17.07.2025
Section 1: The Prop Trader's Dilemma & The Power of Simplicity
Let’s set a scene that might feel painfully familiar. It’s 10:30 AM, an hour into the New York session. The market is moving, you can feel it. But you’re frozen. Your screen looks less like a trading station and more like the command console of a spaceship designed by a committee. You have three different moving averages, a MACD, an RSI that’s hovering near overbought (but what does that even mean in a strong trend?), and a set of Bollinger Bands that are currently constricting. One indicator says buy, another says wait, and a third gave you a sell signal twenty minutes ago that you now regret ignoring.
Your prop firm evaluation dashboard is burning in the corner of your eye. The profit target seems a million miles away, but the daily drawdown limit feels terrifyingly close. Every tick against your last losing trade echoes in your mind. You’re caught in a state of pure analysis paralysis. The clock is ticking, not just on the trading session, but on your evaluation period. The market is speaking, but the cacophony of your indicators is drowning it out. You’re not trading; you’re just guessing with extra steps.
This, right here, is the prop trader's dilemma. We operate in an environment of immense pressure and unforgiving rules. We’re given access to significant capital on the condition that we can prove our discipline and consistency. Yet, the very tools that are supposed to help us often become the source of our downfall. We load up our charts with complex, lagging indicators, believing they will give us an edge. We think more data points will lead to better decisions. In reality, they create a buffer of abstraction between us and the only thing that actually matters: price.
The Failure of Complexity Under Pressure
The traditional approach of relying on a suite of indicators fails prop traders for a few critical reasons. First and foremost, all indicators are lagging. They are mathematical derivatives of past price movements. The RSI doesn't know where price is going; it's telling you about the momentum of where it's been. A moving average crossover doesn't predict a new trend; it confirms a trend that has already begun, often forcing you to enter late and take on more risk for less reward. In the world of prop firm evaluations, where you need to extract consistent profit within a defined timeframe, entering late is a cardinal sin. It ruins your risk-to-reward ratio and makes hitting that 8% or 10% target a monumental struggle.
Second, indicator-heavy systems create ambiguity when you need absolute clarity. When your daily drawdown limit is a hard line in the sand, you cannot afford to be unsure of where your trade is invalidated. Where do you place your stop loss with a MACD-based system? A certain number of pips away? Below the last swing low? What if the RSI is diverging but the price structure hasn't broken? This ambiguity leads to hesitation, second-guessing, and, ultimately, emotional decisions—the very thing prop firms are testing your ability to avoid. You end up moving your stop "just a little further" because your indicator hasn't confirmed the exit, and before you know it, you've breached your daily limit and your account is closed for the day.
This is a recipe for failure, a slow grind of frustration that chews up talented traders and spits them out. It’s time for a different approach. It’s time to take the indicators off. It’s time to trade naked.
The Solution: Reading the Raw Language of the Market
"Naked chart trading," or more accurately, Price Action Trading, is not about trading with less information. It’s about trading with the most important information, in its purest form. It’s a philosophy built on a single, powerful truth: every tick, every candle, and every pattern on a chart is the definitive footprint of the battle between buyers and sellers. It is the universal language of supply and demand, and it is the only true leading indicator you will ever find.
By removing the clutter, you stop trying to interpret a dozen different opinions and start listening to the market's own story. The chart transforms from a confusing data visualization into a narrative. You begin to see where the big players—the banks and institutions—are likely placing their orders. You see the areas where sellers overpowered buyers, creating a ceiling of supply. You see the floors of demand where buyers stepped in with force. You see the exhaustion of a trend in the long wicks of a candlestick, and you see the conviction of a new move in the full body of an engulfing bar.
This is the ultimate skill for a trader seeking precision and confidence. You are no longer reacting to the echoes of past events; you are observing the action as it happens, positioning yourself to flow with the dominant market forces.
The Unmatched Edge for the Prop Trader
For a prop trader, mastering price action isn't just another strategy; it's the perfect methodology for the unique challenges we face.
