The Best Way to Get Started with Price Action Trading
Beginning forex traders often approach the market with a number of problematic thinking patterns. People who are new to the world of forex trading almost invariably seem to think and act the exact opposite of how they should in order to make consistent money as a trader. The beliefs that you hold about what it takes to become a successful trader are ultimately what determine your fate in the market. Traders often make mistakes like believing they need to analyze increasing amounts of market data, or look at numerous time frames and a plethora of currency pairs, I am going to dispel these commonly held beliefs as well as a few others. This article will give you some professional insights to think about as 2010 comes to a close and we begin a New Year full of fresh trading opportunities, follow the tips in this article and your trading in 2011 will be much improved.
Accept that less is more; you don’t have to spend a lot of time analyzing the market.
– Step away from the computer screen
Once you determine what you are looking for in the markets, there is no point in sitting in front of your computer and burning your eyes out if the setup you are looking for is not there. Yet, many traders do exactly that; they start off looking for a setup on one time frame, then if they don’t see it there they go to a different time frame, then if they don’t find it there they start reading financial news or reading articles until they convince themselves of something, then they enter what will probably be a losing trade.
The easiest solution for this analysis-paralysis is to consciously force yourself to step away from the computer screen. Get a hobby, go to the gym, play poker, call up a friend, help out a neighbor; do anything to get yourself away from your computer once you have spent some time looking for your setup and determined it is not there. Many traders enter
low-probability trades just because they want to trade, or they feel like they need to, this thinking will always result in lost money and lost time. Check the market at a pre-determined time, if your desired setup isn’t present, walk way, let the market show you what it is going to do rather than trying to out-guess it or vainly forcing your will upon it.
– Trade off the daily chart
Trade off the daily charts only when first beginning; either the setup is there or it’s not, don’t try to force a setup where there isn’t one, if it’s not obvious on the daily chart it’s probably not worth trading. Set aside a regular time each day that you spend looking at the daily charts of a few major currency pairs, any price action setup that is at a confluent level and well-formed will likely stick out like a sore thumb. After you master a price action setup or two, if you don’t see it on the daily charts after about 10-20 minutes of analyzing, there is probably no trade to take. You have to realize that if there is not a valid and obvious setup, then you walk away until the next day, don’t sit there and over-think and try to figure out a way to get into a trade, you are trying to control the market when you do this and it is impossible to control the market.
Understand the importance of trading journals and trading plans.
– Keep records like a business
It is critical important that you think about and treat your forex trading as a business.