reversal.
This video highlights one of the best scalping strategies that can be used in day trading. Whether you are trading forex, crypto or indices, this Scalping strategy will work incredibly well. This Scalping Strategy also works on any time frame and can turn into long term position holding.
Price action describes the characteristics of a security’s price movements. This movement is quite often analyzed with respect to price changes in the recent past. In simple terms, price action is a trading technique that allows a trader to read the market and make subjective trading decisions based on the recent and actual price movements, rather than relying solely on technical indicators.
The only people who know where the market is heading are institutions. They are the ones who make the market move and our job as a retail traders is to follow their footsteps and get the piece of their movement. As a price action traders we need to find the most profitable ways to enter trades. The highest probability setups are 2nd entries at the key entry points.
2000 tick chart
S&P 500 ES Futures
21 bar EMA
Date August 5 2022
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[@tomaszfiejtek4809]

Hey, my name is Thomas....THANK YOU SO MUCH for spending so much time going through charts candle by candle and explaining some things. YOU are the only person I´ve stumbled upon till now who explains it so clearly

[@williamsm6500]

You have no idea how much I appreciate your videos. After 2 years trading and loosing money, watching your videos, have just lighted me up about what is actually going on 🌹❤️

[@tonyt6240]

Good explanation of the Overshooting concept. Overshoot has bothered me for some times. Thank you for clearing the mystery .

[@DeltaScalper]

I don't remember what I had for lunch yesterday and you remember trades from weeks ago , impressive .

[@ThomasWade]

Haha, just years of practice I assume. I have been starring at ES for so many years you will build the memory. But you don't really need the memory. I know a trader who is trading more contracts than me and he doesn't remember anything from the past. Important is to focus on current day.

[@animax7112]

All of the yt channel I watched about trading this is the only CHANNEL that i learned a LOT!!!! THANKS A LOT to you WADE THOMAS YOUR A LEGEND!!!!!!!!

[@ThomasWade]

🙏

[@daryadil8035]

Best channel on price action. Thank you very much.

[@joelmattsson-boze3266]

Great video on overshoots. Very helpful

[@marshkid1]

Tricky day. Thanks for explaining the overshoot to reversal possibilities.

[@traderchick6560]

Thanks so much Thomas. I did a chart review for a friend of mine (trying to get her to go the price action route) and figured some of that information on overshoots but your in-depth analysis is way better and helps me lock the information in my head!

[@ChompskyChompChomp]

Nice! That was fast! Thanks for posting this!

[@bobbysinks6085]

Excellent presentation ......... you have a new subscriber .......thank you

[@ajaychoudhary4487]

thomas greetings from india . your videos are pure gold . extremely helpful . thanks a lot . please keep sharing your knowledge

[@jimmyn1357]

Lots of golden nuggets thanks Tom

[@andyj256]

Thank you for the great detail chart review on Friday

[@dante075]

I don't know how many times I will write this! But I will write it again mate;Thank you so much! Especially for releasing me from chackles indicators.Which bloured my eyes so many years! Good bless you bro..

[@ThomasWade]

It is truly amazing to be just focusing on pure price action and understand what market is doing.

[@arunmrajan6004]

I am trying to study the price action technique by viewing the videos again and again...Thanks a lot....😊

[@derrickjoul]

Thanks Thomas I think you just became a hero in my Forex comic book I had been making quite a few losses but after watching and rewatching your videos for a while I dub u legendary, thanks alot. Am definately going to refer u to my friends... Cheers

[@themiracle8100]

GREAT

[@mylaivenkatesh4849]

excellent

[@janbawaingade303]

Thanks for sharing knowledge sir! Love from India!

[@jasonalmeida4356]

Excellent info . Thanks Thomas !

[@kamallalchandani6891]

Very helpful

[@geoshanallen]

Thanks so much Wade your videos are helping me realize quasimodo patterns in the trend reversal and avoid needless entries and how to spot the right ones. Great Work keep Rocking!!

