In my last post, I said that if you want to be a consistently profitable trader, you need to stay away from trading indicators, fundamental news, and black-box systems.
If you missed it, here’s the lesson: Why most retail traders fail and how you can avoid it
Now you’re probably wondering:
“So what should I focus on?”
My answer is…
Price action trading.
Wait, what’s that?
Price action trading is a methodology that relies on historical prices (open, high, low, and close) to help you make better trading decisions.
Unlike indicators, fundamentals, or algorithms… price action tells you what the market is doing — and not what you think it should do.
And as the saying goes…
“Trade what you see, not what you think”.
Do you want to see the power of price action trading?
Then read on…
You can “predict” what the markets will do with heightened accuracy…
Let me tell you a secret:
The price can predict the future better than anyone of us.
If you don’t believe me, take a look for yourself…
EUR/USD is in a downtrend before the ECB cuts interest rate:
NZD/USD is in a downtrend before the NZ central bank cuts interest rate:
Clearly, it’s obvious that price leads the news.
So, if you’re always trying to predict where the market is going, then look no further.
Because all you need to do is just follow price and you’ll be more accurate than 90% of the analysts out there.
You trade what you SEE, not what you think
Here’s the thing:
The majority of trading indicators (like Moving Average, RSI, Stochastic, ADX, ATR, Bollinger Bands, and etc.) are a derivative of price.
This means the line (or value) you’re seeing on your indicator is derived by applying a mathematical formula to the price.
What if your RSI indicator is overbought and the Stochastic indicator is oversold, at the same time?
Won’t you have conflicting signal?
But no worries!
You can adjust the settings of your RSI indicator and make it oversold, so now, both your RSI and Stochastic indicator are sending out the same “signal”.
But let me ask you…
Does it make sense?
Why would you want to manipulate an indicator to fit your bias?
It doesn’t make sense.
Remember, you’re supposed to trade what you see, not what you think.
But hey, the good news is…
You won’t have this problem if you choose to focus solely on price.
No bias. No agendas. No manipulation.
You have absolute control over your trading results without relying on anyone
Here’s the deal:
Someone who relies on a black-box algorithm, magic systems, or signal service, isn’t a trader.
Because they are just “blindly” following orders. And the worst thing is…
They GIVE UP the power to be in control.
But no, that’s not you.
Because as a price action trader, you have absolute CONTROL over your trading results.
You make decisions like:
- Where you’ll enter the trade
- Where you’ll set your stop loss
- Where you’ll exit your winners
- How much to risk on each trade
- What are the market conditions you’ll trade
- How to manage your trade from start to finish
And here’s the beauty of it…
When you have total control of your actions, you can make tweaks and improvements to your trading.
You make more profits in the long run (that no systems, robots, or algorithms can match).
Now, I’ll admit.
This isn’t for everyone.
Because not everyone is meant to be a trader.
But if this sound like what you’re looking for and you’re prepared to put in hard work and reap the benefits of what trading can offer… then read on.
You can better time your entries and exits
You know that indicators are a derivative of price (after applying a formula to it), so naturally, you can expect it to “lag” the markets.
This means if you rely on indicators for your entries, you’ll be slower compared to someone who trades based on price action.
Here’s an entry based on moving average crossover:
And here’s an entry based on price action:
Can you see the difference?
How far ahead you’ll be if you can better time your entries using price action?
Unlike trading systems, you can apply Price Action to any markets — and it works
Now, unlike other trading systems that only work in certain markets, price action trading can be applied to all markets.
Why is that?
Because price action is not a trading system that “spits” buy and sell signals.
It’s a methodology that helps you identify the different market conditions, so you know which strategy to use under different circumstance.
This means if the market changes, so do your trading strategy!
You’ll learn how to constantly adapt to the ever-changing market conditions and you can be confident your trading approach will work for years to come.
You can be a consistently profitable trader without paying attention to the news
I’ll honestly say that fundamental news is NOISE to your trading.
I’m sure you’ve seen the market rallies on bad news and collapse on good news. And you’re probably wondering:
“What the heck is happening?”
Well, I’ve no idea too.
The only thing I know is… price is king.
This means you don’t know anything about fundamentals like the price to book value, financial ratios, interest rates, GDP, assets, liabilities, and etc.
And… you still can be a consistently profitable trader — if you follow price.
Here’s the proof:
AMD had 3 years of negative earnings but the stock rallied 700% in 12 months. If you shorted AMD based on fundamentals, then this would really hurt.
But what if you followed price?
Then there is money to be made by being on the RIGHT side of the market.
Or how about the US Presidential election?
If you recall:
The news and media were extremely bearish if Donald Trump gets elected as president because of his policies, his character, the Trans-Pacific Partnership (TPP), and etc.
But look what happened…
The S&P 500 broke to all-time highs.
If you shorted this market based on the media and analyst reports, then you’re probably toasted right now.
So my point is this…
The market doesn’t care about you, me, fundamental reports, news, media, analysts, and etc.
The only thing that matters is Price.
At this point…
You’ve learned what is price action trading and the DIFFERENCE it can make to your trading.
Now you’re probably wondering:
“How do I apply price action to my trading?”
“Where can I learn more about price action trading?
“Do you have any price action techniques I can use?”
I’ll cover more in my next post where you’ll learn actionable price action trading tips and techniques that will improve your results.
And then on Wednesday, I’ll open up my premium training program, The Ultimate Price Action Trader if you want to take things a step further.
But for now, here’s what I would like to know…
What’s your take on price action trading?
Leave a comment below and let me know — I read every one of them.