Price Action Trading Equation

TRADING PLAN Price Action Trading Plan Think of your price action trading plan as your get of jail card If you are going to become a successful trader then it follows you are going to have to abide by your personal trading plan. You may already know that it is very easy to throw yourself into trading price action or any other method of trading for that matter without taking measures to protect yourself from foolish behaviour and haphazard decisions that can dominate without any brakes on your decision making. Without a price action trading plan the trader can get lost, feel fairly gung ho and brave and will almost end the trading session full of regret and probably considerably out of pocket. You should be able to relate to this, it is very difficult to control yourself when there are no rules to follow and you will end up in a tangled mess just like the guy you can see here.

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If you cannot follow a set of rules and other criterion to control your trading activities, then you have no business trading and you lack common sense. Being a maverick, free thinking type can reward you in other areas of your life but you will be punished severely if you approach trading in this free spirited manner. I learnt this the very hard way. The market will beat you up if you do not plan your trades and operate your activities within a rigid set of parameters. Think of your price action trading plan as a strong fence placed around your brain and a set of handcuffs to prevent your fingers pressing buttons to trade when there is no set up as per your plan. What follows are the rules you should abide by each day when using a price action trading approach. You should study this and use it to create your very own personalised price action trading plan in the areas indicated. When learning how to trade it is very easy to lose sight of the overall trading objective…….the MAIN purpose of the Price action trading plan is to keep you grounded and on track with what you should be doing and waiting for rather than what trading can make you do if you lose sight of the rules of engagement.

! The Price Action trading equation daily trading plan Daily BUY and SELL price levels as per the equation = BEFORE contemplating any trade the market has to fail at its session high or a lower price action trading plan level to SELL (lower highs provide the trade set up) ……………. or hold its session low or next higher price action trading level to BUY (higher lows provide the trade set up)……………and later can repeat and present the same trades again unless the market breaks out to the upside or to the downside bringing other price action trading plan levels into play for consideration (you should note well that the majority of safe, robust entries to BUY and SELL the market occur at/or close to round numbers and midway price levels between round numbers as these form natural psychological barriers for traders in trying to move the market UP and DOWN)

! Market Price Position = if the market is not close to or approaching any of the BUY or SELL price action levels you can do nothing until the market has moved into position. You will need to look at a clean, indicator free chart to keep you on track with what the market is doing in terms of price action developments or set an alert to bring you to your trading platform approaching the price level of interest (you should not sit glued to your platform watching every pip of movement as price action will mess with your head leading to error)

! When To Act = You can only BUY if the market is close to a price action level AND holding and not going lower than it and you can only SELL when the market is close to a price action level and is not going higher than it (higher lows signal the former and lower highs signal the latter)

! Trading Stake = X per pip (this will be influenced by the size of your trading bank and crucially by your own competence as a trader. Do not trade above or outside of your comfort level even in a demo account as this could sabotage live trading in the future). New traders or those of a nervous disposition should trade initially at the lowest possible stakes. Generally, your total risk per trade should represent no more than a maximum of 2% of your total trading bank. Daily Target = X pips ideally using an automatic limit order to take profits at the approach to the relevant price level (it is reasonable to set this daily target at between 100 to 200 pips per day when trading price action and it is perfectly acceptable to have lower targets initially until you become more familiar with the extent of movement between price levels and session high and low range) Trade Stop Loss = between 23 pips minimum up to 31 pips maximum and always an odd number relative to the price level exhibiting support or

resistance no exceptions (this level of stop loss is in keeping with the normal ebb and flow of price action and allows for pullbacks as part of a move up or down back to the most recent level of support or resistance). You cannot move your stop loss to break even as soon as you see a profit as this will result in you falling foul of normal back and forth movements if the market is slow to take off and away from your entry price. You can only consider moving the SL up a couple of pips once you are 40 to 50+ pips in profit. Trade Entry Requirements = must enter NO HIGHER to buy or NO LOWER to sell than 15/20(ish) pips away from the price level in question and will get in closer whenever possible if it is offered by the market (it generally is when the trade set up first forms) so that entry generally occurs close enough TO THE RELEVANT PRICE LEVEL to be more than covered with the SL. Manual Close Requirement = MAY be required if trade goes 18 pips negative AND has not yet shown any profit after around 5+ minutes OR more crucially, market moves lower/higher than the level you have bought or sold off (no exceptions). Some common sense is required depending on how high or how low your entry is away from the supportive or resistant price level.

! Price Action = You have to accept that movement on the market may be quick or could be slow AND remind yourself that if you have bought or sold correctly within range of the correct price then you have to allow the market time to develop its move up or down. You also accept that the market may come back on itself and close to or a bit lower than your entry as part of the normal ebb and flow of price action movement AND until it has encountered a blockage to prevent further progress of the current dominant trend. Losing Trades = you will stop trading for the day if you have 2 consecutive losing trades. You are not in the zone and should come back tomorrow with a clear head.

Winning Trades = you will stop trading when you have 1 or 2 profitable trades meeting your daily pips target (or near enough). If you have met your objective why do you need to carry on. Post Session = you will work out what you did wrong on any losing trade so that you can try to avoid the same error again. Winning trades should build confidence and allow you to move forward playing to your strengths. This record will reveal a pattern over time and will allow you to avoid trade set ups that you regularly mess up and will lean you towards trade set ups that you find easier. Positive Mental Attitude (PMA) = you will retain a PMA throughout your journey to becoming a profitable trader accepting that mistakes are an unavoidable consequence of learning how to trade………you also accept that unless you abide by the above rules you will run into difficulties and acquire a number of bad habits that will be difficult to break as you will have demonstrated that you still lack the discipline,

patience and emotional

trading maturity to follow a simple set of trading principles that have been devised fully and completely based on how the markets move in terms of price action.

Price Action Trading Plan- Conclusion To conclude………some words of warning It is important as a trader to have a firm grip on what you want to get out of your trading. This should always form part of your trading plan. For some it will only ever be a second income and for others it will become a full time income and will be used to pay the bills. As competence grows and you progress you should note that you should concentrate fully on what you can lose and your exposure to risk. You should never get too greedy.

It is all well and good having an objective to become rich or financially free but what does this mean. Well it does mean different things to different people depending on background and circumstances. If you start concentrating too much on the rewards of trading you can easily lose sight of the risks involved and you can step up your stakes too steeply, too quickly and get out of your well established comfort zone. Trading at low stakes per pip is entirely comfortable for most people once competent, moving up to higher stakes can raise the blood pressure and stepping up to even higher levels of stake can cause fear and greed to creep back into the proceedings. Using leverage can lead to disaster for some. If you fully embrace price action trading you can target between 100 to 200 pips on say two trades per session on suitable markets and it is possible at times and regularly to get this total from one trade. So go figure what this number of pips means to you and your finances. Even though I have traded for over ten years now I have never used leverage and I maintain a static trading bank. I have increased my trading stakes to my comfort level I have remained at the same level for more than 5 years. My weekly target remains 500 pips minimum. If I achieve 450 pips I am content, if I achieve 950 pips I am delighted. I no longer feel the need to trade every session so I cherry pick sessions as I see fit. My preferred market is WTI Crude Oil as that gushes pips almost every session. I regularly take time off from trading and I encourage any trader to do the same. Trading everyday can cause boredom and complacency in competent traders and so it is very important to have other interests and pursuits which will allow you to stay fresh, motivated and focussed. I do not worry about what other traders I know make, my only interest is what I am doing and in keeping my percentage of winning trades high. If trading becomes an addiction or an obsession then losing money will become a way of life. I have seen it happen many times with trading friends, contacts and my private clients.

It is a happy medium to be able to enjoy trading………the balance is out of sync if you have to trade to feel good, price action trading plan. Would you rather go to bed like

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! You have control of this no one else.

