A Beginner’s Guide to Forex Price Action Trading
Today’s lesson is an excellent price action introduction tutorial for all you beginning and aspiring price action traders as well as a good refresher for the more experienced price action trader. Price action trading is the best way to trade in my opinion and there really is no arguing with its relevance and importance. I hope you all enjoy this lesson and that it clears up any confusion or concerns you may have about what price action trading is all about. Don’t forget to leave a comment , tweet it & share it on facebook when you’re done reading.
What is price action?
To put it succinctly, price action is the “footprint” of money. Financial markets are where money is exchanged between market participants, and this exchange of money leaves a trail, this trail is a market’s price movement or price action and it can be observed on a price chart. As Forex traders, we can learn to identify and trade off of the “clues” left behind from price action as it makes its trail across the charts. These clues are called price action trading strategies or price action setups, and when you learn to trade them and harness their power you are a “price action trader”.
These price action trading strategies form as a result of the fact that price movement in markets tends to be somewhat repetitive. Human beings are ultimately behind the price movement of the Forex market as well as other markets, and because human emotions are relatively predictable when it comes to matters of money, their actions in the market often result in price action formations that repeat periodically and that can be very accurate predictive tools of future price direction.
Price action trading involves trading price action strategies from key levels in the market. I am a firm believer that all anyone needs to develop a solid Forex trading strategy is a plain vanilla price chart and some common sense. By combining price action setups with “hot points” in the market, such as core support and resistance levels and dynamic support and resistance levels, we can learn to pick extremely accurate entries that give us the best chance of getting into a profitable trade.
Price action strategies can be traded in any financial market and on any time frame. However, I advise traders to focus their efforts on trading higher time frames first, with the main time frame being the daily chart. I also primarily teach and trade the Forex market because it is the easiest market for retail traders to access, seems to have more periods of trending than other markets, and generally just lends itself well to price action trading.
Why price action?
Answering the question “why trade with price action?” is really pretty simple; because price is the heart of any financial market. It’s like learning to read a book; if you don’t know how to read you will not be able to understand the words in the book or the story they convey. If you don’t know how to read the price action of a market you will not know how to make sense of a price chart or the “story” it is telling you.
Any trader or other source who tries to tell you that you it’s easier to trade off indicators or trading software than price action, is simply in denial of or unaware of the reality of the markets. The reality of the markets is that price movement is the end result of all variables connected to the markets, so why would you want to concern yourself with analyzing anything but this price movement? Traders tend to fall into the traps of forex indicators and forex robots mainly because the people selling these things make bold claims and make them sound like the key to instant riches.
The truth of the matter is that there is no easy way to make money in this world, at least legally. Any short cuts that you think you have found in the markets are only temporary, I can promise you that. You have to learn to read price action if you want to be a trader, there is just no arguing with that, and the longer you put off or deny this fact, the longer you delay your own forex trading success.
The best way to learn price action…
The best way to learn price action can basically be boiled down into three main points:
1) Learn to master one price action strategy at a time. By mastering one price action setup at a time you learn it inside and out, you make it your own, so to speak. Many traders jump from one strategy to the next without really giving each its due time. Specialists in any field are typically the people making the most money; not people who know a little bit about a lot of things. Think of yourself as a “price action specialist” and try to truly master one setup before moving on to the next.
2) Learn to trade higher time frames first. The main reason I teach traders to focus on higher time frames first is because it is the best “natural” defense we have against over-trading. Over-trading is what kills most traders’ accounts, and it will kill yours a lot faster than you think. By focusing on the higher time frames we can benefit from their natural ability to filter price movement “noise” on the lower time frames and thus improve our overall winning percentage, all while trading in a relaxed and stress-free manner.
3) Learn from a successful price action trader. In point one I discussed that becoming a specialist in something is the best way to master it and make money at it. Well, the most effective and efficient way to become a specialist in the field of forex price action trading is to learn from a successful price action trader. You can greatly reduce your learning curve and avoid a lot of trial and error by learning from a skilled and proven trader.
The best way to trade price action…
In my opinion, the best way to trade price action is by trading like a sniper, not a machine gunner. What I mean by this is waiting for the best price action setups rather than trading anything that you think “might” be a setup. After you master all my price action trading strategies and concepts you should have no doubt of what you are looking for in the market. At that point trading is simply a game of patience; a game of waiting for the perfect price action setup to come into view, and then “shooting it” or trading it flawlessly. There is definitely a positive correlation between the amount of patience one has and their trading account value.
