If you are interested in learning to trade for a living, then you will want to get all of the facts on day trading for a living with price action. After many thousands of hours of watching prices print to a chart each day, I have discovered that day trading profits increase most frequently when I am able to enter the market at the most opportune times, which often appear to be the worst times to enter visually on the chart. Think about your own trading if you have tried it before: Doesn’t it seem that just as you enter, prices almost always reverse on you, ending in a losing trade? If you enter short, prices are quickly turning and going higher, and just about the time you decide you should exit with a loss and do, prices suddenly are going lower again without you. Most unprofitable traders will find themselves getting long at the highs, and then getting short at the lows. In order to day trade for a living and actually make money, you must reverse this trend.
If you have been in trading for any length of time, you have likely heard on more than one occasion that you must “buy low” and “sell high!” The million dollar question that comes next though is how do you do this consistently? My recommendation to you is that you find as many charts as you can in your market of choice and then begin to study them. Cover prices to the right with a blank piece of paper and then just start moving prices forward bar by bar by sliding your paper to the right. Try and determine when you should buy and when you should sell. What you will likely find is that the best entries look like horrible set ups, while the best looking set ups almost always fail. Most of us want confirmation that prices are moving in our desired entry direction first, but by the time that happens and we finally decide to place our orders, the move is over, so we buy the high of an up move or the low of a down move. So, why does this happen, and why do we keep doing the same things when it usually leads to the same results?
We believe that it is caused by our emotions that are triggered by fear and greed. We have proven time and again that if you learn to read a price chart, and then buy the lows and sell the highs, then you can consistently make money. There is more to it than this really, because we only want to buy pullbacks in an uptrend and sell pullbacks in a downtrend, and we want to avoid counter trend trading at any cost during these trends. On the other hand, if prices are ranging, we want to both buy and sell, but we sell the highs of the range and buy the lows of the range. It’s really that simple, but your emotions will get in the way until you learn to control them. After all, it’s very scary to buy a falling markets and it even scarier to sell a rising market, but that’s what you must learn to do if you want to make it long term in day trading, and that’s where our price action trading strategies come into play.
Below is an excerpt from an article that talks about how emotions cause you to buy high and sell low, and although it’s mostly talking about swing trading rather than day trading, it’s still relevant to what we are discussing, and they are just discussing a larger time frame. Here is what the article at financialhighway.com had to say in regards to controlling your emotions when trading.
“Buy low, sell high.” It’s the golden rule of being a successful investor. You’ve heard it too many times to count, and you know it makes sense. Yet time and again, you find yourself doing the exact opposite. Here’s a little secret: most of us do. We let our emotions play a big a role the way we invest. And that’s almost always a mistake.
Why we let our emotions rule
If you’re like the rest of us, you invest to make money. Yes, you know that markets fluctuate and that you’ll lose money from time to time. You know that you’ll have to ride the ups and downs to make money in the long run. Still, at the end of it all, you want to come out ahead.
But what happens when the markets take a serious plunge and you start losing money? Lots and lots of money. Suddenly, you’re not so sure you’ll come out ahead in the end. Riding things out no longer sounds like such a great idea. So you sell—low. Then at some point, you notice that the markets have been doing well for a couple of years. You start to feel pretty good about investing again. So you buy—high. If that sounds like you, you’re in good company. This is how the average investor thinks. This is also a great way to lose money. You can read the rest of the original article here.
Fear makes us afraid to buy the market when it is falling or sell it when it is rising. In addition, greed causes us to hang onto a losing trade for too long, or not exit a winning trade quickly enough. After all, the other phrase we hear so often is to “let runners run and cut losers short.” While this is another important set of rules to follow, if you don’t understand how to read a price action chart, then you won’t know where you should exit in order to let runners run and cut your losers short. You can buy all of the fancy software you can afford, and you can use all of the indicators you can find, but none of them will consistently tell you when to enter or exit the markets when day trading. Learning to read a price chart and day trading for a living with price action is the only way you can approach day trading and consistently make profits. If you are interested, you can get the latest information available on price action trading by going to http://priceactiontradingsystem.com/pats-price-action-trading-manual/.