My own personal price action trading plan has developed to the extent that I only use round numbers and midpoints as entries to buy and sell in any market I trade All entries to BUY and SELL adequately cover these price level zones with my stop loss, thank you-

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TRADING PSYCHOLOGY Why it’s So Important Why Do I Need To Think About Trading Psychology The way we think and behave as traders is what separates good traders from bad traders Trading Psychology is a hard nut to crack and it is human nature to initially ignore just how important it is. To make matters a little more complicated no two traders are exactly the same and yet initially a great deal of effort is placed upon trying to trade just like someone else, someone who appears to be successful turning a profit on most trades taken. Trading Psychology Needs An Investment Of Your Time We sadly invest most of our time and effort initially into trying to make money, ignoring our own behavior when confronted with the markets and all the emotions which surface as soon as we enter a trade and poor trading can send us into a spiral of self destruction. It is not uncommon to be in a state best described, as completely out of control. Our trading psychologoly goes unchecked and we are gripped by fear

and greed and we do stupid foolish things as a result. It makes us feel totally frustrated, desperate and at times like throwing in the towel. Consider This When Tiger Woods decided he wanted to play golf he had probably expressed no more than a passing interest in the sport. He certainly did not go onto a golf course and play off scratch and get a hole in one. He may have shown some early promise but he had a great deal to learn and his psychology also had to develop so that he acquired a winning mindset. So why do some people who express an interest in financial trading expect overnight success and immediate financial satisfaction. It is an unrealistic expectation. You need to invest time into the learning phase and tackle the big issue that is trading psychology. Like Tiger Woods, you are going to have to go through a process of learning, acquiring new skills, overcoming weaknesses, exploiting strengths, perhaps needing a coach and developing a solid plan for your success that is achievable and realistic based upon your personal circumstances. Additionally, you are going to have to cope with setbacks, obstacles, failures, successes, inconsistencies, hard and fast rules and have time to perform analysis and correction techniques. This all takes time and is absolutely necessary if you are going to move forward. Tackle Trading Psychology First So, in much the same way as you need iron clad discipline to reach the pinnacle of a competitive sport………..you need this in equal measure to become a successful, profitable trader and you need to recognize that success can ONLY be achieved with dedication and complete transformation of your trading psychology since no one is born ready to trade consistently well. It is a skill that has to be learned and developed over a period of time. And like any other activity your mistakes are the biggest clues as to what is going wrong and your psychology must allow you to embrace the mistakes and correct them. They

will not improve nor go away if you ignore them. They are likely to become more prevalent and get much worse.

The Million Dollar Question It is always difficult to provide a hard and fast answer to anyone who asks how long will it take me to become a consistent profitable trader……..it will take as long as it takes is the honest answer because it will depend on you and your ability to adapt thinking and behavior to get the most out of your trading activity. Most trading courses pay little or no attention to trading psychology BUT it is possibly the most important aspect of learning how to trade assuming of course that you have a trading strategy and personal trading plan that is effective and achievable. I am aware of many people cheated of trading success due to the sabotaging of their poorly trained subconscious minds BUT still they just plough on hoping to stumble upon some magic bullet. Any successful trader will tell you that if they could start over they would give the psychological aspects of trading much more attention than they did first time out since it was the aspect of the learning process that posed most difficulty and more problems than any other bar none. Reading books helps considerably as you can pick up on things you know deep down affect you even if you don’t care to admit it out loud. Traders are generally highly motivated individuals but largely unfocused, or unsure of how to work through the problems they are experiencing to achieve success. They may never have experienced failure before so find themselves in unfamiliar territory. In almost all cases of trading failure it is the traders own mind that is pulling the rug from under him/her. The mind has to be harnessed and brought under some control. How Do You Know Whether You Have Mastered the Psychological Aspects of Trading

You should consider each of the following statements in order to assess whether your brain functions correctly when trading the markets. If can relate to these statements then you have yet to develop the emotional maturity required to become a profitable trader. All of the following is deep routed in trading psychology. •

You have traded in a demo, simulator or on paper for a while and been profitable but you lose money when you trade for real

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You do not have a solid set of rules you follow and your trading plan is fluid

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You find it difficult to pull the trigger when your trade presents as you fear losing money

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You get emotional when confronted with the markets and lose sight of the rules and your trading plan

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You allow losing trades to run on and may even move your original stop loss to avoid the market closing you out

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You take inappropriate entries contrary to your rules for fear the market may take off without you

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You allow a winning trade to run on beyond your target for profit as you want to make more money than originally planned

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You take profits before your profit target as you fear things may move against you

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You forget about your strategy and plan when trading win or lose

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You bail out of a trade minutes after you have entered it as you become unsure and fearful of failure

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You get angry and upset if you have a losing trade

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You get elated and over excited when you have a winning trade

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You spend time during trading sessions in trading forums or seeking opinions from others as to what to do

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You are glued to your trading station and cannot leave a trade to develop or mature without watching every pip of movement

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After a losing trade you revenge trade and lose again

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Your relationships suffer if you are not doing well with your trading

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You lie to your nearest and dearest (friends or family) about your trading progress and outcomes

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You think it sounds cool to describe yourself as a financial trader

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You are always full of regret after a trading session

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After a winning streak you give back all your profits quickly in subsequent sessions

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You always think tomorrow is another day and hope for the best

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You celebrate winning trades at the expense of brushing losing trades under the carpet

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You cannot describe your entry, exit and money management strategy in a succinct manner

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You do not fully understand and accept your trading strategy and personal trading plan

! Spend Time Addressing Trading Psychology As a new or a long standing poorly performing trader you will relate to many of the above statements. In doing so you need to better manage your time as you push towards trading success. Instead of spending MOST of your time trying to take positions in your chosen market (s) make a sea change and spend MOST of your time analyzing how to correct your shortcomings and get your brain in gear. It is well known and documented that there is no place for emotion in trading, fear and greed has to be conquered as most of the emotion that surfaces is linked to these two aspects. Left unchecked you will be on a fast path to the poor house. If your trading strategy and Trading Psychology plan is solid then your task is to control yourself. If your strategy is thrown together, inconsistent or too complicated then it may not suit you and you need to address this as you do not have a solid foundation upon which you can move forward. All successful traders concentrate on Trading Psychology and what they can lose/their exposure to risk rather than what they can win. Whereas

unsuccessful traders concentrate on what they can win and leave themselves exposed to unacceptable risks. It is a simple task to change this around. Hopefully, you can now appreciate how important trading psychology is and you should never underestimate the time and energy you need to devote to the learning how to get your own head straight. Trading is a battle with your self…………NOT the markets.

Trading Psychology – The man in the mirror. Who is the man in the mirror. It can remain a pretty distorted view until you have come to terms with who you are. Also bear in mind that even the most competent traders have losing trades and bad runs and if any trader tells you any different then he/she is telling lies. The difference between competent traders and those who are seriously failing is usually just about emotional maturity and honesty about one’s own strengths and weaknesses. You can only blame yourself for a losing trade, it has nothing to do with the market or anything else. The blame game can waste a great deal of energy and signals that emotion is surfacing. Emotion can bring with it irrational thinking and can lead to more problems to your Trading Psychology.

! As a trader of some ten years, I can fess up to the fact that I have bad days and suffer losing trades now and again. I do not love my losses but I am emotionally mature enough to know that they happen so I take them on the chin and cut them short quickly. My trading strategy and plan are solid, tried and thoroughly tested and it has enabled me to be a profitable trader overall for many years. My trading plan is not the problem if things go wrong now and then. I am. I found my trading niche with pure price action trading after a rough couple of years grappling with other trading approaches. Since then I have shared my price action trading strategy privately with around 500 people over the last few

years becoming a mentor to guide them through the learning curve. Not surprisingly the single biggest obstacle during the learning phase was the lack of a trading mindset. Emotions run a mock in new traders and longstanding poorly performing traders. Until traders start addressing these emotions then trading successfully remains out of reach. One of the most effective ways of reducing emotion is to spend less time at the trading platform and significantly reduce time spent pouring over charts. Give yourself a chance of conquering trading psychology and draw comfort from knowing every trader has been a bad trader at some point in their trading career. As a trader you are trying to get into a position of taking advantage of this scenario

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! Successful Trading Psychology

Or this One.

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! Fail Trading Psychology

But rather than running scared you should have enjoyed the uptrend and made some pips and rather than expecting more you should be prepared to trade down and enjoy some more pips. If you fail to address trading psychology you will end up in a battle with yourself for a very long time. You need to spend the majority of the learning phase concentrating on how your head and emotions react to trading the markets. Then address these problems. Trading Psychology becomes a far simpler task when you have control over yourself.

! TRADING PSYCHOLOGY SHOW ME THE MONEY Trading Psychology is an old chestnut. The hardest old chestnut to crack completely. As traders we have to evolve over time and have to build a solid mental and psychological fortress around ourselves to be able to cope with the riggers of trading. We all underestimate what impact our own behaviour and

emotions are going to have on us and the consequences plays out in our ability to trade the markets sensibly.

Trading Psychology Gets Damaged From The Start I will be writing a series of articles about trading psychology by drawing upon the typical stages we go through to become traders. I have lots of statistics to strongly suggest there are six stages in total. We all experience them at some point or another. The initial stages are very much the obstacle stages and it can be a struggle to break free of what can become a merry go round of pain and frustration.

Trading Psychology Show Me The Money

You know what this feels like, you have a bit of good information and are champing at the bit to get going. After all how hard can it be. The markets just go up and down and you just need to pick the right direction and bingo money will fall into your lap everyday. You can quit the boring rat race and buy that new car, perhaps even move house. Best of all you can start living the good life, be the envy of all your friends and family and never look back. Your own trading psychology may have something to say about this.

Financial freedom is what all of our dreams are made of and we get very carried away just thinking about the prospect of no mortgage, no debts, money to splash and several holidays every year. Everyone around you feeds the dream and the desire escalates.

OK so what happens next. Having mentored several hundred people in the past I would say that a good 95% of new traders actually do make money at first and trading just seems quite easy. The dream therefore edges a bit closer. Our trading psychology is now getting ready to pounce and mix things up a little.

