How To Get Started in Price Action Trading

[Johnathon 10]

Price Action trading is one of the most powerful methods a trader can use to trade the Forex Market. Price Action trading is using the information that is presented to a trader in the form of raw data such as candles or bars that form trade ideas.

 

Price Action is the most clear and uncluttered method a trader can use as it involves using only key levels in the markets with proven Price Action formations to signal a trade setup.

 

Although Price Action can look at times to be a simple method to trade the markets with, there is much a trader will need to learn and perfect before they can begin making consistent profits.

 

Strip Your Charts of ALL Indicators

The first thing a trader interested in Price Action trading needs to do is take of all the indicators and clean up their charts. One very common false belief new traders have is that the more indicators they have on their charts the more chance they will have of accurately predicting what price will do. This is simply wrong. Start watching Raw Price and the patterns that price tends to create and repeat. Price gives all the information traders need to know to assess the markets.

 

Stop Obsessing Over the News and Fundamentals

Price Action candles are thought to already have the news and fundamentals of a currency pair factored into them. In other words whatever the news does it is already showing us on our charts. Of course at times new announcements will make price react a little more than usual, however price in most cases will already be showing us the way it before the news release.

 

As the little guys in the huge market that is Forex we do not have anywhere near the knowledge of the big guys so give up on trying to trade based on what the news is telling you. By the time you have found out what the news has done the banks and big players have made their millions (if not trillions) and closed their positions. All the while your are still working out whether you want to go long or short based on the new announcement! Forget it! The Price Action will reflect exactly what has happened in the news, so as long as you know how to trade price you will never have to worry about following the news announcement or fundamentals.

 

Learn To Read Price and Price Action Signals

It is very important you learn to read price and get an understanding of how price reacts at certain levels in the markets. Learning to spot if a market is trending or in a range is also vital to your success as trading with the trend is a much easier play than range trading. By learning some key Price Action signals such as a Pin Bar or Engulfing Bar and knowing where to trade them from will also increase your chances of placing winning trades. All this knowledge can be found in just a raw price chart without any indicators whatsoever.

 

Learning through an online course such as Forex School Online’s Advanced Price Action Course can teach you all you need to know about becoming a Price Action trader, and also let you learn in your own time no matter how fast or slow.

 

Don’t Try and Do it All At Once!

Don’t try to trade every setup all at once. Learn just one Price Action signal such as the Pin Bar and perfect it so you know what to do in every situation. Instead of being average at all the Price Action setups, be a master of one signal at a time and perfect it in every scenario the market can throw at you. This will put you at a much better advantage than the majority of the traders who are making the mistake of over trading and trading Price Action signals they don't fully understand.

 

The same goes for trading in different time frames. Start with the longer time frames such as the daily or weekly chart and trade on it only. Until you have mastered that one setup on the daily or weekly chart do not go scanning down on the lower time frames just to enter rubbish setups.

 

Until you have perfected trading on the daily time frame you have no hope of trading on the smaller time frames. Trading smaller time frames such as the 1hr will just cost you money until you know what you are doing. Smaller time frames tend to be more volatile and can have large whipsaws that can knock you out unless you have practiced and perfected first trading on the larger time frames.

 

This doesn’t mean that in time you can’t learn to trade all the signals on any time frame you want. You can, however learning and practicing one setup at a time, on one time frame at a time, will greatly increase your chances of being successful and making money consistently.

 

Demo trade

We are very lucky as Forex traders as we can practice on demo accounts with the same scenario as if we were trading live. We can practise with the same leverage and spreads in place. There is absolutely no reason to lose money whilst learning to trade Price Action. Demo until you have been profitable for a period of a minimum 3 months. After this point you may want to go live but keep in mind you don’t need to go from demo to risking large amounts of money. Trading live will throw up completely new challenges such as how you deal with greed and fear so take your time and DON’T bet the farm! As you start to get more comfortable with your tradining and your making money consistently you may want to increase your trade size but never risk more than 3% of your trading account.

 

Safe trading to all,

 

Johnathon

[mohsinqureshii 10]

Nice Work dude. it is really Simple and informative specially beginners. thanks for sharing .

[Johnathon 10]

Your more than welcome. I hope you can further your education in Price Action!

 

To see some free videos and articles on Price Action go here: Price Action Videos

Edited March 20, 2012 by Johnathon