Forex Trading Info » price action analysis

Price Action Setups; Simple Yet Effective Way To Trade Forex

ghost — Fri, 14 May 2010 21:15:34 +0000

Price action analysis is one of thee most effective yet simple techniques to achieve consistent success in the forex market. Simplicity is key in trading any market because a simple method helps you regulate your emotions more effectively than a complicated indicator based trading system. Any one who has actively traded forex, stocks, or commodities for any period of time knows that emotion management is paramount to consistent profits. Price action analysis allows you to have a window into market direction based on price movement, price data is the most significant data no matter what market being traded. It is the visual representation of all relevant information you need to know for your price action trading plan.
Trading the forex market off of price action is a great journey to embark on. The simplicity yet relevance and profit potential enabled through price action setups cannot be overstated. Once you learn to spot specific price action setups you will be on target to consistently profit in the forex market. It is entirely possible to perfect one specific price action setup and profit consistently off of that one setup. Where many aspiring traders go wrong is in believing they need numerous setups or indicators to make money; they often fall into the trap of assuming more is better in forex trading, when in fact more is usually worse when it comes to trading. The less confusing and jumbled up your forex charts are the more clearly you will be able to see what price movement is naturally trying to show you.

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Many traders over look the benefits of price action analysis because they think it is too easy to learn or that trading should be technically difficult. The fact is that profiting consistently in the forex currency market is not technically difficult at all, it is actually technically easy. It is relatively easy to learn price action setups that work with a high degree of probability. What is not easy in forex trading is managing one’s emotions and managing one’s money as well as maintaining a disciplined mindset. This is one of the main benefits of price action analysis; it helps you manage your emotions and stay disciplined by giving you a straight forward yet highly effective and relevant trading method to base your forex trading plan from.
Most traders start their trading plan on a shaky foundation that uses a confusing method that they themselves barely understand. Why use lagging indicators that are derived from mathematical formulas that you don’t understand which ultimately just show you previous price action that you could have seen in a much more relevant form using price action analysis? The bottom line is that forex trading is an intensely psychological profession, and until you realize that every aspect of your trading plan needs to take into account the psychological aspect of market activity you are likely to be unsuccessful. A solid trading method is usually the first thing traders try to acquire when starting out. Generally, they pay way too much for junk systems that just cover up the relevant price action that you can spot on any naked price chart. Don’t fall prey to the scam of complicated indicator based systems or forex signal services. Educate yourself in price action analysis and teach yourself how to fish in the forex market, then you can eat for free for a lifetime.

Learn Forex With Price Action Courses

ghost — Tue, 06 Apr 2010 20:20:38 +0000

Learning to trade the forex market using price action is a straight forward yet highly effective way to learn how to trade by. Finding yourself an in depth and thorough price action forex training course is essential to your long term success in the forex market. There are a ton of forex courses available that are going to try and sell you on using lagging indicators that quite simply just do not work. These indicators are covering up the natural price movement on the chart below and basically just make it more confusing to figure out what the market is trying to tell you. Many people falsely believe that by having the most complicated forex trading system or trading course that they will proceed to make a lot of money in the forex market. This is simply not the truth, it is entirely possible, and easier, to use a very simple yet continuously relevant method such as price action analysis to successfully trade the forex market.

You will do your self a huge favor by finding a clearly written price action forex training course that is full of detailed picture examples as well as informative written information. This is a key factor to your success in the forex market over the long term. Many beginning traders think they can just invent their own trading method or spend thousands of dollars on some black box signal system that won’t actually teach them anything. It is going to drastically decrease your learning curve as well as save you countless dollars if you invest in a great forex training course that teaches you the most relevant and simple method for trading forex which is using price action setups to analyze market dynamics.

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There are many forex training courses available the internet that make really big claims, however there are very few price action training courses specifically geared towards the forex trader. Price action analysis works every well with the forex market due to its large daily volume and 24 hour 6 day a week market hours. This provides for many great price action setups across all time frames. The wonderful thing about price action trading is that you can successfully trade off the daily or weekly charts and only spend about 30 minutes to 1 hour a day checking your charts and then move on with your life. Many beginning traders get caught up looking at 5 minute or even 30 minute charts which generally will just work to confuse you and frustrate you due to the abundance of market noise on these lower time frames.

A high quality price action training course will give you the necessary tools develop a skilled view point of forex market activity. This will allow you to see clearly what the price chart is trying to tell you; it’s little bit like emerging from a foggy haze and being able to clearly see the road as you drive. People that get in the trap of lagging indicator based trading and using other overly complicated methods generally experience a 180 in their trading account and over all mindset towards trading forex trading once they start using price action as their trading method.

Practice Forex Risk Management

ghost — Sun, 07 Mar 2010 05:45:55 +0000

Forex Set and Forget

Risk management is a topic that many forex traders do not take seriously enough. In fact, risk management is usually the single biggest factor that is over looked amongst forex traders and this is the biggest reason why 95% of them fail to make money over the long term. The reason that so many currency traders ignore managing their risk or developing a risk management plan is simply because they don’t feel like they need to. Many forex currency traders think that their system or their trading method is so accurate that they don’t need to manage their risk because they believe they will win on a very large percentage of their trades. The truth is that this is a false belief and it is simply emotional trading and illogical thinking as a result of fear and or greed. Professional forex traders understand that at best they will win on 60-70% of their trades, they understand they will lose on any where between 30-50% of their forex trades. If you knew you were going to lose anything 50% of the time why would you not manage your risk? The simple answer is because newbie forex traders do not understand the concept of position sizing and they are trading based off emotion.

Position sizing is simply adjusting the number of lots or contracts you trade in order to stay within a pre-defined risk threshold while placing your stop loss at a safe level. Let’s dig into that sentence piece by piece. Many traders make the critical mistake of having a certain dollar amount in their mind that they are willing to risk before they enter a trade. They then will buy or sell a number of lots that is equal to or greater than that dollar amount of risk. After that they will arbitrarily put their stop loss in mainly because they have heard you should use a stop loss. This is not an effective risk management plan, in fact it is basically gambling but it is exactly how, or similar to how most forex traders enter a trade.

To effectively make use of the power of position sizing you must first understand that it is absolutely necessary to have a set risk percentage that you are emotionally ok with losing on any one trade. Most traders cannot operate free of emotion after losing more than about 3% of their account value on any one trade. As such, risking 2% or less is the recommended amount for any trader, you will be hard pressed to find any professional short-term or swing forex trader risking more than that on anyone trade, this is because they understand the importance of risk management and have already lost enough money to know they cannot control the market. So now your risk is at 2% of say a $5,000 trading account. This means you can risk $100 on any one trade that fits your criteria for a valid trade setup.

So here is where position sizing, risk threshold and stop loss placement come in. Once you find a trade that meets your trading plan entry criteria you then need to find the safest place for your stop loss, after you find this level you calculate the distance between it and your entry level. Let’s say this distance is 150 pips, this means you can still only risk $100 but you must now adjust your position size down to meet your risk amount. An advantage to forex trading is that you can trade mini and micro-lots at many brokers which essentially means you have extreme flexibility in position sizing. So to meet your 2% risk amount and maintain your 150 pip stop loss distance you can only trade 0.66 micro lots, which means that you are trading .66 cents per point. .66 x 150 = $99. It’s very important to stay just under your risk threshold if it comes down to being slightly under or slightly over; if you traded.67 cents per pip you would then be risking .67×150=$100.50, which is over 2% risk, you want to avoid this because it will induce an emotional response that will very likely snow ball into a huge emotional roller coaster of trading errors.