And then we get cocky, greed and fear arrives with a big bang and the wheels start to fall off. Our trading psychology is getting into full swing. We now start losing money and doing things we cannot account for and before we know it we are feeling quite depressed and angry.The dream moves a bit further away. It is early days so we think everything will be fine.

We know we can make money but we also know now that we can lose it too. We have lost money and it did not feel good at all. We did know about losing money when we set off but parked that thought somewhere out of the way. The dream moves even further away. Our trading psychology now ramps up a few levels.

We now move forward feeling frightened of losing and this causes us to not enter good trades when we see them. We hold onto losing positions and may even add to them. We get into positions we know we should not be in and rationale goes out of the window. This is when we damage our trading psychology the most.

We are trading purely based on our emotions and mood and very often are fully gripped by fear and greed. We now think trading is a risky business to be in. The risks can paralyse us or unleash us into more madness. The dream is fading fast. Our trading psychology starts to spiral.

We change as people, it can be ugly and we start the blame game. If we have a mentor we blame them, if we don’t, we blame someone or something else. It is not my fault is what we tell ourselves.

As we experience this first stage of trading psychology there is little that can be done about it really. It is a stage that everyone goes through to some extent and it can last several months and longer if not addressed. Self destruction, blowing the trading account and being unaccountable for your own actions is unfortunately normal. Trading psychology is an old chestnut for good reason. It is always lurking.

Trading Psychology Damage Limitation

A good mentor will have perhaps already highlighted this stage to you before you got underway and should be able to bring you out of this stage far sooner than you can yourself but be prepared for some blunt exchanges. The truth hurts. Rest assured that the mentor will have had first hand experience of everything you are doing and feeling because he/she will have been there, done that and got the T Shirt. Or several T shirts.

Trade in a demo account environment or if that feels like too much of a playground then trade at the lowest stakes possible. Realise that you will lose money and you will need more as you recover your composure to tackle the next stage of Trading Psychology. Don’t crash and burn during the first stage, you have a number of stages to go through to tackle Trading Psychology and before the fortress is fully fortified.

I call the next stage of Trading Psychology: “The Shopping Spree”

Be sure to check back for the next and six stages in total. The best trading tactics are often far too simple for the majority to understand initially and that is how negative trading psychology takes hold of you in the early part of the learning process. Trading The Markets follows when you have wrestled your emotions into place.

Trading Psychology is the enemy but you can win the war.

! THE SHOPPING SPREE In this second article we will explore this next phase of learning how to recognise how our trading psychology is now taking hold of us in a negative way. We have experienced some initial joy and pain in stage one and now we get more out of control. We have not really picked through the wreckage of our early trading history and performance but now we know trading the markets is not as easy as we thought so ergo we must need more stuff.

! The Shopping Spree

! It is common to start surfing for trading systems, trading books, courses, manuals, and DVDs. We start looking into buying trading signals, we join free trials of alert services and we start what I describe as the butterfly stage of our learning. We concentrate on nothing and flit from one trading method to another. We become pretty blind to our own behaviour and trading psychology is not something we pay any attention too. Our emotions and trading psychology is forcing us down this route and we grab it with both hands. We of course don’t stick with any one method long enough to even know whether it works or not but we are losing more money probably and further denting and damaging our trading psychology.

! Our psychology forces us to shop around

We venture into trading forums and hear about how good adding technical indicators to our charts is, heck we may even invest in a trading robot and pick up a couple of Expert Advisors. We have convinced ourselves that trading is going to make us rich (trading is the stuff that our dreams are now built upon) and now it is just a matter of finding that holy grail method and we will have cracked it. Just for good measure better a buy a new computer and perhaps we need a few monitors too. Let’s get them now.

! Our Psychology Has Us Spent OK armed with possibly several hundred dollars worth of purchases and possibly more (I have seen it happen and run into thousands) you try out some new stuff. You have forgotten about your trading plan and your initial system, after all you lost money with that so let’s see what we can do with all this new stuff. The answer must be in there somewhere. Fast forward a few weeks and you are feeling a bit more beaten up and you are chasing trades, trying out different entry points playing around with your stop loss or not using one at all, you have an expert advisor churning away on your trading platform and that is not going so well and all these signals and alert services are just not hitting the mark either. Still it is early days so let’s just make matters worse by ploughing on. You still have 60 hours of DVDs to watch so perhaps that will be key. Let’s see. You are now a regular visitor to forums and you are posing lots of questions and more than likely getting 101 different answers. The questions you are asking are not even the right questions. You may get encouraged that other traders are doing well. They may even give away some useful snippets of trading information but you are not really in a position to know what they say is right

or wrong. You are just gripped by your emotions and trading psychology is not on your current agenda. Basically, you are just ignoring what is happening to you. So how long does all this madness go on for. For some it can be up to a year ending in throwing in the towel due to lack of funds and total frustration. For others a few months.For me it lasted around 8 months and the madness cost me around $20.000. Ouch and ouch again but I did end up with a really flash computer !!! You will already appreciate from reading my other articles that until I stopped everything I was doing and embraced Price Action Trading I really did not have a chance of making it as a trader. It was not until I took control of myself that I did realise what I was doing wrong. My best advice is to try and really cut out this stage altogether. Knowing that it can and does happen when you are left to your own devices should help you recognise when it starts to happen to you. There is nothing wrong with buying a few books about trading psychology etc., but the shopping spree is a complete waste of money. A trader mentor can help lessen the impact of this stage of trading psychology as long as you listen to what he/she is saying. If you don’t have a trading mentor then you need to find some help, the trick is to be accountable to someone. It is hard to be accountable to yourself as you are extending blind leniency to all of your actions and often you are not the best person to seek help from at this stage of your trading journey. You are just locked into the negative side of trading psychology. The sad and unfortunate outcome of this stage of trading psychology is that those with a weaker constitution and now lack of further funds give up completely. It is sad because if you can retain some restraint during this stage then very often you are about to start turning the corner and seeing the light in the next stage. I refer to the next stage of trading psychology as The Light Bulbs Start

Flashing And You See The Light.

! My best advice is don’t look for the best indicators or the latest trading craze. Just look for the best way of trading. You know I strongly believe that this is Price action trading. Trading psychology stage two can be very damaging to our finances.

Come back to read about the next stage of trading psychology. Something I call The Light Bulbs Stage.

! ! The Light Bulbs Stage This is the third stage of trading psychology when the ducks need to start lining up for your sanity and bank balance if nothing else.

So moving on with trading psychology now and as long as you have not given up you are evolving as a trader and starting to turn that elusive corner. The light bulbs are flashing and you are beginning to smell the coffee.The only thing that has really got you to this stage is your passion for the markets and your belief deep down inside that you can make trading work for you. If you have a mentor you may need to apologise for some bad behaviour or rudeness that has emerged during stage one and two. Don’t worry mentors tend to be thick skinned and not too delicate.

OK so you are not exactly out of the woods yet but you are starting to see the woods for the trees so to speak. It’s a good sign that your very dented and battered trading psychology will start to get a few repairs.

Trading Psychology Repair Work

You have dusted yourself off again and now you really are so fed up with all the beatings that the fear and greed element of trading psychology no longer seems important. You still love trading and you have fathomed that the one thing that has stood in your way with all of the effort so far is YOU. If you have a mentor you also begin to appreciate that he/she was right and doing their best to help you through the trading psychology dark days.So you push on and trade paying little attention to your winners or losers. This is a bit of a defining moment and the light bulbs start flashing. You have relaxed on the basis that you have got used to losing and winning. This is when I personally felt so stupid at my past behaviour that I made a pact with myself to never repeat the past but to keep it firmly in my memory.

George Santayana is attributed as saying something along the following lines: “those who cannot remember the past are condemned to repeat it”

Suffice it to say remember all the heartache you have endured, all those foolish mistakes and you can commence the repair work that now needs to be done.

You now realise that your trading system is solid but your own behaviour, lack of discipline and foolishness is what has been standing in your way. If you just followed your strategy and trading plan (just like your mentor told you) and took your emotions out of the equation you can see clearly how much easier and profitable your trading outcomes would have been. Better late than never !!!

Trading Psychology Getting A Grip Of Yourself

Shout it out loud…………it is me and the markets and I am not interested in anyone else. Start to internalise your thinking, make sure you remain rational, walk away from the markets when they are confusing you and not presenting entries as per your strategy and trading plan. If you cannot understand what the market is telling you how on earth can you trade. If you have learnt nothing else you have come to appreciate this more. It is what gets you into trouble.

You can return to that trading psychology book that you skimmed in earlier stages and identify with the characters and types of traders talked about. You will find yourself saying: That’s me to a tee.

The time you have been spending in trading forums seems less attractive and you can label it a waste of time as it did not really help you out. You are no longer chasing headlines and endless data as you are at the stage when the light bulbs are flashing and at long last you know none of your past activities will help but instead you can learn from them.

