In my last post, (How I reached the best method for trading!) I finished up by saying:
I had so many indicators and lines on and below my chart, that I was hiding the most important information of all. I will talk about it in my next post, as it fully deserves a post of it's own.
Yes, my charts were like spaghetti, and hiding the most important information of all!
The more indicators and tools I added to my charts, the more I was hiding the truth! Once I realized it was price action (PA), that I needed to study, I just knew I had found a path to becoming a consistently profitable trader.
Now, I am not implying that following PA is the only way to trade profitably. I know successful traders who use other methods to trade for a living, but reading PA suits my personality. I can totally set my entry level, take profit (TP) levels, and place a tight stoploss. I just love tight definite stops.
Yes, I know I will miss many many trades because of this, as price quite often bounces before my level, but hey, as the pilot said, "I prefer being on the ground wishing I was in the air, than in the air wishing I was on the ground!" I can take these trades without batting an eyelid, and sleep like a baby all night. I have no problems with taking losses when price hits my stop, as beyond that level I do not want to be in the trade. I just move on to the next trade, as R:R takes care of my overall profits. See my post (It's All About Risk:Reward).
Indicators are all derived from price, meaning they lag behind the market movement. So by the time an indicator suggests a trading direction or level, price will already have made the indicated move, and you are entering at the end of the price run. It's that simple.
What reading price really means, is determining the levels where the institutional traders, such as large banks are trading, so that you can join in the price run with them. This is achieved by understanding that the large banks are creating obvious levels to bring in the retail traders, and then take their stops. They have to create liquidity in the market for their orders.
Well there's nothing left to do but get into some live chart levels in my next post.
If this is your first time visiting my blog, please be sure to read my previous posts to bring yourself up to date. You can start here