Clarity & Speed: A clean chart allows for instant recognition of high-probability setups. A break of structure, a retest of a key level, a liquidity grab—these patterns become as clear as day. You can make decisions in seconds, not minutes, which is a massive advantage in volatile sessions or when trading lower timeframes. You’re not waiting for indicators to align; you’re acting on the price itself.
Objective Risk Management: This is the game-changer. A price action setup has a built-in, logical point of invalidation. If you go long at a demand level, your stop loss goes just below it. If price breaks that level, your trade idea was fundamentally wrong. It’s that simple. There is no emotion, no ambiguity. This systematic approach to risk makes adhering to strict drawdown rules an objective process, not a gut-wrenching emotional battle. You can calculate your position size with precision, knowing exactly where you're wrong and ensuring no single trade can blow up your account.
Universal Adaptability: Indicator-based systems are often optimized for specific market conditions. A trend-following system will get decimated in a ranging market, and a mean-reversion strategy will fail spectacularly in a strong trend. Price action, however, tells you what kind of market you are in. It shows you the clear higher highs and higher lows of a trend, and it shows you the sideways chop of a range. It allows you to adapt your approach to the current environment, applying the right setup for the right condition. This adaptability is the key to long-term consistency, which is the holy grail for any funded trader.
In the following sections, we will strip this down to its core components. We will move beyond theory and give you a practical, repeatable framework for reading and trading naked charts. We will build the foundation, explore the A+ setups that prop firms reward, and define a clear rulebook for execution and trade management.
It's time to stop letting your tools control you. It's time to trade what you see, not what you think or fear. Welcome to the world of price action.
Key Takeaways:
Indicator Overload Leads to Paralysis: Relying on too many lagging indicators creates confusion and hesitation, which is a critical handicap when facing prop firm time limits and drawdown rules.
Price is the Only Truth: All indicators are derived from past price. By reading price action directly, you are analyzing the market's raw, unfiltered story of supply and demand—the only "leading" indicator that exists.
Simplicity Creates Clarity: A naked chart removes the noise, allowing for faster and more confident decision-making. High-probability setups become obvious when they aren't obscured by clutter.
Price Action Defines Your Risk: Unlike ambiguous indicator signals, price action structures provide clear, logical points for placing your stop loss. This makes managing your risk and adhering to prop firm rules an objective, repeatable process.
Section 2: The Foundation: Reading the Story of the Chart
If the introduction was about understanding why we trade with naked charts, this section is about how. We’re going to strip away the noise and learn to read the market’s story directly from the source. Think of yourself as a detective arriving at a crime scene. The indicators are secondhand witness reports—often unreliable and contradictory. The price chart itself is the physical evidence. The footprints, the direction of the struggle, the force involved—it’s all there if you know how to look.
The story of the chart is a simple one, repeated across all markets and all timeframes: it’s a battle between buyers (bulls) and sellers (bears). Our job is not to predict the future, but to analyze the evidence of this ongoing battle and determine, with a high degree of probability, who is currently winning and where the next major conflict is likely to occur. To do this, we need to master three foundational pillars: Market Structure, Key Levels, and Candlestick Stories.
Pillar 1: Market Structure (The Trend is Your Paycheck)
Market structure is the absolute bedrock of price action analysis. Before you draw a single line or consider a single trade, you must understand the structure. It is the syntax of the market's language, telling you the direction of the primary flow of money. For a prop trader, fighting the dominant market structure is a low-probability, high-stress endeavor that quickly leads to hitting your drawdown limits. Aligning with it is how you catch the powerful, sustained moves that can make or break an evaluation.
At its core, market structure is defined by a series of swing points—the peaks and troughs created by price movement.
Uptrend (Bullish Structure): The market is making a series of Higher Highs (HH) and Higher Lows (HL). Buyers are in control. They are willing to buy at progressively higher prices, and sellers are unable to push the price below its previous reaction low.
