Trading is difficult, let’s get that straight from the start – the odds are against us. It’s a 50/50 game, and too many of traders end up on the wrong side of a zero account balance. To be a consistently profitable Forex trader you need to understand what’s going on, make logical decisions and flawlessly execute your edge. It requires discipline, determination, patience and focus. So, why do so many Forex traders make trading harder than is needs to be? Why trade with flashing quotes, cluttered charts, and every indicator under the sun competing for your attention? Why trade with distraction, when you can trade without? Welcome to the application of minimalism, welcome to price action trading.
Price action trading involves the analysis of price movements across time. Things are kept simple and clean. No confusing indicators, no cluttered charts – price action provides all the signals needed to trade Forex profitably. By analyzing price action, a trader can see how the beliefs and actions of all market participants have changed over time. These actions can then be interpreted, and the clues pieced together into high probability trading setups.
Compared to other techniques, price action trading is an easy to understand and straight forward form of price forecasting. Decisions are made purely by studying how the price moves across time. Indicators – instruments which distort price – are not needed.
The price action philosophy is confusion free. It allows Forex traders to get into a distraction free zone and concentrate on what really matters – the movement of price. By minimizing the amount of background noise presented while trading, price action traders are better able to focus and make rational decisions. The use of indicators while trading can be an advantage to some traders, but for most of us out there, all indicators bring us is contusion and indecision. Trying to interpret numerous signals at once is difficult even for the most experienced traders. So why try? The trick is to only concentrate on the important signals and remove the noise. Adopt the price action philosophy of ‘less is best’, remove the indicators and wipe those charts clean.
With a clear chart, comes a clear mind. And when you’re thinking clearly, you’re in a better space to make the right trading decision when it really matters. By utilizing the price action philosophy, you’re giving yourself a fighting chance against the odds. No, price action trading is not the only way to make money in Forex, but it’s a simple way. It’s easy to understand, and easy to execute. Price action trading is not the Holy Grail, but it’s a helpful step in the right direction.
by Daniel Adams