Price Action Trading-the natural way to trade?

The excitement of day trading could be because no day is like the previous one, the market moves non-stop and prices fluctuate constantly. At times, the market will become quiet for a while, and speculators will ask ‘What’s wrong with price action?’ In fact, there is never anything ‘wrong’ with price action, it’s just that their minds are wondering, they are losing trades, or they are simply over-trading or even they are still having difficulty adjusting to the changing market dynamics and volatility.

It’s only when you start losing trades that you question your trading strategy, and begin to blame different factors. The trick is to not blame anyone for your failure to make profits, but yourself. And always remain optimistic in the face of the adversity the market will throw at you each week, or you will not succeed as a trader!

The following 4 truths about price action should be kept in mind to help you remain optimistic.

Price Action is not a Trading System

Price Action is a form of technical analysis that focuses solely on past prices that have traded in the market. It is not a trading system; it is the study of price action which entails reading past prices to build an approach or plan for the future. Price action will never lie to us because itreports to us what HAS happened as opposed to speculating WHAT will happen.

A trader will never truly know what will happen in the future. Any indicator or indication of future movements is only a possibility employing the same boring concepts of risk, trade and money management. You cannot blindly take every price action signal you see on the charts. You need to apply discretion and ‘hand pick’ only a few good signals per week or per month, depending on market conditions.

Price Action is Universal. It has always worked. Always will.

Many traders wonder whether price action still works, if it is still popular with traders and if it has not been simply replaced with new software techniques. In fact, price action trading has literally been used since the 1700’s and was the first real form of market speculation.

This does not, however, mean that price action trading guarantees success, it doesn’t. You may still lose trades, but due to proper risk scenarios and a sense of when to trade, it is still a natural way to trade. Price action trading is conquered by reading the price, and looking for high-profability clues, such as price action signals. If price volatility is monitored closely, we can learn and interpret the same patterns and movements by learning price action trading, and profit from them if we keep our losses in check and don’t over-trade.

Price Action is not just Candlesticks

Some price action traders convince themselves that price action is all about candlesticks and candlestick patterns, and they do not actually read the chart from left to right. But it’s much more than this; you have to learn to ‘feel’ the collective emotions of market participants.

The important thing is to interpret what the overall market condition is and learn to trade price action signals in the context of the underlying market structure. Taking in the ‘bigger picture’ of what the market is doing will help you formulate a plan of attack for how you will trade.

Price Action Trading tests your strength

Trading in general makes you strong and resilient. You become accustomed to losing trades and making mistakes, sometimes silly ones, which will result in loss of funds. The feeling of loss is intense yet you get to manage it and even learn from it, the negative emotions of loss and failure should not affect your mood or mind-set. As the successful trader that you want to become, you need to remain disciplined, patient and optimistic in the face of the adversity.