Balaji As a trader,speculator and Investor- Balaji have more than a decade of experience trading commodities, stocks and Fixed income securities including as a senior trader with Vexes capital.He also mentors or teaches investors, traders about Financial markets and provide professional training for individuals combining Institutional experience with a technical grasp of seizing market opportunity. Since leaving the Vexes capital and Newyork city,Balaji has been working as Trading coach along with presenting seminars and writing for a number of publications.

Price action Trading-A solution to complicated Indicators

2 min read

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Price behaves the way it does as a result of the behavioral patterns and decisions of the traders (human and algorithmic) who are participating in the market at any given time. Though people are unpredictable and somewhat chaotic (making every moment in trading unique); when viewed as a whole – traders have a ‘€˜herd mentality’, generating recurring patterns can be learned, recognized, and taken advantage of.

Take a look at one of the most occurring price action patterns that I trade in the market everyday which demonstrates the market ‘€˜pullback’, -€“ communicating lower prices are very likely to develop in the near term.

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What are the benefits of trading a Price Action?

At the most basic level, traders who use PA are at a HUGE advantage because they actually learn how to read the raw price charts and trade directly from them. Think about this statement. Many people who are trading markets, do not actually understand what they are doing, but instead rely on indicators and luck, hope or intuition, or maybe at best they stick to a general rule (such as trade with the trend, ‘€˜the trend is your friend’, etc.) -€“ but beyond that do not really understand what they are seeing when they look at the charts.

Can you imagine the exhilarating feeling of confidence that you experience when you genuinely understand what you are seeing on the charts and you can “read them like a book“? Learning the language of price action is in my opinion the ONLY way to trade the markets. At the very least I think all traders can gain an advantage from understanding price action trading -€“ considering most technical trading systems are derived from price action in the first place.

It is proven that people (i.e., traders) do not react rationally to financial news releases and the various fundamental variables that drive the economy and the markets. This is why many traders find themselves frustrated after they have ‘€˜studied up’ on all the key variables that should be affecting the pair they are trading, and yet it does not ‘€˜act as it should’.

It is not these news releases or economic variables that we must then learn to understand and master, but people’s reactions to them.You can observe this if you take a look back through your chart history. The news will generally create short-term ‘€˜noise’ on the chart -€“ but at the end of the day, it’s the technical that end up being respected by price.

This is another advantage of trading with price action, you have TONS of historical trading data right at your fingertips -€“ and if you feel compelled to spend hours pouring over the charts (especially as many new traders do),instead of mindlessly watching the price tick up and down, use your time wisely and study and learn these previously illustrated patterns.

Better yet, educate yourself on price action and look into high probability recurrences.This can significantly cut down the time it takes you to become competent and really speed your learning curve.

Here is an example of a messy, confusing and frustrating charting environment,A dealer in NSE (a friend of my brother) who uses it for signals!!
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Seriously – I don’t know how any trader can work with a system like this…!!

Indicators are based on the mathematical data from previous price action, so they are always lagging. Unless the market is in a strong trend, the constant changing and fluctuating of the market makes indicators ineffective because by the time they tell you to make a move – it is too late, and the conditions are already changing. Even worse, some indicators can make some charts indecipherable. They just clutter up and confuse the ‘€˜message’ that Price action is sending us.

When used properly, price action traders only trade when the circumstances are just right.They don’t just guess and jump into a trade because they see a price moving, or because their indicators gave them a green light. They can look at a chart and instantly know if they should even consider a trade on an instrument (here’s a hint: if price is in consolidation, or whip-sawing around wildly -€“ don’t!) Price Action traders look for confluence to strengthen their decision to take on a trade.

Balaji As a trader,speculator and Investor- Balaji have more than a decade of experience trading commodities, stocks and Fixed income securities including as a senior trader with Vexes capital.He also mentors or teaches investors, traders about Financial markets and provide professional training for individuals combining Institutional experience with a technical grasp of seizing market opportunity. Since leaving the Vexes capital and Newyork city,Balaji has been working as Trading coach along with presenting seminars and writing for a number of publications.

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