Downtrend (Bearish Structure): The market is making a series of Lower Lows (LL) and Lower Highs (LH). Sellers are in control. They are aggressively selling, pushing price to new lows, and buyers are unable to push the price above the previous reaction high.
Your first job on any chart is to identify this pattern. Is the flow upwards or downwards? This provides the context for everything else.
The Break of Structure (BOS): The Signal of Change
A trend is healthy until it’s not. The single most important signal in market structure analysis is the Break of Structure (BOS). This is the moment the established pattern is violated, signaling a potential shift in control from buyers to sellers, or vice-versa.
In an uptrend, a BOS occurs when the price breaks below the last significant Higher Low (HL).
In a downtrend, a BOS occurs when the price breaks above the last significant Lower High (LH).
A true BOS is not just a wick poking through the level. For a high-probability signal, you want to see a full-bodied candle closing beyond the previous structure point. This shows conviction. A mere wick shows a test, but a close shows a transfer of power. Identifying a valid BOS is your first clue that the tide may be turning, giving you an early warning to stop looking for trades in the direction of the old trend and start looking for opportunities in the direction of the new one.
Pillar 2: Key Levels (The Battlegrounds)
If market structure is the story's plot, key levels are the setting—the specific locations where the most important action takes place. These are the battlegrounds where control shifts between buyers and sellers. A trade taken in the middle of nowhere is a gamble. A trade taken at a well-defined key level is a calculated risk. We will move beyond the simple "support and resistance" lines and focus on two institutional concepts.
Supply & Demand Zones
These are not thin lines; they are zones or areas on the chart that represent a significant historical imbalance between buying and selling pressure.
Demand Zone: An area where buying pressure overwhelmed selling pressure, causing price to rally away sharply. This zone represents a cluster of unfilled buy orders. When price returns to this zone, those orders may be filled, causing price to bounce. You can identify it by finding the last down-candle (or series of candles) before a strong bullish move.
Supply Zone: The opposite of a demand zone. An area where selling pressure overwhelmed buying pressure, causing a sharp drop in price. This zone is full of unfilled sell orders. When price returns here, it's likely to be met with heavy selling pressure. You find it by identifying the last up-candle (or series of candles) before a strong bearish move.
The key is to look for zones from which price moved away with explosive force. This indicates a major imbalance—the footprint of institutional activity. Furthermore, fresh zones—those that have not been revisited since their creation—are the most potent.
Liquidity Pools
This is a concept that separates retail thinking from professional thinking. Where do most traders place their stop-loss orders? Just above a recent high or just below a recent low. Now, think about that from an institutional perspective. If a bank needs to fill a massive buy order, it needs a huge number of sellers. Where can it find them? By pushing the price down just enough to trigger all those stop-loss orders sitting below a clear low. Those stops are sell orders, and they provide the liquidity the institution needs.
Liquidity Pools are these clusters of orders. They exist above obvious highs and below obvious lows, especially "double tops" or "double bottoms" that look too perfect. Price is drawn to these levels like a magnet. Understanding this, you can avoid placing your stop where everyone else does, and you can even use a "liquidity grab" or "stop hunt" as a powerful entry signal, which we will cover in the next section.
Pillar 3: Candlestick Stories (The Footprints of Money)
If market structure is the plot and key levels are the setting, then candlesticks are the characters' dialogue. They reveal the psychology and the outcome of the battle between buyers and sellers within a specific period. Don't just memorize patterns; learn to read the story each candle tells.
Wicks vs. Bodies: The Tale of Rejection and Control
This is the most crucial distinction.
The Body: The solid part of the candle shows the distance between the open and close. A long body represents control and momentum. A long green (bullish) body shows that buyers were in control for the entire session, closing the price near the high. A long red (bearish) body shows sellers dominated.