Trading Psychology Developing The Edge

The traders edge is much talked about but it is nothing more than your own experience and your ability to follow a set of rules, take care of money management and stay unemotional to avoid foolishness.You finally have an understanding of the markets, how they move and you accept that trading involves risk and you just have to control that risk. The traders edge is a crucial piece of the trading psychology puzzle and it will get stronger as you move forward as it will still need practice and solid determination and patience. Getting into the right mind set, thinking the right way, allows you to tackle Trading The Markets

You are married to your strategy and really understand now how it works.Your trading plan has taken a front seat in your decision making and at long last everything is falling into place.The light bulbs are at last flashing and profitable trades are possible. Your losing trades are analysed and don’t send you into a death spiral anymore. As a trader you know you will have losers. You can have meaningful, useful, insightful contact with your mentor and things are considerably less heated.

Trading Psychology Is Maturing

Don’t beat yourself up too much that you did not listen sooner just tell yourself you were not able to take on board the powerful information that you were either given or read about. The thing that matters most is that you have stopped the rot, you are developing the traders edge and you feel more in control. There is enough control for you to trade the markets and start being successful.

You might think that this is it and everything is settled. There is more.

The next stage in Trading Psychology is: “I Need To Tell Everyone Else How Good I Am”

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TRADING STRATEGY

! Pivot Points -and Psychological Price Levels So What Is So Great About Pivot Points Much has been written about using Pivot Points and some traders think that is highly unlikely that markets can be influenced by them sufficiently to warrant their consideration or inclusion in the daily trading regime. Instead some traders prefer to stuff their charts with all manner of technical indicators and use them rather than relying on what they can see happening with their own eyes. I am not at all sure just how many technical indicators and chart patterns exist but when I set out as a trader over ten years ago, using these methods had me paralyzed most of the time and I really struggled to enter any trade with confidence. I became a butterfly trader, flitting in and out of bad trades all day long. Occasionally, I would get lucky and that just gave me a bit of hope. That bit of hope did nothing more than encourage me to continue and more bad trades followed. After some soul searching it was time to ditch the indicators and clear the chart and take a look at what the markets actually do. The charts had looked like wiring diagrams previously, so much so, that an electrician may have had a better chance than I in making any sense of them. Pivot Points Provide a Structure and Price Action Lights the Path I did not discover the relevance of pivot points overnight and I did not fully understand how to interpret price action either but it had to be better than the wiring diagrams I had been using.

After some painstaking analysis I discovered that price action and initial direction is impacted based upon where the market opens relative to a set of Daily Standard Pivot Points and provides a very useful starting point for price action trade set ups. In turn these present high probability trades once confirmed with subsequent price action. The opening price is considered to provide an initial directional signal which will confirm or not confirm AFTER the first 30 minutes of the session have elapsed. What Do Standard Daily Pivots Look Like Example WT1 Crude Oil – 31 October 2011 R3 = 98.37 R2 = 96.69 R1 = 95.00 PP = 93.51 S1 = 91.82 S2 = 90.33 S3 = 88.64 Note: source www.livecharts.co.uk

Just a simple set of price levels. It took me around two years to complete my analysis and to develop a set of rules to apply to daily price action trading using daily standard pivot points. It was necessary to ensure that all possible market opening positions were catered for. Initially I found the clash of buyers and sellers during open session did not lend itself to real time analysis as the noise was initially difficult to separate from the music so to speak UNTIL I became more familiar with what I was trying

to work out. So by looking back after the session had closed I could not only determine whether opening prices of markets held any clues to initial direction but could also very clearly determine how exactly trade set ups were presented and then confirmed or not confirmed. It did become a labour of love and it took me a while to join the dots. My objective was ultimately to be able to use what emerged and apply it in real time. It was also necessary to ensure these opening price positions stood the test of time, were reliable and provided a solid structure for price action trading day in day out. What I discovered was eye opening. Markets were selected based upon their average daily range so a selection of major and minor FX pairs, Wall Street, WTI Crude Oil and European Indices were analysed. I ignored any market where there was little movement and momentum each day, after all there is little mileage in day trading financial instruments that do not move very much on a daily basis. You want big moving markets that throw pips at you and there are plenty to choose from. Parameters Used For Standard Daily Pivot Point Analysis FX and WTI Crude were observed from a starting point of 7.00 GMT, European Indices from 8.00 GMT. Wall Street Daily (The Dow) from 14.30 GMT. Wall Street can be traded from 7.00 GMT too as long as price action is considered afresh at 14.30 the New York open. Price action was analyzed during the first 30 minutes of each market as it is during this period of time that markets provide their biggest clues as to whether the opening signal will be confirmed or not confirmed. Initial confirmation may or may not occur during the first 30 minutes BUT further confirmation arises in subsequent price action after the first 30 minutes when price action trade set ups also form and present. Two years analysis produced the following outcomes. Potential initial SELL signals: to be confirmed post first 30 minutes after open

RULE ONE: Market opens at or above any of its R levels RULE TWO: Market opens below its PP and above its S1 level RULE THREE : Market opens closer to its S1 level than to its PP level ( can initially result in some strength due to proximity to S1 that can overrun the first 30 minutes of the open )

Potential initial BUY signals: to be confirmed post first 30 minutes after open RULE FOUR: Market opens at or below any of its S levels RULE FIVE: Market opens above its PP and below the R1 level RULE SIX: Market opens closer to R1 than to its PP level ( can result in some early weakness due to proximity to R1 and can overrun the first 30 minutes of the open) And the opening rule that caused major headaches during the analysis stage is as follows: Potential Ranging Market and Trades to BUY and SELL can arise unless one direction dominates: RULE SEVEN: Market opens in any one of the above positions BUT during the first 30 minutes of the open session price breaches the PP level either from a lower point or from a higher point so that the early session high and low sits either side of the PP. So Did Pivot Points Hold The Key When Trading Price Action ? Not exactly much to my dismay at the time. Although, initially my findings were exciting they did lead to a lot more head scratching before I was done. I was encouraged by the accuracy of what I had determined so far so needed to plough on and refine the rules of entry, exit and stop loss requirements as well

as understand how each of the opening signals then confirmed the trade set up. Even though standard daily Pivot Points are widely observed by traders across the globe something was however not quite right. Something was missing from what I was now referring to as the Price Action Trading equation.

! pivot points and Psychological Price Levels

Pivot points alone did not work as well as I had expected. But all was not lost. I was exasperated but could not let all my hard work gather dust. Made of strong stuff or just plain stubborn I pushed on as I did have more than an inkling as to what was wrong. During my analysis I had been drawn to the obvious and huge influence of round numbers and the midway point between round numbers and had noticed quite early on how they proved to be barriers to a move UP or DOWN across the markets.

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Round numbers and midway price levels caused road blocks after a good move up or down and a change in direction usually followed. I then found some reference to how round numbers influence all of us as we go about our daily lives and I had already positioned them mentally into the standard daily pivot point levels because of the important role they played in all trading sessions I had analyzed. I had no choice but to enhance the standard pivot points to include round numbers and midway levels realising their HUGE psychological impact upon the markets and traders. They were in fact far more influential than most of the standard levels. Enhanced Standard Daily Pivot Points Expand When You Add in the Psychological Levels (PL). You just add round numbers and midpoints to the daily standard pivot points. This exercise produced a very long string of standard and psychological price levels but served to fully illustrate just how many more psychological price levels there are compared to the Daily Standard Pivot Points. And all my light bulb moments had come at once.

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! Don’t you just love it when that happens.

Example: between the PP at 93.51 and R1 at 95.00 you would insert psychological levels 94.00 and 94.50 and likewise as appropriate between the other levels in the standard equation. You will be relieved to know that the opening position of the market immediately eliminates a good proportion of the levels from any consideration in session and once familiar with the Price Action Trading equation composition it is not really necessary to physically insert the Psychological Levels into your equation as long as you know they are there. New or forgetful traders do find that by inserting them into the equation they do serve as a constant reminder as to what must be achieved up and down for moves to develop beyond levels.

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How do SELL signals confirm price action trade sets ups Unless there has been any obvious supportive price action at a price level in the equation during the first 30 minutes you would want lower highs below the session high so far or failure to push progressively through the next higher price level in the equation to confirm the set up. Lower lows below the initial low of the first 30 minutes are needed to enable the decline to progress to at least the next lower price level in the equation. Note: it follows that if higher highs set in after the first 30 minutes then you should be alert to an unconfirmed opening signal and a change of SELL mode to BUY with higher lows forming above the session low or support price level. How do BUY signals confirm price action trade set ups Unless there has been any obvious resistant price action at a price level in the equation during the first 30 minutes you would want higher lows above the

session low so far or failure to push progressively through the next lower price level in the equation to confirm the set up. Higher highs above the session high of the first 30 minutes are needed to enable the rise to progress to at least towards the next higher price level in the equation. Note: it follows that if lower lows set in after the first 30 minutes then you should be alert to an unconfirmed opening signal and a change of BUY mode to SELL with lower highs forming below the high or resistant price level.

