Price Action is different for everyone! How can you Start Learning?
Since Price Action is reading the data on the charts, everyone has their own way of interpreting details in every situation.
As Dr Thomas K. Carr, the author of Trend Trading for a Living puts it: “Reading charts is a hermeneutical problem”
. He means that finding details on the charts is a question of interpretation.
What looks like an uptrend for me, might look bearish to someone else.
Furthermore, our tools, strategies, methods, expiries, assets, indicators and much more can vary from person to person. Nevertheless, we have to start somewhere. You can’t just ditch all your indicators and say “well, from now on I will do Price Action”. That’s not really how it works. You have to understand what to look for and plenty of experience is required! In these series about Price Action I will try to explain what PA is for ME. Requires Experience – Trial and Error!
You can’t expect to learn Price Action in one day. Unlike a simple strategy, PA requires lots of experience. You must’ve had your share of losses, wins, frustrations, hopeless moments and you know the rest…
Best way to skill up quickly is trial and error. The more time you spend on reading charts, back testing, looking for patterns etc. the faster you learn. I strongly recommend that you only trade/study one asset. I know that for newbies this does not make any sense. They have their strategy that they think will give them an 80% win rate and are too greedy to trade less than 20 pairs at the same time. Been there, done that!
What they don’t understand is that some details on the charts can only be seen when they are familiar with an asset very well. Most successful traders I know restrict their trading on 1-3 assets and that’s it. Price Action is Many Things
Price Action is many things but in the end it is all about identifying possible market incidents!
For me, it is about answering the following questions to begin with:
- Which price level are the candlesticks most likely to move towards next?
- Will there be a stop and a possible retracement there?
- Which is the overall trend, short trend and long term trend?
- Which obvious or reoccurring patterns can be observed?
In addition we also have our own rules that works well with our own unique strategy and hence, we have some other questions we have to answer before we are able to take action!
Of course, these rules vary from trader to trader but Thomas K. Carr suggest at least 3 rules and I totally agree with him. Can I Use Indicators?
This question can sometimes lead to endless fights about what Price Action is or isn’t.
In my opinion, just because you are using price action, it does not mean you can’t have an indicator or two. However, I don’t recommend using more than 2 or at most 3. You want to base most of your analysis off of the charts and the subjects I brought up above. Spending time on interpreting 4-6 or 10 indicators will just not work out for you. It will leave you less time for analyzing charts and that’s why you can’t call it price action anymore if you spend it all on reading indicators. Furthermore, I believe that anything on the chart that gives you any hints about the market is actually an indicator. Candlesticks, support and resistance lines, the price, the time, the trend and you name it. So we already have plenty of indicators right there on the charts! Video Walkthroughs
I will share what I know through videos because it is easier than writing.
I can’t just make a video and say this is Price Action. The best way to approach this subject
is to break it down to smaller subjects. At the end we can put it altogether but the last part, the experience, is something I can’t provide you with. That’s where the trial and error part comes in. Please do share your personal diary so you can learn from your mistakes and help others in the process.
Remember these will be explanations of how I
use PA/analyze my charts. I don’t care nor am I interested in how others do PA because this is already working well for me, I’m not here to compete with anyone. I just want to share my experiences.
1. Trends – What do I look for?
2. Support & Resistance – How do I draw them?
3. Patterns – Time and Retracements
4. Putting it together in action
You can ask questions here!
Stay tuned for the first video Latest article on Price Action: