Posts Tagged ‘price action analysis’
How Price Action Analysis helps Solve your Forex Trading Problems
April 18th, 2010
There can be multiple reasons why so many beginning forex traders experience difficulty and frustration when first starting to trade. FX currency trading is an intensely psychological profession that requires objective thinking at every level. Many traders start out by trying to find a forex trading system or method that will give them exact entry and exit signals so that they do not have to think or train themselves in how to read a price chart. The fact is, the FX market is constantly moving and this movement cannot be predicted with any degree of accuracy by a rigid system that employs lagging indicators or other such nonsense. Learning to interpret raw price action on a stripped down price chart with no messy indicators is the most relevant and adaptable way to analyze the forex market.
Market conditions are not static, as such; we need a strategy that allows us to make sense and use of ever-changing forex price movement. Price action analysis will allow you to use specific price setups that occur within the context of a trending or consolidating market. It gives you a way to read a price chart it was supposed to be read; with just pure price action. Many forex trading problems arise when traders think if they could just analyze more information or get a better system or read more books on trading methods they will become profitable. The key to forex trading lies in believing in the fact that your success or failure ultimately depends on how you think about the market and how you manage your reactions to price movement, in other words, its mostly psychological.
This is exactly where the real benefit to price action setups comes in. With regards to helping to fix psychological mistakes that are so often caused by lack of an effective trading method or self-doubt, price action trading can give you a highly relevant, simple, and valid trading method that will give you the ability to find numerous profitable signals and trade in a very straight-forward and clear manner. When you begin to simplify every aspect of your forex trading plan, starting with the method you are using, you begin to think more objectively and see the market for what it is; price movement over time. When we become trained in how to spot specific, highly profitable, price action setups we discover that over-analyzing economic data and numerous indicators is only hurting our bottom line and frustrating us, thus causing more psychological problems.
Most forex marketers or people trying to sell you a trading system or course will not tell you that the method you use can be simple to understand and only needs to make use of price action setups. This is because the business of selling scam forex products that are little better than random is very profitable for some people. Fortunately there are a few of honest forex educators out there who are genuinely concerned with putting out a high quality product that is also effective and continuously relevant. The method of price action analysis is an inherently simple and effective method to trade forex, finding a mentor with a knack for teaching price action but that also happens to be a professional trader can be a huge step in the right direction towards eliminating your forex trading problems.
Best Forex Training
March 17th, 2010
Getting the proper forex education is a crucial factor in determining your long term trading success. There are is a plethora of websites out there offering an over priced trading system or signal service that does little more than hand feed you entry and exit points everyday without actually teaching you anything substantive. The best forex education will not just hand you a fish but it will teach you to fish for yourself in the forex market. Too many people are just trying to make a quick buck off of newbie forex currency traders; it can be very tough to differentiate the honest forex educators from the scammers just trying to cram their useless course down your throat. Make sure you know what the forex educational product you are buying consists of prior to buying it. Buying something that is blanketed in claims of fast money with little effort that gives you no idea upfront of what exactly you are buying, is almost sure to be a scam.
The best forex currency trading course will consist of in depth educational material that gives you a unique market perspective, rather than just a strict set of rules to enter and exit by. The forex market is a constantly changing entity that ebbs and flows 24 hours a day 6 days a week. You will need forex training that teaches you how to make sense of price action in the context of daily market movement. The best forex course will be a tool that you will utilize to get to where you want to be; at professional trader status. This is no easy thing to achieve; indeed almost 95% of people who attempt forex trading do not maintain any sort of relevant long term success. In order to keep from falling into this group you will need to learn from the best forex course that provides the best forex training.
Price action analysis is one of the best and most useful methods to trade the forex currency market with. The best forex education consists of an education in price action analysis. This is because price movement is the heart and soul of any market, lagging indicators and programmed advisors are only covering up and complicating what is already there on a naked price chart. This is because price action setups are the heart and soul of any market, lagging indicators and programmed advisors are only covering up and complicating what is already there on a naked price chart. The best forex educational course will teach you how to trade price action setups from a relevant perspective that will show you how to read the price signals that the market provides about itself every single day. You will have no need to sit around trying to make sense of numerous lagging indicators that are just hiding the truth from you.
Does it not make sense that the best forex training would consist of educating people on the intricacies of price movement? Of course it does, it makes absolutley perfect sense. The problem is that too often people believe the best forex training course needs to be super expensive or super complicated to be valuable. This idea could not be further from the truth. The truth is that simple and logical methods like price action analysis will always perform better than complicated methods that involve programming or lagging indicators. The cause for this is that markets are driven off human emotion and price action is a direct reflection of this aggregate emotion. To use any other tool besides price action analysis to trade the forex currency market is simply a waste of your time.
