Posted by: joetradingplace | April 30, 2013

Learning Price action

 

“Trading technique is simply the ability, through study, observation, and experience, to recognize the signals in each of the several phases of market movement.”
– George Douglas Taylor

A lot of new traders don’t know where to start because the subject is very broad…some think that looking at every bar every tick all day 247 is learning price action. If you do that, you probably get lost and get confused in the process. I will try to provide a skeleton here of reading price and then you add your own flesh to it. First thing to have when you learning price action is to look at price relative to a reference point…by reference point I mean a level of interest whether it’s a S/R or TL. Use reference points that are not subjective..use points that you know most people are looking at eg yearly/weekly open, high/low of the day. Some reference points will depend on what type of a trader you are…if you are a day trader, probably the days open/low/high is more significant to you than a swing trader. I am a swing trader, so I don’t look at the reference points used by a day trader, I am more looking at the weekly/monthly/yearly open, they are more significant to my trading than to a day trader. If you are a scalper, you are looking at what a day traders looks at and also looking at hourly or 15 minute open/high/low.

If price bounces off a point, is it because of intelligent buying/selling or is because of short/long covering…if price breaks from a consolidation and fails to follow through…what does that mean, look to take advantage of that failure. Most traders look at patterns and there are patterns that are so obvious, everyone could see it and CNBC will be talking about it….if this pattern fails, you know that you will make a killing. Look for trapped traders, they are your customers, if you know how to read when traders a trapped, they will pay for your mortgage. I don’t listen to news or follow any news, because I believe that all the news is priced in price already, unless if it’s a natural disaster. All the big banks, hedge funds have research teams who work on forecasting GDPs, NFP and all the fundamental news, so by the time the news comes, most of the big guys would have placed themselves in the market already…so that should have been reflected on price already…but when the news is way off, this might change the market direction…and with your price reading skills you just jump on whatever direction the market takes.

Price reading won’t happen overnight, it takes a very long time to learn this skill and when you learn it, you can trade any market on the planet. You will become very confident in your price reading skills and trading…add that with good money management and trading psychology and you are on your way to financial freedom for the rest of your life.

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Responses

  1. Great blog! Is your theme custom made or did you download
    it from somewhere? A theme like yours with a few simple tweeks would really make my blog jump out.
    Please let me know where you got your design. Appreciate it

    • Thanks very much, the theme is called Ocean Mist, its one of the themes on word press blog

  2. Thanks , I have just been looking for info about this topic for a long time and yours is the greatest I’ve found out till now. However, what concerning the bottom line? Are you positive in regards to the supply?

    • Thanks for the positive comments…i dont really understand your last question, can you clarify.

  3. I am regular visitor, how are you everybody? This paragraph posted
    at this website is truly pleasant.

    • Thanks, glad you are enjoying the content of the blog.

  4. You should take part in a contest for one of the finest blogs on
    the net. I will highly recommend this website!

    • Thanks for the comment, am glad you are enjoying the blog

      • Hi joe what do trapped traders look like on charts? (Maybe pinbar that didnt makr a reversal?)An example would help very much thanks. Also obvious pattern you mean like a head and shoulders pattern that fails? Or like a 100dma looking to hold kind of idea?

  5. Good question Neil, I will post an article on trapped traders

  6. Hi everyone, it’s my first pay a quick visit at this site, and post is in fact fruitful for me, keep up posting these posts.


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