Why price action trading is critical…
No matter what strategy or system you end up using, knowing how to read and trade off of price action will make it better, even if you don’t solely trade price action strategies like I do. Knowing how to trade price action is a requirement if you want to trade successfully; you have to understand price dynamics in the markets, there is just no way around it. Believing you will somehow succeed in Forex without proper and thorough knowledge of price action trading concepts is like believing you can fly an airplane with no formal pilot training; yes, it is possible, but the odds of you crashing and burning (pun intended) are very high. If you want to learn to trade the same price action strategies that I have been using for almost 10 years, check out my price action trading course & check out some of my videos on trading price action
27 Comments Leave a Comment
Thanks a lot Nail for PA explanation.
Nial, few years back in thoughtful trading is about finding a suitable indicators and timeframe but now I can tell with fully confident I’m a price action trader and trade with an edge. hat of to you through all the accuracy information you’ve provide.
Thanks a lot Nail for PA explanation. It is very inspiring and open new mindset to me to understand market much better.
Many top traders say PA is the king. Two thumbs up and 5* to you.
Love the way you do things nial,i see you as my role model right now, thank you so much…
I dont know nothing about trading but i read everything about it on google/internet. I have read about forex tutorial strategy and i think of reading forex price action strategy. Maybe those two will work out for me and apply them on my demo account before i go open a life account. Thanks to you Nial about every info. Thank you again.
I can’t believe you telling me to learn from a successful and skilled PA trader..
Who else is skilled enough but the MAN himself
PROFESSOR EMERITUS OF PRICE ACTION
My teacher, my mentor thanks for this lesson.
nice artical.thanks Nial
Great eye-opener on the most reliable trading method (Price Action). Thanks Nial! Now, i’ve fallen in love with Price Action! :-)
May God bless you for inpiring me to start using price action.
Yet another great revelation for we new comers in forex. l cannot wait to start your price action trading course in Jan 2013
you are great ….Nial…..i think what you said is that money leaves clues which can be used to track its movement accurately and these clues are right there on the neat and clean price action as shown on the charts……right?..cheers
“Price Action Trading”
a “GURU MANTRA”
to become a professional trader.
Mr. Nial is truly a GURU for my trading endevours.
Thanks Nial! Great lesson!
Price action is the footprint of money.
I Love that!!!
Your article today crystallizes why I trade Price Action and how it forms the foundation method of my trading plan.
My son recently reminded me of his military training and the term Standard Operating Procedures (SOP). Anyone trading without a (SOP) or Trading Plan with, quote
“1) Learn to master one price action strategy at a time.”
“2) Learn to trade higher time frames first.”
“3) Learn from a successful price action trader.”
as a framework,
Is a bug looking for a windscreen.
Thank you Nial and the team at LTTTM for your coaching and tuition.
Hi Nial, this is another great articles. Thanks so much
Hope you are well. Another fantastic lesson from yourself. Thank you so much.
Thank you for all your help
Thanks and Regards
I first came across Nials’ site a couple of weeks ago.
I was impressed enough by the video to take time out to look at Nials’ own site and was very impressed with what I watched and read. Despite having been watching charts for over 4 years, I haven’t yet settled into a consistently profitable strategy for me.
The most pertinent to me, at my present level, was the definition of successful. If I make a profit (even if its small) each month, then I have been a successful trader for that month. Before taking this in, I didn’t consider myself to be successful if I didn’t make over 100 pips each week. Its a big psychological shift and makes it much easier to return to the daily timeframe and act as a sniper, rather than take 10 pips from every 1 hour chart Support / Resistance level.
Many thanks Nial
Hi Nial, yet another great article – thanks
“Learn from a successful price action trader”. Some may skim over this point but I have found this critical in my learning process after joining your members forum. I put my thoughts out there on what I’m seeing & senior members & coaches feedback goes a long way to sharpening my lens & fast tracking my learning. Besides the mentorship, I feel a sense of accountability to think through things. I strongly advocate this point in this article.
Its good to refresh earlier teachings.
Helps re inforce the message,
Thanks for helping me stay on track Nial
thanx Nial, though your articles may seem somewhat repetitive, they are not…, I like the way you explain things in a different way always using examples etc. your writing skills are very good as well, as you are able to make your points clear and easy to understand although the concepts behind those points can be somewhat difficult..thanx again and have a good day bud, g
Nial, Your price action teaching made me to have a price chart only without indicators. For the first time in my trading period I saw clear and precise price movement and understood it better. A chart only with resistance and support is the greatest tool in a traders arsenal.
I wish I had known this a long time ago.
Thank you for this immense information.
I am still learning how to read price action. I MUST inform you when it starts making money for me.
Please continue with your passion and objective of helping traders.
Nial, I am a long time member of your course & community and absolutely love it, have learned tonnes. This lesson today was a good refresher and I am sure it has helped alot of newbies and oldies like myself. Well done mate, and thanks again for sharing your wisdom.