The Wicks (Shadows): The thin lines extending from the body show the session's extremes. Wicks represent rejection and indecision. A long upper wick shows that buyers tried to push the price higher, but sellers aggressively pushed it back down. A long lower wick shows sellers tried to push the price lower but were overpowered by buyers.
High-Impact Candles in Context
A candlestick pattern is useless in isolation. Its power comes from its location. A powerful rejection candle at a key supply zone is an A+ signal. That same candle in the middle of a range is just noise. Here are the key stories to look for at your levels:
The Engulfing Bar: This is a story of a complete reversal of power. A bearish engulfing candle (a red body that completely swallows the previous green body) at a supply zone tells you that the sellers have not just shown up, they've taken total control.
The Pin Bar (Hammer or Shooting Star): This is the classic story of rejection. A shooting star at a supply zone, with its long upper wick, tells a vivid story: "Buyers tried to break this level, but sellers slammed the door in their face." It's a clear signal that the sellers are defending their territory.
Indecision Candles (Doji): A Doji has a very small body with wicks on either side. It tells a story of equilibrium. Neither buyers nor sellers could gain control. When you see this at a key level after a strong trend, it's a warning sign that the momentum is fading and the trend may be about to pause or reverse.
By combining these three pillars, you build a multi-layered, confluent view of the market. You start by identifying the overall plot (Market Structure), then you identify the critical locations where the action will happen (Key Levels), and finally, you wait for the actors to give you a clear signal through their dialogue (Candlestick Stories). This is how you move from guessing to executing a high-probability trading plan.
Section 3: High-Probability Setups for the Prop Firm Trader
With a firm grasp of market structure, key levels, and candlestick stories, we can now move from analysis to execution. This is the critical step where knowledge turns into profit. But let's be clear: as a prop trader, your goal is not to trade every market wiggle. Your goal is to survive and thrive within a strict set of rules. This means you must become ruthlessly selective. You are a hunter, and you only engage when the odds are overwhelmingly in your favor. You need A+ setups—patterns that are not only reliable but also offer crystal-clear parameters for risk management.
An A+ setup is one that combines our three pillars into a single, confluent picture. It’s where the market structure gives you direction, a key level gives you a location, and a candlestick pattern gives you the trigger. Anything less is a B-grade setup, and B-grade setups are what slowly bleed accounts and lead to evaluation failures. We will focus on two of the most powerful and reliable price action setups: one for its dependable consistency and one for its professional-grade precision.
Setup 1: The Bread-and-Butter (The Break and Retest)
If you were to master only one trading setup for the rest of your career, this should be it. The Break and Retest is the quintessential price action pattern. It's reliable, it's easy to spot once you know what you're looking for, and it provides an exceptional framework for risk management—making it the perfect tool for a prop trader.
The logic behind it is simple. When a significant level (like a structural high or a demand zone) is broken, it signals a shift in market dynamics. What was once a ceiling (resistance) now has the potential to become a floor (support), and vice-versa. The "retest" is our opportunity to see if this role-reversal is confirmed.
The Mechanics:
The Context (Market Structure): First, identify the prevailing trend. Let's assume we're in a downtrend, defined by Lower Lows (LL) and Lower Highs (LH). We are only looking for selling opportunities.
The Break (BOS): Price pushes down and creates a new Lower Low, breaking a previous support level or demand zone with conviction (a strong, full-bodied candle closing below the level). This confirms the continuation of the bearish structure.
The Patience (The Retest): This is where most novice traders fail. They chase the breakout and get caught in a pullback. The professional waits. We wait patiently for the price to pull back up to the level it just broke. This broken support level is now our potential new resistance.
The Confirmation (Candlestick Story): As price retests the level from below, we watch the candlesticks for our entry trigger. We are looking for a story of seller conviction. This could be a powerful Bearish Engulfing bar, a Shooting Star with a long upper wick showing strong rejection, or a series of Dojis showing buyer exhaustion followed by a strong bearish candle.