[@boonleeglobal]

Brilliant

[@grishasquortsoff5296]

Just Brilliant

[@kennylim471]

thank you for sharing your thoughts on overshoot structure. i was also thinking about this after seeing live how the market moved. To avoid hindsight bias i would set more objective rules to decide whether it's a genuine overshoot or not during live. (genuine meaning price will tend not to break & make new extreme). Rules around: i) drawing trendline (3-point confirmation), labelled "0% line", ii) drawing trend channel (highest/lowest point between 1st and 3rd point), labelled "100% line"; iii) drawing the "200% line", another channel line with equal channel width (to that between 0% line and 100% line); So far i've seen genuine overshoots when price hit the 200% line or more. thank you

[@Goditsthetruth]

another great one. thank you!

[@achrafmekkioui4930]

thank you mr thomas

[@kendallsworldofcrafts]

Your videos are so clear to understand. I watch your videos everyday and have subscribed. My only issue now is actually jumping in on a trade when I see a set-up. I talked myself out of a promising trade today that would've hit my goal for the day. But at least I'm starting to understand. There's always Monday :)

[@ThomasWade]

It definitely takes time to see it live and get used to to pull the trigger. No rush. It is a process and skill like anything else.

[@samgk1435]

Today was confusing for me. Everytime there was a break of trend (after overshoot) i was still looking for price to move to a new extreme. For that reason it was hard to decide when i should switch biases from uptrend to downtrend. On some trends the overshoot was exactly the previous channel width (same as the midline 50%). Which also confused me if the trend was still in play. Very nice to see your explaination, clears things up.

[@ThomasWade]

I was also looking for new high for a long time. This doesn't happen often but today was a good learning experience what can overshoot create sometimes.

[@tomdertom3073]

Very clean, thank you

[@hemantburman]

Hi Wade bro , there is slight adjustment in the theory ..there are multiple scenarios i think as i hv watched & traded over smtime now, break of trendline = either a new extreme or a 78.6 to 90 % or equal to the last extreme , all these are MTRs in any case say it HL MTR or double bottom MTR , break of a trendline or a channel may implicate all of these scenarios. I hv seen in ur previous videos as well there was HL MTR ( Major Trend reversal ) and u were looking for shorts 2nd entry whereas the trend has already reversed and shooting higher at least .5 % of the previous leg downtrend. Content and knowledge has been awesome , its a real privilege to go through such knowledge and content . Thanks for sharing to us .

[@ThomasWade]

🙏

[@user-bq5jr8qh6n]

Great. Thank you💜

[@recstormTV]

Thank you! :)

[@JW-ke9ed]

Thomas Wade, thank you for so generously sharing your price action knowledge. Do you have a video explaining in more detail the High/Low (HL) and Low/High (LH) markers on your entry points? Thanks again!

[@ThomasWade]

Higher lows and lower highs are confirmation setups. Meaning they have to confirm something. 1) Second entry 2) Failed breakout 3) Failed second entry 4) Support and resistance bounce HL and LH are additional confirmations. Sometimes when we are not sure about the second entry or failed breakout we can wait for the market to confirm the momentum and enter after confirmation. HL and LH should form close to EMA preferably, once they move too far we generally tend to wait unless the trend is healthy and strong. Signal bars should be good. I would say that we don't look for HL LH at first, only when second entry for example is not forming so great and it looks sketchy, we can wait and see if HL LH will confirm it and give better entry.

[@JW-ke9ed]

@@ThomasWade Hi. Thank you for taking the time to answer my question. I am so happy to come across your price action trading strategy. One of the hardest parts of trading, there are many, is having trades go against me as soon as I enter. Following your rules and entering trades at the key entry points with my stop one tick beyond the signal bar is a game changer for me and has reduced my anxiety significantly. I can't thank you enough. I have been paper trading your strategy since February with one contract of MNQ. I consistently win 2-3 10 point trades each session and my stop loss is usually less than 10 points. Even if I take one or two losses, I usually still come out ahead or at worse flat for the day. I plan to start live trading in May. Thanks again and all the best to you.

[@aadarshmishra5276]

Genuine!!

[@martinmcghee8165]

At 4:10 would you have taken the F2ES entry TW? Thanks again for these great videos on PAT

[@ThomasWade]

Had it formed above EMA, yes. But it didn't form.

