Last week we introduced the idea of Forex trading as an art form and how to prepare your mind for success in the markets. If you haven’t read part 1, here’s a link to it: The Art of Trading Forex – Part 1.
Today we are going to discuss price action trading as an art form and how becoming a master price action trading “artist” can help simplify and improve your Forex trading.
Price action trading is an art form
• The “music” of the markets – Just like painting a beautiful picture or writing a hair-raising song, if you want to succeed at Forex trading you must implement a refined sense of human discretion. Art allows for unbounded expression and freedom, similarly, chart reading has infinite boundaries since the markets are always in motion. There are many different ways to trade and invest in many different markets, but price action trading gives us a means to read the “music” of the price charts, no matter what market we choose to trade.
• Price action transcends all – Just as other forms of art like music and painting transcend language barriers, race, and gender, price action trading transcends all time frames and markets, giving traders the ability to read the ebb and flow of any market they choose.
• Develop your own trading style – The beauty of art is that there is no “set” style…similarly, with price action you can develop your own style and flexibility after you understand the basic concepts behind the price action trading strategies that I teach. After you learn to read the raw price action of the chart you can apply it anywhere…you are not tied down to one market or one time frame or one market condition. Price action trading is truly the only trading method that transcends all markets and market scenarios and provides you with a way to trade them all.
Why rigid trading systems can’t compete with the art of price action trading
As we discussed in the first part of this article series, the markets are constantly ebbing and flowing, and therefore we cannot use a mechanical trading system to make money consistently. Each day’s price action is different, and it takes a trading strategy that allows you to take advantage of this to truly succeed long-term.
Unlike rigid computer-software trading systems and those based on forex indicators, price action trading provides you with a flexible “framework” to base your trading decisions off of, instead of dictating that you only trade under “exact” circumstances. If you read Jack Schwager’s New Market Wizards books you will see that the greatest traders are not purely mechanical. There simply has to be some amount of human discretion involved in trading the markets if you want to accurately determine when the best trading opportunities arise, in essence, you need to get “in touch” with the market by learning to decipher what price is telling you.
How becoming a master price action “artist” can benefit your trading NOW
No matter what trading strategy or system you are currently using, you probably have an underlying bias or “gut feel” about what the market is going to do next. It’s not surprising either, the movement of the market is the best indicator of what is likely to happen next, and it’s often not very difficult to accurately predict mid to longer-term market direction. Where most traders get tripped up is in timing their entries and effectively navigating the shorter-term movements in the market.
Price action trading allows you to use your natural discretionary trading instinct by providing you with “confirmation” via price action trading setups. For example, if we are trading an up-trending market our bias is naturally going to be bullish, but how do you take advantage of this bias? The best way to use your underlying market bias is to wait for a price action signal that confirms your bias, like a pin bar strategy for example. This way, you are not relying on indicators or trading software, you are simply reading the price action to determine the underlying market bias AND to enter the market. When all of your technical analysis efforts are price-based, you remove the confusion and rigidity of software and indicator-based trading systems.
If you are currently confused or disappointed with your trading system or trading strategy, you need to stop now and start learning to read a ‘naked’ price chart. You simply are not going to develop a refined sense of Forex trading discretion if you do not learn to read the natural ebb and flow of price action. If you are reading this article and find yourself a little overwhelmed and “on the fence” about whether or not to change your current trading system or strategy to price action, consider trying to master one price action strategy at a time on the daily charts. This will allow you to focus your efforts on one price action setup and won’t over-load your brain with too many variables while you transition into a new trading strategy.
Price action leads the news
Have you ever noticed that when big forex news events come out the market often behaves contrary to what that news release implies? Trying to predict where the market will move based on news events is simply not an effective way to trade the markets. Price action actually LEADS news by showing you the movement of price BEFORE the news release. It’s common knowledge that traders and investors act on their expectations of upcoming news, and by the time it is released there is no longer anything to expect, so price will often behave contrary to the implication of the news event.
Since all market news and other variables are reflected via price movement, the best way to trade ANY news event or other variable is to simply learn to become a price action trading artist. This will allow you to make sense of the movement BEFORE the news event, rather than being one of the masses of traders sitting in front of their computer trying to trade Non-Farm payrolls and seeing their money vanish in an instant because they didn’t read the preceding price action.
How to become a master Forex price action trading “artist”
How do you learn other art forms? Sometimes a few talented individuals can teach themselves to play the piano or paint a beautiful picture, but most of the time people need to learn from mentors who have already mastered the art form they are trying to learn.
To play the piano well you need to learn the mechanics of how to play the instrument, you have to learn where all the notes are, scales, chords, and how it all fits together. This is not the actual “art” part; the art comes later, after you have learned the mechanics of the instrument. Similarly, to properly trade price action it is necessary to learn the framework for which you are to base your price action analysis off of, then once you obtain this knowledge you are free to exercise it in any market and on any time frame, although as you may know I am a huge proponent of trading the daily charts.
In case you haven’t noticed, I am one of the biggest advocates of price action trading. If you really want to get inside of my head and learn everything I know about mastering the art of trading with price action…check out my trading course and members’ area. I can tell you beyond a doubt that it will change the way you think about trading the Forex market.