The Execution: Once you get your confirmation candle, you enter the trade. Your stop loss has a logical, objective home: just above the high of the retest swing or the confirmation candle. Your trade idea is that this level will hold as new resistance; if it breaks, you were wrong, and you get out with a small, managed loss.
The Prop Trader Angle:
The beauty of this setup is its clarity. There is no guesswork. Your entry is defined, your stop loss is defined, and your risk is defined. This allows you to calculate your position size perfectly to stay within your daily drawdown limit. For example, if your max daily loss is $1,000 and your stop loss on a given Break and Retest setup is 20 pips, you know exactly how many lots you can trade. Furthermore, the risk-to-reward (R:R) potential is often excellent. Your first logical profit target would be the next major swing low, which is often much further away than your stop loss, giving you the 2:1 or 3:1 R:R ratios needed to pass evaluations.
Setup 2: The Professional's Entry (The Liquidity Grab / Stop Hunt)
This setup is more advanced and requires a deeper understanding of market mechanics, but it is one of the most powerful concepts in price action trading. It aligns your entry directly with the flow of institutional "smart money." We discussed liquidity pools in the last section—the clusters of stop-loss orders resting above old highs and below old lows. This setup is the act of trading the intentional triggering of those stops.
Institutions need massive liquidity to fill their orders without causing significant slippage. The easiest way to find this liquidity is to hunt for the stops of retail traders. The "Liquidity Grab" (also called a Stop Hunt or a Judas Swing) is this engineered move.
The Mechanics:
The Context (The Obvious Level): Identify a very clear, obvious level of support or resistance. A "double bottom" or "double top" is a perfect example. You know that below that double bottom, a massive pool of sell-stop orders has accumulated from all the traders who went long.
The Grab (The Manipulation): Instead of bouncing at the level, price pushes decisively through it. It breaks the low, triggering all those sell stops. Retail traders who were long are now stopped out (their positions are sold), and breakout sellers jump in, also selling. This creates a surge of selling liquidity.
The Reversal (The True Move): This is the critical moment. The institutions, having now found the liquidity they needed to fill their huge buy orders, step in and absorb all the selling pressure. The price stops on a dime and aggressively reverses back into the original range, leaving all the breakout sellers trapped and the original longs stopped out at the worst possible price. The candle that performs this grab often ends as a Pin Bar with a long, dramatic wick.
The Confirmation & Execution: Your entry is on the confirmation that the grab was fake. You want to see price rapidly reclaim the broken level. A very aggressive entry is to enter as soon as the reversal starts. A more conservative entry is to wait for the candle to close back above the liquidity level, confirming the institutional support. Your stop loss is placed just below the low of the liquidity grab wick.
The Prop Trader Angle:
Why is this a professional's setup? Because you are trading against the herd and with the institutions. It offers an absolutely phenomenal risk-to-reward profile. Because you are entering right at the extreme of a move, your stop loss can be incredibly tight, often just a few pips. Your potential profit, however, is massive, as these moves often initiate a major new leg in the market. Successfully trading this setup demonstrates a sophisticated understanding of the market that prop firms value. It requires immense patience, as you may be watching a level for hours, waiting for that tell-tale grab and reversal. But for a prop trader looking to hit a significant profit target with minimal risk, mastering the Liquidity Grab is a true superpower.
Section 4: Execution and Trade Management: The Prop Firm Rulebook
You’ve done the hard work. You’ve analyzed the market structure, identified a high-probability key level, waited patiently for price to approach it, and have a potential A+ setup forming right before your eyes. Now what? This is the moment where process must override emotion. For a prop trader, execution and trade management are not just about making money; they are about not losing it. Your primary job is to protect your capital and stay within the firm's drawdown limits. Profitability is the natural byproduct of excellent risk management.
Think of this section as your personal rulebook, the standard operating procedure you will follow for every single trade. It removes discretion when you are most vulnerable—when your money and your career are on the line. It ensures that your trading is a repeatable, professional operation, not a series of emotional gambles.
