Forex trading blog

[FXSchoolOnline]

What is Price Action and how to trade it?

Price Action is everything that price is doing on any trading instrument, being represented on a chart for a Trader to see.

In very basic terms Price Action illustrates in a way that a Trader can see exactly on a chart, what a certain pair did for a particular time frame. For example the individual candle sticks or bars will show how high the pair went, how low the pair went and also the open and closing prices. Most charting platforms can produce candle sticks and bars for time frames varying from 1 minute to 1 month.

Another way to think about it is, Price Action is everything humans are doing and how they are trading, shown in a chart form.

This basic explanation of Price Action is not subjective. What I see on my chart is exactly what another Trader will see on their chart, providing they are using the same charting equipment.

The next question is the important question. How can we use Price Action to profit? Humans are very habitual. Traders tend to do the same things and react the same way over and over again when presented with similar circumstances.

Although if the same two Traders have the same charts they will see the same Price Action that does not mean the same two Traders will come to the same conclusion. In this way Price Action can be interpreted by the individual depending on how they understand different Price Action formations.

If you have watched the charts previously you may have noticed that the same patterns, most of the time, repeat themselves. This is once again because humans are habitual and react the same way given very similar circumstances.

So if we can notice these patterns and human trading habits in the markets, we can start to find a trading strategy and implement it, to make money off the other Traders, while they carry out their normal trading patterns.

These patterns will continue repeating themselves as long as human’s trade. Like I said, humans are very habitual and most of the time they repeat themselves, over again given similar circumstances.


What is needed to trade Price Action?


Clean charts-

Price Action is best seen and traded from clean charts. To trade Price Action we don’t need fancy indicatorsor anything at all except for a clean chart.

Many Traders fall into the trap of thinking the more indicators they have on the charts the better chance they have of predicting where price will go. This is just plain wrong. Indicators just confuse what doesn’t need to be a confusing process.


Solid method-

Trading Price Action in the Forex market is the best way to consistently predict movement. For a Trader to do this however they need a strong method and skills to trade with. Learning through a course such as an advanced price action course will give Traders the skills and understanding they need to trade effectively.


Continual education and practise-

Trading the Forex markets with Price Action is a skill that takes continual practise. The Forex markets are continually doing new and different things and all Traders from the beginner to the advanced can continue to learn by trading and watching Price Action through their charts.


An edge on the market-

A trading edge is something that gives a Trader a statistical advantage of being profitable over a sample size of trades. The edge for a Price Action Trader is their Price Action signals and trade management. Traders need to learn how to trade the low risk with high reward setups, using solid Price Action formations that form in the markets time and time again. Without an edge a Trader may as well just flip a coin because even a coin toss should average out to 50/50.



Trading can be very rewarding and profitable endeavour if the Trader knows how to trade using solid Price Action techniques. Trading with Price Action allows the Trader more flexibility and a lot less stress than the Trader who trades with so many indicators they get confused.

In forex trading less is more. Less confusion and less overcomplicating things leads to more success and ultimately more profit.


I hope you have enjoyed this quick post,

Johnathon Fox
Forex School Online

 

[FXSchoolOnline]

Many traders come to trading with dollar signs in their eyes and dreams of a yacht docking at the Bahamas. Whilst this dream is not unattainable the percentage of traders that are ever going to make that type of money is extremely small.


What can be realistically achieved?

What you will be able to gain out of the market is largely based on the amount of money your trading account has. Someone with $1,000 is going to struggle make decent living and ride out what are inevitable losses that will come, compared to someone with $100,000 who is going to have a far better chance.

It is simple maths that the more money in the trading account the less percentage that the trader has to make, to make a decent living.


Are you kidding yourself?

Are you expecting to open an account with $10,000 and quit your job? If so I think you need to realistically asses your situation.

Example:

Let’s say that you need to make $50,000 per year to make a living.

Account balance A= $10,000 to make $50,000 profit = 500% per annum

Account balance B= $200,000 to make $50,000profit = 25% per annum


As you can see from the above example trader A needs to make 500% yearly to make a living, whilst trader B only needs 25%. This is obviously not including compound interest from within that year however trading on the assumption that you need to make any more that 5% a month is very risky.