Posted in automated forex system trading, automatic forex system trading | 
Tags: best forex course, best forex, best forex educational course, best forex instructional course, best forex training, best forex training course, price action, price action analysis, price action strategies, price action trading | 
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Risk Management in Forex
March 14th, 2010
Risk management is a topic that many forex traders do not take seriously enough. In fact, risk management is usually the single biggest factor that is over looked amongst forex traders and this is the biggest reason why 95% of them fail to make money over the long term. The reason that so many forex currency traders ignore managing their risk or developing a risk management plan is simply because they don’t feel like they need to. Many novice forex traders think that their system or their trading method is so accurate that they don’t need to manage their risk because they believe they will win on a very large percentage of their trades. The truth is that this is a false belief and it is simply emotional trading and illogical thinking as a result of fear and or greed. Professional forex traders know that at best they will win on 60-70% of their trades, they understand they will lose on any where between 30-50% of their trades. If you knew you were going to lose anything 50% of the time why would you not manage your risk? The simple answer is because beginning forex traders do not understand the concept of position sizing and they are trading based off emotion.
Position sizing is simply adjusting the number of lots or contracts you trade to stay within a pre-defined risk threshold while placing your stop loss at a safe spot. Let’s dig into that pervious sentence piece by piece. Many aspiring traders make the huge mistake of having a certain dollar amount in their mind that they are willing to risk before they enter a trade. They then buy or sell a number of lots that is equal to or greater than that dollar amount of risk. After that they will arbitrarily put their stop loss in mostly because they have heard you should trade with a stop loss. This is not an effective risk management technique, in fact it is basically gambling but it is exactly how, or similar to how most forex traders enter a trade.
To profitably utilize the power of position sizing you must first understand that it is absolutely necessary to have a set risk percentage that you are emotionally ok with losing on any one trade. Most traders cannot operate emotion free after losing more than about 3% of their trading account value on any one trade. As such, risking 2% or less is the recommended amount for any trader and you will be hard pressed to find any professional short-term or swing forex trader risking more than that on anyone trade, this is because they understand the importance of risk management and have already lost enough money to know they cannot control the market. So now your risk level is at 2% of say a $5,000 dollar trading account. This means you can risk $100 on any trade that meets your criteria for a valid trade setup.
So here is where position sizing, risk threshold and stop loss placement come in. Once you find a trade that meets your trading plan entry criteria you then need to find the safest place for your stop loss, after you find this level you calculate the distance between it and your entry level. Let’s say this distance is 150 pips, this means you can still only risk $100 but you must now adjust your position size down to meet your risk threshold. An advantage to forex trading is that you can trade mini and micro-lots at many brokers which basically means you have extreme flexibility in position sizing. So to meet your 2% risk percentage and maintain your 150 pip stop loss distance you can only trade 0.66 micro lots, which means you are then trading .66 cents per point. .66 x 150 = $99. It’s important to stay just under your risk margin if it comes down to being slightly under or slightly over; if you traded.67 cents per pip you then would be risking .67×150=$100.50, which is over 2% risk, you want to avoid this because it will induce an emotional reaction that will very likely snow ball into a huge emotional roller coaster of trading errors.
How to Trade Contrarian in Forex using Price Action Analysis
March 8th, 2010
The foreign currency market ebbs and flows in a contrarian fashion. This means the movements this market makes will generally be counter to what looks like should or would logically happen next. This is a huge reason why many aspiring forex traders have trouble developing a profitable trading plan and why consistent success in the forex market can seem so elusive. The forex market is designed to handle big volumes, as a result there is often volatile price action induced by commercial bank traders that can cause extreme price swings from day to day. This type of volatility combined with the ability to leverage position size is what attracts many retail traders to the forex market. However, these same two factors can be, and often usually are, what ends up causing many traders to blow out their trading account and ultimately give up.
We can take the most advantage of the large price swings in the forex market by knowing what to look for and thinking contrarian. Anyone can sit down at a price chart and if it is going higher make the observation that they think it will continue to go up. This same mind set is what gets many traders into trouble however. Many times beginning traders are nervous or fearful to enter the market, this is usually a result of them being un-confident in the method they are using and/or using too much leverage, which means trading too big a position size for their trading account. Managing position size is a direct result of self-discipline and control over one’s own emotion, unfortunately this skill cannot really be taught, it is generally acquired through trial and error or from belief in the teachings of a mentor or professional trader who has already made the same discipline mistakes their self. The skill of reading price action and learning to trade and think contrarian is however a skill that can be taught.
The power of a price action setup lies in is ability to allow traders to see possible price direction before it occurs in the forex market. Often times large moves in the forex market terminate in a specific reversal pattern that we can learn to spot and use to our advantage. Many traders will feel good about a market as it trends in one direction and often times right when the trend is at its peak or trough is when many traders enter due to the safe feeling they get from such a powerful movement. Unfortunately feeling is not something that is useful to the successful forex trader. Professional forex traders know that the market moves contrarian to what the masses usually expect, consequently they will trade contrarian to what most forex traders are doing and generally use a method like price action analysis that gives them a clear and concise method to enter and exit positions.
