Forex Trading Price Action

Forex Trading Price Action

I have wasted a lot of time on things that do not work. I use to try different styles of trading charts and different type of indicators. My charts were stuffed with every tool that you could imagine. Did any of this chart oranament make me a better Forex trader? No! In someone way I believe that it actually held me back and slowed down my progress as a trader. The truth is that no one really needs all of those things on their chart to pick high probability trades. There is a much better way to found those trades.

A better way to find high probability set ups in Forex or any market is to learn how to read the price action. Price action is the story that creates what you see on the chart and it has to be viewed in real time. If you look back at an old chart, you will miss a lot of the story that the price fluctuations tell. When you simply spend months of time looking at how charts develop, you will be able to tell the ending of the story ahead of time. This is the beauty of understanding price action.

Price action will show you how the big banks and institutional traders develop intraday trades. You will be able to spot how they setup both novice traders and professional traders. There's nothing more magical when you start to be able to predict what is going on and what is going to happen because of the price action. I remember my first style spotting a fake out 10 minutes before it happened. I felt so accomplished and proud of myself. That was my first Yoda moment and far from my last. Give this a try and you will understand what I am talking about.

So is this magic and all I need to trade. Yes, you can develop your trading style all around price action but be warned that this is a form of discretionary trading. You will be making decisions off of subjection information and beliefs and if you lack the fundamentals of trading this can comeback to hurt you. The fundamental that you need to have are: Trading using a pre-planned system that you will not tinker with due to fear or greed. You have to have a money management strategy. If you understand these basics then trading Forex based on price action might be for you.

As you can see, the price is right! Price action tells the whole story of what has and will transpire in the Forex market. By observing price action, you will be able to accurately predict where the market is going, what the big money traders are trying to do and why a movement in price happened. Whereas technical indicators lag the market and are based off old data, watching price action focuses on the here and now, and on the only thing that matter when trading. What is that one thing, PRICE.

Trend Trading Forex

Trend Trading Forex

I was an idiot when I first started trading Forex. Like most new traders who eventually lose all their money, I started off as a day trader. I was sitting in front of the computer for 4 hours a day trying to make pips. I was even waking up at 3 AM to trade the London open. I loved the action and the speed of trading on a short time frame but it was very stressful. Not only was it stressful but it wasn't really profitable. I lost more money than I made and at one point I was just happy to break even.

I remember reading the Market Wizards series of books and reading about Richard Dennis, the guy who created the turtle traders. The turtle traders were a group that Richard Dennis put together after a bet with his trading partner. Richard Dennis believed that anyone could learn trading if they had the right rules. He put an ad in the paper and he taught people from all walks of life how to become traders. Many of the people he taught became millionaires and some are even running their own firms.

One of the core principles that Richard Dennis taught his turtle traders is hot to trade the trend. His philosophy was that price action is the only thing that matters in trading, it is the only thing that is true. Technical indicators aren't true and predicting where the market will go doesn't work. Trend traders simply ride the market like a wave. If the marketing is up, they are taking long positions; if the market is down, they take short positions. This sound rather simple but it is psychologically hard to apply when trading. It is difficult to see a trade go against you and knowing that you have to stay in it.

The turtle trading system can easily be applied to Forex because the currency market has some of the longest trends of any market. There are trends that last several years. If you can jump onto just one trade, you can make a ton of money. With this trading system, you will get a lot of false starts and you will often get kicked out of trades because they will turn on you, but it only takes one major trend per year to make you the bulk of your money.

This is the same system that John Dunn uses. He is famous for taking a small investment and turning it into a 300 million dollar fund. His system is always in the market and is always trading. When it gets onto a trend, it stays with it until it ends. There are years when his systems doesn't make any money and years where it makes a killing. As said, it is psychologically hard to trade like this but for those who can, they will see themselves earning more money, while having to spend less time slaving in front of a computer all day.