How Can You Take This Further Why not observe this yourself and see the influence of the opening position relative to its Pivot Point and observe the huge influence of round numbers and midway points as price action unfolds. If you cannot appreciate this in real time initially then look back at a clean one minute bar chart of the session after it has closed and see what I saw that enabled the creation of this solid price action trading strategy. You should not be concerned with lower timeframes for the purposes of your observation. Markets do not care about timeframes, traders created them for their own convenience and comfort. Price is what matters most and the collective beliefs of all the traders trading the market throughout a session. A move of 100 or so pips can take no time at all. Equally the same move may take 4 or 5 hours or all session. You should also note that each of these potential SELL or BUY set ups does cause the market to behave in a particular way as the session gets underway and price action plays out. This together with how the markets move between price levels provides the glue to pull everything together into a solid price action trading strategy. This glue as I refer to it will be coming soon so be sure to check back to discover why it was time to tick all the boxes at long last.

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! Now take a look at the trade set up of Wall Street Daily 4 November 2011 at the New York open. See how price action played out. This is a great example of the effectiveness and predictive nature of price action and the equation at work.

! The opening SELL position immediately presented the trader with the potential for a move down to at least 11900 or lower as long as the index did not move higher than the pivot point nor 12000 in early price action. All that was needed were lower highs below the high post 10.00 EST to fully confirm the move down. As lower highs developed below 11983 the market is confirming it cannot get above its pivot point level. It has no choice therefore to approach at least the next price level in the equation. If lower highs also form below 11950 later so that this price level is blocking any progress up then 11900 may give way to allow a move down at least towards 11850 as price action moves forward.

The market progressively moved down to 11851 to sit close to the 11850 midway price level. The BUY set up confirmed later when a higher low presented 1 pip higher than the low and the market then headed back up and towards the pivot point again. The only stumbling block for the move back up might have been getting back above 11950. This did not cause a problem and the market did go slightly above the pivot point as the session drew to a close to settle at 11983. The above Wall Street session presented the price action trader with the following opportunities: SELL lower highs below the high from 10.47 EST. The best entry on offer was 11977 and there were several others that covered the pivot point and high. Take profit either approaching 11900 if wanting a no effort trade on a limit order placed just above the 11900 price level at 11905. Or if in open trade a move down to 11851. Exit from the BUY was notified and confirmed at 11.20 on higher low at 11852. With a further higher low a few minutes later at 11865. The move down offered the trader either +69 pips to the round number at 11900 or +118 pips to the midway point and session low. Exit from the SELL trade at 11852 or 11865 could have been handled as a reversal to BUY and left to settle after seeing that market did get back above 11950 on its rise. The move back up offered the trader either +90 pips if trading to 11950 or +128 pips if leaving the market to settle. The Price Action trading equation looked like this based on the opening price: PL = 12000 PP = 11983 the early high stayed lower than this price level to confirm the decline PL = 11950 PL = 11900

S1 = 11889 PL = 11850 the session low was made at 11851 and 11850 held to confirm the rise PL = 11800 Traders should hone their understanding of price action and the importance of pivot points so that they can be shepherds in the market rather than sheep. Sheep get slaughtered.

Download the PDFs Here…….Two Further Examples of the PATe trading approach for WTI Nymex Crude Oil & Spot EUR/USD

PDF 1 PDF 2

! ! Price Action Trading Long before financial trading technology grew wings traders used price action analysis to trade the financial markets and they did it with no indicators or expert advisors. They relied upon what their own eyes and gut instincts told them. As traders we should be prepared to do the same. If it was not broke then it is not broke now. You have arrived here because of your interest in Price Action Trading. Hopefully, you are not expecting bells and whistles and magic trading bullets now that you are here. Price Action Trading does not need any embellishment. In fact if you do need lots of flashy charts and lots of technical indicators then my apologies as I do not believe that any of that helps with trading price action.

I would go as far as to say it can impede trading progress and success and you may not appreciate this unless you adopt a price action trading approach. Hopefully, now that you know that, you feel ready to embrace what I have to say about how the markets move and how a price action trading strategy can be adopted across all markets. Make no mistake, what you learn as you acquire more knowledge about Price Action Trading should stay with you for the rest of your trading career and serve as the catalyst to transform not only your understanding of price action but transform you into someone who can trade with real money and be highly profitable once you are competent. Competence of course comes as a result of some hard work and concentrated effort and can take time to develop. You must ditch all other trading baggage and beliefs if you are going to succeed. Don’t worry it is not as hard as you think and you should not let the thought of trading with a naked chart frighten you either………..on the contrary it should free up your mind and your view of the markets totally. Later you have my permission to give a two fingered salute to every other trading approach you have ever used or considered adopting. This is why I decided to share my Price Action Trading equation. I am not suggesting that other approaches cannot work (I would say they never worked for me and lots of other traders I know personally) but I am saying no other approach is as consistent, rewarding, uncluttered and uncomplicated as price action trading. Less is more with trading but most traders do have a tendency to overly complicate the process even when repeatedly told not to. Keep it simple and remember before charts existed traders were able to make money just observing price in the form of supportive and resistant price levels. Progress and technology have complicated the process beyond belief. Why on earth does anyone need a room full of monitors. The human brain cannot process all of this information efficiently without breaking down into chaos and indecision.

Do Not Waste Anymore of Your Valuable Time and Energy on Trading Approaches That Will Tie You Up In Knots I admit I too wasted the first two years of my trading career grappling with complicated technical indicators, expert advisors and all manner of other things including trading robots before it dawned on me I just needed to understand price movement. To this day I feel stupid that it took me so long to make this discovery. If you keep it simple your trading station can look calm and uncluttered. Ah peace and tranquility and a pleasant environment in which to perform the magic.

What Is Price Action Trading SIMPLY using nothing more than a clean price chart the trader has the skill and understanding to correctly interpret price movement, identify a few solid price action set ups and have an informed/educated view about the likely future movement and target for profits. Trading is not about the throw of the dice. Is Price Action Predictive This may sound a little controversial and many will disagree with me but as a Price Action practitioner of some ten years I am going to say a definite YES. I will further qualify this by adding that price action developments over the course of a trading session further inform direction and extent of movement UP or DOWN and the session high and session low are very important price levels too. Having said YES, it is probably the most difficult aspect of a price action trading approach to accept but the more you see the more you can believe. So when you see the same set ups arise day in day out with the same outcomes then you have little choice but to accept them as solid, when you realize that using a big picture view of earlier price action as a measure of future price action plus some consideration of the position of the session high and low then you can really beef up your trading plan.

How Do the Markets Move

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! You will notice I will not make any distinction between markets since they do all notify and confirm future movement in exactly the same way. Different markets may move in larger or smaller denominations but set ups for trades are largely the same. It took me longer than I care to admit until I fully recognized and took on board that it is humans/traders that move markets NOT SOME UNKNOWN FORCE. The majority view of humans/traders is what makes the markets move either UP or DOWN. Ergo, if the majority see the market going higher they will BUY and push prices higher………..if the majority think price should be lower the majority will SELL and push the market down AND IF THERE IS NO MAJORITY VIEW then a tight range may develop until the view changes or a dominant view emerges. This can lead to a clash of buyers and sellers and can cause price action congestion and possibly a reason to leave the market alone until there is some sort of breakout. When price has moved enough either up or down then humans/traders take profits and

markets have little choice but to change direction until the situation repeats itself. It explains why after a decent rise or decline on any market you will get a change in direction and it is the very reason why you should never BUY close to the top of a range nor SELL near the bottom. You are too late to join the party and the move is generally over for the time being so generally you should be looking to do the opposite of what the market is suggesting you should do. It is human nature to want to BUY into a rising market near the top of its current range and likewise SELL into a declining market near the bottom of its current range. Most of the time we should of course be taking the opposite view.

! ! ! ! SELL high and BUY low.In very simple terms markets move UP to a level of resistance beyond which they cannot go for the time being, so if the market cannot rise any further it has little option to go down OR Move DOWN to a level of support beyond which they cannot go for the time being, so if the market cannot decline any further it has little option but to rise Importantly a market must rise away from its lower ground before it provides a price action SELL set up and must decline away from its higher ground before it provides a price action BUY set up. This fulfills the requirement to sell high and buy low too. Price action set ups do develop where the move UP or DOWN commences and allows the trader to get in as close to the start of a move as is possible. Price Action is also a great indicator of when it is wise to walk away from the markets and let them do their thing without you……………any successful trader will tell you knowing when not to trade is very important and can save you

from some uncomfortable trading situations. Price action can become congested, unclear and lack any real momentum up or down. These conditions are best avoided as you will regret your decision to get involved most of the time. It is also worth pointing out that the trading arena can attract some weird and wonderful characters seeking quick financial fixes and fast routes to the money and it should be made very clear that price action trading is definitely neither of these. Furthermore trading forums are stuffed full of struggling traders in search of the Holy Grail which if you have any common sense you will realize does not exist. The good news is that a well developed understanding and application of price action trading is as close as you will ever likely get to a magic bullet. Price Action Trading requires a structured approach, some rules to cater for entry, exit and stop loss money management. Your trading plan should reflect your own trading goals based upon your level of skill/expertise. Your trading plan objectives can be adjusted to suit your growing expertise as you move forward. You also need a simple way to analyze your trading outcomes. Trading outcomes should be kept up to date so that you can learn from any errors, build upon your strengths and address weaknesses. We all have different strengths and weaknesses and they need to help shape your trading plan.

