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in Paul's Musings - 03 Aug, 2013
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Price Action Trading.

Most forex traders use 1 way to trade the markets . Technical Analysis.

They do this using indicators , support &  resistance lines , trendlines , the list goes on and on.

Lets take a look at a typical “trendline trade”

We learn that a trendline forms when it touches 3 points on a chart . Take a look at the chart below.

EURJPY Failed Trendline

EURJPY Failed Trendline

Traders are placing long orders to go long at the next touch of the trendline , as can be seen that didnt work out very well did it . What these traders are doing is relying 100% on the trendline to hold and bounce the price back up , if you take a look through the charts you will see that the majority of the time these trendlines just do not hold.

The reason for this in a lot of cases is that by the time the trader is seeing the trendline (3 touches) the price is already trending  in the opposite direction.

A lof of the more popular indicator setups also give this behaviour (for example MA crosses) because mostly the price movement is over by the time you see the cross.

MA cross setups are primarily used to confirm a trade already in progress, NOT for trade entry.

The only real way to make consistent profits trading Forex is to use the price action . Remember we as retail traders are not the market makers , we just tag along for the ride on the price changes that the market makers create.

What we do here is identify price action at certain places on the charts, we then jump on board and let the price take us for a ride.

We also teach you how to use price action , it is not a black art , it just demands patience and the correct chart setup. All the information you need to make succesful trades is sat there on the chart staring at you , it is in most cases your prior “traning ” which stops you from taking these trades.