Learning To Trade Price Action Alone Is Not Enough To Succeed At Day Trading

While price action trading strategies are very strong and one of the best trading systems available, learning to trade price action alone is not enough to succeed at day trading. Starting with a solid trading strategy is simply step one and it is only a small piece of the larger picture that is necessary to become a successful trader. Most new traders think that once they find the Holy Grail in trading techniques, that they will then quickly become a great trader and easily trade their way to riches.

This is simply not true and it while your strategy is important, you must also overcome the mental and emotional aspects of trading, which is the hardest part of becoming a profitable trader in our opinion. We always suggest that you start by learning to use price action trading strategies as your main trading tool, but learning those strategies is only the beginning. Once you get that part down and begin to see the price action patterns unfold on your chart in front of you, that’s when the real learning actually begins in my opinion. It’s at this point that you must learn to control your emotions and that inner voice that will inevitably talk you out of the best set ups, and into the worst set ups.

Here is what Dr. Woody Johnson had to say about the emotions of trading in a recent article he posted www.fxstreet.com:

It looked like it would keep going up, but the price action soon stalled and headed to the downside. It was on the NQ E-mini and Martha had placed a market order as an extended candle on the 30-minute chart had blasted off and had continued to go upward. Martha had been trading for several months and believed that the seminars she had taken had provided enough of an education in the markets to prepare her for live trading. “How hard could it be?” she had said to herself after completing the course. She made a plan and made sure that she had a few rules. Additionally, Martha thought that the brief instruction in the discipline of trading was more than enough because, as she put it, “I have that part handled.” There had been a number of her colleagues that had made a few ventures into the markets and she had commented to herself, “Hadn’t they done well?” It didn’t matter to her that when she spoke with her friends even they had admitted that they really did not have a plan and simply “went with the crowd.” Martha was not fazed by that admission and barreled forward with an unbridled confidence that she would prevail. However, this confidence was not based upon a foundation of competence and was established before she had a string of losses. Therefore this latest turn in the price action left her feeling confused, frustrated, fragmented and frazzled. She couldn’t figure out what was going wrong. This stuff was supposed to be easy: Wasn’t that what the seminar had intimated? Unfortunately, Martha not only lost in that NQ trade, she proceeded to lose consistently for several weeks that ended in a blown account. She blamed her failure on the seminar, the market news channels, her friends and anyone or anything else that came to mind: that is, anything else but her.

The bottom line is that Martha had not “positioned” herself for trading success. Yes, she took a course and had studied her material ardently; however what she failed to take into account was that success in any important and valuable endeavor requires more than just a few classes, it requires both an educational foundation and a mindset that is supportive to the task at hand. Trading, as anyone who has traded for any length of time will come to know, is arguably the single most challenging business venture on the planet. The reason for this is simply that trading is the only business where if you are in an active trade you are gaining or losing money with every movement of the tick. Money is an extremely powerful stimulant in our society and from the early years of childhood we are taught that capital is directly associated with power and influence. Additionally, money becomes a part of personal identity and people who have it tend to feel a higher self-esteem than those who don’t. Trading requires both mechanical data expertise (the ability to analyze and process market order flow, price action, indicators and economic reports while planning and executing according to rule-based strategies) and internal data expertise (the ability to manage thoughts, emotions and behavior) which are the precursors to getting any result. The internal data, or your mindset and attitude, are crucial to your ability to see the mechanical data without distortion which often leads to erroneous interpretations and a lack of effective follow-through. You can read the rest of the original article here.

We wanted to post this information because we agree with Dr. Johnson completely. I often have students that quickly learn to read a price action chart, yet they consistently continue to lose money trading. I will get a message from one that says that they always seem to watch the best trades unfold in front of them while in shell shock, and then quickly enter at that worst possible time. That’s nothing more than fear and greed working on your emotional make up, and it’s what you must overcome in order to start making money on a consistent basis.

You must learn to separate your money, the trade, and your emotions completely and think about nothing but the trade and your rules. You will be either right or wrong, and if wrong, you must learn to figure out why you were wrong and make corrections. If you are right, study that set up and learn to spot it every time it appears and then don’t hesitate: Just take the trade and don’t worry about the outcome! Scared money rarely wins, so learn to trade without thinking about the money, but only the trade and the overall outcome. By doing so, you will slowly begin to separate yourself from your emotions when trading. Most don’t make it that far, but if you do, the rewards are substantial! Before you take your next trade, remind yourself that learning to trade price action alone is not enough to succeed at day trading! ¬†Learn our technique of trading with price action by visiting¬†http://priceactiontradingsystem.com/pats-price-action-trading-manual/.