Price Action Trading – The structure needed to make it

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Viable

! price action trading is best approached using a set of daily standard pivot points further enhanced to include other important psychological price level zones to make up what I call the price “equation”. The strategy is very different to the traditional pivot point approach which has some very important missing links and inherent weaknesses. The equation does not rely on chart time frames nor any form of technical analysis. It is driven by price action behavior in relation to the “daily trading equation”. You will need a chart to assist in staying abreast of price action developments but see the chart as a tool rather than something you cannot move away from. You will need to refer to a clean chart to establish what the market has done as opposed to what the market is doing now. What the market is doing now may be totally irrelevant to its overall direction but may be nearing a suitable price for entry or exit. Much of what the market does do creates noise and obscures the view if you let it. Price action trading is not about scalping small moves that come about from the normal ebb and flow of a much bigger move. Why grab 10 pips when 100+ pips are on offer. It is very much about trading the big picture that presents using the trading equation levels for suitable entry and exit points when the market is in position and it capitalizes on the fact that the markets are not random…….they are highly predictable and price action is very reliable. You may start out taking profits much sooner than you should using a price action trading approach but with experience and competence your pips per trade should grow considerably over and above the trades of scalpers. When you understand how to construct a daily trading equation you can apply the same exact method to any market that has good intraday movement and momentum. I encourage traders to choose and stick with one or two markets and ignore the rest as you can be highly successful sticking with one market (having one in reserve). The WTI Crude Oil, Major and Minor FX pairs and Indices can easily throw up 200 to 300+ pips of movement each per day off price levels that appear in the daily trading equation.

As with any new trading approach the novice trader is positively encouraged to embrace the learning process by making use of a demo, simulator or paper trading methods until they have perfected their own approach and settled on a personal trading plan. Such an approach ensures you do not lose money needlessly while learning the ropes and you will not trade for real until you are ready in terms of mental/ emotional capacity and knowledge. I am not a huge fan of demo/simulated trading and see it as a stop gap while you get used to the trading platform and set ups as per your trading strategy. Beyond this there is no substitute for real time trading. The learning process for Price Action Trading throws up different issues and obstacles for traders……………..each person is different and therein lies the difficulty sometimes but I am sure you appreciate that trading is 90% mind set and 10% application of a set of hard and fast rules. There is no place for out of control emotions. Some people have a real battle with themselves despite understanding the trading approach. Having said this, most do get there with the required effort (and at times help) but it can take months of practice and disappointments for folks who find the emotional side of trading difficult to master. Price action trading does have elements of discretion concerned with exact entry and exit points but there are only certain safe entry price levels at which you can enter a market anyway given the trading range that is in place so far in any trading session. When you understand Price Action then most markets will be on offer to you since Price Action and understanding it enables you to be in an elevated position as a trader……elevated because you understand what the markets are doing and what they plan to do next. Price Action Trading -Economic News

Any strategy used to trade the financial markets will be impacted at times by economic news and unscheduled announcements. Price action trading is no different. common sense should dictate that you should never try and preempt important news items in the economic calendar or how the crowd may react to it and red flagged news should dictate when you are in the market or sat on the sidelines. So make sure you know what news is due and when and avoid being in trade when red flagged news is due. Breaking and unscheduled news is something we as traders can do nothing about. That is one of the reasons why we trade with a stop loss. Draw comfort from the fact that this does not arise often enough to concern you on a day to day basis. It will happen now and again. Don’t fret over things you cannot control. Concentrate on what you can control, hoping this Price Action Trading information has enhanced your undertsanding of the markets.

! ! ! Support And Resistance

Support and resistance levels exist in all markets and wouldn’t it be just great if we instantly knew where they were going to be each day just before we started considering pivot points and psychological trading levels for our entries and exits. Trading price action really would be so much easier because we know we BUY at support and SELL at resistance. Simple.

Support And Resistance – Where Is It ? Any trader can easily determine where yearly, monthly, weekly support and resistance has been just by looking at the relevant chart covering the relevant

time span (this provides a very useful and informative BIG PICTURE of your chosen market). Support and Resistance are lines in the sand for any trader but when trading today how do we fathom where support and resistance will be. Read on.

Support And Resistance – You Cannot Just Take A Stab At It

Lots of traders get so impatient waiting to get involved in the markets that they overlook the basics of trading using support and resistance:

you should only be BUYING the market when you know where SUPPORT is.

you should only be SELLING the market when you know where RESISTANCE is.

you can only stay involved in a BUY trade off supportive price levels UNTIL the market moves UP to a level of resistance and cannot rise any further.

you can only stay involved in a SELL trade off resistant price levels UNTIL the market moves DOWN to a level of support and cannot decline any further.

Support And Resistance – Psychological Price Level Zones

If you have not already done so you should study the article Pivot Points and Psychological Price Levels and if you do not already accept the huge influence that psychological price levels have on traders then look closely at the markets

to see their influence daily, weekly, monthly and yearly. Just by accepting their influence and incorporating this into your trading mind set will put you leaps and bounds ahead of countless other traders. This will considerably help you in developing the traders edge.

I have been tweeting price levels for WTI Crude and EUR/USD via Twitter from: JuliesPatTips for the last few weeks. I am not trying to prove Price Action Trading works nor that I know better than others. On the contrary, apart from wanting to help others struggling with the markets in general I have wanted to demonstrate the reach of these two markets and how higher/lower psychological price levels provide support and resistance on a daily basis.

I could have chosen any number of different markets to make the point to twitter followers BUT my choices were based on popular markets that have decent intra day ranges and that are popular with traders globally. WTI Crude oil is one of my personal favourites although I prefer other FX pairs over EUR/USD.

Support And Resistance – Let Price Action Demonstrate Where This Is

If you are still emotionally unstable or immature when trading then you first need to work on your trading psychology before being able to accept anything meaningful about the markets.

As traders we should always allow the market (any market) a bit of time to get going. I always allow markets 30 minutes (minimum) to demonstrate price

action so that I can consider and apply my Price Action Trading equation to what has happened.

The low and high of the first 30 minutes then provides the reach of the early range. What happens next in terms of price action provides initial direction and a potential target level for the inaugural move of the session. In turn support and resistance will become clear as price action develops.

Support And Resistance – It Can Show Itself Quickly or Take A While To Confirm

As traders we have no control over price action, so it is pointless trying to will the markets to do as you want. There is little mileage either in having any firm views about what you think the market will do as this will blind you to what the market is doing. Always remember as traders we must trade what we see…….not what we think. I found this aspect of trading hard initially because I often thought I knew better so ignored BIG price action clues.

If after the opening 30 minutes or so the markets races off then that is a good indication that a trader must sit on his/her hands until things slow down and trade entries actually confirm. I will never chase after a market and neither should you.

SELL set up: if the early session HIGH is not extending moving forward then the market is setting up a SELL entry. As a minimum, entry needs to adequately cover the HIGH with the stop loss and ideally the nearest round number or midpoint. If there is no close approach to the HIGH then a lower midpoint or round number will fail on lower highs to provide entry but it will take a while to come to pass. It is prudent and sensible to always cover the

level of resistance by a few pips higher to allow for over keen brokers/or trading software. At this stage you cannot know where SUPPORT may be but you should expect that it is likely to be between at least 80 to 125 pips (or more) away on suitable markets and depending on the proximity of the next round number or midpoint.

BUY set up: if the early session LOW is not extending moving forward then the market is setting up a BUY entry. As a minimum, entry needs to adequately cover the LOW with the stop loss and ideally the nearest round number or midpoint. If there is no close contact with the LOW then a higher midpoint or round number will offer support to provide entry but it will take a while to come to pass. As above it is prudent to more than cover the level of support by a few pips lower to allow for any slippage when price action retraces as part of the move UP. At this stage you cannot know where RESISTANCE may be but you should expect that it is likely to be between at least 80 to 125 pips (or more) away on suitable markets and depending on the proximity of the next round number or midpoint.

Support And Resistance – Should Not Be Assumed

Unless the market is approaching a level of support or resistance that has stood for sometime like a 52 week high or low or a weekly/monthly price level that has held the market up/down then you should keep an open mind and either trade to the most relevant price level or wait and see (while in open trade) allowing price action to play out and show you intent.

