Why Price Action instead of indicators?

Why Price Action?

There are many novice traders, including myself, started out trying to find an indicator or automated trading system that we able to press start on and then just sit back and cash the cheques. This is what I thought (like many) that would lead to the lifestyle I desired! After all, isn’t that what a forex trader should be looking for?

In the past, I have been constantly searching for the “Holy Grail”, once a particular indicator/system failed then I started looking into other indicators that I could place on the chart that would give me an advantage of placing a winning trade. The mindset I had (and many others have) was that the more indicators the more chance I had of placing a winning trade. I had all these coloured lines and moving averages. At that time I thought I knew how they all worked but looking back now it just make myself confused. It is not surprising to find that this story sounds familiar as I have found this to be a very common story for many novice struggling traders.

When my Trading Started Turning Around

My trading started to turnaround when I finally stumbled upon Price Action trading. Price Action trading has changed my trading career drastically. I stripped of all the indicators and began to read just the price. I found that the more I made things simpler the more success I began to have. I went from being uncertain in entering trades to entering trades with confidence. Each entry I made are supported with clarified justification - why, how and when I enter and exit a trade. No longer was I looking at a chart and wondering what some other indicator was saying or if one line crossed what I should be doing. I began to learn that everything the big guys do in the market can be gathered from exactly how the price behaves on the chart. I began placing trades and my account began to turn the corner.

Keep it Simple Stupid (K.I.S.S)!!!!

K.I.S.S - This acronym is as applicable to the field of Forex trading as it is to any. Simplicity is the most often and easily over-looked factor to profiting long-term in any financial market. One of the biggest problems I have found in trading is that people think that trading should be complicated so they make it so. The more they lose the more they form the idea that trading should be complicated and the cycle goes. In fact, no fancy indicators or complicated systems are needed to make money consistently in the Forex market. The correct knowledge of exactly how price works and also money management techniques is all a trader needs to begin to turn their trading around.

Learning the art and skill of price pattern recognition will provide us with a perspective and not a system. How did famous traders like George Soros, Jesse Livermore, and Warren Buffet make their millions (and billions) in the market? Not through complicated trading software or lagging indicator based trading method, but through a discretionary market perspective that was developed through an awareness of price dynamics and market condition in various financial markets they traded.

Chart below shows a clean and simple Price Action Chart VS over cluttered charts:

Clean Chart

Confusing Chart

Learning to trade with Price Action will only make you a better trader

Finally, I would say that perhaps the best reason to learn how to trade with price action is that no matter what strategy or system ultimately end up trading with, knowing how to read and trade off the raw price action of a market will only make it better. Price action is the foundation of any trading method, whether you are using an indicator-based system or a software-based system, the signals that systems generates are ultimately derived from the raw underlying price movement. Therefore, having a thorough and practical knowledge of how to trade off of price action will help you understand your trading method much better than if you don’t.

Whether you decide to use price action in conjunction with another trading method or as a stand alone trading strategy, learning how to trade off of it is only going to make you a better trader. This is a realization that typically takes most traders a while to figure out as they struggle with mechanical indicator and software based systems. Once you learn how to trade with price action it will be like turning on the lights; you will instantly gain a clearer and more effective understanding of how the markets move. 

I have now turned my hand to help aspiring traders find their way out of the darkness and confusion that indicators create. I urge all traders to strip all the confusion (indicators) of their charts and begin to learn Price Action. If you want to learn more about how to read and trade off of the raw price action of the market, you should checkout my blog as I will post my price action analysis and setups.