The Entry Trigger: Your Final Green Light
The entry trigger is the final piece of the puzzle. It’s the specific candlestick signal at your location of interest that tells you, "The time to act is now." It’s the confirmation that the buyers or sellers you expected to be at this level have actually shown up to the party. Waiting for a clear trigger prevents you from jumping the gun and entering a trade prematurely, a common mistake that leads to getting stopped out before the real move even begins.
Your trigger must be a pre-defined, non-negotiable part of your plan. For the setups we discussed:
For a Break and Retest (Short): You are watching the broken support level, expecting it to act as new resistance. Your trigger is the first clean sign of aggressive selling at that level. This could be:
A powerful Bearish Engulfing Bar that completely swallows the prior bullish candle.
A Shooting Star with a long upper wick, showing that buyers attempted to reclaim the level but were decisively rejected.
A "Three-Candle Reversal" pattern: A bullish candle touches the level, followed by an indecision candle (like a Doji), and finally, a strong bearish candle that closes below the indecision candle's low.
For a Liquidity Grab (Long): You have just seen price raid the lows and are waiting for confirmation that it was a fake-out. Your trigger is the proof of the reversal:
A Bullish Pin Bar (Hammer) with a long lower wick that shows the aggressive rejection of lower prices.
A Bullish Engulfing Bar that closes firmly back inside the range, above the liquidity level that was just taken. This shows the institutional buyers have absorbed all the selling and are now in control.
You do not enteruntilyour specific, chosen trigger candle has closed. This requires discipline, but it is your final defense against false signals.
Stop Loss Placement: Your Invalidation Point
Your stop loss is the most important order you will ever place. For a prop trader, it is your shield. It is the ultimate tool for enforcing the firm's maximum loss rules. However, its placement should not be arbitrary (e.g., "I'll risk 20 pips"). Your stop loss is not just a price; it is the point on the chart where your trade idea is proven fundamentally wrong.
This is where the beauty of price action shines. The chart gives you the exact, logical location for your stop.
For a Break and Retest (Short): Your trade idea is that the old support will hold as new resistance. Therefore, your idea is proven wrong if price breaks above that new resistance. Your stop loss should be placed just a few pips above the high of the pullback swing (the top of the retest).
For a Liquidity Grab (Long): Your trade idea is that the move below the old low was a manipulative stop hunt. Therefore, your idea is proven wrong if the price continues even lower. Your stop loss should be placed just a few pips below the absolute low of the liquidity grab wick.
Placing your stop loss based on structure, not a random pip value, is what separates professionals from amateurs. It allows the trade room to breathe but ensures you get out with a minimal, controlled loss the moment the evidence turns against you. This objective placement is what allows you to survive your losing trades—and you will have losing trades—so you can be there to capitalize on your winners.
Profit Targets (The Smart Way to Get Paid)
Finally, you need a plan for taking profit. Hope is not a strategy. You need to know where you intend to exit the trade before you ever enter it. For prop firm traders, who need to show consistent profitability and hit a specific target, a mechanical approach to taking profits is crucial.
The best profit targets are, just like stop losses, based on the structure of the chart. You are looking for the next logical area where the opposing force might step in.
Target 1 (The Safety Target): The Next Opposing Liquidity Area.
If you are in a short trade, your first target should be the most recent significant swing low. This is an area where buyers previously showed interest and where some sellers may look to take their own profits, causing a potential bounce.
If you are in a long trade, your first target is the most recent significant swing high.
Target 2 (The Evaluation-Maker): The Next Major Supply/Demand Zone.
Look further on your chart. Where is the next major, untouched demand zone (for a short) or supply zone (for a long)? This is your home-run target.
The Power of Scaling Out
One of the most effective strategies for prop firm success is scaling out. This means you don't exit your entire position at one price.
When price hits your Target 1, you sell a portion of your position (e.g., 50% or 33%).
Immediately after taking partial profits, you move your stop loss on the remaining portion of your trade to your breakeven point (your entry price).