The focus of any BUY trade is the low or next higher supportive level (your entry)……….NOT how quickly progress UP is being made. Plus the ability of any

rise to reach higher than the next midpoint and/or round number as the move develops. And vice versa for a SELL trade. Movement and price action can of course be limited to the sesssion high and low range until/unless a breakout occurs up or down. There are meaningful trades on offer in both directions when a decent range is in place (and until the break comes, if indeed it does come).

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A decent range up and down eventually leading to a break UP after repeated higher lows. The trader should already know where the session high and low are……….these have curbed movement up and down until the break UP won through.

A simplified approach is to trade from round number to approaching next round number.Or midpoint to midpoint. A solid break UP through a round number or midpoint extends the range or reach of the current move to/ approaching the next round number or midpoint as appropriate.

Support And Resistance – How Does It Confirm

Some traders take a while before they can accept that higher lows above the low+ (SUPPORT) tell you the market is trying to rise to a price level possibly

100+ pips away. And that lower highs below the session high (RESISTANCE) tell you the market is trying to decline to a price level again possibly 100+ pips away. Quite often the session high and low are positioned within range of a round or midpoint price level.

Traders get fearful of taking early lower highs/higher lows as entries as they often want to see more of a rise or decline before getting involved. This delay just serves to get traders into trouble as entries will then be too high to BUY or too low to SELL and will be in danger of being fouled by the normal retracement action on markets. There is nothing worse than getting closed out of a trade just because your entry was off where it should have been taken.

Unless a market has a very tight/small daily range there is no such thing as a dominant move that only moves 20/30 pips or so. Traders are caught out all the time by thinking the market is no longer rising or declining because it is now heading against the direction in which they are trading………..THIS IS NORMAL and is the nature of retracement.

Traders will assume support and resistance at inappropriate places if they sit and watch the chart too closely. This will just lead to you becoming a scalper, it will prove very time consuming, stressful and at risk of error as you are allowing the markets to push you in and out of trades all session long. The market can only bully you if you let it.

Support and resistance is mainly encountered at round numbers and midpoints as these affect crowd psychology. If the market has risen off a lower round/or midpoint price level or declined off a higher round/or midpoint price level and is approaching the next it often stops and changes direction here or at/approaching the next midpoint beyond the round number in question. The

change in direction can result in a decent pullback or a permanent more meaningful counter move as long as round numbers and midpoints are cleared with price movement as a consequence of the change in direction.

Support and Resistance must be fully confirmed on any market before you are going to trade. When it is not clear or still forming a trader should be sat on his/her hands.

! ! Trading Price Action – Get To Grips With The Important Numbers Trading Price Action is gaining in popularity as more and more traders recognise its effectiveness for trading intra day or over a longer term period. All technical indicators lag but have provided a degree of false comfort for traders over a long period of time as traders show a reluctance or fear to adopt trading price action alone. Any shift in thinking that is required to adopt price action trading can of course cause anxiety and be error prone when the shift is first attempted. Accept that it will take time for you to settle in and take that leap of faith into this different approach for you.

Trading Price Action – Make The Change Trading Price Action as the basis of your trading plan requires a change in thinking but once made it considerably enhances the traders understanding of the markets. Think about it……..if you understand how the markets move and why, then of course it is going to be easier to negotiate with them. I am issuing my free market view for WTI Daily US Light Crude and Spot EUR/USD

each morning at around 8.00 GMT……by design that view can see you through the whole session using the Price Action Trading equation price levels.

Trading Price Action – Can It Transform The Trader

It will take some practice and additional learning to take on board that trading price action is the best route to take as you move forward with your trading activity. Recognising and accepting the KEY role played by round numbers and midpoints, the session high and low should simplify how to interpret price action. Plus, you should read very carefully the full article at PIVOT POINTS…….this is your passport to Trading Price Action.

Top 5 Reasons Why Trading Price Action Is The Way To Go

1. Trading Price Action you will come to appreciate that what you see with your own eyes can be relied upon as price action can repeat itself throughout a trading session. You will know where the market is headed based upon where it started its move UP or DOWN. You will soon recognise clear BUY and SELL set ups allowing you to take your entry and in the safest possible place.

2. Trading Price Action you will be able to look at a clean chart without indicators and recognise the importance of what price action alone has indicated in terms of the next move or current move so will feel more comfortable to let the market try and reach its intended destination. This allows the trader to have an enhanced view of a suitable exit until price action indicates the next safe set up to trade again.

3. Trading Price Action you will be able to think about higher time frames and have a BIG PICTURE view of market intention based upon what has already happened, where the market has indicated support or resistance plus the position of the session high and low can be properly considered as part of the Price Action Trading equation (PATe).

4. You can adjust your trading times to the optimum times to trade when price action will be giving its best view of what comes next. Most markets will settle into one dominant direction during the London open from 7.00 or 8.00 GMT………then when New York opens this direction either continues to dominate or there is a clear signal that the market will change direction.

5. You can pick and choose suitable markets as all price action plays out in a similar fashion across the markets. There should be no such thing as a strategy suitable for EUR/USD only or Wall Street Daily only. Price Action Trading using the PATe method can be applied to ALL suitable markets using exactly the same strategy and approach.

Trading Price Action – It Has Further Benefits

Once a trader is comfortable with trading price action he/she can be more relaxed, less anxious and considerably less confused about what the markets are doing. If nothing else this will help prevent jumping in and out of trades throughout the session and overtime should deliver more profitable pips per trade than ever achieved before once competent.

Trading Price Action allows the trader to stay with the market for longer resulting in far fewer trades, less time at the trading platform and delivers an enhanced understanding of the BIG PICTURE versus what is happening on lower time frames, which lets face it, is generally just noise or a bit of price action congestion away from the key price levels.

Price action will also be able to demonstrate when it is not clear to get involved making the trader wait until price action becomes clearer.

How To Embrace Price Action Trading – Use the PATe Approach

Making a change to your trading regime may be difficult at first as you are going to be challenging long held beliefs and will need to change how you trade. I often tell people to get to grips with price action trading by initially looking at a clean price chart AFTER the market has closed and to do this for a week or two. That way you are not yet trying to accept price action in real time and so you can be calm and not under any pressure. Instead you can see the set ups and how BUY trades formed above the session low or at a near round number or midpoint support………how SELL trades formed and set up close to and below the session high or at or near a resistant round number or midpoint. This occurs day in day out so the more you see it happen the better prepared you will be for anticipating theses price action clues when looking at real time markets before these moves set in.

You will see how a rising market is supported by a succession of higher lows that start just above the session low and then gradually rise and get higher to support the rise as the move plays out.

How a declining market posts a succession of lower highs that start just lower than the session high and then gradually decline and get lower to keep the decline in motion as the move plays out.

Moreover, you will get a good appreciation of the size of moves in terms of pips on your chosen market and how long they can take to play out. Along with this enhanced understanding of market moves you will develop an appreciation that there will be times when you are not in the market but instead waiting for the next set up to form. The outer edges of the trading range offer the best opportunities to trade. Entries taken mid range are more difficult and safe entry takes time to form fully as it relies on price action informing you where the safe entries are.

Trading Price Action the PATe way is the best, most effective change any trader can make to their current trading approach if wanting to take pips from the markets everyday you trade.

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TRADING THE MARKETS

! - Does Not Need To Be Too Complicated.
 We may all start off thinking that trading the markets must be complicated, I know I did. The reality of course is that trading the markets can be as simple or as complicated as a trader chooses to make it. So it can be a little Russian Roulette……..take the complicated route and we ask for trouble. The sad reality is that traders do have a tendency to adopt the more complicated route, adding layer upon layer of considerations to their trading regime. I am not entirely sure why this is but visit any trading forum and you will find more expert advisors, technical indicators, trading robots and home grown flung together strategies than there are stars in our solar system. Add to this, pages and pages of chart set ups galore and the only real outcome can be confusion and delusion. Traders can be brain washed into the complicated route helped by other traders, forums and the mountains of junk that litters the Internet. Look at this messy chart. Who can realistically cope and concentrate on this volume of information.

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! Trading the Markets can be a lonely business and there is no dispute about this and I have often described it as a cruel sport because the harder we try at first the more we end to fail. Perhaps this is what draws the uncertain and new trader towards forums in the first place……..once there then information

overload and colliding strategies take over and send the trader into a deeper place. Information is great if it is accurate and well researched but in itself it does not transform a bad trader into a good trader. Information does not equal transformation in the trading arena. I have never been one for spending a great deal of time in trading forums to be honest. But the time I have spent has always resulted in me being told in no uncertain terms to butt out followed up with lots of Private Messages best described as warnings to stay out of a particular thread or keep my opinions to myself. It only takes a few references to the predictive nature of price action or how misleading technical indicators are and I’m run out of town. I find it funny now but used to let it annoy and frustrate me. Price Action Trading as an approach to trading the markets is not given enough exposure in forums or in the minds of traders who are struggling with relying on technical lagging indicators or expert advisors and such like. Traders dismiss it as being too hard without even giving it a chance or really understanding what it is but then spend several years grappling with everything else and still failing to make any head way.

