Tuesday, November 11, 2008

11-11 Price, Price, Price


Many times over the last 3 years I have been confused about my trading set ups. I have tried to make something out of nothing and traded when I didn't have very many reasons to do so. Much of this was due to not truly understanding price action. The main understanding of that became apparant to me a few months ago and has started to stand out to me more and more as I saw the same thing happen over and over again. There will be times the market will not do what I anticipate, but if I let price show me and confirm that there is a true set up there, I will win much more than I lose, and that will continue to put profit into my account. I think that understanding price begins with knowing where the fractals (dealing ranges) are and understanding where True Support and Resistance is in relation to those fractals. Once I can determine this and I can see a key consolidation and the a break and hold by price, a trade can be placed on the retest of the level with confidence that the trade will pay a high majority of the time. An example can be seen on this USD/CHF 15 minute chart as the price traded to the highs of the year, but could not hold and broke down, first by breaking a consolidation (fractal) and confirming by holding below for some period of time. A retest of the support area offered a trade and paid quickly. Understanding this can transform anyone's trading and has helped mine in so many areas. I am so thankful to Chris Lori for really forcing me to focus on this. Understanding price action and how it behaves and then knowing what to look for can keep a trader out of a lot of bad trades, not to mention the patience and discipline to wait until you see these kind of patterns.