Price action setups can help to safe-guard a forex trader from jumping in with the amateurs just as a strong move is ready to reverse. Developing a keen eye for specific price action setups is the best tool that any trader can employ to take a contrarian mindset in the forex market. Analyzing the raw price data inherently supplied by the FX market with no lagging indicators is the best way to develop your contrarian forex trading skills. Once you develop this skill you will start to pull apart for the masses of amateur traders who are constantly losing money and become one of the professionals taking it.
Learn to Trade Forex Currency Pairs with Price Action Setups
March 6th, 2010
Price action setups can be a very solid form of forex trading that is both easy to understand for the beginning trader but very useful for even the veteran forex trader. The reason trading the forex market using price action setups is so effective and worth while is that you are not hiding crucial price pattern setups beneath a mound of lagging indicators or trying to trade off some complicated programmed expert advisor or the like. This makes it much more easy to see what the market dynamics are inherently trying to tell you. For the skilled price action trader the charts will literally begin to “speak” to you, you will be trading from a clear point of view and won’t experience analysis paralysis or constant indecision with your method; either the price action setup is there or it isn’t.
Learning to trade the forex currency market can be a great journey in self discovery and will teach you many lessons about how to handle your emotions as you learn from trial and error. It is important when first learning to trade that you understand the destination of professional trading is usually not achieved from a very technically difficult to understand trading method or system. Most professional traders understand or have figured out through many painful lessons that trading excellence is not achieved by method alone. Trading method is important but you do not need a complicated method, on the contrary usually a simple and easy to understand method like price action setup trading are the ones that foster the best conditions for a disciplined mindset.
Achieving solid self discipline and maintain this level of consciousness is probably the single most critical factor in achieving long term success in the forex market. Many beginning traders overlook this fact or brush it aside believing that they can master the market through a piece of trading software or a trading system that will win 90% of the time. Most professional forex traders win about 60% of the time. This means they lose on 40% of the trades they take. The secret is they have discovered how to make more money on their winning trades than they lose on their losing trades, and, they have also figured out how to maintain discipline. One of the most important factors in maintaining discipline while trading the forex market is having an effective trading method that you fully trust combined with the understanding that you only need to wait patiently for your next setup to come along.
Price action setups provide high probability setups along with the ability to navigate the forex market based on pure price movement which is really the most important analytical tool you will ever find. You only need to master a few effective price action setups and you then have the ability to build a very profitable trading plan around this technique. Don’t get caught up in the analysis trap by thinking if you only had the best trading system or the newest combination of lagging indicators you will make huge profits with little effort, this simply is not possible. All that is required is a simple method like price action analysis and the knowledge that intense self discipline is required to achieve any level of long-term success as a forex trader.
Price action explained
January 5th, 2010
Price action is the behavior of price of a specific currency, commodity, stock or other trading instrument over a specified period of time. Price action analysis deals with the predictive capacity of specific price setups that re-occur in the market over time. Certain price patterns re-occur in the markets and can be used to develop a rule-based system.
Through price action analysis we can visually see exactly what is occuring in any given market at any point in time. Price action shows the supply and demand situation of a specific trading instrument during a specified period of time. Price reflects the expectations and beliefs of all market players; the bigger more informed players obviously leave a more noticeable trail, so by analyzing the behavior of price over a specified period of time we can make an educated guess as to what those “in the know” are doing in the markets.
As retail forex traders, our goal is to jump aboard the price trail left by bigger players who have the power to move the market. In order to ride the market momentum to consistent profits we need to build our price action trading system around a few time tested and repetitive setups. It is the nature of markets to re-produce specific price action setups on a semi-regular basis.
Most people who have traded actively for any length of time will attest to the fact that trading is about 80 or 90 percent psychological and 10 to 20 percent method. Most traders start off by thinking it is the other way around and thus end up losing money and finding themselves losing what seems like a constant fight against the market. Since the psychological aspect of trading is so crucial to long term success we need a traing method that gives us the ability to concentrate on our trading psychology, price action analysis provides us this ability as result of it’s simplicity and effectiveness. If we as technical traders are primarily basing all of our trading ideas off of charts then why would we confuse and frustrate ourselves with anything but what the chart is made of which is of course price action ?
In order to master the markets we need to root our methods of trading in consistency. A consistent approach to our trading will lead to long-term success in the market. An education in price action provides you with the ability to identify specific price patters that re-occur in the market. This gives you the key to consistency that so many traders desire yet so few ever attain. Great training and mentoring are necessary components to exellence in any profession. Learning from someone who trades with the same methods they teach is crucial to the relevancy of your price action education. So get yourself forex training in specific price action patterns and I promise that you will be well on the path to trading consistently.