This single technique is a psychological and financial superpower. You have now "paid for the trade." You have locked in a small win, which contributes to your profit target and builds confidence. The remaining position is now a"risk-free" trade. The worst-case scenario is that price reverses and stops you out at breakeven for no loss. The best-case scenario is that the trade continues to your home-run Target 2, allowing you to capture a massive R:R winner that can make your week, or even pass your evaluation, in a single move. This blend of conservative profit-taking and aggressive risk management is the hallmark of a consistently profitable prop trader.
Section 5: Case Study: A Naked Chart Trade from Start to Finish
It’s time to move from the drawing board to the battlefield. In this section, we will walk through a complete trade, step-by-step, applying the exact framework we've built. We will use the "Bread-and-Butter" Break and Retest setup, as it’s a perfect illustration of patience, precision, and process.
Imagine we are looking at a 1-hour chart of EUR/USD. The indicators are off. The screen is clean. All we have are the candles, telling their story.
Step 1: The Big Picture (Reading the Market Structure)
Before anything else, we zoom out. What is the overall story? We look at the last few days of price action and immediately identify a clear pattern: a series of Lower Highs (LH) and Lower Lows (LL). The market is in an undeniable downtrend.
A significant high was made three days ago.
Price then fell, creating a low.
It pulled back up but failed to reach the previous high, creating our first Lower High (LH).
Price then broke below the previous low, creating a new Lower Low (LL).
This simple analysis takes less than 30 seconds, but it is the most important step. We now have our bias. The market structure is bearish. Therefore, we are only interested inselling opportunities. We will ignore any and all potential buy signals until this structure changes. This single decision filters out 50% of the noise and dramatically increases our odds.
Step 2: Honing In (Identifying the Key Level and the Break)
Now we zoom in a bit to the most recent price action. We see the last clear swing low—a level where price bounced for a few hours before the sellers finally took control again. This swing low is our key level of interest. It was the last battlefield where buyers put up a fight.
We watch as price approaches this level. There's a bit of a struggle, but then we see it: a long, powerful, full-bodied bearish candle closes decisively below this key swing low.
This is our Break of Structure (BOS). The sellers have not only continued their campaign but have also captured new territory. That old floor of support is now a potential new ceiling of resistance. Our plan begins to form: we are anticipating a retest of this broken level.
Step 3: The Patience (Waiting for the Retest)
This is where we earn our money. The breakout candle is tempting. The urge to jump in and chase the momentum is strong. But we resist. We know that markets rarely move in a straight line. A pullback, or "retest," is probable as early short-sellers take profits and new, weak buyers try to pick a bottom.
We do nothing. We watch as the next few candles form. As expected, the selling momentum slows, and price begins to drift back up towards the level it just broke. Our key level is at, let's say, 1.0750. We see price slowly climb... 1.0740... 1.0745... It is now entering our "kill zone." We are on high alert, waiting for the sellers who broke this level to prove they are still here and ready to defend it.
Step 4: The Execution (The Trigger, Stop, and Targets)
Price taps the 1.0750 level almost to the pip. The first candle that touches it is a small bullish one. No signal. The next candle is a Doji, showing indecision—the buyers are losing steam. And then it happens. The third candle is a massive Bearish Engulfing Bar. Its body completely swallows the previous Doji and closes well below it.
This is our entry trigger. It’s the story we were waiting for: "Buyers brought the price back to the scene of the crime, but the sellers were waiting for them and responded with overwhelming force."
Entry: We enter a short position at the close of the Bearish Engulfing candle.
Stop Loss: Our trade idea is that 1.0750 will hold as resistance. The highest point of the retest was the wick of the Doji candle, which peaked at 1.0758. Our idea is proven wrong if price breaks this high. We place our stop loss just above it, at 1.0761, giving it a few pips of breathing room. Our risk is defined and contained.