Some people will say "only 5% a month". Well 5% a month is 60% per year, and if you add compound interest with the growth of your account it is 80% per year! If you can make 80% per year growth you are doing very well!


How does having unrealistic expectation hurt my account?

Getting rid of unrealistic goals will help you with the mental application of your trading plan. Traders that are trying to reach trading percentages that are large will in most cases do two things;

1. Over trade

2. Risk too much money per trade

Overtrading is a very common mistake made by many traders who are unrealistic in what they can achieve. They operate on the assumption that trading more will make them more. This is in fact is the complete opposite. Trading more will lead them to taking setups that are not worth taking and they will begin to lose.

Risking too much will in most cases lead to an account being blown. Occasionally a trader will get lucky and pull off a large winner. Over time however the same trader can’t keep it up and when the losses come their account is crippled.


What is needed to become consistently profitable?

To become profitable a trader needs to realistically asses their situation. Every trader is different. How they trade and what method they will use will vary greatly from trader to trader. Learning a method such as Price Action trading and perfecting that method will greatly increase the chance a trader will have of making consistent returns in the market.

If a trader can learn to trade Price Action and start using strict money management principles they will set themselves apart from the pack and give themselves a good chance of becoming consistently profitable.


I hope you enjoy this article. It is designed to show you what is possible but at the same time bring you into the correct mindset that is needed in such a competitive market such as Forex.]

Safe trading,

Johnathon Fox

 

[FXSchoolOnline]

Making emotional trading mistakes and errors can be a very easy and dangerous trap to fall into. Many traders and in particular beginner traders come to the market with an expectation that the market will make them happy or give them a feeling of fulfilment that they may be lacking within their life.

Your trading success is always reflected in the mindset in which you approach the markets. If you approach the markets scared or in fear, you will struggle for success. If you come to the markets with a confident yet disciplined mindset, your chances of success will be greatly improved.


Emotional Trading Mistakes

Emotional trading examples are:

Overtrading
Holding trades too long and being greedy
Exiting trades too quickly due to fear
Over leveraging
Revenge trading

These emotional trading errors can quickly turn into roller coaster rides that are very hard to get off, and tend to repeat themselves.

As soon as a trader makes a trading mistake of any kind it gives them an emotional feeling. What they do with this feeling then determines whether they will commit emotional trading errors or not.

These emotional trading errors are often first triggered by the trader not feeling good before they place any trades. The trader may be having some personal problems or just not feeling 100%. They then come to the market and place a trade, looking for the market to make them feel better by having a nice winning trade.

The first trade the trader placed that was to make themselves feel better, goes on to be a loser. This then makes the trader feel worse. They then have the worry of not feeling good in life and they have also now lost money. The trader now feels like they have to win that money back, and they place a trade on a dodgy setup they know they shouldn’t be getting into. This trade goes onto to lose and so on and on and on. You can quite easily see how this vicious cycle could be hard to break.


Setting Rules and Having a Plan

Fortunately there is a way to fix these emotional trading errors and it is all about setting rules and following them with discipline.



Examples of possible rules are:

I will not trade when I feel down or sad
If I have 2 losing trades in a week I will not trade until the following week
I will never revenge trade
I will never open another trade in the same day of a losing trade

These are just some basic ideas for you to put into your rules. When working out your rules and plan to prevent emotional errors ensure you think about ways to prevent your life circumstances from affecting your trading success.


The “Zone”

Most people have experienced a time in their lives when they have felt in the “zone” or in the groove where everything seemed to go their way with complete ease. People may have been in this state of mind in sporting events, school or playing music.

Characteristics of being in the Zone are: relaxed, confident and completely focussed.

The mindset of being in the Zone is where we want to be when entering and managing trades. When we are in the Zone, trading is effortless and our sixth sense or subconscious mind is in overdrive, alerting us to opportunities and dangers.

Getting into the Zone can be sometimes easier said, than done. A few ways to help with clearing your mind and giving yourself every possibility to reach the ultimate state of mind are:
Meditation
Exercise
Eating healthy

Emotional trading errors can be quite dangerous to the aspiring traders account balance. Methods to protect traders account and capital can be put in place and all wise traders will have them in place.

Safe trading,

Johnathon Fox