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! Or would you stand a better chance at processing this clean uncluttered chart as shown above.

Trading The Markets New Traders or Poorly Performing Traders Should Take Note

Accept that as a trader you will develop your own trading style, you will have your own attitude to risk, you will be influenced and underpinned by your background, long held beliefs, your longstanding strengths and weaknesses. You will be motivated to trade by your own personal circumstances and aspirations. You will have your own personal trading objectives. Trading the markets for you will therefore be different compared to other traders that you know. You may want to trade for a bit of extra pocket money, you want to secure a way of making money after your retirement from the rat race or you may want to leave the rat race and become a full time trader and earn a full time income from it. You may want to become rich or you may just need a few hundred dollars extra a month to make life a bit more comfortable. The truth is regardless of what you want you are an individual and you cannot step into the shoes of someone who describes himself or herself as a professional trader. You can compare notes and the professional trader may be able to pass on some wise advice but that is it. I am not even sure what a professional trader is. In my book there are good traders and bad traders. End of story. Just because someone trades part time and does not earn his/her main income from it does not equal a bad trader. Just because someone trades full time does not equal a good trader either so think on. TRADING THE MARKETS – Good traders vs. Bad Traders. Good Traders = people who have a solid trading approach and a solid trading plan. They have wrestled with and conquered their trading demons and their percentage of profitable trades is greater than their losing ones. They make a profit. Bad Traders = people who may or may not have a solid trading approach or solid trading plan or who cannot follow either consistently. They have not tackled their weaknesses or trading demons, they trade emotionally and are controlled by fear and greed. They generally lose more money than they make and remain in denial.

Learn the skill of interpreting price action from the off and ignore everything else. Spend less time in general trading forums and accept that it is you and the markets. Expect your biggest obstacle to yourself so be prepared to have to whip yourself into shape. Whipping yourself into shape should take up 80% of your time initially when you are learning how to trade as it will be the toughest element of the learning process. Stick with price action and get really good at it and you will never look back as long as you also acquire the traders mind set too. If you need help get a good mentor, do not go to forums to get lots of differing opinions. If you cannot afford a mentor join a price action membership site so that you are with like minded traders who can encourage you and share their best bits with you. Be prepared to Invest some money into your learning process for Trading the markets as it will pay dividends later on. Don’t keep searching for the holy grail, as good as it is price action trading is not the holy grail either but it is as close as you will get to it if you set out to embrace it and give yourself time to acquire the skills to use it as your sole trading approach. I wish I had my time over again because I wasted a lot of time and dropped a lot of money ignoring the best way to trade the markets bar none. Initially I had never heard of Price Action Trading and came across it by accident and default. It made a lot of sense and having already being a spectacular failure for a while using other trading the markets approaches I began to see and understand what moved the markets. It was like a weight had been lifted and it gave me renewed hope of success. I fully adopted price action trading a little over eight years ago and would never consider any other method ever again. You could not even tempt me with a trading robot that does actually work or an expert advisor with a 90% strike rate.

Trading The Markets Keep Trading the markets Simple and Accept The Following

Day trading with the current trend is the overall aim of price action trading since it is only the collective belief of all market participants (traders globally) that move the markets in a particular direction to a point of resistance or support. Generally, there are also meaningful counter trend moves that offer decent profits (off supportive and resistant price levels) so there should be NO OBJECTION therefore to taking trades in either direction once a trade set up has presented and confirmed. And it should be noted that without any meaningful breakout to the upside or downside the established range does provide very safe and highly predictable trading set ups throughout a trading session. You will only react promptly to the supportive BUY and resistant SELL price levels when trade set ups present IF YOU BELIEVE AND FULLY ACCEPT that price action trading is by far the most reliable method for trading the markets as a day trader………it is also highly reliable over longer time frames beyond today’s price action too using longer term standard pivot points for a week or longer as some traders prefer to hold positions overnight and for several days. It boils down to your trading personality and personal preferences. I started with day trading and stuck with it because moves on suitable markets can be substantial and satisfy the needs of even the most ambitious trader. At specific times of the trading calendar I may take longer term futures positions when traditionally markets sell off or push higher but that is more difficult to manage these days with one global crisis after another. Standard Daily Pivot Points combined with the more influential psychological price levels (positioned at big round numbers and midpoints) provide an excellent structure for trading the markets and consider pure price action. I never stray from this structure as it forms an excellent trading foundation. Using this structure allows traders to consider the market based entirely on how it develops price action during and throughout the trading session in relation to the price levels in the equation.

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! The Market Does One Or More Of The Following During A Trading Session it can be dominated by an uptrend and rise off supportive price levels with pullbacks/counter trend moves over lower ground (supportive price levels are likely to become higher as the up trend develops and until the market cannot go any higher and encounters some solid resistance) or it can be dominated by a down trend and decline off resistant price levels with pullbacks/counter trend moves back to higher ground (resistant price points are likely to become lower as the down trend develops and until the market cannot go any lower and finds some solid support) or it can range and move in fairly equal measure up and down the range between the session low and session high until/unless there is a breakout to the upside or downside which then dominates price action moving forward. That describes what any market does and they do all do the same in exactly the same way. The upshot being that all you are ever trying to do is participate in the current move as long as the market allows you a suitable safe entry and in the knowledge that you must be not too close the existing session low if selling or the existing session high if buying as this avoids being closed out by the normal ebb and flow of market price action movement. Markets rarely move in straight lines up or down. The Trading Mind Set

! Trading the Markets Understanding how the market moves is all well and good but is of no use to anyone unless that can be allowed to dominate a traders thinking. The market is driven by human psychology and that is why big round numbers and midpoints serve as NATURAL support and resistance barriers en route to higher or lower price level destinations. As such they are a huge influence and statistically provide more BUY and SELL entries than ANY other price levels (standard pivot points cannot be ignored entirely as entry price levels as they can also play a role in providing support and resistance albeit an inferior one). If you struggle to accept or are yet to become familiar with how round numbers and midway price levels play a part in every trading session on all markets go and take a look at the markets and see where moves UP and DOWN set up and start and end in the main. You will discover endless moves commencing their journey to move UP and DOWN at round numbers and midpoints. Daily Standard Pivots Points are the most widely observed additional price levels and that simply explains why the market can react to these too plus they do play an important role when the trading session begins and gets underway. Not all standard and psychological price levels in the daily trading equation are necessarily going to feature as they do cover a very wide range from top to bottom. I eliminate those that are more than 250 to 300 pips higher and lower

from the opening price of the market I am trading. Generally, markets tend to open somewhere falling between the Support 1 and Resistance 1 price levels. And occasionally can open outside of this range. It makes things easier if you think of the price levels as rungs on a ladder so you can easily take a view where the market MUST travel to either to make further progress UP or DOWN. Early price action will light the path as to intent and opening price has a bearing on intent too. Price Action Trading requires a leap of faith that some traders find difficult to take because you are relying on the market to move between relevant price levels, the session high, low and prior support/resistance in a predictable fashion. Most traders view the markets as being random and unpredictable and so this element of price action trading becomes a bit of a hurdle to overcome initially. Fortunately, the markets do operate in a predictable manner and are not as random as you may have been lead to believe but it is very easy to lose sight of this in real time BEFORE the moves occur because price action can get congested at times and can obscure intent. So practice makes perfect and you can embed and learn to accept the predictable nature of the markets by looking back at the session after it has concluded to further connect with the nature of price action so that you can improve your performance in real time. Or you can spend time observing real time price action without participation until you can see the reliability of price action first hand as it plays out and unfolds over the course of a full session. A traders performance will be impacted negatively if he/she cannot let confirmed moves develop to/approaching their destination and you should spend time developing the ability to place your trade and walk away with a sensible limit order to take profits in place (this will be informed by the session so far (big picture) or will be an arbitrary numbers of pips that you can already see are on offer based upon the destination of the move).

If you exit a trade prematurely you should NOT be looking to trade again or in the opposite direction UNTIL price action confirms end of move which may be some distance away from where you took your leave. Just because you have decided the move is over is irrelevant, the market may have further to travel. Trading the Markets. My preferred markets are: WTI Daily Light Crude = I expect two decent circa 150+ pip moves during most sessions and it does usually outperform this. Wall Street Daily = I expect at least one decent circa 100+ pip move per session. GBP/JPY or EUR/USD = both are more than capable of 100+ pip movements per session. There are plenty of big moving markets that are suitable for day trading using a price action approach BUT it is my view less is more and you only need one or two at your disposal to provide plenty of trading opportunities throughout a trading session. Trading the markets can be as simple or as complicated as you choose to make

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TRADING THE MARKETS CAN BE EASIER. RELY ON WHAT YOU SEE WITH YOUR OWN EYES. TRANSFORM YOUR TRADING OUTCOMES.YOUR EYES ARE YOUR MOST RELIABLE TRADING THE MARKETS INDICATOR