I just finished reading the book “Price Action Breakdown” by Laurentiu Damir published by Amazon in 2016. When I read a book I take notes of the important concepts that are expressed in the book and later I copy them to an electronic document for my reference in the future. This way of reading a book is a half way between reading and studying and it will allow you to have a quick reference in the future.
The book is quite short with just 103 pages and a good size font. This is a positive point for me as the author just goes directly to the key aspects of his method. There is little repetition in this book and the concepts are easy to understand as they are well explained with some charts to help on the explanations. Only a couple of times the explanation gets a bit confusing but nothing major.
The author explains his methods of trading the markets using only price action, which includes price, volume and the identification of what the author calls Value Area. The value area is similar to a channel in “standard” technical analysis. The author makes a great emphasis on analyzing the fluctuations of price around the high and the low of the value area, as well as in its mid-point, which the author calls the Control Price. There are no classic price patterns here being discussed, no flags, head and shoulders, cups, etc. Just plain support and resistance, volume and speed of market.
As per the analysis of the volume, the author looks for big price moves with big volume to identify new forces entering the market. These moves are called by the author Initiatives. These initiatives can signal new trends when they break one of the boundaries of the value area. In the book the author details the reasoning behind this believe and how to trade these kind of events. I will not disclose here the contents of the book as this is not the purpose of this review.
The book method can be applied to both swing traders and day traders as the author emphasises the use of multiple time frames and discusses how to use them depending on your trading strategy. Is it clear thought, that the method best applies to swing traders like the author himself.
There are a couple of good general takeaways that I would like to share with you and that applies to any trading system that you may use, not only to price action traders:
- Our goal as traders is to speculate market imbalance between supply and demand
- Technical analysis works when people trade in predictable patterns, not on erratic moves, like the ones caused by fundamental news
Overall I recommend this book. It’s fast and easy to read and it’s a good back-to-basics method that I’m sure will improve your trading.
I would like to finish this review with a personal thought that I had meanwhile I was reading the book. The author talks few times about the speed of the market which it is measured by the number of bars the market stays at a certain price level. While this is valid, and certainly is a way to gauge market speed, for day traders I think is better to use tick bar charts and an indicator like the Tape Speed to easily identify fast market moments in day trading. For swing traders this will not apply, as they normally are ok with few minutes or hours time charts but the use of the Tape Speed indicator is helpful for day traders.