[@martinmcghee8165]

@@ThomasWade Perfect! Understood 😀

[@deoriginalrudeboi]

Ty❤

[@aakashdeepsingh7106]

In your first entry long setup you have skipped the trade because of the doji signal bar and prices were below the 21 ema. Then after two bars you have a big bullish signal bar that surpassed the high of the previous bearish doji bar but the next bar after the signal bar is a bearish inside bar so where you entered the market? When the bullish signal surpassed the high of the bearish doji means the signal bar became the entry bar itself or after the break of bearish inside bar and if you opted for the latter entry doesn't it violate the strategy rules and the second entry long should be skipped?

[@ThomasWade]

Entry would have been after trigger above bearish inside bar. That setup was very good setup context wise after actually second entry and visual two legged pullback chances are very high market will go higher. I also marked from context perspective. Next time you will have trigger there you can enter.

[@aakashdeepsingh7106]

@@ThomasWade thanks for clearing my doubt.

[@koonsickgreen6272]

on Jan 4th 2024, emini S&P, the EXACT same thing happened between 10am - 12 pm central time. The Overshoot and Sell off ... (not the usual new extreme ). Check it out guys~

[@dilippatel7833]

Thanksgiving 👍

[@hemantburman]

Here also at 8.17 u r looking fr a short then u say mrkt went into conso , whereas immediately after tht triple top where u were looking to short there is HL MTR nd its a mega reversal . Hope u gt my point . Once mrkt has done 2 leg move to the down there is no point as an Intra Trader to look for shorts . Marekt may have reached 100 to 125 ADR targets for the day ....only thing tht remain is either trap or sideways or an reversal to .5 or max .61 of the last leg down or the entire leg down .

[@hemantburman]

Mailed you

[@assassinhitman]

Do you believe and practice smart money concepts, order blocks, supply and demand, fair value gaps, Elliot waves, and Wyckoff?

[@ThomasWade]

I don't. I prefer pure price action.

[@A4grayghost]

amazig what are you trading and what time frame are you using?

[@ThomasWade]

I trade ES, SP500. 2000 tick chart, similar to one minute.

[@MOUTHonesixtyseven]

would you say it's acceptable to chart in this way on a 1 hr chart for instance, do the same sort of rules still apply or are they different with this being a 1 min time frame? Thanks, Thomas!

[@ThomasWade]

Price action is universal however some charts work better than others. Personally I would not recommend hourly charts. Either smaller ones 1-5 minutes or higher daily-weekly.

[@zenoo514]

Hello Thomas , so if i understand well at 4:15 , overshoot create a reversal and new trend in the opposite direction only 80 or 90% of the time and the rest of the time it still do a new extreme ? Interesting because i often find my self wondering if i should still excpect a new extreme or just a straight up reversal. Thanks for your video , a little relaxed Saturday night with a couple of staropramen in tribute to you ;)

[@ThomasWade]

Yes, generally even after overshoot we still expect new extreme. Especially if the trend is large. It is all about following price action, we never want to jump the gun. Sometimes it can reverse the trend. When you have big trend, correction which has overshoot, sometimes correction may not get new extreme because overshoot combined with big trend may create trend resumption.

[@zenoo514]

@@ThomasWade Perfect Thank you

[@dheerajtiwari2376]

I am the first one who comments...😃

[@ThomasWade]

You must have notifications on :D

[@matthewchoo6578]

Hey Thomas, before I ask my question I just wanted to say I really appreciate you taking the time in your videos to explain PA. I've been finding it really useful and you truly are a rare find. At around 16:59 you say that we should enter at 2EL or F2ES, annotated on the chart. However, couldn't the first green bar that closed above the EMA be your 2EL or F2ES? (which would have resulted in a losing trade) or is that not counted because price didn''t make lower lows on the failed short attempts? I hope my question makes sense - it's hard without annotating the bars myself but I can't post an image in my comment unfortunately. PS: I might just be reading it wrong because I'm still learning your PA rules.

[@ThomasWade]

Hello Matthew, you mentioned the first green bar. Which first bar are you referring to? At that time around 16:59? That was just 1EL but it was never stopped out, you keep SL one tick below the signal bar.

