Trading Price Action Using Your Intuition
Successful traders are not sitting at their computer desk waiting for a robotic trading system to give them a buy or sell signal. Nor are they rigidly waiting for 10 different indicators to line up on their charts providing them with an entry or exit signal. Successful traders have long since realized that these types of rigid and mechanical Forex trading systems simply do not work over the long-run. They don’t work because the market is a constantly changing entity; it ebbs and flows and virtually anything can happen on any given day.
Given these circumstances, it seems almost comical that so many people try to fully-automate or mechanize the process of Forex trading. The best traders and investors in the world like Warren Buffet, George Soros, and others, are not using mechanical trading systems that are called “Turbo Pip-Blaster 5,000” or something equally as silly. Instead, they use their brain, they use their ‘gut’, and they use their discretionary trading instinct or intuition to help them analyze and trade the markets.
What is trading intuition?
With all trading methods, no matter what the educators or sellers of the system say, there is always a degree of intuition and awareness that is taking place in our trading, and its time to learn to harness it correctly.
There are 2 main things to be aware of here:
1. The Forex trading strategy that you use – Clearly, you need an effective trading strategy like price action. But it’s not ONLY the strategy that decides whether or not you trade successfully, it’s HOW you trade it, which brings me to my next point:
2. Using discretion or intuition to trade your strategy – Part of trading is the psychological element, and the ability to read the market with “gut intuition and feel”. This aspect of trading is not easily taught, and it’s really something you need to develop through study and screen time and by getting ‘in-tune’ with how a particular market moves.
There is no mechanical approach that I am aware of that makes money long-term, all methods I trade and that others trade that I know of, use a basic set of guide-lines, and basic “trading plan conditions” that they use to find a high-probability entry into the market.
For example, a simple Forex trading plan may look like the following…
One might have 3 preconditions:
1. The chart shows a clear up trend over the last two or three weeks
2. The market has pulled back to a support point within the uptrend
3. The market then forms a “price action signal” after the retrace lower into support to confirm a reversal back in the direction of the overall uptrend, which may become the entry point.
These may be the general criteria in a trading plan, but how do we truly filter this and say, “OK I will trade this setup, but I won’t trade this one, because of X,Y or Z.” ?
As I say to all my students, the greatest traders are in fact people that can have a trading plan conditional element, but then use what I call the “gut feel element” and the “internal emotional filter”, or put simply; they use market experience and screen time to help make quick on-the-spot trigger decisions.
How to develop your price action trading intuition
As a price action Forex trader, I can only offer my personal trading insights and the things I have picked up over the years that have helped me with trading strategies and my general approach to reading charts…
I can not give you all of the “gut feel” qualities that are a larger part of the ingredient to long-term success, this market intuition and emotional element will only come with learning and trading experience. Nobody will want to tell you this though.
I am here to tell you that no matter what trading strategy you learn, it will require screen time, patience and absolute discipline to trade it successfully.
You will find that once you begin to follow your favorite markets and demo-trade price action strategies, you will start to get ‘intimate’ with the market, meaning you’ll get closer to it and understand how it moves better. Every market has its own dynamics, volatility, and different factors that influence it, thus every market moves a little differently than another. I suggest, you pick several of the major forex pairs and really get familiar with their price action and their dynamics; really focus intensely on just 3 or 5 markets at first, and become a ‘master’ of them. You will begin to see that you get ‘in-tune’ with the market, and you will develop a natural feel for reading its price movement, in other words, you’ll develop your price action trading intuition for the market, I also sometimes call this a “discretionary trading sense”.
Of course, the first step to developing your price action trading intuition is to get an education on price action trading strategies. Once you understand the theory of the strategies and how to trade them, you can begin to apply them in the markets, via a demo account at first and then later on a live account after you feel comfortable in your abilities. There is no exact amount of time that it will take any one trader to fully develop their trading intuition, as every trader is different and brings different mental variables to the table. However, it’s safe to say if you really commit yourself and you’re really passionate about becoming a successful price action trader, you can make it happen if you trade in a disciplined manner and put in the necessary screen time to develop your price action trading intuition.
4 Comments Leave a Comment
One of those simple important things I have not heard before. Thanks
Thank u Nial,
As good as always
Just read this for the first time! Brilliant as I have been a member for over a year now and followed the site for nearly 2 years and I’m still finding and learning Nial’s wise words.
The best article nial about intuition .. Thanks !!