Target 1: We look left on the chart and identify the next area of potential support—the most recent Lower Low that was formed by the BOS. This is at 1.0700. This is our safety target.
Target 2: We zoom out further and see a fresh demand zone from a week ago, sitting much lower at 1.0650. This is our home-run target.
Step 5: The Result (Managing the Trade to Completion)
Our trade is live. The risk-to-reward on our first target (1.0700) is excellent, well over 2:1. Price begins to move in our favor, dropping away from our entry. A few hours later, it hits 1.0700.
As per our plan, we scale out. We close 50% of our position, locking in a solid profit. This profit immediately boosts our evaluation account balance and, more importantly, our confidence. We then move our stop loss on the remaining 50% of the position from 1.0761 down to our entry price.
Our trade is now risk-free. The worst possible outcome is a small, guaranteed win. We have followed our rules, managed our risk, and paid ourselves. Now, we let the market do the rest. Over the next day, the bearish momentum continues, and price eventually cascades down to our second target at 1.0650. We close the remainder of our position.
By combining a top-down analysis of structure with a patient, rules-based execution plan, we captured a high-probability, high-reward trade. We didn't predict anything. We simply observed the evidence, waited for a specific set of criteria to be met, and managed our risk impeccably. This is the path to becoming a funded trader.
Section 6: Conclusion: Trade What You See, Not What You Fear
We began this journey in a state of analysis paralysis, staring at a screen cluttered with lagging indicators, feeling the immense pressure of the prop firm evaluation clock. We were caught between the fear of missing out and the fear of taking another loss, a common dilemma that stems from a lack of true clarity and confidence in our methodology.
Throughout this post, we have systematically stripped away that noise. We have peeled back the layers of abstraction and complexity to reveal the raw, unfiltered truth of the market: price action. We learned that the chart is not a random series of data points, but a story—a story of the constant battle between buyers and sellers. By learning its language, we can move from guessing to reading, from reacting to anticipating.
We established the three pillars of this language: understanding the overall plot through Market Structure, identifying the critical battlegrounds at Key Levels, and listening to the real-time dialogue through Candlestick Stories. We saw how these elements combine to form A+ setups like the dependable Break and Retest and the precise Liquidity Grab, patterns that offer not just a high probability of success, but a logical framework for risk management.
Most importantly, we created a Prop Firm Rulebook for execution. We defined exactly how to enter, where to place our stop loss based on structural invalidation, and how to manage our trades by taking partial profits and moving to breakeven. We saw in our case study how this entire process comes together, transforming a chaotic market into a series of clear, manageable opportunities.
The core lesson is this: trading with a naked chart is not about having less information; it’s about focusing on the right information. It forces you to be accountable to what is actually happening on the chart, not what a lagging indicator suggests might happen. It builds a deep, intrinsic confidence that cannot be found in any black-box system or magical indicator. It’s a confidence born from skill, observation, and a repeatable process.
Your Challenge
Knowledge without action is useless. So, I challenge you to do something that might feel uncomfortable at first. For the next full trading week, take every single indicator off your charts. All of them. Leave nothing but the candles.
Pick just one of the setups we discussed—the Break and Retest is perfect for this. Go back through your favorite instrument's chart and identify the last ten times this pattern occurred. Mark the break, the retest, the entry trigger, the logical stop, and the targets. This is your backtesting. See for yourself how powerful and consistent it is.
Then, for the rest of the week, your only job is to watch for this one setup. Don't trade anything else. Wait with the patience of a sniper for the market to deliver your A+ opportunity. When it appears, follow your execution rulebook to the letter.
By narrowing your focus, you will be amazed at how the market's noise fades away and the clarity of price action comes into sharp relief. You will trade less, but you will trade better.
Mastering price action is the most direct path to becoming a consistently funded and profitable prop trader. It’s the ultimate edge because it’s not a secret system; it’s a skill. And once you have it, no one can ever take it away from you. So clean your charts, trust your eyes, and trade what you see. The confidence will follow.
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