[@matthewchoo6578]

@@ThomasWade Hey Thomas, I'm referring to the first green bar that closes above the EMA after the break of the shortened uptrend 11 bars before your first 2EL. I'm trying to understand why that bar wasn't considered a 2EL either. Is it because price broke the shortened uptrend?

[@ThomasWade]

@@matthewchoo6578 Please sent me screenshot with marked bar to [e-mail] so we can see what are we talking about.

[@Chartacus_]

TW, at 9:47 in the video you mention having a second entry high. At this point, all I see is higher highs with no lower high (even though we see a lower low there). Is this a nuanced perspective here or do you have a hard rule that defines the second leg here? fyi, So valuable getting a deep perspective into the day we all just traded. Thanks as always for sharing.

[@ThomasWade]

I read your comment many times but I don't really understand the question :) Are you asking about the 2EL below EMA, two legged pullback? Or are you talking about the 2EL where I didn't have trigger at the time.

[@Chartacus_]

@@ThomasWade Sorry Thomas, it's hard when referencing time in a video on a time chart but thanks for taking the time. Ill try to clarify but if this doesn't make sense immediately feel free to move on. if you call the high bar in the swing high just before 8:40 on the chart, bar 1, the first entry long starts on bar 6 (which is also your signal bar for the FEL). The next 6 bars all make new highs which I thought would mean these were all part of a single first entry long. Is a lower high not necessary for a second entry long pattern?

[@gamingwithdad4564]

Is an overshoot similar to a range having a failed breakout? The FBO typicaly carries momentum with it that usually breaks out the opposite side. I often hear ranges are just flat trend channels.

[@ThomasWade]

You can look at it that way. But I wouldn't complicate it. Overshoot is for channels and breakouts for ranges. But the basis is the same.

[@gamingwithdad4564]

@@ThomasWade Thanks, have a great weekend. Keep the great content coming!

[@sureshshrestha3757]

May know EMA day to apply chart like 50 or 20 sir?

[@ThomasWade]

21 bar EMA.

[@iheanyianyaogu8056]

What is the ema period and the timeframe of this analysis

[@ThomasWade]

21 EMA and 2000 tick chart.

[@TR-hv3yx]

What time frame do you trade Thomas ?

[@ThomasWade]

I trade 2000 tick chart.

[@sanjaylodha6459]

are you a millionaire?

[@golammostafa307]

Thank you Sir! Pls adv which time frame you used to draw trendline in the charts. Rgds

[@ThomasWade]

I trade 2000 tick chart, similar to one minute chart.

[@golammostafa307]

Thanks Thomas. Can it be used for stock trading for other time frames like 01 hr, 01 day or week!

[@ThomasWade]

@@golammostafa307 Yes but high probability setups take time to develop so you may be waiting very long time for a good setup. For this reason I trade smaller timeframes

[@ssejjdelorenz3152]

Halo Thomas, what EMA was on this chart and is it Multi-timeframe?

[@ThomasWade]

21 bar EMA. It is 2000 tick chart.

[@bpcfgaming-trading]

When you refer to a larger Channel could that also mean on a larger time frame?

[@ThomasWade]

Possibly. But I mainly focus on one timeframe.

[@cyberfam996]

This rare occurrence happened twice today on $SPY lol

[@dhondiramnalapure9037]

Hi Thomas sir, This set up will works in 5 minutes charts in Indian stocks market ?

[@ThomasWade]

Price action works on all markets and timeframes. 5 minute chart is good. You can also check 1 minute. Anything between 1-5 min are great. Make sure the instrument you are trading is liquid enough.

[@dhondiramnalapure9037]

@@ThomasWade thanks for your valable help sir

[@helarry6169]

Hi Thomas, am a beginner and I have question from your former video.. Please, is second entries and two legged pull back based on trendline rule concept?

[@ThomasWade]

Hi, I wouldn't say that. Second entry is just a setup to enter on at the trendline or EMA. It is a form of a pullback. We combine it with the trendline to make it high probability setup.

[@helarry6169]

@@ThomasWade thanks so much, but what I mean, according to trend line rule "when there is a break out, new extreme will be formed before reversal"... For instance for an uptrend, the breakout is first entry short failure and the reversal is second entry short success. But if the second entry short is a failure, now the first and second entry short is now a two legged pullback. Am I correct with this?

[@ThomasWade]

@@helarry6169 I believe you are counting it the wrong way. If you have uptrend, breakout and new extreme. If you want to take reversal it would be failed second entry long. You are counting shorts. Counting for 2ES in uptrend is OK because it could fail and form F2ES. But breakout of the trendline is not considered first entry short.

[@helarry6169]

@@ThomasWade Thanks so much. Just watched your video on how to count legs, it was really an eye opening. Tnx sir!

[@CosmicClip]

What if instead of an overshoot on an uptrend it creates an undershoot? Where it breaks the lower trend line instead of the top. Is this still a point where you should be careful about going long? Great video btw!

[@ThomasWade]

That is called normal break of the channel. In that case we follow trendline rule and expect new extreme after break.

[@CosmicClip]

@@ThomasWade Ahh i see, tysm

[@riteshsurana8497]

Pls suggest a book for Price action trading

[@ThomasWade]

Pats Manual from Mack. PATS trading channel is solid manual to start.

[@matiascramer1978]

u do zoom or youtube live analysis and trading?

[@ThomasWade]

I don't.

[@rajeshkumar-vn9vi]

it is workin all market pls beacause i checked in nifty 50 in india i cant this

[@ThomasWade]

Indian markets seem more choppy with less volume so I am not a fan of those.

[@kboys5448]

what timeframe you are using?..new subscriber here😁

[@LI-dv2ub]

2k ticks chart

[@ThomasWade]

I am using 2000 tick chart.

[@khorshidtabande9083]

hi may i ask you what is you platform

[@ThomasWade]

Hi, I use Ninjatrader.

[@turtletoes7499]

I did so bad today. I was positive the first 30 mins and after sitting for a while and skipping some of the 2nd entry’s Cuase my trend lines I started to force entry and then I was still looking for new high of the big trend and I just started to be down bad and I ended mad. 💀

[@DeltaScalper]

If you have rithmic , try setting up a max daily loss to preserve capital .

[@ThomasWade]

I feel you. I also expected new high. But for that reason we need to follow price action. There was no push above EMA with F2ES so we have to adapt.

[@turtletoes7499]

@@ThomasWade yeah after the three touches down and having a nice trendline down I knew it was a downtrend but there was no entry near the key points after that and just started sinking hard. Was so hard to not feel like I was just missing the whole market

[@hugocampfire790]

Why don't you use volume to confirm PA?

[@ThomasWade]

I have been trading pure price action basically my entire trading career. If it helps you then by all means. Personally I just don't have the need. If it ain't broken don't fix it. I believe if you learn to read the pure price action you can do very well.

[@levont.husser153]

What time frame?

[@ThomasWade]

I trade 2000 tick chart. 1-5 min are great too.

[@levont.husser153]

@ThomasWade Thank you. I'm learning options. Trying to master it. Awesome channel

[@kedarpandya200]

Hey Thomas! I started trading on 1 minute chart as I don't have access to tick charts. My stoplosses, which I usually place 3-4 ticks below the entry candle, seem to always get hit. I know stoploss are a part of trading but still wanted your advice on what should I keep as my stoploss for minute chart?

[@natandotan9950]

Move to tick chart ASAP

[@Blooding]

Use the closest swing high/low but you got to identify the trend/momentum and get an early entry, ATR or R/R.

[@traderchick6560]

From what I learned if you're doing 1-min charts, you need to go for the bigger swings. Go to a 15-min chart to determine your support and resistance zones. Then switch to the 1-min chart and trade from one zone to the other with proper candlestick patterns placing your stops right before the zones and counter trendlines in case price turns around.

[@kedarpandya200]

@@traderchick6560 sure would try that👍

[@ThomasWade]

I believe I answered your other ocmment right now but stoploss is always 1 tick below signal bar when going long and 1 tick above the signal bar when going short.

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How can I reach your trader? I want to grow my portfolio.

[@ersoydede6561]

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[@professor7329]

This youtube channel has really saved me through all this chaotic market.

[@erricyeh8446]

Not every trader provide's good & working trading signals like Anthony Pompliano, I mean it. 💯